Committee Reports::Report No. 16 - Nitrigin Eireann Teoranta::12 August, 1980::Appendix

APPENDIX 10

LETTER TO CLERK TO JOINT COMMITTEE FROM IRISH FARMERS’ ASSOCIATION

The Association wishes to make an observation for consideration by the Joint Committee in its investigations into the activities and finances of Nítrigin Éireann Teoranta. At the outset we would wish to state that we have enjoyed a very satisfactory relationship with NET for many years and have found them responsive to the needs of agriculture.


We believe that their decision to build a Urea manufacturing facility at Marino Point exemplifies their vision in looking to the future needs of agriculture and that in the medium to long term it will ensure the availability of an essential input. However, we are most concerned at the manner in which the plant was financed which was almost exclusively by loans of various categories. The effect of this method of financing will cause NET to bear Interest Charges this year of the order of £25 million, which will inevitably have to be borne by NET’s total range of customers and 90% of their sales by value are of fertilizers to the agricultural community.


NET’s total sales of fertilizer last year were 630,000 tonnes at a value of £52 million indicating an ‘ex works’ average price of £83 per tonne. If the projected Interest Charge for this year of £25 million is applied to last years tonnage of fertilizer sales, this would represent an Interest Charge of £40 per tonne. If the Interest Charge were applied to NET’s estimated total capacity of 750,000 tonnes, this would represent an Interest Charge of £33 per tonne which is a totally unrealistic burden having regard to the selling price of fertilizer.


It is clear that the product cannot bear an Interest Charge of a minimum of £33 per tonne without further unacceptable trading losses arising which in turn would lead to further and higher Interest Charges or alternatively a loss in market share to NET, which would have the same results.


The primary beneficiaries in the short term of the decision to build the NET complex at Marino Point were the building workers who got employment during the project, and the workers who got jobs on an ongoing basis. However, because of the unusual financing method for the project the capital cost of providing these jobs falls to the farmers by way of a surcharge on the product price which we feel to be unreasonable. We consider that the project should have been financed in a more conventional manner with a debt/equity ratio such as would be applicable in industry generally.


We would wish to recommend to the Joint Committee therefore that additional equity should be made available by the State to NET to bring their capital structure into line with commercial practice.


 

Yours faithfully,

 

 

12 August 1980

R. M. Stanley,


Chairman,


Industrial and Transport Committee.