Cantillon

Inside the world of business

Top semi-State jobs up for grabs

State-owned energy company Bord Gáis is busy on the recruitment front these days.

Yesterday, it advertised for a managing director for Irish Water, the new entity that will be responsible for providing water metering to 1.5 million residential and business premises in Ireland in the coming years.

The company is also in the throes of finding a successor to group chief executive John Mullins (pictured), who some time ago flagged his intention to depart the business at the end of next month.

Reports have suggested that this process is going nowhere and is possibly being held back by the Government’s €250,000 pay cap. However, it seems there is a considerable momentum to the process.

More than 30 candidates are believed to have applied for the role while a shortlist, ahem, of about eight candidates has been drawn up by the board of the gas and electricity provider.

It seems that the board is confident that a high quality candidate will be secured to succeed Mullins.

Whether that is within the timeframe of Mullins’ planned departure remains to be seen.

The Dublin Airport Authority has operated with an interim CEO since the departure of Declan Collier about eight months ago.

Senior Glanbia executive Kevin Toland is returning from the US to take up the post but not until January. He’s even taking a massive pay cut.

The new Bord Gáis CEO will need to hit the ground running.

In addition to overseeing the establishment of Irish Water, there is also the issue of the sale of Bord Gáis energy business and its decoupling from the networks part of the group. This process will ultimately be dictated by the Government and it makes the task of finding a suitable heavyweight CEO all the more important, whatever the timeframe.

Will banks risk SME loans?

If there is one story that has remained constant throughout the recession, it’s the dearth of lending to the smaller business sector. But at last there may be signs of improvement.

Loan approval rates have risen, and are now up to about 51 per cent according to the Irish Small and Medium Enterprises Association (ISME) or 84 per cent according to Bank of Ireland.

And last month the Government – finally – introduced two new schemes to help smaller businesses get over the funding hurdle. But a month on, are they filling the hole?

While the Microfinance scheme is limited to companies with less than 10 staff members, the credit guarantee scheme has wider applicability.

It works by providing security to banks that are reluctant to lend to companies without the required collateral.

So for example, if a company can only provide a bank with 50 per cent of the security it needs, the Government will step in to provide the remaining 50 per cent. It can offer a guarantee of up to 75 per cent of a loan, and given how risk averse the banks have become, the possibility of getting security from the Government must be particularly appealing.

In this respect, there might be a real fear that banks will simply refer companies to this scheme that they may have otherwise lent to.

After all, why take a risk if you can get a Government protection on your lending? If they do, businesses will still get their loan – but will have to stump up the 2 per cent premium the Government is looking for.

So far, it’s difficult to determine how the scheme will pan out. Word on the ground is that take up of the scheme has been slow to date, with few, if any, loans sanctioned. If it is to work, it will need the banks to play fair when it comes to assessing the collateral on offer by SMEs.

School run and commercial contracts

Late last month, the High Court shot down a bid by US-backed Student Transport Scheme (STS) to get the Department of Education and Skills to put the school bus service out to tender.

State company, Bus Éireann, has operated the service since the late 1960s. STS argued that the arrangement is a public service contract and should be put out to tender, in line with EU law.

However, both Bus Éireann and the department argued that the relationship is not a contract, but an administrative scheme. Mr Justice Brian McGovern agreed. His judgment says that the evidence shows the arrangement does not contain “any terms that might normally be associated with a commercial contract”.

Amongst other things, he points out that the department can unilaterally cut funding for the scheme, whether Bus Éireann likes it or not.

Suprising then, that on page 38 of its accounts, Bus Éireann states: “The School Transport scheme is operated under contract with the Department of Education and Skills”.

The company says that this is meant as a “layman’s description” of the relationship, not a legal one.

Whether laymen and lawyers differ in their understanding of “contract” is a moot point.

What is not debatable is that reading the accounts could lead someone, particularly those with no knowledge of the STS case, to believe that the company and department have a normal commercial relationship, something they and the High Court say does not exist.

ON MONDAY

FBD Holdings interim management statement; Petroneft Resources EGM (Herbert Park Hotel, Dublin).

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