John McGuinness
Question:62Deputy John McGuinness asked the Minister for Public Expenditure and Reform the expected timetable for the commencement of the sale of State assets; and if he will make a statement on the matter. [11192/12]
View answerTuesday, 28 February 2012
Questions (6, 7)
Michael Moynihan
Question:82Deputy Michael Moynihan asked the Minister for Public Expenditure and Reform the primary criteria that he will apply in determining the way in which it is best to proceed in relation to the sale of State assets; and if he will make a statement on the matter. [11195/12]
View answerOral answers (14 contributions)
I propose to take Questions Nos. 62 and 82 together.
Following my announcement of the programme of State asset disposals last week, work is progressing on plans for the disposals. All of the relevant Departments will participate, overseen by my Department and with the assistance of NewERA. The objective is to identify by the end of March any remaining policy, regulatory, legislative and-or financial issues that may need to be addressed prior to disposal. Great care will be taken at all times to ensure any decisions are in the national interest and represent value for the Exchequer. It is intended that any issues arising will be addressed by the end of 2012 in order to facilitate transactions commencing in 2013.
I refer to Question No. 82. I asked how the Minister intends to proceed with regard to the sale of State assets. Has he an open mind with regard to the public placing of shares, the placement of shares with certain financial institutions, an invitation to expressions of interest and the sale of assets to the known businesses in the trade? Has he asked the NTMA to draw up a list of power companies who will be invited to bid? I understand a number of sharks are out there - the term used by Bord Gáis Energy - who want to take over that business.
I ask the Minister to explain the process for the sale of the assets. I do not mean to say I agree with a selling process but I wish to hear the Minister's intentions as to the process he intends to follow.
Detailed analytical work commenced immediately following the Government decision with regard to Bord Gáis Energy, the ESB and the Coillte proposal, which is being considered. The process will examine the regulatory and legislative difficulties, the best placement procedures and how to obtain best value. These matters are currently under consideration. I am required by the Government decision to revert to the Government by the end of March to address those issues and to set out how we intend to proceed.
As for the other decision, the Minister for Communications, Energy and Natural Resources, is looking at those generating assets within the ESB which are non-strategic and which can also be available for sale. The idea is to sell Bord Gáis Energy with some ESB power generating in a bundle or sell some of the generating capacity of the ESB separately in order to have a significant nucleus of energy generating capacity that would be competitive and offer best value to ensure that the cost of energy is as competitive as possible. There is a double value. First, we will try to get a maximum price and, second, we want to get a strategic change so we will have real dynamic competition within the energy sector in the interests of business and the consumer.
Are the people in NewERA and the NTMA factoring in the issue of pension fund deficits in these organisations and whether there will be an employee share option scheme, as happened in some previous privatisations?
As Deputy Fleming is probably aware, there is an ESOP scheme already in Bord Gáis Éireann. A little over 3% of the company is owned by the employees and that will be part of the things which will be addressed now because, as Deputy Fleming knows, the company is well on the way to being disaggregated into the transmission and the generating elements of it. The transmission elements of it, including the gas interconnectors and so on, will remain in State ownership. What is proposed to be sold is the generating capacity of it, which is not strategic. If we can have a significant new player in the Irish market, it will be in the interests of the consumers and industry generally. The other point Deputy Fleming made about pension funds and deficits is a factor which is being taken into account.
In the case of both the ESB and Bord Gáis Éireann, the workforce holds shares so, with that in mind, I was curious to hear the Minister had not spoken to the trade unions. He might do that with some urgency because the employees will have a view on all of this.
The Minister repeatedly made a claim today that the sell-off of these assets is somehow a pathway to enhanced competitiveness and reduced prices. I am sure he is as aware as I am that the history of deregulation of the energy sector in this small island has never resulted in a dip in prices. In fact, we moved rather spectacularly from having very low energy prices to now having among the highest across Europe. It probably makes a good sound bite for the Minister in selling this fire sale but I do not think it is an argument he can substantiate.
The Minister said he will raise €3 billion. Notwithstanding giving us figures down to the cent, he must have some sense of the individual value of these assets. I put it to him that there is a reason these assets are attractive to put on the market and bidders will be interested in them. It is because they generate very significant revenue.
It is very hard to take lectures about sound bites from Deputy McDonald. She is the master.
I take that as it is intended.
I say that as a compliment. She used four sound bites in the question, including representing it all as a fire sale when not only the decision but the memorandum of understanding with the troika makes it crystal clear there will not be a fire sale. If we do not get a fair price for these, we will not sell them. It is as simple as that, so that will ensure there will not be.
I refer to the other point Deputy McDonald made and all these things one cannot let go, because she throws these things in as almost the truth, and this is the notion that this is deregulation. It is anything but deregulation of the energy market.
I did not say that.
We want to achieve real and better competition in the energy market.
I refer to the notion that it is somehow a bad thing to get a good price for them and that we will get a good price for them because they are valuable assets. Of course, we want to get the best price because we need to pay down some of the State's debt. That is not a bad thing of itself, that is, to take some of the terrible burden of debt off the Irish taxpayer. We also want to get some access to money to invest in the productive economy. We have got a very good deal where one third of the total asset sales can be used for that purpose.
The Minister told us there will not be a fire sale. He said he will get full value for the State. Would he agree that is not likely to happen in the next two or three years given that the price of everything has gone so low? It beggars belief for him to think he can get real value for this in the next two or three years. Will there be a detailed cost benefit analysis to weigh selling State assets against the long-term costs to the economy, society and the environment? That would be interesting.
The Minister said there is no great strategic value to the State's holding of 25% but we must remember that the staff hold 15% and, combined, at 40% it is the largest stake by far.
The question asked about the criteria used by the Minister in proceeding with the sell-off. Why did he think it unnecessary to examine fully each State asset in terms of the social, economic and environmental value? I refer in particular to public forests, which could be managed in a way that is of enormous benefit to citizens in this country. I ask the Minister to comment on why we have 11,000 people employed in forestry when a country half our size, Switzerland, has 120,000 people employed in forestry. Why is he not analysing our State assets in this way?
That is worthy of a long debate and the Minister for Agriculture, Food and the Marine would be delighted to have it. The percentage of land under forest in Switzerland is of a different magnitude to the percentage under forest in Ireland, if the Deputy had not noticed. We need more forestry and this Government has given clear attention to it in the programme for Government. Managing forests means harvesting the crop in the public interest. There is a difference in the decision. We will consider the Coillte proposal because other proposals have been made for the use of the forest. The Minister is examining these and we will make the best strategic decision for the Irish economy.
The questions of Deputy Wallace are like saying that we should ignore the current economic crisis. We must map our way out of it with every tool available. It has long been said that austerity alone is not a strategy, a criticism with which I agree. It must be part of the strategy because the only people who will give us money have attached conditions to the money. That is why we must achieve the deficit reduction target. There is no gainsaying that and anyone who understands economics understands that. We must also have a growth strategy and utilising some of the assets to invest in the productive economy is part of that strategy. There are other elements, such as the development of the NewERA entity and the strategic investment fund, to which we have committed €250 million from the National Pensions Reserve Fund, NPRF. We will leverage that to €1 billion for investment in job creation and we also want to use the residual part of the NPRF. I had a discussion on the use of other pension funds. We want to release that because of the €70 billion in pension funds, only 2% is used in the productive economy. There will be a range of initiatives to leverage further investment for a growth strategy to mirror the strategy of balancing books.