ESB and Bord Gais changes signal end of an era

Analysis: The era of the State owning a group of commercial statutory bodies appears to be coming to end with plans to change the status of the ESB and Bord Gáis, writes Emmet Oliver

At present several State-owned firms are structured as statutory bodies or corporations, including CIÉ, ESB, RTÉ, the VHI, Bord Gáis and Horse Racing Ireland. But the Department of Communications plans to convert ESB and Bord Gáis into public limited companies or plcs.

The Department of Health is also believed to be studying changing the status of the VHI and previously there has been consultation with RTÉ about making it a plc.

If these changes go ahead this will leave only CIÉ and Horse Racing Ireland as main statutory bodies under the supervision of their departments, although there are other bodies like the Digital Hub Development Agency Ltd and the Irish National Petroleum Corporation Ltd, which has lost most of its assets.

The greater majority of State-owned companies are either public limited companies or private limited companies. Falling into this category are An Post, Bord na Móna, the Dublin Airport Authority, Aer Lingus and Coillte.

The historical reason for establishing State-owned enterprises as statutory corporations was political control. Operating under statute these companies were under control of their supervising Minister, with major strategic decisions sometimes needing legislative changes.

Chief executives of the main State-owned companies would all support greater commercial freedom and making them public limited companies goes some way to achieving this. But as long as the Government retains the majority stake in each one, the level of commercial freedom is likely to remain circumscribed.

However as State-owned enterprises expand the question of ownership and access to funds becomes more critical. The trigger for the privatisation of Aer Lingus for example is its need to upgrade its long-haul fleet. With wide-bodied aircraft now costing about $100 million each, Aer Lingus would find it difficult to fund a large order from its existing resources.

ESB chief executive Padraig McManus has made it clear he would like to see some new mechanism for State-owned enterprises to access funds.

The trade union movement, in the form of the Irish Congress of Trade Unions, has suggested a state holding company be set up and pension funds could invest in this. These funds could then be used by the State-owned firms, but the equity of the companies would not change hands.