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Dáil Éireann debate -
Friday, 6 Mar 1992

Vol. 416 No. 9

State Guarantees Act, 1954 (Amendment of Schedule) Order, 1992: Motion.

I move:

That Dáil Éireann approves the following Order in draft:

State Guarantees Act, 1954 (Amendment of Schedule) Order, 1991,

a copy of which Order in draft was laid before the Dáil on 27th february, 1991.

The Resolution arises from the application from the Waterford Harbour Commissioners that borrowings of up to £10 million over 15 years in connection with the Belview harbour development plan be guaranteed by the State.

Waterford Harbour is one of Ireland's premier commercial ports. It is one of the key ports on which our commercial harbours policy is based. The principal objectives of this policy in the medium-term are: (a) to ensure that Ireland has sufficient port facilities to meet the anticipated increase in trade expected following the completion of the Single Market.

As Deputies will be aware, we are very anxious to increase our access to Europe, and we perceive Waterford as a major port in that regard. The foregoing objectives are being pursued principally through an investment in commercial ports of approximately £69 million in the years 1989 to 1993. This investment is being funded in part by the EC through the Operational Programme on Peripherality. The programme is assisting projects at the key ports of Cork, Dublin, Rosslare and Waterford and at other important local ports. The Waterford project is the largest single project in this programme. These measures when implemented could have the effect of winning back some of the substantial Republic of Ireland traffic that has moved to Northern Ireland ports.

Waterford Harbour handles more than 30 per cent of Ireland's Lo-Lo, lift-on/lift-off, container traffic. Containerised traffic through the port of Waterford has more than doubled in recent years reaching 130,000 TEUs — unit of measurement of container traffic TEU — twenty foot equivalent unit — in 1991 and this throughput is set to increase dramatically in the coming years — throughput in 2005 is estimated at 275,000 TEUs. But this cannot be achieved at the present terminal which has a design capacity of 80,000 TEUs. Deputies will note that it is already being used up to a volume of 130,000 TEUs.

To cater for the proposed dramatic increase in container throughput Waterford Harbour Commissioners are about to embark on a major Lo-Lo harbour development plan at Belview, County Kilkenny, four miles downriver from Waterford, at a cost in excess of £20 million. The plan comprises major capital dredging, the construction of a 450 metre container wharf, container cranes, container compounds, stockpile areas, internal roads, railway sidings, access road and other ancillary works. Full planning permission has been obtained by Waterford Harbour Commissioners.

Provision has been made in the National Development Plan and in the Operational Programme on Peripherality for expenditure by Waterford Harbour Commissioners of £15 million between now and 1993 on the provision of the harbour element of the facilities. EC aid totalling £7.5 million has been approved, in principle, towards the cost. Prospects are good that the rail — £1.36 million — and road —£3 million — links to Belview will also qualify for EC aid under the road and rail elements of the Operational Programme on Peripherality. The first tranche, based on expenditure to date of EC grant aid — £458,000 — towards the cost of the project was paid to Waterford Harbour Commissioners in November 1990. In addition, and as an exceptional measure, State grant assistance of £200,000 was paid to Waterford Harbour Commissioners in 1990 in respect of expenditure already incurred on the project. Commercial borrowings totalling £705,500 in respect of essential preliminary works have been drawn down by the commissioners with my approval and that of the Minister for Finance in accordance with section 120 of the Harbours Act, 1946. The second tranche — £418,000 — of EC grant aid was paid to the commissioners on 9 October 1991. A further tranche — £82,000 — of EC aid was paid to the commissioners in February 1992.

I am satisfied that the Belview project is justified, the present Lo-Lo container terminal having a design capacity of 80,000 TEUs; in 1991 it handled 130,000 TEUs. Because the existing terminal is being overutilised there is a very real danger that the wharf will be undermined to such an extent that it will have to be taken out of commission. Due to lack of capacity traffic is being forced away from Waterford, the service to customers being adversely affected. Indeed I should say the volume of traffic has been accommodated only by a seven days per week, 24-hour operation.

The Belview Lo-Lo container terminal, when operational, will reduce by one hour sailing time between Waterford Harbour and UK and Continental ports, will enable three ships to be worked simultaneously, will have flexible working arrangements — 24 hours per day, seven days per week, 364 days per year — which will result in a quicker ship turnaround time and, thus, reduce costs to users. The Lo-Lo handling capacity of Waterford port will increase to 320,000 TEUs per annum.

While essential preliminary works, e.g. capital dredging, have been undertaken, actual construction works have not yet commenced. In 1991 Waterford Harbour Commissioners invited tenders for the wharf construction — £7.5 million — and crane acquisition — £3.7 million. While the commissioners have issued letters of intent to the successful tenderers — Ascon for the wharf and Davy Morris UK Ltd. for the crane — the contracts have not yet been awarded as certain necessary formalities have not been completed. These are: a financial package for the project still having to be finalised and the commissioners have not as yet executed an agreement with Bells Lines Ltd., the intended main user of Belview, whereby Bells will effectively undertake to service commercial borrowings of up to £10 million by the commissioners. The final draft of the agreement which is subject to approval by me is at present under consideration.

The draft agreement provides that Bell Lines will provide sufficient income to the commissioners to enable the interest and capital cost of borrowings up to a maximum of £8.5 million for a one crane operation and £10 million for a two crane operation to be discharged over 15 years; in addition, harbour rates in respect of guaranteed minimum throughputs will be paid by Bells to the commissioners. These harbour rates will be increased annually in line with, or related to the increase in the CPI. In return Bells will have priority, though not exclusive use, of the Belview container terminal. Thus it can be seen that the agreement will underwrite all of the outgoings on the borrowings Waterford Harbour Commissioners could not have undertaken out of their income of approximately £1.5 million per annum. If traffic falls off for reasons other than force majeure or if Bells decide not to continue using Waterford they would still be legally bound to meet the capital and interest repayments. Without this agreement Waterford Harbour Commissioners would not be in a position to undertake the project on their own because of their present financial circumstances.

I should mention that the agreement also provides that Bells will continue to enjoy the use of the existing container terminal, the Frank Cassin Wharf. Of importance here is the fact that the management and operational structures currently in place at the Frank Cassin Wharf and which have been so successful, will continue. Once Bells transfer their operations to Belview, the Frank Cassin Wharf will be available to other container operators and both Waterford Harbour Commissioners and Bells are anxious to attract such operators to this wharf.

The original proposal was that the project, apart from any EC aid secured would be funded jointly by Waterford Harbour Commissioners and Bells. The financing arrangements concluded by both parties were not acceptable to the EIB or lending institutions here. Attempts by the commissioners to secure borrowings without a State guarantee for all or part of the proposed borrowings were unsuccessful. The Harbours Acts do not provide for borrowings by harbour authorities to be guaranteed by the State. In the absence of such a provision in the Acts a guarantee can only be provided under the State Guarantees Act, 1954.

Bell Lines have been associated with Waterford Harbour since the 1960's and have spearheaded the drive to make Lo/Lo more cost effective nationally. During all that time Bell Lines have achieved all of the projected growth figures they have given Waterford Harbour Commissioners and they have also fully honoured all their financial obligations to the commissioners.

The financial viability of Waterford Harbour Commissioners is heavily dependent on Bells continued association with the port. Ownership of the Belview site is vested in Waterford Harbour Commissioners; likewise, ownership of the new wharf, cranes and on-shore facilities will be vested in the commissioners. Bells will be required to pay harbour rates to the commissioners and the Bell operation will continue to be subject to full compliance with the by-laws of the commissioners.

The established policy is that each harbour authority, including Waterford, should be operated as a commercial undertaking and should be financially self-supporting. Harbour authorities should conduct their affairs so as to ensure that revenues are not less than sufficient to remunerate capital and repay borrowings. The proposal now before the House is that the Schedule to the State Guarantees Act, 1954, be amended so that borrowings by Waterford Harbour Commissioners can be guaranteed by the State. This exceptional measure is warranted, in view of the significance of Waterford port, its impressive track record, and its unique place in efficient Lo/Lo development.

I am prepared to recommend that borrowings of £10 million by Waterford Harbour Commissioners be guaranteed by the State because of the scale of the Belview project — total investment will amount to in excess of £20. The project is important from the point of view of improvements to overall access transport infrastructure. It will reduce by one hour the sailing time between Waterford Harbour and UK and continental ports and thus reduce costs to importers and exporters. I am satisfied that without such a guarantee the project will not proceed.

The Belview Harbour development plan is being strongly supported for EC aid — EC aid of £7.5 million has already been approved in principle and further EC aid is under consideration.

The national advantage dictates the development of Waterford port. This view has been confirmed by an independent evaluation recently commissioned by my Department on the financial aspects of the project.

I have pleasure in recommending the Resolution to the House.

We fully support this resolution. It is a red letter day for Waterford in that we are getting this Government guarantee for £10 million which we have been awaiting for a considerable time. That together with a grant of £7.5 million from the Structural Funds will enable Waterford Harbour Commissioners to embark on a major development at Belview which will include not just the new wharf but road and rail systems serving that wharf. Waterford is already the biggest container port in the country and it will make it the biggest by far.

Waterford has the second lowest costings for a container port in Europe, which makes it a particularly attractive site for industry and business enterprise. It is second only to Le Havre. That adds to its attractiveness. There will not be any problem in getting back a lot of business which was lost to Northern Ireland ports in recent years. This development will give a huge stimulus to container traffic in the Republic, specifically in Waterford harbour. We have felt as if we were being bypassed in recent years. Other ports got massive Government grants while Waterfort had not been getting reciprocal aid. This resolution does not grant money but it guarantees that the Government will underwrite borrowings of £10 million from the European Investment Bank. That and the £7.5 million from the Structural Funds will enable the work to be carried out. It is not just a wharf and gantry. It will enable the harbour commissioners to remove the two serious impediments to large ships in the harbour. I am referring to the two sand bars, one at Cheek Point and the other at Drumcannon. Once they are removed there will have to be continual dredging. The initial removal will be the major issue and the dredging will come under normal upkeep.

I understand that one reason for the delay in granting the guarantee was that a risk analysis study had to be carried out to ensure that the project is viable. The study was carried out by Coopers and Lybrand. Their study showed that the project was highly viable. The contractors are there and are ready to start work.

Once this resolution has been passed by the Dáil it will be a case of all systems go. Everything is so organised that the work can proceed immediately. The operators in the container port are Bell Lines Limited, who have been enormously helpful to Waterford over the years. Bell Lines are a particularly well managed company and they will operate this terminal. We may well see a new era of industrial development in the Waterford Harbour area as a result of ancillary developments which we hope will result from it.

Moneys are being provided for dredging and building a wharf and this will mean that container ships of up to 20,000 tonnes will be able to use Waterford Harbour. This will be quite an achievement. It will make the harbour area a very valuable asset for industrialists because they will be able to move quantities of the order of 20,000 tonnes in and out on a daily basis.

On behalf of the Fine Gael Party I welcome this proposal which has our full support.

Like my constituency colleague, Deputy Deasy, I too, on behalf of the Labour Party would like to welcome this resolution. When the Minister is replying to the debate will he say how soon he expects the Government seal to be attached to it, because it is vital that work begins on the new terminal as speedily as possible.

In the timeframe which is built into the tendering system as arranged by Waterford Harbour Commissioners with the contractor we foresee the project beginning in March of this year and being concluded by July 1993. The Minister has dealt with the reasons it has become so important that the development takes place at Belview. This site is four miles down river from Waterford city and was selected after extensive investigation of other locations for its physical, commercial and environmental advantages.

As the Minister pointed out in his speech, the inner port, and in particular the Frank Cassin wharf, from where Bell Lines Limited operate, is fast becoming too small for their operations. The fact that the whole operation can be transferred down river by July next year — if the resolution is passed in the Seanad next week and the Government seal is attached quickly — will mean that the Frank Cassin wharf can be released in the inner port for other activities.

The Minister dealt with the effects of Ireland's peripheral location. We have always made the case in Waterford that we are not as well endowed in the services sector as we should be. Probably the greatest commercial era in Waterford related to the good years in the port. We see that era returning because Waterford port is the nearest port to mainland Europe. As the Minister pointed out the sea journey to either the UK or mainland Europe will be an hour shorter as a result of this new development.

The new terminal will be able to cater for ships of 20,000 tonnes as against 12,000 tonnes — which is the largest ship that can be handled in the inner port — due to the work to be carried out on the sand bars in the river. In addition the ships will be able to turn around. The terminal will comprise an area of 21,600 square metres; a quay length of 450 metres and a low water draught of eight metres. There will also be two container gantry cranes, and railway sidings will be installed in co-operation with Iarnród Éireann with the capacity to cater for the simultaneous loading of four full length liner trains.

Deputy Deasy pointed out how important this development will be to the Waterford area. It will also be very important to the south-east region and beyond. As he pointed out, Waterford is not alone the cheapest container port in this country, it is also the second cheapest container port in northern Europe. As far as I can recall there is a difference of £1 per box between it and Le Havre. The new terminal will shorten the sea journey and also allow for larger ships and this will make Bell Lines rates out of Waterford more competitive.

In the Single Market our peripheral location will dictate that we must cut transport costs as far as possible. I am very pleased with the emphasis in the Minister's speech on Waterford because implicit in it is the recognition that Waterford is the gateway port to Europe.

We would have liked to have seen this resolution before the House sooner but I would like the Minister to outline the Government's proposals. How long will it be before Waterford Harbour Commissioners can go to the European Investment Bank with their State guarantee, as their transactions there are well advanced, to borrow the money to get on with the job?

As the Fine Gael spokesperson on the Marine I join with my colleagues, Deputies Deasy and O'Shea, in welcoming the positive news for Waterford Harbour Commissioners.

Like the Minister, Deputy Woods, I think that Waterford port has an impressive record. The independent evaluation which was required before the Government agreed to guarantee the £10 million for harbour development was very positive about the port's potential and the business acumen of the Waterford Harbour Commissioners. We must pay tribute to Waterford port for having the second lowest costings in northern Europe, second only to Le Havre. This shows that with the right facilities and investment, and presumably good management because that has much to do with it, a great deal can be achieved. The Minister's tribute to Bell Lines Limited in association with Waterford Harbour shows that when we get all these areas working together towards the same end, in a highly competitive area and a peripheral location, business efficiency can pay off. This has a national dimension as well in that the updating of the facilities of this port may enable us to stop the haemorrhage of business to the Northern Ireland ports of Larne and Stranorlar and help us to win back that business. Investment is absolutely essential in all major ports. All of us welcome the vote of confidence in Waterford Harbour which this investment represents. Waterford has been a victim of very high unemployment and everything that can be done to raise confidence and create employment in that area is to be welcomed.

I notice that the £10 million guarantee had to be introduced to this House under the State Guarantees Act, 1954, because the Harbours Acts do not provide for borrowings by harbour authorities to be guaranteed by the State. There will be huge investment in our ports in coming years involving private as well as State money and I wonder if the Harbours Acts need to be amended in order to provide for this type of guarantee. This might be more efficient than having to resort to the State Guarantees Act. There would be legal as well as monetary implications and I would welcome the Minister's response. There may be a reason the Harbours Acts do not facilitate State guarantees.

It if vitally important to invest efficiently EC funds which are coming onstream for the development of Waterford Harbour and other harbours throughout the country. The extent of that investment in the years 1989 to 1993 will be approximately £69 million. The Operational Programme on Peripherality will be of great importance in assisting projects at key ports such as Cork, Dublin, Rosslare, Waterford and other important local ports. One of the ports in the latter category is Dún Laoghaire and I should like to think that some of the £69 million will be invested here. I welcome the Minister's announcement yesterday on the Adjournment that he has received a report on the harbour and that he will be acting with alacrity in relation to it. We always knew that our ports were the gateways for people coming to or going from this country and we now realise that the strengthening of our economy will rely to a growing extent on the efficacy of those ports and the efficient use of investment to increase productivity there. All my support is for the investment in Waterford but I would include the need for development of facilities at Dún Laoghaire. Let the work commence.

I thank Deputies for their comments and for their support, which is very understandable in the circumstances. This is a major development and I am promoting it as urgently as I can. The fact that we are here today is proof of that. I am grateful to the Whips for the opportunity to get this resolution through the House and to follow up with a resolution in the Seanad next Wednesday. It will be recognised that we are losing no time. I assure the House that the Government will sign the guarantee immediately after the passage of the resolution through both Houses. The Waterford Harbour Commissioners will then be in a position to finalise their funding agreement and we will do everything possible to assist. The commissioners will be able to award contracts and get on with the work and by the summer of 1993 this project will be in operation. That is a very short time-scale for such a major project. We are perhaps inclined to forget that it involves 450 metres of quayside, as well as road linkages and offices. This major development is very welcome in the area.

Deputy Deasy asked about the risk analysis study. The study was a condition of Government approval of the guarantee. The House will recognise this as an essential element in the Government's control. The study was completed within four weeks of being awarded to Coopers and Lybrand and was received by my Department on 14 February. It has been assessed and accepted that the study gives the assurances required from the financial point of view and we are able to move ahead very speedily with the implementation of this guarantee.

I was asked by Deputy Barnes about using the 1954 Act and whether the Harbours Acts could be used instead. A commercial harbours review group are at present in session and if they have not considered this to date I will ask them to bear it in mind in their considerations.

The emphasis today is on the commercial viability of the ports and harbours. This is an exceptional measure for a very large project, a fresh undertaking. Nonetheless, there is always the question of having the enabling power in the appropriate place and I will ask them to look at it. I expect they will be in a position to report to me in a short time on the much wider question of commercial harbours generally. Deputy Deasy stressed the importance of Waterford as a container port and its standing in European terms. I know the channel very well. It is a slow channel in which particular care has to be taken. As you emerge from Waterford you are well down stream at Cheek Point. This will allow for a much speedier operation in the port — a faster turnaround and a shorter time in getting to our export markets.

I think I have answered the point made by Deputy O'Shea in relation to where we go from here: this motion will go to the Seanad immediately, and we can then proceed with the implementation of the project, which I am very anxious to see under way. The Deputy can be assured we will work urgently on all aspects to ensure that that happens. We have facilitated the commissioners in a number of ways in the interim but this is the crucial step.

I thank the House for the support they have given here today for this development and wish those involved every success in bringing it to a conclusion.

Question put and agreed to.