Article: Lenihan considers sale of state assets: IE, ports, airports, ESB, etc.

Amtmann

Airports, ports, RTÉ and the ESB are included in a list of State companies that a Government-appointed group will consider selling in an effort to cut the €84 billion national debt.

Minister for Finance Brian Lenihan announced yesterday he has appointed economist Colm McCarthy, who led the body that recommended €5 billion in public service cuts last year, to chair the new Review Group on State Assets.

It is charged with looking at the possibility of disposing of public-sector assets, including commercial State companies.

According to a preliminary list published yesterday by the Department of Finance, the organisations it will cover include all major State companies, such as ESB, Bord Gáis, RTÉ, Iarnród Éireann, Dublin, Cork and Shannon airports, (all owned by Dublin Airport Authority) 10 port companies and Bord na Móna.

The national debt stands at €83.98 billion, but the sale of these companies could generate a lucrative return. For example, the ESB’s assets, its power plants, networks and energy business, are valued at €7 billion. Bord Gáis has assets worth €3.5 billion.

Department of Finance official Donal McNally and TCD’s Prof Alan Matthews will join Mr McCarthy on the review group.

Mr Lenihan said its initial focus would be commercial State companies. It will look at other assets, such as the radio spectrum, used to carry mobile phone and TV signals, and mining and exploration licences.

The group’s work won’t necessarily stop at establishing if the companies can be sold. It will also consider how best they can be used to boost growth and contribute to the State’s own investment plans.

Where appropriate, the group will be able to scrutinise companies’ investment and financing plans, business practices and regulation.

They will also have to examine any liabilities that the State may have as a result of owning these businesses.

For example, many of the companies involved have pension deficits. Bord na Móna said this week that the shortfall in its staff retirement fund was €20 million at the end of last year.

The group will report at the end of the year. Mr McCarthy said yesterday that it would give an explanation at that stage for its findings and recommendations.

None of the companies involved commented. Most have already said that they would co-operate with any review of State bodies.

Eamon Ryan, the Minister for Energy and Natural Resources, whose department is responsible for many of the companies and assets involved, indicated that he would not like to see energy companies such as the ESB and Bord Gáis sold.

The Minister said he wanted to engage fully with the group, and would both listen to it and make his own views known.

However, he added that he was “loathe to break up business models that were working” in the energy sector, and pointed out that these companies had plans to invest €30 billion between them in Ireland over the next decade.

Mr Ryan also added that the group should learn the lessons of the Eircom sale, which resulted in the sale of the State’s telephone network, which subsequently delayed the development of broadband services in the Republic. About 10,000 people are employed by the State companies that fall under Mr Ryan’s remit.

Noel Dempsey, whose department is responsible for the public transport, port and airport companies, did not comment.

Mr McCarthy is a well-known economist. Last year he chaired the Government’s Special Group on Public Service Numbers and Expenditure Programmes, dubbed “an bord snip nua”, which recommended cutting the number of public service employees by 17,000 and spending by €5.3 billion.

Mr McNally is second secretary general of the Department of Finance. He also worked on the McCarthy report. Mr Matthews is professor of European Agricultural Policy at Trinity College and a director of its Institute for International Integration Studies.

http://www.irishtimes.com/newspaper/breaking/2010/0723/breaking1.html

marmurr1916

Stupid idea to sell off vital national infrastructure such as ports and airports IMO.

It's also a commercially poor decision to sell major asset in the middle of a major recession - the price you'll get is going to be rock bottom, while the future revenue from, for example, Dublin Airport, when the economy improves will be foregone.

A short-sighted idea to raise some quick cash which will harm the state coffers in the long-term.

Things must be pretty desperate if this is what's being proposed.

BTW Furet, did you see the other article? The one that tells how the cabinet has approved a package of measures including the introduction of tolls on national routes and increases in road tax...

Poly

Could they not offer a long term lease of infrastucture with strict reveiws every 5 years?

helimachoptor

I'd be really against the sell off of semi state assets despite the negativity of their high wages etc that is on the airwaves. I'd prefer them to stay within (semi) state control.

seamus

I'm all for selling off the semi-state companies provided that the infrastucture remains in state control. If someone like Virgin came in here and bought IE, the quality of our rail system would get a real shot in the arm.

dubhthach

seamus wrote: »

I'm all for selling off the semi-state companies provided that the infrastucture remains in state control. If someone like Virgin came in here and bought IE, the quality of our rail system would get a real shot in the arm.

Indeed if Eircom thought us anything you do not privatise the actual infrastructure but the service company. Telecom Eireann should have been spilt into two, a networks company (EirNet?) which would have stayed state owned and would have been open access and a service provider (Eircom) which would have taken all the customer accounts etc and would have been privatised. awh well we can't really cry over spilt milk in this case.

T Corolla

I love to see CIE get a good seen to. The management are poor to say the least. I wrote in an earlier thread of the commuter lines been sold off to another rail company and there is a possibilty of this happening 5 euro's return from Connolly-Maynooth when you can do the same journey in major cities in America for 1/2 the price. 19 euro's from Mullingar to Dublin. I done the same journey in New York for 10 dollars (Grande Central Station to Fleetwood station Harlem line)

eia340600

dubhthach wrote: »

Indeed if Eircom thought us anything you do not privatise the actual infrastructure but the service company. Telecom Eireann should have been spilt into two, a networks company (EirNet?) which would have stayed state owned and would have been open access and a service provider (Eircom) which would have taken all the customer accounts etc and would have been privatised. awh well we can't really cry over spilt milk in this case.

Your right, and I think the government have learned their lesson.They did something similar with power, by privatising the customer end and keeping the infrastructure state owned(eirgrid)

Cookie_Monster

oh please please please please sell IE.

A private company would breathe such life into the area, would not put up with all the ****e that goes on in there at the moment and we might end up with a rail system that works.

I wonder would Deutche Bann be interested?

Bards

Cookie_Monster wrote: »

oh please please please please sell IE.

A private company would breathe such life into the area, would not put up with all the ****e that goes on in there at the moment and we might end up with a rail system that works.

I wonder would Deutche Bann be interested?

Imagine what a private company could do with the same subvention that CIE gets from the taxpayer every year

Zoney

Imagine what private buccaneers could do with our semi-states given their current market position and our government's track record in regulation.

I'll stick with a bit of inefficiency and traditional state-run enterprise please. There's more hope of getting the state to invest in them and improve the semi-states than there is of arranging things such that private operators do anything beyond asset-stripping and abusing market position. I certainly believe we can improve things with a change in government, even if things remain far from acceptable in these companies.

By all means split up the semi-states (infrastructure and services) and perhaps allow others to provide services (e.g. operate power stations, run public transport services, etc.) but it would be idiotic to sell off national assets even if they need investment. Far cheaper too for us to collectively invest as taxpayers than be fleeced by private operators who *might* invest as well as profiteering (and even so, they'll only invest in a competitive environment where they can get more custom by doing so - we don't have that in Ireland).

Nothing good can come of these proposals - even the money gained in short-term will go very little towards alleviating our position. It is a disaster to sell anything in the current climate.

Zebra3

T Corolla wrote: »

5 euro's return from Connolly-Maynooth

It's €6.

T Corolla

I cannot see IR will be sold but maybe a serious shake up of management to deliver better with what they have maybe sell the DAA/ESB they would be good purchase

Cool Mo D

There is one very big problem with privatising public transport.

Public transport will require an ongoing subvention to maintain current levels of service. It is in any businesses interest to maximise profit. If Irish Rail is privatised, the new company may decide that it is easier to provide a bare minimum service and concentrate on getting as big a subvention as possible from the government, rather than improving service.

What needs to be done is copying how the Luas is run, with a set price paid to the operator, rather than letting them keep fares, and getting a subvention as well.
This will be less attractive to any private company, as there is little potential for large profits this way. Therefore, it will probably not be much of a reduction in what IÉ are getting.
I oppose privatisation to save money, as I don't doubt we will get a worse service. I support privatisation to get a better service - but I don't expect it to cost less.

marmurr1916

T Corolla wrote: »

I love to see CIE get a good seen to. The management are poor to say the least. I wrote in an earlier thread of the commuter lines been sold off to another rail company and there is a possibilty of this happening 5 euro's return from Connolly-Maynooth when you can do the same journey in major cities in America for 1/2 the price. 19 euro's from Mullingar to Dublin. I done the same journey in New York for 10 dollars (Grande Central Station to Fleetwood station Harlem line)

British railways were privatised a long, long time ago. Overall, it's been a disaster. The company that was in charge of the railways, the stations and signalling had to be re-nationalised because it was so inefficient (several rail disasters because of poorly maintained track etc) and losing so much money, despite government subsidies.

Train fares in Britain are amongst the highest in Europe - like for like they're far higher than in Ireland AND they're increasing well above the general rate of inflation.

Do rail travellers benefit from better services as a result of the much higher prices they're paying?

Hardly. Late trains, cancelled trains, cuts in services, overcrowded trains, especially on busy commuter routes, poor quality rolling stock, all par for the course on British trains.

Apart from that, at least one major private rail operator has gone bust - it's services have had to be taken over by a state-owned railway company.

The simple fact is that privatisation has not worked. Ireland would be much better off in getting rid of Iarnród Éireann's crap management and bringing in managers from continental Europe.

ardmacha

I would like to see a tender for a private operation to take over the Rosslare Limerick Galway line with the existing subsidy. They could then try and drum up some business with better timetables etc and make a go of it.

Stonewolf

marmurr1916 wrote: »

British railways were privatised a long, long time ago. Overall, it's been a disaster. The company that was in charge of the railways, the stations and signalling had to be re-nationalised because it was so inefficient (several rail disasters because of poorly maintained track etc) and losing so much money, despite government subsidies.

Train fares in Britain are amongst the highest in Europe - like for like they're far higher than in Ireland AND they're increasing well above the general rate of inflation.

Do rail travellers benefit from better services as a result of the much higher prices they're paying?

Hardly. Late trains, cancelled trains, cuts in services, overcrowded trains, especially on busy commuter routes, poor quality rolling stock, all par for the course on British trains.

Apart from that, at least one major private rail operator has gone bust - it's services have had to be taken over by a state-owned railway company.

The simple fact is that privatisation has not worked. Ireland would be much better off in getting rid of Iarnród Éireann's crap management and bringing in managers from continental Europe.

The British model has been heavily studied and is well known to be fundamentally flawed. It has however given the rest of us some very good lessons on the subject, if you should despair of the British example in an Irish context it's on the basis of our abysmal track record of actually learning from other peoples mistakes.

Chris_5339762

When has Ireland ever learnt from the mistakes of other countries though?

dowlingm

Here's what I'd do: transfer the operating assets of some of the semi-states to a holding company associated with the NPRF and retain stuff like the land its built on in direct ownership. Canadian public pension funds like OMERS or Ontario Teachers have been snapping up infrastructure companies but rather than offering Irish assets to companies like these, there is an opportunity to create our own.

The pension fund company could then borrow against the purchase of these assets from the state and run them on a more commercial basis - no more kiteflying by the likes of Phil Hogan for a station at Gowran or Fiddown, to take recent examples, no more building peat stations for the sake of saving midlands seats. It might also be possible to acquire assets from the Irish banks which are being forced by the EU to sell subsidiaries to avoid being hit with State aid actions, rather than a firesale to the likes of Santander.

The State general fund would benefit from the divestment but the State's employees would be the beneficiaries when the economy rebounds (or more to the point, the impact of a near certain short fall of public service pension provision would be far less on the taxpayer)

KevR

T Corolla wrote: »

I love to see CIE get a good seen to. The management are poor to say the least. I wrote in an earlier thread of the commuter lines been sold off to another rail company and there is a possibilty of this happening 5 euro's return from Connolly-Maynooth when you can do the same journey in major cities in America for 1/2 the price. 19 euro's from Mullingar to Dublin. I done the same journey in New York for 10 dollars (Grande Central Station to Fleetwood station Harlem line)

Athenry-Galway is €11 return. Roughly the same distance as Maynooth-Connolly (although Athenry-Galway is faster because there are no stops in between). And they wonder why Athenry people jump in their cars every morning and sit in traffic on their way into Galway.... :rolleyes: