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Seanad Éireann debate -
Tuesday, 30 Jun 1998

Vol. 156 No. 7

Turf Development Bill, 1997: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

I was sitting outside the Chamber from 3.30 p.m. until 4.30 p.m. but there was a division in the other House and only the Minister of State, Deputy Molloy, was paired. I would not otherwise have kept the House waiting.

I am glad to introduce the Turf Development Bill, 1997. Bord na Móna is one of the oldest semi-State bodies. The company is a household name in large areas of Ireland and has come a long way since it was set up over 50 years ago. The board operates in a number of competitive markets against major private sector companies. It has become extremely flexible and the opportunities now open to it would have been unheard of some time ago.

The board needs flexibility to undertake options, delegate core activities to subsidiaries, the power to transfer assets and liabilities within the group of companies and the power to enter into joint ventures where appropriate, etc. The Bill is designed to give the board this flexibility by providing for the conversion of Bord na Móna from a statutory corporation to a public limited company. These changes in status reflect the evolving commercial mandate and business environment.

When it was established in 1946, Bord na Móna was given a duty to develop the peat lands of Ireland in the national interest. Since then, the board has acquired and developed approximately 88,000 hectares of bogland which, in turn, has supported whole communities in the midlands region. Most of the Members present are aware of the impact of Bord na Móna on many communities. In that regard I always think of the village of Rochfortbridge and the rows of houses in Derrygreenagh Park. Derrygreenagh bog is located in Senator Gallagher's and Senator Moylan's constituency, but people are leaving Rochfortbridge, which was a Bord na Móna village.

The company supplies peat to five power stations, to a large number of homes in the form of peat briquettes and produces and markets horticultural products. It has a turnover of £140 million and has become one of the top companies. The purpose of the Bill is to ensure that the board has the right structure to allow it to develop.

The use of peat and the role of Bord na Móna continues to be supported because of the strategic and social roles of peat. Entire communities are bound up in working the bogs. Despite massive cut backs and other exigencies over the years, the company has a workforce of 2,000 people. If one company employed that number of people it would be regarded as a huge part of a community.

The company has undergone major and painful changes and the process of change is ongoing. The first step was the successful operational restructuring that has been undertaken by the company. The second step was the investment by the State of £100 million of equity, while the third step is the planned construction of the europeat power station. The final step is the new corporate structure which the Bill will provide.

Senators are aware of the rationalisation programme and the individual requirements of each division. New self-directed work teams were introduced which allowed workers to be rewarded on the basis of output efficiency and quality of peat produced. This and other innovations have resulted in an 80 per cent increase in productivity since 1988, which is an enormous leap. Virtually all the board's milled peat is now produced by work teams and the concept of team based work systems and performance related pay has extended into other areas of activity.

Bord na Móna was the first State company to engage in a major process of change. The workforce is to be commended for its foresight in recognising the need for the programme and for the hard decisions which had to be made. What emerged was a clear understanding throughout the organisation that Bord na Móna was departing from an old corporate culture to a new one determined by the realities of the marketplace and the public finances.

The successes of the rationalisation process were the beginning of a new era for Bord na Móna. However, the company continued to be in a very serious financial situation in the late 1980s and early 1990s because of the huge level of debt which was on its books. This debt had to be serviced. It was apparent that the solution to this problem did not lie within the company but with the State as its owner. The accounts of Bord na Móna for 1995-6 show that the company had total borrowings of almost £170 million and a negative net worth of over £60 million. The majority of this debt originated in the period following the oil crisis in 1973 to the early 1980s.

As a direct result of peat being cheaper than competing fuels during that period and in light of the hardships imposed, Bord na Móna undertook a series of investments. This was known as the third development programme and involved total investment of approximately £164 million. While the programme resulted in increased utilisation of peat, it failed financially as it was predicated on oil prices remaining high, which did not happen. By 1993, despite rationalisation and a return to profitability, this debt remained on the books of Bord na Móna with the result that the company had a negative net worth. The board engaged financial consultants who reported that £126 million of the debt was unsustainable.

The State had never injected any equity into Bord na Móna since its inception in 1946. All the board's investments were funded by borrowings and in earlier years by repayable Exchequer advances. In 1995 the previous Government decided to address the debt problem directly through a first ever injection of equity. This was designed to bring Bord na Móna back to commercial normality.

The decision to inject these funds was conditional on a commensurate reduction in the price of milled peat sold to the ESB. The reduction in that price brings to an end the previous indirect method of servicing the unsustainable debt and involves savings of approximately £14 million to the ESB. The equity injection had to be cleared with Europe, and immediately following this clearance £49 million was paid to the board in December 1996. In September 1997 a further £51 million was paid, giving a total Government investment of £100 million in the company.

Regarding the new peat fired power station, Bord na Móna needs to achieve minimum sales of three million tonnes of milled peat per annum over the next ten years to help ensure the board's continued viability. The station is included in the National Development Plan, 1994-9, and the EU Commission has agreed to make £21 million in Structural Funds available to it. The Commissioner for Regional Policy, Ms Monika Wulf-Mathies, confirmed to me last year that expenditure incurred to the end of 2001 will be eligible for co-financing under the Structural Funds.

The development is proceeding in line with projections in terms of planning applications, various studies and consultative meetings. The Senators who live in the constituency are aware of that. When I took office last year I asked my officials to give me a report each week on what was happening with regard to the new station. I was presented with this progress report every Monday morning and it was a great database for me. It allowed me to follow the progress of the new station. The Finnish IVO Group was the successful bidder and the station will be located at Clonbullogue in the east midlands. The IVO company has moved rapidly to ensure there is no slippage in its schedule.

The contracts between IVO, the ESB and Bord na Móna were signed in March, which was followed by a reception in the Merrion Hotel. The application for planning permission for the site, including an environmental impact statement, was submitted to Offaly County Council on 28 May. The engineering procurement and construction contracts were signed last week, on 24 June, and the company is due to commence a site survey within the next month to enable advance civil design, e.g. foundations and buildings, to continue. I hope there will be no upset to the onward march of that very important project, on which our officials, IVO and Offaly County Council have worked in tandem. I hope no one will be so insensitive or mischievous as to seek to hold it back.

IVO is also conscious of the need to keep the local community informed of developments. A public meeting was held on 19 May and two half day informal meetings were held on 24 and 25 June.

The station will support 250 full-time and 250 part-time jobs. Approximately 450 people will be employed at peak in its construction. The money which will spill into the local community as a result will revive that area and bring it back to life. The new station will be subject to the full planning and environmental requirements and will be state of the art design.

The final ingredient required to further strengthen the board's future prospects is the legal restructuring of the company to provide it with a new modern corporate structure. The objective is to provide the board with a company configuration.

The Bill provides for the conversion of Bord na Móna from a statutory corporation to a public limited company. It also allows for the injection of further equity into the new plc, as well as the updating of certain miscellaneous provisions.

The common feature in each business is the use of peat, but in all other respects they are quite different. The peat energy division supplies milled peat to ESB power stations. It is effectively a monopoly with a secure future. The other three divisions, however, are open market divisions competing with the private sector under different and difficult market conditions.

The solid fuels division is operating in a declining market. The challenge is to manage that decline while maintaining profitability, which will be some job. If this division is to survive, it must balance the decline in turf consumption by seeking alternative opportunities. In this regard, Senators will be aware of the recent acquisition by Bord na Móna of the coal business of Suttons and Staffords North-East.

The horticulture division is responsible for the production of the well known "Shamrock" brand of horticultural products based on peat, over 90 per cent of which are exported. The environmental products division is still in its infancy. I am not going to put it in a straitjacket as I want to see it grow and realise its potential. I was very interested when I went to Bord na Móna to see the very professional, interesting young people working in that division developing projects. I thought it had a great future.

Sections 1 to 5 contain standard provisions in legislation. Sections 6 to 11 provide for the formation of the new company. Sections 12 to 17 provide for the issue of shares in the company. Sections 18 to 20 provide for the appointment by me, with the consent of the Minister for Finance, of the chairperson and directors of the board, all of whom are in place except one.

Section 21 is an enabling provision for the further injection of equity not exceeding £10 million. Sections 22 and 23 include a number of standard general powers. Sections 24 and 25 are standard provisions relating to auditors. Section 26 deals with the managing director. Sections 27 to 33 relate to the remuneration of staff, etc., and provide that directors who become Members of either House of the Oireachtas or the EU Parliament cannot remain on the board. Sections 28 and 29 relate to superannuation.

Sections 34 to 40 provide for the establishment of Bord na Móna's business activities as separate limited liability subsidiaries. Section 41 relates to the share capital. Sections 42 to 44 provide for the appointment, terms and conditions of the chairpersons and the directors of each new subsidiary. Sections 45 to 50 are standard provisions relating to auditors.

Sections 51 and 52 provide for the transfer of staff from the old company to the new company. Sections 53 to 55 are standard provisions relating to the performance of the functions of the new company. Section 56 provides that the new company must afford appropriate protection to the environment and archaeological heritage. Section 57 provides for the dissolution of Bord na Móna statutory corporation on the vesting day of the new company. Sections 58 to 61 provide for the application of the existing Turf Development Acts and the Worker Participation (State Enterprises) Acts to the new company and the application of certain provisions of the Taxes Consolidation Act, 1997.

The new corporate and legal structure proposed in the Bill is fully in line with the philosophy advanced in the Culliton and Moriarty reports on industrial policy, which recommended incorporation under the Companies Acts as a general model for commercial State enterprises.

I have no doubt that Bord na Móna will benefit from this. Bord na Móna has experienced some outstanding highs and, unfortunately, some very dramatic lows over many years. There are no longer any safe harbours for companies seeking to operate commercially and viably. However, Bord na Móna has reached a position where it knows the road ahead, equity has been put into it and it knows it must operate commercially and viably in each of its groupings. It has a very stable board, chairperson and chief executive officer. I wish to pay tribute to the work of the previous chief executive officer, and also to the present chief executive officer who provides a very steady framework for the ongoing work of Bord na Móna. I commend the Bill to the House.

We support the Bill. When Deputy Dukes was Minister for Transport, Energy and Communications he was in charge of much of the preparation of this Bill.

The purpose of the Bill is to place Bord na Móna on a commercial footing. It is the most important legislation affecting Bord na Móna since its foundation. As a commercial company operating in a very competitive market, it is essential that Bord na Móna changes and becomes a public limited company. The Bill will grant Bord na Móna plc status and will allow its four divisions — horticulture, environmental products, peat energy and solid fuels — to operate individually and with their own boards which will place them on a competitive and commercial footing.

The last decade has been very difficult for Bord na Móna. In 1989 the company lost £91 million; in 1991 it owed £187 million. Wrong decisions were taken by Bord na Móna which left it with a crippling debt. Its future is now based on the successful restructuring of the company which has been undertaken over the past ten years. Over 3,500 jobs have been lost and difficult decisions have been taken by both workers and management.

Bord na Móna was set up over 50 years ago. It has supplied energy, peat moss and turf to ESB power stations. In particular, it has provided much needed employment in areas which would never have had any industry otherwise. It employed thousands of workers in Counties Kildare, Offaly, Laois and Longford and part of County Mayo and gave economic stability to the people of those regions. It gave young people, in particular, the opportunity to work and prosper at home. It revitalised many depressed areas by providing essential employment and has made significant contributions to the social fabric of these counties.

The Turf Development Act, 1990, gave Bord na Móna the power to form subsidiary companies but did not allow the delegation of any of its statutory functions. This Bill will allow Bord na Móna's operating divisions to function as stand alone companies where their performances can be evaluated and monitored. They will have to be profitable to survive in the real commercial world. Bord na Móna will now be subject to all the legal obligations and responsibilities which apply under company law.

The board was charged with developing our bogs under the 1946 Act. It introduced new machine technology following consultation with experts in Russia and Germany. Large areas of bog were acquired and drained. When Bord na Móna changed over to milled peat, new power stations were constructed and major changes took place in drainage technology. Bord na Móna was at the cutting edge of turf technology.

Earlier this year the Government brought forward the final portion of the EU approved money, bringing the total amount of money invested by successive Governments in Bord na Móna to £100 million. This means that the company no longer labours under the crippling debt burden which accumulated during the energy crisis.

The Bill gives the company a structure which is fine tuned to the world of trade and commerce and to a marketplace which has undergone radical change in the past decade. The solid fuel market in Ireland is decreasing by approximately 7 per cent per annum. Through goods branding and marketing, Bord na Móna is fighting to retain its market share. By purchasing coal distributors, CDL, for £3.5 million Bord na Móna has increased its market share in a shrinking market, but it is facing a dwindling demand for its product as a home heating fuel as householders switch to cleaner and more convenient forms of heating such as oil, natural gas and electricity.

The future of Bord na Móna lies in improved efficiency and output. Its horticultural division has an annual turnover of £45 million and employs over 300 staff. This is a competitive business and profit margins are very tight. Market forces are driving horticultural peat prices down and the board's performance in this sector must be improved. The peat energy division has ESB as its main customer, and this sector will receive a major boost when the new European peat station is built in the midlands. Over one million tons of peat will be supplied annually to that station to generate electricity, and this 120 megawatt facility is fundamental to the future of the peat energy division. It not only meets the strategic objectives of fuel diversity and power generation but uses an indigenous energy resource. In 1991, between gas and peat, the ESB found 44 per cent of its energy resources in Irish materials. Bearing in mind the decline in capacity in coming years, that figure will decline to 11 per cent by 2001. The European peat station will have the latest technology in thermal combustion and energy generating efficiency. I welcome the decision of the EU Commission to approve in principle the injection of £21 million into this project.

Bord na Móna has a very successful and innovative environmental division. It has developed many new products and exploited the soakage capacity of peat. This division has grown in turnover from £3 million to £5 million in two years and is expected to increase to over £10 million within years. There are over 100 people employed by the board in the United States and the market shows tremendous potential for growth.

It is essential the board takes a new direction and uses its valuable resources — land and skills — for major new developments. It is involved in an extracting industry which is finite — the supply of peat left in commercially operated bogs will last approximately 30 years. The company will have to change radically over the coming years, and bogs will have to be utilised for windpower and tourism. The Minister said that approximately 2,000 people are employed by the board in the midlands, and I ask her for guarantees on Ballacorick power station, which has been a valuable asset to the people of Ballacorick, Bangor-Erris and Crossmolina. That station has employed many people on both temporary and permanent bases since it was built. The Minister did not mention it specifically, and although I welcome the privatisation of Bord na Móna, I seek safeguards for that station to be put in place.

What plans are being prepared to safeguard our raised bogs? We need a debate on this matter. Bord na Móna has expanded and diversified in recent years into production of peat moss and horticultural exports and payroll costs have been halved. There has been an 80 per cent improvement in the company's productivity. I pay tribute to the commitment and partnership ethos of both management and workers. I would like to see an employee shareholding option introduced by Bord na Móna, as this would put the workers on a par with those in other semi-State companies, cementing the excellent relationship between management and workers and help the company reach its full potential. I wish the managing director, Mr. Paddy Hughes, and all the workers every success in this venture.

I welcome this Bill, although there are not many bogs on the streets of Dublin North East. I note Senator Ross is present; I am still smarting on the wounds he inflicted on me in our last debate. I hope he left his truncheon at home as I could not take a second day of that.

An Leas-Chathaoirleach

Members present or otherwise are not a matter for this debate.

Senator Fitzgerald is inviting fire.

I pay tribute to the Minister for her work on this Bill and to her predecessors, Deputy Dukes and Deputy Stagg. It is surprising that the unanimity one would have expected for this Bill did not occur in the Dáil. I am confident that there will be strong unanimous support here for this Bill as it is the aggregate work of this Minister and her predecessors.

The purpose of this Bill is to convert Bord na Móna from a statutory corporation into a company under the companies legislation, and this is a positive and innovative move. It takes due account of the commercial nature of the company's operations in a highly competitive market. The Turf Development Act, 1946, which founded Bord na Móna, was a powerful, progressive piece of legislation for its time, but it now hampers the company in today's market of high efficiency, partnerships and strategic alliances. Conversion to a PLC will enable the company and its subsidiaries to attract investment, to consider partnership arrangements and to generally facilitate the further development of its business activities, as well as providing scope for greater diversification. To survive, it cannot stand still and must have flexibility in its operations to take account of and to act in response to rapidly evolving market conditions. I agree with other speakers that Bord na Móna reaching a position of net worth is a great achievement. The Minister has outlined the sometimes horrific experiences of the board before it arrived at that position.

This phenomenal change in fortune is due in no small way to the workforce and management in partnership to turn the company's fortunes around. The 1980s and early 1990s were a financial nightmare for Bord na Móna; and for me, as for others, the turning point was the appointment of Dr. Eddie O'Connor as chief executive in 1987. At that time the company's finances were a mess and getting worse. He and his board found production levels continuing to fall and the financial performance getting worse. He inherited the consequences of earlier commercial decisions which had turned out to be disastrous; the servicing of bank loans and overhead levels were crippling. The rescue programme put together was spectacular. Dr. O'Connor brought his board and the workforce's unions with him as he introduced self-directed work teams which maximised flexibility, and productivity levels were consequently improved. The workforce was more than halved in that period from 4,500 to approximately 2,000 today. Partnership in the workforce became a reality and was enhanced by the practice of rewarding workers on the basis of output, efficiency, and the quality of peat produced. There was investment in modern machinery and the cumulative effect was to turn the financial albatross of 1987 into the profitable concern Bord na Móna is today.

I wish to record my utter disgust at the treatment meted out to Dr. O'Connor. He successfully pioneered the first major restructuring of a commercial semi-State company and transformed the work culture and ethic within that company. He had the courage of his convictions and spoke publicly about his philosophy and vision for the commercial semi-State sector. His payment for such courage and vision was to be hounded from office by small minded and cowardly elements not fit to lace his commercial boots.

Mr. O'Connor's success was brought to fruition when the State finally decided to confront the board's historic debt problem. As late as 1995-6, total borrowings were still in the region of £170 million and the company had a negative net worth in excess of £60 million. A decision by the State to invest equity of £120 million, criticised by some, has been welcomed by almost all sides. I join in the tributes to Mr. Paddy Hughes, Dr. O'Connor's successor, who has brought a very impressive record of service and a high degree of professional expertise to his new posting.

On its foundation Bord na Móna was given responsibility for developing Ireland's bogs and providing the country with an indigenous energy supply. As already pointed out, it was clearly intended by the then Minister, the late Seán Lemass, that it would develop along commercial lines. Lemass stated that he was placing an obligation on the Turf Development Board to find a market for all its produce, which should be produced on an economic basis, something which is very important. It is clear, therefore, that the company should be run on sound commercial lines and the Bill enhances its ability to realise these commercial objectives. Bord na Móna will become a holding company and its business and operations will be carried out by the new subsidiary companies.

The four main business activities are the peat energy division, the horticultural division, the solid fuels division and the environmental products division. Sections 34 to 40 provide for the establishment of these divisions as separate limited liability subsidiaries under the Companies Acts. The peat energy division supplies milled peat under contract to the ESB for electricity generation purposes. Current projections show the annual quantities of milled peat expected to be consumed by the ESB will decline sharply over the next two decades, from approximately three million tonnes to a little over one million tonnes. On this basis, Bord na Móna would be unable to generate sufficient revenue from sales to remain viable.

The major medium-term viability strategy, referred to by the Minister in detail, is integrally tied into the construction of the new state of the art 120 megawatt peat fired power station, namely, europeat. The company needs to achieve minimum sales of three million tonnes of milled peat per annum over the next ten years and the construction of the new power station will facilitate this through an increase in annual peat consumption of approximately one million tonnes. The project is made more attractive by its inclusion in the national development plan and its qualification for £21 million in Structural Funds. I am reassured by the Minister that there is no difficulty or risk to this funding despite utterances from some quarters to the contrary. I am aware that the Finnish Power From Peat group has been selected to build, own and operate the new peat powered plant in the east midlands, something the Minister referred to in detail.

The other three divisions will operate as independent entities in the open market without any cross subsidisation. As the Minister correctly stated, it is essential that the provisions being introduced be grounded on a solid pragmatic rather than ideological base so that these entities, through the board, have the necessary flexibility to respond to the increasing commercial complexities of the marketplace.

Up to last year the company's long-term borrowings were secured under Government guarantee. As a result of the equity investment and the provisions in the Bill, the board will have the necessary asset base and company structure to enable the holding company borrow on a commercial basis without Government guarantee.

Strategic alliances and joint ventures will not only be possible but ultimately necessary. Economies of scale will play an increasing role with larger sales and distribution systems effecting vital efficiencies and savings. Alliances will promote access to funding and wider markets. This will be particularly relevant to the solid fuel division. The domestic market no longer uses solid fuel as its main heating source. The lower cost, cleanliness and greater convenience of gas and oil have proven very attractive for householders. The division must expand its market share, something it has already done on a number of occasions, even over the past year.

The Minister, her predecessor and supporters of the Bill will be commended in the years ahead for facilitating the modernisation of this commercial semi-State organisation. The provision of a modern company configuration as the last of four main pillars in constructing the board's future will significantly enhance its scope and prospects of achieving its potential through a more definitive commercial focus and will enable the board's commercial operations to continue to provide vital employment in communities and regions where it is badly needed.

I thank Senator Fitzgerald for his kind words and will not have time to do what I did last week.

For a long time Bord na Móna has been a very sick company. I do not approve of the method which this and the previous Government embarked upon to supposedly cure its problem. For many years the Oireachtas and semi-State bodies have been struggling with its problems. The company went from crisis to crisis and simply continued to incur debts which were guaranteed by the Government. The chairman's statement in the last accounts issued by the company states that Bord na Móna is kept going by debt. There is a genuine desire on the part of the Minister and others to resolve the problem and establish the company as a commercial body which can exist in the commercial world, although I am not sure this is possible.

The fundamental flaw in the approach to the problem is that Bord na Móna is not really seen as a commercial body producing peat and turf but as a company with a social role. In her speech the Minister referred to the social role of peat. In the modern world a product can no longer be seen as having a social role. I understand the political sensitivities of this for many people in all parties. As an employer Bord na Móna is viewed by politicians, almost by definition, as an employer rather than a producer, an inevitable view given the nature of politicians. However, it is not the nature of the company and should not be the way in which the company is viewed. The current and previous Bills ask us to ratify this attitude towards the company.

No longer is the debt of almost £200 million being guaranteed by the Government with Bord na Móna carrying on as if nothing was happening, but rather the debt is simply being paid off. The payment is being cloaked in fancy words, as often happens nowadays, to confuse people. In this case the term used is "an equity injection", a wonderful phrase which simply means that the debt will be paid off. It sounds very pompous, as if the Government is doing something very noble——

That is true.

——and taking a serious, sophisticated commercial decision. However, this has not happened. Rather the Government, in two tranches, is giving the company £49 million one year and £51 million another year. It is not, as described, an equity injection. The money relieves the company from the right to pay off as much interest.

Over the years Bord na Móna has been master of the concept of operating profit. It is the only company which makes a consistent and disastrous loss every year but which manages to turn in an operating profit, something many people are fooled by. The company says that were it not for all the interest it had to pay it would be making money. However, this is true for all of us. If we borrowed money and did not have to pay it back we would all make money; it is a simple concept. This is how Bord na Móna has been existing. For years I have had arguments about this with Ministers, those on the board of the company and apologists for it. The reality is that it has been living off other people's money, losing money hand over fist and declaring an operating profit. The company was living in a fairyland by saying that if it did not have to pay off the debt which resulted from borrowings it would be making money.

I am worried about the future of Bord na Móna, to which the Bill or the Minister did not refer, whether it should exist and if the reason for its existence is the employment it gives rather than the profit it may be able to generate. That is the difficulty. If we continue to approach the semi-State companies with that particular motive as the priority, they will not exist without going from one crisis to another.

TEAM Aer Lingus is a classic case. Media and political coverage and statements have concentrated on the 1,000 or 1,500 jobs which will be lost in TEAM Aer Lingus. People forget that between £90 million and £100 million of taxpayers' money has been provided to keep those jobs, but the company is still losing money. TEAM Aer Lingus should have closed many years ago. I may be wrong but I gather one Minister had the courage to suggest this at Cabinet. He was eaten alive by people who had different priorities and pressures. Other Ministers at the Cabinet table — it was not this Government — said they could not live with it politically and would have to keep pushing TEAM Aer Lingus on and subsidising it. Even to this day it is doubtful if TEAM Aer Lingus is making any money. It may be making a small amount at the moment but that is at the height of the cycle and when the cycle turns, it will be back in deficit. We are in a season in which it can make money and if it cannot do so, it never will. The lack of commerciality in semi-State bodies is apparent everywhere and nowhere more so than in this Bill.

I will be interested to hear what the Minister has to say about EU funds. It is my impression that Bord na Móna is still getting EU funds; I am not sure but I believe it is getting £21 million over a period. It is difficult maintain that a company which has received £100 million as an injection to put it on a commercial basis — I do not believe it will — can justify still receiving money from the EU. The money may be for a specific project but that is not the point. If a specific project cannot stand on its own two feet, why should it get EU funds when it has already got £100 million?

I have not seen any accounts in the past year and perhaps the Minister might indicate when they are due out. The last accounts were issued this time last year and were signed in early July 1997. Perhaps the Minister would deal with the delay in issuing accounts, a matter with which we dealt the other day. I will be interested to know how Bord na Móna has been doing since it got part of this injection and how it has been affected by seasonality in recent years. This is more a question for Committee Stage but there is a funny item in the accounts where two directors appear to have loans from the company for houses. Is that normal in semi-State companies? They are small amounts but it seems odd that directors in Bord na Móna should get special treatment for buying houses.

I welcome the Minister and this legislation which we will support. I would like to pick up on a point made by Senator Ross in respect of the Turf Development Bill and what it achieved. By the lights of the time, it achieved an enormous amount. It is true the activities which took place over an extended period were social in dimension, had a major national impact and were unprofitable. However, by the lights of the time, that was what was needed in the communities in which the board existed.

Part of the lack of profitability was probably caused by political factors as much as anything else. If anybody even hinted that a briquette factory and anything else in an area might be closed, there was an immediate and unified response of outrage and horror. The Government of the day responded to that and the board had to continue along its merry way adding to its losses and compounding its debt. That was caused as much by political pressures as anything else and in the circumstances, it was probably appropriate for the political establishment to respond by taking the debt off the shoulders of the board, allowing it to operate commercially and get on with its work in a commercial way. Given the circumstances of the late 1930s and 1940s and the need to produce turf from the bogs, it was appropriate.

The appropriate response now is to have a commercial company which is modern, forward looking and can generate profits and would still be able to fulfil a social function in so doing. The director of Lough Egish Co-operative said on one memorable occasion that the co-operative had two purposes: one was a social purpose and the other was to make money and if it did not make money, it would not fulfil the social purpose but frequently it was put the other way around. He was right about that.

The activities of Bord na Móna are hugely important in County Kildare. It is a matter of some satisfaction the board's headquarters are located in Newbridge. I trust this was in response to the request I made when the 1990 Bill was passing through the House and I asked that the board's headquarters be located in Newbridge.

I am sure it was.

I had an input into the commercial or non-commerical dimension of the board.

It took some job to move it from Baggot Street.

I am sure the Minister and her colleague were well up to it.

From a purely logistical point of view, the board did tremendous work over an extended period. Its harvesting activities and the way it produced the peat was a huge and successful undertaking at the time. We should acknowledge the work of these people and the management in the early years. Until recently there was a monument in Newbridge to that activity during the Emergency when thousands of workers gathered in dormitory style buildings in Newbridge and went to work in the bogs. They were heroes in their own right at a time when there was no Celtic tiger.

This Bill moves the board in the direction which is required in a modern society. Like the 1990 Act, it is a major step. The effect of the decline in the number of workers in the company has been extremely dramatic in parts of south Kildare, particularly the western part of the constituency, where a large number of people have lost their jobs in the past ten years not only in Bord na Móna but in the ESB and its associated activities. That had a detrimental effect which was proportionately as severe as that experienced by the coalminers in Wales or by rural depopulation in parts of the west. The positive aspect was that many skills were acquired as a result of the board's activities. Many members of a family were employed by the board and they developed skills in the locality which are being put to good use. The Minister referred to the new working procedures which operate, the teams and so on and the effect that has had on productivity. That is a tribute to those living in the area.

We reached a point where there was a £180 million debt around the board's neck and a negative net worth of £60 million. In conventional terms, if the board was a going concern it would have been regarded as insolvent and would have had to be wound up. If it had not been a State enterprise, it would have been wound up. There was the question of writing off the assets and investments made as a result of the oil crisis when people were projecting forward development based on that crisis and the debt became unsustainable from a commercial point of view. The consultants confirmed that by saying a debt of £123 million was unsustainable. I acknowledge the role played by Deputy Dukes and Deputy Stagg in injecting capital into the company. This has been continued by the Government.

Another factor has been the reduction in the price of milled peat. When considering the relationship between the ESB and Bord na Móna it has always been difficult to decide which company has subsidised the other. Was Bord na Móna charging too much for the peat it supplied, thereby reducing the profits of the ESB, or was the ESB getting the peat at the right price? There was sometimes a difficulty in segregating the activities of the two companies.

The construction of a new 120 megawatt europeat station in Clonbullogue is welcome. I hope the ambitious time frame for construction will be met. The target date of 2001 mentioned by the Minister must be met to draw down the funding of £21 million. I hope all the planning procedures and construction work will take place on time to ensure the project will proceed and will create the 250 full-time and the extra 200 part-time jobs on the bogs and the 450 jobs in construction we hope for.

The question of what the new plant will contribute by way of carbon dioxide emissions has received much attention. The technology is now such that it is possible to greatly reduce these emissions. It is also such — this was not stated in the Minister's speech — to ensure that power can be generated profitably from these plants because they are much more efficient than the older ones. In addition, sulphur emissions are in many ways more noxious than carbon dioxide emissions. Moneypoint springs to mind. However, as a farmer, I welcome sulphur emissions because they contribute to crop health. We would not have to spread sulphur based fertilisers. It is unnecessary to do this in England because of the amount of sulphur emissions in the air.

With regard to the division into four business activities, why is it necessary that they be stand alone activities or separate companies? Why can they not be part of the overall parent company? This was raised by Deputy Dukes in the Dáil.

He set it up in that way; I could not get over it.

In addition, Deputy Stagg appears to have taken a stance contrary to the one he took a short time earlier. Perhaps something in the air in County Kildare causes us to take two contrary positions at the one time. I hope I do not share that characteristic with my colleagues.

The Minister mentioned what might happen to the peat energy division in terms of the reduction in the amount of peat which would be consumed other than by the introduction of the europeat station. I believe the horticultural division has performed well. Approximately 90 per cent of what it produces goes for export. One does not question the merit of peat and its value for horticultural purposes, but environmentalists in Europe and Britain are becoming increasingly concerned about the use of what they regard as a scarce resource. There may be calls for the use of alternative products.

I welcome what has taken place with solid fuels, CDL, Suttons and Staffords. It is important that the company, being a seller of fuel, should involve itself in other areas within that sector. However, the biggest potential is with the environmental products. The Puraflow system has been strikingly successful. The team of researchers in Newbridge is to be congratulated on the developments that have taken place.

We are dealing with a hugely versatile product in peat. It has enormous potential. There will be other uses which will develop over the years. The questions of the cost of electricity — the Minister is aware of the key role this has in competitiveness — and of the contribution of the staff and management to the success of the activity are important. I am glad of the plans to invest in Kilberry in south County Kildare. Concerns were expressed about it, but it is very good for the manufacture of horticultural peat.

There is a tourism potential with the bogs. The cutaway and the use of them as wetlands must also be considered. That is a debate for another day. Peatland World in Lullymore is a valuable tourism asset. There is talk that it may be closed down. I do not know if it is the responsibility of Teagasc, Bord na Móna or the local community to keep it open. However, I appeal that something be done to ensure that it continues to exist and that the heritage of the bogs and so on continues to be explained to people visiting that part of County Kildare, which is in the middle of the bogland areas.

Like other Senators who have a strong constituency interest in this matter I welcome this Bill. I followed its progress through the Dáil where most of my concerns were addressed. I will outline my remaining concerns later.

While Senator Ross has approached the debate from his perspective, we who know and appreciate the contribution of Bord na Móna to our areas have our perspective. I am sorry he is not here. I would like to bring him to the midlands to visit the various areas, show him what Bord na Móna has meant to us and tell him about the great celebration which occurred last year in Kilcormac to commemorate the 50th anniversary of the establishment of the housing scheme there. I would also like to show him all the small businesses, engineering companies, mechanical companies, small businesses and employers who learned their trade and grew out of Bord na Móna and the small industries and industries that have developed based on the skills provided by the company. I hope this would give him an appreciation of what the company means to us.

There has been no lack of enterprise or innovation in Bord na Móna. However, at times there has been a lack of opportunity for it to be expressed. When opportunity has shown itself, whether it is in the innovation and production of new equipment, the development of the environmental side of the business, the support for and encouragement of the development of small business in the areas of its operation or the innovative and enterprising autonomous work groups which were established as part of the change of the company, Bord na Móna has been to the forefront of change at many times in its history. Those of us who recognise its importance make no apologies for saying that employment has been, is and will continue to be a very important objective with regard to its activities. Anybody seeking election to the Oireachtas in our constituencies who says employment in Bord na Móna was not important would not be successful.

This Bill is the culmination of a long and difficult period of change for Bord na Móna. It has secured the survival of the company and has left it much better to face the future. When my colleagues in Dublin were confronting the crisis at TEAM Aer Lingus and when colleagues in other parts of the country were dealing with difficult problems of change, I always pointed out that in the midlands and other parts of the country Bord na Móna provided examples of where management and the workforce faced up to the reality and set out a strategy in dealing with it. I join in complimenting all the members of management, workforce, boards of directors, the various Ministers and their officials who have been associated with this change, especially over the past decade.

While the change has left the company fitter for the future it has been achieved at considerable human, social and economic cost in all our communities. I urge the Minister to look at this issue and do her best in the negotiations for EU funding on which the Government will embark to try to address the human, social and economic cost which we are still bearing.

As members of Offaly County Council, Senator Moylan and I were recently involved in formulating a submission to the Midlands Regional Authority as part of its formulation of a submission for European support. The facts and figures associated with the decline in Bord na Móna and ESB employment in west Offaly made stark reading. The 1,500 lost jobs would be equivalent to the loss of 30,000 jobs in Dublin. If 30,000 jobs were lost in Dublin, a national emergency would be declared. We are still dealing with those job losses in the midlands in spite of the relative success of Bord na Móna and that fallout must be addressed.

Other speakers spoke about the future of the industry; turf is a finite resource and Bord na Móna should be enabled and encouraged to diversify into the greatest possible number of areas to ensure employment will continue to be provided in the future. The Minister addressed that issue in her speech and the structures being put in place through this Bill will enable the company to attract the necessary investment to assist its diversification and ensure employment will continue to be provided even when peat runs out.

The Minister provided a historical outline of why the changes in Bord na Móna were necessary. The reason Bord na Móna had to finance its development through bank borrowing was very simple — the shareholder did not put any money into the company. Whether or not the recent equity investment was associated with the management of debt in the company, I am very pleased the State, as shareholder, faced up to its responsibility to invest in the company and enable it for the first time in its history to approach the future on a sound financial footing. No apologies must be made for that.

I compliment the Minister's predecessors who worked in tandem with Bord na Móna in regard to the equity injection. I want to mention my constituency colleague, Deputy Cowen, who was Minister when this was initiated and to place on record my appreciation for the attention which Deputies Spring and Quinn accorded to the representations I and others made seeking a response to the Bord na Móna submission. Deputy Quinn, then Minister for Finance, responded by approving the first tranche of investment in Bord na Móna. I compliment the current Minister for ensuring the second tranche of funding was put in place.

I understood the debt package amounted to £120 million, an injection of £100 million has been provided, but how is it proposed to manage the remaining debt? I urge that flexible and favourable consideration be given in future to the issue of an employee share option in the company. The Minister, given her experience in bringing the Telecom negotiations to a conclusion, will appreciate the value of such a scheme in any company. How will this legislation assist in implementing an employee share option scheme in Bord na Móna in the future?

In spite of the relative success of Bord na Móna and europeat, the Minister is well aware of the severe difficulty being experienced in Ferbane, not far from her own constituency. It is a shame to think that various Government Departments, including the Minister's own, and politicians from all parties have not done their best to resolve this issue. The work forces in Bord na Móna and the ESB having initiated the proposal and the ESB board having put up £16 million for the job, it is a shame niggling matters which cannot be agreed at local level are standing in the way. I regret the recent initiatives taken to attempt to facilitate agreement in this situation have been unsuccessful but I am confident the Minister, appreciating the problem from a local level, will do her utmost to ensure it is resolved. Hopefully, investment in west Offaly which will benefit Bord na Móna and the ESB will be drawn down and implemented as quickly as possible.

The Turf Development Bill is a very welcome piece of legislation which will allow Bord na Móna to operate in a modern, competitive Ireland. To operate in such an environment it is essential that Bord na Móna be in a position to delegate core activities to its subsidiaries and have the power to enter joint ventures and transfer assets.

Bord na Móna is an outstanding example of success with a turnover of £140 million per annum and a strong and innovative management. With a workforce in excess of 2,000 people, Bord na Móna is making a significant contribution to the economy of the midlands. I do not speak from personal experience when I say that but any employer of that size would obviously be very important to a region.

I listened with some amusement to Senator Ross's contribution. I wish we lived in the kind of clinical environment in which he expects businesses to operate. To deride an investment or equity injection of £100 million in an Irish owned employer whose profits are kept within the country is farcical.

As with any organisation, it is vital to look to the future. This Government is committed to the future of Bord na Móna and has already laid some foundations in this regard. The Minister has outlined the measures being taken and I do not intend to go over old ground. The operational restructuring of Bord na Móna is to be admired and the rationalisation of the workforce and implementation of new work practices are to be welcomed. Change is always difficult and in an organisation which would have been perceived as particularly traditional, it could have proved especially difficult to bring workers and management along together towards the development of a successful business. The self-directed work teams which have shown an increase of 80 per cent in the company's production levels since 1988 are examined and imitated by other organisations throughout the country. The old ways went out the window when Bord na Móna considered restructuring. Its management essentially took the bull by the horns in preparing the company for the future.

The Government has addressed the debt problem in a focused and reasonable manner. Any organisation can be crippled by debt and cannot survive in those circumstances. The Government invested £100 million in the future of Bord na Móna and is to be complimented on that. Its vision and the manner in which the investment was implemented is something of which we should be proud. Bord na Móna is not getting a free ride or money for nothing. The company must meet stringent objectives in order to ensure its continued viability and contribution to employment and the local economy.

Today's Bill is the third step in the strengthening of Bord na Móna's foundations. It will allow the company to create the modern environment and necessary tools to compete in a modern environment. The company has a number of platforms from which to do that, among them its peat and energy division, solid fuel division, horticultural section and environmental products section. The company's diversification is to be admired; the same company which produces the peat briquettes we burn and the peat moss we use in our gardens offers consultancy services abroad.

The Bill sets the standards for Bord na Móna's continued contribution to the Irish economy. Bord na Móna will benefit substantially from this legislation. Not only will the 2,000 people in the midlands benefit, the entire economy and the Government, as a shareholder in the company, will benefit. I commend the Bill to the House.

I thank the speakers who contributed to the debate — Senators Burke, Liam Fitzgerald, Ross, Dardis, Gallagher and Cox. To have so many speakers in such a short time is an achievement.

Senator Burke asked about Bellacorick. In the year 2000 Bord na Móna is to review the operation of a certain number of stations and Bellacorick is one of them. I would like to see the station continue and I will bear the Senator's comments in mind. Senator Liam Fitzgerald said that there are no bogs in his area but he is obviously interested in the subject. His speech was studied and reflective.

Senator Ross decried the social role of Bord na Móna. I agree with Senator Cox's comments in that regard. The Government no longer guarantees funding for Bord na Móna. It must have an operating profit. Senator Ross then asked if we still receive EU funds. We received funds for the europeat station and they will come on stream when it is built. He further inquired about loans to directors for housing. The board provided housing, such as Waterford Bridge. Moderate loans were issued to directors in the past but this practice has been discontinued. In the past decisions were made which caused problems but we should now look to the future.

Senator Dardis displayed a great knowledge of the subject. I have read about the conditions of turf workers in the 1940s. They slept in bunks in spartan wooden huts. A pub licence was granted at one such camp in County Kildare and people came to me recently seeking to revive the licence.

The Senator asked why the company must stand alone. Europe does not want cross subsidisation. When we negotiated the State aid for Bord na Móna it was stressed that the company had to stand alone. Last week the Court of Justice in Luxembourg decreed that the French aero industry will have to repay the 2 billion francs they received from the French government. Aer Lingus, Air Italia and TAP, the Portugese airline, now face the same judgment. The Commission is to fight the action but it is a sobering thought. Governments cannot prop up public sector firms which are not viable.

I welcomed Senator Gallagher's contribution. I am interested in European funding for the midland region. All the midland counties were proven to need greater assistance than areas which would have been deemed to be more depressed. The Taoiseach and I have discussed this informally and we will be pushing the issue as the figures now exist to prove that need. The State faced up to its responsibilities here.

In 1996-7, Bord na Móna made a net profit of £7.1 million and £4.8 million the year before. The accounts for this year will be released in the next fortnight and I trust they will follow this improving trend. There were bad times but the decision to inject equity managed to lift the industry. As a result it focused and sorted itself out. It is now doing modestly well. When this Bill was being prepared the unions in the industry came to see me and they were very helpful. Workers in Bord na Móna decided to sort out the industry themselves and they displayed great courage. There is only £8.2 million left of the original £20 million debt. Around £12 million has been paid back and the Minister for Finance should feel good about his home county when we put the case for repayment.

Two weeks ago I wrote to the chairman of the ESB and told him that the situation in Ferbane is ridiculous. The investment will be lost if the issue is not settled. A sum of £16 million has been provided for necessary repairs in Ferbane. That money has been available for months but there is a local difficulty due to the merging of two unions. Some people are behaving in an obdurate fashion. Through their own non-participation they may lose those funds. I appeal to them to settle the issue. Why are their peers not putting pressure on them? It is they who stand to lose. Whatever their difficulties they can come to see me. I will ask them what is the problem which is holding up an investment of £16 million. I would not blame anyone for feeling frustrated. I am extremely annoyed and frustrated by the lack of investment in the Midlands.

An Leas-Chathaoirleach

I would remind the Minister that business is due to be interrupted at 6 p.m.

Senator Cox made a supportive speech in which she took up the theme of look to the future. This is very important and they must operate properly. They must look to the future and that is the theme on which we will end Second Stage.

Question put and agreed to.

An Leas-Chathaoirleach

When is it proposed to take Committee Stage?

Committee Stage ordered for Wednesday, 1 July 1998.
Sitting suspended at 6 p.m. and resumed at 6.05 p.m.
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