McCarthy backs planned sale of State assets

Wednesday 20 April 2011 22.14
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Colm McCarthy - Warns against a rushed sale process
Colm McCarthy - Warns against a rushed sale process
Coillte - Assets should be sold off
Coillte - Assets should be sold off
Brendan Howlin - Government will study findings
Brendan Howlin - Government will study findings

The McCarthy review group on State assets and liabilities has recommended a planned programme of asset sales to reduce the State's high level of indebtedness.

However, it warns against a rushed sale process, as this would 'inhibit attainment of value, and in many cases would not be prudent or even possible given the requirement for revised regulatory procedures and complex legislation.'

The review group has not put valuations on individual State assets in the report as they depend on many factors, including what a buyer will pay.

The net asset value of commercial company assets whose disposal is recommended is about €5bn, but the review group warns that this is no more than a rough guide to what might be realisable.

A restructuring of State companies and strengthened regulatory arrangements is recommended as a prelude to possible sale, but also to enhance the competitiveness of the economy even if assets are not sold.

Core transmission assets in gas and electricity should not be sold to private interests in the immediate future, according to the review group. The group believes that such a disposal in the Irish context would carry risks and that consideration of this option should be deferred.

The group also recommends changes in the governance of State bodies while they remain in public ownership to enhance efficiency and performance.

It is not proposing that all assets be disposed off. In the case of land-based assets in particular, it proposes that the State sells the rights to reap the produce of the land but not the land itself.

Intangible assets such as rights, licences, options and leases should be treated in the same way as tangible assets, which should invariably be sold to the highest bidder.

The review notes that the group's appointment predates the application for financial assistance from the International Monetary Fund and the European Union in November.

The IMF-EU memorandum of understanding does not specify any target for an asset disposal programme.

Minister for Public Expenditure and Reform Brendan Howlin has welcomed the publication of the report and said the Government would study its findings.

Mr Howlin said that, as set out in the Programme for Government, non-strategic assets up to a value of €2bn would be sold only when market conditions were right and when adequate regulatory structures have been established to protect consumer interests.

ESB and Bord Gáis

The McCarthy group says the ESB's energy supply and electricity distribution businesses, power generation assets, as well as its international and consulting businesses, should be sold as a single entity.

It says the electricity transmission grid, including the system it has bought in Northern Ireland, should be transferred to EirGrid and kept in public ownership.

The report says that if the ESB stays in public ownership, however, all of its overseas interests should be sold off.

The ESB should be required to sell off further generating capacity in Ireland, according to the report

On Bord Gáis, it says the company's transmission and interconnector assets should stay in State ownership, but the remaining businesses should be privatised as a single entity.

The report also says Bord na Móna should be sold off, including peat extraction rights but not ownership of the peat lands.

It says State-owned ports, including Rosslare, should be restructured into several multi-port authorities, built around Dublin, Cork and Shannon Foynes.

After this step, privatisation of 'some or all' of the ports should be looked at.

Sale recommendations

The report says the State should start selling off Coillte's forestry and non-forestry assets, but not its forest land. It says unforested land that Coillte does not need should also be sold.

The State should sell its 25% stake in Aer Lingus 'as soon as it is opportune', while the DAA should sell off its overseas businesses in order to reduce its debt.

In due course, the report says, privatisation of the airports should be considered.

But, regardless of ownership, regulatory arrangements need to be reviewed and the scope for political intervention in investment decisions curtailed.

The group does not believe any An Post assets should be sold at the moment, but recommends that the granting of a new seven-year licence to run the National Lottery be the subject of an open competition.

Privatisation of Dublin Bus should be considered, but only after the Government has decided on a model for competition in the city's bus market.

It says CIÉ's tours business, expressway services and other bus business competing with private operators should be sold.

The group says the amount of money invested in further transport projects should be 'severely constrained'.

RTÉ and TG4

On RTÉ, the report says the 7% of the licence fee which currently goes to the Broadcasting Fund should be increased substantially.

It says networks business RTÉNL should be sold as a regulated entity, with safeguards put in place to ensure its availability to the State in emergencies.

The report says RTÉ's provision of services to TG4 should be done on a commercial basis, and paid for by TG4 from its own revenue.

Exchequer support for each organisation should then be adjusted to take account of this.

The McCarthy group calls for the sale of the National Stud. It says Horse Racing Ireland's racecourse interests, Bord na gCon's interests in greyhound tracks and both organisations' Tote interests should be sold if commercially satisfactory terms are available.

If the granting of licences, rights or quotas gives any party substantial market rights, 'such a process should involve a transparent auction.'

The report says the Department of Jobs, Enterprise & Innovation should become the department responsible for all economic regulatory bodies.

It calls for a single regulator for the broadcasting and telecoms and postal industries and recommends that the Health Insurance Authority be absorbed into the Financial Regulator.

The group urges that any proposed new water body shold be regulated through an expansion of the Commission for Energy Regulation and not through 'yet another' regulator.