I am pleased to have this opportunity to present the Gas Regulation Bill 2013 for consideration by the Dáil.
Gas Regulation Bill 2013: Second Stage
I am sorry to interrupt, but I must ask the Minister to move that the Bill be now read a Second Time.
I move: "That the Bill be now read a Second Time."
Thank you, Minister, I am sorry about that.
You are sticklers for detail in Dublin South.
I just have to do my job.
Of course, as always.
The Bill will implement the Government's decision of February 2012 on the sale of State assets. It will ensure the retention of the strategic gas networks in State ownership, while also facilitating the sale of Bord Gáis Energy's competitive energy business.
Before I turn to the detail of the proposals of the Bill, I would like to speak about energy policy issues generally. The overriding objectives of Irish energy policy remain security of supply, competitiveness and sustainability. Our island status on the periphery of Europe and at the end of a gas pipeline makes us all acutely aware of the importance of a secure gas supply. Ireland imports 95% of its natural gas needs, leaving us vulnerable to supply disruptions and volatility in prices, which are determined by global markets.
I am on record on many occasions as stating the proposal by Shannon LNG to develop a liquefied natural gas, LNG, terminal in Tarbert is welcomed by the Government. Such a facility, together with the bringing onshore of Corrib gas, would provide important security of supply for Ireland. The employment boost from the construction of the LNG plant would also be very welcome locally. However, we remain heavily reliant on gas supply from Great Britain and are also heavily reliant on gas for the generation of electricity. This reliance is set to remain for some time. In this context, the Government fully recognises the strategic importance of retaining the gas network in State ownership.
The Government endorses the importance of investing in Ireland's gas transmission infrastructure. Our reliable, modern gas system is the result of significant investment by BGE, a well run and profitable State-owned company that has been instrumental in the economic development of the country.
I will turn now to the decision to sell the Bord Gais Energy business. In November 2010 the memorandum of understanding agreed between the then Government and the EU, the IMF and the ECB, known as the bailout programme, committed "to setting appropriate targets for the possible privatisation of State-owned assets". The details were to be informed by the recommendations of the special group on public service numbers and expenditure programmes, a review then ongoing. When the new Government probed this privatisation target at its first meeting with the troika, the EU, IMF and ECB representatives mooted a figure of €5 billion for the sale of State assets, the proceeds of which were intended to pay down debt. The figure committed to in the programme for Government between the two parties comprising the new Government was an assets disposal programme of up to €2 billion. Initially the EU, the IMF and the ECB were not disposed to allow us to retain any of the proceeds from State asset disposal, insisting that all of the proceeds be used for debt reduction. The negotiators ultimately settled on a figure of €3 billion, after the troika had agreed that a proportion of the proceeds could go towards reinvestment for job creation.
Eventually, after more than six months of negotiations, it was agreed that 50% of the proceeds could be invested in job creation measures and that the remaining 50% could be used as a backstop for securing funding for job creation, before eventually being used to retire debt. It was also acknowledged that any programme of State asset disposals should be undertaken only when market conditions were right and when the necessary regulatory structures had been put in place to protect consumer interests. The outcome, therefore, of the renegotiation of this aspect of the bailout programme is enormously significant because the quantum of State asset disposals is less, the use of the proceeds will assist economic recovery and key strategic assets such as the gas transmission and distribution systems will be retained in State ownership. In the light of this and following detailed consideration of the financial and policy issues, in February 2012 the Government agreed, inter alia, to retain the strategic gas networks in State ownership and sell the competitive energy business of Bord Gais Energy.
Bord Gais Energy comprises the following businesses: a leading energy supply business in Ireland, servicing over 700,000 customers in the gas and electricity markets; a 445 MW gas-fired power station at Whitegate, County Cork; a large-scale portfolio of onshore wind assets and Firmus Energy; and a growing energy supply and distribution business in Northern Ireland. All of the businesses making up Bord Gais Energy operate within a competitive market structure, competing against other market participants. Bord Gais Energy's entry into the domestic electricity market, with its highly successful Big Switch campaign, had a galvanising effect on competition in the all-island energy market. The sale of Bord Gais Energy can deliver positive outcomes for Ireland's energy markets, for Bord Gais Energy and its employees.
The sale process was formally launched in May and is now well under way and expected to be concluded by the end of the year. It is important to maintain the momentum in the sale process in order that the proceeds can be reinvested promptly, once available, to ensure an immediate impact on the economy and job creation. The enactment of the Gas Regulation Bill will ensure there is no unnecessary delay in the transaction process.
I now propose to outline the provisions of the Bill. For the convenience of the House, a detailed explanatory memorandum has been published which provides a synopsis of the provisions contained in the Bill which comprises five parts. Before continuing, I wish to inform the House that I wish to share my time, although no Deputy has offered to share with me as yet. I do not know if Deputies are trying to tell me something. If someone on this side of the House should offer, I am willing to give him or her a few minutes when I finish.
Part 1 of the Bill deals with general matters. Part 2 provides for the establishment of a network subsidiary company of BGE which will be responsible for the ownership and operation of the gas network. Part 3 deals with matters relating to the sale of the Bord Gais Energy business. Parts 4 and 5 deal with amendments to various Acts in order to provide for changes in BGE functions and for new shareholding and governance arrangements for BGE. The amendments in Parts 4 and 5 are primarily based on the need to ensure compliance with EU requirements for State-owned gas network companies.
I will now turn to the detailed provisions of the Bill. Sections 1 to 3, inclusive, contain standard provisions concerning commencement, definitions and ministerial costs.
Sections 4 to 19, inclusive, provide for the establishment of a new subsidiary of BGE which will assume responsibility for the ownership and operation of the gas network business. This subsidiary will be compliant with EU requirements and ring-fence and protect the strategic gas network assets. Section 4 also provides, importantly, that BGE cannot sell this strategic network subsidiary.
Section 5 provides for the memorandum and articles of association of the networks subsidiary, which are subject to ministerial approval. Section 6 provides for the appointment of the directors, subject to ministerial approval.
Sections 7 to 11, inclusive, set out standard provisions concerning the requirements for directors of the network subsidiary, including provisions regarding disqualifications and disclosure of interests by directors, a prohibition on Members of the Oireachtas or Members of the European Parliament acting as directors and a provision concerning the disclosure of confidential information by directors or employees of the networks subsidiary.
Section 12 provides for BGE and Gaslink to prepare a network transfer plan or plans in respect of the network subsidiary. Gaslink is the BGE subsidiary currently responsible for transmission operation. The transfer plan will set out those assets, licences, rights and liabilities and staff to be transferred by BGE to the network subsidiary.
Section 13 provides for the Minister for Communications, Energy and Natural Resources, with the consent of the Minister for Public Expenditure and Reform, to approve the network transfer plans. Section 14 provides for a network transfer date to be set by the Minister and notice to be published in Iris Oifigiuil. The network transfer plan will have effect from this date. Section 15 provides that, with effect from the transfer date, the provisions of Schedules 1 and 2 apply and the network subsidiary becomes responsible for the ownership and operation of the networks system.
Section 16 provides some flexibility for the parties involved in the transfer if it is found that additional assets and so forth require to be transferred to the network subsidiary. The section provides that BGE and-or Gaslink may, up to one year after the transfer date, enter into a further agreement with the networks subsidiary for the transfer of additional assets, licences, rights and liabilities and staff to the network subsidiary.
The section provides that BGE or Gaslink may, up to one year after the transfer date, enter into a further agreement with the network subsidiary for the transfer of additional assets, licences, rights and liabilities and staff to the network subsidiary. Such an agreement would require ministerial approval.
Section 17 provides legal certainty to BGE and the network subsidiary that title to an asset can be proved by the issuing of a jointly agreed certificate. Section 18 relates to the production of documents of title. It follows the provisions of section 84 of the Land and Conveyancing Reform Act 2009 but is tailored to the specific circumstances of the transfer plan between BGE and its subsidiary. Section 19 provides for an annual report and accounts in which the activities of the network subsidiary must be separately identified.
Turning to the sale of Bord Gáis Energy, Part 3 provides for the transfer of the energy business to a subsidiary, referred to in the Bill as the energy company, to facilitate the transaction. These provisions provide legal certainty with regard to the assets, licences, rights, liabilities and staff to be transferred to the energy company, which is then sold. Section 20 provides for the preparation by BGE of a transfer plan or plans, which will set out the assets, contracts, rights and liabilities and staff to be transferred to the energy company. The plan must be approved by the Minister. Section 21 provides for the memorandum and articles of association of the energy company. It allows for ministerial oversight of the content of the memorandum and articles, which must be consistent with this Act and with the EU gas directive. This provision will cease to apply from the date of disposal of the energy company. Section 22 provides for the appointment of directors to the energy company, subject to ministerial approval. Only employees of BGE shall be eligible for consideration and no remuneration will be paid to directors. After the disposal date, board appointments to the energy company will of course be a matter for the new owner.
Section 23 provides for the approval of a transfer plan regarding the energy company. The plan must be approved by the Minister for Communications, Energy and Natural Resources with the consent of the Minister for Public Expenditure and Reform. It ensures that I, as Minister, must be satisfied that the plan provides only for the transfer of those assets, staff and so forth that are relevant to the energy business. Section 24 provides for an energy company transfer date. This date will be set by me following the approval of the transfer plan. Notification of the transfer date is required to be placed in Iris Oifigiúil. Section 25 provides that, with effect from the transfer date, the provisions of Schedules 3 and 4 apply and the energy company becomes responsible for the assets, contracts, rights and liabilities transferred to it. Section 26 provides that BGE may, up to the date of disposal, enter into further agreements with the energy company for the transfer of additional assets, licences, rights and liabilities and staff to the energy company. This section is intended to provide for flexibility in the event that, following the transfer date, it is found that additional assets and so forth need to be transferred. Such an agreement is subject to ministerial approval.
Section 27 provides legal certainty to BGE and the energy company that title to an asset can be proved by the issuing of a jointly issued certificate. Section 28 relates to the production of documents of title following the provisions of section 84 of the Land and Conveyancing Reform Act 2009 but tailored to the specific circumstances of the transfer plan between BGE and the energy company. Section 29 provides that BGE may dispose of an energy company, subject to the approval of the Minister given with the consent of the Minister for Public Expenditure and Reform.
The amendments in Part 4, sections 30 to 38 inclusive, provide for a range of amendments to the Gas Act 1976. As I have already stated, this Bill underpins the State's continued ownership of BGE's strategic gas transmission, distribution and interconnector assets by implementing certain EU requirements for a State-owned gas networks company. The majority of the amendments in this Part arise as a consequence of the requirement to provide for the designation of a majority-shareholding Minister to whom will be transferred the majority of capital stock in BGE. It is proposed in section 30 that the Government may, by order, designate such a Minister. A minority stockholding will be retained by the Minister for Communications, Energy and Natural Resources and by the Minister for Public Expenditure and Reform.
It may be useful to provide some background as to the rationale for this new shareholding structure and the powers that may be exercised by the majority-shareholding Minister. The designation of a new Minister as majority shareholder is proposed because the current shareholding arrangements are not compliant with EU Directive 2009/73/EC on the gas market, which requires significant restructuring of gas transmission operators throughout Europe in line with one of three unbundling options. Unbundling is intended to create a level playing field for gas suppliers and to enhance competition and transparency in the gas market by removing the ability or incentive for monopoly gas transmission companies to discriminate in favour of related gas suppliers. Under the directive, the unbundling option which allows for the sale by BGE of its energy business and for the retention of the network business in State ownership is the full ownership unbundling option, which Ireland is accordingly obliged to transpose and implement. Essentially, the full ownership unbundling rules require a separation of ownership and control as between energy producers on the one hand and network transmission businesses on the other. I, as Minister for Communications, Energy and Natural Resources, and my colleague the Minister for Public Expenditure and Reform are shareholders in State companies which are active in power generation and electricity and gas supply, such as the ESB and Bord na Móna. Under the directive, therefore, neither of us may retain a decisive or controlling role in Bord Gáis Éireann's network business, which, as I have stressed, will remain in State ownership.
The amendments to the Gas Act 1976 that are proposed in sections 30 to 38, inclusive, relate to the powers of Ministers in regard to the activities of BGE. They provide for capital stock in BGE held by Ministers, the revised functions of BGE taking account of the fact that BGE will no longer be engaged in electricity or gas supply, and the ministerial powers for conferring additional functions on BGE. The amendments also relate to the procedures for BGE to enter into capital commitments relating to networks, ministerial powers in regard to directions as regards financial objectives of BGE, and provision in regard to annual accounts, staff and superannuation and appointments to the board of BGE.
The consenting provisions in sections 30 to 38, inclusive, and throughout the Bill ensure that the current role of each Minister on the corporate governance and policy framework will be fully taken into account while also ensuring that legal obligations under the directive are met.
Sections 39 and 40 relate to the transfer to the majority-shareholding Minister of certain capital stock issued to BGE and to the functions of the majority-shareholding Minister regarding the network company. Sections 41 and 42 provide for technical amendments to relevant Acts to ensure that BGE may not engage in any business activity relating to energy supply or generation which would contravene the full ownership unbundling requirements.
Section 43 is a technical amendment. Section 44 amends section 16 of the Water Services Act 2013 to disapply to Irish Water, a BGE subsidiary, the obligations of this Bill which require the board to obtain the approval of the majority-shareholding Minister in regard to all capital commitments. The Minister for the Environment, Community and Local Government will remain the key consenting Minister in respect of Irish Water matters.
The Schedules provide for the detailed operation of the two transfer plans under this Bill. I intend to introduce a number of amendments on Committee Stage, primarily to clarify certain matters, to facilitate the sale of the BGE assets and business and to ensure maximum returns to the Exchequer from this sale.
I set out earlier the Government's overriding objectives as regards Irish energy policy, which are security of supply, competitiveness and sustainability. These objectives align well with the proposals in the Bill to create a strong State-owned network company within the BGE group. I look forward to early consideration of the Bill on Committee Stage. I ask members of the select committee to table their proposed amendments as quickly as possible to allow full and fair consideration to be given to them. I will of course carefully consider all amendments tabled by Deputies. I look forward to working constructively with Deputies and to an informed and meaningful debate. The input from Deputies from all sides of the House will help in advancing the measures proposed in the Bill.
It is also an important measure in delivering on the commitment in the programme for Government to fund investment for jobs and growth. I commend the Gas Regulation Bill 2013 to the House.
During the Minister's speech he mentioned he would be delighted to share time with anybody from this side of the House. There appears to be nobody, but I will take the opportunity to mention a note on the speaking time clock. I remind Deputies that the new speaking time clocks are being used today and can be seen on the railings above. They are intended to assist Deputies in keeping to the designated time limits. The time indicated on the screens during the debate will be the slot time, as provided in Standing Orders or the order of the day. If sharing time, the Deputies sharing must all conclude in the time indicated, so Deputies should be aware of what time is left on the clock. I ask Deputies to comply with the time limits for debate, as running over time is unfair to other Deputies waiting to speak. I commend the Minister, who has left lots of time to spare.
I wish to share my time, but I will conclude after 15 minutes on the Second Stage of the Gas Regulation Bill 2013. I thank the Ceann Comhairle for the opportunity to speak on the Bill. Fianna Fáil will be opposing this Bill which will result in the passing of one of Ireland's most profitable companies, Bord Gáis Éireann, BGE, from State ownership to the private sector. There are four elements to our opposition to this piece of legislation including the current expected sale price which it appears will be an undervaluation of the company; the lack of clarity over where BGE's current net debt will be placed and the future employment of those contracted to BGE after it is split in two; the uncertainty over the future of Irish Water as a public utility company which is part of BGE; and the lack of a clear plan of investment for the proposed revenue to be generated by the sale of BGE.
The EU-IMF memorandum of understanding agreed in December 2010 does not require the privatisation of BGE in whole or in part. Those who claim otherwise may not have read the memorandum and are just repeating what they have heard, but I believe they are simply misleading people. Importantly, the discussion of the sale of assets in the original memorandum does not take place in the fiscal section but rather in the section regarding obstacles to competitiveness. In other words, if there is to be a sale of a State asset, the objective is not to write down debt but to improve competitiveness. The sale of Bord Gáis is a competitive measure. We do not sign up to the privatisation of the company, for the following reasons.
BGE is one of Ireland's largest energy suppliers which supplies gas and electricity to businesses and homes throughout Ireland, North and South. Since its establishment in 1976 Bord Gáis has been one of the most successful public enterprises in the State. The Labour colleague of the Minister sitting opposite me, the Minister for Public Expenditure and Reform, Deputy Brendan Howlin stated on 24 April 2012 that "Bord Gáis Éireann is an excellent example of a strong, vibrant and dynamic State company, which has demonstrated its capacity to invest and develop new, efficient and competitive business for the benefit of Irish consumers." Bord Gáis is a model which should be followed by other public enterprises. Now, this Government has decided to sell the company despite its significant value to the State.
BGE has been a deeply valuable asset to the State and would continue to be as a public enterprise. In 2012 BGE paid €23.8 million to the Exchequer, bringing the total dividends paid to the Exchequer since the inception of Bord Gáis in 1976 to €854 million. Bord Gáis is a profitable and expanding State company. Last year, total revenue grew by 1% to €1,625 million. Profit before income tax increased 29% to €121 million. This is an impressive result given the current economic circumstances. The company itself runs an expansive energy supply business in Ireland servicing over 700,000 customers in the gas and electricity markets, a 445 MW combined cycle gas turbine plant at Whitegate in County Cork, a large-scale portfolio of onshore wind assets and a growing energy supply and distribution network business in Northern Ireland.
Bord Gáis has also helped in ensuring Ireland reaches its renewable energy targets. The company is a key player in improving Ireland's renewable energy capacity having invested heavily in the Irish wind market. Where private enterprise, individuals or small companies have come together to develop small-scale wind farms around the country, BGE has been there to assist and has invested strongly. The mechanism BGE has used to bring energy generated by wind turbines to the substations and the exemplary way it carries out the work on the road network and through the countryside are a joy to behold. There is a major issue developing regarding wind energy and connection to the grid and the fears of many local communities regarding wind energy can be seen as an example. I have seen it at first hand when a small-scale wind farm developed close to me was brought to the grid. There are many concerns in communities about shoddy workmanship but the way that work was done was second to none and should be seen as an example of how that work should be done in further wind energy developments across the country. BGE has played a key role in helping small developers, individuals and co-operatives, in the wind energy market.
BGE operates 15% of the installed wind capacity in Ireland. At the end of December 2012, the company had 174 MW of wind projects in construction, 100 MW to be brought to financial close within 24 months and a further 350 MW of medium to long-term wind development. These are impressive results and reflect the ability of this company as a public enterprise to deliver projects which are not only commercially viable but also hugely beneficial to the State. One would image that the Government would have a number of exceptionally convincing reasons for selling this State company. Unfortunately, this is not the case.
First, it is obvious that the sale price of BGE would reflect current market sentiment and international activity in the energy sector. The price at which BGE is to be sold is uncertain. Originally, the Government had an expectation that the sale of BGE would fetch an estimated price of between €1 billion and €1.5 billion. Recently, however, Davy has estimated that the sale is likely to be on the lower end of that scale. Some sources familiar with the sector believe the price could be as low as €800 million. This is a very worrying development. It does not inspire confidence on this side of the House in the Government's ability to get the best deal possible for the current owner of this company, the Irish taxpayer. The lower price estimate may reflect an expectation of increasing competition in Ireland's energy market or concern relating to other international energy matters. Nonetheless, the current uncertainty leads us to believe that now is not the time to sell one of the most profitable State assets. Given the fact that BGE is a very profitable company, with profit before income tax of €121 million last year, and the fact the company has assets of approximately €4.6 billion, Fianna Fáil believes any sale reaping less that €1.5 billion would represent a fire sale of the company by the Government. We need to ensure the taxpayer is not short changed and private investors rewarded in an unduly generous fashion.
There is also a lack of information as to how the current company debt is going to be divided and whether employees will be guaranteed jobs in the newly privatised energy company.
With the sale of Bord Gáis Energy, the State will no longer receive a significant dividend from the Bord Gáis group. It will instead receive a once off dividend payment to the Exchequer from the sale. It is still unclear how the company's current net debt of €1.9 billion will be divided between the newly privatised energy company and the State-owned transmission and distributions company. Any ongoing liabilities remaining with the State company must be outlined well in advance of the sale. Fianna Fáil is greatly concerned by this given the new State distribution and transmission company's decreased ability to service the debt if its most profitable aspects are privatised. We want clarification on the division of its debt liabilities and demand a Government-backed plan to be prepared on how any ongoing liabilities held by the State-owned company will be serviced.
Similarly, there is a need for clarification on whether those currently employed in Bord Gáis Energy will remain employees of the company in the long term. The employees will be transferred when the immediate privatisation of the company occurs but there is no guarantee that the newly privatised company will not seek redundancies. Some reports have suggested that if the company is purchased by another European energy consortium certain customer service jobs will be lost or moved outside the country. Clarification as to pension liabilities and their distribution between the two companies must also be sought. The privatisation of Irish Sugar, which was one of Ireland's most successful companies, resulted in people being unable to access the pension funds to which they had contributed over many years. The evidence suggests that commitments on pensions have not been honoured subsequent to the privatisation of companies.
The Government has recently passed legislation to create Irish Water as an independent, State-owned subsidiary of Bord Gáis. This company will be one of the most important utility companies in Ireland and will bill all households for their use of public water supplies. Fianna Fáil is seeking a guarantee from the Government that Irish Water will not be privatised in a similar manner to Bord Gáis Energy given the national strategic importance of its infrastructure. The move to transfer ownership of all water assets to Irish Water from local authorities has caused concern that it could in the future raise commercial capital using these assets as collateral, thereby allowing them to enter private hands by default.
The Government has stated that half of the proceeds from the sale of Bord Gáis will be available to fund employment enhancing projects of a commercial nature. A clear plan of investment is desperately needed to encourage increased employment in our capital starved economy. The Government must outline the exact projects it intends to fund from these proceeds. The infrastructure and capital investment framework for 2012 to 2016 envisages a 60% reduction in Exchequer capital investment in 2014 from its peak in 2008, with the allocation in 2014 of €3.25 billion representing less than 2% of GDP. This cut in capital expenditure is too deep. The Government needs to confirm where the revenue raised will go and how it will increase employment.
Given the fact that Bord Gáis is a very profitable company, with profit before income tax at €121 million last year, and the fact the company currently has assets of approximately €4.6 billion, Fianna Fáil believes any sale reaping less than €1.5 billion would represent a fire sale of the company by the Government. We need to ensure that the sell-off does not become a fire sale of an impressive state asset resulting in the taxpayer being short changed and private investors being rewarded in an unduly generous fashion.
The sale of Bord Gáis Energy was part of Fine Gael's five point plan to revitalise the Irish economy and increase employment levels. The justification for privatisation of State assets was the potential for massive investment in national infrastructure projects and the creation of 100,000 jobs. Fine Gael has so far raised none of the promised €7 billion for job creation through the sale of State assets. In fact, according to CSO's labour force survey, 1,841,800 people were employed in the first quarter of 2011 compared to 1,845,600 in first quarter of 2013. This shows a dismal net increase of 3,800 new jobs since the Government took office. This number is approximately 160 new jobs a month against a background of some 445,000 unemployed people. This is a long way short of the promised 100,000 over five years.
The Government must not only weigh up the long-term cost to the Exchequer of the sale of the company but also ensure that the current employees are protected in terms of their jobs and pensions. It has often been the case that the mistakes are only recognised 15 or 20 years after the privatisation of State companies, when vulnerable people are exploited. This Bill should be withdrawn because it is the wrong step at this juncture and we oppose it.
I apologise for arriving late to the debate. I missed the first five minutes of the Minister's speech because I was attending another meeting and did not realise the debate had been brought forward.
I thank the Deputy for his gracious apology.
That is where my agreement with the Minister will probably end. This Bill is bad policy and bad legislation. Sinn Féin will oppose it at every Stage. There is a dark irony in that an economic crisis which many people believed would mean the death of neoliberalism has instead been used to entrench neoliberalism. Deregulation caused the euro crisis and one would logically expect that State intervention and regulation would be the means used to solve it. However, despite the crushing cost of bailouts no major reforms through intervention or regulation have been implemented at either national or European level. We have instead witnessed the promotion of a neoliberal agenda for the privatisation of State assets and public services. This Bill forms part of that agenda. It is part of a wider effort to get rid of public assets in a fire sale and to deregulate many sectors. Bord Gáis is just one of the many organisations threatened by this Government. It is our role as Opposition Members to oppose these moves and point out where the policy is misdirected.
It is ironic that the Bill is being introduced by a Labour Party Minister. Just over one year ago, members attending a Labour Party conference gave a resounding message to the party leadership that they would not accept the sale of State assets. It is now 2013 and a Labour Party Minister is introducing a Bill to sell Bord Gáis Energy.
If I were a card-holding member of the Labour Party I would feel disheartened and disillusioned, not only with the Labour Party but with the political process and party leaders who do not listen to the policies put forward at their own party conferences.
Paul Krugman, a well known and respected economist, stated: "The drive for austerity was about using the crisis, not solving it. And it still is." Clearly the sale of Bord Gáis Energy forms part of a wider neoliberal agenda which uses the current economic climate to further a certain political ideology. Over the past two decades close to $1 trillion US dollars' worth of state-owned enterprises have been privatised in more than 100 countries. Restructuring, privatisation and deregulation of electricity started as a political ideology in Chile, New Zealand and the UK, but has spread to the EU, the US, and the rest of the world. The troika's promotion of privatisation is clearly an ideological approach in support of an ever more discredited neoliberal economy and benefits only a small group of transnational corporations. Their insistence on entrenching neoliberalism is also profoundly anti-democratic.
When given the chance, European citizens have voted against privatisation. This was demonstrated in the resounding rejection of water privatisation in the 2011 referendum in Italy, where they were fortunate enough to have a referendum on the matter. Other citizens across Europe are building powerful anti-privatisation campaigns to stop public services bring sold off. However, there are clear winners from these policies. Private companies have been able to scoop up public assets in a crisis of low prices, and banks involved in reckless lending have been paid back at the expense of citizens. The corporate elite is using the pretext of the crisis to hammer away at hard-earned rights and benefits of workers and citizens gained over the past number of decades. The sale of Bord Gáis Energy forms just another part of this long list of attacks on public goods.
Ireland has been described by the European Commission as the poster child of austerity, and it uses us as an example to other countries across Europe, yet the reality is we remain crippled by high levels of unemployment and our young people are emigrating in tens of thousands. If we are the poster child for the rest of Europe then it clearly shows Europe is not in a healthy state.
Let us look at the company the Government is about to privatise. Bord Gáis is a duel-fuel all-island business which serves more than 825,000 customers with gas and electricity North and South. It also operates a 445 MV combined cycle gas turbine plan at Whitesgate in Co. Cork, a large-scale portfolio of onshore wind assets and Firmus Energy, an energy company operating in the Six Counties. In 2001 Bord Gáis Energy entered the electricity supply market and in 2009 it entered the residential electricity supply market. It has been a very successful company. In 2012 Bord Gáis Energy had a gross operating profit of €79.4 million compared to €44.3 million in 2011. Bord Gáis Energy is by far the biggest player in the domestic gas market at present, with a 60.97% market share in June 2013. The question must be asked as to why the Government is selling off such a successful company. Bord Gáis Energy is hardly a millstone around the necks of taxpayers as it returns a profit to the State. Therefore the sale of Bord Gáis Energy can only be described as an ideological move, one which is fuelled by the austerity agenda of the troika.
Reports anticipate the sale of Bord Gáis could raise between €1 billion and €1.5 billion. However recent estimates have predicted the figure to be at the lower end of this scale, and it may be even lower. Half of the sale proceeds will be available to fund employment-enhancing projects of a commercial nature, with the other half destined to pay down debt. The fire sale of State assets has been shown to be risky, particularly during economic recessions. We only have to look to Greece to learn projections as to what the sale of state assets would generate had to be significantly downgraded, as severe austerity wards off investment.
The Minister has given assurances jobs at Bord Gáis Energy will be protected. How can this commitment be delivered upon? Under a policy of deregulation and privatisation jobs are never as secure as they are under state control. An OECD report on privatising state-owned enterprises found, in the short term at least, restructuring and privatisation result in job losses, even in cases where the sector is growing and the economy is creating new employment opportunities. Is the Minister able to guarantee the current employees of Bord Gáis Energy will keep their jobs and that their livelihoods will be protected? How will such a guarantee be delivered?
Ireland, in the greater scheme of things, is a small country. Bord Gáis Energy controls 60.97% of the domestic gas market and a significant portion of the electricity market. The sale of Bord Gáis Energy to a private operator will likely be handing a monopoly into private hands, especially with regard to the gas market. Ireland does not have the infrastructure enjoyed by many other European countries. Developing and expanding infrastructure is part of the wider debate in which the Minister and several of his colleagues engage. However, when a State asset such as an energy supply company passes into private hands the information to inform debate becomes less and less available. In a privately run industry, information is valuable and confers commercial advantage. No company will disclose investment plans, maintenance schedules, upgrading or capacity requirements unless mandated by a regulatory authority or government inquiries. Where is the requirement in this legislation to provide such information?
The sale of Bord Gáis Energy also has a direct impact on an important debate taking place in Ireland at present. Bord Gáis Energy is involved in the development of wind energy projects. We, as a party, fully support wind energy development. Ireland has a target of 20% renewable energy by the year 2020 and we have consistently called for a national strategy to be laid out for this target to be reached. As part of this, we believe it is imperative the State and semi-State companies play a major role in the development of wind energy projects. This, we believe, is the only proper and sustainable measure for the proper development of wind as a renewable source. What we have seen far too much of in Ireland is private companies taking the lead on the development of wind energy projects without proper planning or consultation with local communities. Semi-State companies need to take the lead in developing wind energy projects.
If Bord Gáis Energy is to be sold, this removes the option of such initiatives being taken. Those who will buy Bord Gáis Energy will also take with them the wind farm projects that are currently in place. If Ireland is to reach its target of 20% renewable energy by 2020, it needs to have semi-State bodies at its disposal to make it happen. The Minister and the people of this country cannot be left waiting for manna from the table of private companies.
Fuel poverty is a serious issue which affects many people in Ireland each and every year. Those who are worst affected are those on the margins of society such as the elderly, the infirm, the disabled, the ill, single-parent families and the unemployed. The sale of Bord Gáis Energy out of State control and into the hands of private corporations will surely have a negative impact on the fight against fuel poverty. As I have already stated, Bord Gáis Energy has over 60% control of the domestic gas market, meaning that the company which would take over the ownership of Bord Gáis Energy would be free to raise its prices as it sees fit. This news will not be of comfort to many of those who are already fearing the winter months ahead. Privatisation is bad for the weakest in our society and should not be forced upon them.
If revenue generation is the main goal, there are other alternatives. Commercial semi-State companies can play a vital role in delivering employment activation measures and training. Following the collapse of the housing market, ESB Networks agreed a programme of on-the-job training with FÁS to take on 400 redundant electrical apprentices who were left unable to complete their craft qualifications. It is exactly this kind of intervention that can assist the State in rebuilding the economy, creating employment and creating a skills base fit for the 21st century.
The energy sector also has the potential and capacity to use its expertise and reputation to fund smart metering technology, resulting in more jobs, reduced emissions and lower utility bills. Sinn Féin in its prebudget submission outlined a number of proposals on how to adequately deal with semi-State companies. We want to see NewERA replaced with a semi-State strategy group which would include CEOs from the semi-States working directly with the Ministers for Jobs, Enterprise and Innovation, Social Protection and Education and Skills. The group would report directly to the Taoiseach and would be responsible for delivering a strategic job creation and training project. We believe all annual dividends paid to the State by commercial semi-State companies must be reinvested in employment activation and training measures as identified by the semi-State strategy group and signed off on by the Taoiseach. In case anybody might think we are looking for more money for the CEOs of semi-State companies, I repeat our request that all CEOs of semi-State companies should be capped at €100,000 per annum, which would save this State €3 million per annum.
We have very short memories, and the Government has a very short memory. If evidence were needed of how privatisation of semi-State companies does not work in Ireland, we need look no further than the sell-off of Telecom Éireann. The privatisation of this company has meant we have lowest level of high-speed broadband in the European Union. While I accept this is now being worked on, privatisation was an abject failure which has severely inhibited our chance of developing industry, especially along the western seaboard. The sale of Telecom Éireann was part of the same neoliberal agenda that is today pushing the sale of Bord Gáis Energy. The selling off of Telecom Éireann was a mistake and the sale of Bord Gáis Energy is a mistake.
The Fine Gael and Labour Government must take full responsibility for the sale of Bord Gáis Energy. While the troika has indicated it wants the deficit reduced in a certain timeframe, it has not indicated that we must sell off our energy company. This decision rests on the head of the Government. Future generations will remember this move as the Government falling upon the sword of the neoliberal agenda. We will oppose it at every stage.
It is clear this is a right-wing Government, entrenched in the ideological obsessions of the right. The dismantling of social services, the vilification of the working class and the asset stripping of State services for private profit are examples of this ideology. Fine Gael stands clearly as the driver of this agenda, with Labour naively or cynically along for the ride. However, it is the people who are being taken for the ride. These policies do not just hurt this generation but future generations. The current incarnation of this agenda is the Gas Regulation Bill, which will allow the sale of Bord Gáis Energy, a division of Bord Gáis Éireann.
The Bill splits Bord Gáis into two companies. One is the network company, in control of pipes, maintenance and so on, which will be retained in State ownership. The second is the energy company, which is to be sold. Bord Gáis Energy is comprised of the following businesses - an energy supply business in Ireland, servicing over 825,000 customers in the gas and electricity markets, North and South; a 445 MW combined cycle gas turbine plant at Whitegate in County Cork; a large-scale portfolio of onshore wind assets; and Firmus Energy, an energy company operating in the Six Counties.
The sale of Bord Gáis Energy is part of the troika programme of sale of State assets. This is certainly what Labour Deputies will stress but, in reality, it is part and parcel of this Government's approach to public services and semi-State companies. Fine Gael has long believed in carving them up and passing the profit along to private hands, not that Fianna Fáil did not engage in this practice when it felt it would be accepted by the public. The debacle that was the sell-off of Telecom Éireann is evidence of that fact.
Bord Gáis Energy is a profitable company. In 2012 Bord Gáis Energy reported an EBITDA gross operating profit of €79.4 million, compared to €44.3 million in 2011, so we are actually talking about disposing of a profitable company but also a company which is increasingly profitable. Bord Gáis is by far the biggest player in the domestic gas market at present, with a 60.97% market share in June 2013.
Wholesale privatisation has been the agenda of many governments over the last 20 years, with countries such as Chile, New Zealand and Britain leading the charge, followed by the US and much of the EU. Some did so at the behest of the IMF and other lenders but many were driven by Reaganomics and Thatcherism. This malignant ideology denied the existence of society and yet set its shoulder to the wheel in aggressively dismantling that supposedly imaginary society in the name of profit. Over the past two decades, close to $1 trillion worth of state-owned enterprises have been privatised in more than 100 countries.
The troika and Fine Gael's promotion of privatisation is a clearly ideological approach in support of an ever-more discredited neoliberal economy and benefiting only a small group of transnational corporations. Their insistence on entrenching neoliberalism is also profoundly anti-democratic. When given the chance, European citizens have voted against privatisation, as was demonstrated in their resounding rejection of water privatisation in the 2011 referendum in Italy. Other citizens across Europe are building powerful anti-privatisation campaigns to stop public services being sold off. In the short term at least, restructuring and privatisation result in job losses, even in cases where the sector is growing and the economy is creating new employment opportunities, according to the OECD report on privatising state-owned enterprises.
Reports indicate that the sale of Bord Gáis Energy could generate proceeds in the region of between €1 billion and €1.5 billion, although some more recent estimates have been towards the lower end of that scale.
Half of the proceeds will be available to fund employment-enhancing projects of a commercial nature, with the other half destined to pay down debt. Experience from Greece has shown that the sale of State assets has not returned the expected profits, and projections have been revised down considerably. At the Labour Party conference in 2012, members voted to reject the sale of State assets. The people did not vote for the sell-off of Ireland but rather for its renewal.
This Bill is simply a continuation of the agenda we have had for 20 years in this country, an agenda which failed us so badly in telecommunications that widespread broadband access is still an issue in 2013, as is mobile telephone reception. Let us learn the lessons of other states and their privatised industries. Let us learn the lessons of our own mistakes. It was semi-State companies which brought this State into the 20th century, as in the case of Ardnacrusha and other impressive initiatives. The State did the job when private profiteers were too disorganised, petty or unambitious to fill the gap. We must ensure that Irish people and not multinational shareholders benefit from Bord Gáis Energy, and it is for this reason that we oppose the Bill. An innovative approach which brings Ireland forward must be at the core of what Bord Gáis Energy does. That obliges us to oppose this Bill and we urge colleagues to do likewise.
I propose to share time with Deputies Clare Daly and Finian McGrath.
That is agreed.
Like the previous speakers, I am very dubious about the prospect of selling off any of our energy facilities. It is notable that the Government is intent on offloading only those entities that are successful. Of course certain facilities are more attractive than others, but there must be a major concern that it is our most valuable assets that are being put up for sale. There will not be a shortage of interest in Bord Gáis because it is a very attractive prospect, but the Government will not realise its true value. It is very difficult to obtain full value for anything in the current market.
It is ironic to consider these proposals in the context of the crazy sums of money we borrowed from the markets and from the European Central Bank and IMF in order to rescue our failed banks. The people of this country will be paying for that rescue for many years. Now, however, they are effectively being asked to pay twice as the Government prepares to sell profitable State facilities like Bord Gáis in order to deal with the bank debt. People were sold a pig in a poke in being obliged to rescue failed banks; now they are being told that in order to meet the agreement with the troika we must sell off the best of our State assets because they are the easiest to sell. It is a disappointing strategy and leaves much to be desired.
People of a certain ideology are of the view that privatisation is good and that State management of services leads to inefficiencies and often a lack of profitability. This argument ignores the fact that State services are generally designed to serve the people. Where they are privatised, however, the priority is making money, which is as one would expect. Companies with shareholders have a legal obligation to those shareholders to maximise profits on an annual basis. This leaves little room, however, for the notion of the provision of essential services for the good of the citizenry.
A problem that has emerged in the business world in recent years is an excessive focus on short-term considerations. Next year does not matter so much; it is all about the next six months or three months. The pressure is on to turn over a profit in the short term or sell shares or dividends. That is a poor way to organise things and is one of the reasons we are facing so many problems at this time. There is an insufficient focus on the interests of the long term, as we have seen not just in Ireland but across the developed world in recent years. This lack of long-term vision and planning is part of the reason that the employment situation has deteriorated. It is also a factor in the collective failure to embrace a commitment to sustainable living. Environmental issues are put on the long finger because there is no short-term gain to be had in implementing them. There is insufficient concern about the serious damage we are doing to the planet as a consequence of the decisions we make today, because those consequences will not immediately be felt. It was bad enough when we had governments which could not see past the next election, which was a maximum of five years. The consequences of that in the area of planning and otherwise are clear to all of us. Now, however, we have businesses, and large corporations in particular, working to even shorter timescales. That is becoming a serious problem.
It is useful to consider how privatisation worked in Britain over the past 30 years. It is true that the manner in which some companies in that country were run in the 1980s, for example, was very poor and that productivity was very low. The reality, however, is that improvements in efficiency are associated with the arrival of competition, good management and better regulation, all of which are issues on which governments can take action. We do not have to give that authority to the private sector. For a private company to break even is not good enough. Its entire purpose is to turn a profit for its shareholders. By that philosophy, it is a bad idea for a State to allow its services to move into private hands because the primary concern thereafter will not be serving the people but almost exclusively making a profit.
Having said that, I absolutely agree that State companies should be run in a competitive fashion. Competition is healthy in any sector. If there is only one restaurant within two miles in any part of a town or city, there will be no pressure on it to improve its offering. If there are four or five within walking distance, on the other hand, each is under pressure to provide good food and good service. Competition is always good because it obliges service providers to operate more effectively if they are to survive. We need good management and regulation at State level in this country, and that can be achieved by the State itself. Bord Gáis is a positive asset of this country and we should retain it. It is something worth having because it is valuable to the people.
Another issue to consider is that it is very often the poorest people who are the most expensive to serve. How does one persuade a private company to take that on board? Although An Post is still in State hands, it is being run in a commercial fashion. I do not have a problem with that or with the company making money, but I would prefer to see a greater commitment to the needs of the people it is supposed to serve. In my local area the village of Duncormick is home to the last remaining post office in the parish, but not for long. It is due to close because it is not sufficiently profitable and An Post is of the view that it can do without it. The problem is that there are many people in the community who cannot do without it. In fact, its closure is hugely problematic for many of them, particularly older people who are not Internet savvy.
They really miss their post office. Despite being one of the smallest parishes in Wexford, 1,200 people wrote to An Post pleading with it to keep the post office. However, it does not matter as their concerns are irrelevant. An Post ploughs on and its only ambition is to make sure it turns a profit.
I am sorry the Minister is not present in the Chamber. The State will continue to own the gas network. In January and in June I raised the issue of a high-pressure gas mains being installed between Santry and East Wall. It will be placed at a depth of 1 m. From experience, best industrial practice puts it at 2 m in residential areas where there are already many services. It should go in underneath rather than over existing services. The Minister, in his reply, told me that the Safety, Health and Welfare at Work (Construction) Regulations 2006 place the responsibility for identification and avoidance of existing infrastructure on the party carrying out the works. That is grand but it will not bring any joy when a new contractor is looking to put in some cables for communications or water next year and breaks the gas pipe because it is sitting over the services he wants to access. It is a bad idea to put it at that level. I asked the Minister for confirmation from Dublin City Council that it is happy with a high pressure gas mains going in at 1 m in a residential area of Dublin city when best practice says it should be going in at 2 m. I asked in January and in June but I have not yet heard. I would like to see a letter from Dublin City Council confirming that it is happy with the depth of the pipe at 1 m.
It is incredibly ironic that we are discussing this topic under the jurisdiction of a Labour Party Minister, mind you, one who could not be bothered to remain in the Chamber for the opening slots in the debate, not to mind the debate in its entirety. The reason the proposal is on the table is not that it makes sound economic sense or is ideologically viable but precisely for the reasons outlined by Deputy Wallace. Bad decisions were taken in the State and our people were shackled to bad debts, bailed-out banks and bondholders. In order to pay for the disaster, the State jewels and State assets are being sold off. We are losing on the double and the idea of the Labour Party Minister betraying the ideology of the Labour Party and standing over that on the 100th anniversary of 1913 is incredible. I have a document from the Irish Congress of Trade Unions, the organisation that gave the Minister his livelihood in his working days when he was a union official. It is an organisation whose members pay his election campaign to get in here. The trade union movement has been built on opposition to privatisation for a number of reasons. It is a betrayal of workers and citizens in the State that the Labour Party is standing over it. We expect nothing less from Fine Gael, which has always been ideologically driven in that regard.
We must look back at the role of State companies. I come from the semi-State sector, having worked at Aer Lingus. We must examine, in this era of neoliberalism and record unemployment of almost 500,000 people on the dole, the role that State companies played in our economic development. Is it a way forward or is the idea of hiving off these companies the way forward? Every example of privatisation, in Ireland and internationally, tells us that the path the Government is embarking upon is economic lunacy. Throughout its history, the semi-State sector has provided relatively decent, secure, pensionable and permanent employment, good services and good dividends to the taxpayer. It was a contributor all the way around. In the early years of the State, the visionaries who developed the likes of Aer Lingus and the ESB put this country on the map and gave employment and development that would not have taken place if it was left in the hands of the private sector. We now have a crisis of employment, with very little economic development and employment opportunities in the private sector. The Government solution is to sell off some of these semi-State companies, which is an absolute disaster. Other Deputies have referred to a number of the reasons for this and I will touch on some of them.
These include the inevitable loss of services that comes with privatisation. Clearly, the somewhat unprofitable but socially desirable aspects go by the wayside even though they are providing a necessary service. We will see a substantial potential loss of revenue to the Government. We may get a quick buck in the initial period and the coffers will get a short injection but it is at the loss of dividends and revenue for generations to come. An example of that is the selling of Irish Life, Eircom and other facilities in that direction. Unemployment is a critical issue but there has not been a privatisation that resulted in job creation. In fact, the evidence points in the opposite direction. In the case of Eircom, the workforce once stood at over 15,000 and it is now less than 7,000. Aer Lingus had a massive employment record but now has a fraction of the number it once employed. Going down this path is ridiculous.
The other Deputies pinpointed the critical point of the loss of Government control. When a company is sold, it moves out of Government control and into the hands of investors whose only concern is profit. They do not have the strategic interests of the country at stake. A speedy buck is all that is sought. There are many examples, such as ICC Bank being sold and the Royal Bank Of Scotland, which went out of Irish control and is now exiting Ireland. Is this the direction in which we want to go with Bord Gáis? Clearly, for this Government it is.
I will not go into the problems with Eircom. It is imbued in the public psyche in terms of the disaster of super profiteering, by those who got their paws on it, the asset stripping of a vital service and how this country is on its knees since in trying to rebuild the infrastructure at enormous cost due to the loss of that key utility. Now, this Government will do the same.
We cannot consider the discussion in isolation from what is going on with energy costs. It is a scary situation for many Irish people, particularly as the winter months approach. We see what has gone on in terms of fuel poverty. There is a huge increase in price and Bord Gáis, even as a semi-State company, has stood over it. Many people's lives are in danger because of fuel poverty and standard gas bills are costing people, on average, €500 more today than two years ago. We must ask whether this will improve or get worse if the company is sold off. Where profit is the goal, the situation will only get worse and will cause enormous hardship for citizens. We need only look at the companies lining up to get their paws on what is a very lucrative asset. They do not make a nice guidebook to who is who in the market. These companies include the company that owns British Gas, which is considering heading up a consortium, putting in a sole bid and stripping assets later. There will be major difficulties in terms of the wind turbine aspect of the service, in which it may not be interested.
This company is advised by Citigroup and by Goodbody Corporate Finance. Indeed, all of the purchasers lined up are being advised by some of the main banks, the very banks that caused much of the crisis internationally in the first place. There is another company that is owned by Bahrain's banking sector, and a group in Singapore also.
Once an asset goes out of State control, anything can happen in terms of how our energy is produced and sold. For example, the company that owns British Gas has proposals to introduce nuclear power stations in the United Kingdom. If we give it over, what is to stop the purchaser of Bord Gáis going down this road in the future? Once it is handed over, health and safety, the welfare of communities and all of these issues are secondary factors. The Minister of State, Deputy O'Dowd, living as near as one can to Sellafield, should know about the problems in that regard and the significant issues existing in Japan in this area of energy creation.
Bord Gáis is an important utility. It is an important service, it is an important employer and it is an important strategic business for the country. It is precisely the type of company that we should be developing and investing in, not hiving off to the highest bidder in order to pay debts that were never ours in the first place. It is the economics of the asylum, and Irish people will strenuously oppose the sale, as they should. The Minister should abandon it while he still has a chance.
I thank the Acting Chairman, Deputy Troy, for the opportunity of speaking on this new piece of legislation, the Gas Regulation Bill 2013.
This is an important debate, as we constantly must discuss, review and look at options in gas and the other national resources. This is a particularly difficult time in our economic history and there is an urgent need to create jobs and redistribute the national resources in a way that will benefit all of the people. We have a duty to look seriously at reform and change, as many of us promised at the last general election. Of course, restructuring is part of that agenda, but we also must not be blinded by the view that all types of privatisation are good for the economy and society. This view is blatantly untrue and we need to have an open mind on this Bill, particularly on gas regulation.
The main provisions of the Bill are: to provide for the restructuring of Bord Gáis Éireann, BGE, by the establishment of a gas networks subsidiary; to provide for the sale of Bord Gáis Energy by providing for the establishment of an energy subsidiary; to change the ministerial ownership and control provisions for BGE; and to provide for consequential amendments to existing gas legislation.
I urge the Minister to beware of fire sales of the natural assets. The only game in town, as the Minister of State knows well, may be summed up by three words: jobs, jobs and jobs.
That is what this debate should be about. If we do not create jobs, we cannot raise taxes, we cannot provide services for those with disabilities, we cannot provide educational services and we cannot provide decent hospital services. That is linked into this debate.
I do not know whether the Minister has been following the debate about Scottish independence in recent weeks, but the big issue on their agenda is the use and value of their natural resources. This is something that we should watch carefully in the debate in this country. I wish the Scottish people well and I hope they vote for independence.
We must look at the facts of what is going on in this country in relation to gas and our natural resources. Generations of Irish schoolchildren have learned that Ireland lacks valuable natural resources. However, Ireland's offshore territory of 652,000 sq k is nine times larger than Ireland itself. Recent Government and industry data as well as discoveries by oil companies indicate the potential for vast reserves of oil and gas under the seabed. That is the reality and anybody who says it is not true is playing games.
According to a 2006 study for the Government, the Atlantic Margin alone, off the west coast, contains potential reserves of the equivalent of 10 billion barrels of oil in the form of oil or gas. At June 2012 prices, this is worth €750 billion. This estimate does not include the areas off Ireland's south and east coasts, where several valuable discoveries have been made, nor does it include Ireland's onshore resources. The Minister should note that figure. It is accurate. There is €750 billion worth of oil and gas below the Irish seabed around the coast of this country. That could do a great deal for the future of this country. It could do a great deal for the economy and it could do a great deal to create jobs. It could do a great deal in providing services for persons with disabilities. In the past three years the Government has ripped €12 million out of St. Michael's House services, and we heard from parents over the summer whose services and transport, and also day-care services, were being reduced. I raise this in the debate tonight because it is important that we say it. We are always fighting over €2 million, €12 million or €3 million, when according to Government figures we are sitting on top of an asset worth €750 billion. That is the reality.
Unfortunately, the sad reality is that the terms under which companies are granted permission to explore for these hydrocarbons are so heavily weighted in favour of oil companies that the benefit to Ireland is almost non-existent. The terms were introduced 20 years ago following heavy lobbying of the Haughey Government by the oil industry. Under these terms, when a company finds oil or gas in Irish territory, ownership and control of that oil or gas is transferred in full to the company; no royalties are paid to the State; the company can choose to export the oil or gas; it does not have to land the resources in Ireland or use Irish services or personnel; even if the company decides to sell in Ireland, the full current international price will be recovered from the consumer; and Ireland has no ability to limit extraction in light of the link between fossil fuels and climate change. The only guaranteed benefit to Ireland from extraction of these resources is a 25% corporation tax on the profits declared from the sale of the oil or gas. Before declaring profits, the company can write off 100% of costs against this tax, including the cost of previous unsuccessful wells drilled anywhere in Irish waters. Following changes in 2007, in exceptional cases a very large field could incur an additional tax of between 5% and 15% on post-tax profits. However, this does not apply to the many licences granted before 2007. International studies show that State take in Ireland is among the lowest, roughly half the rate of countries with a similar economic approach. These are facts that are not being discussed today.
The Minister, Deputy Rabbitte, is now in this zone. He is a senior Minister in the Cabinet and a member of the Labour Party. Have we not learned from the sell-off of Telecom Éireann, which was a complete disaster? Have we not learned that neoliberalism did not work in this country? The Minister should ask the former Progressive Democrats Minister, Michael McDowell, whether it worked for the country.
People have major concerns about this legislation. They have major concerns about loss of services and loss of revenue. Above all, however, as I stated earlier, they have major concerns about the only game in town in this country today - that is, jobs, jobs and jobs - and that is what this debate is linked into. I mentioned the link between jobs and services, but I am also making the link between jobs and the gas issue and the broader debate.
Bord Gáis Éireann is a major energy provider, supplying gas and electricity to homes and businesses throughout the island of Ireland. Established in 1976, it is majority owned by the Government through the Minister for Finance and the Minister for Communications, Energy and Natural Resources. Bord Gáis Energy is a division of the Bord Gáis Group, operating in both the South of Ireland and the North. It is a dual-fuel, all-island business that services 825,000 gas and electricity customers. I am one of those customers and I am a regular supporter of the company. I like the idea that it is an all-island company providing services throughout the island because I believe strongly that we need to get rid of the partitionist mentality, which exists in this House as well.
Even if people do not agree with the beliefs of the 1916 leaders, there are strong economic reasons to end the division of the country.
The Bill addresses legislative amendments to allow for and facilitate the sale of Bord Gáis Energy, the retail arm of Bord Gáis which sells gas and electricity to all market segments and performs related activities. The Bill also provides for the restructuring of BGE in order to establish a gas networks subsidiary company which will remain in State ownership. This is to be welcomed. In addition, it changes the ministerial ownership and control provisions for Bord Gáis Energy.
The sale of Bord Gáis Energy is part of the Government's State assets disposal programme and being pursued as a commitment under the EU-IMF programme. The Government announced its intention to sell Bord Gáis Energy in February 2012 and the sale process was formally launched by BGE on 3 May 2013. It is expected that the sale will be concluded by the end of the year. This is the Government's policy.
I refer to the value of the sale. Reports anticipate that the sale could generate proceeds in the region of between €1 billion and €1.5 billion. I do not believe that figure is possible in the current economic climate. Some more recent estimates have been towards the lower end of that scale and I agree. We need to be careful when dealing with the sale of a very valuable asset. It has been stated half of the sale proceeds will be available to fund employment enhancing projects of a commercial nature, with the other half destined eventually to pay down the debt that is swallowing and ruining the country.
I welcome the debate. I urge the Minister to beware of fire sales of our national assets because it is a dangerous road to go down.
I wish to share time with Deputy Peter Fitzpatrick.
I welcome the Minister of State, Deputy Fergus O'Dowd, a Minister who adopts a hands-on approach to any portfolio he holds. He is very approachable for all colleagues in the House.
The Gas Regulation Bill 2013 is part of the process for the disposal of State assets and being pursued as a commitment under the EU-IMF programme which was agreed by the previous Government. The sale could generate proceeds of approximately €1.5 billion, although this has been disputed by some colleagues in the Technical Group. Deputy Clare Daly spoke about vultures hanging around to purchase, while Deputy Finian McGrath put a different valuation on the assets when he undervalued this very valuable asset.
I was good at maths in school.
Half of the proceeds of the sale will be available to fund commercial employment enhancing projects, with the other half going towards paying down our debt. When the Government took office two and a half years ago, most of the proceeds from the sale of State assets were to be used to pay off the debt, but the Government has negotiated that half of the proceeds would be used for job creation projects.
The Gas Regulation Bill will see Bord Gáis Energy split into two companies, with one company taking control of the physical gas network, while the other will take control of the energy business which could be sold by the end of 2013. I hope the economic climate will be conducive. The last thing anyone wants is a fire sale which would serve no purpose. We want to get all we can for our State assets in order to see consequent benefits for communities and job creation.
The Bill address legislative amendments to allow for and facilitate the sale of Bord Gáis Energy which is the retail arm of Bord Gáis. The Bill will impact on the group structure of Bord Gáis Energy, given that it provides for the restructuring of Bord Gáis by establishing a gas network subsidiary company. Bord Gáis Energy is a major energy provider, supplying gas and electricity to homes, industries and businesses throughout the island of Ireland. Its main stakeholder is the Government through the Minister for Finance and the Minister for Communications, Energy and Natural Resources. Bord Gáis Energy is a division of the Bord Gáis group, operating in both the Republic of Ireland under the Bord Gáis Energy brand and in Northern Ireland under the Firmus Energy brand. It is a dual-fuel, all-island business serving over 825,000 gas and electricity customers.
The Bill addresses the technicalities to assist in the sale of Bord Gáis Energy and does not deal with the wider policy issues such as consumer protection. There is no published regulatory impact analysis to accompany the Bill and no detailed analysis of the potential impact of the sale of Bord Gáis Energy. We need to be cautious with this sale and look closely at the possible implications for the customer. Lessons should be learned from the sale of Eircom, the privatisation of which ended in a very dismal fashion. It was bought by private business for short-term profit. Regulation was lacking and many Members still remember these events. Various owners were allowed to load Eircom with debt so long as the company met technical standards and the markets were happy to keep lending. A successful privatisation is not about looking at how much money a sale raises, rather it is a case of considering how good a service can be provided by the private sector and how to ensure it delivers.
We need to look after the public. The people of Longford-Westmeath are being bullied by the wind farm development process, of which the Acting Chairman, Deputy Robert Troy, will be aware. They are anxiously awaiting wind energy review guidelines which were to be published in the third quarter of this year, but they have not been released as yet. We need to ensure the process is fair for the men, women and families involved and it is my job to look out for them. From what I have seen thus far, many aspects of the process have not been fair. For example, I am not sure if the Minister, Deputy Pat Rabbitte, is aware of hidden clauses which have been found in contracts signed by farmers whose land is to be used for the construction of wind turbines. We need clarity on the issues involved. For example, people have mentioned to me that a clause in the contract states the farmer who has leased what he or she thought was a hectare of land for the construction of the turbine has, in fact, also relinquished his or her right to sell on his or her land to whomever he or she pleases or, in some cases, subsequently use it as farmland. If this is true, then we have a major problem on our hands. This is an example of an issue that needs clarification and there are many similar issues with regard to the wind turbine process. It would take an experienced solicitor to find these hidden clauses in the contracts. It is a disgrace that hard-working farmers who are the backbone of the economy are subjected to this trickery from big corporations which have been contracted to build the wind turbines. A public consultation process will begin in the next weeks and the big corporations will attempt to address people's concerns about the plans for their land.