'We won't be bounced into asset sales'

FRIDAY INTERVIEW: Pat Rabbitte, Minister for Communications, Energy and Natural Resources

BARGAIN HUNTERS WILL be disappointed to hear that none of the Republic’s State-owned companies will be going up on eBay before St Patrick’s Day.

Pat Rabbitte, the Minister whose department – Communications, Energy and Natural Resources – has charge of most of them, says the Government still has a long way to go before it decides precisely what it is going to do with the businesses and assets that the State owns.

Since the process that is likely to decide their future moved up a gear this year, speculation has been growing about what is about to happen, particularly with the largest of them, the ESB. Depending on which story you believe, the Government has decided against selling even the minority stake it originally proposed putting on the block, or it is close to hiring advisers to work on a sale. The Government has to consider two reports, one on the proposal to sell a minority stake in the ESB and the other on the entire stable of State companies.

“Both reports are now in,” Rabbitte says, “but neither has been considered by Government and both will have to be considered by Government.”

Not surprisingly, given what the Government has said from the start of this process, Rabbitte is adamant that there will be no firesales. He cites the example of the decision to effectively pull the sale of Irish Life to support this. “There will be no State assets going up on eBay before St Patrick’s Day,” he says.

The drive for privatisation is coming from the EU-IMF-ECB troika, but the Minister says relations between it and the Government are good enough to ensure the State is not pushed into any forced sale of its assets.

Rabbitte is not even sure that the State will ultimately sell a stake in the ESB. “There is no obligation to sell a minority stake,” he says. He personally would rather see it remain in State ownership as an integrated utility.

Rabbitte has inherited charge – if that’s the word – of an energy industry where two State-owned companies, ESB and Bord Gáis, compete with each other in the natural gas and electricity supply markets. Not surprisingly, their private-sector competitors regard this with suspicion.

The original deal with the troika included a clause committing the State to reviewing this and to coming up with proposals to at least limit its involvement in the sector.

Outside this, the future structure of the market has been the subject of a lot of debate over the last five years. In 2007, Noel Dempsey, who held the office Rabbitte now occupies, said he favoured splitting the ESB and transferring ownership of the national grid, the backbone of the State’s electricity transmission system, to Eirgrid, which currently manages the grid.

This was EU policy at the time and the argument was that the move would foster competition in the Irish energy market. Rabbitte does not agree and favours keeping the company together. “Sometimes we have a habit in this country of turning whatever is the fashion of the moment into the central principle of policy,” he says.

Supporters of the idea might have regarded the ESB as some sort of behemoth, he argues, but in fact things are changing all the time.

“We are moving now towards a regional market [that is where the Irish energy market would be part of a northwestern European region] and the ESB is no behemoth in the context of a regional market,” he says.

He makes it clear he would favour retaining it entirely in State ownership, if that were possible, but accepts that part of it may ultimately have to be sold.

However, he is keen to stress that different State companies should be treated differently. Dublin Port, for example, is strategically important for a State whose economy is focused on exports.

“But do we, for instance, need to keep the non-network side of Bord Gáis?” he asks. “I don’t think we do, and if there is the prospect that, should we proceed with the sale of the energy side of Bord Gáis, it would attract in a big player, then that would be compatible with our objectives.”

British utility Centrica, which owns British Gas, has been named as a possible suitor for Bord Gáis, although nothing has been confirmed. It would seem a natural fit. Both have evolved from being natural gas suppliers to businesses that supply both gas, electricity and a range of related services.

Given the pace of change in the overall sector, Rabbitte thinks that it is time for a White Paper on energy policy. The last one was five years ago. The Minister points out that there are significant events looming.

The Corrib natural gas field, which has the potential to supply up to 60 per cent of Irish needs when it reaches its peak, is set to come on stream in two years. There are plans to build a liquid natural gas (LNG) plant at Tarbert on the Shannon Estuary.

Both Corrib and the LNG plant will play a role in guaranteeing security of energy supplies, a subject that the White Paper will cover. Natural gas is used to generate about 60 per cent of Ireland’s electricity, with more than 90 per cent of what is used here being imported.

Rabbitte says the one element of Corrib about which he is enthusiastic is the fact that the Republic will have an indigenous supply of gas. Multinational Shell and its partners, Norwegian-owned Statoil and Canadian group Vermillion, are heading into the final phase of its development and gas will begin flowing in 2014, five years later than originally expected.

The delay was down to the controversy that occurred in north Mayo, where the gas will be coming ashore and which has not yet died away entirely. Rabbitte agrees that the row did put other big players off the idea of carrying out further offshore exploration around the Republic’s coast, which his department believes should hold more hydrocarbon reserves. However, he says that this situation is turning around.

Those objectives also include exporting electricity to Britain, something that wind farm developers in the Republic are keen to see happen, as they believe our nearest neighbour is a ready-made market for surplus energy.

One particularly vocal group is National Offshore Wind Ireland, which wants the Government to introduce guaranteed minimum prices for electricity generated by offshore wind farms. Onshore wind farms receive the equivalent of about €5 per megawatt hour. One figure proposed for offshore developments is €14.

Whatever the actual figure, the industry argues that the introduction of market supports would spark a wave of investment and job creation, and very quickly deliver earnings from exports.

However, the existing onshore supports are ultimately paid by consumers and businesses, through the public service obligation that is added to their electricity bills. The wind farms’ share of this will be €37 million this year. Rabbitte does not believe it would be appropriate to add to this burden.

In addition, Paul Gorecki of the Economic and Social Research Institute warned in a paper published late last year that even the current market supports could result in Irish electricity users subsidising their British counterparts if power were exported between the two countries.

“I do not think that we need a further imposition on the PSO in terms of offshore wind,” Rabbitte adds. “We do have targets to meet and all of our advice is that we can make those targets with onshore wind.”

The targets he is talking about are the State’s commitment to generate 20 per cent of all its electricity needs from renewable sources by 2020.

He agrees that the Republic has “bountiful resources” of offshore wind, but says a feed- in tarriff is not needed to turn that into electricity that can be exported to Britain.

The position as it stands is “that the British government has expressed to us that they would be interested in sourcing energy supply here”.

However, for that to happen, the two countries have to complete an international agreement. After that, it could be open to Irish-based offshore operators which want to export to Britain to avail of the supports available there. “That is a possibility that they should look at,” he says.

Rabbitte is not saying that offshore investors should simply plough on on their own. He believes that there are alternatives to offering them guaranteed prices for their electricity and says the State could still offer support to the industry through agencies such as Enterprise Ireland and the IDA.

New technology of a different kind has brought change to another part of Rabbitte’s brief, public service broadcasting. He is a strong believer in the basic principle, but thinks that the time to change how it is funded is fast approaching.

He argues that the current mechanism for financing public-service broadcasting, the TV licence, is beginning to look like an anachronism, as people increasingly use a range of different devices to watch television. “The convergence of technologies is making that almost inevitable,” he says. “It’s simply a fact that more people are viewing TV on the internet.”

The Minister wants a general broadcasting charge to reflect this fact. It is not, he argues, another tax, as it would be imposed in place of the licence, not on top of it. He “makes no apology for believing that public broadcasting is necessary and must be funded”.

On sell-offs

...There will be no State assets going up on eBay before St Patrick's Day

On Bord Gáis

. . . if there is the prospect that should we proceed with the sale of the energy side of Bord Gáis, it would attract in a big player, then that would be compatible with our objectives

On the TV licence

. . . public broadcasting is necessary and must be funded

On wind

. . . We do have targets to meet and all of our advice is that we can make those targets with onshore wind

On the ESB

. . . There is no obligation to sell a minority stake

On the record

Name:Pat Rabbitte.

Position: Minister for Communications, Energy and Natural Resources.

Age: 62.

Why is he in the news?He is the Minister in charge of State companies, such as the ESB and Bord Gáis, the future ownership of which is the subject of debate in Government and speculation in the media. Developments such as the opening up the Corrib natural gas field mean the energy market, a big part of his brief, is in for a shake-up, while he has other issues, such as the future of the TV licence, to ponder as well.

Career: He was first elected to the Dáil as a Workers Party TD in 1989 and was one of six of its TDs to leave and form Democratic Left, which later merged with Labour. He served as minister of state for commerce, science, technology and consumer affairs between 1994 and 1997.

He succeeded Ruairí Quinn as Labour leader 2002 and served in that role until 2007.