The immediate need for the proposed legislation derives from the intention of the Government to institute a special financing arrangement for the Panamax bulk carrier which is at present under construction at Verolme Cork Dockyard Limited for Irish Shipping Limited.
The contract for the construction of the bulk carrier was placed in February 1981 and the original arrangement was that the cost would be financed by the provision of £7.1 million State equity to Irish Shipping Limited, a Shipping Finance Corporation loan of £7.1 million to the company, and a State subsidy to the shipyard. The estimated cost of the vessel at the time of placing the contract was £25 million. The contract is subject to escalation clauses and the final cost is now estimated to be £28 million. The net effect of the original financing arrangement as far as Irish Shipping Limited are concerned is that the vessel would stand on their balance sheet at £14.2 million, that is the £7.1 million equity and the loan of £7.1 million. In cash terms the obligation incurred by the company would be the payment of interest on and the repayment of the capital sum of the £7.1 million loan over a period of eight years.
The special financing arrangement now proposed is in line with Government policy to take advantage of funds on offer from the private sector and is being pursued by Irish Shipping Limited in consultation with my Department and the Department of Finance. The arrangement, which is still at the negotiation stage, will incorporate a leasing contract in respect of the vessel on attractive terms. The Government will underwrite lease payments by Irish Shipping Limited to such an extent that the company's commitment will be no greater than that which would have applied under the original financing arrangement.
Although, as I have just explained, Irish Shipping Limited will only be responsible for payments equivalent to that which they would have paid under the original financing arrangements, it is necessary for the purposes of the special funding arrangement that they should assume formal responsibility for the full £28 million cost of the vessel. The banking institutions concerned require that the Government give formal guarantees in respect of the obligations which will fall to Irish Shipping under the special arrangements. Such guarantees are, in effect, similar to normal State guarantees of borrowing by Irish Shipping for which there is already statutory authority. I am advised that specific statutory authorisation as proposed in the Bill before the House is necessary in respect of the particular type of funding now proposed. The Government are empowered already to give such assurances in the case of other State bodies—for example, Córas Iompair Éireann, under the State Guarantees (Transport) Act, 1962. The legislation which I am proposing today will remove the obstacles which at present exist to leasing and other contracts being entered into by Irish Shipping Limited with the benefit of a Government guarantee.
I should emphasise again that the negotiation of the revised financing arrangements has been the responsibility of Irish Shipping Limited themselves and that the company are entirely satisfied that, from their point of view, they offer terms as advantageous as the original financing proposal. I am also satisfied that the special arrangements represent the most efficient way of meeting the Governments undertakings in relation to financing the vessel. Due to the fact that negotiations are still in progress and that premature disclosure might jeopardise the success of the negotiations, I am unable, at this stage, to give particulars of the proposed arrangements.
I would wish to draw the attention of Senators, however, to the fact that the Bill in section 5 provides for an annual statement as to guarantees to be laid before each House of the Oireachtas.
On a more general note I should like to refer to the general activities of Irish Shipping for whom the past year has been one of considerable progress. Through their new subsidiary company—Ocean-bank Limited—the company have sold a 25 per cent share of both Irish Continental Line and their shareholding in the Insurance Corporation of Ireland and the Property Corporation of Ireland. This transaction released funds to the company which helped them to finance the purchase of a secondhand car ferry—the St. Patrick II—and to lengthen the existing ferry the St. Killian. These developments have substantially increased carrying capacity on the Rosslare/ continental routes to the benefit of both tourist and commercial users.
The company have also been very much involved in the reinstatement of the Belfast/Liverpool service—my fellow Ulstermen will rejoice in this—previously operated by the P & O Company. The new service began on 1 May and is operated by the former St. Patrick now re-named St. Colum I.
Irish Shipping's main activity, the operation of a fleet of deep-sea ships, has had to contend with a fall in freight rates due to the present stagnation in worldwide shipping resulting from recessions in the US and other industrial countries. The company, nevertheless, hope to benefit from the upsurge in activity in the bulk carrier trade in coal. The National Board of Science and Technology in their study of Ireland's coal shipping requirements estimated that the business of shipping coal to Ireland will increase from £18 million in 1984, to £29 million in 1986 and may reach £47 million in 1988.
There is valuable business here for Irish shipowners and I have no doubt that Irish Shipping Limited will be able to trade the new bulk carrier profitably in this market. In the latter connection, I understand that the coal requirements of the ESB are expected to increase substantially during the next decade and I would hope that Irish Shipping Limited as well as other Irish shipowners will be able to play a major role in providing the necessary transport.
The final accounts for the year ended 31 March 1982 are not yet available but the indications are that the company will maintain their profit record and will improve on the profit of £3 million which the company returned in 1981. The company will also be reporting an increase in passenger carryings by Irish Continental Line of the order of 2 per cent. This is certainly a very satisfactory situation and very much to the credit of the board and personnel of the company, having regard to the tough trading conditions of recent years.
Is main liom mar sin an Bille seo a mholadh don tSeanad. Go bunúsach, is Bille é a chuireann ar chumas an Aire Airgeadais barántas a thabhairt i leith íocaíochtaí áirithe a dhéanfas Loingeas Éireann Teoranta. Tá an chumhacht sin ag an Aire cheana chomh fada is a bhaineann le hiasachtaí, agus is ceist teicniúil dlí í an chumhacht chéanna a thabhairt dó maidir le íocaíochtaí. Rinneadh an ní céanna cheana i gcás Chóras Iompair Éireann. Ach taobh amuigh de sin, tá dhá mhór-chuspóir leis an mBille, uimhir a haon, chun a dheimhniú go mbeidh ar chumas longchlóis Verolme i gCorcaigh an lucht oibre a choinneáil ag obair ar an long nua atá dá tógáil acu, agus, uimhir a dó, feidhm a bhaint as airgead príobháideach ó bhancanna agus a leithéid chun cabhrú le aidhmeanna na gcomhlachtaí Stáit.
Accordingly, I recommend the Bill to the House.