CIÉ's contract with Treasury Holdings dates to October 1998. The cash-strapped transport company agreed to a scheme designed to source hundreds of millions of pounds" from its lands on the north quays in Dublin.

But the ambitious venture, which included proposals for a National Conference Centre at Spencer Dock and residential developments, was rejected by An Bord Pleanála in 2000. In a notable contribution to the debate, the Taoiseach, Mr Ahern, described the proposed development as a "monstrosity".

Despite the refusal of An Bord Pleanála to sanction the plan, the State-owned transport group remains bound by its 1998 contract with Treasury Holdings. It is unable to use the land for alternative purposes.

CIÉ's need for funding is undiminished. The group will receive almost €600 million (£472.5 million) from the Exchequer this year. Its seven-acre properties in the North Lotts are valuable.

According to market sources, lands in the area have fetched €7.62-€13.97 million per acre in recent years.

In the latest initiative with Treasury, CIÉ's rental income from the developments at Spencer Dock will not be received until 2004, when a 200,000 sq ft office building is occupied by PricewaterhouseCoopers (PwC). This is the first phase of a new development plan for the 51-acre site.

One of the State's largest financial services firms, PwC acts as auditor to CIÉ. According to sources close to the arrangement, the company has agreed to pay annual rents of €46.98 per sq ft in the five years to 2009, when the rent will be reviewed. That means that the Spencer Dock Development Company, jointly owned by CIÉ and Treasury, will receive annual rents of €9.4 million.

Treasury is constructing the development and it will receive the bulk of the rent-roll. According to a number of informed sources, CIÉ's official share will amount to €1.5 million. However, the actual annual payment will be lower than that due to "tenant inducements". The payment may be about €1 million, according to one source. Suggestions that the return would be any lower than that were denied.

Planning permission is required to activate the deal between Treasury and CIÉ. But, while the process has not passed that stage yet, CIÉ is required to vacate a seven-acre plot of land currently used by its rail-freight operations this month. If the property is not vacated, CIÉ faces a penalty.

Treasury will pay CIÉ about €160,000 for possession of the site. According to sources, this will enable it to move ahead with site clearance, in anticipation of planning permission. It is understood that CIÉ will spend about €500,000 relocating the freight operations to the East Wall area.

The latest proposals for Spencer Dock are contained in a master plan for the North Lotts area submitted last August to the Minister for the Environment, Mr Dempsey, by the Dublin Docklands Development Authority. A decision is expected "in the next few weeks". The Minister for Finance, Mr McCreevy, must also be consulted. If approved, the authority will initiate a fast-track planning scheme for the entire area.

At the time the Treasury deal was agreed, CIÉ's financial position was not good. According to evidence given by a board member to an Oireachtas sub-committee last year, the company would consider "anything" to boost the bottom line. While north quays' residents opposed the plans, arguing that they were not in keeping with the character of the area, the deal with Treasury was portrayed as a boon for CIÉ.

For CIÉ, the contract was negotiated by its then property manager, Mr Jim Gahan, and its then director of programmes and projects, Dr Ray Bryne. It was Dr Byrne who claimed to An Bord Pleanála the initiative could be worth hundreds of millions for CIÉ.

Uncertainty still surrounds the extent of CIÉ's commitments to Treasury, a privately-owned company controlled by Mr Johnny Ronan and Mr Richard Barrett. Directors include a former head of the Department of An Taoiseach, Mr Paddy Teahon, who is leader to the Stadium Ireland initiative.

Treasury's spokesman declined to comment on the detail of its arrangment with CIÉ.