Sale of assets hindered by €3.4bn hole in semi-state pension funds

THE €3.4 billion hole in pension funds of semi-state companies has tied the hand of the Government in deciding how to proceed with the sale of state assets.

A spokesperson for Public Expenditure Minister Brendan Howlin said he will bring proposals to Cabinet “shortly” on how to proceed with the disposal of assets as agreed with the bailout troika of the EU, IMF and ECB.

The plan is expected to involve the sale of minority stakes companies considered to be of strategic importance, such as ESB and Bord Gáis, to raise €2bn for infrastructure projects.

A senior source said the scale of the pension deficits leaves the Government with few options but to sell smaller stakes or defer disposal of assets until pension deficits have been sorted out — something that can only happen in the long term.

According to a report on state assets by economist Colm McCarthy in April the ESB pension fund — the biggest in the country — had a deficit of €515 million in 2009, although “it has since reached agreement with its workforce on new pension arrangements which will substantially reduce this shortfall”.

The Bord Gáis pension fund is short €23.3m; Coillte has a €72m deficit.

These deficits are among the first things any potential investor will consider and are likely to be a stumbling block for the Government in selling anything other than minority stakes, a leading pension expert said.

This view was echoed by economist Jim Power, who said the pension positions will be a key part of the calculations for any potential purchasers. “The pension liabilities are very significant and would be a key factor for any potential purchaser and will be discounted from the price.”

He said this is one of a number of reasons why the Government should hold off on the sale of state assets in the short to medium term. “If the government wants to maximise the price attainable, it has to make the pension situation as good and clear as possible. That is not a short-term possibility.”

The latest memorandum of understanding with the bailout troika, released by the Department of Finance three weeks ago, said the Government will “consider options for an ambitious programme of asset disposals” by December.

The Programme for Government contained a commitment to sell “strategic state assets” to finance infrastructure, but did not clearly state what is strategic and what is not.

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