Europe’s Privatising Industry – new Trasnational Institute report highlights Irish example

The Transnational Institute has just produced a new issues brief called ‘The Privatising Industry in Europe’. The authors identify Ireland as one of the countries that has seen “a renewed effort to privatise the last remaining state services” by the International Monetary Fund, the European Central Bank and the European Commission:

They claim that private ownership will make companies more cost effective and competitive and that the public will benefit from lower prices and better service. Yet, as this report explores, they ignore the evidence of recent privatisations which have more often led to reduced state revenue, increased corruption and poorer services. They also ignore the wage losses, redundancies and erosion of labour rights that have resulted from privatisation that have further exacerbated the economic crisis.

The report focuses on “the growth of a powerful privatisation industry in Europe that profits immensely from these sales and actively lobbies for continued business”.

The report highlights the Irish government’s sale of Bord Gais Energy and those who benefitted from it:

In Ireland one of the biggest privatisations to date has been the sale of the state owned utility company Bord Gais Energy (BGE) to a consortium comprising Centrica plc, Brookfield Renewable Power Inc and iCON Infrastructure. The Troika pressurised Ireland to sell off its lucrative energy supplier to alleviate the precarious financial situation it faced in 2012. Valued at roughly €1.5 billion, BGE eventually sold for only €1.1 billion, because no reserve auction price had been set.  Ultimately, due to additional costs, the state was able to cash about €1 billion.  The sale included a brand new power station, for which just four years previously in 2010, BGE had paid €400 million. Bord Gais, the mother company of the energy supplier, was forced to change its name to Gas Networks Ireland. In addition, the state-owned company lost its profitable wind farms, plants and the right to supply gas to nearly a million customers in Ireland. As a state asset BGE had yielded rising profits with an EBITDA  of €91 million in 2013. Despite the disappointing result of the privatisation, adviser fees for the process amounted to €27 million.

In Ireland, the risk of privatisation features heavily in the campaign against water charges, with many opponents unpersuaded by the claims of the current Irish government that the utility will not be privatised. This report highlights a European trend that suggests that this is not only feasible, but also quite likely, as well as being highly lucrative to those providing legal and financial advice on privatisation of public utilities.

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