Report of the Review Group on State Assets and Liabilities

Scofflaw

Plenty happening at the moment - this is the report on the potential for sale and disposal of state assets (and liabilities). It, too, is unlikely to contain any recommendations about who should be imprisoned.

http://www.scribd.com/doc/53424523/Report-of-the-Review-Group-on-State-Assets-and-Liabilities

Again, if someone has a non-Scribd link, please post it.

Terms of Reference of the Review Group

The members of the Review Group are University College Dublin economist Mr Colm McCarthy (Chairman), Department of Finance Second Secretary Mr Donal McNally and Trinity College Dublin economist Prof. Alan Matthews

The following Terms of Reference have been set out for the Group:

# To consider the potential for asset disposals in the public sector, including commercial state bodies, in view of the indebtedness of the State.
# To draw up a list of possible asset disposals.
# To assess how the use and disposition of such assets can best help restore growth and contribute to national investment priorities.
# To review where appropriate, relevant investment and financing plans, commercial practices and regulatory requirements affecting the use of such assets in the national interest.


Interim List of Assets to Be Reviewed

(i) Commercial State Bodies:

• Dublin Airport Authority (incl. Cork and Shannon Airport)
• CIE
• Dublin Bus
• Irish Rail
• Bus Eireann
• Irish Aviation Authority
• Dublin Port Company
• Cork Port Company
• Drogheda Port Company
• Galway Port Company
• Waterford Port Company
• Shannon Foynes Port Company
• Wicklow Port Company
• New Ross Port Company
• Dundalk Port Company
• Dún Laoighaire Harbour Company
• ESB
• Bord Gais Eireann
• Bord Na Mona
• Eirgrid
• An Post
• RTE
• TG4
• National Oil Reserves Agency
• Coillte
• Horse Racing Ireland
• Irish National Stud Company Ltd.
• Bord Na gCon

(ii) Intangible Assets

These include, inter alia, radio spectrum allocated for broadcasting and telecommunications; carbon emissions permits; and mineral, hydrocarbon and other licences issued by the state.

Outline recommendations are here: http://www.finance.gov.ie/viewdoc.asp?DocID=6802&CatID=78&StartDate=1+January+2011

Section 2: The Policy Context of Asset Sales

1. Any programme of asset disposal should be assessed from the standpoint of its contribution to long-term economic recovery. The Group cautions against any actions which enhance short-term asset disposal prices at the cost of damage to the economy’s long-run competitiveness, including specifically any failures to maximise the potential for competition or any value-enhancement of privatised entities through weak regulatory arrangements.

2. Any privatisation legislation involving companies operating critical infrastructures in Ireland should include explicit provision for resolution or step-in powers. The United Kingdom rules provide a possible template.


Section 3: Market Design and Regulatory Reform

3. The objectives of economic regulatory agencies need to incorporate, explicitly and on a common basis, the minimisation of cost to the rest of the economy.

4. A comprehensive review of the legislation governing economic regulatory agencies should be undertaken and necessary legislative amendments enacted prior to any state disposals.

5. The Department of Enterprise, Trade and Innovation, which already has responsibility for competition policy, should become the parent department for all economic regulatory bodies, and should take responsibility for their supervision and performance measurement and for legislative updating.

6. Levies on regulated entities, including license fees and other miscellaneous charges, should accrue directly to the Exchequer, and, in order to strengthen their independent role, the operating budgets of economic regulatory bodies should be a charge on the Central Fund.

7. Central government departments responsible for policy in areas such as energy and transport should ensure that adequate internal resources are made available for the task and should avoid excessive reliance on regulatory agencies and outside consultants.

8. Economic regulators should be relieved of responsibility for extraneous administrative functions.

9. There should be a single regulator for the broadcasting and telecommunications (including postal) industries.

10. The Health Insurance Authority should be absorbed by the Financial Regulator.

11. In the event that a customer-financed water industry structure emerges, this monopoly should be regulated through expanding the role of the Commission for Energy Regulation rather than through the establishment of yet another sector regulator.

12. A comparison should be undertaken of pay and conditions in all commercial state companies with those elsewhere in the Irish labour market and in competitor countries, in particular in the UK, in order to assure that the cost structures in these companies are competitive with their counterparts. The outcome of this review should determine the approach of economic regulators to costs allowable in tariff determination.

13. Sector regulators should seek explicit justification of mass market advertising budgets from regulated monopolies and should disallow from cost recovery any element they deem commercially unnecessary.

14. The legislation governing economic regulatory bodies should permit them to grandparent certain regulatory provisions for pre-existing operators when regulatory policy changes.


Section 4: The Commercial State Companies in Aggregate

15. The regular payment of a reasonable dividend to the shareholder is good practice and a performance regulator. The Group recommends that a dividend of at least 30% of profits should be paid each year except in the most unusual circumstances.

16. The exercise of the shareholder function in all state commercial companies should be centralised in a specialised unit located in the Department of Finance. This unit should also take responsibility for whatever asset disposal programme is decided on by Government.



Section 5: The Policy Framework for State Energy Companies

17. Policymakers and the regulator should facilitate the development of gas storage capacity in Ireland on a commercial basis.

18. If security of supply is the goal, policymakers and the regulator should facilitate the development of liquefied natural gas importation capacity in Ireland on a commercial basis.

19. Carbon emission targets should be pursued on a least-cost basis and current targets for wind penetration in power generation should be revised downwards in the context of the adequacy of existing capacity, the diminished prospects for demand growth and the altered outlook for gas supplies and prices.

20. An early review, before divestment, should be undertaken of the system of energy regulation in Ireland.


Section 6: Electricity Supply Board (ESB)

21. The transmission grid, including the high-voltage system in Northern Ireland, should be transferred to EirGrid and retained in public ownership as a regulated monopoly. The transfer prices for these assets should reflect their regulated asset valuations. The Review Group notes that unbundling is not an end in itself but a policy designed to increase competition and efficiency in the industry.

22. All hydro units should be transferred to EirGrid and should be operated by them as regulated assets.

23. ESB should be required to dispose of further generating capacity in Ireland, the units to be sold to be selected by the CER. This should happen regardless of any ESB ownership decision. No acquirer should be permitted to bid for capacity which would bring its Irish market presence above approximately 2,000MW. There should be no regulatory inhibition to generators owning supply businesses, subject to competition law.

24. ESB’s energy supply business, electricity distribution business, generation assets (after some divestment), international investment, and consulting and engineering businesses should be sold as a single entity.

25. Should ESB be retained in state ownership, the Group recommends that, in order to assist in deleveraging the state balance sheet, all of its overseas interests should be disposed of and there be no further expansion outside the island of Ireland.


Section 7: EirGrid and the High-Voltage Electricity Transmission Grid

26. The Group recommends that EirGrid’s Grid25 targets be re-considered in the light of demand developments and the Group’s recommendations regarding reduced wind penetration.


Section 8: Bord Gáis Éireann and Gas Industry Structure

27. The Group recommends that BGÉ’s regulated transmission and interconnector assets should be retained in state ownership. Consideration should be given to the establishment of a distinct state body to own and operate these assets and also to the option of merging these operations into EirGrid.

28. The Group recommends that the remaining operations of BGÉ, other than gas transmission and interconnection, be privatised as a single entity.


Section 9: Seaports and Port Industry Structure

29. The state-owned ports, including Rosslare, should be restructured into several competing multi-port companies, built around Dublin, Cork and Shannon Foynes. The Competition Authority should be consulted concerning the amalgamation process.

30. Privatisation of some or all of the ports should be considered, ideally after the recommended restructuring. The adequacy of competition in the sector on an all-Ireland basis should be reviewed prior to privatisation and suitable regulatory arrangements instituted, if deemed necessary.


Section 10: Bord na Móna

31. The Group recommends that the Government should seek to dispose of Bord na Móna as a single entity, including peat extraction rights but not ownership of the peat lands.


Section 11: Coillte Teoranta

32. The state should initiate the disposal of Coillte’s forest and non-forest assets (but not its forest land), possibly using the New Zealand Crown Forest Licence template modified to make it suitable to Irish conditions. Unforested land surplus to Coillte’s requirements should be sold and the proceeds remitted to the Exchequer by way of special dividend.

33. The replanting obligation attached to Coillte and grant-aided forestry should be discontinued.

34. In order to minimise the national cost of climate policy, activities that sequester carbon should be treated equally to those that emit carbon. The Group supports efforts to reward forest owners for the value of carbon sequestered by new forests after 2013. For farmers in receipt of the current range of financial incentives, the Group recommends that these incentives be restructured to explicitly reward the carbon sequestration value but there is no justification for a further increase in these payments.


Section 12: State Airports and Aer Lingus

35. As an exception to its general recommendation on dividend policy, the Review Group recommends that no dividend be sought from DAA for the present.

36. The DAA should dispose of its non-core assets, primarily overseas, as a means of substantially reducing its debt exposure. The timing of this deleveraging programme should be determined by the company board. In due course, privatisation of the airports should be considered.

37. Whether DAA’s airport assets are privatised or retained in state ownership, the regulatory arrangements need to be reviewed and in particular the scope for political intervention in capital investment decisions curtailed.

38. The state’s shares in Aer Lingus should be disposed of as soon as is opportune.


Section 13: The Irish Aviation Authority

39. The Government should explore the possibility of merging Irish air navigation operations with NATS and possibly other North-West European services. In the event of a merger, the state’s share should be disposed of for the benefit of the Exchequer.


Section 14: Coras Iompair Éirean (CIE)

40. CIE’s tours business, Rosslare port, Expressway and other bus businesses competing directly with private operators should be disposed of. Policy should seek to limit the level of public subsidy through greater efficiency and the amount of capital to be invested in further transport projects should be severely constrained.The Review Group recommends that the privatisation of all or part of Dublin Bus should be considered in due course, but only after government has decided on a model for competition in the Dublin bus market.


Section 15: Public Service Broadcasters (RTÉ and TG4)

41. The portion of the license fee allocated to the Broadcasting Fund, currently just 7%, should be increased substantially, in order to better equalise conditions of competition between RTÉ and private broadcasters.

42. In the interests of transparency, the Group recommends that RTÉ’s provision of Irish language content to TG4 under the provisions of the Broadcasting Acts is transacted on a commercial basis, and funded by TG4 from within its revenues. The respective Exchequer support of each broadcaster should be adjusted accordingly to take account of the transaction.

43. RTÉNL should be disposed of as a regulated entity with appropriate safeguards in place to ensure its availability to the state and fitness for purpose in the event of a national emergency.

44. In line with the position taken by the Group generally on allocation of radio frequency spectrum, the Group recommends that rights to use spectrum for broadcasting purposes are allocated using a market-based approach that promotes the most efficient management and use of the spectrum resource.


Section 16: An Post and the Postal Market

45. The grant of a new seven year licence to operate the National Lottery should be the subject of an open competition.

46. The Group does not consider that An Post is a ready candidate for asset disposal in the near term. Instead, the focus of management must be on ensuring a sustainable future for the company through cost containment.


Section 17: Irish National Stud, Horse Racing Ireland, Bord na gCon

47. The National Stud should be disposed of.

48. HRI should dispose of its racecourse interests if commercially satisfactory terms become available.

49. Bord na gCon should dispose of its interests in greyhound tracks if commercially satisfactory terms become available.

50. HRI and Bord na gCon should dispose of their Tote interests if commercially satisfactory terms become available.


Section 18: Asset Management in Certain non-Commercial Sectors

51. The Group reiterates the proposal of the Special Group on Public Service Numbers and Expenditure Programmes that there should be one state property management agency and a consolidated register of all state property howsoever owned.

52. The Group recommends that an annual target should be set for sales of state property over each of the next five years and the responsibility for this should be given to a single agency.

53. The Group recommends that a study should be completed as soon as is practicable on the means and feasibility of privatising the operations, but not the ownership, of bodies such as the Property Registration Authority.


Section 19: The State’s Intangible Assets

54. The Review Group recommends the introduction of auctioning of quotas into Irish fisheries policy as part of the forthcoming reform of the Common Fisheries Policy.

55. The Group is firmly of the view that if the granting of licences or allocation of rights or quotas confers substantial market rights, the process should involve a transparent market auction. This is the only way to secure market value for the state without controversy. For all other cases, fees should be charged to cover administrative costs, at least.

cordially,
Scofflaw

later12

Scofflaw wrote: »

Again, if someone has a non-Scribd link, please post it.

You just know I'll always rescue you, Scofflaw.
http://www.rte.ie/news/2011/0420/mccarthyreport.pdf

beeftotheheels

http://www.finance.gov.ie/documents/publications/reports/2011/stateassetsrep.pdf

D'oh, too late!

RichardAnd

In theory, if CIE and the ESB were sold off to the private markets, what would the effect be for

1. The customers of both of these companies.
2. The employees of these companies.

Sleepy

Why is TG4 even being looked at as an asset?! There's no way it's commercially viable.

Zubeneschamali

On CIE, the report does not recommend selling it off:

CIE’s tours business, Rosslare port, Expressway and other bus businesses competing directly with private operators should be disposed of.

ei.sdraob

Exclusions from consideration by the Grou wrote:

NAMA: The assets held on behalf of the state by the National Asset Management Agency
as part of the Government’s programme of remediation for the banking sector are outside
the terms of reference of the Review Group.

Banks: The government has acquired substantial ownership stakes in certain banks as a
result of the rescue and re-capitalisation process. These stakes may be disposed of in due
course but the Group feels that it is too early to consider concrete disposal options.

sigh

beeftotheheels

Recommendation 12: The Review Group recommends that a comparison be made of pay and conditions in all commercial state companies with those elsewhere in the Irish labour market and in competitor countries, in particular in the UK, in order to assure that the cost structures in these companies are competitive with their counterparts. The outcome of this review should determine the approach of economic regulators to costs allowable in tariff determination

This one will be interesting...

dan_d

Is the train system included under CIE, or is that being omitted?

I'd imagine there are some very worried state and semi-state workers out there today....suddenly nobody's job is safe.

mrgaa1

will this report matter really - the last one he did they ignored most of it

RichardAnd

mrgaa1 wrote: »

will this report matter really - the last one he did they ignored most of it

It's a different ball game now, the EU and IMF are involved and we have a far better picture of the problem. I don't think this report will so easily be swept aside.

Unpossible

I don't have the time to go through it, is there a rough figure of how much will be earned or saved through these recommendations?

beeftotheheels

One of the scariest things for me were the pension deficits, and the lack of understanding of pension deficits that the authors had. They referred to the actuarial values per the stats as though those numbers accurately reflect the deficit whereas the actuarial numbers used by the trustees usually exceed the actuarial numbers per the stats based on the different criteria used. This means, that the amount that the trustees would want to close the deficit could be significantly larger than the deficit per the stats.

And since Irish private sector pensions are not subject to the level of protection required by EC law (no Pension Protection Fund Levy on under funded schemes etc) any purchaser could walk away from a large part of the deficit.

I assume that the trustees would watch any proposed sale carefully, and would either want the taxpayer to guarantee the liabilities to date ala the UK government when they privatized BT, or they would want the shortfall made whole which may render some of these companies liabilities rather than assets.

Yet no proposal to migrate the semi states from DB to DC schemes which could be manageable... the shocking story of our public sector pensions continues...

Scofflaw

Unpossible wrote: »

I don't have the time to go through it, is there a rough figure of how much will be earned or saved through these recommendations?

Sure:

We are not putting valuations on individual state assets in this report. These depend on many factors and ultimately on what a buyer will pay. The net asset value of commercial company assets whose disposal is recommended is about €5 billion, but net asset value is no more than a rough guide to what might be realisable.

cordially,
Scofflaw

Raskolnikov

So we're spending €50 billion, but our tax take is only €30 billion. Even after we sell all of this . . .

* Dublin Airport Authority (incl. Cork and Shannon Airport)
* CIE
* Dublin Bus
* Irish Rail
* Bus Eireann
* Irish Aviation Authority
* Dublin Port Company
* Cork Port Company
* Drogheda Port Company
* Galway Port Company
* Waterford Port Company
* Shannon Foynes Port Company
* Wicklow Port Company
* New Ross Port Company
* Dundalk Port Company
* Dún Laoighaire Harbour Company
* ESB
* Bord Gais Eireann
* Bord Na Mona
* Eirgrid
* An Post
* RTE
* TG4
* National Oil Reserves Agency
* Coillte
* Horse Racing Ireland
* Irish National Stud Company Ltd.
* Bord Na gCon

we take in a one-time windfall of €5 billion.

If the government are genuinely serious about tackling the deficit, we need much more radical action.

1. Raise the lower and upper tax bands by ~15% to 35% and 55% respectively.
2. Raise VAT to 30%.
3. DIRT to 50%.
4. Increase fuel excise by 10c a litre on both petrol and diesel.
4. Abandon the National Childrens Hospital, Metro North, Luas Interconector, Underground DART, and just about every other capital intensive project.
5. Impose a 10% paycut on the public sector, fire another 10% of public sector workers.

If we brought in those measure, we might actually get close to raising revenues and cutting spending to balance the books.

Macha

I like the way he says there's too much investment in wind but acknowledges we need to achieve our renewables targets in the most cost effective manner with no alternative solutions suggested. Fantastic.

hmmm

Some of the figures in the Appendix for employee remuneration are gobsmacking. I expect the Sunday Indo will pick up on them because no-one else seems to have.

The ESB we always knew about, but check out Dublin Port.

donkey balls

hmmm wrote: »

Some of the figures in the Appendix for employee remuneration are gobsmacking. I expect the Sunday Indo will pick up on them because no-one else seems to have.

The ESB we always knew about, but check out Dublin Port.

Just had a look at the report on the ESB with the usual average wage in and around 75k:rolleyes: having a friend that works for them I know for a fact they dont earn that amount,The sindo allways seem to pick up on the average wage within the ESB I noticed that the average wage within the IAA was not published how come?

hmmm

donkey balls wrote: »

I noticed that the average wage within the IAA was not published how come?

It is, on the same page. 95,600.

donkey balls

hmmm wrote: »

It is, on the same page. 95,600.

Thanks for that I need to get to spec savers:o also how come the IAA wage is never taken up by the media except when they had their strike some time ago.

PhatPiggins

Macha wrote: »

I like the way he says there's too much investment in wind but acknowledges we need to achieve our renewables targets in the most cost effective manner with no alternative solutions suggested. Fantastic.

I think we can all work out the alternatives ourselves. Is it not primarily a review of current assests as opposed to a future road map?

Macha

PhatPiggins wrote: »

I think we can all work out the alternatives ourselves. Is it not primarily a review of current assests as opposed to a future road map?

Like what? Gas is not a renewable. It's funny you say that though, when I read it, it seemed to be a commentary on general government policy in areas like energy etc. I suppose some element of that was necessary but quite a few of the recommendations went beyond whether or not to sell particular state assets.

hmmm

donkey balls wrote: »

Thanks for that I need to get to spec savers:o also how come the IAA wage is never taken up by the media except when they had their strike some time ago.

I would say it's because when the public hears that fitters in the ESB are on 6 figure salaries they go "what!?", whereas when they hear that air traffic controllers are on the same they go "fair enough so".

Unpossible

Raskolnikov wrote: »

we take in a one-time windfall of €5 billion.

Does that include savings from wages and pensions?

donkey balls

A fitter in the ESB getting a six figure sum:eek: now I dont know what the break down in staff is in the ESB regarding normal front line staff back office etc mgmt etc,My mate gets a decent wage from them but certainly not 75k if you wereto look at the average wage in Ryanair your looking at about 80k ish if not more going with the average.

Raskolnikov

Unpossible wrote: »

Does that include savings from wages and pensions?

It's complicated.

No private investor would go near a company with large and unfunded pension liabilities. If we were to sell the semi-states, we would almost certainly have to put money into them to reduce the number, or alternatively promise to fund the pensions for x number of years.

Browney7

beeftotheheels wrote: »

One of the scariest things for me were the pension deficits, and the lack of understanding of pension deficits that the authors had. They referred to the actuarial values per the stats as though those numbers accurately reflect the deficit whereas the actuarial numbers used by the trustees usually exceed the actuarial numbers per the stats based on the different criteria used. This means, that the amount that the trustees would want to close the deficit could be significantly larger than the deficit per the stats.

And since Irish private sector pensions are not subject to the level of protection required by EC law (no Pension Protection Fund Levy on under funded schemes etc) any purchaser could walk away from a large part of the deficit.

I assume that the trustees would watch any proposed sale carefully, and would either want the taxpayer to guarantee the liabilities to date ala the UK government when they privatized BT, or they would want the shortfall made whole which may render some of these companies liabilities rather than assets.

Yet no proposal to migrate the semi states from DB to DC schemes which could be manageable... the shocking story of our public sector pensions continues...

Just a quick question. Do employees of the semi states pay contributions to their pensions or is the cost borne solely by the employer?

Reason I ask is whether or not it is comparable to the Public sector pension levy.

Don't see the point of selling off the assets. Sure we might as well be left with something when the default happens eh?

beeftotheheels

Browney7 wrote: »

Just a quick question. Do employees of the semi states pay contributions to their pensions or is the cost borne solely by the employer?

In short, the deficit, which as you may gather from my above post is calculated by various different interested parties by reference to different criteria, is the amount which the employer would have to put in today in order for the scheme to be in a position to pay off its liabilities (i.e. the pension entitlements accrued to date).

Some of the deficit may reduce naturally if the underlying assets in the pension schemes appreciate, wouldn't be surprised to discover these schemes sitting on a lot of Irish bank bonds which they could be carrying below par, and Irish equities which fell way back in recent years.

Some, will undoubtedly be borne by us - the taxpayer. Either through funding the deficit, underwriting pensions accrued to the date of privatization, or be being sued by the pensioners is the company is sold off and the purchaser walks away from their liabilities which they can do under Irish law, but which they should not be able to do under EC law (Ireland has failed to interpose a directive properly so we're on the hook for damages to any individuals who lose out).

I realize that the above does not answer your question because the issue with DB (defined benefit) schemes is bigger than just employee contributions.

Say I had a cake shop with one employee in the year XXXX and that one employee was male and thus expected to live to be 72 (back in the year XXXX). So, I sit down and figure out that if he works for me for 40 years, and retires at 60, he needs a pension pot of €yyy,000 to buy him an annuity worth whatever percentage of his final salary. Based on this analysis he puts in a certain amount per year, and I stump up the remainder.

Now, the pension fund is managed, and invested in equities, bonds etc. If the assets increase, I will have to put in less at the end of the day, if they fall, as is the case in Ireland then I have to make good the shortfall. If he lives to be 90 instead of the 72 which I factored in, I have to make good the shortfall. In other words, I, the employer, take all the risk.

A DC (defined contribution) scheme in contrast means that he puts in €ABC per month, I put in €XYZ, and whatever the pot is at the time he retires, is the amount which he can use to buy his annuity. Meaning my exposure is just to whatever amount I agreed to put in every month.

If you could find a well funded private sector DB scheme, the employees would be contributing a whole lot more than the pension levy. A DB scheme is one of the most valuable employment related benefits you can find, there are very few of them left outside the public sector precisely because all the risk lies with the employer, from markets falling through to pensioners living longer than expected.

Making the employees contribute more could help, but if their contributions are being invested in Irish equities, and the equities fall in value, then their contribution disappears (through no fault of theirs). The employer is still on the hook for any shortfall.

ArtSmart

Finally, we're into the asset stripping aspect/ fall-out of the fiasco.

was wondering when it'd be flagged.

if there were ever a space worth watching, it is this and related cyber info.



(side note: the aul print media is becoming less and less relevant)