Portuguese Energy Privatisations.

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All three ‘programme’ countries, Greece, Ireland and Portugal, are committed to privatisation of state assets.

In Portugal, the state owns 25.05% of EDP, a listed electricity generation, distribution and supply business, which also owns some gas operations. A slice of EDP’s operations are in Brazil, some in Spain, most in Portugal.

The state also owns 51.1% of REN, a listed business which owns the electricity transmission business and the high-pressure gas pipeline network in Portugal, as well as some LNG and gas storage operations. It has no significant activities outside Portugal. Both EDP and especially REN embrace regulated activities. Both gas and electricity were originally state-owned in Portugal.

The government has announced the sale of 21.35% of the shares in EDP to the Three Gorges power company of China for €2.7 billion, which will leave the government with less than 4%. The shares are widely held and Three Gorges will be the biggest shareholder. The government has also announced its intention to sell part of its stake in REN, presumably taking it below majority ownership.

These developments are interesting in view of the Irish government’s decision to eschew vertical separation at the ESB and to seek to sell a minority stake in the existing company. Portugal went for vertical separation of the network companies some years back, along the lines of the recommendation for Ireland in the of the Review Group on State Assets which reported in April 2011, and has now decided to exit ownership in powergen/supply more or less altogether. In addition, they seem willing to go below majority control of REN, the networks business. The State Assets report recommended retention of state ownership, at least for the time being, in these businesses.

45 Responses to “Portuguese Energy Privatisations.”

  1. John Foody Says:

    @ Colm

    If you’ll allow me, I’d like to ask a question that has been bothering me. Regarding the ‘Recommendation 24′, in the ‘Report of the Review Group on State Assets and Liabilities’ i.e.the sale of ESB minus the transmission network. Why would you recommend sale of the distribution network? It seems to me such a network is a natural state monopoly, if it was ‘eircomed’ we’d be in real trouble in 10 years or so.

  2. colm mccarthy Says:

    Fair question. Distribution is a (local) natural monopoly and needs to be regulated, regardless of ownership. Transmission is however a network, (distribution is not) and is the pitch, if you wish, on which the competition game is played. So the orthodox prescription is that generation and transmission should not be owned, much less operated, by the same people. Thus the recommendation for vertical separation.

    Distribution (and supply) businesses have been left with generation in many countries, but with regulation of distribution, and access rules. If you screw up regulation, you are going to have problems, with either public or private ownership.

  3. VincentH Says:

    How on earth it will make a ha’p’orth of difference to the customer when the chunk the exchequer takes is huge.
    This selling off is just ludicrous, overall. Why on earth sell off something that renders a profit. This makes NO sense beyond idiotic ideology unless that is you have an investment that will give you better return with the same controls.

  4. John Foody Says:

    @Colm

    I would argue that the Distribution network can also be part of ‘the pitch’. Even more so now you have wind making up 40%+ of generation on some nights, a lot of wind farms require the distribution network (38kv) to get to the transmission network (100kv+). As most of them are in the middle of no where.

    I agree there’s no need to keep the supply business (Bord Gais or Electric Ireland), Power Gen or ESBInternational to be state owned. The TAO/TSO and DSO/DAO separation, but selling the poles on the distribution network seems to me like looking for trouble, no matter how regulated it is.

  5. Paul Hunt Says:

    A delicious and provocative Xmas offering from Mr. McCarthy. Thank you.

    The biggest challenge facing all electricity and gas companies and utilities throughout the EU is to secure efficient financing of a huge volume of investment. This volume of investment includes replacement of existing, but getting close to being clapped out, generation plant but it also includes electricity and gas network interconnections to secure an efficient EU internal market. In addition it comprises new gas investments to diversify the source and mode of supply. And, to top it off, it includes a huge cliff face of investment to meet the EU’s gloriously expensive carbon change agenda.

    In terms of generation replacement investment and prospective diversity of gas supply Ireland is better positioned than most. But it has been secured at excessive cost to consumers and the economy. What the State Asset Review Group did not – for, I suspect, various reasons – highlight was the fact that, in the absence of direct state financing, consumers were required to pay up-front to financing a goodly portion of investment and then to pay for the full return on, and return of, all this investment.

    Consumers and the economy have been hosed – and continue to be hosed – to keep the ESB and BGE in the style to which they have become accustomed. They will be hosed even more to pay for this gloriously expensive renewables programme.

    Successive governments did not provide direct financing, apart from some limited forgoing of dividends, when they had access to very cheap money and it would have been a hugely profitable public investment and reduced the burden on consumers. Now it doesn’t have any.

    The primary issue is securing low cost-of-capital, efficient financing of investment; privatisation is a secondary issue.

  6. seafóid Says:

    A bit off topic mais quand meme..

    A Christmas special for Michael Hennigan

    Property-developer-turned-emigrant Sean Dunne was back on his home turf after returning from the United States where he has set up home in Connecticut with his wife Gayle Killilea.
    The couple arrived separately at the exclusive Unicorn restaurant on Merrion Row for a pre-Christmas lunch yesterday afternoon.
    Ms Killilea, who was wearing in a chic black dress and fur-lined coat, arrived at the restaurant first while her husband entered a short while later, after finishing a conversation on his mobile phone.

    ‘BARON’

    The former ‘Baron of Ballsbridge’ admitted earlier this month that he was forced to emigrate to find work. However, he returns on a monthly basis to manage his Irish business interests.
    He owns the D4 hotels in Ballsbridge, one of which was recently damaged by flooding.
    He also recently stepped down from his company, Mountbrook Homes, after 16 years and was replaced as director by his wife. Most of Mountbrook’s assets are controlled by NAMA

    Read more: http://www.independent.ie/lifestyle/independent-woman/celebrity-news-gossip/famous-faces-step-out-for-a-festive-feast-2972628.html#ixzz1hXkXEp8d

  7. The Dork of Cork Says:

    The privatisation of natural utilities and the subsequent reduction of capital spend is at the heart of European Industrial collapse.

    Any Austerity is now just transformed into consumption for other people – as there is no longer any vector towards core capital investment….. this entire absurd game is pointless when looked at in a holistic manner.
    Utilities that make profits are only in the extraction business – they always subtract wealth over time.

    http://www.iea.org/stats/pdf_graphs/PTTPES.pdf

    Happy Christmas Proles.

  8. EWI Says:

    @ Paul Hunt

    And, to top it off, it includes a huge cliff face of investment to meet the EU’s gloriously expensive carbon change agenda.

    You make investment sound like a bad thing. Jobsjobsjobs.

  9. derriz Says:

    “Why on earth sell off something that renders a profit?” Simple arithmetic based on the cost of finance and nothing to do with ideology. I very much doubt any of these semi-states are returning 10% dividends.

  10. paulr Says:

    @ derriz
    But is that not the problem, 10% return on investment is massive and could never keep on being real. When the Shareholder became KING, reason was lost and that is why our wonderful banks lent money foolishly and drowned our country in a lake of greed, or why business thinks that BIG profit is good when it is done at the expense of society. Nothing wrong with profit, but greed… well just look at the mess we find ourselves in:-(

  11. Michael Hennigan - Finfacts Says:

    On a general point about privatisations, I suppose there is some consistency in the fact that the best termed employees in the commercial sector also can get icing on their cakes with up to 5% of state companies free plus the option of another 9.9%, usually at a knockdown price, sanctioned by people who’ve nothing directly at risk.

    Usually there is some trade off on work practices where aspirations count more than reality.

    This isn’t remotely comparable with stock options in a startup in lieu of lower than market pay, while working long hours.

    The illusion of access to power offered by clientism is no substitute for collective power in the Irish system.

    @ seafóid

    The New York Times did accept my suggestion two years ago that Seán Dunne should be their poster-boy of the Irish bubble.

    It’s interesting that the ‘exclusive’ Unicorn, bust and reborn, is still popular with the remnants of the nouveau riche gannets.

    The Irish Independent reported last March that “suppliers owed €2m by the company behind the fashionable Unicorn Restaurant were stunned to learn…that it is no longer run by that company.”

    http://www.independent.ie/national-news/euro2m-creditors-left-stunned-as-top-restaurant-has-new-owner-2565534.html

    I recall a waiter in the Unicorn who had what Americans would term ‘an attitude problem.’

    Serving the assumed rich can make some arrogant too.

    I do have a lot of respect for waiting staff as I regard a job as a waiter at The Broadmoor hotel in Colorado Springs, as one of the highest pressure jobs that I’ve had — it’s not that I’ve lived in monastic serenity since.

  12. julO Says:

    Hi! In Finland this subject has caused much conversation so we made a song about it (We are small finnish band). Here is a link to our demo. Please comment!
    http://www.youtube.com/watch?v=xSJonHUg1Z8

  13. Paul Hunt Says:

    The key point in Colm’s post is that Portugal implemented the restructuring/unbundling of the networks from generation and supply in line with EU primary legislation and as recommended for Ireland by the State Asset Review Group. Successive Irish governments – and this one is no different – have implemented a cunning operational unbundling while rataining the state-owned electricity and gas businesses as integrated entities in ownership and financial terms.

    They have been very careful to comply with the letter of EU primary legislation but they have employed every trick in the book to contravene its spirit so as to preserve the market power and inflience of the semi-states.

    And this Government has been forced down this road of a part privatisation of the ESB, which will do nothing to reduce the burden its activities impose on consumers and the economy (and may well worsen it), simply because this is all the ESB namagement and staff will countenance – and the staff may strike in any event.

    So we have a government that is able to extract €3.8 billion from the economy with almost negligible protest, but is powerless to restructure a business it almost fully owns on behalf of the people. And effective restructuring of the electricity and gas semi-states, while they remain in piblic ownership, would significantly reduce the burden they impose on consumers and the economy and could release equity invested in excess of the projected privatisation proceeds. And where do people think these wonderful profits come from? They do not come from any miraculous efficiency (even if the efficiency of BGE’s basic operations compares well with their peers). They come from the streams of revenues, the gouging of which from business and household consumers the CER either sanctions or approves. What revenues the ESB wabts, the ESB gets – let the consumer go hang.

    The simple fact is that the Government is unable to pursue the restructuring that the State Asset Review Group recommened, which would be in line with both the letter and spirit of EU primary legislation – and which would generate significant benefits to consumers and the economy – because it lives in dread of ESB staff going on strike and bringing the country to a standstill. Its carefully cultivated – and much-trumpetted internationally – competence to implement reforms without provoking serious popular discontent would be in tatters.

    When a group or sectional interest is able to prevent a government acting in the public interest (and prevents a parliament – insofar as we have one that deserves that name – legislating in the public interest) that group or sectional interest becomes the government in that area. It is a measure of the extent to which Ireland’s democratic institutions have become so corrupted that a sectional interest (representing the narrow interests of, say, 10,000 management and staff) can bend a government – even a government with an overwhelming Dail majority – to its will.

  14. Brian Woods Snr Says:

    @ EWI: “Jobsjobsjobs.”

    Q: Yes, but from whence do they come? Where is the surplus production that we can sell abroad for income?

    A: Down on the farm, is where. Ah! But not many folk like dirty, backbreaking, shitty, poorly-paid, shovel-ready work. Its …. … Well, not Manly.

    @PH: “It is a measure of the extent to which Ireland’s democratic institutions have become so corrupted that a sectional interest (representing the narrow interests of, say, 10,000 management and staff) can bend a government – even a government with an overwhelming Dail majority – to its will.

    This sounds very like a voluntary request. “What position would you like me to assume?”

    If Nigeria goes ‘pearshaped’ – and the odds must be positive, then expect oil to increase sharply (the overall price is slowly creeping up anyhow*). What level of energy price increases would (could be) tolerated before the Gov was ‘forced’ to act?

    Brian

    *There may well be a 12 – 18 month decline when the major western developed economies eventually stagnate. After that, its TSHtF time! Rem that at least 2 billon folk are using between 0 and 1 litre of oil per day. Chindia is in range 2 -5 l pp /d. EU and US use in range 15 – 25 l pp /d. And, the daily output has stalled just below 14,400 bil l/d. Not much time left. When our energy imports decrease, EWI: its unjobs time!

    B

  15. John Foody Says:

    @ Paul

    ‘The simple fact is that the Government is unable to pursue the restructuring that the State Asset Review Group recommened, which would be in line with both the letter and spirit of EU primary legislation – and which would generate significant benefits to consumers and the economy’

    Do you have any references/papers/material backing up this statement? I’m quit sceptical that the ‘State Asset Review Group’ provides a panacea to our energy industries woes. In particular I consider the idea of selling the Distribution network as very foolish and something that would be ultimately extremely costly to the state, i’d see it as akin to doing an Eircom, but I’m open to reading evidence to the contrary.

  16. EWI Says:

    @ Brian Woods sr

    Yes, but from whence do they come? Where is the surplus production that we can sell abroad for income?

    As even Mr. Tol was forced to admit, combating climate change through the renewal and upgrading of infrastructure and tech will lead to real economic activity. He has, after all, told the poor unfortunate citizens of Cork something similar to this last year so can hardly claim otherwise now.

    People in work is the only way out of this mess. Austerity won’t deliver this (whatever Kenny might have been smoking when he made certain claims otherwise to the Oirish Daily Mail yesterday).

  17. The Alchemist Says:

    Perhaps, some of the much vaunted reform promised under Croke Park might be in order first? Very busy shopping day to day yet Most Dublin intercity services finished up before six o’clock likewise for mainy commuter trains.

    The lack of decent investment in broadband, is that a legacy of the ‘successful’ Eircom privatisation? I am not convinced that a small population country can successfully mount competitive privatisations without doing the reform bit first.

  18. Michael Hennigan - Finfacts Says:

    Only if we had some more Facebooks, we wouldn’t have this hassle of upending any insider applecarts.

    Facebook Ireland generated a pretax profit of €1.9m, up from €297,000 in 2009; revenues jumped from €15.2m to €229.1m in a 4 month period.

    Who said the domestic economy is in depression?

    It’s easy to see how national account statistics can become distorted – - nevermind, mantras on service exports.

    How dare that Merkel expect American companies pay tax on their earnings in Germany…how dare that Merkel avoid taking responsibility for reckless lending by German banks to us eejits!

    Richard Bruton is due to announce new jobs schemes and incentives in Jan — watch out for the targets: gross direct and indirect jobs, gross direct jobs, and net direct jobs (allowing for job losses) – - you can be sure the latter will not be included. Anyway, who’s going to wonder?

    He will have something the brag about on the flagship jobs program: 30 spinouts from university research last year. Some (?) claimed this was a higher rate than Stanford. Minister for Research and Innovation Séan Sherlock said in Nov in response to the Times Higher Education and QS World University rankings that the number of Irish universities in the top 200 considered against GDP, “shows that Ireland ranks 6th in the world.”

    Only if we could monetise bullshit?

    So from the €2.5bn science budget, the jobs from spinouts before failures: likely 120 and a max of 150.

    The Organisation for Economic Cooperation and Development (OECD) says there is “little evidence of success” in the commercialisation of university research. Why would we listen to them? – - dismissed during the bubble as “academic bean counters” speaking from Paris “with an air of authority that is utterly undeserved.”

    Spending by big countries on general research is important and after 30 years of US government support in the development of exploration technology both direct in public laboratories and support for private projects, the shale gas revolution is providing a payback.

    The Obama administration has an $80bn clean technology program but the solar energy market collapsed this year with the end of subsidies in some markets and oversupply in China.

    The Obama administration gave a $535m loan guarantee to a solar manufacturer that folded this year.

    Some more words of wisdom here; half the article is available for freeloaders!

    http://www.finfacts.ie/irishfinancenews/article_1023698.shtml

    Sherlock continued in his Nov release: “Thomson Reuters Essential Science Indicators 2010, which measures the impact of countries’ scientific research, ranks Ireland in 20th position in the world across all research fields – a dramatic rise from our placing of 36th as recently as 2003. Ireland is ranked even higher in areas such as in Immunology (3rd) and Materials science (8th).

    Ireland continues to produce large numbers of highly educated and skilled workers, despite economic pressures, ranking 4th in the OECD and 1st in the EU in third-level attainment rates of 25-34 year olds.

    In addition as captured in the World Competitiveness Yearbook (2011) IMD, Ireland ranks 1st globally for availability of skilled labour and openness to new ideas (up from 4th in 2010) and is ranked 4th globally for labour productivity per person employed per hour (up from 6th in 2010).

    Minister Sherlock concluded by saying ‘Of course we know that we can continue to further improve elements right across our higher education and innovation system but it is through the quality of our people plus the exceptional work and research being performed at all of our institutions, that we can successfully build a true knowledge economy, one that will grow from strength to strength.’”

    Here he has followed the script of predecessors by conflating the FDI and indigenous sectors and for years this blarney got big audiences at home and abroad. However, in recent years it has begun to collide with the reality of 315,000 officially unemployed and 448,000 on the Live Register.

    Exports rise but there are no additional jobs; billions of euros are spent on research in the past decade and about 8,000 full-time equivalent research jobs have been added to the public payroll but the net jobs added in the commerical sector is likely less than two-thirds the number currently employed in the rump of Anglo Irish Bank.

  19. Philip II Says:

    Again michael h a hard to understand semi structured rant. So…where donuounsee the jobs comig from? You constantly critique gov investing in r&d but never tell us an alternative. Are you still in Kuala Lumpur?

  20. Paul Hunt Says:

    Any comment here or elsewhere or any attempt to advance a sensible course of action (as opposed to the consumer and economy-damaging nonsense currently on the table) is totally futile, since the Government decided on its current course on 14 Sep. 2011.

    Legislation will have to be advanced to give it substance, but, in the absence of a functioning parliament that would assess and reject this nonsense for what it is, the Government is almost certain to prevail. This is a done deal.

    The opposition factions will oppose it, of course. But not because it will be a bad piece of legislation – and demonstrably not in the public interest. It will be opposed because it will put Labour in a bind. Some of its core support will defect – and, from the perspective of the opposition factions, hopefully in to their arms. Labour may lose another couple of TDs – on a point of principle, of course, but really to secure a sporting chance of re-election.

    Labour will cling on tightly to the intention to use any proceeds to finance a Strategic Investment Fund – leading to a Strategic Investment Bank. (It will be interesting to see how much of the proceeds the Troika will consent to have diverted in this manner.) FG is likely to hold firm – though there might be the odd unexpected abstention or defection. But Labour will hunker down and that will see the Government cross the line comfortably.

    The ESB staff, their unions and various unpersuadables on the left will make the usual noise and posturing, but, after a bit of token noise about strikes and once an appropriate percentage of the net value of the company is ear-marked for the staff ESOT, it will all subside pretty rapidly.

    After all the angst and frantic activity behind the scenes since the State Asset Review Group was established in July 2010 the waters will close over quickly and it will be back to ‘business as usual’, with the ESB (and BGE) continuing merrily to gouge consumers and the economy. The only difference is that it will have to make a bit of space for a private sector player – probably external – to insert its snout in the trough. And Labour might have a billion or so to finance some of its pet projects and whizzo schemes.

  21. Michael Hennigan - Finfacts Says:

    @ Philip II

    In the linked article I suggested €1bn of the science budget should be used elsewhere to promote the formation of startups across all sectors as they are crucial for sustainable job creation.

    I’ve covered this issue more indepthly in other articles including a bigger allocation of the €15bn public procurement budget to startups e.g water meter installation; repair and maintenance and website work that than be competently done at a fraction of the cost of contracts that are given to big firms; big contracts should include designated subcontracting.

    A recent 2,000 word article on jobs strategy argues that the prospect of high Irish long-term unemployment will not be seriously impacted by new incentives and schemes.

    A change of mindset at policy level is urgently needed including replacing the spin that dominates enterprise policy with an unvarnished assessment of the challenges facing Ireland in a changing global economy… Minister for Finance Michael Noonan announced in the Budget support for exporters targeting BRIC countries (Brazil, Russia. India and China from the original classification plus South Africa).

    It will help a number of firms but exports to these five countries only accounted for 2.3% of total exports in 2010 with China accounting for the lion’s share. Exports to India were at a decimal point. Besides most of the existing exports are made by foreign firms.

    Foreign language competence remains poor and is an impediment to developing markets in Europe. According to Eurostat, the EU’s statistics agency, nearly 80% of children in the EU were studying a foreign language at primary school in 2008; in Ireland the level was 3%!

    I suggested that focus for indigenous firms should be mainly in the undeveloped single currency area not difficult emerging markets far from home.

    http://www.finfacts-premium.com/2011/1254
    /Ireland_jobs_government_crisis_plan

    The international market is much bigger than it was in the early 1990s and while improved competitiveness helps, developing new export markets is a hard and long slog.

    My son opened a trading startup in Dublin in the past year and is doing OK.

    Have you any experience of startups, selling domestically or developing export sales?

  22. Michael Hennigan - Finfacts Says:

    Article link:

    http://bit.ly/vHxoVZ

  23. Brian Woods Snr Says:

    “… reality of 315,000 officially unemployed and 448,000 on the Live Register.”

    This is an awfully lot of folk to ‘find’ jobs for. Can’t happen:math is firmly against this. This looks very like a Rock-and-a-Hard Place scenario. The usual emigration channels have been throttled back and there are ??? thou new entrants to workforce each year, less those who have to retire (age and infirmity) and maybe get a pension. Nett MUST be less, or else!

    My advice would be to do a trawl of the 1930s archives and see what Ireland was like then (demographics and all). Because this is where we are headed. OK, we will have better housing, communications and equipment, but incomes (and energy access) will be severely constrained. Dork and I are somewhat at variance about the need to move folk out of urban areas and to re-populate the rural parts (I favour this – with strong conditionalities). The inevitable outcome of this policy would be a significant decline in population of this island. If this does occur, then the economic consequenses are also severe. As I said above, Rock v Hard place.

    Xx% of folk are not paying energy utility bills. This nasty number appears to be trending up. That’s trouble, big time.

    Brian.

  24. Michael Hennigan - Finfacts Says:

    @ Brian Woods Sr

    Brian,

    Your’re on the money whatever about the value of rural re-education camps!

    The key statistic that puts the challenge in focus and neuters the vacuous superlatives of public officials, is that in the period 2001-2007 only 5,000 net jobs were added in the international tradeable goods and services sectors.

    This includes firms like Guinness, Kerry and Glanbia, which were both
    exporting and selling domestically during an out-of-control credit boom when the overall workforce expanded by over 400,000.

    Every country is trying to export their way out of recession. As for China, an MIT professor of Taiwanese origin, developed a breakthrough lithium battery and began manufacturing in China. Even tbough he deliberately slowed the transfer of the technology, staff began a rival operation using his technology.

    Besides high tech, Australia and NZ supply western type food.

  25. The Alchemist Says:

    @Michael H
    Last week I caught on piece on RTE radio where a university president bemoaned a brain-drain. He followed up by saying that several of his academic staff were now sending their offspring abroad for an education. The first thing that struck me was the very fact that they could afford this luxury with free fees on their doorsteps. The second thing was yet again how the collision between reality and citation indices seems to pass otherwise very bright people by. The entire Smart economy effort is simply not working.Clanking chains in the attic to frighten the political children won’t save it but might keep the cabinet on message. It could never have worked but when the cash was being shelled out once again those best placed to lift the veil kept their heads down. It is not alone in its Olympian vanity. Look at FAS. A ridiculously large budget at a time of full employment and no one shouted stop.

    On the matter of privatization, the likelihood is that the vested interests will use the endless debate surrounding it to deflect attention from seriously overdue reforms in the Public Service. There was a piece on RTE radio today concerning the ending of milk quotas in 2015. Surprising none of the assembled, and for once it was mainly those outside the usual wedding guest list that RTE pundits keep ready, delved into whether the relevant areas of the public service were fit or would be for the changes. A curious omission given that Dept of Ag in its many guises employs more people to police the farming sector than the gardai have available to them.

  26. EWI Says:

    @ the Alchemist

    There was a piece on RTE radio today concerning the ending of milk quotas in 2015. Surprising none of the assembled, and for once it was mainly those outside the usual wedding guest list that RTE pundits keep ready, delved into whether the relevant areas of the public service were fit or would be for the changes.

    So you’re moaning that a piece on the milk quotas didn’t focus on public sector ‘reform’ (as cuts are called these days)?

    You really are a parody. What’s next, complaints that RTÉ’s cookery programs aren’t focusing on public sector increments?

    The lack of decent investment in broadband, is that a legacy of the ’successful’ Eircom privatisation? I am not convinced that a small population country can successfully mount competitive privatisations without doing the reform bit first.

    This is a first, even in this place – blaming the inevitable course and final destination of private sector pillaging of the former Telecom Éireann on the public sector.

  27. The Dork of Cork Says:

    @Brian
    Much of this energy crisis is a result of a multiple decade malinvestment nightmare which accelerated in the 80s , not just simple depletion.
    The use of very high quality fuel such as NG for electricity generation is a criminal waste of a precious resourse and is the primary mechanism used to create artifical profits for the new privatised or semi privatised electrical utilties.
    A utility with a national strategic objective rather then a narrow profit agenda would seek to free up this gas for its best uses (direct combustion) & reduce the opportunity costs dramatically.

    http://www.iea.org/stats/pdf_graphs/FRTPESPI.pdf

    http://www.iea.org/stats/pdf_graphs/GBTPESPI.pdf

    But Utilities cannot make much profit when seeking national goals – hence a destruction of the commons & general wealth.

    Question : how many reactors did EDF construct since semi privatisation ?
    Not many me thinks as companies cannot make much money out of this highly capital intensive operation – however it dramatically increases the wealth of the commons as it frees up fossil fuels for their optimum uses.

    How can privatised utilties persue these deep national strategic policies ?
    Answer : They cannot.
    Me thinks something is very wrong with European energy policey & deregulation dogma.

  28. John Foody Says:

    @ Paul Hunt and @ All

    Can anyone provide me with an example of a country benefiting from the privatization of it’s electrical distribution Network?

    Also, any sign of JTO new blog?

  29. Michael Hennigan - Finfacts Says:

    @ EWI

    private sector pillaging of the former Telecom Éireann on the public sector.

    It was the Government that privatised the telco with few conditions.

    The main union and workers avidly drank the soup because they perceived that they had got a good share of the spoils.

    It was the first manifestation of Celtic Tiger public hysteria and Shane Ross recommended public purchase of shares and later led a campaign against Eircom.

    What followed later was in the same shambolic vein.

  30. The Alchemist Says:

    @EWI

    The Single Payments Scheme was introduced a few years back. Didn’t hear of any major shakeup in the technically redundant Area Aid section in the dept of Ag. In fact, the same forms are still issued with some minor tweaks, even though the arrival of the Single Payments Scheme heralded a ‘formless’ future.

    For decades Teagasc was the living breathing face of a real knowledge economy outfit in Ireland. During the bubble years all talk was of anything but the food industry. It was too backwards and obviously industrial to be worth bothering with. Now that the bubble has burst, politicians and their PR cheerleaders have ‘rediscovered’ farming and food as sources of exports and employment. Sure if cows could Tweet their milk yields wouldn’t all the country’s problems be solved?Time to clean out the stalls…

  31. colm mccarthy Says:

    John Foody:

    You could spend a month reading the technical literature on utility regulation and the experiences of different countries with privatisation. Here’s somewhere to start, and good luck!

    http://www.regulationbodyofknowledge.org/

  32. Brian Woods Snr Says:

    “There was a piece on RTE radio today concerning the ending of milk quotas in 2015.”

    I caught this piece (well, most of it). Those bozoes are living in cloud-cookoo land. There is a nasty suprise waiting for them: energy costs. OK, so the agri sector will get 30% rebates, then 50%, then … Without significant tit-sucking from the unfortunate Irish taxpayer, agri (as it iscurrently configured) cannot expand, and it will be lucky to flat-line. Not a peep from any of the contributors about those little matters (subsidies+ energy cost increases). No sireee!

    “Sure if cows could Tweet their milk yields …” But I thought this was in the udder!

    “… politicians and their PR cheerleaders have ‘rediscovered’ farming and food as sources of exports and employment.”

    They have not ‘rediscovered’ the Reference Frame for real farming. Sure, we might well be able to ‘employ’ 100,000 stout fellas (and lassies), but my oh my. They will just spend those dark winter evenings making babies. Bang goes your economic model, as they say.

    Brian

  33. The Dork of Cork Says:

    No new EDF Nuclear stations have acheived criticality since it has become a limited liability corporation some 6 / 7 years ago now.
    With the now much fewer new stations planned behind schedule for the first time in decades.
    Could it be about CAPITAL cost cutting to achieve a tempory artificial Profit ……..NEVER

    You see , utility companies may need to pay top money for people with actual skills in the real world of making stuff.
    What exactly is this profit stuff if it needs to subtract from a countries core capital base ?
    Me thinks the dynamics withen the electrical utility industry are almost identical to bank utilties profits before the bust.

    THE PROFITS WERE ARTIFICAL.

    Has Europe’s energy import dependency increased since the liberlisation experiment of the 80s ?
    You Betcha.
    And its not just about North Sea depletion – it goes much deeper then that , to who formulates Europe’s Energy Policy and the most important question of all.
    Who benefits ?

  34. The Dork of Cork Says:

    Just looking at eurostat primary energy production for EU 27 (Nuclear) and it peaked in the year 2004 at 260 MTOE , falling to 231MTOE in 2009.

    Could it have to do with EDFs privatisation during that time ? & also more local body blows such as the shutting down & non replacement of the Lithuanian plant.

    European import dependency has risen from 45.1% in 1999 to 53.9 % in 2009.
    Partly as a result of non investment in Nuclear & also of course the decline of the North sea reserves.

  35. Paul Hunt Says:

    It’s unfortunate that the focus is on energy (electricity and gas) industry privatisation rather than on the structure and organisation required to ensure efficient operation, production, investment and consumption irrespective of ownership.

    It’s not only stupid, but potentially very damaging, to focus on the former without conducting a comprehensive assessment of the latter. But for Ireland, and probably to an extent or Portugal and Greece, this focus on privatisation was always likely to dominate, given the Troika’s insistence on realising at least some of the state’s equity investment in these and other industries to supplement the diminished fiscal coffers.

    And, given the ToR of the State Asset Review Group in July 2014, it was likely to dominate even more in Ireland – despite the best efforts of the Review Group to balance the emphasis by addressing other aspects in relation to efficient operation and regulation that were also in its ToR. Indeed the initial version of the EU/IMF technical MOU demanded a detailed assessment of the electricity and gas sectors, drawing on the work of the Review Group, that would take place from 1 July 2011 to 31 March 2012.

    It’s quite clear that the energy semi-states, most likely aided and abetted by the Department and the CER – not to mention the unions, have been very successful in exerting pressure behind the scenes to water down this requirement to almost nothingness. At each quarterly review by the Troika, the actions demanded for the energy sector have been altered and whittled down, so that this 9-month detailed assessment of the electricity and gas industries has disappeared and it has been folded in to the requirement to present an outline proposal on the possible disposal of some or all state assets to the European Commission by the end of this year. And, not only does it appear to have been folded into this proposal, but this proposal is likely to focus on the outline implementation of the Government decision on 14 Sep. to part-privatise the ESB as an intgerated entity. It appears that consideration of all other semi-states and state assets is being conducted by this NewERA beast that has been established as a non-statutory body and well-hidden behind the walls of the NTMA.

    This is precisely the type of misgovernance, bluster, lack of transparency, cunning, deception and evasion that got Ireland in to its current economic and financial mess. It is a perfect example that nothing, absolutely nothing, has been learned during the last 3 years.

    The last, and almost totally forlorn, hope of stopping this nonsense in its tracks, or, at the very least, compelling the Government to think again and to be a little bit more transparent (rather than issuing decisions as fait accomplis), is for one or more members of the Oireachtas to pose a few key questions to the Minister when the ‘debate’ on the expected enavling legislation is being conducted.

    For example, the Minister should be asked:
    1. What was the net book value of the ESB as an integrated business (a) as at 31 Dec 1999 and (b) as at 31 Dec 2010?
    2. Between those dates, what was the ESB’s total investment (i.e., gross capital expenditure net of disposals and impairments) in (a) the 26 counties and (b) outside of the 26 counties?
    3. What contribution in total during this period did (a) (i) the State and the (ii) the ESOT make directly, (b) the EU make and (c) final customers make (in capital contributions) during this period to finance total investment in the 26 counties?
    4. What is the ESB’s total annual net borrowings for this period and what is the allocation between the financing of investment within and outside the 26 counties?
    5. What amount in total during this period did (i) the State and (ii) the ESOT extract from the ESB (a) in dividends (or other direct payments to the State under the relevant legislation) and (b) in corporate taxation and what is the allocation between profits generated within and outside the 26 counties?

    The same questions could be asked for Bord Gais for the period between 31 Dec 2002 and 31 Dec 2010.

    If voters (and their public representatives) are happy (1) that the State and the ESOT made a net negative contribution to financing the level of investment that allowed the ESB (and BGE) to grow by (1.(b)/1.(a)-1) per cent over this period, (2) that final consumers contributed the lion’s share to finance this investment and (3) that consumers will continue to contribute the lion’s share to finance the huge volume of invested projected out to 2020 and beyond, then there is no reason why the legislation enabling the Government’s current proposals should not be enacted.

    If, on the other hand, voters and their public representatives become aware of the current and likely future reality and are less than best pleased, then the Government should be forced to think again.

    The State Asset Review Group, presumably, has access to these data, but chose, for whatever reasons, not to reveal them. It is time, however, that these data were revealed and voters and their public representatives allowed to decide.

    But the chances of this happening? Snowball’s chance in hell’s territory, I reckon.

  36. Paul Hunt Says:

    @John Foody,

    Lest you think I am ignoring your question, I am not. You are simply pointing to just another awkward piece in a much bigger jig-saw puzzle. And this piece is proving more awkward than most because full retail competition (which seperates distribution from retail supply), despite some short-term, ephemeral benefits, has proved to be an unmitigated disaster for most energy consumers in the medium to longer term.

    The main thrust of my comments is an entreaty to the Government to, please, think again. And I view Colm’s post as a similar, but more gentle, encouragement to the Government.

    I have provided chapter and verse and made submissions to all and sundry demonstrating that what successive governments have done – and what this Government is proposing to do – is both stupid and economically damaging for the majority of businesses and citizens (even if it is hugely rewarding for deeply entrenched vested interests). All of this effort hasn’t made a blind bit of difference. I’m resigned to accepting it won’t in the future either, but, on this issue, I refuse to give in or give up.

  37. The Dork of Cork Says:

    @Paul
    Why make everything so complicated on such a small island ? – the adminstrative duplication costs must be huge.
    With the whole Island holding only 2 Greater Manchester’s it makes this insane Russian Doll Syndrome beyond absurd.

    When you have no clear chain of command rentier activities are almost certain to fill the vacuum.
    The Faith of EDF which was thee most successful of all national utilties both before but alas not after it became a limited liability corporation fills me with dread.

    European energy policey much like its previous fishery policey is a epic disaster for the commons as the deals are done in the Halls of Brussels as far away from local governance as is possible to be.
    Whatever about its limitations ESB did its job effectivally in the 70s & 80s with big capital intensive investments which limited the effects of future oil shocks to a certain extent.
    However the recent spreading of jet engines around our coast is not a capital intensive operation no matter what the bean counters say.
    Is it true that the ESB only has 40 % of the energy generating capacity of the Island now.
    How can a goverment implement national policey when you have so many Indian chiefs & cowboys to talk to ?

    What is the point of this HSEitis ? and this management gobbledygook …. no let me guess – extraction.

  38. The Alchemist Says:

    @DoC

    “Why make everything so complicated on such a small island ? – the adminstrative duplication costs must be huge.
    With the whole Island holding only 2 Greater Manchester’s it makes this insane Russian Doll Syndrome beyond absurd.”

    Because there was no other way except giving in to people, groups, and sections of society who felt entitled to a income for life from the state. Capitalism at the front door, socialism in the kitchen and a plutocracy in between. Wasn’t Bertie Ahern himself a socialist in his own words?

  39. The Dork of Cork Says:

    @The Alchemist
    The commons could equal to communist in some people eyes – with EDFs nuclear policey not really democratically sanctioned but it is a strange world with many internal contradictions.
    As a Dork I have completely given up on so called private utilties – they are a natural contradiction that make direct governance either democratic or not a contradiction & indeed a impossibility.
    Once people realise the local guberment has no levers of powers to pull what happens next. ?
    Do we consult to infinity and beyond ?
    Direct republics did not operate as such , at least in theory.

    Anyway I tire of these strange governance fashions – physics points to certain areas of efficiency wether pursued or not.

  40. Paul Hunt Says:

    @The Dork,

    When you go off in to the financial ether you lose most of us most of the time, but, with some effort, a few of us might be able to detect something intelligible to mere mortals when you tread upon this more physical domain.

    However, you are wearing rose-tinted spectacles when you wax lyrical about EdF and the ESB in their vertically integrated, national monopoly prime. They exercised total national market power, delivered whatever services they decided should be delivered inefficiently and dominated national energy policy in a totally non-democratic manner. During the ’60s and ’70s the interests of the people and government, on one side, and of those of these behemoths, on the other, generally coincided. But, during the 1980s and from then on, the interests of both sides began to diverge and conflict. The behemoths had to be brought to heel in the public interest.

    The problem, and here I agree with you, is that the application of the cure, both in Ireland and throughout the EU, has proved worse than the disease it was intended to cure. But there is no going back to the status quo ante. That simply isn’t possible. It requires some honesty from politicians, policy-makers and regulators, both in Ireland and throughout the EU, about the nature of the mess this process of electricity and gas market ‘liberalisation’ has created. Only then will it be possible to craft a way through to something sensible.

    But, given the effort they have put in to create this dysfunctional optical illusion, it’ll be a long time before we’ll get the truth from these politicians, policy-makers and regulators. Even the academics and apparently ‘disinterested’ commentators and opinion formers find they are either unable or unwilling to call it.

    As final prices keep prices keep rising, and taxes are increased, to finance this paradise for subsidy-grabbers, regulator-capturers, rent-seekers and consumer-gougers, it is possible the patience of the paying public will snap eventually. But it’ll take a while.

  41. The Dork of Cork Says:

    @Paul
    Never say never.
    As for the Nuclear , well the Japanese experience even before the earthquake points to direct political control via the post war EDF model rather then the Private fiefdoms that developed on that Island.

    Anyhow I don’t get this private fetish for achieving deep strategic goals – Gold standard Britain was putting 25% of her tax revenue into the RN before the Great war because without a navy the empire was a nothing.

    Without energy the west is a nothing.
    If the west can send armies into the Gulf albeit mainly dog soldiers during the last unsuccessful by some measures colonial operation then it can have a state controlled electrical utility.
    The market state experiment is dying anyhow – so why not ?

    Are people really that scientific ? – willing to repeat the experiment again & again.
    The results will be catostrophic.

    Energy dynamics changes politics – the Carter Persian Gulf policey is dying, he was the first modern President to deregulate because cheap oil politics (- the Iranian Blip) & deregulation appears to mix – his deregulation of the trucking Industry created the Walmart dynamic but walmart cannot survive without very cheap trans continental supply chains.

    The multiple losses always caused by deregulation simply cannot be sustained in a expensive oil world as the externality torpedoes sink too many ships.

  42. Paul Hunt Says:

    @Dork,

    You make relevant points, but we have no forum where these issues might be thrashed out with the results impacting on public policy formulation. Public policy decisions are made behind closed doors (influenced by who know what narrow sectional interests) and promulgated as faits accompli. The stupid, consumer and economy-damaging (but narrow sectional interest-favouring) public policy decisions will continue to be made until we change the process of policy formulation.

    But there are far too many well-placed and influential individuals and narrow sectional interests profitting from the current arrangements. Now you wouldn’t want to go upsetting them, would you?

  43. The Dork of Cork Says:

    Yes , what people seem comfortable with now is Royal Navy elite type outfits such as EDF going back to their privateer roots.
    What I mean is they consider themselves a elite – but it is now once again detached from the Imperium.
    But the fully professional post Napoleonic navy was set up in that fashion for a reason – technological development.
    Dreadnoughts were complex thingies.
    Reactors are complex thingies.
    You should not seek Bounty on the bow of a reactor vessel.

    Looking at Romania’s CANDU program and no less then 6 utility conglomerates were operating through a joint stock company + the state utility.

    From wiki if you care to believe it :
    “20th of January 2011, GDF Suez, Iberdrola and RWE pulled out of the project, following ČEZ which already left last September, citing “Economic and market-related uncertainties surrounding this project, related for the most part to the present financial crisis, are not reconcilable now with the capital requirements of a new nuclear power project”

    Something is very wrong with the chain of command.
    To make money companies are destroying wealth and paying a meagre tax towards their base of operations.

    European energy policey is in disarray – anybody can see this.

  44. Paul Hunt Says:

    @Dork,

    “European energy policey is in disarray – anybody can see this.”

    Indeed. But the first step for the politicians, policy-makers and regulators – like any alcoholic wishing to go dry – is to admit it. They simply can’t – and won’t – until the wheels start to come off just like the Euro. And those outside these circles of power who could call it are either too conflicted or compromised – or just too lazy and well fed – to do so.

  45. Superfurryanimal Says:

    REN has bye-laws in place which mean that no one shareholder can own more than a certain percentage of the company. The ownership threshold is even lower if you are an energy company.

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