Inside the world of business

Energy policy gives with one hand, takes with the other

GOVERNMENT ENERGY policy has reached the point where something as simple as switching on a light is going to have accountants in some industries reaching resignedly for their calculators.

Yesterday, the Commission for Energy Regulation (CER) published details of a credit for large energy users – which include the likes of pharmaceutical industries, food processors and large-scale manufacturers – many of whom are worried about the cost of doing business here.

The credit was introduced last year as a temporary measure to ease pressure on companies that employ large numbers of people. It is being cut around 48 per cent, as the plan is to phase it out.

But the reduction comes on top of a reintroduced public service obligation charge and the combination of the two changes, both of which apply from October 1st, will be to increase industries’ monthly electricity bills by four figures.

While the CER has been getting most of the brickbats for the various charges and add-ons to electricity bills, they are a result of Government policy, which is steadily tying itself in knots.

At this stage, the public service charge means that the State is taking money from all electricity customers and giving it to some power producers – mainly wind and peat generators. The money to fund the credit given to large energy users will come from the carbon windfall tax introduced last July. This applies to all power plants, except those which receive the cash raised by the public service charge.

So, at the same time, the State is taking money off some power plants and giving it back to some electricity customers.

The only organisation that’s going to benefit from all that is one that specialises in collecting and distributing levies and charges, which, funnily enough, is the State.

After all that posturing . . .

The latest eruption over Anglo Irish Bank, triggered by the Green Party’s wobble at the weekend concerning the Government’s good-bank-bad-bank solution has generated more heat than light.

The position of the Government, the Department of Finance and the bank itself remains that the split – rather than an accelerated wind-down – is the lowest cost option. And even the Green Party’s weekend efforts to distance themselves from the official lines has pretty much petered out with yesterday’s Government statement.

But not before the views of the various opponents of the Government policy were ventilated once again and given some additional oxygen by the acknowledgement by the Government that even though splitting the bank was the least expensive option, it could not actually say what the cost would be.

But, fundamentally everything remains as it was. Except perhaps for a lingering suspicion that something is going on behind the scenes. More specifically there is a sense that the Government might be contemplating trying to make a virtue out of a necessity by opting voluntarily to change tack and wind the bank up rather than be seen to be forced to do so if Brussels comes out against the current plan.

This at least has the virtue of making some sort of sense out of what otherwise looks life pointless posturing by the Green Party.

Inexplicably determined

Cardinal Capital’s efforts to secure ownership of EBS are as determined as they are inexplicable. In the absence of any detailed comment from the secretive group – which is reported to have the backing of US private equity group Carlyle – there has been much speculation as to their ultimate objective.

It’s pretty much common case that Cardinal’s ambitions extend beyond acquiring a troubled Irish building society and thus much of the speculation has centred around what they will do with EBS’s banking licence.

One of the more intriguing scenarios currently being sketched out is that Cardinal and EBS will turn the tables on Irish Life and Permanent and look to buy Permanent TSB and presumably become the “third force” in Irish banking.

They could reasonably expect the support of the Government for such a move as it brings about much needed consolidation and at the same time the involvement of US private equity would send a very positive signal abroad about the state of the industry.

While this seems to indicate the sort of ambition and opportunism that might induce Carlyle to get involved in Ireland it still doesn’t tick all the boxes. In particular it remains hard to identify the upside in hammering together a couple of beat-up Irish mortgage lenders with funding problems, and huge pools of unprofitable mortgages.

Today

Exchequer returns for August are due to be published this afternoon. According to the Minister for Finance they will show continuing stabilisation of the Government finances.

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