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Dáil Éireann debate -
Wednesday, 29 Nov 2000

Vol. 527 No. 1

Nítrigin Éireann Teoranta Bill, 2000: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

If the directors in this company, which has many debts, worked for a private company, they would be sacked. What are the Department and the Government doing about them? Will they be dealt with? We should not reward people by keeping them in positions when they have failed. These people have created a debt of £180 million and now the taxpayer must pick up the tab. That is not acceptable. If these people are not doing the job, action must be taken to deal with them.

The banks give away umbrellas on a fine day but they take them away on a wet day. However, they were looked after and they got large interest payments from this company. That should not have happened. This company is owned by the State. The banks should not get interest and then a reward from the taxpayers. They pay DIRT on the one hand and then we give them back money for this company.

This company should be managed properly. I want an alternative to the fertiliser industry. I hope that whatever the Government plans to do in the future it will appoint people who can run the company. However, it looks like we may have to sell it. We must be careful not to sell it to a non-national operation which will close it down. We will then have a monopoly in the fertiliser business. The farmers and the people will pay because there will not be competition.

We have enough monopolies. The Government brings in European legislation relating to monopolies but our greatest monopoly is the Government. We have a monopoly with regard to the lotto machines. In parts of rural Ireland with a population base of below 50,000 or 60,000, the company will not provide the machines. What is the Government doing about it? Nothing. I have written to the director who has responsibility and the Commissioner with responsibility in Europe and have asked them to take a case against the Government. The people in rural Ireland are entitled to the same services as the people in Dublin City, Cork City or Galway City if the Government are giving licences to provide it. It is a little like the situation regarding TV3. I live in the west of Ireland and to this day TV3 has not provided the service. We are receiving TV3 through the illegal deflector system and it is only thanks to the community that we are receiving it. It is not a very good signal. TV3 gets a licence to provide the service nationally and all it covers is Galway City and the big cities and it leaves out rural Ireland. It is not good enough.

I spoke about the way the farmers have been treated by the EU and by the Government. The people who ran this company did not provide a good service for the State. It is sad now that the State has to pick up the tab. I ask the Minister and the officials what will happen with the directors? Are they to be rewarded with bigger jobs now that the NTMA is to run this company? When the day comes that this company is sold on, it will be like other companies. After they ran it into the ground, there will probably be big handouts paid for by the tax payer. It is not good enough and it is not right that we cannot do anything about people who worked for monopolies and for the State and did a bad job. On this occasion, the Government has to save the other jobs. The workers are the innocent victims in this matter again. If the company is to be sold, the Government should ensure it is sold to an Irish person and we must be careful to make sure the jobs are maintained for the workers.

I wish to share time with Deputy Billy Timmins. I am very glad Deputy Timmins will have an opportunity to speak since he has represented the town of Arklow very well and will continue to do so for Fine Gael in the future. I too am a representative of County Wicklow and I am naturally enough concerned about the future of the IFI plant and in particular, the work force in Arklow. As other Deputies said, the history of NET is a very difficult one. The chronic financial debt overrun that built up to extremely high proportions has always been there as a cloud threatening the future of the Arklow plant. Inevitably the rationalisation experience reduced the work force dramatically. The work force now is at more than 600 people. However, the reduction in the past of the numbers at IFI had a significant impact on the prosperity of Arklow town and the hinterland of south Wicklow and north Wexford. Those job losses were compounded by job losses at the potteries and the closure of the mines at Avoca to such an extent that the town went into a period of serious decline. For years, Arklow was an unemployment blackspot. However, over the lifetime of the last Government, and in the time of this Government, infrastructural development and tourism related investment has transformed the town. It is designated now as a growth centre under the regional strategic planning guidelines. While the town is being restricted unfortunately by the inability of the urban district council to proceed with the planned sewage treatment plant, the future of Arklow, it is safe to say, is secure.

I hope the future of the workers at IFI is as secure. Ever since its establishment, the economic life of the fertiliser factory and that of the town of Arklow have been inextricably linked. Today the interdependence is less pronounced. There is a greater level of industrial development generally which offers employment opportunities for people living not just in Arklow but in the south Wicklow hinterland. However, that said, the IFI plant is still a major employer. Some 630 workers are employed by the company. There has been considerable investment in plant facilities to bring it up to a par with other EU plants. It is now a very competitive and efficient plant. Significantly, confidence in the future of the plant is such that young workers have been taken on in recent times and have been trained up in-house. Recruitment is a good indicator that the company is intent on regenerating its work force which can only be an encouraging sign. While this Bill does not secure the future for the IFI plant and for these young workers, its provisions will rationalise the current legal framework and open up the next stage in the life of Arklow and of the operation in Cork.

The purpose of the Bill is to transfer the accumulated debt of NET to the Minister for Fin ance. It also allows for the transfer by the Minister with responsibility for managing the debt to the National Treasury Management Agency. Most importantly, at local level, it opens up the opportunity for the sale by NET of the State's 51% shareholding in IFI at some point in the future. Along with the other measures in the Bill these arrangements will lead in time to the winding up of the holding company NET.

The establishment of the joint venture company of IFI in 1986 was a major step in resolving the problems besetting them at the time but the cost has been considerable. The relationship between NET and the IFI company was complex but essentially a contractual arrangement. This in effect ended at the end of 1999. NET was a vehicle for supplying to IFI the natural gas which is the essential raw material for the process. Once that arrangement came to an end, the purpose was null and void in terms of the company itself.

The company, at the moment, buys raw material from a number of sources but clearly the gas link with Scotland has importance for IFI in providing it with an assured supply. The company, despite this major debt that has been present for a considerable time now, has achieved viability in commercial terms. That needs to be put on the record. It required considerable investment and a certain sacrifice in terms of rationalisation but there is a greater confidence. As yet a suitable buyer has not been found. The State intends to sell off its share and ICI too intends to sell. ICI globally has been getting out of the fertiliser business and there is an objective there to withdraw. Change is coming and it is vital that when that sale occurs, the jobs and the future of the work force are secured. IFI had a stable performance in a business that is extremely cyclical, prone to very severe shifts and inherently unstable in many ways although its performance in the home market has been inestimable and two thirds of the business is internal. The future of IFI will have an impact on agriculture and any buyer must take the long-term view not just in terms of the needs of the company but the needs of the larger market it serves.

I raise the matter of worker participation because under this Bill it inevitably will come to an end in terms of the set-up in NET. I commend the role of the worker directors. The principle of worker participation at decision-making level is an essential one. Currently, we are seeing the breakdown of industrial relations on a huge scale across important sectors of our economic life affecting entire swathes of Irish life from the taxi men to nurses, from teachers to railway workers and the pilots. Despite the fact that this Government is headed up by a Taoiseach who made his name as being good at labour relations and being the kind of person who could fix the problem when industrial relations ran into rocky patches, we currently have an extraordinary state of upheaval countrywide. It is not just about money or conditions.

As spokesperson on health, I am very con scious that in the hospital structure particularly, among professionals and health care workers providing essential services there is an alienation from the management structures within which they operate. That kind of social partnership does not just occur at the top. It is not just a matter of negotiating at the top, it is a matter of ensuring that it comes from the bottom up. The worker directors in NET are an important model of how things should be. For example, they played a very important role when the plant was threatened by the ILDA workers' strike, during which supply to the plant in Arklow was cut off. There was a close relationship between management and workers, and a very clear commitment to resolving a problem not of their own making, and much energy went in to doing what was generally perceived to be the impossible task of ensuring that supply was provided for IFI in Arklow. They went to Cork and did the business, and it was a very fine example of social partnership being not just about striking deals with Government or the various pillars of the social partnership structure, but about ensuring that people can work together in a good atmosphere and on a basis of trust.

Deputies Joe Higgins and Pat Rabbitte spoke about the role of the banks and the history of the enormous debt which is still outstanding. The banks made extraordinary profits from debts arising in the 1980s and have done so ever since. In ways NET was a cash cow for the banks all through the years during which, it is now clear, many of the banks themselves were involved in ripping off the taxpayer. At a time when Arklow was on its knees in economic terms, the banks were leeching off the State both in legitimate ways and, as is now evident, in illegitimate ways as well. That is something we should not lose sight of.

I was interested to hear Deputy Ahern refer earlier in a positive way to the role of Charles J. Haughey in terms of managing the national debt. To me, the image of a time when the Taoiseach of this country, a Fianna Fáil Taoiseach, was living high on money that belonged to other people, supporting an extraordinarily lavish lifestyle, while in the town of Arklow a generation of young people were forced to leave their home place and work elsewhere because there was no work for them and no possibility of a future, provides a stark contrast which is something we should not lose sight of. Time can distance people's understanding of an experience. It is important that we have the reminders, the contrasts, the reality of the lives of people in Arklow at that time.

The last point I would like to make before handing over to Deputy Timmins is in relation to the cross-Border aspect of the work being done by IFI. This is not a new aspect. It now has quite a track record. It is enlightening to see, particularly since the Good Friday Agreement, how many connections are building up very rapidly between Northern Ireland and the Republic. There is an enthusiasm now in many areas of activity, whether economic or otherwise – I am particularly conscious of the area of health – where the connections and the growth of cross-Border activity are speeding well ahead of the formal structures and policies being put in place as a consequence of work being done by the two Governments. Here we have a model that grew up out of necessity but also out of seeing that there was great benefit to be had by cross-Border connection and working together, and that is to the credit of everybody involved.

At this time of year we become familiar with the main Christmas toy, whether it be the cabbage patch doll, the Barbie doll or whatever. Listening to my colleague, Deputy Ring, I could not help drawing the connection between fertiliser in Arklow and lotto machines in Westport. Maybe Deputy Ring will come up with a very innovative game some Christmas. There would be a good opening for him there.

Notwithstanding that, I welcome this Bill which will remove a psychological noose from around the neck of NET. When IFI was formed in 1987, NET retained the State guaranteed debt of £164 million on its balance sheet. As of 30 December this year the debt stands at £187 million.

This joint venture took place in 1987. People have criticised it. However, at the time the deal was done in the company's best interests and was based on the best advice available. No generation or group of people has ever had a monopoly on wisdom. I am sure we are making some decisions today that in the future will be shown to have been incorrect. It would be wonderful if we lived in a Utopia where every decision we made bore fruit, be it in our personal or in our public lives. That is simply not the case. I reiterate that the people involved in that deal at the time did it in the company's best interests. The company was confident that it would clear the debt over a period. This did not happen, in the main due to increases in oil and gas prices.

The Bill is relatively straightforward. It transfers the debt to the National Treasury. That is welcomed by the many people who work in the company; in the mid-1970s there were probably 1,100. The Minister worked there, and he is entitled to reflect on that when moving the Bill. There are not many people who get the opportunity to introduce a Bill in an area that had a very definite impact on them and in which they had a definite involvement, particularly a Bill with such a narrow focus as this one. Today between 130 and 150 people work in the company; I am not too sure about the numbers in Cobh. The workers in the plant are concerned that this debt has been hanging over their heads, and it seemed to be impacting upon them. From that point of view I welcome the fact that it is to be removed.

I realise that the Minister for Enterprise, Trade and Employment has sought to sell the State's shareholding in the company but has not been successful. The Minister said that there was some interest, but that a deal was not worked out. There is a general acceptance among workers and management that a private buyer must be found for the plant. I hope the Minister can react to this process when market conditions are favourable. It is vital that that happens because much capital investment has gone into the plants in Belfast and Arklow.

In the region of £15 million has been spent on making the plant in Arklow more environmentally friendly. An article in the Evening Herald by Anne Ryan recounting a tour of Wicklow referred to the fact that the IFI plant was a blight on the landscape. No one could argue with that. It was built prior to 1963. It is located in one of the most beautiful areas in the country, and it certainly is an eyesore. Short of growing oak trees, which would take 300 or 400 years to mature, I do not know what can be done about that. However, I call on the management of the company and on the Minister to use their influence to see whether anything can be done to make it visually a little more attractive.

My party welcomes this Bill. We hope a buyer will be found in due course and that, although we cannot impose many restrictions on a new owner, the current workers will get a fair deal and that their employment will be protected. I am confident that will happen because they are an excellent workforce and IFI is part of the tradition of Arklow, like many other industries in towns. It is important to draw the distinction between the fruits of the endeavours of the current workforce and the debt that exists for historic reasons. I realise the Government is keeping the workforce informed of what is taking place.

I reiterate that I welcome the Bill. It is important that in the future we should have locally based industry that produces fertiliser. Having to import fertiliser because of difficulties in the company in the past has had a negative impact on the farming community because of increased prices for fertiliser. It is important to have a product that is commercially viable and to be able to compete with larger companies across the single market. I hope the company's affairs will be put in order and that it will have a bright future. I am confident that will happen before the lotto machine, to which Deputy Ring referred, arrives in Westport.

On behalf of the Tánaiste and Minister for Enterprise, Trade and Employment, I thank Deputies for their useful contributions and acknowledge the broad support the Bill has received from all sides of the House. The Bill's main purpose is to transfer NET's State guaranteed debt to the Minister for Finance and, while that does not relate directly to the manufacturing company, IFI, it is understandable that the future security of jobs there has arisen as one of the primary concerns in this debate. It is the Government's intention to seek a purchaser for IFI who is committed to retaining and developing the company as a manufacturing facility and securing, as far as possible, the future of jobs at the company. Prior to any sale, all employment issues will be fully explored with IFI employees through the consultative committee which was formed at the time of the previous sale process and on which there is employee representation. As the board of NET will be part of any sale process, this will ensure that IFI worker directors will be kept fully informed of developments.

The issue of the amount of interest paid by NET to financial institutions was also referred to. NET has always managed the debt to the best of its ability by obtaining the best cost of funds available. It should also be noted that a substantial amount of the interest payments made by NET were funded by income generated from the commercial arrangements between NET and IFI. NET has carried out its debt management role in a most professional manner over the years.

Difficulties associated with the fertiliser industry, such as environmental challenges and international trade pressures, were acknowledged in the course of the debate. The fertiliser market is a cyclical one and fertiliser prices have been particularly low in recent years. It is hoped that the sale of IFI will become possible if there is a recovery in market prices.

Following the Bill's enactment, it is intended to transfer NET's debt to the Minister for Finance who may, in turn, transfer responsibility to the NTMA to repay and-or manage the debt. NET will, therefore, be relieved of its debt. The majority of NET's State guaranteed debt was built up in the 1970s primarily as a result of large cost overruns during the construction of NET's Marino Point plant in Cork. At the time of the joint venture in 1987, NET, in its new capacity as the holding company for the State's 51% shareholding in IFI, retained the historically accumulated debt of £164.6 million. The debt, therefore, became that of the holding company, NET, not of the newly formed manufacturing company, IFI. Prior to 1987, NET itself had been the manufacturing company.

It was hoped in 1987 that NET, through its 51% shareholding in IFI, would receive sufficient income to service and possibly repay some of the debt which NET has retained. However, while NET received profits from the sale of gas to IFI in addition to dividends from the company, these did not prove sufficient to fully service NET's debt. When the restructuring of NET's fertiliser manufacturing activities occurred in 1987, the debt which NET retained was effectively a State debt as the loans were State guaranteed. The total amount of debt has now reached £187.2 million.

The most pressing reason for transferring responsibility for the management of the debt to the NTMA at this stage is that following the expiry of the gas agreement last December, NET no longer had income from profits from the sale of gas to IFI to meet its debt management com mitments. The primary remaining responsibility of NET and its board, following the enactment of this Bill, will be to manage the State's 51% shareholding in IFI.

On the occasion of the joint venture in 1987, NET, which already had a long-term commercial contract in place with Bord Gáis Éireann for the purchase of gas, entered into a long-term commercial gas agreement with IFI under which NET sold its gas allocation on to IFI. The gas agreement between NET and IFI expired in December 1999. The agreement contained a commitment by IFI to pay NET £13.5 million when the termination date of the contract was reached. This payment has now been made. However, due to the pressure which this payment exerted on IFI's cash flow, both shareholders – ICI and NET – agreed each would make a loan of £6.75 million to IFI on strict commercial terms . The loan, which is at commercial interest rates, is repayable by October 2002.

In my initial contribution to the debate on the Bill, I took the opportunity to acknowledge the excellent management and workforce, past and present, at the company, particularly at the Arklow plant. Having spent almost two decades of my life there, I was very au fait with the circumstances which prevailed there. I particularly compliment the current management and workforce on the huge improvements made in the company's operations, specifically in regard to environmental issues which were the subject of much concern in the hinterland of Arklow and further afield. People's appreciation of the major improvements made on environmental matters is tangible. I do not apologise to Deputy Rabbitte or anyone else for referring to these matters.

(Dublin West): Why did the Minister of State fail to explain the banks' rip-off and the huge interest bill?

The Minister, without interruption.

If Deputies raised any pertinent questions in the course of the debate to which I have not replied, I will ask the Minister to arrange for replies to issue to them.

Question put and agreed to.
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