Semi State Body sell off

ocokev

With the economy in dire need of a cash injection and heavily funded semi state bodies, would it be wise to sell all these entities to fund the increasing national debt and NAMA bill.
It dosent make sence that we can have all these assets, many of which are over paid and over staffed and run very inefficiantly.
Why dont we sell
ESB
Bord Gais Eireann
Irish Rail
Bus Eireann
Aer Lingus
RTE
Horse racing Ireland
The VHI
With water charges coming take control from the council and sell it to some Water Company.
How much money would this generate?
Wouldn't we be better off?

OhNoYouDidn't

We already sold Aer Lingus.

The eircom debacle and mistakes overseas have shown this simply doesn't work at a practical level.

All of these semi states listed do not cost the state a cent and all but two (RTE and possibly Irish Rail) return huge profits to the excehquer, so your argument is fatally flawed I'm afraid.

Sleepy

I'd agree but you'd need to allow whoever bought them to tell the heavily entrenched unions to go swing if you wanted to get any sort of decent price for them.

Also, after the complete balls the government made of the Eircom floatation I'm not certain I'd want the ESB Network, the Gas Network or Rail Network in private hands. ESB has already split it's network off to a different company anyway so I'm sure something along those lines could be done to keep the network infrastructure publicly owned whilst selling on the commercial activities.

Bus Eireann would be a controversial one as Rural dwellers would be outraged at routes being altered/pulled to avoid the financially unviable parts of the curren network which are provided as a public service rather than a commercial action.

The governments remaining shares in Aer Lingus, RTE, VHI and HRI should all be sold in the morning. Though why anyone would buy the HRI is beyond me. We can't be too far off having a government that will pull the plug on the insane levels of grants and tax breaks that the racing industry gets.

Sleepy

OhNoYouDidn't wrote: »

We already sold Aer Lingus.

The eircom debacle and mistakes overseas have shown this simply doesn't work at a practical level.

All of these semi states listed do not cost the state a cent and all but two (RTE and possibly Irish Rail) return huge profits to the excehquer, so your argument is fatally flawed I'm afraid.

Do they return profits at a higher level than the interest rate we pay on borrowing to the value of businesses if they were sold though?

Also, would the companies be run more efficiently by the private sector, leading to higher private profits which would be liable to our admittedly low corporate tax rate?

OhNoYouDidn't

So what you are arguing is that we should sell profit making vital state infrastructure on the cheap for a quick buck to plug a bit of the NAMA hole and to hell with the consumer when the eircom-esque debacles happen downstream?

No thanks chaps.

Joey the lips

Another run for the same debate....

Put simply... It has not worked as well as you think in england and the u.s. However to make it simple

ESB
Bord Gais Eireann

The markets on the ESB and GAS are now open as required under european law. In other other words your free to choose.

Irish Rail - This is a strategic company... Ireland is small has a small rail infrastructure. There was talk of selling verious lines but lines in the west would suffer and the tax payer would pay.

Bus Eireann - Same problem as irish rail - Also the m1 route is open to many operatiors

Aer Lingus
RTE - No loss I agree

Horse racing Ireland ..... WTF....

The VHI

With water charges coming take control from the council and sell it to some Water Company. You clearly misunderstand how councils work


In fact for the moment I will not be subscribing to this thread as its going to be boreing.

I imagine you dont live in the west and as of yet dont pay for your water.

OhNoYouDidn't

Sleepy wrote: »

Do they return profits at a higher level than the interest rate we pay on borrowing to the value of businesses if they were sold though?

Yes.

Sleepy wrote: »

Also, would the companies be run more efficiently by the private sector, leading to higher private profits which would be liable to our admittedly low corporate tax rate?

eircom certainly wasn't.

I find it hard to believe that there are business people out there who can turn something well run like ESB into an entity that makes the state more in corporate tax than it currently does in profit - full stop, never mind while maintaining current levels of safety and supply.

At least we are now looking at this pragmatically, unlike the ideological debate it tends to be.

Sleepy

OnNoYouDidn't - do you have figures to back that up the assertion that their profit levels are higher than the 6% or so their current value? I can't see how you could as it's difficult to quantify the market value of a business that's not publicly quoted.

I'm not suggesting that anyone could raise profits in one of our publicly owned commercial interests to the point that the 12.5% of current profits would be greater than the current total.

Let me use BS figures to illustrate my point: say the non network parts of ESB (power generation, domestic and commercial service etc) can be collectively privatised at a return of 10 billion.

That's 10 billion we could take off the national debt which we currently pay 6% for or 600 million of debt servicing a year.

Given that a private ESB would be subject to tax of 12.5%, unless the non-network parts of the ESB are currently returning steady profits of more than €685,714,285.71 per year (the interest on the 10 billion debt and corporate tax calculated on that level of profit), we are better off to sell them.

Agreed that eircom was a disaster, due to the government selling the network with the services and the unions bending the tax payer over and relieving us of a large chunk of a national asset and through this far too much say in the running of the privatised company.

OhNoYouDidn't

Sleepy,

The inherent problem with your methodology is that its nigh on impossible to put a fair value on these assets in the current climate. There is no way we would get 10bn for ALL the semi-states listed combined, never mind one arm of the ESB. I accept your high level argument that there is a break even point from an accounting perspective that would mean its viable to sell x or y, but that ignores strategic and consumer aspects of the purportive sale and I still maintain its short termist in the extreme.

I would suggest the main issue with eircom was that it was done for ideological reasons and inevitably saw specualtors take control and asset strip, leaving us with dramatically reduced broadband or new phone number roll out which had significiant impact on Ireland Inc.

Scofflaw

Sleepy wrote: »

OnNoYouDidn't - do you have figures to back that up the assertion that their profit levels are higher than the 6% or so their current value? I can't see how you could as it's difficult to quantify the market value of a business that's not publicly quoted.

I'm not suggesting that anyone could raise profits in one of our publicly owned commercial interests to the point that the 12.5% of current profits would be greater than the current total.

Let me use BS figures to illustrate my point: say the non network parts of ESB (power generation, domestic and commercial service etc) can be collectively privatised at a return of 10 billion.

That's 10 billion we could take off the national debt which we currently pay 6% for or 600 million of debt servicing a year.

Given that a private ESB would be subject to tax of 12.5%, unless the non-network parts of the ESB are currently returning steady profits of more than €685,714,285.71 per year (the interest on the 10 billion debt and corporate tax calculated on that level of profit), we are better off to sell them.

Agreed that eircom was a disaster, due to the government selling the network with the services and the unions bending the tax payer over and relieving us of a large chunk of a national asset and through this far too much say in the running of the privatised company.

The ESB made post-tax profits of €273m in 2008 (source). Last time it was valued - in 2001 - it was valued at about £1.4bn (source).

Normal valuation practice would suggest 5-10 times post-tax profits for a company with an established financial record, and that gives us a current range of €1.4bn - €2.73bn for the value of the ESB group in total. That's in line with the previous valuation, as are the profits - ESB profits in 1999 were £216m (source).

I'm afraid the idea that the State would get €10bn for part of the ESB is kind of pie in the sky. Using your figures, and a more realistic valuation of €2bn, the sale of the ESB would knock off about €120m a year in interest payments - but it makes nearly twice that in post-tax profits, as well as currently paying tax to the State.

cordially,
Scofflaw

Sleepy

Apologies, I didn't mean to imply that the ESB was worth 10 billion, I was just taking it as an example and using 10 billion as easy figure to work from.

Scofflaw - thanks for providing the figures. Seems ESB is better kept than sold at the moment so. Would have thought a longer term multiplier of profits would be a fairer valuation for a company with such strong market position and track record though. 5 to 10 years profits seems low for a company one could expect to keep performing for another 20 years at least.

OhNoYouDidn't - I think the problem with eircom was the incompetent manner in which it was privatised (which, to be fair, with the same gombeens running the show that privatised it, could lead me to think they'd make a similar balls-up of privatising other state assets). Including the network infrastructure itself in the sale was what provided the incentive to speculators to asset strip.

I'd disagree from an idealogical perspective that consumer interests are better served by state controlled organisations than by the private sector but I can't see us coming to agreement on that if you hold the opposite ideology!

[EDIT]10,000 posts? What have I done with my life!!! [/EDIT]

Cookie_Monster

OhNoYouDidn't wrote: »

We already sold Aer Lingus.

The eircom debacle and mistakes overseas have shown this simply doesn't work at a practical level.

All of these semi states listed do not cost the state a cent and all but two (RTE and possibly Irish Rail) return huge profits to the excehquer, so your argument is fatally flawed I'm afraid.

CIE cost the state €300m a year between irish rail, bus eireann and Dublin Bus

ESB is gradually being broken up already, fored to sell many of its plant to the private sector

RTE - lets be honest, no-one would miss them, they should go.

Aer Lingus - the rest should be sold off and the company should be allowed to die naturally

VHI should either be sold or some form of healthcare reform brought it to make it properly viable, without all this nonsense cross subsidisation

HRI - probably makes a lot of money in fairness through the breeding and stock side of the industry

Scofflaw

Sleepy wrote: »

Apologies, I didn't mean to imply that the ESB was worth 10 billion, I was just taking it as an example and using 10 billion as easy figure to work from.

Scofflaw - thanks for providing the figures. Seems ESB is better kept than sold at the moment so. Would have thought a longer term multiplier of profits would be a fairer valuation for a company with such strong market position and track record though. 5 to 10 years profits seems low for a company one could expect to keep performing for another 20 years at least.

Not really - you'd value maybe 3 years for a less well-established company whose future you were uncertain of. As the period gets longer, obviously, you're discounting the future cash flows more heavily. After all, at the moment the guarantee of the ESB's future is that they're a semi-state - which wouldn't apply if they were fully privatised.

Sleepy wrote: »

[EDIT]10,000 posts? What have I done with my life!!! [/EDIT]

I'm only 9 posts behind you, and I've been here for three years less!

cordially,
Scofflaw

Sleepy

Cookie_Monster wrote: »

HRI - probably makes a lot of money in fairness through the breeding and stock side of the industry

Could they make it if the industry wasn't so heavily subsidised?

Cookie_Monster wrote: »

Aer Lingus - the rest should be sold off and the company should be allowed to die naturally

It's got a decent brand and some valuable slots. It doesn't need to be killed off, just sold to Ryanair so the unions can be weeded out of it and the company turned around.

Riskymove

Scofflaw wrote: »

I'm only 9 posts behind you, and I've been here for three years less!

cordially,
Scofflaw

ah...but he doesn't have the excuse of having lots of cordial Mod posts!!!!

Cookie_Monster

Sleepy wrote: »

Could they make it if the industry wasn't so heavily subsidised?


It's got a decent brand and some valuable slots. It doesn't need to be killed off, just sold to Ryanair so the unions can be weeded out of it and the company turned around.

No, I agree there is no need to kill it, but the only reason it is still alive is because the government has a stake. Its not that viable an airline and if the gov didn't hold so much many other parties would be interested. Ryaniar would buy it instantly if the courts would let them purely to asset strip it, I imagine this will happen in the next 10 years anyway

Sleepy

Cookie_Monster wrote: »

No, I agree there is no need to kill it, but the only reason it is still alive is because the government has a stake. Its not that viable an airline and if the gov didn't hold so much many other parties would be interested. Ryaniar would buy it instantly if the courts would let them purely to asset strip it, I imagine this will happen in the next 10 years anyway

I don't think the government stake is keeping the company alive. I think it's killing the airline slowly so the unions can suck it's lifeblood until it folds.

I honestly don't think Ryanair would asset strip it. It wouldn't make sense to try to run long-haul flights on the Ryanair model and the brand is significantly different that they could operate as the 'slightly more expensive but slightly more civilized' airline on the short-haul routes around Europe. I may be wrong but I'd take O' Leary at his word on keeping the companies separate, it makes most business sense to me.

Yes, he'd bring in the Ryanair management style when dealing with unions etc. but that could only be a good thing for the airline and, long term, for those working within it. (a job at 80% of your income for 10 years being better than 100% of your current income for the next 3 before your union bosses run the airline into the ground).

donkey balls

i have seen a very profitable private company change hands three times over the years,and on each ocassion it was asset stripped.
the ESB also operates ESBI a separate company who mainly do work abroad and is very profitable,as for the high wages that people get in the ESB it is b*ll*x i have friends working there and they are no way on the figures people throw around (70k+ average wage)

Sleepy

The 70k average wage came from a Deloitte produced report iirc so I'll take that as being more accurate than what your friends tell you they earn. It's also an *average* so of course people earn less than that in ESB.

They do seem to be a very generous employer though. My own annecdotal 'Evidence' would be a cousin who works for them and reckons they seriously over-pay himself and the other lads who maintain the network. In his own words: "I'm not about to say no to three grand for having to park my car 500 yards away from the old carpark cos the offices have moved but they're feckin' eejits for giving it to me".

donkey balls

deloitte are they not the same guys that looked after anglo?:rolleyes:
as for them been good employers they are according to my friend and have nice perks nothing wrong with that to be honest.
some companies have perks others dont a company i worked for had free travel around the world, and depending on your lenght of service you could be out sick for 12 months on full pay.

Scofflaw

donkey balls wrote: »

deloitte are they not the same guys that looked after anglo?:rolleyes:
as for them been good employers they are according to my friend and have nice perks nothing wrong with that to be honest.
some companies have perks others dont a company i worked for had free travel around the world, and depending on your lenght of service you could be out sick for 12 months on full pay.

An ex-girlfriend of my brother's has been on paid sick leave (ME) from her advertising company for several years now. She's still on 80% of her original salary.

cordially,
Scofflaw

FINGAL FAN

PD ideology didnt go out with PD's sadly . Does the Eircom experience not clearly show that private investors come in for one reason only -to make as much money as they possibly can as quickly as they can regardless of the effect on the Company . For this reason no proper investment has been made in the Eircom network and we are seeing the results .

Sleepy

If private investors only ever make an investment to make as much money as quickly as possible, Fingal Fan, please then explain the success of Warren Buffet..

Scofflaw

Sleepy wrote: »

If private investors only ever make an investment to make as much money as quickly as possible, Fingal Fan, please then explain the success of Warren Buffet..

Or even, perhaps, explain the growth of capitalist economies since the invention of stock markets!

amused,
Scofflaw

kraggy

Whatever you think of the quality of RTE, it simply cannot be sold. You cannot have the main media channels in the country being controlled by some right wing media mogul or other agency with a particlar motive.

Sleepy

Why not?

Cookie_Monster

kraggy wrote: »

Whatever you think of the quality of RTE, it simply cannot be sold. You cannot have the main media channels in the country being controlled by some right wing media mogul or other agency with a particlar motive.

as opposed to showing a state biased view as often they can?

dekbhoy

surely this will be the Nail in the coffin for any government if this goes ahead. no evidence of where this has been successful in the past .Privatisation will cost jobs ,lots of jobs.If privitisation is carried out large scale people will lose faith in our country, how would it make sense to have a private company in complete control of our countries Ports , airports , energy supplies etc. they could potentially hold the country to ransom

Einhard

OhNoYouDidn't wrote: »

We already sold Aer Lingus.

The eircom debacle and mistakes overseas have shown this simply doesn't work at a practical level.

All of these semi states listed do not cost the state a cent and all but two (RTE and possibly Irish Rail) return huge profits to the excehquer, so your argument is fatally flawed I'm afraid.

The privatisation of Telecom Eireann was a deeply flawed process, and any arguement against further privatisations which takes that one as its premise, is itself deeply flawed.

TE privatisation was bad =/= all privatisations are bad

the groutch

Dublin Bus & An Post should be the first to go, they both have the potential to be world class if put in the right hands

dekbhoy

the groutch wrote: »

Dublin Bus & An Post should be the first to go, they both have the potential to be world class if put in the right hands[/QaUOTE]


nonsense ...... a lot of dublin bus routes are non profitable , therefore many parts of dublin would not be provided with bus routes, also cant see a private bus owner providing thousands of pensioners and people who are incapacitated persons with free travel ......

OhNoYouDidn't

Einhard wrote: »

The privatisation of Telecom Eireann was a deeply flawed process, and any arguement against further privatisations which takes that one as its premise, is itself deeply flawed.

TE privatisation was bad =/= all privatisations are bad

So what will be done differently this time? What vital piece of state infrastructure do the Irish crony capitalist class get to play with now to prove that eircom was a once off debacle?