Monday 24 September 2018

FDI jobs keep flooding in as Apple keeps it low-key with Leo

Apple CEO Tim Cook described the work being done by staff in Ireland as ‘phenomenal’ and said the tech giant may look at future data centre projects. Photo: Elijah Nouve/Reuters
Apple CEO Tim Cook described the work being done by staff in Ireland as ‘phenomenal’ and said the tech giant may look at future data centre projects. Photo: Elijah Nouve/Reuters
Richard Curran

Richard Curran

Oh to have been a fly on the wall for the meeting of Taoiseach Leo Varadkar and Apple CEO Tim Cook during the week. What a lot to talk about. There is that matter of the €13bn tax bill imposed by the European Commission and how the handover of the money is going.

And, of course, there is US President Donald Trump's new Corporation Tax Bill, which makes legally challenging that €13bn somewhat redundant. It now seems that companies like Apple will be paying tax on overseas earnings, regardless of whether the money is held offshore or not. Then there is the question of data centres and planning. After Apple pulled the plug on a massive €850m data centre project in Galway, some might have questioned the corporation's commitment to future expansion in Ireland.

On this one Cook intimated that Apple would consider Ireland for future data centre projects, especially in light of the Government's new planning proposals. I wouldn't hold my breath for that one.

And, of course, there is the fact that Apple employs 6,000 people in Cork and has no doubt many routine issues it might like to discuss with the Taoiseach of the day.

"Regular" was how government officials described the meeting. It was "regular", as opposed to "unusual", "special", "unique" or even "warm and friendly".

Given that the EC's case rests on the idea that Apple availed of particular preferential tax treatment which amounted to illegal state aid, every meeting between these two from now on will be described as regular.

Cook is not one to do hyperbole or overstatement. He is a measured and fairly direct chief executive. So perhaps the most interesting word he used about his visit to Ireland was "phenomenal". This was how he described the work being done by Apple employees in Ireland. This was encouraging. He didn't have to be so effusive. But it is difficult to really gauge how relations are between Apple Inc and Ireland Inc.

IDA Ireland has managed to keep those FDI projects rolling in. This week saw one enormous and two more solid job announcements. Amazon announced another 1,000 jobs in Ireland while cybersecurity firm Forcepoint said it would create 100 high-end, quality jobs in Cork at its new offices.

Truata, a venture backed by MasterCard and IBM, is to create 75 jobs at its European headquarters in Dublin. The firm, which is set up as a trust, helps organisations conduct analytics in full compliance with Europe's new GDPR regulations.

IDA Ireland has done well in the first half of 2018, with 139 projects compared to 114 for the same period last year. Many of the job announcements in recent months really appear to require highly-skilled software engineering and data analytics people.

During the recession we had to bottom fish for more glorified "call centre" jobs at a time when the economy really needed them.

Given that infrastructural and housing constraints are growing we could even see a return to boom era FDI policies where only higher value-added jobs were sought.

Still not clear what way the offshore energy wind is blowing

Here are two statements, by two people, two years apart. In June 2016, energy minister Denis Naughten said: "Ireland has the best offshore energy potential in Europe." This week the managing director of SSE Ireland, Stephen Wheeler said: "Ireland has the one of the strongest offshore wind resources in the world, yet is one of the only countries in Northern Europe not developing offshore wind capacity."

Lots of potential but must try harder seems to be the message from those in the industry. Wheeler lamented the fact that offshore wind energy development was being stymied by a lack of renewable electricity support and grid access. He said there was a lack of any "standard support mechanism and grid access for offshore wind energy in Ireland."

Naughten insisted that offshore renewable energy will play a "critical role in Ireland's clean energy future."

The problem is Ireland is facing massive fines for failing to meet environmental targets. All of its renewable eggs have been placed in the onshore wind farm basket and not enough has been done on solar, offshore and other renewables.

We haven't a hope of meeting even our 2030 targets unless projects of real scale are used. Some parts of the country have more than done their bit by having so many turbines dotted around the place.

The minister is set to bring a Renewable Electricity Support Scheme to Cabinet shortly. The longer we leave it to come up with a detailed financial plan on offshore, the further we could get left behind. However, on the upside, the longer it takes, the more technology is developing which brings down the amount of subsidy this kind of energy requires.

The UK has 43pc of all offshore wind energy produced in Europe. But in recent years the costs associated with these giant projects have come down.

Last year the Netherlands awarded its first subsidy-free contract for an offshore wind project. Germany came next. These projects will not be up and running until about 2024.

Offshore projects are big business and require large long-term investments. Despite the technological advantage of waiting for the economics of the industry to improve for taxpayers, time is running out for some kind of major initiative, short of having a wind farm on top of every hill - except Killiney Hill that is.

Kerry farmers at the crossroads

In the history of the food industry in Ireland surely the role played by co-ops features large. Several co-ops spawned major multinational-listed companies and none more so than Kerry Co-op. But have they had their day, as forward-thinking, innovative creators of value and investment? A big row at Kerry Co-op's AGM showed how much has changed.

A cohort of farm shareholders in the co-op want it to distribute the 13pc stake it holds in Kerry Group directly to the members.

The shares are worth €2.2bn and would see average share distributions to farmers of €165,000. Some would get a lot more.

The leadership of the board is reluctant to dismantle and sever this final link with the multi-billion euro food giant that evolved from the co-op.

They see an opportunity to go back into core co-op businesses including milk processing and are even open to acquiring businesses like Kerry Plc's agri-business division.

Some farmers argue this would mark a return to low-margin businesses. Perhaps they are keen to finance their own dairy herd expansions using the shares or perhaps they ultimately feel their money would be better spent by them directly rather than any new business expansion plan of the co-op.

The board argued that tax breaks available for previous share distributions are no longer available, which of course means the transfer could be a sizeable boon for the Revenue Commissioners.

Glanbia Co-op has stayed in business by acquiring a chunk of the former plc operations, albeit in lower margin sectors. The risk has been shared between the plc and the co-op and it contributes to longer term job creation and regional investment.

Relations between the co-op and the plc in Kerry have drifted somewhat in recent years, especially when former plc chief executive Stan McCarthy decided to resign as chief executive of the co-op. This had traditionally been a dual role. A €2.2bn distribution might lead to more liquidity in Kerry Group stock if farmers did sell on their shares.

It would have been unthinkable even back in 2002 when the co-op still owned 37pc of the plc which was seen as a buffer against a takeover.

Co-op members have received share distributions seven times since 1993. The last was in 2013 and it amounted to €270m. Could this be the last big pay day?

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