JOINT COMMITTEE ON THE ENVIRONMENT, TRANSPORT, CULTURE AND THE GAELTACHT debate -
Tuesday, 5 Jul 2011

Draft Harbours Acts 1996 to 2009 (Transfer of Functions of Dundalk Port Company) Order 2011: Motions

Chairman

The purpose of the meeting is to consider the draft Harbours Acts 1996 to 2009 (Transfer of Functions of Dundalk Port Company) Order 2011 and the general scheme of the Road Traffic (No. 2) Bill 2011. On behalf of the joint committee, I welcome the Minister for Transport, Tourism and Sport, Deputy Leo Varadkar. As this is his first appearance before the committee, I wish him well in his new position. I hope we can work with him in a true spirit of co-operation during the coming period.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

We will proceed to our first item of business, the draft Harbours Acts 1996 to 2009 (Transfer of Functions of Dundalk Port Company) Order 2011. On 21 June Dáil Éireann referred to the committee for its consideration the following motion:

That Dáil Éireann approves the following Order in draft:

Harbours Acts 1996 to 2009 (Transfer of Functions of Dundalk Port Company) Order 2011,

copies of which were laid in draft form before Dáil Éireann on 1st June, 2011.

Seanad Éireann referred the order to the committee on the same date. I ask the Minister to proceed with his opening statement. When he has concluded, members may ask questions.

Minister for Transport, Tourism and Sport (Deputy Leo Varadkar)

I thank the Chairman for his kind words. It is a pleasure to be here. As this is the first occasion on which I have sat on this side of a committee room, I hope members will not be too hard on me. I look forward to working co-operatively with the committee in the coming months and, perhaps, years. The committee is obviously going to be extremely busy because it appears to be covering the work of three Departments. As members are aware, the Government is giving additional responsibilities to committees which they did not possess in the previous Dáil. I refer to the vetting of appointments, the holding of pre-legislative sessions - we will be having such a session later - and, if the referenda are passed in November, investigative powers. Much of the focus of parliamentary business is going to shift from the Dáil and the Seanad to the committees. In that context, I wish members the very best in their work.

On 19 May I announced my intention to transfer the functions of Dundalk Port Company to Dublin Port Company. The draft transfer order we are discussing is the instrument by which the transfer will take effect. The order will transfer all functions, staff, assets and liabilities of Dundalk Port Company to Dublin Port Company.

It was with some regret that, having considered all the options, I came to the conclusion that the financial difficulties faced by Dundalk Port Company meant that it no longer had a future as an independent company. Dundalk town has a proud maritime tradition dating back many centuries. The port company, established in 2002, was the successor of Dundalk Harbour Commissioners established back in the mid-19th century.

In the early years after corporatisation the new company traded well. As the larger ports operated at near capacity, smaller ports, such as Dundalk, benefited from niche markets, in particular the importation of construction materials. The total number of vessels entering the port grew from 184 in 2002 to 251 in 2006. Over the same period the total tonnage handled grew from 290,000 tonnes to 436,000 tonnes.

However, the financial performance of the company was less impressive. Since corporatisation in 2002, the company has only returned an operating profit twice in two years, 2006 and 2007. The onset of the current recession has had a detrimental effect on traffic at all of our ports but the smaller ports have been particularly badly affected. Dundalk Port handled only 140,000 tonnes in 2010, a 70% drop on 2006. The figures for 2010 alone show a drop of 36% compared to 2009.

The financial impact of this fall off in business is evident in the company's accounts. The company has been loss making since 2008. In 2010 the company recorded an operating loss of €1.1 million, on a turnover of only €778,000. The company has managed to sustain these losses by eating into its cash reserves. These stood at €1.2 million in 2008 and are now down to approximately €500,000.

My Department monitors closely the corporate governance and performance of the bodies operating under its remit. In this context, the Department raised its serious concerns with Dundalk Port Company on several occasions since 2008. These included issues relating to establishment of subsidiaries without ministerial approval and issues relating to pension provision.

The statement on behalf of the shareholder at the 2009 annual general meeting pointed out that the company was not reducing its cost base in line with the reduction in business and that it needed to take action to prevent losses from further depleting the company's cash reserves. The company did not take sufficient action and the deterioration of the company's finances accelerated in 2010. In early 2011 it became clear to my Department that the company could not take the necessary steps to put the business back on a sustainable footing. It was at this point that the Department stepped in to appoint financial advisers to examine the company.

Farrell Grant Sparks, FGS, was appointed in February to conduct an independent business review of the company which analysed the company's finances and assessed the various options available. It concluded that in a do-nothing scenario the company would go out of business in a matter of months. It also found the difficulties at the port were not temporary and radical changes would be needed if the business was to survive. However, FGS concluded it was unlikely the company had either the financial or management resources to implement such a corporate recovery plan, which at that stage was long overdue. In addition to the poor financial performance, the issue which really sealed the fate of the company was its pension funding.

Like all the port companies, upon corporatisation the company took responsibility for the existing pension scheme of its predecessor, the Dundalk Harbour Commissioners. Once corporatised the company had an obligation under the Harbours Act 1996 to establish a pension fund. The company did not meet its obligations nor did it register with the Pensions Board which is the statutory regulator for pension schemes. Accordingly, the largest liability on the company's balance sheet is its pension liability, which amounts to more than €1 million. This is the background to my decision in May that the most orderly and efficient way to manage the company's affairs is to transfer it to Dublin Port Company.

This does not reflect well on the management and board of Dundalk Port Company. I am deeply disappointed with the manner in which the affairs of the company have been conducted, in particular with the pension matters. The current structure of the port sector has not helped the situation, whereby the State owns ports of varied sizes which are all subject to a one-size-fits-all corporate governance regime. The option of amalgamating Dundalk Port with another existing port company was examined prior to corporatisation in 2002. However, Dundalk Harbour Commissioners were determined the port would continue as an independent entity.

In hindsight, it is clear the decision to set Dundalk Port up as an independent company may not have been the right one. Given the small size of the business, the pension deficit the company inherited and the overheads involved in running a State company, it was always going to be difficult for the company.

This also illustrates the importance of State companies having good quality boards in place with an appropriate skill-set and a full understanding of the duties and obligations of a board member. Improvements in the appointments process are being put in place through the reforms the Government is implementing in this area.

When I announced the transfer, I stated that I hoped that port activities could continue at Dundalk. Over the coming months Dublin Port will assess the future commercial viability of the business and will ensure the issues relating to the pension scheme are regularised. I am pleased to report this process is under way. Since the transfer was announced in May, both companies have co-operated fully in the process.

Dublin Port has already examined the business and has had discussions with several port users. It will endeavour to keep the business open. This will be a matter the market will decide, however. If sufficient customers continue to use the port it may have a commercial future. However, Dublin Port does not intend subsidising a loss-making business nor should it.

Once the current difficulties are overcome, I would not rule out the possibility of the port returning to local control or being put to alternative uses in the future. There are several examples of small ports and harbours around the coast which are under local authority control or are in the process of being transferred to local authorities. Some of these ports, such as Youghal and Sligo, also have levels of commercial traffic similar to Dundalk.

A review of national ports policy is being finalised. A ports policy statement was published for the first time in 2005. A public consultation on a review of this policy took place in 2010. I intend to publish a revised ports policy document in the autumn. The State owns the majority of the port infrastructure in the country, all organised into port companies of varied sizes. A revised policy document will provide a framework for future decisions on the structure and ownership of the sector. The McCarthy group recommended the number of ports be reduced through amalgamations before any consideration of the State disposing of these assets.

There are no active plans to amalgamate any other ports. The circumstances in each port are quite different and need to be dealt with on a case-by-case basis. Options other than amalgamation may be more appropriate in some cases, such as transfer to local authority control as already mentioned.

Irrespective of the structure and ownership of the sector, the primary goal of a revised policy will be to ensure the ports provide an efficient transport service in and out of the country for goods and people. This will be vital to facilitate the economy's return to growth.

I look forward to engaging further with the committee on these wider ports policy issues as they evolve.

Deputy Gerald Nash

I welcome the Minister for his debut on that side of the committee room and assure him of constructive engagement from this side during his term. I appreciate the Minister's decisiveness and the actions he has taken to resolve this critical matter at Dundalk Port Company. The decision to transfer the company to Dublin Port Company is to be welcomed. Exceptional action, as outlined by the Minister, was required to address these issues. It has secured the short-term future of the port and it will be a matter for the State and the markets to decide its long-term future.

Over three years, Dundalk Port Company's cash reserves were reduced by €750,000, leaving it with reserves of approximately €500,000. The Minister outlined some of the reasons for this. He also referred to the establishment of subsidiaries without ministerial approval. To the best of my knowledge of legislation covering port companies, any port going into different business relationships outside of its core activity would require ministerial approval. Will the Minister elaborate on these subsidiary activities? Will these continue to be carried on by Dublin Port under the new governance arrangement?

I am concerned about the company's pension provisions. Failure to register with the Pensions Board and some of the other issues the Minister outlined are outrageous. Will the Minister confirm that all pension obligations for former and current staff would be fulfilled by Dublin Port Company? Will he give more information on the issues around the company's pension provisions? Does the Minister foresee another State agency, Department or other actors becoming involved in an investigation into what happened with the pension funds at the Dundalk Port Company? Those who worked in Dundalk Port Company and those who are currently employed there seek clarification, confirmation, comfort and consolation on what the future holds for them.

There was also criticism, implied or otherwise, of the level of governance employed by the board in recent years. It has been demonstrated that concerns arise about the board and how it has governed the port. The question arises as to whether the boards in general were sufficiently strong to deal with some of the challenges facing them. Would the Minister say the performance of the board was weak? Will he outline his vision for the future of Dundalk Port Company in the context of its new governance arrangement with Dublin Port Company?

Deputy Leo Varadkar

I will deal initially with pension provisions, which is the issue that gave rise to most concern. The requirement is that companies must set up a pension fund if they have a pension. All the port companies were to set up a pension fund, as they did, but Dundalk Port Company never did. Essentially what it did was to pay pensions out of cash. That is not a sustainable way for any company to operate. It was required to do so by the Harbours Act but it did not. Unfortunately, while it is a requirement of the legislation to establish a pension fund, it is not an offence not to do so. Even though people may feel a prosecution should have occurred in that case, there is no option of taking a prosecution under the Harbours Act. I did seek advice from the Attorney General's office on whether it would be possible for me to refer the responsible people to the Office of the Director of Corporate Enforcement. The advice I received is that, unfortunately, that was not the case, as no company law provision had been broken, although the Harbours Act was.

On the ongoing pension problem, the fact that the company has now been taken over by Dublin Port Company means that the liability is transferred to Dublin Port Company. The four pensioners will receive their pensions. That is assured by this measure. Had the company gone into receivership or liquidation, that would not have been the case. I was conscious of that in making this decision. All the employees have transferred to Dublin Port Company, including the casual workers. The future of the port and of those jobs will be dependent on commercial operations at the port in the future.

On subsidiaries, in 2004 where the irregularities essentially related to the establishment by the company of a subsidiary without ministerial consent and the existence of unauthorised borrowings in the name by the subsidiary company, both the subsidiary company and the borrowings related to the purchase and operation of a dredger. The dredger had been purchased in connection with dredging to be carried out by the company under a national development plan approved project. Irregularities were also identified by the Comptroller and Auditor General as part of a review he carried out on NDP-funded projects. Essentially, those issues were raised immediately with the company by the Department and efforts were made to engage with the company to address the matter satisfactorily. In response to the repeated breaches, the Department appointed financial advisers to review the situation and to advise on the most appropriate course of action. That work was done by Baker Tilly which reviewed the corporate governance breaches by the company at the time and made a number of recommendations to regularise the situation. The recommendations were pursued by the Department on foot of quarterly monitoring reports produced by the consultants and by 2006, all matters were regularised to the Department's satisfaction. Unfortunately, the pension funding irregularities were not highlighted as part of that process at the time.

The future of the port will depend on two things. The first will be the level of commercial traffic that is interested in using the port. Ultimately, a port is a business and it must have customers. If it has customers, it will continue to operate but if it does not, it will not. There are potential opportunities, particularly in the leisure and tourism field, for ports of that nature. The reality is that the ports business is changing. Ships are getting bigger and, essentially, they want to use deep water ports. That is just the way things are going. We did initially make contact with Louth County Council on whether it wished to take an interest in the port. It made initial inquiries. Without quoting it, as it did not say it to me, it is fair to say it would not have been prepared to take on the pension liabilities and everything else, but now that the Dublin Port Company has taken over and will work through the difficulties, the option does arise down the line for Louth County Council, if it so wishes, to take an interest in the port.

Deputy Gerald Nash

May I ask a supplementary question?

Chairman

I will allow supplementary questions later. Eight members wish to contribute. I will invite Deputy Nash to contribute later.

Deputy Dessie Ellis

I thank the Minister for attending. It is disappointing that we are losing Dundalk Port Company as we know it. People will feel they have lost ownership. In an area such as Dundalk the port is important for jobs. When an outsider such as Dublin Port Company gets involved, it will be less favourable to local concerns. The port in Dundalk has contributed a great deal and the effect on the town will be evident. The Minister referred to tourism and spin-offs. Those are areas on which everyone is working and more effort is required in that regard. I suspect they will be less important under the auspices of Dublin Port Company. The input will not be the same.

Pension funding has been a big issue. We are connecting the pension fund and the port. It is obvious that the pension fund was not properly administered but that is being coupled with the port itself. It is a big loss for the Dundalk area. Another State company is being wound down and that will be detrimental to the area in the long run.

Chairman

Before the Minister responds, as he did not deal with it in his presentation, I wish to focus on two matters. Could he clarify that the previously existing board positions on the Dundalk Port Company no longer exist? Have the individuals been amalgamated onto the board of Dublin Port Company? Following on from what Deputy Ellis said, what provision will the Minister put in place to allow for representation by people who are familiar with the Dundalk area?

Deputy Dessie Ellis

And existing jobs.

Deputy Leo Varadkar

As far as I am aware, the board will cease to exist on the day of transfer but the port will still be Dundalk Port Company. Members will be aware that Greenore is 50% owned by Dublin Port Company and still retains its individual identity. I do not see this as a loss; I see it as a way of saving existing jobs in Dundalk and saving the pensions of the people who used to work there. What it boils down to is the fact that had it not been amalgamated with Dublin Port Company, those jobs and pensions would be lost.

Deputy Terence Flanagan

I welcome the Minister and wish him well in the future. I commend his decisiveness in the awkward situation in which he found himself. How many directors are involved in Dundalk Port Company? Did they resign voluntarily or did the Minister formally sack them? Is the State in any way liable in that regard?

On a day-to-day basis does Dublin Port Company have its own staff on site and make decisions on how the company is run? Certain subsidiary companies were established. What provisions are necessary to ensure new subsidiaries could not be set up by another port company in the future?

Deputy Leo Varadkar

There are nine directors on the board currently. The board will cease to exist when the transfer order goes through. They will not be sacked, as such, but the board will cease to exist and the board functions will be taken over by the Dublin Port Company board.

Regarding new subsidiaries, it will be a case of closer monitoring and making sure that such things do not happen again but they must report any new subsidiaries being established. The Deputy asked one other question in regard to-----

Deputy Terence Flanagan

Is there any contingent liability in that regard and the day-to-day running of the port?

Deputy Leo Varadkar

There is no liability on the directors. Obviously, their liability is limited but as far as I am aware, nobody from Dublin Port Company is on site running the show. The employees are still there operating the port. The chief executive officer, CEO, is gone but everyone else is still there. Dublin Port Company is actively involved in helping to manage the company and is meeting the staff to assist them in managing it. They are the right people to do it. Who do we get if we want somebody to run a port? We get somebody from the three big successful port companies to do the job. They are the experts in doing that business rather than me or my Department.

Deputy Clare Daly

I have two brief questions. The Minister mentioned the McCarthy report, and obviously he has an advantage over those of us in the Opposition who have not had a chance to discuss its contents, but I do not know if he is implying that it has a status beyond that in that it is now Government policy or whatever. He stated that McCarthy's suggestion of reducing the number of ports would not be enacted currently but that the situation would be reviewed case by case. He seemed to suggest that the preference might be for a transfer to local authorities in some cases rather than a reduction in the number of companies. Given the difficulties with the transfer of a number of harbours to local authorities in the Minister's area in particular, whereby the harbours were transferred without any funding being transferred to support them which caused huge difficulties, what appeared to be an assistance was not an assistance at all. If we are talking about transferring resources to local authorities, particularly now given the constraints on local authority funding, will appropriate funding be given in that regard?

With regard to the pensions issue, the Minister stated that he had inquired about pursuing the issue through the Office of the Director of Corporate Enforcement but if there was an irregularity or a breach of company law or the statutory duty of those responsible in setting up this pension scheme, presumably we are actively engaged in trying to pursue those responsible for that and holding them to account. The Minister may not have come across the correct mechanism for doing that but are we actively pursuing that? If somebody is responsible for that, will they be held to account for it?

Deputy Leo Varadkar

The McCarthy report is still a report. It has not been adopted by the Government as policy yet. I am not saying necessarily that will happen. We have discussed it but we have not made any decision on it yet. This decision in regard to Dundalk should not be seen as part of a McCarthy process. It would have had to have happened in any case. If anything, it is more like the Shannon-Foynes case. The Deputy will recall that Shannon and Foynes were merged because of various difficulties. It is more like that case than anything to do with the McCarthy report. We have made no decisions on the McCarthy report. That will come into the new ports policy statement which I hope to do later in the year.

As regards the individual ports, they must be seen on a case by case basis. The circumstances are different from one port to the next. I am not sure if it is correct to have a one size fits all policy or say we should amalgamate them into three big companies because they happen to be within 200 miles of one another. I am not sure that is necessarily the right approach.

The transfer of harbours has occurred in some cases. I imagine the Deputy is referring to Loughshinny and some of the ones we would be familiar with in Fingal, but what happens in that regard is that funding is provided for two years for remedial works. It is appreciated that when harbours are being transferred, the Department must transfer them in a reasonable condition to ensure the local authorities can take them over. A round of funding for Bantry and a number of different ports was announced about two months ago.

In regard to pursuing the issue with the directors, I was very keen to do that, which is the reason I sought the advice of the Attorney General. The advice we have is that no offence has been committed under company law, and while the Harbours Act was breached, it is not an offence in itself. There are no sanctions open to me to deal with the directors, with which I am not satisfied. The next time we are dealing with ports legislation, we will have to amend that part of the Harbours Act to make it an offence.

That highlights the need for Ministers, and now Oireachtas committees, to ensure that when making appointments to the boards of commercial entities and State agencies, we appoint people who understand the responsibilities, that it is not just about turning up to meetings and collecting a board fee, and that there are real responsibilities in this regard. We are dealing with people's jobs, businesses and pensions and we must ensure we have on State boards an accountant or somebody with accountancy expertise to chair the audit committee, and potentially someone with legal expertise and so on. That has not always been the case with the port companies. It is often local interest groups that have been represented on the port companies or, in some cases, the customers and, frankly, it is inappropriate to have the customers on it. It behoves us now to approach appointments somewhat differently than was done in the past, and it is important that committees have a role in that.

Deputy Patrick O’Donovan

Along with other speakers, I wish the Minister well. I have a number of questions. First, the Minister mentioned that the CEO is gone. Did he go voluntarily or was he dismissed by the Minister's Department? Did he go off into the sunset with a handsome package? What about the remainder of the management of the port? I presume this was not a one man or one woman show and that other people were working in a managerial role. What has happened to those people? Are they still in a managerial role within the port business?

Second, is the Minister confident that this is an isolated incident? I may be wrong but the Minister said that while the tonnage was going on an upward progression, the profit was going down, yet it was not until this February that action was taken. Why did it take so long if the pension scheme was being inappropriately managed? Was the shareholder not aware of that? Was the previous Minister not aware of it and, if he was, what action, if any, was taken by him to address it and safeguard the future independence of the port? For instance, did the shareholder make any statement? The Minister referred to a statement made by the shareholder at the annual general meeting. At previous annual general meetings did the shareholder make any reference to that?

The Minister stated also that a review of the national ports policy would take place. That would be an opportune time for this committee to get involved in that because we all have ports in our individual areas in which we would be interested. My concern is whether this is an isolated incident and the consequences of it. The Minister is fortunate, as he rightly said, because Dublin Port Company was willing to take it on when Louth County Council might not have been as anxious to do so. If Dublin Port Company was not willing to take it on, the pensioners and the employees would have been cut loose. Whatever damage Deputy Ellis said will be caused to the town, they would have been cast aside had Dublin Port Company not settled in. How many other cases like Dundalk do not have somebody willing to take them on? That is my concern. Is the Minister confident the other ports are acting in the manner in which they should be acting? The Minister might revert to us on that.

Deputy Leo Varadkar

It may not be entirely fair to Dublin Port Company to say it was willing to take them on. It was ordered to take them on. It has kindly accepted the order and is co-operating entirely, and we are very grateful to it for doing that. I do not believe Dublin Port Company would be queuing up to absorb liabilities but it agreed to the decision.

In terms of the CEO, he resigned subsequently. He is not entitled to a pension because he had to serve ten years to get a pension under that scheme.

Deputy Patrick O’Donovan

Did he get a severance payment?

Deputy Leo Varadkar

I do not think so. I can double-check that. One generally does not receive a severance package on resigning. The CEO is not entitled to a pension. He has since found a job in Dún Laoghaire Port, a small port. He was the only manager; the other four staff were not in management.

With regard to the pensions issue, this is definitely an isolated incident. We have checked all the other port companies and noted all have pension funds and are registered with the Pensions Board. With regard to the financial performance of ports, it is not necessarily an isolated incident. It is the case that some ports are not performing well financially because of the recession and the changing nature of the business. The focus is shifting towards bigger and deeper ports for bigger ships. It would not be appropriate to elaborate on the financial performance of various ports and say which are in trouble and which are not. The members can understand the reasons for this.

With regard to monitoring, the shareholders at the AGM review the annual accounts, which are then presented to the Government. At a number of the AGMs, concerns were expressed over the financial performance of the company. The Deputy is asking whether we could have intervened earlier. Perhaps we could have but the entities in question are commercial entities and have reserves. They are entitled to a little time to deplete their reserves and turn themselves around. One must give State companies this opportunity. In this case, they were not able to do so. There are examples of other State companies getting into severe difficulty that were able to turn the ship around. That was not the case in the circumstances in question.

Chairman

Speaking of reserves, the Minister stated in this document the company managed to sustain losses by eating into its own cash reserves over a period and that reserves worth €1.2 million in 2008 are now reduced to €500,000. How much of the €700,000 used was used in paying the pensions from cash funds?

Deputy Leo Varadkar

It was €40,000 per year for pensions.

Chairman

Per year or in total?

Deputy Leo Varadkar

Per year.

Chairman

So it is €120,000.

Deputy Leo Varadkar

It is €40,000 per year.

Chairman

Between 2008 and now, the cost was €40,000 per year, which amounts to €120,000. Some €120,000 has been spent in paying pension funds over the period.

Deputy Leo Varadkar

From cash, yes.

Deputy Noel Coonan

I welcome the Minister. He got what he was looking for today. He is getting an easy run so far and I hope that continues for him.

How many people are employed on the board? In the Minister's address, he stated an effort will be made to continue activities in the port. He also stated a review is being set up and that an effort will be made to keep the port open, but not at a loss. This sounds warning bells for Dundalk Port. What steps are being taken on foot of the amalgamation to prevent ports such as Dublin Port from cherry-picking from Dundalk? Our experience in the airports begs this question. It was stated every effort would be made to keep the port viable and, therefore, open, and to secure employment in the area.

The Minister said that if he wanted somebody to run a port, he would get the experts from the three ports. In the circumstances in question, there are only experts from one port. I felt that there would be a better option for Dundalk if the experts from the other ports were used also to advance the projects in this area. I am sure from remarks made today that the Minister has no worries about bonuses being paid at the port.

The main issue is one of meaningful employment in the area. The Minister outlined the employment that exists at present. What hope can he offer people of meaningful employment in the future?

Deputy Leo Varadkar

There are four full-time employees, one part-time cleaner and three casual members of staff. They have all been transferred to Dublin Port. Their jobs are secure for now but, as with any business, this will depend on the amount of business they can generate. There is a niche market. The ports are used by Bord na Móna to bring in coal on a seasonal basis and for other purposes. There may well be potential for the port to continue in operation, but this will ultimately be a question of customers' willingness to use it.

No bonuses have been paid in recent years but bonuses would have been paid in previous years. I understand the Deputy's point on taking in people from management in various ports but, ultimately, one cannot transfer assets and liabilities to three different ports. They are transferred to one port and, therefore, the logic is that it is the management from that port that should try to rehabilitate it.

I agree with the Deputy's basic point on employment. The decision taken was aimed primarily at maintaining employment in the port and protecting the pensioners. This will be contingent on the commercial viability of the port.

The costs will be a lot lower. The costs of running a semi-State organisation are quite high. Now that the port is a subsidiary or part of another semi-State organisation, its costs no longer accrue.

Deputy Seán Kenny

I welcome the Minister. I share the concerns expressed by Deputy Nash and others over the governance of the Dundalk Port Company board and the question of the pension fund. I welcome the fact that the employees, including the casual employees, are being taken on by Dublin Port Company. At least they have some safeguards.

What would be the impact if the commercial traffic to and from Dundalk Port, the volume of which has dropped considerably, were transferred to Dublin Port? The Dublin Port tunnel takes the traffic under the city to the port. North of the Dublin Port tunnel, the M1 can sometimes be quite congested. The N32 - I represent the area around the N32 and M1 - can be very congested at times. Has the impact of additional traffic on these routes been assessed?

Deputy Leo Varadkar

It has not been. Roughly one ship per week is going into the port. Any impact on traffic would obviously be very limited. The port generally serves the north east in any case. The traffic generated is pretty minor. One can understand the difficulty experienced by a port company with eight members of staff that receives only one ship per week.

Deputy Niall Collins

I thank the Minister for his presentation. What role did the auditor of the company play in highlighting the fact the company did not comply with the requirement to register with the Pensions Board? Did it highlight it in the annual accounts statement? How up-to-date are the accounts? Has the auditor signed off on all the accounts to date?

Deputy Leo Varadkar

The auditors signed off on the accounts every year. It was just two years ago that a note was put in the accounts to indicate an issue over pensions.

Deputy Niall Collins

The auditor missed it for a number of years. Who was the auditor?

Deputy Leo Varadkar

A local firm. The board appoints the auditor.

Deputy Kevin Humphreys

I welcome the Minister. As he stated, this is his first time on the other side of the table and this is nearly my first time on this side of the table. We will learn together.

Having listened to the questions, it amazed me to hear there were nine directors for eight members of staff. The balance seems to be wrong. May I bring the Minister back to the shareholders' meeting? At the time, the issue of how to deal with pension provisions was the main discussion point across all the ports. In respect of Dublin Port, discussions with shareholders at the annual shareholder meeting on how pensions were being dealt with took up a great deal of time. There is no shame in trying to turn around a company and I acknowledge the recession resulted in fewer ships coming in. However, I am at a loss regarding the company's losses in respect of pensions, the failure to flag the issue and how this problem arose. One must consider who were the directors at the time, that is, between 2004 and 2009. While I understand new directors were appointed from 2009 onwards, was there a changeover of directors at that time or did the same number of directors continue? As many of my questions have been dealt with already, I only have one specific question. As the directors obviously will not be finishing out their term of office, I seek clarity on whether any of them will receive a lump sum payment in lieu of service.

Deputy Leo Varadkar

No, once the board is dissolved the directors' terms end and there is no compensatory payment or anything like that. It is the case this probably should have been picked up sooner either by auditors or at a different point under different review mechanisms. I can assure the Deputy that once this was picked up in Dundalk Port Company, an audit was performed on all the other port companies to ensure they all had pension funds and were registered with the Pensions Board. As this is the case, there is no concern in respect of the other companies.

Deputy Kevin Humphreys

To clarify -----

Deputy Leo Varadkar

Sorry, the directors changed in 2007.

Deputy Kevin Humphreys

-----were there two shareholders, namely, the Department with responsibility for the marine and the Department of Finance or did the structure differ for this port company?

Deputy Leo Varadkar

No, it is just us. The only shareholder is the Department of Transport, Tourism and Sport.

Deputy Catherine Murphy

At the outset, it seems reasonable to amalgamate this company with Dublin Port. What is the extent of the liability being taken on by Dublin Port? Second, when the Minister consulted with the Attorney General with regard to what he could do, did the latter identify deficiencies that could be plugged in areas other than the harbours legislation, such as, for example, in respect of the Office of the Director of Corporate Enforcement, ODCE? In this regard, should the Minister then flag this issue with the appropriate Minister for amendment to legislation? If one is to prevent such events from recurring, it is clear they must be used as examples. If a deficiency exists in law, this obviously would be the kind of situation in which one could highlight it.

Deputy Leo Varadkar

I must clarify my last answer. Apparently the Minister for Finance holds one share and as Minister for Transport, Tourism and Sport, I hold all the rest. checked and all the others do.

The liabilities being taken on by Dublin Port are €1.5 million but obviously there also are some assets, including what remains in the cash reserves. In theory, were the entire port, land, plant and everything else to be sold, there also would be assets. However, there are no plans to so do at this point. In respect of the Attorney General, I really only sought advice on whether I had grounds under the Companies Acts to refer the company to the ODCE and the finding was I did not. If an obligation falls on anyone to change the law in this regard, it falls on me as Minister to change the Harbours Acts to make it an offence, if possible, for a port company not to have set up a pension fund. In some ways, however, that is now an academic point because we have

Deputy Brian Walsh

Many of the questions I had intended to ask already have been asked and addressed by the Minister. As for the pension deficit, given we are where we are, transferring functions from Dundalk to Dublin will not address the existing deficit. As the shareholder, does the Minister intend to invest resources in the pension fund or will Dublin Port take responsibility for the aforementioned deficit in order that existing and future pensioners of the port will have a future income? Obviously, the Minister has lost the services of the chief executive officer. Does he envisage any other cost savings arising from this merger? During the Minister's contribution, he suggested there may be an independent future for Dundalk Port outside of Dublin Port. As those two ports competed historically with each other for business, realistically, does the Minister believe that Dublin Port will restore this company to profitability in the future? Does he believe it will do so in the knowledge that Dundalk Port might have an independent future in which it again competed with Dublin Port?

Finally, as a former member of the board of Galway Harbour Company, I note Deputy Niall Collins's comments regarding the auditors. Did neither the Comptroller and Auditor General nor departmental officials have oversight responsibility? The pensions issue certainly was a live issue at Galway Port between 2006 and 2007 and departmental officials were aware of the small deficit that then existed in that port. It is surprising to learn this issue was not spotted until a later date. The Minister also mentioned two independent investigations into Dublin Port and referred to Farrell Grant Sparks as one of the bodies that had conducted an investigation. Does the Government have any recourse to those bodies as to the reason they failed to discern this problem with the pension deficit?

Deputy Leo Varadkar

Can the Deputy repeat the last question?

Deputy Brian Walsh

I refer to the other independent bodies that came in to investigate which, quite apart from the external auditors, the Comptroller and Auditor General and the departmental officials, failed to spot the problem. The Minister mentioned Farrell Grant Sparks and another body which had been sent independently to examine the port structure. It is difficult to appreciate how they did not see this problem with pensions.

Deputy Leo Varadkar

Farrell Grant Sparks was only brought in this year after the pension issue already had been identified. Baker Tilly was brought in regarding the issue on the subsidiary but was not specifically asked to consider this issue. While potentially it was something that might have turned up, the firm was not asked to consider this issue and cannot really be held responsible. It is fair to state the matter could have been identified earlier, either by the auditors or by other means. However, once it was identified in 2009, actions were taken. By then, however, the company already was in such a poor financial position there was no way in which it could recover the situation. While problems exist in respect of pensions in other port companies, they at least have plans to deal with the problem in conjunction with the Pensions Board, even if it runs over 15 years.

The pensions deficit is being taken over entirely by Dublin Port. It is not Government policy to bail out any of the semi-States' pension funds and this remains the case. One should be clear in this regard as quite a number of semi-States have very large pension deficits. It must be understood and must be clear the Government will not under any circumstances bail out semi-State pension funds. Such issues must be resolved by those companies in co-operation with their worker representatives.

There can be quite a lot of cost savings. For a start, there will be a fair amount of money saved in respect of the board. The chief executive officer has departed and another point is the general costs that arise in any company, such as filing accounts, auditing and so on, all will be gone because Dundalk Port Company will be part of another company. The question as to how exactly it will be managed in the future is for Dublin Port to work out in consultation with its new staff members in Dundalk. One measure that may be considered and which is done in other ports is to use it only on an operational basis and to only open when the ships come in. This is done in many small ports and harbours nationwide and although such ports are opened when a ship comes in, they do not retain a full staff and everything else in the absence of business.

Deputy Gerald Nash

What level of remuneration did the former chief executive officer enjoy in recent years? Can the Minister inform members as to what was the level of payments to board members over the last few years? Typically, from where were such board members drawn? My understanding is that many board members will have been members of local authorities in the area and I seem to recall that such a practice was ended or at least curtailed in 2009.

Deputy Leo Varadkar

The chief executive officer was in receipt of a salary of approximately €80,000. If I recall correctly, he acted as both chief executive officer and harbour master and was in receipt of approximately €80,000. As part of the recent reforms proposed by the Minister, Deputy Howlin, the salaries of chief executive officers of port companies are being decreased quite substantially and for the smaller ports will be €56,000. We often talk about very highly paid semi-State bosses, yet when one looks at the port companies some of them are relatively modestly paid. As regards the small ports, the salary level would be down to about €56,000. I do not know the exact figure for board members, but it is usually about €8,000 to €10,000. It can be about €5,000 or €6,000 for the smaller ports.

Deputy Gerald Nash

Over the last number of years?

Deputy Leo Varadkar

Yes. We can find the exact figures for the Deputy, but it is about €5,000 or €6,000 a year. Up to 2009, there was a provision for councillors to serve on the board but that has now gone. All the others were ministerial appointees. The issue of councillors serving on port companies comes up from time to time. There are still a number of councillors serving on port companies but there is no automatic appointment of councillors to port companies any more. It is something one has to be careful about because, first, one needs to know that the councillor is not there to represent the council on the port company. The councillor so appointed needs to understand that the role is to be a board member of the port company, and should put that first.

In addition, there can be conflicts of interest where councillors who serve on port companies have to excuse themselves either from meetings of the council or the board any time that planning issues arise. That arose in Dublin, for example. While I certainly do not rule out ever appointing a councillor to a port company, it would have to be within those parameters.

Deputy Niall Collins

Will the Minister clarify if the auditors, or a new firm of auditors, will go back and restate the accounts over the years, as they have been materially misstated? On what date did the CEO-harbour master resign and depart the business?

Deputy Leo Varadkar

He resigned as CEO and harbour master on 30 May. It will be up to Dublin Port now as to whether to trawl through the accounts and undertake a forensic analysis of what went wrong. I do not know if anything would be served by doing so, but that would be up to the new owners.

Deputy Kevin Humphreys

I thank the Minister for his full and frank answers. He said it was not the policy to bail out semi-State companies but this is happening. At the end of the day, Dublin Port will probably have to reduce its dividends to the State for taking on the liabilities. That is the reality.

Deputy Leo Varadkar

We contend that is not the case and that they are not being bailed out by the State and certainly not by the taxpayer. It is worth pointing out though that Dublin Port is getting the assets as well. It is getting the money that is left in reserve and the theoretical value of the land and plant, so the total assets would be about €2 million, whereas the pension liability is €1 million. It is not a straight bailout in that sense, but I know what the Deputy is saying.

Chairman

Before moving on to the remaining supplementaries, I would remind members that we still have to discuss the Road Traffic Bill. Before calling Deputy Terence Flanagan, I want to ask about the figure of finance and pension reserves. My maths are not great but they would certainly appear to be better than those of the accountants running the company. It equates to about 20% of the reserves lost over that period. Of €40,000 a year, there was a loss of €700,000. From 2008 to 2011, that means that about 20% of losses were from feeding the pension itself. It is remarkable that a company was trading at that level of loss every year.

Was any consideration given to any other port in the Louth area? What consideration was given to Drogheda, for instance?

Deputy Leo Varadkar

Consideration was given to that, but Drogheda itself is a relatively small company and would not be in a position to take on the assets and liabilities of Dundalk. In particular, Drogheda has its own plans for the future concerning Braemore. It was considered but Dublin was considered to be the more appropriate option.

Deputy Terence Flanagan

I thank the Minister for his full and comprehensive responses. As regards buildings and assets, how many empty buildings are there which could potentially be leased out by the port? How many acres does the port comprise and what is its value? Are we talking about a book value of roughly €2 million?

Deputy Timmy Dooley

The Opposition used to ask questions like this. The Government Deputies are putting their Minister through an awful flogging on his first day.

Deputy Leo Varadkar

I am not sure if the Deputy really wants this information, but there are the port company offices, a detached house, a bulk storage facility and oil yard, some quays, an oil storage facility, 44 acres at Soldiers' Point, 96 acres leased from the Roden Estate, and 172 acres forming lands between the first river breakwater and the Ballymascanlon River. There are also navigation aids and about €680,000 worth of plant and equipment. Deputy Nash, who has now gone, might know the geography better than the rest of us.

Deputy Terence Flanagan

So is the book value roughly €2 million?

Deputy Leo Varadkar

The figure is €2.191 million, but that would assume that one had sold everything and was able to sell everything.

Deputy Patrick O’Donovan

Am I correct in thinking that the former CEO is now working for Dún Laoghaire Port?

Deputy Leo Varadkar

Yes.

Deputy Patrick O’Donovan

In the same capacity?

Deputy Leo Varadkar

No.

Deputy Patrick O’Donovan

What is he?

Deputy Leo Varadkar

He is the new harbour master.

Chairman

That concludes our consideration of the Harbours Acts 1996 to 2009 (Transfer of Functions of Dundalk Port Company) Order 2011. In accordance with Standing Orders, I propose that the committee should instruct the Clerk of the committee to send a message to the Clerk of the Dáil and the Clerk of the Seanad stating that the joint committee has completed its consideration of the Order. A report on the order along similar lines will be laid before the Houses of the Oireachtas.