I move amendment No. 1:
In page 3, line 29 and in page 4, lines 1 to 13, to delete subsection (5) and substitute the following subsections:
(5) The Board shall establish each of its ancillary activities as subsidiary companies.
(6) The Board shall publish separate accounts for each of its subsidiary companies, along with its Annual Report. Such Report shall include details of any long-term contracts entered into by a company.
(7) (a) All such subsidiary companies and each of its ancillary activities shall conduct their affairs in a commercial manner in order to earn profits for their shareholders.
(b) The Board shall assess the operation of each company established within five years of its establishment and each five years thereafter and consider inter alia
(i) the return on capital achieved,
(ii) the dividend paid to shareholders,
(iii) the desirability of the Board retaining its shareholding in the company.
(8) The Board shall treat its subsidiary companies as commercially independent entities. In particular—
(a) The Board shall not make preferential loans to a company.
(b) The Board shall not provide any subsidies to a company
(c) The Board shall not provide any loan guarantees to a company.
(d) The Board shall price any goods or services purchased from it by a company on the basis of full cost, and the prices charged shall be reported in the Annual Report of the company.
(e) The Board shall not become involved in personnel management or industrial relations of a company.
In my Second Stage speech I made the point that I certainly had no ideological or, indeed, any other objection to this Bill and was delighted that the ESB, as a result of these new proposals, would be able to diversify into other forms of business. This should be helpful to the Electricity Supply Board and to our economy. However, I said I felt that it was most important that those companies who as a result of this legislation will be dealing with the ESB in direct competition should be able to do so in an equal and a fair fashion. Because of our concern that some of the provisions in the Bill are in a sense too advantageous to the Electricity Supply Board vis-a-vis those other companies we put down amendment No. 1.
The main part of this amendment involves the deletion of subsection (5) of section 2 which allows the Electricity Supply Board to lend money to those subsidiary companies which they will be setting up. The point was made in the other House that this provision more or less allows the ESB to become a banking organisation. While that term may be a little strong, the provision would obviously allow the Electricity Supply Board to be quite liberal in the way they could lend money to their subsidiary companies. We are concerned that this would allow the subsidiary companies set by the Electricity Supply Board to have a major and, indeed, an unfair advantage over people attempting to compete with them on a fair and equal basis.
We are, of course, also concerned about the guarantees which the Electricity Supply Board are able to give in relation to these loans. We believe that this is a provision which will give their subsidiary companies unfair advantages. One would also have to be concerned about it from the economic point of view. Some of the subsidiary companies might not be as careful or as diligent in their dealings as they should be and might not worry about the consequences of mismanagement as their loans would be guaranteed by the parent body, the Electricity Supply Board.
Amendment No. 1 deals with what was referred to commonly in the other House as the "arm's length" subsidiaries of the Electricity Supply Board. We are trying to ensure that those subsidiaries to be set up as a result of this legislation will be set up on an entirely separate basis and far removed from the Electricity Supply Board, that they will conduct their affairs as separate entities, on an economic and, hopefully, profitable basis and that they will not use the parent body, the ESB, as a crutch in difficult times.
Subsection (7) (a) of our amendment states:
All such subsidiary companies and each of its ancillary activities shall conduct their affairs in a commercial manner in order to earn profits for their shareholders.
This is very important. There is no point in allowing the ESB to branch out their activities into wide and varied fields unless we are sure that the legislation allowing this also ensures that these subsidiary companies will attempt to be profitable and that the ESB will not set up subsidiary companies for the sake of setting them up. We feel it is very important that a close eye should be kept on all the subsidiary companies of the Electricity Supply Board and, in particular, that we should take note of the return on capital achieved by these subsidiary companies, the dividends paid to shareholders, and the desirability of the board retaining their shareholding in the company.
The amendment says that: "The Board shall treat its subsidiary companies as commercially independent entities" and that it "shall not make preferential loans to a company" and "shall not provide any subsidies to a company", that it "shall not provide any loan guarantees to a company.""The Board shall price any goods or services purchased from it by a company on the basis of full cost, and the prices charged shall be reported in the Annual Report of the company." Finally, "The Board shall not become involved in personnel management or industrial relations of a company". Those overall provisions are extremely important if we are to ensure that this Bill will result in some excellent companies being formed by the ESB. We are seeking to ensure that the subsidiary companies will enhance the reputation of the ESB and the overall economic wellbeing of the community and are not established for the sake of allowing the ESB to vary their activities. We are particularly concerned that the companies should not be able to bring down their competitors because of their structure. When this point was debated in the other House, many Members stated their concern about matters such as this.
We are giving the Electricity Supply Board many new powers. We are allowing them into many areas of activity from which they were shut off previously. We are not objecting to that. However, we are trying to ensure that they play the game fairly in the new field and that they will not undermine in any way those companies who will be in direct competition with their subsidiary companies.