Siteserve Deal Won't Go Away - Michael Noonan Finance Minister In Deep Water

March 28, 2015

The Best Deal For The State

You may recall how Catherine Murphy, Independent TD for North Kildare, has been asking questions of Finance Minister Michael Noonan in the Dáil about IBRC’s sale of Siteserv to Denis O’Brien.
Mr O’Brien bought it for €45.4million cash while Siteserv owed Anglo €150million.
The sale involved IBRC writing off €100million of Siteserv’s debt with €5million distributed to Siteserv’s shareholders.
After the sale of Siteserv to Mr O’Brien, GMC Sierra won a State contract to install water meters. GMC Sierra is comprised of GMC Utilities Group and Sierra Support Services Group. Sierra is a subsidiary of Siteserv.
It was previously reported that Australian hedge fund Anchorage Capital offered a higher price – €52million – but that ‘elements of the offer were considered less attractive then the O’Brien bid’.
And that French company Altrad claimed it was denied the opportunity to make an offer for Siteserv – saying it had been prepared to offer €60million – but that it was ‘effectively denied the opportunity because its representative was told the Irish group was not for sale’.

Last December, Ms Murphy raised her concerns about GMC Sierra’s water meter contract, in the Dáil, asking how could GMC Sierra be awarded a contract [by former Environment Minister Phil Hogan] for water meters even though it didn’t legally come into existence until July 15, 2013, 15 days after the closing date for bids.
She also asked Finance Minister Michael Noonan if he was satisfied that the IBRC acted in the best interests of the State when it sold Siteserv to Denis O’Brien/Millington.
In his reply, Mr Noonan stated that the IBRC acted “at an arm’s length to the State” and that “commercial decisions in relation to IBRC were solely a decision for the bank.”
In another question, Ms Murphy asked Minister Noonan to furnish her with the so-called Relationship Framework and Operational Protocol which oversaw the interactions between the Finance Minister and the former management and board [headed by Alan Dukes, former Fine Gael leader] of IBRC before it was liquidated.
Ms Murphy asked Mr Noonan to indicate to her the precise financial thresholds under the framework which would have “triggered mandatory consultation in advance of a transaction and/or disposal”.
In a reply on February 26 last, Minister Noonan confirmed to Ms Murphy that the bank would consult with the minister in relation to “any transaction which resulted in an adverse impact on total regulatory capital of the bank of greater than €100million would require interaction between the minister and the IBRC”.
Further to this, Ms Murphy then asked, if that was the protocol, why wasn’t Minister Noonan involved in discussions with IBRC, regarding the Siteserv sale.

In a reply, Minister Noonan stated that the protocol only came into effect on March 29, 2012 – 14 days after the Siteserv sale was completed.
Yesterday, Ms Murphy received three more answers from Minister Noonan in relation to records kept of meetings between Minister Noonan and IBRC in respect of the Siteserv sale; if IBRC extended a €10million credit facility to Siteserv between 2010 and its sale in 2012; and about IBRC’s reported rejection of a higher offer for Siteserv.
In his responses, Minister Noonan said the file notes, minutes and other records regarding his meetings with IBRC are currently the subject of Freedom of Information requests and will be released in due course.
As for the €10million credit facility, he said it wouldn’t have been typical for decisions around credit facilities to be disclosed or discussed with Department of Finance officials.
And, as for the higher offer for Siteserv, he said a company which made a higher bid made representations to the Department of Finance, prompting officials from the department to meet with IBRC. At this point, IBRC chairman – and former Fine Gael leader – Alan Dukes reassured the Department of Finance officials that the transaction was the best result for the State.
Minister Noonan also said minutes and records pertaining to these meetings are subject to Freedom of Information requests and will be made available upon their release.
However, here is a more detailed account of Ms Murphy’s questions and answers…
In her first question, Ms Murphy asked if records were kept of any meetings Minister Noonan or his officials held with IBRC in respect of the Siteserv sale; what questions he raised in respect of payments to the directors of Siteserv, in light of the debt that was written off; what questions he raised in respect of the number of tenders considered; why Millington’s bid was more deemed to be more advantageous to the State and the questions he raised in respect of this who were involved in the tender process.
In response, Minister Noonan said:
“As way of background on the transaction referred to in the question, following a meeting between officials from my Department and senior management of IBRC held on 31 May 2012 it was agreed that my Department would review this transaction to better understand the decisions taken by IBRC. This review took place, by way of a meeting between officials from my Department and senior management of IBRC, on 11 June 2012. Following this review, a further meeting was held on 25 July 2012, which I attended along with officials from my Department and senior management from IBRC. At this meeting, the transaction referred to in the question was discussed further, along with a number of other topics. A further meeting between the former Secretary General of the Department of Finance, John Moran, and the then CEO of IBRC took place in August 2012 at which this matter was further discussed.”
“The file notes, minutes and other records regarding these meetings are currently the subject of Freedom of Information requests and will be released in due course as part of these Freedom of Information requests should officials in my Department consider their full release to be appropriate. The Deciding Officer will make the materials released under these Freedom of Information requests available to you upon their release.”

“Until those decisions are made by the Deciding Officer, I can confirm that at the meeting which I attended on 25 July 2012, it was put to senior management of IBRC that officials in my Department had concerns with a number of decisions taken by IBRC in relation to the sale of the company referred to in the question including the decision to allow the sale process to be led by advisors of the company referred to in the question, the decision to exclude trade buyers, the timing of exclusivity and the payment to shareholders. Senior management of IBRC confirmed to me at this meeting that the transaction involving the company referred to in the question was thoroughly assessed by the Board of IBRC prior to them
approving it and that the transaction was managed in the
best manner possible to achieve the best result for the State.”

Secondly, Ms Murphy asked Minister Noonan if IBRC extended a €10million credit facility to Siteserv between 2010 and its sale in 2012; if he’d confirm that all due diligence procedures were followed in advance of the forwarding of this line of credit; and if the €10 million or outstanding portion thereof was specifically recovered through the sale of Siteserv or if the money was written down entirely.
In response, Minister Noonan said:
“In relation to the Deputy’s query on a €10 million credit facility extended to the company referred to in the question between 2010 and the sale of the company in 2012, I am advised that it would not have been typical for decisions around credit facilities to be disclosed or discussed with Department of Finance officials unless required under the Relationship Framework which governed interactions between the Bank and the Department of Finance as these activities typically would have been within the ordinary course of business for the Bank.”
“Officials in my Department have also contacted the Special Liquidators but they are unable to comment on individual cases as the information requested is confidential and it would not be appropriate for them to release such information. This being the case, I am unable to comment further on this matter.”

A.M.R. (Mike) Aynsley Group Chief Executive 23 August 2012

Finally, Ms Murphy asked Minister Noonan, if he’d confirm the media reports that IBRC had turned down a higher offer for Siteserv because one element of that proposal included a mandatory eight-week due diligence exercise.
She also asked if Minister Noonan was aware that if IBRC had chosen this reported bid, the new framework agreement would have been in place once the said eight-week period had expired. She then asked if he felt the sale of Siteserv was rushed and, if so, why.
In his response, Minister Noonan said:
“As part of parliamentary question 97 which was answered on 12 March 2015, the Deputy is aware of the process which was undertaken to introduce a revised Relationship Framework for IBRC and the reasons behind this.”
“In relation to the sale of the company referred to in the question, it was after representations made by an unsuccessful bidder in the process and subsequent meetings between that party and officials in my Department that my officials met with IBRC and undertook a review of this transaction. Following this review, my officials were made aware that the transaction involving the sale of the company referred to in the question was run by the company referred to in the question along with its advisors. This review raised concerns with the quality of some of the decisions taken in respect of this transaction, including, among others, that a higher bid for the company referred to in the question was received after entering into an exclusivity agreement with the ultimate winning bidder.”
“In light of concerns stemming from the review of the transaction by officials in my Department, I subsequently met with IBRC’s Chairman [Alan Dukes] and CEO to discuss this transaction. The Chairman and CEO confirmed to me that the transaction process and its terms had been thoroughly assessed by the IBRC Board and that the transaction was managed in the best manner possible to achieve the best result for the State.”
“The file notes, minutes and other records regarding the review of this transaction by my officials are currently the subject of Freedom of Information requests and will be released in due course as part of these Freedom of Information requests should the Deciding Officer consider their full release to be appropriate. The Deciding Officer will make the materials released under these Freedom of Information requests available to you upon their release.”

The Best Deal For The State, Bodger, Broadsheet.ie March 27, 2015

Links

You Want Transparency

Denis O'Brien, Fine Gael And The Water Meter Deal

I'm Getting Fed Up Of The Constant Questioning From Catherine Murphy

Irish Water Stress Test Deadline Missed What Is The Signifcance

March 27, 2015

Irish Water Stress Test Postponed

At a meeting in March 2015 of the Select Sub-Committee on the Department of An Taoiseach Estimates for Public Services Deputy Sean Fleming (FF) commented on a letter from An Taoiseach Enda Kenny to the Chairman. He said “ We have received a very comprehensive reply from the Taoiseach on the matters raised. I wish to refer briefly to the issue of Irish Water and its classification in terms of the market corporation test. The assumption up to now was that we would know by March how that would work out, that is, whether Irish Water would pass that test. However, in the Taoiseach's letter, he says that the CSO is working to finalise its report in the next two to three weeks; hopefully it will be done by the end of March. He goes on to say that the assessment will then be provided to Eurostat and that the CSO has been advised that the final response from Eurostat is likely to take at least two months from the date of receipt of the assessment. At this stage it looks like it will be at least June, possibly later, before we get a final decision on the market corporation test for Irish Water. This is significantly at variance with what we understood and I am pleased to get that information on the record”

Questions Dail Ministers and MEPs Should be Asking

The significance in the Taoiseach's reply is even more compounded when he added “ the classification of publicly controlled entities for their market/non-market status is a relatively routine occurrence in the compilation of GFS (Government Finance Statistics)”. The under-reporting of the Taoiseach's reply to the Sub-Committee is surprising. If the stress test is ' a relatively routine occurrence' then how come the Irish CSO has not supplied Eurostat with their own domestic report expecially given the seriousness of the situation and the fact that they had months to prepare it.? And why have Eurostat let the Irish CSO miss the timescale for finalising the report by months? These are the questions all Dail ministers and Irish MEPs should be asking. Who benefits from the delay of the CSO's Irish Water stress test report?

Eurostat Not Asked For Advise From Irish Government

Buncrana Together asked The European Statictical Data Support (ESDS) for clarification on whether there is a delay in their market corporation test of Irish Water and if so how long will this delay be? Whether there is a delay what is the reason for it? The ESDS responded “there is no delay on the side of Eurostat. We have not yet received any request for advice on irish Water from the Irish Authorities.”

Who Benefits From Delay And Irish Water Future

Last year the European Union Statistic Office, Eurostat, was obliged to do a market corporation test (stress test) on Irish Water. The European Commission has to decide whether Irish Water can be judged independent from the Irish government. To meet the test Irish Water have to cover more than half their operating costs from income earned from customers. If the company passes the test then much of the state funds paid over to support its investments and operations are not counted when the EU calculates the state's deficit each year. If Irish Water passes the test then the money the State is paying the company to support its operations would not count towards calculating the annual budget deficit. If it does not pass the test the whole structure of Irish Water is in doubt. This occurance would have far reaching consequences for the Government, the State and Irish Water

Eurostat's report on Irish Water was supposed to be published in March 2015. In an article in The Irish Times, Mr Fleming said the timescale to pass the Eurostat test was this month, after which, on the assumption that Irish Water would pass the test of being an independent, stand-alone commercial semi-state body, homeowners were to begin receiving bills in April. In the same article Mr Fleming said the Government should ensure “people do not receive water bills from an entity whose right to exist is not yet determined”. An Tánaiste Joan Burton responded saying “the fact that the timelines may be shorter or longer is entirely a matter for those independent bodies, not a matter for the Government”. However, Joan Burton's statement is a bit misleading. Should it not be the EU Commission and national Governments that agree timescales and not some statistic office like Eurostat especially when national budgets or financial security of the state are involved. For whatever reason both Enda Kenny and Joan Burton are downplaying the significance of the delayed timescale of Eurostat's stress test, 'significantly at variance', as Deputy Fleming put it.

The Central Statistics Office is answerable to The Taoiseach's under the Statistics Act 1993, and is delegated to the Minister of State Paul Kehoe TD. It is debatable how independent the CSO can be since it is within the the Dept of the Taoiseach and answerable to him. The delay of the stress test certainly suits the Government and Irish Water? It buys them extra time to try to fullfill the criteria required for Irish Water to be classified as an independent, commercilly viable semi-state company.

The Irish Examiner January 24 2015 reported that “a crisis general election would be on the cards if official fears in Brussels casting doubt on the viability of Irish Water are borne out by EU watchdogs. A senior Cabinet source told the Irish Examiner the Government would not be able to continue in office if the Eurostat agency rules in April that the utility is not financially independent”. A European Commission report back at the beginning of the year stated that there was uncertainty over Irish Water's financial position created by the major reduction in charges forced by mass protests.

Does the Stess Test Mean Anything?

Enter the IMF. On the 25th March in an interview, see Gavin Reilly, Today FM says
"public opposition to water charges is beginning to weaken, as a result of the reduction in charges.
The comments are made in a new report on Ireland's economic progress - although a spokesman says the comments were written before the most recent demonstrations.
The Fund also says the government could need new austerity measures worth over half a billion euro if Irish Water fails the market corporation test.
It says the budget deficit would grow by 0.3% of GDP if the test is failed later this year. If this brings the overall deficit above the EU's 3% target, new measures would be needed to make up the lost ground.
This could mean the government would need nearly €550 million in new measures, depending on the state of other matters in the economy.
The IMF's Craig Beaumont says there will be no easy fixes if the new utility fails the test.

Pressure is On Irish Government

The pressure on the Irish Government over the outcome of the stress test must have been intense. Final dates for registering with Irish Water have been changed several times. The Government have now moved the deadline for registering to June 30 2015. A few weeks ago legislation was passed to allow County Councils and An Post (Irish post office) to pass residents details on to Irish Water. This was in response to the lack of households registering with Irish Water. On April 24 the Taoiseach said that legislation relating to those who do not pay the charge would come before Cabinet in the coming weeks and then it will go before the Dáil. He said “ There is a need for compliance and people to understand there will be equality in regard to compliance and that everybody who can pay should and will pay.” Implied threats and misinformation have been what seems a constant ploy, used both by Government Ministers and Irish Water to break the anti water charge protests. However, the protestors are not going away. The number of households not registering and not going to pay Irish Water charges is significant especially in relation to the viability of Irish Water. There is widespread scepticism among the public about the numbers of customers that the Govenment and Irish Water are quoting. Alan Kelly, Minister for the Environment has said 1.3 million have registered, Elizabeth Arnett, Irish Water spokeswoman gives 1.2 million whereas a month ago the figure quoted was approximately 900,000. Apparently this included households and farms that do not meet the criteria for a customer of Irish Water. Even the Government has admitted that there were mistakes made by them in the way Irish Water has been set up and handled. Alan Kelly Minister for the Environment announced that water bills will be starting to roll out starting April 2015. They will be posted to 1.8 million properties. Irish Water admitted that some of the details on the bills may be incorrect, 0.5% of meters will not have been read and that up to 150,000 properties with private wells and septic tanks will be mistakenly billed. As well as that Irish Water is far from completing their water meter installation programme and in fact it may never be completed due to the level of opposition.

Buncrana Together 27 March 2015

First Chink In Coalition Appear Over Irish Water

March 26, 2015

Tánaiste: ‘Deeply problematic’ to take water bill from dole

Tánaiste Joan Burton has told the Labour Party that it would be “deeply problematic” to deduct dole from welfare claimants who are unwilling to pay water charges.
The Social Protection Minister made her comments last night at the private parliamentary party meeting where she answered queries from TDs and Senators about speculated new compliance measures.
She told members she did not know where the proposed measures had emerged from and that it would be very difficult to deduct people’s welfare.
Her comments came as Enda Kenny earlier said most people want to know if their neighbours are paying their Irish Water bills as he revealed sanctions for non-payment will be unveiled in the coming weeks.
Mr Kenny’s comments come following an admission by Irish Water that the utility will issue thousands of bills to the wrong houses over the coming months.
He said legislation relating to those who do not pay the charge would come before Cabinet in the coming weeks and then before the Dáil.
A level of fairness in charging was needed, stressed the Taoiseach.
“The majority of people who have signed up as customers of Irish Water and will continue to sign up want to know that their neighbours, including the deputy, will make their contribution to the cost of production of quality Irish water in the coming years,” he said.
“There is a need for compliance and people to understand there will be equality in regard to compliance and that everybody who can pay should and will pay.”

Irish Examiner Thursday March 26 2015