Friday 20 April 2018

Irish Water has paid the State €6m in fees to borrow money

John McGuinness. Photo: Tom Burke
John McGuinness. Photo: Tom Burke

Paul Melia and Shane Phelan

Irish Water has paid the Government more than €6m in 'guarantee' fees for borrowing money from the State to fund the meter installation programme.

The amount paid to date is the equivalent of the water bills of almost 24,000 families, the Irish Independent has learned.

The spend is revealed in exchequer returns published by the Department of Finance and comes after the Dáil Public Accounts Committee (PAC) was told the State expects to continue funding the utility until after 2016.

It also emerged that the Government will have given the company €2.5bn in operational funding and loans between 2013 and 2016, including €439m last year from the Local Government Fund - a pot of cash made up of motor tax and local property tax receipts.

The €2.5bn includes €300m borrowed from the National Pensions Reserve Fund (NPRF) to fund the metering programme. This is made up of two facilities - €250m agreed in July 2013, and another €50m extended in November last year.

The money has been fully drawn down, carries an interest rate of 2.5pc and is due to be repaid in September this year.

However, the Irish Independent has learned that these loans have attracted a premium payment in addition to interest.

This is because when the loans were agreed, Irish Water did not have any sources of revenue or assets to back the loans. The Pension Fund required that the €300m borrowings be underwritten, and the guarantee was provided by the State,

In return, the Department of Finance has charged Irish Water a fee for the facility. New figures show that a total of €6,224,686.39 has been paid. This cost is factored into expenditure incurred by the company, and is ultimately reflected in customers' bills.

Department of the Environment secretary general John McCarthy told the committee it was likely that further State funding would be needed after 2016, but that the amounts involved had yet to be determined.

The figures prompted PAC chairman John McGuinness to ask whether Irish Water was being given "a blank cheque" by the department.

He said the figures would bring to €2.5bn the amount channelled to Irish Water between 2013 and 2016.

"€2.5bn coming from your department to them. Is it open ended? Is there a blank cheque here from Irish Water in terms of their set up?" he asked.

Mr McCarthy said the utility would need more State money after 2016 for capital projects, but could not say how much. However, he noted it would be a "declining amount".

He also said he did not believe the utility would fall foul of the crucial Eurostat market corporation test, despite the huge sums being given to it by the Government.

A draft European Commission report raised concerns about the issue last month.

To pass this test, over 50pc of Irish Water's revenue stream will have to come from sources other than the Government.

Mr McCarthy told the committee: "The projections are that test will be satisfied."

If it fails to meet this target, the Coalition will be forced to include the utility's borrowings on the State's balance sheet, impacting on the budget deficit.

It would also oblige the Government to find €500m a year needed to upgrade the network from existing resources, meaning that plans to reduce income tax rates and restore public services would have to be revised. It could also result in spending on essential upgrades being cut.

The company has secured €206m in loans from the Department of the Environment and the exchequer to fund upgrades and provide working capital.

The Department of Finance said that no commercial borrowings from Irish Water were backed by the State, and that the guarantee would expire once the loan was repaid.

The €2.5bn allocated to Irish Water out to the end of 2016 is drawn from a variety of sources. including the Local Government Fund. This would previously have been used to fund water services provided by local authorities.

The money includes loans, subvention to meet operational costs and funding for the capital investment programme, including fixing leaks, upgrading plants, installing meters and start-up costs of the new utility.

Irish Independent

Today's news headlines, directly to your inbox every morning.

Editor's Choice

Also in Irish News