Irish state asset sale must consider pensions deficits, opposition warns
IRELAND - Opposition lawmakers in Ireland's parliament have raised concerns over the sale of state-held companies in light of several "significant" pension deficits.
The €3bn proposals, announced by minister for public expenditure and reform Brendan Howlin in late February, would see the sale of Bord Gáis Eireann and several power-generation assets deemed "non-strategic" in an effort to comply with the country's memorandum of understanding with the European Union and IMF.
However, Éamon Ó Cuív - who resigned as deputy leader of the opposition Fianna Fáil party last month - argued that the sale needed to take account of any deficits within the pension funds.
"I wonder how much money will be got when one takes into account the pension fund deficits and calculates a multiple of the loss of the dividend," he said.
"In other words, the value of an asset must be set against the income one would have earned from that asset, where one owns the asset and the income, whereas when one sells, one sells the goose that lays the golden egg, unless one gets a good multiple return."
According to the most recent annual report, the seven defined benefit funds maintained by Bord Gáis had combined assets of €220m, with a funding shortfall of €20m at the end of December 2010.
It is unclear how the obligations for the schemes would be divided between Bord Gáis Networks, remaining in state ownership, and the retail division earmarked for sale.
The sale would also cover sources of power generation owned by the country's energy utility ESB.
It has recently sought to address a €2bn deficit by shifting from final salary to a career average revalued earnings arrangement. It is also now able to account for its fund as a defined contribution scheme.
Speaking in a separate debate, minister for energy Pat Rabbitte deflected questions that the deficits could lead to a "potentially depressed" sales price, or even industrial action.
Rabbitte said the issue of the pension funds would be "considered down the line", only telling the Dáil: "I am glad the ESB has managed to get the support of its group of unions to refurbish the pensions scheme and done so imaginatively and creatively. Bord Gáis is well on the way to doing the same."
Ireland's national carrier Aer Lingus, in which the state still owns a 25% stake, could also be sold, with opposition transport spokesman Timmy Dooley arguing that ownership should be seen as "strategic" and that any sale was short-sighted.
"The return will be minimal when we take into account the pensions hole that will have to be dealt with as part of any sale," said Dooley, adding there would be nothing left for the "noble aims" of job creation.
The airline has faced resistance from one of its main shareholders, rival airline Ryanair, to address its €700m funding shortfall, with chief executive Michael O'Leary recently warning that it would consider legal action if deficit contributions were made.