Dáil Éireann Debate, Wednesday - 15 April 2015
195. Deputy Billy Timmins asked the Minister for Public Expenditure and Reform the policy he has with respect to dividend payments to the Exchequer from commercial semi-State bodies; and if he will make a statement on the matter. [14925/15]
Amharc ar fhreagraHistorically, there has not been comprehensive central guidelines for State companies regarding dividend policy although, over recent years, dividends of approximately 30% of profits after tax have been sought and expected from most commercial State companies and, in Budget 2013, an additional €100m was sought from the sector.
However, with the establishment of NewERA in 2011, this Government began the process of reforming how the Government's shareholder role in relation to the commercial State sector is managed. NewERA now provides financial and commercial advice to the relevant Ministers in relation to the six key commercial State companies in the NewERA sectors of energy, water, telecommunications and forestry. The companies in question are ESB, EirGrid, Ervia, Bord na Mona, Irish Water and Coillte.
As part of the reform, NewERA, in conjunction with the relevant Government Departments, has developed a Shareholder Expectations Framework which is intended to provide clarity and guidance for each of the companies in relation to the Government's strategic priorities, policy objectives, and financial performance and reporting requirements. One of the key areas addressed as part of this shareholder expectations framework is dividend policy. To-date the boards of ESB, EirGrid, Bord na Mona and Coillte have respectively engaged with NewERA and the relevant Government Departments with a view to developing a new formal dividend policy, striking an appropriate balance between the payment of dividends and re-investment in the business.
A new dividend policy for ESB, as announced by ESB in October 2013, will see ESB increase its dividend payout to 40% of normalised profits after tax by 2017, subject to ESB sustaining a minimum credit rating of BBB+.
The Board of EirGrid recently agreed a new dividend framework based on factors that EirGrid have set out in its recently published annual report. This has led to the Board of EirGrid recommending a dividend of €3m based on its financial results for the year end 30 September 2014.
Significant levels of organisational and structural change have occurred and are continuing within Ervia including the sale of Bord Gáis Energy, the establishment of Irish Water and preparation for the transfer of the gas network assets and liabilities of Ervia and Gaslink to a newly established subsidiary of Ervia called Gas Networks Ireland. Dividends to the State arising from the sale of Bord Gáis Energy are expected to be up to €1bn, of which the first €150m was paid in 2014. The process of reviewing levels of future dividends and agreeing a dividend policy based on the future financial performance of Gas Networks Ireland is expected to commence shortly. In the medium term it is not envisaged that any dividends will be paid from Irish Water.
In the case of Bord na Mona and Coillte, the Boards of these entities are currently giving consideration to the development of a formal dividend policy, in consultation with NewERA.
In this way, a new formal dividend policy has been or will be agreed for each of the NewERA companies, thus giving greater clarity and certainty in relation to the State's future expectations in this regard.
My Department is also working with other relevant Departments, reviewing the shareholder management and oversight arrangements applying across the wider commercial state sector - i.e. in those commercial State companies which do not currently come under NewERA's remit. The intention is to introduce a more structured and consistent approach to the management and oversight of these companies also, and thus the entire commercial State sector, modelled on the approach already adopted for the NewERA companies adapted, as appropriate, for the particular circumstances of each individual company. This will include establishing a Shareholders Expectations Framework for each such company, which will include the development of a specific and appropriate dividend policy for each such company.
