Irish Water paying €5m ‘guarantee’ fee for bridging loan from State pension fund

Irish Water is paying a "guarantee" fee of up to €5 million annually for a bridging loan given to it last year by the National Pension Reserve Fund (NPRF) to help the fledgling business meet its costs until revenues begin flowing in 2015.

This has emerged from an answer given by the Minister for Finance Michael Noonan to a recent question from Michael McGrath, Fianna Fáil's finance spokesman.

In addition to the payment of this fee, a spokesman for the NPRF confirmed yesterday that Irish Water was paying an annual interest rate of 2.5 per cent a year to the the State pension fund for the €250 million bridging loan, which was made available in September 2013.

Mr Noonan said the loan was to provide short-term funding for Irish Water’s start-up and metering installation costs. It initially drew down €160 million, with the balance drawn last month.

The NPRF “required a guarantee” for the loan as it has a commercial mandate and because Irish Water will not generate any revenues until next year.

“The Government agreed in June 2013 to the provision of such a guarantee,” Mr Noonan said. “The fee for the guarantee is 2 per cent per annum on the amount of the loan facility drawn down by Irish Water. The fee reflects the fact that the loan arrangements are commercial in nature and are made on an arm’s-length basis.”

Guarantee
While the guarantee is given by the Government to the NPRF, the fee is paid by Irish Water. The company paid €823,504 to the exchequer for the period from October 5th to January 5th.

This was a pro-rata payment based on the fund having drawn down €160 million initially. On a full-year basis, the fee will amount to €5 million.

Irish Water hit the headlines last month when it emerged that its set-up costs will be about €180 million and that it expects to pay €85 million on consultants and external contracts by the middle of next year.