INSIDE THE WORLD OF BUSINESS
Bord na Móna could not sell waste firm without huge loss
Bord na Móna’s decision to write down the value of its waste management subsidiary by €23.1 million, five years after it bought the company for €61 million, highlights the issues facing private waste management companies in Ireland.
A combination of government-imposed landfill levies – designed to encourage diversion of waste from landfills to other more environmentally-friendly means of disposal – an estimated 30 per cent drop in the volume of waste being produced across the country, and the cut-throat pricing policy of an industry that is becoming increasingly competitive have served to weigh heavily on some of Ireland’s largest private waste management companies.
NTR subsidiary Greenstar posted a loss of €64 million for the year ended March 2011, for example, while Limerick-based Mr Binman entered receivership last year.
While larger players such as Bord na Móna’s AES bemoan the proliferation of smaller companies in the market – chief executive Gabriel D’arcy called yesterday for greater consolidation in the sector – the flip-side is that many private operators believe the presence of a State-owned body in the private market is unfair. Bord na Móna’s €23 million impairment charge also raises questions about the group’s diversification strategy. While D’arcy was not at the helm when AES was acquired, the decision to buy into the private waste sector at the height of the boom seems ill-judged.
Bord na Móna said yesterday it does not intend to sell AES, stressing its “strategic importance” to the group. The reality is that it would not be able to offload the business without incurring a huge loss. Greenstar, for example, has effectively been on the market in different forms for two years. As the debate over the role of State assets continues, a bit of soul-searching on the part of Bord na Móna wouldn’t go amiss.
Situation in Spanish banks holds a certain resonance for Irish ones
Watching Spain’s unfolding banking crisis, for Irish observers, is a little like Groundhog Day. Shares in Bankia, Spain’s answer to Anglo Irish Bank, and even the big banks Santander and BBVA, began declining to the point where a short-selling ban was introduced, co-ordinated with a similar one in Italy, to halt the sliding share prices and soothe investors.
Shares dropped by up to 5 per cent but recovered some ground following the ban on investors betting on shares falling.
Spain’s ban is for three months and covers all stocks on its stock exchange, while Italy’s is only for a week and for shares in 29 banking and insurance companies.
Four years ago, this was the position the Irish banks found themselves in. They were pushed to the edge of the cliff as short-sellers purportedly made a killing against falling share prices.
The UK regulator, the Financial Services Authority, introduced a short-selling ban in the middle of September 2008 which prompted the Financial Regulator in Dame Street to follow suit in an attempt to squeeze the short-sellers. As anyone who followed the crisis will know, the short-selling bans only bought a brief respite as there were fundamental concerns among all classes of investors about the stability of the Irish banks.