JOINT COMMITTEE ON TRANSPORT debate -
Wednesday, 2 Dec 2009

Shannon Foynes Port: Discussion with Shannon Foynes Port Company.

Chairman

I draw the attention of witnesses to the fact that members of the committee have absolute privilege but this privilege does not apply to witnesses appearing before the committee. Members are reminded of the parliamentary practice that members should not comment on, criticise or make charges against any person outside the House or any official by name or in such a way as to make him or her identifiable. Members are also reminded that civil servants, while giving evidence to the committee, may not question or express an opinion on the merits of any Government policy or policy objective or produce or send to a committee any document in which a civil servant, a member of the Defence Forces or a member of the Garda Síochána questions or expresses an opinion on the merits of any Government policy or policy objectives.

From the Shannon Foynes Port Company, I welcome Mr. Pat Keating, interim chief executive, and Councillor Kieran O'Hanlon, director. I propose that the witnesses give a short presentation followed by which there will be a question and answer session. Is that agreed? Agreed.

Councillor Kieran O’Hanlon

I thank the joint committee for inviting us to discuss the performance and future plans of the Shannon Foynes Port Company. I am joined by my colleague and interim chief executive of the company, Mr. Pat Keating.

Mr. Pat Keating

I thank the Chairman and members of the joint committee for giving us the opportunity to address them regarding the business plans and future development of the Shannon Foynes Port Company. I will provide a brief overview of the company followed by which I will outline our market strengths, trading and financial performance from 2006 to 2008 and future development plans and requirements. I appreciate that the committee has a busy schedule and I will endeavour to adhere to the time limits set out in the letter of invitation we received from it. I would be happy to present the company's views on the remaining items raised in the letter following my presentation if members so desire.

The Shannon Foynes Port Company was formed in 2000 by way of ministerial order amalgamating the two legacy port companies on the Shannon, namely, Shannon Estuary Ports and Foynes Port Company. The origins of these legacy port companies can be traced back to when the Vikings used the Shannon Estuary for both conquest and trade. Throughout the Middle Ages, Limerick was an important trading centre facilitating seaborne trade with England, France and Spain. Its current origins and configuration date back to legislation passed in 1832 establishing the Limerick Bridge Commissioners, predecessor to Shannon Estuary Ports, with powers to make by-laws for the regulation of the harbour, to license pilots within the port and harbour, to construct a wet dock and to build and regulate the operation of what is now known as Sarsfield Bridge.

Today Shannon Foynes Port Company is responsible for the maritime management of one of Ireland's premier natural assets, the Shannon Estuary. As one of the largest port operators in the country, the company has statutory jurisdiction over all marine activities on this magnificent 500 sq. km watercourse stretching from Loop Head to Limerick city. The strategic location of our terminals on the estuary offers access to the vibrant economy and population of a large part of Ireland.

The company provides a variety of services from controlling navigation and marine safety to warehousing, logistics and cargo handling. We handle the largest vessels entering Irish waters, which are up to 225,000 dead weight tonnes, and have a track record of continuous growth and innovation. We facilitate 35% of the country's non-unitised trade and cater for 58% of the nation's dry bulk market. All our operations are accredited to ISO 9001:2000 by Lloyd's Register quality assurance.

Shannon Foynes Port Company services six facilities on the Shannon Estuary and handles over 10 million tonnes per annum, which demonstrates its importance as a national economic pillar. The facilities at Foynes, Limerick docks and Shannon Airport are owned by the company. As the deepest company owned facility, Foynes accommodates vessels from 3,000 deadweight tonnes to 40,000 deadweight tonnes, caters for all key cargo classifications and has a substantial 100 acre landbank with 400,000 sq. ft. of warehousing. The Limerick docks facility handles all general bulk cargo types together with project cargoes. It is an important revenue centre which handled an average of 578,000 tonnes of cargoes per annum for the period under review. Shannon Airport is one of the few international airports to have its fuel requirement supplied directly by ship. The three other dedicated terminals, which are privately owned, are Moneypoint and its 2 million tonne coal transhipment facility, Tarbert Island for heavy fuel and Aughinish for bauxite imports and alumina exports.

The company has made extensive investment in infrastructure in recent years and currently has a total asset cost base of €63 million. We have the expertise and experience to cater for all ship sizes and types. We handle on a regular basis ships from 225,000 deadweight tonnes down to coasters of 3,000 deadweight tonnes. While we can facilitate all modalities except for ro-ro, we see our niche as serving the dry and liquid bulks, break bulk and project cargo markets.

We were involved in the container or lo-lo business for a three-year period up to 2006 but decided to exit this in light of the inadequacy of its marginal revenue stream. This was due to the characteristics of the Irish container market and its reliance on feeder vessels to and from the mainland European ports. Ireland's deep sea and short sea trade is almost entirely routed via northern European ports. Given these trade flows, ports on the west coast are automatically disadvantaged by vessels having to come around the corner of the south-west coast. The associated extra sailing times and threats to scheduling due to Atlantic weather systems make the service uncompetitive when compared with south and east coast offerings.

The cruise business is facilitated on the estuary but is not a significant revenue stream for us. We do, however, actively engage with Shannon Development in promoting this business as it is readily accepted that the mid-west region has much to offer tourists in terms of its quality destinations and excellent value for money. We therefore see the dry and liquid bulk sectors as the markets where we can offer the best competitive advantage and service to current and future customers. We have the deepest naturally occurring water in the country, at in excess of 22 metres. We have the scale and proven expertise to handle the very largest to the smallest vessels. Importantly, we have invested in people and infrastructure to offer best in class service to the bulk sector. We believe it is by promoting and building on these attributes that we will grow our current customer base. Furthermore, and as mentioned in the briefing document, the estuary already displays the characteristics of an energy cluster that is even more enhanced by Shannon LNG's plans for a new deepwater gas terminal at Ballylongford. We are very optimistic for the future as there are large projects of scale in the pipeline that will utilise our resources as a port authority and exploit the physical advantages of the estuary.

In summary, we do not view the fast moving goods sector, and hence the traditional unitised markets, as core to our future business model. We intend to play to our strengths, which are most definitely utilised by concentrating on the business-to-business needs of the agricultural, industrial and energy sectors, traditional and renewable, where we can offer real competitive advantage. In short, we do not intend investing millions of euro on aspirational business cases but we will maximise our existing deepwater and infrastructural facilities by partnering private capital.

Regarding trading and financial performances for 2006 to 2008, the 2008 results show a substantial improvement in all operating financial performance indicators with earnings before interest, taxes, depreciation and amortisation, EBITDA, operating profit and profit attributable to shareholders all positive to those posted in 2006 and 2007. These improvements were made despite a 34% reduction in turnovers from 2006. This reduction in turnover arises primarily from the cessation of the Foynes-Rotterdam container line service in September 2007 and the severe tightening of the economy during 2008, particularly the construction sector with cement products, timber and steel being notably affected by the latter. Overall tonnage throughput for 2008 of 10.8 million tonnes is 400,000 tonnes adverse to 2007 and 600,000 tonnes adverse to 2006, which reflects the external economic turmoil and is not an erosion of our market share. Furthermore, it should be noted that during 2006 and 2007 we facilitated record tonnages against the backdrop of a robust economy and therefore these years are considered a lofty benchmark but one that we will strive to surpass in the coming years.

Despite the economic conditions experienced in 2008, the company has continued to increase its EBITDA and operating profit, and has posted a bottom line profit for the first year since 2005. EBITDA, at €3.8 million, is 8% greater than the previous year and 61% greater than that posted in 2006. Operating profit of €2.1 million is the highest ever recorded by the company and shows a 233% increase over 2006 levels.

In terms of future development, we believe the Shannon Estuary is currently underutilised from a commercial maritime shipping perspective. In order to maximise its potential we believe it necessary to promote its capabilities internationally. It is most suited to projects of scale requiring maritime expertise such as ESB's Moneypoint or Rusal's alumina plant. SFPC has shown it has both the physical infrastructure and marine expertise to assist any potential investor or promoter. However, given the scale of the projects envisaged — by their nature in excess of €300 million per project — we believe a team or a joined-up thinking approach is necessary. We believe it is vital that all relevant local and regional authorities, together with the regional and national development agencies, are on board from the outset. In that regard, we have identified all suitable deepwater sites on the Shannon Estuary and teamed up with the relevant local and regional authorities to include in their development plans appropriate zoning of the lands adjoining these deepwater sites. We should be able to hit the ground running whenever a potential promoter displays interest and general zoning requirements should be in place beforehand.

With regard to marketing, we recently launched an international promotional drive, in conjunction with the Irish Maritime Development Office, IMDO, and the IDA, whereby the IDA has undertaken to promote the Shannon Estuary across all its international offices and to its current and potential foreign direct investment, FDI, clients.

With regard to SFPC direct investment in infrastructure, the Foynes terminal has been earmarked for substantial upgrade in future years. We have completed a roadmap for future infrastructure development that has the flexibility of being implemented over a phased timeframe. Any investment is subject to cost-benefit analysis in line with the appraisal guidelines for capital investment. In short, the plan provides for an additional 300 metres of quays and 14 acres of infill to give much needed additional open quay storage. We are currently drafting an engineering feasibility study to determine the most cost-effective approach and should be ready to commence planning in the foreseeable future. Our aim is to have the statutory consents process complete to allow us commence construction as soon as it is economically justified by business demands. Other more short-term projects include a new fire fighting system to facilitate the new 80,000 cu. m deepwater oil terminal at Foynes, a new headquarters and the upgrading of our VTMS system to facilitate the LNG project and other large-scale future projects.

One area of major concern to us is the Shannon Estuary's connectivity to the motorway and rail networks. This issue is expanded on in the briefing document. Given the estuary's national strategic importance and the economic potential it has to offer, we view it as short-sighted not to include in the national plan first rate road and rail connections to it. We estimate that for €23 million the lower estuary could be connected to the proposed M20 Limerick to Cork motorway. This would be a very small price to pay for unlocking the economic potential that is the Shannon Estuary. We are currently engaged with the relevant authorities to have these issues addressed on the mid-west area strategic plan, MWASP.

With regard to the general framework all the commercial ports operate within, we believe the approval process for foreshore leases and dredging licences could be streamlined to better serve all stakeholders.

We note the Harbours (Amendment) Act 2008 provides for the amalgamation of SFPC and Tralee and Fenit. We are not convinced this amalgamation would be in the best interests of all the parties concerned. Our board has made a submission to the Department of Transport in this regard.

Chairman

On the question of the container traffic, Mr. Keating said that the extra sailing times from the east coast or the south-east coast makes container traffic difficult. Is he saying there is no future for container traffic in the mid-west or the west?

How many cruisers has the port had in the past 12 months or two years? Has the company done any studies as to the potential of that market? Is the west coast location a disadvantage as opposed to the east or Cork, where they have significant cruise business?

The company has been involved in a good deal of legal activity and difficulties and it is my understanding it went to the High Court with its former chief executive. Could Mr. Keating explain the reason it was necessary to go to the courts and if that problem has since been sorted out?

Mr. Pat Keating

I will take the question on the container business first. I would not say the Shannon Estuary has no future business in containers but the current market structure is that the trade routes flow from Ireland to the northern European ports. The disadvantage the west coast has in that regime is the longer sailing times and obviously the weather on the Atlantic west coast is much more severe and can play havoc with the smaller vessels coming around the south-west coast. From that point of view the integrity of the scheduling is more difficult to maintain than if one were operating out of an east coast or southern port.

The second point is that every port needs a busy hinterland. The east coast, with Dublin as the main economic driver in the country, generates a substantial amount of the business. As a result, the ports on the east are situated that bit closer to their European counterparts. There are, therefore, probably two factors at play in respect of container business and the way the market is currently configured for both the deep sea and short sea business. The latter both transit to European ports and that places us at a disadvantage.

Chairman

Is Mr. Keating saying that it is necessary for trucks to traverse the country from Dublin?

Mr. Pat Keating

We ran a container service from Foynes to Rotterdam for a three-year period up to 2006. There was some market buy-in to this service and a number of local multinational companies, Irish and foreign, were interested in using the service. However, there was not sufficient critical mass to generate enough profits for the company. The second element is that if one missed one's first sailing, one would have been obliged to wait a full week to catch the second sailing out of Foynes. There was only one sailing out of the port per week. That was a major drawback to the service. There was not sufficient critical mass in the market to support two sailings per week. At the time, this presented a major risk for the logistics people in the context of changing their routings from Cork, Waterford or Dublin to Foynes, which only had one sailing per week.

The market did not tend to buy into the Foynes-Rotterdam service as much as we would have liked and this was even though containers were being transported by road from nearby locations to either Cork or Waterford. This was simply down to logistics. It is not even the companies that use the containers which determine how they will be moved, it is the logistics or the freight forwarders who do so. It is the latter who decide whether Foynes, Cork, Dublin or Waterford will be used. Even though some big international players with local operations were interested, the final decision rested with the freight forwarders. The fact that there was only one single sailing per week was probably the main reason it was not as much of a success as we would have hoped.

We work in tandem with Shannon Development in respect of cruises. There were approximately six cruises this year but, again, the weather can play havoc. For example, we had a cruise lined up for the end of August of this year. The vessel involved was supposed to sail from Cork to Foynes and on to Killybegs. Unfortunately, there was some stormy weather on the Atlantic and the cruise was cancelled. The cruise business is also driven by schedules and the weather has an effect on whether cruise liners visit the port. If there were other ports on the west coast at which cruise liners could call, then there might be more of an incentive for cruise operators to include the west coast on their itineraries. In general, however, these operators view the west coast as a risky proposition, particularly in view of the weather and the fact that they are obliged to run to strict schedules.

Chairman

Has market research been carried out with regard to whether there might be potential in this area in the future?

Mr. Pat Keating

We have carried out some research with Shannon Development. We will continue to assist the latter in that regard.

Chairman

Perhaps Mr. Keating will provide us with the market or other research his company or Shannon Development has carried out in this regard.

Mr. Pat Keating

Apart from contacting the various cruise operators, no detailed market research has been carried out and we have not employed consultants in this regard. The Shannon Foynes Port Company and Shannon Development possess a great deal of experience in this area and the latter can provide quite an amount of information on what the region has to offer in the context of tourism destinations and is in a position to showcase those destinations to the various players involved.

Chairman

Okay.

Councillor Kieran O’Hanlon

It was stated at the outset that witnesses are not covered by Dáil privilege in respect of discussing individuals. Concerns were raised with the board with regard to a number of matters. Action was taken by the board in respect of the then CEO and the matter went to the High Court and was settled, on a confidential basis, by that individual and the company. Due to the confidentiality aspect, we are not really in a position to expand on the matter.

Deputy Thomas P. Broughan

Is Councillor O'Hanlon in a position to indicate whether the investigation being carried out into this matter by the Garda National Bureau of Fraud Investigation, which is based in Henry Street, Limerick, is ongoing?

Councillor Kieran O’Hanlon

I am not aware that it is ongoing.

Mr. Pat Keating

As far as we are aware, there is no Garda investigation. We have not been contacted in that respect by the Garda.

Deputy Fergus O’Dowd

We wish the port and the authority with responsibility for it all the best. My grandmother worked as a tailor in Loughill, which is not too far from Foynes and among my relatives is the famous former Fine Gael Deputy from Limerick, Michael Finucane.

Some members received documentation in respect of alleged wrongdoing at the port. However, I stress this was before Mr. Keating's time. One of the allegations is that in the annual report to the Department of Transport mention was not made of the transfer or sale of a particular site. It is also alleged that this site was sold to an individual and that there was no public bidding process. It is further alleged that a significant amount of money could have been gained by the port authority if other interested parties had been allowed to tender for this site.

Without going into the matter in detail and acknowledging that our guests are not afforded the same privilege as us, it still must be stated that this issue has been brought to our attention. Whatever happened in the High Court happened. However, a question arises, in the interests of clarity, with regard to whether the Deloitte report can or should be published or whether it should be made available to members. That report may or may not be an authoritative analysis of what occurred in this instance.

I presume the company is audited on an annual basis. Again, I may be referring to matters relating to the period before Mr. Keating's time. Would the auditor have access to information for the period 2004 onwards in respect of the various dealings that occurred?

Councillor Kieran O’Hanlon

We were dealing with a difficult situation. In that context, the Deputy is referring to certain allegations that were made——

Deputy Fergus O’Dowd

Absolutely.

Councillor Kieran O’Hanlon

——about which we must be extremely careful. The company is prepared to release any documentation to the committee. If the committee wishes to speak to the company, we would be quite willing to have any information made available.

Deputy Fergus O’Dowd

I would, if possible, like to be provided with a copy of the Deloitte report. What is the position with regard to the auditor?

Mr. Pat Keating

A number of auditors are involved with the company. One of these is the auditor who is statutorily responsible for auditing the books and records of the company and ensuring that its financial statements provide a true and fair view. The company has received a clean audit report in each year since its inception following the merger.

Following what happened in the instance under discussion, the board commissioned a full review of its internal control and corporate governance structures. Deloitte carried out that review on the port company's behalf and made a number of recommendations, all of which have been implemented. Deloitte is retained by the company as an external auditor and has terms of reference which allow it to examine our internal controls and corporate governance mechanisms.

Deputy Fergus O’Dowd

To make specific findings on that Koala site?

Mr. Pat Keating

We do not believe this is the forum to discuss the matter because of some of the legal implications and the agreement that was reached.

Chairman

This is an Oireachtas committee.

Deputy Fergus O’Dowd

Transparency is the issue.

Chairman

We want to know exactly what the problem was. Surely that is public knowledge.

Mr. Pat Keating

As Councillor O'Hanlon said, given the litigation that was around all of that matter at the time, Deloitte did prepare reports.

Deputy Fergus O’Dowd

The key question is whether the site was sold without a public tendering process or knowledge? That is one of the allegations.

Mr. Pat Keating

I think to answer the question, as Councillor O'Hanlon alluded, the best way to approach this is probably by forwarding to the committee the Deloitte reports on the matter.

Chairman

No, hold on a second. The Shannon Foynes Port Company is a State company. We do not want to know anything that was agreed confidentially in court, but we do want to know what the problem was. Mr. Keating should give us the detail of the sale of this site, as the Deputy requested.

Deputy Thomas P. Broughan

There was not even a competitive tender.

Chairman

Was the site sold?

Deputy Thomas P. Broughan

To support what the Chairman said, when allegations like this were first made to me — and it is possibly the same for my colleagues — I referred them to the Committee of Public Accounts and the Comptroller and Auditor General, who referred them back to this committee. So, ultimately, this committee has responsibility to the people for corporate governance and the use of public moneys at Shannon Foynes. Therefore, Mr. Keating must answer to this committee concerning, for example, the allegation that there was no public tender for the piece of land in question.

Deputy Fergus O’Dowd

Was it 16 acres?

Deputy Thomas P. Broughan

Koala was, yes.

Mr. Pat Keating

The letter of invitation regarding the terms of reference falls outside this period and therefore we were not as prepared as we might have been for questioning on this.

Deputy Fergus O’Dowd

This is the biggest issue for the board. We are not trying to trap the witnesses into saying something that will compromise their legal agreement. We just want to know whether the findings of the report were that the site was sold without a public tendering process. Were other people who were known to be interested in that site not given an opportunity to bid for it? Did the legal adviser raise issues concerning public procurement? Was there a potential loss of €10 million to the company as a result of what happened?

Councillor Kieran O’Hanlon

As our interim CEO said, we were not actually prepared for this line of questioning today.

Deputy Fergus O’Dowd

The witnesses must have expected it.

Councillor Kieran O’Hanlon

We are quite happy to come back, if the committee wishes, to answer those questions, if we are given an opportunity to prepare for them. We have no problem answering any questions.

Deputy Thomas P. Broughan

Can Councillor O'Hanlon confirm that part A of the Deloitte report deals with what we would regard as an unbelievable transfer of land without competitive tendering? On the face of it, this resulted in a loss to the State of at least €10 million. Can he confirm that part B referred to hiring the Targa 33 cruiser, which was apparently owned by a company established by the chief executive, and that that is the subject matter of the Deloitte report, which this committee needs to see?

Mr. Pat Keating

We can forward the Deloitte report. As regards commenting on some of aspects, because they were subject to legal settlement, we were not——

Deputy Fergus O’Dowd

That is between parties, but the State is——

Councillor Kieran O’Hanlon

I am afraid it is tied in with some of the allegations that were made. Today, therefore, we are not in a position legally to answer those questions. We are quite happy to come back and answer them, if there are specific questions.

Chairman

Was the actual site sold? Was the sale completed?

Councillor Kieran O’Hanlon

Yes.

Chairman

It was?

Mr. Pat Keating

Yes.

Senator John Ellis

I was not going to dig into that at all, but I am worried that a settlement was done by the port company with the person concerned, that kept everything in a totally confidential lock-out clause. Whoever gave that legal advice to what is a State company, is off the mark. I can understand that lay members of the board will take advice from a legal adviser. We all accept that and I can understand where Mr. O'Hanlon is coming from — that he has to keep his mouth closed up to a point and cannot say what he might like to say. If that is the position, however, does it mean we cannot get to it?

Councillor Kieran O’Hanlon

I can assure the committee that we had some of the top legal advice in the country, and costly legal advice may I say.

Deputy Thomas P. Broughan

The whole point is that this matter was left out of a report to the Minister for Transport. Did the port company get the approval of the Minister for Transport and the Attorney General concerning this legal advice?

Mr. Pat Keating

The Minister would have been consulted as regards the ongoing process at the time.

Deputy Thomas P. Broughan

Did the Minister agree to this settlement?

Mr. Pat Keating

It was before my time.

Councillor Kieran O’Hanlon

The Department was aware of the settlement in advance.

Chairman

I suggest that we should bring the witnesses back and that the chairperson, hopefully, will be available. What was the cost of the High Court case to the port company?

Mr. Pat Keating

Obviously, from our accounts the committee will see that there are quite large, exceptional items over 2006 and 2007, a large majority of which would have related to the case. The exceptional items in the accounts were approximately €2.5 million. Not all of those related to the case. There were other exceptional items such as rationalisations that would have occurred at the same time.

Deputy Thomas P. Broughan

What is the exact cost of the legal settlement?

Mr. Pat Keating

We are not at liberty to disclose the legal settlement itself. There are confidentiality clauses in that, so we cannot disclose it.

Deputy Thomas P. Broughan

The witnesses come before this committee representing a company of which the Minister for Transport is a shareholder on behalf of the public. This is the people's business, so surely they have to know. Has anybody on the board, or Mr. Keating as chief executive, inquired from the National Bureau of Fraud Investigation whether or not an investigation is continuing? Has anyone established that? We need to establish whether the Garda Síochána is continuing an investigation. Some months ago, the Sunday Business Post stated clearly that a senior garda in Limerick was conducting an investigation into the matters of the Deloitte report. Has Mr. Keating attempted to find out? I certainly feel we should find out what the situation is regarding the Garda investigation.

Chairman

All I want to establish is why it was necessary to go to court. Can the witnesses tell us exactly what happened that caused them to go to the High Court?

Councillor Kieran O’Hanlon

Basically, the board took action in relation to the allegations that were made. We were taken to the High Court by the acting——

Chairman

Did the board approve the sale of this site?

Councillor Kieran O’Hanlon

We will be quite happy to come back and answer that at a later stage.

Chairman

Councillor O'Hanlon can understand that, as an Oireachtas committee, it would be ridiculous that we cannot ask the witnesses any questions.

Deputy Thomas P. Broughan

The allegation is that the decision on the land was presented as a fait accompli to the board.

Deputy Fergus O’Dowd

Was the contract signed two weeks before the board met to discuss it? That is the allegation.

Deputy Thomas P. Broughan

That is the allegation that is before us.

Deputy Fergus O’Dowd

It is a serious allegation. Can we put it a different way? Will this Deloitte report bring transparency to these issues for us and for the witnesses?

Councillor Kieran O’Hanlon

I think it would, but because of the whole nature of the litigation, to discuss it in a public forum such as this, leaves both the company and ourselves open to litigation.

Deputy Fergus O’Dowd

If it is placed in the Oireachtas it has privilege, does it not? We do not want to infringe in any way on a Garda investigation. If we are told that there is one, we could not possibly comment on it. However, we need to get to the bottom of this issue because there are procurement issues. Mr. O'Hanlon mentioned procurement issues himself and there were recommendations on procurement. They may apply to other boards as well.

Deputy Thomas P. Broughan

Allegedly the Targa 33 cruiser was owned by a company controlled by the chief executive. It did not go to a public tender because it was under the €50,000 public sector threshold. Can Mr. Keating confirm that this company was paid €110,000 exclusive of VAT over a two-year period? Does that appear in the company's accounts?

Mr. Pat Keating

Yes.

Deputy Thomas P. Broughan

Where does that stand?

Mr. Pat Keating

As we stated, the Deloitte report to the committee would give the Deputy clarity.

Deputy Thomas P. Broughan

Is that service happening today?

Mr. Pat Keating

No.

Deputy Thomas P. Broughan

It is ceased.

Mr. Pat Keating

It is ceased.

Chairman

Is the Deloitte report a confidential report?

Mr. Pat Keating

It is obviously confidential to the company. The Department of Transport has received a copy of it. We can make a copy available to the committee for its own use but we cannot really comment in public on it because of the legal issues around it.

Chairman

I take it Mr. Keating will not come back and tell us that we cannot deal with it in a public forum.

Mr. Pat Keating

Given the terms of reference behind which I am not trying to hide, the review period was 2006 to 2008 and the property transaction to which we referred occurred well before that. It is for that reason we are not probably as prepared as the committee might have expected us to be.

Deputy Thomas P. Broughan

This is the first opportunity the Oireachtas has had. This occurred recently with the major public sector transport company, that the only area where it can be invigilated is in this committee. Many citizens in the Shannon Estuary region are counting on us to bring these matters to a wider public attention and to ensure a full public resolution of them. There is an expectation that such would be the case.

Councillor Kieran O’Hanlon

Deputy Broughan stated earlier that he would like to get to the bottom of this issue. I can assure him that the board and the company made every effort to get to the bottom of all the allegations, but when one is dealing with legal people on both sides, one can find many hurdles put in one's way at times in getting to the bottom of issues. We have put every measure in place now to ensure that everything is done in accordance with proper procedures.

Deputy Fergus O’Dowd

Can Mr. Keating give the committee a copy of the company's documents stating the contract dates and when the board met, showing if it is true that it met, and that the contract was signed before the board met? These are important issues for the committee to know.

There is also an allegation about a site which was sold to the Limerick race company. I do not know what the story is there. Is that referred to in the Deloitte report as well?

Mr. Pat Keating

Yes.

Chairman

Deputy O'Dowd asked if Mr. Keating had reported this to the Department of Transport and he did not answer that question. What was the specific question?

Councillor Kieran O’Hanlon

Was it if we got approval from the Department?

Deputy Fergus O’Dowd

My question was whether the Department of Transport signed off on it. Did the Department get a copy of the Deloitte report? Has the Department carried out any actions as a result? Has it given Mr. Keating instructions?

Mr. Pat Keating

To move on from the point to what is happening today, obviously the board commissioned a full review of its own internal systems — corporate governance, internal controls. That was an extensive review and the Deloitte report was a major part of that.

The control environment of the company has been bolstered and changed as a result of what happened. There are continuous reports from our internal auditors which go to our internal audit committee and, obviously, up to the board. As regards our systems, there has been much work done. All of the recommendations in the reviews completed by Deloitte have been implemented since.

Deputy Fergus O’Dowd

Did the Department advise Mr. Keating as a result of this report in any respect?

Mr. Pat Keating

The Department has received copies of the reports and I am not sure, to the best of my knowledge, if it——

Deputy Fergus O’Dowd

Can I ask Mr. Keating a different question? If I am a member of a board that is in the control of a company that owns State property, sometimes an audit might make a finding against me that I, as a director, may be liable as a result if there was not due process on the sale of land. Were there any such findings by an auditor?

Mr. Pat Keating

The Deloitte report is available to the committee. It will give the committee clarity on the findings.

Deputy Fergus O’Dowd

On due diligence, if that is the term, on one's statutory role or role as a member of a company, one has a duty to that company. Is that what one calls the fiduciary duty?

Mr. Pat Keating

Yes.

Deputy Fergus O’Dowd

Were there any findings in that regard relating to the board or any employees of the board?

Mr. Pat Keating

Not to my knowledge.

Chairman

We will have Mr. Keating back.

Senator Ned O’Sullivan

I must declare an interest. Prior to my election to the Seanad I was a director of the Shannon Foynes Port Company and had the pleasure of serving with both the executive and Councillor O'Hanlon. Prior to that, I was a director of the former Shannon Port Company and prior to that, the Limerick Harbour Commissioners.

There is a bit of history in all of this into which I will not go except to state that the Chairman of this committee played a leading role in knocking heads together and bringing all of those disparate interests together into the new existing company, for which he will be thanked in the future.

In my view, many of these allegations and problems arose out of teething problems with that amalgamation, which really was monumental in its scope at the time. Many of the difficulties which arose specifically came out of one particular initiative of the board, namely, the Limerick docklands initiative, which was a vision for the development of Limerick docklands as a non-core asset of the harbour board to turn it into a marine-type tourism and residential area and to develop the Shannon Estuary downstream which, as someone from County Kerry, I had a particular interest in.

The then CEO and all the members of the board here present were working on the same idea, which was for the good of the country and the good of the mid-west region, and these difficulties which arose afterwards had their genesis in local politics, regional politics, etc. Other than that, I cannot say because I was, as I stated, a director. I was also appointed to an investigative committee under the former Secretary of the Chairman's former Department and, therefore, I would be privy to legal matters as well.

I wish to move on. I welcome the delegation to the committee. Where is Shannon Foynes Port Company in the development of the lower estuary? I am referring in particular to the deep harbour facilities in Tarbert-Ballylongford, in north Kerry. What is the relationship between Shannon Foynes Port Company and the Shannon LNG group, which proposes to build a gas terminal in north Kerry and which has been held up by a number of objections down through the years? I would ask that the committee might get a commitment here today from the two delegates that they are totally supportive of LNG. Nationally, a significant number of jobs are dependent on it for energy security and also for job creation in an area that has been damaged considerably by emigration and unemployment.

There are the plans for the lower estuary vis-à-vis Limerick docks, of which Councillor O’Hanlon would be fond, but there is a vast facility on the outer Shannon Estuary which Shannon Foynes Port Company has a duty to develop. I would ask Mr. Keating to address that issue.

Mr. Pat Keating

Obviously, we have done a great deal of work with Shannon LNG on the technical side and our pilots and harbour masters are involved on an ongoing basis with that company in deciding, I suppose from an engineering, technical and marine perspective, what is the best set-up on the ground. They have spent much time in the marine college in Cork using simulators and what not, trying to establish the line-up of jetties, etc.

The port company sees the Shannon LNG project as a major boost for the area. As I alluded to in my presentation, we see the lower estuary, in particular, as emerging as an energy cluster. We already have the ESB in Moneypoint producing electricity. Tarbert Island is now owned by Endesa, which is the Spanish utility, and it has plans to convert to gas. Shannon LNG will nicely complement that entire sector.

Further upriver is the Aughinish Alumina plant. In the context of promoting the estuary, our company does not have a major level of resources. We have decided, therefore, to adopt a team approach. We are working with IDA Ireland, in particular, to commence a marketing drive internationally on selling the benefits of the estuary's deep sheltered water, of the infrastructure currently in place on the river and of the expertise available locally. IDA Ireland has an extensive network of foreign direct investment clients and potential clients which can facilitate our work in this regard. We are trying to link to that network and use IDA Ireland's resources rather than duplicating that which already exists.

We have commenced this marketing drive and produced new promotional material recently in co-operation with the IDA and the Irish Maritime Development Office. We are extremely active in promoting the estuary and the lower estuary and see these as the main driver for our company, the region and the national economy. The potential that exists is huge. Furthermore, we have identified potential deep water sites — or deep water sites that are available — on the estuary, with the intention of having the adjoining land zoned appropriately. When a buyer or promoter considers what the estuary has to offer, it would be good if the general land zonings were already in place in order that our work would not be delayed for a further two years. We want to be able to hit the ground running when someone expresses an interest.

Shannon Development has considerable landbanks along the estuary. I refer to its lands at Askeaton and those remaining at Ballylongford. We are also working with Shannon Development in the context of marketing the port, the expertise available there, the landbanks to which I refer, the deep water opportunities that exist, etc. We want to be able to present someone with a complete package and state that we are open for business and are in a position to cater for his or her needs. We are targeting the clean technology sector — which incorporates wind and wave power, renewables, etc. — and the energy sector. We are extremely active on this front.

Chairman

I understand that the lower Shannon Estuary is probably the deepest estuary in Europe. What is the deepest draught of vessel using it at present?

Mr. Pat Keating

The deepest draught vessels using it at present are those which belong to the ESB and which operate out of Moneypoint. The draught relating to these vessels is approximately 17.5 m. The depth of the estuary is well over 30 m to 35 m in certain parts. However, there is a limit on the entrance — which is known as "the bar" — of approximately 22.5 m to 25 m. Weather and tides obviously have an effect in this regard. However, that is not really an impediment.

Deputy Thomas P. Broughan

I wish to make a final point on the incredible allegations which must be investigated and resolved. Is it the case there is no payment listed in the accounts which our guests very kindly forwarded to us in respect of the land that was sold to Limerick racecourse?

Our guests made a cogent and admirable case in respect of the link road. I can see how that would be really advantageous. The committee should take that matter up with the National Roads Authority and the Minister for Transport.

There are many questions we would have liked to have asked about normal matters relating to the port. However, owing to time constraints and the seriousness of the issue relating to the sale of the parcel of land, we felt we had to concentrate on the latter. With regard to the general accounts, the company has a workforce of approximately 50. What is the plan in respect of providing a greater level of employment? A significant allocation has been made in respect of the pension fund. What is the status of Shannon-Foynes Port Company's pension fund at present?

Chairman

What is the future of Limerick Port? Is it envisaged that activity there will cease?

Councillor Kieran O’Hanlon

No. It is operating profitably and we are happy that it will continue to do so.

Chairman

Would it not be sensible to use Foynes as the main harbour?

Mr. Pat Keating

On average, 600,000 tonnes pass through Limerick Port each year. The port's customers definitely want to continue using it, especially from the point of view of cost competitiveness. The other main advantage the port possesses is the availability of open quay storage, which is critical in respect of the type of goods — scrap metal for export, timber, steel and similar products — that tend to flow through it. Foynes does not have the same level of open quay storage available. Limerick Port remains in operation because this is what the market wants.

There is a great deal of discussion regarding cost competitiveness and Ireland's lack of competitiveness at present. Business relating to 600,000 tonnes of goods is transacted at Limerick each year.

Chairman

What does that entail?

Mr. Pat Keating

The products passing through the port are oil, steel, timber, scrap metal for export, fertiliser and project cargoes.

Chairman

Our guests are seeking €23 million to build a main road to Foynes. A new tunnel has already been put in place and this prevents many heavy vehicles entering the city centre. It does not make sense to operate two ports. That was part of the logic behind amalgamating the ports. Is it not the case that Limerick wants to hold on to the business to which Mr. Keating refers? With regard to exporting scrap metal from the middle of Limerick city, would it not be more sensible to operate one serious port and invest €23 million in constructing a proper road thereto? With the completion of the tunnel, Foynes now has the ability to become a much more significant player in the ports business.

Councillor Kieran O’Hanlon

Until such time as there is a proper road link between Foynes and Limerick, we will not be in any position——

Chairman

There will never be a proper road link if scrap metal continues to be exported out of Limerick Port.

Councillor Kieran O’Hanlon

The N69 from Limerick to Foynes is already highly congested. Considerable expenditure would be required to upgrade this road but I do not believe this will be provided. Is the Chairman suggesting we should encourage the use of HGVs to bring goods from Foynes to Limerick rather than transporting such goods directly to the city by ship?

Chairman

Our guests indicated that it will cost €23 million to put in place a proper road link to the Cork-Limerick motorway and that they believe this money should be made available.

Mr. Pat Keating

The point is that we are discussing the lower estuary and not just Foynes Port. The lower estuary has major potential which we and many others in the region believe remains untapped. It is a huge national asset but the connectivity relating to it is substandard in nature.

Chairman

We are discussing a port which probably has greater potential than any other in the context of development. As our guests stated, the largest ships are able to enter Foynes. Then there is this wonderful parcel of land, with great potential, in the middle of Limerick city in respect of which there has been controversy up to now. If our guests do their business in the correct manner from now on, this land is an asset which could yield significant profits for their company. In light of the new road network and the existence of the Limerick tunnel — which makes all the difference — would it not make sense to remove heavy traffic caused by bulk oil tankers and other HGVs from the city centre and route it out to Foynes? This would make the company far more profitable in the long term.

Mr. Pat Keating

Limerick Port is actually quite profitable for us. As already stated, it is also profitable for those who use it. If business were to move to Foynes, their logistics chains would become inefficient as a result of a heavier emphasis on road transport. As a result of the way it is set up, Limerick Port is one of the more profitable parts of the company's business.

A point was made with regard to the road network. I do not believe we are the authority to go building roads.

Chairman

No, but the port company invests in the roads.

Mr. Pat Keating

We have pensions and infrastructure to invest in. Bodies such as the NRA should invest in the roads.

Chairman

Deputy Broughan was asking questions. I apologise for stepping in.

Deputy Thomas P. Broughan

I ask Mr. Keating to deal with the pension fund, etc.

Mr. Pat Keating

Regarding the pension fund, obviously a ten-year blanket derogation was given at the time of corporatisation of the port companies in 1997. That derogation has now expired. The Oireachtas passed legislation at the end of 2008 to give certain bodies the ability to apply to the Pensions Board for an extension to their funding proposals. The normal funding proposal is a three-year period. We have applied for that extension to the funding process. We were accepted as a party that could make use of the funding proposal extension from three years up to 15 years. We have made a preliminary funding proposal to the Pensions Board which will be out over a period of 15 years to give the company the ability to fund the pensions from its own resources without recourse to the Exchequer over the next 15 years.

Deputy Thomas P. Broughan

Is there a deficit at the moment?

Mr. Pat Keating

There is a €12 million deficit in the funds, but with this proposal and the disposal of non-core assets, we envisage being in a position to fund all our liabilities over time. It was important to get the extension on the funding proposal because as we all know, the current market for property has gone walkabout and might not be back for some time. We wanted to have the flexibility not to have to incur the fire sale of assets. That process is with the Pensions Board at the moment. The Port of Waterford recently received an extension and we would hope to get the same.

Deputy Thomas P. Broughan

What is the timeframe on the liquid gas terminal?

Mr. Pat Keating

Shannon LNG has received planning permission. It has received a foreshore lease or licence. It is currently looking at the operation licence which will be issued by the Commission for Energy Regulation. We believe that is due to be granted. It will then be up to Shannon LNG as to whether it wants to go ahead and invest. It has spent probably €20 million to €25 million to date on feasibility studies, and applying for planning permission and a foreshore licence. It is a significant investment. All the signs we are getting from Shannon LNG are very encouraging and obviously we would love to see it proceed.

Senator John Ellis

This issue may not be related. The Shannon Foynes Port Company has a new oil terminal with a €30 million private sector investment. Who will be responsible for its operation? Will there be general access to it or is the company tied into a contract with those who provided the money that they will become the sole operators?

Mr. Pat Keating

The terminal has been built by a private operator on land leased to it by the port company. It is an 80,000 cu. m facility located at Foynes. The operator will be the importer of oil through that terminal. It is its terminal.

Senator John Ellis

Is the port company getting a royalty from the operator or has it given the operator a lease on the land to allow it to operate?

Mr. Pat Keating

All the tonnage from that terminal will come over our quays.

Senator John Ellis

Is that all the port company will get?

Mr. Pat Keating

Obviously we will get rent from the lease itself.

Senator John Ellis

I understand that.

Mr. Pat Keating

We will get our ships and tonnages.

Senator John Ellis

Is the port company not creating a monopoly whereby an operator will be able to control oil imports into the country because it has the facility at Foynes, which will be one of the biggest in the country? This is the sort of deal that stinks to the high heavens because it prevents competition. As bad as the Dublin Port Company is, all the major oil companies have access to that port. Will all oil companies have access to Foynes or will it only be those allowed in by the operator?

Mr. Pat Keating

This oil terminal is no different from any other oil terminal that operates in the country. Whatever operator builds uses its own facilities. It is the same as in Galway or Dublin.

Senator John Ellis

While I understand that, would it not have been far more beneficial for the Shannon Foynes Port Company to have provided the facility itself and then got the full take from it?

Mr. Pat Keating

We are not experts in the oil business. The operator forked up €30 million of its own money.

Senator John Ellis

I accept that.

Mr. Pat Keating

We are not oil operators or distributors. That is a business in its own right.

Senator John Ellis

I totally agree. However, if another operator wanted to go in and discovered that Foynes was a port that suited it, is the Shannon Foynes Port Company prevented from allowing another operator in?

Mr. Pat Keating

If another operator wanted to come into Foynes with a similar facility in the morning——

Senator John Ellis

It is entitled to.

Mr. Pat Keating

——send it on to us and we shall facilitate it.

Chairman

I thank the witnesses for attending. We shall be inviting them back because we want to have further discussion of the issues we covered today. We shall be looking for answers and will be talking to representatives of the Department of Transport about the arrangement for how deals can be done and put through the courts. The issue of confidentiality is one that causes me some difficulty.

Sitting suspended at 5.05 p.m. and resumed at 5.10 p.m.