Dáil Éireann debate -
Tuesday, 30 Mar 1993

Vol. 428 No. 5

Gas (Amendment) Bill, 1993: Committee and Final Stages.

Sections 1 and 2 agreed to.

SECTION 3.

Mr. Cullen

I move amendment No. 1:

In page 2, line 29, to delete "a condition" and substitute "conditions".

Why is the Minister limiting himself by inserting the words "a condition". Surely it would be more correct to substitute those words, as the amendment suggests, with the word "conditions" because of the eventualities that could arise. Can the Minister explain the reason he is limiting himself by specifying "a condition" as opposed to "conditions" when it is obvious that a number of different conditions could arise?

Minister of State at the Department of Transport, Energy and Communications (Mr. N. Treacy)

I do not visualise any difficulty with the terminology in the Bill. The Deputy will agree that the word "condition" can include "a condition" or be comprehensive enough to include conditions or sub conditions. The singular condition already includes the plural, conditions. The words "a condition" are in themselves capable of being comprehensive. To insert the word "conditions" in paragraph (a) on page two, line 29, and have the words "a condition" in paragraph (b) on page three would be incongruous and conflicting. We must be consistent in the words we use. We have been consistent in what we have done and if we accept this amendment there will be conflict and inconsistency. Therefore, I would be grateful if the Deputy would withdraw his amendment.

Mr. Cullen

I do not agree with the Minister. It is a moot point. The word "conditions" better reflects what is intended in the Bill and would be more correct in its application. The Minister's explanation is not satisfactory or correct and I ask him to reconsider this amendment. This is not a play on words but a question of getting the wording in the Bill as correct and as accurate as possible. The insertion of the word "conditions" instead of the words "a condition" would be more satisfactory.

Amendment, by leave, withdrawn.

Mr. Cullen

I move amendment No. 2:

In page 4, line 15, after "notice," to insert "or".

There is a gap in that section and it would be more appropriate to insert the word "or". I am sure the Minister will be able to accept this amendment as the word "or" is common in most Bills in this context.

Mr. N. Treacy

I am sure the Deputy will agree that if we include the word "or" the Minister would have to make a choice between the two paragraphs and that would be unwise. We must allow for flexibility and the maximum consideration of any option or options that a Minister may wish to pursue. I am satisfied that his amendment is not necessary. It could reduce the options available to the Minister, who may wish to send a notice dealing with the subject matter of paragraphs (a) or (b) or both. It would be unwise to limit the options available to successive Ministers. Consequently I regret I will not be able to accept the amendment and would be grateful if the Deputy would withdraw it.

Amendment, by leave, withdrawn.

Section 3 agreed to.

SECTION 4.

An Leas-Cheann Comhairle

Amendments Nos. 3 and 4 are related and may be discussed together.

Mr. Cullen

I move amendment No. 3:

In page 5, line 4, to delete "£350,000,000" and substitute "£300,000,000".

I mentioned my concern in regard to this matter on Second Stage and many other Deputies did likewise. In the Minister's reply to Second Stage he indicated that the project will cost £290 million. As yet I have not got a satisfactory answer from the Department of Energy or from the Ministers who have spoken on this Bill as to why the figure mentioned in this section should be £350 million. An unnecessary amount of space is being created in the context of the moneys being made available and this is unnecessary. Likewise in section 5 the borrowings that can be guaranteed by the State have been increased from £80 million to £190 million. Will the Minister explain why those figures are necessary in the short to medium term? They may be necessary in the long term, but I dislike the principle of making available massive State borrowings to companies in the first instance. That is not necessary.

On Second Stage I questioned also the matter of State guarantees, which is running a little awry. There is a comfort factor involved for commercially viable companies who are legitimately involved in commercial projects and BGÉ and the gas pipeline project are commercially viable. Here again the funding must be guaranteed by the State and that comfort factor has become the be all and end all of projects in this country. This is unwarranted and a change of direction in this regard is urgently required.

I am not satisfied that the figures in the Bill are what are required and the reduction proposed in this amendment more than adequately covers anything the Minister has said in regard to what BGÉ requires to satisfactorily complete this project. The figures of £300 million and £150 million are substantial by any yardstick and the Minister should accept these amendments. They have been put down in good faith and do not limit the scope of the company or the project. Far too much room is being given for further borrowings which might not necessarily be questioned by this House and which would create a necessity for further enabling legislation to be introduced. This House should have the opportunity to discuss in detail any further projects or change in direction that BGÉ undertakes. I am concerned why the figures are so large. The amendments should be accepted by the Minister.

Mr. N. Treacy

We must differentiate between what is proposed in these two amendments. Amendment No. 3 allows Bord Gáis Éireann a borrowing capacity of £350 million and amendment No. 4 covers a State guarantee up to a maximum of £190 million. Consequently, State exposure in regard to the £350 million borrowing would be £190 million, not £350 million and I do not believe one can say that figure is abnormal. Bord Gáis Éireann must operate on commercial criteria and must have certain flexibilities. We must allow it respond to opportunities in the marketplace and operate under commercial criteria. We cannot tie its hands whereby it is structured to a State guarantee of £190 million and allow it operate under commercial criteria. The commercial criteria allow it to have a borrowing capacity up to £350 million and the State exposure is only £190 million. We are satisfied that Bord Gáis Éireann has no more leeway than it needs in regard to the figure of £350 million. This will be a fairly tight financial fit when borrowing for the interconnector is put in the context of existing borrowing and working capital requirements, even taking account of the European Community grants. Bord Gáis Éireann must have room to manoeuvre in the event of those grants being late. For example, if the total contract is £290 million, with a grant element of £90 million, and the contract moneys are due before the grant is sanctioned, the company will be exposed to honouring its financial responsibility and contractual obligations. This will lead to exposure in excess of £300 million at least and we must legislate for that.

On the second amendment, I emphasise that the margin will be tight between what Bord Gáis Éireann will be allowed and what its exposure could be. Bord Gáis Éireann has existing loan commitments and must deal with this major project. When the devaluation of existing Deutsche Mark and ECU loans is added the total exposure would be greater than £180 million. There is no further room for manoeuvre in this area. We have to take into account existing commitments — the contractual commitments in regard to the gas interconnector and the commercial criteria under which the company must operate. We have to allow the company the flexibility which is vital in regard to this major contract, a new dimension. The figures proposed are tightly based to allow the company flexibility, enable it to meet its contractual obligations and ensure that the commercial viability of the company is protected. These figures have been recommended and agreed and, consequently, I regret that I will not be able to accept the amendments.

Mr. Cullen

I do not necessarily disagree with any of the remarks made by the Minister in regard to commercial viability — every company has to operate on the basis of commercial viability. However, the Minister seems to be saying that a company cannot be viable unless the State guarantees its borrowings. In effect, that is what is being said here. I do not accept this point. It would be tremendous if every company operating in the commercial sector was able to make all its decisions based on the fact that no matter what it did the State would effectively guarantee a substantial portion, if not all, of its borrowing.

The point I am making is that the entire principle of State guarantees needs to be looked at by the Government. It is clear from various pieces of legislation dealing with a whole raft of semi-State operations that before we know what has happened the borrowing limits have been reached. If the limits had been set lower in the first instance we may have had the opportunity, when things went wrong in various companies, of coming into the House at an earlier stage to look at the problems and perhaps have a better chance of solving them. I am not suggesting that this is what is definitely going to happen in this case, but we have enough examples of where it has happened.

We need to be very conscious of the scarce resources available to the State and seek at every opportunity to minimise State involvement by ensuring that the figures are cut to the absolute minimum. I do not accept that the State exposure proposed in the Bill is necessary. The figures could be reduced to those proposed in the amendments which are reasonable and would still allow for flexibility within the company, to which the Minister correctly referred. I do not think these figures would hamper or hinder the development of the company or the projects in which it is involved. I ask the Minister to think again about these figures.

Mr. Ferris

I would be concerned if we were to follow Deputy Cullen's logic to a conclusion. I welcome this legislation, which is supported by the House. These figures were not pulled out of the sky to satisfy any particular lobby.

Mr. Cullen

I never suggested they were.

Mr. Ferris

These figures, which were suggested by the industry, were regarded as necessary if the job was to be carried out correctly. It is appropriate that the State should be involved in this type of project. Bord Gáis Éireann was set up by the State to do a particular job and it needs the comfort, as Deputy Cullen calls it, of knowing that it can do its job and that legislation is in place to protect it. If the company overspends, the Bill will have to be brought back before the House. The amounts proposed are regarded, optimistically, as those which will be required. The logic put forward by Deputy Cullen in the House is contrary to what he has said in public at meetings of Aer Lingus workers and others.

Mr. Cullen

It is not.

Mr. Ferris

He can make a contrary argument to the Public Gallery at any given time. We are talking about a legitimate and specific project which has been identified and quantified. These amendments were put down just for the sake of putting down amendments and to give the Deputy the opportunity to debate the philosophy of the Progressive Democrats, who believe that all the books can be balanced at reducing figures. The Progressive Democrats accused the Labour Party of being "taxers" and "spenders".

Mr. Cullen

The Labour Party proved that in the budget; it did not need me to prove it.

Mr. Ferris

I could accuse the Progressive Democrats of being "cutters and reducers".

Mr. Gallagher

(Laoighis-Offaly): Thatcherites.

Mr. Ferris

Yes, although it may not be an appropriate parliamentary——

(Interruptions.)

Mr. Ferris

The reality is that this is a legitimate figure put forward by the industry, which I commend. The figure was not pulled out of the sky. The Minister has our full support for the figures proposed in the Bill.

Mr. Cullen

I wish to clear up a point. I support this Bill. If we, as politicians and legislators, were to take at face value every figure put forward by various industries the state of the public finances and borrowings would be a hell of a lot worse than they are. I am legitimately entitled — indeed it is part of my duty — to question to the greatest possible degree why any Government should do anything, particularly when it comes to spending public money. It is my right and duty to do this——

Mr. Ferris

The Deputy's party spent £100 million more last year than it intended.

Mr. Cullen

——and it is the Deputy's right to question me. To suggest that I question these figures merely because I wish to make some philosophical point——

Mr. Ferris

The Deputy has not given any reason.

Mr. Cullen

The reason I question these figures is because I am not satisfied that what the Minister has said either here today——

Mr. Ferris

The Progressive Democrats Party is not satisfied.

Mr. Cullen

I am dealing with the Bill and I will speak for myself and my party when I am here. I am not satisfied——

Mr. Ferris

It is Deputy O'Malley's amendment.

Mr. Cullen

Is the Deputy trying to split hairs now?

An Ceann Comhairle

We are dealing with the Committee Stage and, while interjections are in order, we could do so in a more formal way.

Mr. Cullen

Thank you, a Cheann Comhairle. If I was not being baited by those on my right it would probably be easier to achieve that.

Mr. Ferris

It would be hard to be on the right of the Progressive Democrats.

Mr. Cullen

The Labour Party has taken a major step in that direction during the past few weeks.

Mr. N. Treacy

A step to longevity.

Mr. Cullen

There is another answer to that. These amendments take into account the need for us to come back into the House to look at further developments in this company, if the State is to be responsible and has to carry the can. These amendments will give the company plenty of room and flexibility and will allow for all that the Minister and the company may wish to happen in the near to medium future.

Mr. N. Treacy

I could not agree with Deputy Cullen that we should come back into the House to consider the figures. Neither financial nor political management would allow for a situation where, if we were to restrict a company to a figure below that which is proper and required by it to carry out its mandate and carry out a major project, we would have to bring legislation back before the House to increase either the borrowing requirement or the State guarantee. The financial markets would be dictating other types of policies, and we would not be giving flexibility to any company in terms of financial management if legislation had to be brought back before the House. There is a clear demarcation between what is proposed here. On the one hand, we are giving the company the right to increase its borrowing requirements up to £350 million, while on the other hand we are only exposing the State to £190 million——

Mr. Cullen

Only?

Mr. N. Treacy

When one compares the figures it puts the matter into context. I concur entirely with the points on this matter made by Deputy Ferris in his excellent contribution.

Mr. Cullen

No doubt.

Mr. N. Treacy

He always makes very good and practical contributions.

Mr. Cullen

The Minister was not saying that last year.

Mr. Ferris

Deputy Cullen was not in a position to say anything in the House last year.

Mr. N. Treacy

Deputy Ferris and I have been in this House together for ten years and we have always argued our points and been able to achieve a consensus in the interests of the people we represent.

Mr. Cullen

I am delighted to hear that.

Mr. N. Treacy

That is our record and if the Deputy looks back on our records both in the Seanad and Dáil he will see that we were able to do our business. The point is that where there is a State guarantee on the borrowing, the semi-State company involved can get major financial help from the European Investment Bank and others at very reasonable rates of interest. If they have to come back to the House to increase that guarantee, it may be that the rates have changed, that it is not possible to do business or that the cost of the project has increased. We have taken into account the cost of the contract, the company's present liabilities and operations, the major exposure it might have, its financial capacity and requirements and the necessity to guarantee the funds it needs up to a certain figure based on what we see as the maximum required at any particular time and taking that against the commercial criteria on which the company is based. The two figures we have put up are prudent and reasonable for the commercial viability of the company. Contrast that with other semi-State companies here who have a 100 per cent State guarantee for their borrowing. We have been very reasonable, very careful and we acknowledge the very great contribution made by the BGÉ in its very short life.

In this new project it is extending its operations very much. We cannot restrict those operations or leave the company with one hand tied behind its back. This company will make a major contribution to our economic and energy policies in the years ahead. It is necessary that we take these positive decisions and I would like the House to be unanimous on them so that we can give this company a clear vote of confidence in regard to what they are doing in the interests of our country.

Amendment, by leave, withdrawn.

Section 4 agreed to.

SECTION 5.

Amendment No. 4 not moved.

Section 5 agreed to.

Section 6 agreed to.

Title agreed to.

Bill reported without amendment.

Question proposed: "That the Bill do now pass."

Minister of State at the Department of Transport, Energy and Communications (Mr. N. Treacy)

I want to thank the Deputies for their contributions on all Stages of the Bill. I enjoyed the contributions and am very grateful for the co-operation I received. We have made a very good decision in the interests of our country.

Question put and agreed to.