I am honoured to have been nominated as chairperson designate of the NRA and RPA by the Minister for Transport, Tourism and Sport, Deputy Varadkar. I am pleased to attend this committee and to make a short initial presentation outlining my background and the issues facing both organisations.
I grew up in Dalkey, County Dublin and was educated in Scoil Lorcáin and Coláiste Eoin. I then attended UCD where I studied engineering, graduating in 1980. I joined the ESB from college and worked for five years in the steam and gas turbine technical services area and trained at Brown Boveri in Switzerland and Parsons in Newcastle, England. I was then promoted to run a section responsible for monitoring and improving power station efficiency. While at the ESB, I also studied part-time for a master's degree in industrial engineering/business, which I was awarded in 1985.
In 1987 I moved to Irish Intercontinental Bank, then majority-owned by KBC of Belgium. It subsequently became a fully-owned subsidiary. I worked initially in corporate banking, but moved in 1989 to help set up the bank’s international aircraft finance operation. In the early 1990s I was appointed as head of the bank’s international project finance operations in Europe, the Middle East and Africa. The team grew rapidly, to a point where it had 30 project financiers split between Dublin and Brussels. The team, when I was there, was responsible for several billion euro of lending for infrastructure, energy and telecommunications projects. During that time I was involved in road projects in England, Hungary and Portugal, tunnels in Belgium, France and England and a number of bridge projects. I was also involved in light rail projects in Manchester and Sydney.
In 2000, I returned to the ESB as investment director and worked on a number of major projects in Northern Ireland, Spain and Poland. This job helped me to look at projects from the broader perspective of an investor, rather than the narrower perspective of a lender. I was fortunate to work for a major semi-state company which has a disciplined and highly sophisticated track record in developing major projects. In 2003, I moved to Goodbody Corporate Finance, where I have advised a number of semi-State and private companies on energy and infrastructure projects, as well as in other areas.
A number of years ago I worked with the Construction Industry Council to develop the concept of infrastructure bonds and how to use pension fund money to fund Irish infrastructure.
One could ask how that diverse experience is relevant to the chairmanship of the NRA and the RPA. I have been a director of companies for almost 20 years, starting with KBC Finance Ireland, moving on to ESB subsidiaries in the UK and Europe. In recent years I have been a director of Goodbody Corporate Finance. I have worked on projects as an engineer, a financier and on behalf of investors. I have advised both the public and private sector on the viability and financing of projects for almost ten years.
I will move on to talk about the National Roads Authority and the Railway Procurement Agency. I was approached by the Minister during the summer to chair the merger implementation group for the NRA and the RPA. My focus since then has been on learning about the organisations and working with the two chief executives to see how best to bring these two excellent organisations together, without damaging the capability of either. However, I am still very much a newcomer to both organisations, having only joined their boards within the last month. I will come back to the challenge of the merger later, if I may.
My initial impression of both organisations is that they are well-led and competent for the tasks they have been charged with by the Minister and the State. Many European countries have well developed road networks, and for them the challenge is to make the best use of their existing assets, using network management systems. Other less well developed countries are focused on building a modern road network. Ireland is probably somewhere in between, and must address both tasks simultaneously. We have a partially modernised network that requires advanced network management. We also have a great deal of work to do to improve those roads that are not up to standard.
As the members of the committee will be well aware, a high-quality national road network is critical to the country’s economy. National roads are enablers of sustainable growth and social interaction for every region in the country. A trading country such as ours must have good internal transport. Improvements to the network in recent years have been a big driver of the reduction in road traffic accidents. Much more progress can be made in that regard. A central task for the NRA is to continue to develop and improve the road network in all parts of the country and to manage the existing network effectively, efficiently and, above all, safely.
The NRA has overseen an investment of over €17 billion in the last 11 years. The major inter-urban routes are over 740 km in length, with about 470 km of other dual carriageways. The connection of most major cities is a major achievement. While the Celtic tiger era has left a difficult legacy, the building of this significant road network is something of which we can all be proud. I pay tribute to the skill and dedication of the management of the NRA in achieving that. It was ably led by Fred Barry as CEO and Peter Malone as chairman during the time. We also have two excellent light rail lines.
The RPA has overseen an investment of over €1.5 billion over the last 11 years. The infrastructure was paid for by the public purse but both lines have been able to operate to date without any funding subvention from the State. That is a major achievement for a public transport owner and operator. The RPA and its operator, Veolia Transdev, continue to try to reduce costs and increase revenue where possible. While passenger numbers fell during 2008 and 2009, they increased by 15% between 2010 and today, mainly, it has to be said, due to line extensions. Fare revenue and ancillary revenues, such as advertising, have increased by 7% during 2012. This has allowed recent fare increases to be limited to 2%, in line with inflation.
The priority projects for the NRA are the N11, Newlands Cross interchange and the N17, from Gort to Tuam. Fred Barry recently described to the committee the NRA's drive to improve safety by eliminating the 50 most dangerous bends in the country. The priority for light rail is the delivery of the Luas Broombridge project, announced yesterday by the Minister. The BXD is finally connecting the two Luas lines, but also connecting Luas to much of the city centre bus network, DIT Grangegorman and commuter rail links to Maynooth and Dunboyne. It is hoped that this integrating and connecting project will significantly reduce the number of cars in the city centre, improving the quality of life for all. It is expected that the construction of the line will generate 800 jobs and cost in the region of €370 million. It is expected to generate between 8 million and 10 million passenger journeys, commencing in 2017. With its focus on connectivity, Luas Broombridge should deliver a benefit to cost ratio in excess of 2:1. This project comes on the back of the successful execution of three extensions to the Luas network. The success of the RPA in the execution of Luas has been recognised in that it has contracts advising the cities of Bergen and Utrecht about their plans to introduce light rail.
However, the RPA and the NRA face real challenges in the immediate period ahead. The first and most important of these is the merger of the two organisations. That has to be done in a manner which preserves the competence and motivation of the excellent staff in both organisations. There is still some distance to go in the merger and I will devote significant energy to achieving this in the coming months. The current target is to have a single functioning organisation by the third quarter of next year, subject to legislation being ready. The merger must take place in an open and transparent manner and I will work with the two chief executives to achieve that.
The second challenge facing the new organisation is to fund future infrastructure. I will assist in any way I can to find innovative financing solutions to Ireland's infrastructure needs. I have had the good fortune to have worked on the financing of infrastructure across Europe, as well as in the US and Asia. I acknowledge that financing is both in short supply and expensive. We will work with the relevant Departments to ensure that we apply rigorous cost benefit analysis to all projects.
The third challenge the new organisation will face is to maintain the excellent infrastructure that we already have. I am conscious that in the coming year we will not be able to maintain the existing road network as well as we would like. Cutting back on motorway maintenance expenditure is not a serious issue for a year or two. However, as the backlog builds up and deterioration accelerates, there comes a time when maintenance will have to receive funding priority if many of the achievements of the past are not to be lost.
The fourth challenge I see is the need to continue to contain and reduce costs. I have been impressed by how effectively the NRA and the RPA have reduced their staffing numbers in recent years in response to reduced levels of activity. Both organisations have reduced central numbers by approximately 30%. The NRA, in its oversight of the regional design offices, NRDOs, has gone even further in reducing staff there by about 50%. In the merger, I will work with the management to maximise synergies and reduce costs where possible.
The fifth challenge, and probably the most important, is to maintain the competence built up by the CEOs of both organisations, Fred Barry and Frank Allen, over the last ten years. There is a need to maintain a critical mass of competence for both roads and light rail in the face of budgetary cuts. While the Government is intent on reducing the size of the public sector, given the need to reduce expenditure, it should not penalise organisations which have been lean and have outsourced as much work as possible in the past. The new organisation should not suffer a disproportionate cut to its staff numbers because of previous prudent stewardship or to meet arbitrary employment control framework numbers. There is a real danger that when we, as a country, are again in a position to invest in roads and light rail, the new organisation will have lost key experienced personnel. The cost to the country of not having the right procurement staff in place in the future will far outweigh any possible savings to be made now from cutting small numbers of staff. I believe that the CEO of the new merged entity, Fred Barry, expressed his concerns on this matter to the committee when appearing before it recently.
It will be a privilege for me to become chairman of the NRA and the RPA and to oversee the merger of these two fine organisations. I look forward to working with the boards, the executive and the staff of both organisations as they merge into a stronger single entity. My goal as chairman will be to lead the board in an effective and efficient manner and to work closely with the Department of Transport, Tourism and Sport to implement the policy objectives communicated by the Minister. It is, I believe, a part of the chairman’s role to ensure strong communication and transparency between the company and the Department and I have found the Department to be both helpful and supportive over the last number of months.
I intend to challenge and encourage the chief executive and the management team to do more with less and to develop both our road and light rail networks to the best of our ability within severe budgetary constraints.
I thank the Chairman and members for the invitation to appear before the committee. I look forward to working with them in the future and to a time when I can return with a greater level of knowledge of both the new organisation and its important work than that which I possess today.