Dáil Éireann debate -
Wednesday, 19 Nov 1997

Vol. 483 No. 1

Turf Development Bill, 1997: Second Stage.

Minister for Public Enterprise (Mrs. O'Rourke)

I move: "That the Bill be now read a Second Time."

It is a very special honour for me to introduce the Turf Development Bill, 1997 to this House. It is without doubt the most important legislation in relation to Bord na Móna since the original legislation establishing the board was passed by this House just over 50 years ago.

Bord na Móna was established under the Turf Development Act, 1946 as a statutory corporation. The company is governed by the terms of that legislation but is not subject to the general body of company law which has been developed over the past 30 to 40 years. As a commercial company now operating in highly competitive markets, it is desirable that Bord na Móna should be reconstituted as a public limited company under the Companies Acts. This Bill provides that the general powers and duties of the board outlined in the 1946 Act will continue to apply. However, as a company under the Companies Acts, Bord na Móna will be subject to all of the legal obligations and responsibilities that apply under general company law.

Before speaking in detail on the Bill, I would first like to speak about the history of Bord na Móna, the strategic role peat plays in Irish energy policy and the recent turnaround in the fortunes of the board.

Bord na Móna was born out of the scarcities and privations experienced by this country during the last world war. The company came into being just over fifty years ago on Friday, 21 June 1946 when the first board held its inaugural meeting in the company's head office in Fitzwilliam Square. One can imagine the Ireland of that time, the privations of the war, the fact that we had a policy of neutrality which left us in a critical situation vis-a-vis isolationism, the general sense that times were tough, the courage required to set up the board and to see that there was a huge source of energy and potential commercial viability under our feet to be harvested.

The board was charged with responsibility for developing Ireland's bogs and the 1946 Act gave it the necessary powers to perform this work. Its goal was clear-cut — to provide Ireland with an indigenous energy supply. However, achieving this was not so simple. It was in many ways a huge leap of faith. Heretofore, turf gathering had been done locally by people using their own methods. Those of us from the midlands or where there are bogs remember happy times bringing home the turf and the associated enjoyment. One did not work very hard if one was young but one certainly enjoyed the whole experience. Those times seem tranquil in retrospect, but living through the privations of that time was not at all easy. The scale of the operation to be tackled dictated that sod peat production had to be mechanised. The production and use of peat in Russia and Germany were studied and new machine technology was developed. Large tracts of bog had to be acquired and extensively drained and new work systems devised to undertake the sod peat production work.

Sod peat was used to manufacture briquettes at Lullymore and for electricity generation at Portarlington and Allenwood. In the 1950s the board changed over to milled peat to supply the new power stations at Rhode and Ferbane and this necessitated radical changes in drainage systems, technology and work systems. All of these were developed in-house by Bord na Móna. It sounds easy to go out to the bog and harvest turf, but the huge scale on which it had to be done, the systems of drainage, technology and engineering, demanded not just physical strength, which it did in abundance, it also required creativity. One does not think of that when one thinks about a solid matter such as a bog and the saving of turf.

The board began to export moss peat to the UK in the 1960s and the household fuel market was targeted in a major way by building Croghan and Derrinlough briquette factories. By the late 1950s Bord na Móna was producing over two million tonnes of peat per annum and had firmly established itself in a pioneering role in this field. Its mission was to develop Ireland's extensive peat reserves as a strategic energy source. That mission brought significant social and economic benefits to the areas where the operations of the board were concentrated.

With a turnover of £240 million, Bord na Móna is today one of Ireland's top 100 companies. Since its establishment, the board has acquired and developed about 88,000 hectares of bogland. It supplies peat to five power stations, to a large number of Irish homes in the form of peat briquettes and produces and markets horticultural products to many European states. Since its inception Bord na Móna has designed and developed its own peat production machinery. The company, through its research and development expertise, has also developed pollution abatement systems using peat, and it is also provides consultancy and analytical services. I noted with great interest when I visited the company's headquarters the pioneering research that is being done there which, in a modern sense, represents a further act of creativity which does not replicate the earlier work. The young people who are carrying out the new research represent further steps forward for the company. The value of peat was particularly noticeable during the oil crisis of the 1970s and 1980s when it was cheaper than oil — it was significantly cheaper at times — for many years. While I hope we have left those days behind us recent events have given rise to fears that the same could happen again.

Security of supply is also one of the main planks of the European Union's energy policy. The EU recognises the need for diversity of fuel supplies and has accepted that account must be taken of the need to develop indigenous energy sources. This is best illustrated in the recently adopted EU Electricity Directive which provides that 15 per cent of the fuel mix used in electricity generation can be reserved for indigenous sources.

Bord na Móna is of major importance to the areas in which it operates. Peat production by Bord na Móna and the associated ESB electricity generation business create significant employment, with corresponding social and economic spin-off, in the regions concerned. With more than 2,000 employees, Bord na Móna is a major employer and contributes enormously to the local economy, particularly in the midlands. I do not wish to take from the Fine Gael spokesperson, but those of us reared in midland areas where there is much bog know the frisson which runs through a community—

Mr. Kenny

The same applies further west.

Mrs. O'Rourke

And further south. At the Fianna Fáil parliamentary party meeting today midland Deputies were told they were not the only ones who knew about bogs.

Mr. Stagg

I am sure Deputy Yates often had turf mould under his finger nails.

Mrs. O'Rourke

I am sure he experienced all the fun that went with it too.

Mr. Yates

Not in County Wexford.

Mrs. O'Rourke

However, he is concerned about a different type of turf now.

Mr. Yates

That is true.

Mrs. O'Rourke

The physical geography of much of the midlands is dominated by large tracts of bog which are the only natural resource of any significance. As a consequence, the region and, in particular, the many small towns and villages which rely almost exclusively on Bord na Móna and ESB activities are vulnerable to any run down in the peat economy. The Government is committed to ensuring that the country continues to have a dynamic peat industry and a viable, financially secure and fully commercial Bord na Móna.

The future of Bord na Móna is based on four main pillars. The first is the successful restructuring that has been undertaken by the company over the past nine years or so. We all remember the large meetings held at Rochfortbridge and other places during the time difficult decisions had to be taken by the workers and management. The second is the investment by the State of £100 million of equity into Bord na Móna and the restructuring of the company. The previous Government took the decision to inject this equity into the company and I was glad to follow it up this year, with this Bill. The third is the planned construction of the new state of the art peat fired power station. I will deal with this in greater detail later. The fourth is this legislation which will give Bord na Móna a modern company configuration.

The board has gone through a major rationalisation programme in recent years. This programme was unavoidable. By the late 1980s production levels continued to fall and the financial performance was poor. Long term issues which had to be addressed included the continuing cost of servicing loan capital and the level of overheads which were a legacy of older times.

The rationalisation process which ensued was enormous. The new self-directed work teams which were introduced allowed for maximum flexibility and resulted in greatly improved productivity levels. The new work systems allowed workers to be rewarded on the basis of output, efficiency and the quality of peat they produced. This innovation, coupled with significant investment in modern machinery, designed and built for the most part by Bord na Móna, has resulted in an 80 per cent increase in productivity since 1988. Virtually all milled peat is now produced by work teams and the concept of team-based and performance-related pay has been transferred into other areas of activity.

It is only right that I publicly acknowledge the great work done by the management and workforce of Bord na Móna in turning the company's fortunes around. Difficult decisions had to be made and Bord na Móna was the first of the State companies to engage in such a major process of change. As a result, the corporate culture has undergone rapid transformation. All this culminated in a clear understanding throughout the organisation that Bord na Móna was changing.

Despite the successes of the rationalisation process, Bord na Móna continued to be in a very serious financial situation. This brings me to the second plank on which the future of Bord na Móna is based — the decision by the State to address directly the board's historic debt problem. At the end of the financial year 1995-6, Bord na Móna still had total borrowings of almost £170 million and a negative net worth of more than £60 million. During the 1970s and early 1980s peat was cheaper than competing fuels. As a result, Bord na Móna undertook a series of investments to increase the use of peat in the national energy mix. This series of investments, known as the third development programme, involved total investment of approximately £164 million over a number of years. The investment involved, among other things, building two new briquette factories and the development of large areas of bog.

While the third development programme resulted in increased utilisation of peat, it failed financially. The programme was predicated on oil prices remaining high for a long period. However, the collapse in oil prices in the mid-1980s resulted in serious financial losses for Bord na Móna. Some of the investments made at the height of the oil crises became non-viable and the board had to engage in a major write-off of assets during the period 1985-89.

The third development programme was funded entirely by borrowings, much of them at very high interest rates. Following the write-off of assets, the majority of the board's debt became unsustainable from a commercial point of view. Despite the benefits of the rationalisation process and a return to profitability, Bord na Móna still had an inordinately high level of debt and a negative net worth in 1993. Financial consultants engaged that year by the board to look at financial restructuring reported that £126 million of the debt was unsustainable.

In 1995 the previous Government decided to address the board's debt problem directly through an injection of equity. I pay tribute to Deputies Dukes and Stagg and the departmental officials for working through the complex issues, compiling the memorandum for Government and seeing it through. That decision had two advantages. First, it restored Bord na Móna's balance sheet to commercial normality and complemented and completed the successful operational rationalisation which had been taking place within the company since 1989. Second, it responded to the need for transparency in dealing with Bord na Móna's debt. The equity provided and the removal of the historic debt will facilitate a commensurate reduction in the price of milled peat sold to the ESB and will bring to an end the current indirect method of servicing the unsustainable debt. The reduction in the price of milled peat as a result of the State investment will lead to a saving of approximately £14 million per annum to the ESB. I hope the company passes this on to consumers by way of lower charges.

The decision to invest equity in Bord na Móna had to be cleared with the EU Commission from the State aid perspective. The Commission had received complaints during 1995 that Bord na Móna was in receipt of State aid which was being applied in a manner incompatible with the Treaty of Rome. The essence of the complaints made by competitors of the board in the horticultural field in other EU states was that the existing pricing arrangement with the ESB for milled peat for electricity generation and the proposed Exchequer equity would give rise to cross-subsidisation of the board's horticultural business, thus distorting competition on the European horticultural market.

After an exhaustive examination, which took almost two years to complete, the Commission accepted in December 1996 that the equity proposal and the existing pricing arrangement with the ESB were designed to deal solely and directly with the unsustainable debt and that there was no cross-subsidisation. The Commission did, however, identify the absence of a premium on the State guaranteed loans of the board's horticulture business as possible State aid. The then Minister gave a commitment to withdraw the State guarantees and to seek reimbursement from Bord na Móna of an amount equivalent to the estimated benefit involved. A sum of £875,000 was paid to the Exchequer by Bord na Móna earlier this year in full, final and retrospective settlement of the amount due.

As part of the settlement of the case, the then Minister undertook to bring forward legislation for the incorporation of the board's different business activities as separate legal entities to protect against future cross-subsidisation. The current legislation meets that undertaking and Part III of the Bill provides specifically for the establishment of the different business activities of Bord na Móna as separate subsidiary companies under the Companies Acts.

Following EU clearance, a first injection of equity amounting to £49 million was paid to the board late last year and a further tranche of £51 million was paid about two months ago. That was commensurate with the early introduction of the Bill and of great assistance to Bord na Móna. This latest injection brings the total Government investment in Bord na Móna to £100 million. The company is now on a sound financial footing to meet new challenges. I emphasise, however, that the Government investment, which is taxpayers' money, is not a free gift to Bord na Móna. One of the strict conditions attaching to the equity injection is that Bord na Móna reduces its price of milled peat sold to the ESB, thus providing a saving of about £14 million per year. Paradoxically, while that is very good news for Bord na Móna, there will be an obligation on the company to reduce its price. That is a new challenge which it will have to face. As well as having financial benefits, the removal of the huge financial overhang, which must have been a nightmare to those serving on the board, to management and staff, will also be a relief psychologically.

The planned construction of the new 120mw peat fired power station represents the third pillar of support. Bord na Móna needs to achieve minimum sales of three million tonnes of milled peat per annum over the next ten years. Current projections show that the annual quantities of milled peat expected to be consumed by the ESB will decline sharply over the next two decades, from around three million tonnes currently to a little over one million tonnes. On this basis, Bord na Móna would be unable to generate sufficient revenue from sales to remain viable. The only realistic means of dealing with the situation is for Bord na Móna to increase sales in the medium term and the current proposal for the construction of a new power station will achieve this through an increase in peat consumption of around one million tonnes annually required for the new station. The commissioning and building of the new station, therefore, is critical to the future of Bord na Móna.

The new station is included in the National Development Plan 1994-9 and the EU Commission has agreed to make available £21 million in Structural Funds. There was some speculation earlier this year that this funding might be lost. One of the key priorities of the new Government, as identified in our programme for Government "An Action Programme for the Millennium", is to ensure this funding is secured. I am pleased to inform the House, therefore, that the Commissioner has confirmed to me that expenditure incurred up to the end of 2001 will be eligible for co-financing under the Structural Funds. I am confident this timeframe will allow us to draw down all the grant.

At present all power stations in Ireland are owned by the ESB. However, the new station is currently the subject of a competition on the open market on a "build, own and operate" basis. The competition is now well under way and is being run by a consortium of independent consultants. All aspects of the competition are in the hands of the consortium to ensure transparency in the competition process. The competition was launched last March and the prequalification phase, which identified five shortlisted candidates, was completed in June. The competition is now in its second phase and the shortlisted candidates are in the process of finalising their full bids for the project. It is expected that the preferred bidder will be announced early next year and the competition will then enter the detailed negotiation stage. In parallel with this, it is expected the winning bidder will apply for planning permission and an EPA licence with a view to engineering-construction phase commencing in early 1999. The consortium estimates that the station will then take about two and a half years to construct.

The station will be located in the east midlands where there are sufficient resources of peat to supply the station for many years. Bord na Móna has identified a site at Clonbullogue, County Offaly, which is available to bidders should they so desire. Ultimately, however, it will be a matter for the successful bidder in the competition to decide the exact location. The station will have a major impact on employment in Bord na Móna. The necessary work in the preparation of the bogs and in peat extraction work will support 250 full-time and 250 part-time jobs in the company over the lifetime of the station. In addition, approximately 450 people will be employed at peak times in construction of the station. The local economy will benefit significantly from the new station. Studies carried out on behalf of Bord na Móna have estimated that there will be a direct income impact of £19 million during construction and £8 million per annum during operation of the station.

The new station will be subject to full planning and environmental requirements. It will be of the latest "state of the art" design, use the most modern technology and will be substantially more efficient than the existing peat power stations. The new station will give rise to a temporary increase in emissions of CO2 from peat stations but there will be a progressive reduction in CO2 emissions from peat in the years ahead as some of the existing older peat stations come to the end of their operational lives.

The organisational restructuring, equity injections and new peat station together provide Bord na Móna with a firm foundation to safeguard its future viability. However, the final ingredient required to further strengthen the board's future prospects is the legal restructuring of the company to provide it with a new, modern corporate structure. My objective in introducing this Bill is to provide the board with this new structure. The basic purpose of the Bill is to give Bord na Móna a modern company configuration of the kind required by such a company. The Bill provides for the conversion of Bord na Móna from a statutory corporation to a public limited company and for the incorporation of Bord na Móna's individual business activities to limited liability subsidiaries. The Bill also allows for the injection of further equity to the new plc as well as updating certain miscellaneous provisions.

I am continuing the fine work carried on by previous Ministers and thank them for their efforts in that regard. I have strong local knowledge, based on constituency and local work over the years, of the work of Bord na Móna and I am very interested in it. About three months ago I visited Bord na Móna and met each member of the board. I was greatly impressed by the communion of spirit that exists between all who work there. There was a lack of the "them and us" attitude and a great belief in sharing of challenges and commitment to Bord na Móna. That was very evident in the operation of the company. That belief originated from the challenges the company has had to meet and prepares it for the fresh challenges it faces. Many people who work in Bord na Móna are the families of those who were the pioneers of the company. There is a belief that the staff are doing a worthwhile job, which is the nation's business because they are using a native resource, albeit in a modern way. That is good for those who work in the company who, in general, have managed to rise to major challenges.

I will be pleased to consider amendments on Committee Stage and I have arranged to meet the main union representative. I presume there will be a lapse of time between Second and Committee Stages during which I hope to meet members of the board to consider any lacunas that may arise and rectify them on Committee Stage.

The Bill is essentially the same as that introduced by Deputy Dukes when he was Minister. Deputy Stagg had a strong input into that legislation and I was pleased to be able to incorporate an essential change made by Deputy De Rossa which was recorded on the files in the Department. Major challenges face the company in the future, but I am sure they will be successfully surmounted.

Sections 1 to 5 contain standard provisions in legislation, for example, short title and collective citation. Sections 6 to 11 provide for the formation of the new company, Bord na Móna public limited company, and for the assignment to this company of the functions of the existing Bord na Móna statutory corporation. Sections 12 to 17 provide for issuing shares in the company and for further issuing shares to the Minister for Finance. Provision is also made for issuing a share to me and to each of the subscribers to the memorandum and articles of association who shall hold the shares in trust for the Minister for Finance. Sections 18 to 20 provide for the appointment by me, with the consent of the Minister for Finance, of the chairperson and directors of the board of the new company. Section 21 is an enabling provision for the further injection of equity, not exceeding £10 million, into the new company to be used by it for the sole purpose of repaying debt. Sections 22 and 23 include a number of standard general powers, including confirmation of the powers of borrowing. Sections 24 to 25 are standard provisions relating to the keeping of proper accounts and the appointment of auditors.

Section 26 deals with the managing director. The existing 1946 legislation provides for the appointment of the managing director by the Government, but it is now common practice for boards to appoint managing directors. Section 26 provides that the existing managing director will become the managing director of the new company for the residue of his term of appointment. Thereafter, each subsequent managing director may be appointed and removed by the directors of the new company. I hope that will not happen. Sections 27 to 33 are in the main standard provisions relating to remuneration of staff, disclosure of interests by directors, prohibition of unauthorised disclosure of information and provisions governing directors or staff who become Members of either House of the Oireachtas or the EU Parliament. Sections 28 and 29 update the existing superannuation powers of the board to provide, inter alia, for modern pension schemes.

Sections 34 to 40 provide for the establishment of Bord na Móna's business activities as separate limited liability subsidiaries under the companies Acts. This fulfils the promise to the EU made by the then Minister, Deputy Dukes. The four business activities are the peat energy division, the horticulture division, the solid fuels division and the environmental products division.

Overall, therefore, the board has one division supplying milled peat under contract to the ESB for electricity generation purposes. The remaining three business activities are "open-market" activities. Each of these individual businesses will be established as a separate subsidiary company and effectively will have to operate as independent entities, without any cross-subsidisation. That has come about because of the proposed action under "State aids". Section 41 deals with share capital.

In line with our programme for Government, these provisions represent a pragmatic, rather than an ideological, approach which recognises the highly competitive environment in which much of Bord na Móna's activities take place. The board is anxious to have the necessary flexibilities to respond to the commercial realities of the marketplace.

Sections 42 to 44 provide for the appointment and terms and conditions of the chairpersons and the directors. The boards of the subsidiary companies will be primarily concerned with the day-to-day operation of the businesses and implementation of group policy. Sections 45 to 55 deal with standard provisions. Section 56 provides that, in carrying out its activities, the new company must afford appropriate protection to the environment and archaeological heritage. Section 57 provides for the dissolution of Bord na Móna's statutory corporation on the vesting day of the new company. Sections 58 to 62 also deal with standard provisions.

The new corporate and legal structure proposed is fully in line with the philosophy advanced in the Culliton and Moriarty reports, which recommended incorporation under the companies Acts as the general model for commercial State enterprises. Bord na Móna is one of our older State bodies. It has evolved from being a producer of peat for electricity generation and of sod peat for home heating to a company which has developed successful applications for peat in the area of horticulture and environmental control. In 1995 the company successfully acquired the assets of Coal Distributors Limited. It remains a significant player in the domestic heating market. The future viability of Bord na Móna's constituent businesses require that they have the same commercial flexibilities as their competitors and the same ability to exploit any commercial opportunities that may arise.

The Bill will complement and complete the major changes which have taken place within Bord na Móna in the past ten years and lay the legal basis for its further development in the next millennium.

I extend to the company my warmest wishes on its developments to date and wish it every success in the future.

Mr. Yates

My party supports the legislation. In Government we prepared the heads of the Bill and in 1995 we agreed to the investment of the equity to which the Minister alluded. This is not a contentious Bill in that sense.

I am one of the few Deputies who will speak on the Bill who is not from the midlands.

Mrs. O'Rourke

From bog country.

Mr. Yates

Many members of my party will speak from a constituency perspective. This gives me more latitude to cast a colder and harsher eye on the enterprise than those who need the votes of people who live in the midlands.

I carry no baggage on the issue. I have not had many dealings with Bord na Móna although I have had a number of meetings with its management in Newbridge and found them extremely open and courteous. The more I delve into this area of public enterprise, the more I realise one must approach it with some concept of the role of the State and shareholders in such matters. Is it the same as an ordinary shareholder, pension fund holder or equity investor? What are the normal elements one expects? It is not unreasonable to have a commercial focus for the sake of the company's success so that it might grow abroad, return a dividend and be efficient and competitive. This is not an ideological position — the company should succeed whether in State ownership, as a joint venture or in private hands. It is with this analysis that I view this legislation.

The last decade has been a horror story for Bord na Móna. If one looks at the balance sheets and the cumulative figures, one sees that the debts peaked at £187 million in 1991. In 1989 the company lost £91 million, which is extraordinary by any standards on a turnover of £119 million. I appreciate that written into that is an accumulation of difficulties. I do not wish to attach blame to any particular Government, Department, board or management. I have no agenda in that regard. I am simply examining the figures as presented. When I examined what we got for the £90 million lost I found that we developed bogs and other facilities at Ballyforan, for example, yet there are no plans to cut the turf. There have been serious errors of judgment. Some 3,500 jobs have been lost. One might have argued that the expenditure was justified if it had sustained employment but, as the Minister pointed out, there has been a transformation in the employment in Bord na Móna.

In terms of examining the cause 1986 is a pivotal point in time when the price of oil collapsed. It changed fundamentally the economics of milled peat as an energy source. It is instructive to examine the figures for the comparison between heavy fuel oil and milled peat before and after the oil crisis. In the period 1974-85 in terms of the differential between milled peat and heavy fuel oil paid by the ESB, it gained £295 million. Since the oil crisis the figures are staggering. If the ESB had decided that it wished to use heavy oil only — never mind coal, although the ESB has told me that it has twice the efficiency at Moneypoint — it would have saved £221 million. That works out at an average cost penalty of about £21 million a year on the ESB and on every domestic and industrial electricity user. It is easy to be wise after the event. The cost the ESB has paid for milled peat to date is a source of grievance for it because the price is uncompetitive. Moreover, the thermal conversion rate of milled peat is about half that of the coal fired station at Moneypoint.

An assumption of continuing high oil prices led to large investment in bog development and briquette manufacturing facilities. Some of these have proved worthless as developed bogs are either unused or subsequent investments have had to be abandoned. Over the period successive Governments did not inject equity but allowed Government guaranteed borrowings to stack up, resulting in the huge historic interest burden of which the Minister spoke.

If it was not bad enough that the economics of using milled peat changed, a number of other factors, unrelated to the operations of Bord na Móna, have come into play. It is now acknowledged to be the most smoky of fuels, with the highest level of CO2 emissions. Ireland has signed up to a reduction in the levels of CO2 emissions overall.

Mr. Stagg

That is not true.

Mr. Yates

Which fuel has more CO2?

Mr. Stagg

Coal.

Mr. Yates

My understanding is that while coal has more sulphur emissions, CO2 emissions are higher from peat.

Mr. Stagg

Try heavy fuel oil then.

Mr. Yates

That is a matter of fact, not opinion.

Households are using less solid fuel. More people have switched to oil or gas because they are clean and convenient fuels. Outside the control of Bord na Móna these environmental and household factors and the change in oil prices have taken effect.

It is right that equity should be invested in the company and the legislation should be seen as a cornerstone for a proper commercial plc structure for Bord na Móna and its four subsidiaries. It must be seen as a one-off; we cannot repeat this level of equity injection because the taxpayers could not justify or afford it. We must examine a new commercial focus for the company's future operations, with which I am sure the staff of Bord na Móna would agree.

The Minister outlined four divisions of the company. The biggest of these is the peat energy division. I met a delegation from IBEC recently and it complained bitterly about electricity costs and a proposed 2 per cent increase in prices for industrial users. It pointed out the lack of competitiveness between electricity prices here and in other countries in Europe. The most pivotal aspect of the peat energy division is Europeat in the east midlands. This 120 megawatt facility which is to use one million tonnes of milled peat is fundamental to the future of the peat energy division. It meets not only the strategic objectives of fuel diversity and power generation but uses an indigenous energy resource. In 1991 between gas and peat the ESB found 44 per cent of its energy resources from Irish materials. Accounting for the outlay of capacity in the years to come that figure is to decline to 11 per cent by 2001. Europeat will have the latest technology in terms of thermal combustion and energy generating efficiency.

I welcome the Minister's comments on the Europeat station but I have heard somewhat different information from that which she outlined. I understand the Commission approved in principle the injection of £21 million into the investment of £120 million. My concern is that the Commission has reservations at a technical level about Europeat. It has reservations about CO2 emissions and because of the historic subsidies to the coal industry in Europe in the major five coal producing states and the former East Germany. It is concerned that the door might be opened to national and EU subsidies which it has thoroughly resisted.

The Minister said that it will be early next year before the process for the five competitive tenders to construct Europeat will be completed. With an environmental impact study, the EPA analysis for licence purposes, the planning process and the prospect of an appeal to An Bord Pleanála which we cannot discount—

Mrs. O'Rourke

And about which we can do nothing.

Mr. Yates

—we could run into a situation where, despite the best efforts of the successful tenderer or Bord na Móna, the timeframe could be beyond that envisaged by the Minister. It will take two and a half years to construct and there is a prospect that it will run into 2002 should something go wrong. It is essential the Government maintains pressure on a doubting Commission to ensure this is seen as having political priority and ensure funding because the fuel comparison of oil, coal and peat, as well as hundreds of jobs, depend on the thermal efficiencies of Europeat.

Many householders no longer use coal, turf or other forms of solid fuel as their main heating source. The lower cost and greater convenience of oil and greater availability of natural gas to homes has proved attractive to many. Bord na Móna has increased its share of a declining market through the acquisition of CDL, the principal coal distributor in Dublin and the east coast. Increasingly, solid fuels are used only in the living room given their ornamental attractions of warmth. There is likely to be further consolidation in this sector and Bord na Móna, through its fuel subsidiary, should be open to cross shareholding to establish not only a strong market share in terms of other fuels, such as coal, but also because this is a prime market. Unless one is a big player, one will have difficulties because of its overall dynamics. Efficiencies and savings will come with the larger sales and distribution systems that can afford heavy marketing, a fleet of trucks, etc. Growth will not come generically and a very specific plan is necessary for the fuels division.

I am most concerned about the horticultural division. This was first brought to my attention by an economist who expressed concern that the losses sustained by this division were high over recent years. A clear and transparent breakdown of the division in the accounts of Bord na Móna which allows one to analyse what went wrong. It primarily sells peat moss under the Shamrock label and 94 per cent of its sales are exports — 95 per cent to the UK and 5 per cent to continental Europe. Bord na Móna also got involved in a French company which proved less than successful, but it is focused mainly on the UK market. Two developments have been very unhelpful. First, the market is oversupplied by Russian, Finnish, Irish and other operators who are chasing a narrowing band of consolidated distributors. Bord na Móna has done a deal with BNH and we are dealing with a price war and wafer thin margins, if not losses. Second, Prince Charles stated that the use of peat moss was not environmentally supportable or friendly and that people should use bark mulch instead. There is a decline in the use of peat moss by gardeners in the UK.

Mrs. O'Rourke

He should keep his mouth but-toned up.

Mr. Yates

I appreciate that peat moss is essential because it covers the top half of bogland beneath which is the fuel source for briquettes and peat energy. The Irish taxpayer is not in the business of giving cheap peat moss to the householders of Britain. Of course, one can justify indigenous resources for our fuel energy sources and a regional policy that supports the midlands but giving subsidised peat moss to gardeners in England is difficult to support. A hard headed assessment on the future viability of this division needs to be undertaken. Sometimes those most closely involved are not the best to make the assessment because they made the original investment decisions. I wish to see a commercial analysis of the horticultural division so that increasing difficulties in this area are not sustained.

The most exciting area in Bord na Móna is its environmental division. I had a similar experience to the Minister on visiting Newbridge as I found it to be dynamic. We saw the development of new products and the soakage capacity of peat used in terms of septic tanks and other facilities. This is extremely exciting in terms of research and development but, as any industrialist will acknowledge, this area is characterised by high capital intensity and risk. One could spend a fortune developing a product and the straitjacket that often exists between obtaining approval from line Departments and the Department of Finance is not necessarily the best structure. The environmental division needs an equity partner to grow at the extent of the potential of the company. It may have successful or unsuccessful products but it can fly high on the wind of opportunity. The recycling project is a joint venture with Irish Rail. In Dublin there are major objections and obstacles to the building of a new incinerator.

Mr. Stagg

There are not. When will the Minister receive EU approval?

Mrs. O'Rourke

That is not in my basket.

Mr. Yates

If it were to go to Kill, there would be many objections. The local authorities in Dublin charged with refuse and recycling have a number of options and, in the event of a national incinerator not going ahead, I would support the proposal by the environmental division of Bord na Móna. In terms of the successful growth and development of the company, I wish to see an employee shareholding option, which other semi-State companies have, to build on the successful transformation of work practices so that the company can achieve its full potential. I am disappointed there are no proposals for an ESOP, particularly in the subsidiaries where there is exciting potential.

The Minister referred to the 80 per cent improvement in productivity by the workforce at Bord na Móna. Payroll costs have been halved, which is a tremendous achievement, and I pay tribute to the commitment and partnership ethos between management and the staff working at the bog face for the enormous structural changes. If they had not taken place, the company would have had no future in terms of supplying a competitive product to the ESB. Up to l985 the price of milled peat was governed by regulation. Since l988 the price has remained unchanged and there has been an interim arrangement between the ESB and Bord na Móna. What the price of milled peat will be needs to be transparently established. Will it be based on a basket of prices between oil, alternative wind energy or other fuels such as gas, coal or other fuels for the ESB? That would be one basis on which a fair price could be set, another would be on a cost recovery basis. It should not be for politicians to set the price but the ESB should not be lumbered with a high price. There should be competitive pressures on Bord na Móna to reduce its cost structure on an ongoing basis.

If the Celtic Tiger is to continue to roar the Government has a duty to provide low cost telecommunications, energy and electricity. We have a peripherality problem which we have to live with vis-a-vis transport costs. It is an overall competitiveness mandate on every Government and we will have legislation in relation to the EU directive on electricity generation. There are many different points of view as to how that should be done. Heavy industrial users have an EU right to get 28 per cent of their energy requirements from suppliers other than the ESB by a certain year. It is grossly unfair to ask the ESB to produce electricity at a price if they are expected to pay a political price. When I met the ESB officials they said peat is the most political fuel. We must ensure the ESB is not lumbered with an unfair price which in turn has to be recouped from the taxpayer.

The future of Bord na Móna depends on oil prices because once the natural gas field in Kin- sale comes to an end—

Mrs. O'Rourke

I alluded to that.

Mr. Yates

—there is likely to be a second gas interconnector to the UK. Given the way it has developed in terms of the EU directive on gas, through those two pipes one will be able to buy Norwegian, Russian or Algerian gas. There is a huge grid and there is not the security of supply argument to suggest there is a problem. When I met the INPC in the refinery at Whitegate I learned that all the big companies in the oil business — Statoil, Gulf Stream etc — are closing down refineries. They say there is no problem with oil supplies for the future and that oil will be extremely competitive. It is easy to say that in l996 the price of oil collapsed, everything that was decided at Ballyforan went out the window and wrong decisions were made. One cannot assume high oil prices. We must have a realistic assessment of where oil prices are going.

Mrs. O'Rourke

Wait until Sadam Hussein gets going.

Mr. Yates

We are not depending on that part of the world for oil. The UN sanctions on Iraq are such we have not been sourcing oil there but in various member states.

Mrs. O'Rourke

It does not matter.

Mr. Yates

On the positive side, the peat reserves are unlimited. I understand we have 130 million tonnes and existing foreseeable capacity will use only 70 million tonnes. For the Europeat power station, the particular bog in the east midlands has 34 million tonnes. There is no problem with the resources although the environmental argument may change.

Fine Gael supports this Bill and the tremendous turnaround achieved by the staff and management of Bord na Móna. Let us go into this with our eyes open as regards the future threats. The threats to Bord na Móna are that the timescale for Europeat will jeopardise the EU funding; the existing ESB plants are grossly inefficient at bound milled peat; the ESB can produce conclusive arguments that it is its most expensive fuel; the market for peat moss as a product is not growing and in the UK is meeting serious problems; there is a growing environmental lobby which is negative to peat in terms of the bog and I foresee EIAs being needed for bog development in the future, leaving aside the CO2 question; the use of solid fuel in households is declining and the ESB has to be more cost competitive.

Those who will prepare the next Turf Development Bill would want us to have looked at some of the things that were not assessed. When replying will the Minister say if there was any external consultant in the Department of Finance who signed off Ballyforan or was it a political project? In fairness to Bord na Móna, did politicians insist on these things? The whirlwind of the £110 million is due to some of those mistaken investment decisions and nobody has been brought to account.

I wish the management, staff and all involved in the midlands peat development every success. We will support the Bill on Committee Stage. I see Europeat as critical. I hope the issues relating to pensions and superannuation can be dealt with satisfactorily while moving to a new commercial structure and legal framework. I am not suggesting that is a particular problem. The managing director should be a member of the board, as provided for by law. It is not possible to manage the complexities of a company unless one is a member of the board where the decision are taken. Any part-time director, no matter how committed, will not have the knowledge which the executive team will have. Fine Gael supports the Bill and hopes the circumstances which led to the serious investments which were necessary will not arise again.

Mr. Stagg

I thank the Minister for introducing the Bill. I look forward to the Minister bringing in a Bill where she will not have to blame me, Deputy Dukes or Deputy De Rossa for the parts she does not like.

Mrs. O'Rourke

I praised Deputy Stagg's work.

Mr. Stagg

I wish to comment briefly on the position of the ESB on peat. Traditionally the ESB has resisted Government policy in the matter of using peat as a fuel and this has bedevilled the power stations it owns. It has consistently refused to keep them in working order except in one case, Bellacorick in County Mayo, where it needs the power station. It does not need the others for its grid. They are now in a state where they produce the most expensive form of electricity. That was a deliberate action by the ESB. I say that advisedly, having examined the matter during my term in the Department.

Sulphur, as a greenhouse gas, has ten times the effect of CO2. Given that we produce larger amounts of CO2 from motor cars it is the main concern but sulphur is ten times worse from the greenhouse gas point of view. If Moneypoint were to have the standards required by the European Union for power stations the electricity from it would not be as cheap. A case should be made for a retro fitting at Moneypoint to prevent it polluting the atmosphere, particularly for our neighbours in Europe who get the brunt of acid rain arising from the operation at Moneypoint.

I pay tribute to the management, workers and unions in Bord na Móna. The midlands, County Kildare in particular, have been transformed by its actions and activities. Small areas of the west have also had positive experiences. I remember fondly the times I spent cutting turf on the bog. At the age where I spread rather than cut turf I recall an occasion when my father was ill and we had to hire a man to cut the turf. He worked 12 hours a day for which he was paid £1.

Mrs. O'Rourke

And tea in the billy can.

Mr. Stagg

When he was late arriving I decided that I would start cutting the turf and that my brother would spread it. I found cutting much easier than spreading. I sacked the man concerned when he arrived. He is the only man I have ever sacked.

Mrs. O'Rourke

Was the Deputy also paid £1 a day?

Mr. Rabbitte

The staff of Bord na Móna had better watch out if the Deputy ever becomes managing director.

Mr. Stagg

In the mid-1980s Bord na Móna was in serious trouble with debts of £170 million-£180 million and rising. In 1987 Dr. Eddie O'Connor was appointed chief executive. Mr. Brendan Halligan was appointed chairperson of the board around the same time. With the unions, they tackled long outstanding issues. Cost efficiencies were agreed to reduce operating costs. This involved severe pain with a reduction in staff numbers from 4,687 to 2,270. Autonomous enterprise units were established and a direct labour system put in place. Partnership in the workplace was the reality. Management and unions were determined that Bord na Móna would not only survive but develop, expand and thrive. The previous Government decided to make State equity of £120 million available. I was glad and honoured to be involved in pressing it to make that decision.

I pay tribute to some of the people who have been involved. The SIPTU representative, Mr. Kevin McMahon — it is unusual to name a trade union official in the House — was a critical person in the development of Bord na Móna. He maximised the number of employees that could be fruitfully retained by the company and the benefits and conditions of the remaining employees. He developed and sold to his members the concept of partnership.

I pay special tribute to Dr. O'Connor. Under his stewardship between 1987 and 1996 the company was literally turned around. He was handed an ailing monster and turned it into a profitable going concern. He had new ideas and found new markets for the company's products. Sales increased from £98 million to £141 million per annum; productivity from 1,750 tonnes to 5,100 tonnes of turf per person and profits from £4.5 million to £24.2 million. If he had been a chief executive in a private company Dr. O'Connor would have received large bonuses if he had achieved anything like the results achieved in Bord na Móna. He was instead hounded from office by mean-spirited people incapable of appreciating his work. I regret that I did not have the power to prevent his good name being dragged through the mud. Bord na Móna did not come within my remit. By a series of leaks and innuendo he was effectively undermined. What was it all about? The answer is a bottle of smoke, a few bottles of wine and a suit of clothes. Dr. O'Connor cannot be airbrushed out of the history of Bord na Móna. Without him it would have collapsed.

A recent newspaper article sought to give the impression that I, as a Labour Party Minister of State, and Labour Party advisers were somehow responsible for the attacks on Dr. O'Connor because of his opinions on the ownership of the company. This is not true. The leader of my party, Deputy Quinn, then Minister for Finance, and his advisers brokered an honourable and acceptable severance package for Dr. O'Connor who I understand is now engaged in a variety of enterprises in the private sector. I wish him the best of good fortune and I am sure the private sector's gain is the public sector's loss.

I also pay tribute to the new chief executive, Mr. Paddy Hughes, who has brought a new style and energy to the position. It could be said without any inference that Bord na Móna is in a safe pair of hands.

What is the real purpose of this Bill? Why is it necessary and what will it do? It is instructive that it was not brought forward during the term of office of the last Government. The Minister may wish to give credit to various Members in Opposition.

Mrs. O'Rourke

It was not ready.

Mr. Stagg

The company has been brought back from the brink of ruination and is now thriving with increased productivity and sales. It has excellent industrial relations and a positive partnership agreement between management and unions. It has a new outlet for its core product in the Europeat power station. It has new well developed products in its horticultural and environmental divisions and the potential to further develop its wind energy division and the artistic and innovative Celtic Roots.

All this is controlled and managed by a central board and four divisions which are well managed. It is now proposed to break up the company into a holding company and four separate subsidiary companies each with its own board. This will result in duplication. Since it is agreed by everybody that the existing board is doing a good job, why is it necessary to have five boards? The Minister referred to the European Union and the need for transparency between the divisions but there is no need to have five boards to ensure this.

Mrs. O'Rourke

The Deputy's party was part of the Government which agreed to it.

Mr. Stagg

The heads of a Bill had been agreed but that is a long way from introducing it in the House. The reason it was not introduced was there was no agreement, as the Minister will discover if she looks at the correspondence.

Under the Bill the Minister will have the power to sell off 49 per cent of the holding company and all of any one of the subsidiaries provided its value does not exceed 50 per cent of the total. Why does the Minister need this power to sell off half of the company without further reference to the House? Is there a bidder or buyer waiting outside the door?

Mrs. O'Rourke

There is not.

Mr. Stagg

Should the need arise the Minister should seek the authority of the House and explain why it is necessary to sell off half the company. We can take it as read that the horticultural division in which 312 people are employed and the environmental division in which 70 people are employed are for the high jump. This Bill is a blueprint for the sale of all but the core activity of the company, the production of peat. It is a regrettable return to the sterile philosophy of "stick to your knitting" first put forward by the former Minister for Transport and Communications, Deputy Lowry. Though he has departed that office I am aware of strong supporters of that philosophy in very high places in the Minister's Department determined that Bord na Móna cut turf and do nothing else. The proposers of this hopeless position seem to ignore the fact that the planned commercial life of bogs is some 20 years. If we accept their planned obsolescence, what will happen the midlands when the turf runs out? What will happen the villages, communities and commerce depending on the company's activities? We must reject the knitters with a limited supply of wool and put in place structures to allow the company diversify and develop rather than force it to sit around until the turf runs out.

Bord na Móna should be encouraged to develop as a premier alternative energy company exploiting in full the development of wind energy as well as the varied commercial uses of its primary product. That might mean that some of its core activities, while desirable, will be diverted to other usage by the company, to ensure that all of its potential is not usurped by continually cutting turf.

In its present form this Bill will prevent such development. The Minister's was a very positive contribution with regard to Bord na Móna but she needs to examine this Bill more closely and the effect of its implementation. Why else does she seek power to sell half the company and any or all of its subsidiaries? The agenda is clear: sell off what you can and plan obsolescence for the rest. On the basis of the case I have made, knowing the Minister's positive attitude to Bord na Móna and the commercial public sector generally, I ask that she withdraw this Bill and introduce one of her own reflecting the views she expressed today.

There are other areas of concern in this Bill also, such as that of worker directors. The four main activities of the company are to be divided among four subsidiaries. The numbers of their board members are not yet known although there is provision for only one worker director on each. At least the same level of representation of worker directors should be provided for within these new companies as obtains in the primary company.

In May 1996 the Government decided to give £120 million equity to Bord na Móna, of which £100 million has been paid. The balance of £20 million requires legislation to allow payment. Why has this Government decided to pay £10 million only of the balance of £20 million due? Why is it not all being paid, or have I missed £10 million somewhere?

Mrs. O'Rourke

As the Deputy will know, the current legislation did not permit payment of more than the £100 million which has now been cleared.

Mr. Stagg

But £120 million was the amount the Government decided to pay in 1995 whereas the provisions of this Bill allow for the payment of an additional £10 million only, which would appear to leave a shortfall of £10 million.

Mrs. O'Rourke

The board paid off £10 million, leaving £10 million remaining to be paid by whatever Government was in office.

Mr. Stagg

Perhaps the Minister could clarify that point which was raised with me by a number of people.

The Bill is essentially flawed in a number of areas. It is a blueprint for a sterile, hopeless philosophy of "stick to your knitting", a very dangerous philosophy for this company which will simply be left digging turf in the short-term. When the turf runs out, there will be no further planned commercial activity for the company or its workers. The Bill fails to address how the company will develop and diversify and the necessary structures to be put in place. While facilitating sell-off, it does not address the essential question of worker shareholdings. The issue of worker directors in subsidiaries is subject to the vagaries and tender mercies of management.

I ask the Minister to seriously consider with-drawing this essentially flawed Bill which will not result in achieving her intentions, as expressed today. Since there is no enormous rush, I ask her to re-examine it. If she cannot see her way to withdrawing it, its provisions will warrant major amendment to prevent the hiving off of certain of its activities which could become the core of certain activities when the turf runs out in the foreseeable future. In the event of the Minister being unable to withdraw it, I shall table amendments on Committee Stage.

Mr. O'Flynn

With the permission of the House I wish to share my time with Deputy Seán Fleming. I welcome the Minister's introduction and presentation of this Bill. Though not from the midlands or a midlands constituency, I am deeply interested in all business activities in the semi-State sector. We are all committed to their being placed on a commercial footing to ensure they are profitable, stand-alone operations rather than continuing to absorb taxpayers' money.

I perceive the change in status of Bord na Móna from that of a semi-State company as a very positive, innovative one. For too long its development has been hampered by the restrictions of the Turf Development Act, 1946 enacted on the establishment of the company that year. The proposed change in its status from semi-State to PLC is a positive move because its development has also been hampered by lack of investment. Its conversion to a PLC will mean the company will be in a position to attract investment partners. Such investment and partnership arrangements will facilitate research and the development of its business activities, as will diversification into new areas, also vital to its expansion and survival. The implementation of this Bill will result in the constitution of the company as a PLC and of its four subsidiaries as public limited companies.

On a personal note this change is a far cry from my childhood memory of walking down Cork Centre Park Road toward the marina, seeing the vast stock piles of turf of local fuel merchants. Those massive manmade mountains were a relic of the war years. I remember then wondering how anybody could ever burn that amount of turf. It also brings to mind the thriving turf business run by many Cork companies, one of whom was Pope Brothers whose lorries were driven regularly to the midlands to keep our fires burning and Corkonians warm in their homes. Unlike Deputy Stagg, I have no experience of cutting turf even though, believe it or not, there is a turf bog in Cork.

Mrs. O'Rourke

I cannot believe it.

Mr. O'Flynn

It is located in Rylane in County Cork. During the war years and the Emergency, the Army played a pivotal role in ensuring that its construction corps provided turf for the fires of the city and county of Cork.

Mrs. O'Rourke

What about the pub licence?

There was a pub licence on the bog.

Mr. O'Flynn

There is still a pub there. In the not too distant past I remember the pride I felt when some European peat developers came here to study and learn peat harvesting technology from Bord na Móna which was then and remains the foremost in Europe.

When established in 1946, with a largely developmental mandate, it was appropriate for Bord na Móna to have the structure of a statutory corporation. In the intervening years the company has successfully carried out its mandate from successive Governments under a series of turf development Acts. It is now being converted to a PLC with a full commercial structure. This conversion will have the general effect of causing the company to adopt and operate the financial management and legal structures in general use in all commercial entities. The main effect of the change will be that Bord na Móna will become a holding company. All its operations and business will be carried out by one or other of the new subsidiary companies.

The 1990 Turf Development Act gave Bord na Móna the power to form subsidiary companies but did not allow Bord na Móna to delegate any of its statutory functions to such subsidiaries.

More particularly, it did not provide the mechanism for the transfer of assets and liabilities to subsidiaries. As a result of this Bill, it will be possible to constitute the operating divisions of Bord na Móna as stand alone companies. Their performance can be monitored and evaluated, they can be promoted as separate entities and will have to be profitable to survive in the commercial world.

As a result of the Bill and the equity the Government has invested, Bord na Móna will for the first time have a share capital that will make possible the measurement of its performance and the assessment of its appropriate borrowing level as a ratio of its capital.

Regarding the issuing of shares, the Government must always hold the majority. We do not want to see any outside shareholder taking a dominant position in the company. Until some months ago, all of Bord na Móna's long-term borrowings were under Government guarantee. Other speakers have charted the past business problems of the company. I agree that by providing the company structure and the necessary asset base, the Bill will make it possible for the holding company and its subsidiaries to borrow on a commercial basis and without Government guarantee, thereby putting responsibility on the company to ensure it is profitable and viable. A limited liability structure will also give Bord na Móna the freedom to form strategic alliances and enter into joint ventures subject to the provision of the Bill. Partnership arrangements will help by supplying funding, technology and access to wider markets. Divisions such as horticulture, environmental products and Celtic Roots would benefit greatly from such arrangements. It will also make possible the introduction of an employee share participation scheme should such a scheme be agreed by the company, the Government and the trade unions.

The first substantive part of the Bill deals with the establishment of Bord na Móna as a PLC. It provides that the authorised share capital shall be set at £300 million. The objects to be included in the memorandum and articles are to be the functions set out in the various turf development Acts. It will make allowance for additional objects and powers incidental or ancillary to Bord na Móna's functions.

I note from the Bill that one share will be vested in the Minister for Public Enterprise. I do not believe that will affect the Minister in any way in relation to remarks she made earlier. The remainder will be vested in the Minister for Finance other than those held in trust by the members. The Minister for Finance may not reduce his shareholding to less than 50 per cent without a resolution of Dáil Éireann. That should satisfy Deputy Stagg who was concerned that the company would be sold off piecemeal.

The chairman, managing director and other board members will retain their positions after the changeover to PLC for the balance of their current terms of office. As the Minister has already explained, the Government is empowered to pay a final tranche of equity up to £10 million. An upper limit is set on the borrowing powers of the PLC and its subsidiaries.

The pension entitlements of employees will be retained and protected, and changes in regulations will be made to bring them into line with the Pensions Act, which is welcome. Penalties will be imposed on board members taking part in decisions on which there is an undisclosed conflict of interest and for disclosing confidential information. I welcome that proposal.

The second substantive section allows for the formation of Bord na Móna's divisions into subsidiary companies. It provides that these subsidiaries can include in their objects functions of Bord na Móna under the turf development Acts. The Bill provides for a vesting day when Bord na Móna will cease to exist and Bord na Móna PLC will come into existence. It will also allow land owned by Bord na Móna to be licensed through a subsidiary. It will ensure that Bord na Móna may not sell more than 50 per cent of the value of the whole of its subsidiaries without a resolution of Dáil Éireann. The Bill also provides for a transfer day when business, assets and liabilities will be transferred to each subsidiary.

The third substantive section protects the terms and conditions of employment of employees who have played a positive role in the success of Bord na Móna. I acknowledge also the pivotal role played by the staff of Bord na Móna in today's events and in the advances achieved by the company since its foundation. Thanks to them, output has doubled through changes in work practices, training, new machinery and the introduction of team-based production systems. The workforce has already been hit by substantial job losses but it has shown a willingness and capability to accept change. The unions have played a positive role also in this transformation and they are to be commended for their contribution. I anticipate that the change to PLC status will not affect the staff through further job losses.

Deputy Stagg expressed concern about turf resources but I understand from listening to other speakers this evening and from my own research that there is approximately 40 years of production available in the bogs in which Bord na Móna is currently operating. That is a fairly long period in which to have so many resources available.

I pay tribute to Mr. Pat Dineen, the chairman of Bord na Móna, who joined the company a short time ago—

Mr. Rabbitte

I wonder where he is from.

Mr. O'Flynn

—and who was nominated to that office at a difficult time. I know unethical practices were conducted in that company at the highest level but I disagree with the comments made by Deputy Stagg. Mr. Dineen faced all of the issues with his noted business acumen and has brought the company to the level of achievement it has attained today. He has prepared it for the changeover in his own calm and efficient manner and I have no doubt he will ensure the company goes from strength to strength in the years ahead. He deserves our thanks, as do the board members and the staff for their contribution to the company.

I compliment the Minister on the imagination and foresight she has shown in introducing the Bill. She has my full support in ensuring it is passed as quickly as possible.

Mr. Fleming

I welcome the opportunity of speaking on the Bill. As a Deputy from the constituency of Laoighis-Offaly I am delighted to see the Bill being introduced by the Minister, Deputy O'Rourke. Bord na Móna is and has always been a major employer in the midland region and we are very aware of its positive effects on the economy in both Offaly and Laois over many decades. Coolnamona and its Bord na Móna subsidiaries in Portlaoise is one of the major employers in the Portlaoise region.

The timing of this Bill is particularly interesting because a short time ago I spoke on local radio about the difficulties caused by population decline in Ferbane. Local councillors are very concerned about the lack of investment and the future of Bord na Móna. People in the area were pleased to be informed that the Bill was being introduced in the House today.

An £11 million refurbishment programme for Ferbane power station was recently put in place which will secure the life of the station for the next 15 years. That announcement is welcome in a region such as Ferbane where Bord na Móna is a key employer.

There are approximately 2,000 employees in Bord na Móna and their concerns must be taken on board in any new change of status of the company. We must be concerned also about the customers and the operation of the business. In addition, the diversity of the Bord na Móna activities must be recognised also. It is not simply concerned with turf. Many of the company's subsidiaries deal with the horticulture and peat moss, areas which have seen enormous development in recent years.

On a more minor point, most people burn either briquettes or turf in their homes. I suggest the new management should be more customer friendly in terms of the products they sell because both men and women find the plastic used to tie bales of briquettes difficult to handle. They should be sold in easy to use plastic bags or something similar.

In her contribution the Minister highlighted a number of aspects in relation to the financial position of Bord na Móna. I refer to the most recent set of accounts published which cover the period up to March this year. Approximately one year ago Bord na Móna had a negative net worth of £63 million. After a £49 million capital injection by the Government, with EU consent, last December and the profit generated during the course of the last financial year the negative net worth of the company is now approximately £7 million. The summary of the financial statistics of Bord na Móna is a credit to its management team and board of directors. They have generated increased revenue over a considerable number of years and have generated profits in the region of £20 million. However, they have been crippled with substantial interest payments which last year alone amounted to £15 million. Nevertheless, after allowing for all operating expenses, depreciation and interest payments the company has a net profit of more than £7 million. I am sure if Bord na Móna's level of activity is maintained in the course of this year it will have for the first time in my recollection a positive net worth. I look forward to its achieving that. There is also a Government commitment to contribute an additional £10 million towards the company's debt repayment. That will put the company for the first time ever in a position of positive net worth. That is a source of celebration for the Minister, the board of directors and the employees.

Bord na Móna has had an important history. Its role was to provide a strategic energy source. One of the key planks of our policy is to have an indigenous source of energy and to produce it economically. That is what we have in Bord na Móna. Natural gas off the south coast is another indigenous energy source, but it has a short lifespan and when it is exhausted we will be fully reliant on Bord na Móna as our only indigenous energy source.

There are four key aspects to the restructuring of Bord na Móna which we should consider. First, the company has been successfully restructured from a financial point of view. That was done with a good deal of pain but a minimum of fuss. There was major rationalisation, but it was achieved with increased productivity by employees and without any major industrial dispute. Second, an investment of £100 million, which is now almost complete, was made in the company. Third, the Europeat 1 power station will be located in the midlands and that will further underpin the role of Bord na Móna in the midland region for many years to come. Fourth, there is the legislation before us.

I mentioned some of the key aspects in relation to the company's employees. This Bill does not involve any diminution in employees' rights. Their rights are being fully maintained and I am pleased there will continue to be worker participation at board level in the new arrangement. I was particularly disappointed to hear what could be described as nothing short of scaremongering tactics used by some speakers. It is not a correct interpretation of the Bill to send out alarm signals that will do nothing but upset people who have no reason to be upset. It is not possible for Bord na Móna to be sold off without the consent of this House. That guarantee has been given and I am sure all Members are pleased about that. It is important that any commercial company, such as Bord na Móna, has the flexibility to enter into strategic alliances where it sees fit. The company will have some flexibility in that regard without the need to refer back to the House.

I am sure the appointment of a managing director which is covered under section 26 is one of a number of points that will be raised in the course of this debate. The most important position in any company is that of managing director. Bord na Móna has had some excellent managing directors over the years who oversaw restructuring and brought the company back to profitability. The choice of managing director not only now but in the future will be one of the key decisions any board of directors will have to make. I am pleased the Minister for Finance and the Minister for Public Enterprise will be shareholders in the new company. A number of sections deal with routine measures such as the appointment of auditors, the role of subsidiaries and the transfer of staff rights, assets and liabilities to the new company and to the various new subsidiaries.

The new company is being charged to carry out its work and activities in an environmentally friendly way and to make appropriate provision to protect our archaeological heritage. That is very important. Under many boglands there are important archaeological artefacts that have not come to light and that is something on which we should concentrate.

When Bord na Móna has completed work in an area it should develop a strategy to deal with cut away bogs. There are not too many tourist attractions in the midlands and cut away bogs may have some tourism potential. There is a great wealth of wildlife, flora and fauna in those areas and we must ensure they are protected for future generations. I commend the Bill to the House.

Mr. Rabbitte

I agree with Deputy Fleming that it is a sign of tremendous achievement and hope for the future that Bord na Móna is in sight of being in a position of positive net worth. Against the background of the figures adduced by Deputy Yates that is a phenomenal achievement. Deputy Yates made a fair point about why we should have realised such an accumulated deficit over a decade. The company has been turned around. Deputy Fleming is right in acknowledging the contribution of those who are responsible for that.

I am not sure Deputy Fleming is as entitled to dismiss the views of Deputy Stagg in terms of his remarks on the configuration of the company as presented in the Bill. I hope Deputy Fleming is right and Deputy Stagg is wrong. Not too many years ago the then Minister for Agriculture, Deputy Michael O'Kennedy, presented the same arguments in this House about the Irish Sugar Company that now roll so easily off the tongue of Deputy Fleming and no doubt will roll of the tongues of other Government backbenchers before this debate is finished. The record will show what Deputy O'Kennedy said at that time. We know what happened subsequently. It is not relevant to this debate as to whether what happened was good or bad. I do not want to reopen that debate. I do not dismiss Deputy Stagg's point of view on this quite so lightly. I have no difficulty with Bord na Móna being converted to a PLC. That is probably overdue, but I would be concerned if the official attitude is that Bord na Móna should be restricted to what is described as its core activity.

I should comment on the Civil Service in this regard. I come from the school of thought that has a high regard for the Irish Civil Service. The brief time I spent in closer proximity to them than I normally spend enhanced my regard for them. I do not want to convey any rose tinted view of the Civil Service. Its members are not uniform in competence, quality or application, but generally speaking they have served the State well in an independent and patriotic manner. Having said that, it would be naive to suggest that ideological positions are not adopted by senior figures in the Civil Service. Over a decade ago, I remember making the life of the then Minister for Transport, Deputy Jim Mitchell, a misery when the same Department with which we are now dealing wanted to sell off the Great Southern hotels. According to the official line, the hotels were a disaster and had to be given away. It is not an exaggeration to say that if they had been disposed of it would have been for a song. That line was taken largely for purposes of convenience but in the event we contrived to prevent that happening. Look at those hotels now and the importance of the hotels network generally for our tourism industry.

Having praised the civil servants I believe their place is in the Civil Service and not running commercial companies, even at one hand's remove. I was deeply uncomfortable about recent developments in Bord na Móna. I do not know if Deputy O'Flynn has a basis for his remarks or whether, which is more likely, he was being parochial in praising the present chairman. I do not wish to take away from praise of the present chairman with whom I dealt quite often as a Minister of State. I was, however, uncomfortable about what happened. It was an unhappy chapter.

I have known the managing director since we were students together. It happened and there may have been matters of detail that I did not know about. However, the fact that I did not know about them and should have known, only makes me more uneasy. I did not know where things were coming from or why and that is not a desirable position.

I want to return to the configuration of the new Bord na Móna and what Deputy Stagg summarised as the "stick to your knitting" philosophy. That is an extension of my contention that, in many cases, senior officials in the permanent government — I do not use the term derogatorily — do have ideological baggage. They discovered that straightforward privatisation was not an attractive proposition, even though it seemed to be popular internationally.

Fianna Fáil itself is a coalition of forces that unites cohesively when the occasion requires it. On other occasions, however, there are disparate views within the party, for example, on the question of privatisation. There is no mad ideological aggression in Fianna Fáil on the question of privatisation. The party will take a pragmatic view on it. Many people in the senior management echelons of semi-State companies and, indeed, in the Civil Service, have read that and decided they cannot go at it head on, so they will devise the "stick to your knitting" or "stick to your core activity" strategy. That, in itself, will produce a situation where some of these companies will necessarily need strategic partners and, in some cases, will need to be sold off altogether.

The practice in Britain has clearly shown that senior executives have a definite and direct personal interest in their companies being privatised. Across the water it was one of the great scandals under the Tory Government. Figures have been published in various reports — in the past I have put some of them on the record of this House — showing that executives in some of the former State utility companies in Britain made fortunes beyond their wildest dreams as a result of privatisation. I am not suggesting that would happen in this country, but it is a factor driving this kind of approach.

I am quite satisfied to take Deputy Fleming's view that there is nothing sinister, only the modernisation of the commercial structure to allow Bord na Móna to achieve its potential and at the same time provide employment in regions where it is badly needed. However, because of the company's structure, I can see how it and the four subsidiary companies are neatly parcelled up for a situation where they could be disposed of and where the company itself would return only to saving turf. I honestly do not think there would be a particularly long-term future for Bord na Móna if that is all it had to do.

I was immensely impressed by the modern company and its management. I was especially impressed by the research and development division and the new product development that is being piloted from Newbridge. It is immensely encouraging. However, if the company was to restrict itself to its core activity it would beg serious long-term questions.

I want to share my time with Deputy Enright who has a particular interest in this matter. I would like to make two quick points before doing so. Deputy Fleming raised the question of cutaway bogs. When the Minister replies, I would like her to deal with the 1991 report of the independent expert committee on the future uses of cutaway bogs, which referred to 90,000 hectares coming back into use. What is the policy orientation on that? It seems to be a critical and important question.

I congratulate the workers in Bord na Móna who took all the pain of a pretty savage, but necessary, rationalisation programme. Some 2,500 to 3,000 workers lost their jobs. A system of contract companies was created which did have the merit of retaining some people in employment. While it is certainly more efficient in terms of the overall interests of the company, the workers deserve great credit for facing up to severe rationalisation. I wish the company well in the future. It is right that it should be modernised and I am glad I was a member of a Government that made the massive equity injection into it for the future.

Mr. Enright

I welcome the Bill. It is important legislation which outlines the thinking of successive Governments on the future of Bord na Móna since it was established under the Turf Development Act, 1946. The Bill makes provision for the future of Bord na Móna, which will mean significant changes in the company in the next 25 to 30 years. We should be thankful for the major contribution Bord na Móna has made to society through its economic development over the past 50 years. In the 1940s, 1950s and 1960s people had the vision, courage and persistence to identify and commercialise one of our great natural resources. The development of vast tracks of bogland across the midlands and west made a huge contribution to the economic development of the State. It provided jobs and led to the development of many regions where, prior to that, there had been little employment. It is important to realise that Bord na Móna has a role in regional development. At one stage it had developments in 13 of the Twenty-six Counties, while today it operates in approximately ten. When we consider the problems associated with traffic congestion and lack of housing in our towns and cities, particularly in Dublin, it is important to do what we can to ensure that bodies such as Bord na Móna continue to be developed in the regions.

This country has failed to spread economic activity on an even basis across the country. As an energy producer, Bord na Móna has approximately 30 years left as an employer. As an extractor industry, it has by its definition a limited life-span and is now well into the second half of its life. It is therefore essential that the Bill's provisions ensure that Bord na Móna not just completes the primary task for which it was established, but that it is given new direction to use its valuable resources of land and skills as a vehicle for major regional development.

We should conduct proper research and development into other sources of energy, such as the cutaway bogs in Bord na Móna's possession. I will give the Minister some statistics on research and development. British Nuclear Fuels Limited spends more money on public relations than is spent on research and development into renewable energy in the United Kingdom. That shows that sufficient research and development is not being carried out on new sources of energy, such as wind, water, solar energy and biomass. Great strides have been made in northern Europe in developing wind energy. Bord na Móna has expertise in this area as one of its stations already produces wind energy. If we allow Bord na Móna to proceed, then I am confident it will be able to develop wind energy as a clean renewable source in Laoighis-Offaly and along the Irish coast.

I welcome the power in this Bill to issue shares in the company, which will be of major benefit to Bord na Móna. We must consider how these shares will be issued and how this practice can be extended to other industries. Bord na Móna has shown its skills and expertise in the past and I am confident that if it is given Government support it will create many jobs and produce clean economical energy.

As the Minister is aware, Bord na Móna owns approximately 120 million tonnes of peat which has yet to be extracted from bogs. It is essential to proceed with the development of this resource. I want to know what is happening regarding the new 120 megawatt peat powered generating station. The House is aware that a major initiative is under way to set up this additional station, but I am disappointed at the progress being made on the independent generating programme.

The Minister is aware that Deputy Dukes secured an extension on the draw down of funds for this programme when he was Minister for Transport, Energy and Communications. I understand that further delays have been experienced in organising the competition to build the Europeat station. I ask the Minister to exercise her powers to ensure no undue delay in completing this project. I also ask her to examine each stage of the selection, planning and construction process so that European Union funds provided for this project are drawn down. If it is necessary to make provisions in this Bill or to issue statutory instruments for that purpose, then the Minister should do so immediately. I am certain she will have the full support of this side of the House if changes are necessary to ensure that the Europeat station proceeds as quickly as possible because it is important for the future of Bord na Móna and for the midlands.

Many years ago I spoke publicly about the necessity to provide equity for Bord na Móna. For many years it was used as a plaything by different Governments. Wrong decisions were taken which left it with a huge debt. Developments carried out by Bord na Móna were paid for without grants; it was given an opportunity to borrow. That is why Bord na Móna found itself in difficulty, which it has now resolved. I thank Deputy Lowry for getting £120 million equity sanctioned by the Government when he was Minister for Transport, Energy and Communications. One tranche of £49 million was provided by the previous Government, while £51 million is now being provided. Bord na Móna requires a further £20 million which I hope will be provided at the earliest possible date.

I live among and represent many Bord na Móna workers and we have seen what the ESB and Bord na Móna have done. They have helped to develop the small towns and villages in the midlands and to make it a prosperous and progressive area in which to live. It is for this reason that Bord na Móna must be encouraged to make progress in these areas.

What is causing the delays in relation to unit four at Ferbane power station? Eleven months ago the then Minister, Deputy Dukes, announced the refurbishment of the power station. I am disappointed and angry that little or nothing has happened since. Is Bord na Móna, the ESB or the Government responsible? I believe these delays are being caused by the ESB. If it is experiencing difficulties, it should make a public statement immediately. The Minister must make a special effort to ensure that work is completed on the Ferbane power station at the earliest possible date.

Reference was made to carbon dioxide emissions. Bord na Móna is active in this area. Between 1990 and 2010, the reference period in which the target for greenhouse emissions has been set, emissions of carbon dioxide from peat will have been reduced by 30 per cent. Bord na Móna is anxious to ensure a clean environment. Energy produced from peat is clean. It is important that Bord na Móna makes every effort to ensure the cleanliness of the product it produces.

Mr. M. Kitt

I welcome the opportunity to contribute to this debate and I congratulate the Minister on introducing the Bill. I am delighted we are discussing not only Bord na Móna's development but the provision of more equity. I pay tribute to the workers and management for the work they have done over the years. I do not speak as a midland Deputy but I know that east County Galway has often been regarded as part of the midlands. There is a hospital in Ballinasloe, County Galway, which serves the midlands and there are thousands of acres of bog in north and east Galway and south Roscommon.

The bogs of east Galway and south Roscommon have often been mentioned in terms of development by Bord na Móna. I remember an ESB proposal in the 1970s to build a power station in the area and I think we lost out at that time to an extension to the Shannonbridge station. Later a peat briquette factory at Derryfadda/Ballyforan was suggested but a decision was taken subsequently not to proceed with it. However, thanks to Bord na Móna, we continued to develop and mill peat there for transportation to Blackwater and Shannonbridge, and this involved the employment of over 100 people in the 1970s. The tragedy for the area which I represent was that the number at work declined over the years to the point where few were employed and very little peat was being transported to the midlands. One of the reasons given by Bord na Móna for not proceeding with the development of Derryfadda was the increased cost of transport, particularly after the oil crisis in the 1970s. It is ironic that the Derryfadda work-shop is serving a useful purpose as a classroom for a school which is being refurbished at present. The House will recall the public protest at the national school at Kilglass near Ahascragh, County Galway.

I am glad a new station is to be provided in the east midlands and I would have Deputy Enright know that we were looking to have it established in the west. I recommend that the bogs of east Galway and south Roscommon be developed to serve that station.

Mention was made of the former managing director of Bord na Móna, Eddie O'Connor. I want to pay tribute to him because he was conscious of the fact that Bord na Móna should market its products and he was geared towards the needs of the consumer. I know he and many of the Bord na Móna staff were anxious to get the supermarkets and smaller shops to promote Bord na Móna products. That was not always easy when there was such an array of imported briquettes and other products. If Eddie O'Connor and the Bord na Móna staff had had more funding to market and promote Bord na Móna products, they would have been able to sell more.

I agree with others speakers who said that Bord na Móna could still do more to improve the packaging and presentation of briquettes. They could be made more user friendly. If it can be done with firelighters, surely it can be done with briquettes. This area should be developed.

A small station at Attymon, County Galway, at which turf production by Bord na Móna has ceased but where a worker co-operative has taken over the production of turf, is also involved in the distribution of briquettes. It is doing an excellent job both in the sale of loose turf and briquettes. This is the kind of thing in which Eddie O'Connor and his team were involved.

Thousands of acres of bog have not been developed. I admit that a small section of the bog to which I refer will become part of the national heritage area and the special areas of conservation. Farmers, from whom bogs were acquired compulsorily in many cases for the development of Derryfadda and who were paid as little as £20 per acre, are most anxious to find out whether they can seek the return of that bog, especially where it is in the heritage areas which qualify under the REPS. The answer these farmers receive is that this bog is now being dealt with by the National Parks and Wildlife Service. I would hope some resolution can be found to help these farmers, such as a lease arrangement under which they could include this bog under the REPS or cut turf for themselves and their families. All these questions relate to this evening's debate.

The workers have suffered in helping Bord na Móna address its serious debt and I pay tribute to them. Some of them suffered unemployment but I am glad to see there is still a large number employed in Bord na Móna. Figures for the peat energy division show that 1,258 people were employed in six Bord na Móna works and 655 people were employed in five of the ESB stations. Hopefully, the number employed will increase through the construction and operation of the new station.

The board consists of a chairman, a managing director and up to ten other members, including four worker directors. Eight of the directors are appointed by the Government and the worker directors are elected by the workforce. The board's duties in relation to acquiring and developing bogs and in the production, use and marketing of turf and turf products are very important.

I referred earlier to the fact that a large area of bog has been acquired. We will see Bord na Móna develop this over a number of years, but there is still great scope for Bord na Móna to market products. The new board is doing that and I wish them well.

We all remember the furore about smog and pollution from certain fuel products. The Bord na Móna products have always been first class. One could not have more environmentally friendly products.

There are 362 people employed in the five Bord na Móna works of the horticultural division. We are all familiar with "Shamrock" branded peat products, which have been a great success. Over 90 per cent of these products are exported, mainly to the UK and continental Europe. These are high bulk, low value products and a high proportion of the division's costs are accounted for by freight charges. The company operates in the European market which is heavily oversupplied and experiences intense competition.

There are 365 people employed at the briquette factories of Bord na Móna's solid fuel division at Croghan, Derrinlough, Littleton and in the board's works at Ballydermot and Lullymore. A further 60 people are employed in the divisional headquarters. The solid fuels division is responsible for the production and sale of Bord na Móna's branded products of peat briquettes and sod turf for use as home heating fuel. The division operates in a market which is in long-term decline due to changes in consumption patterns, namely, increased use of oil and gas by consumers. The majority of the division's sales are in Ireland. In 1995, the solid fuels division diversified into the coal market through its acquisition of CDL. This was designed to restrict the impact of Bord na Móna's declining peat business.

Debate adjourned.