Committee Reports > List of Committees > Joint > 1981 > Committee on State Sponsored Bodies > Report No. 16 - Nitrigin Eireann Teoranta

APPENDIX 4

INITIAL MEMORANDUM FROM NÍTRIGIN ÉIREANN TEORANTA

ESTABLISHMENT OF THE COMPANY

Nítrigin Éireann Teoranta (NET) was incorporated under the Companies Acts in October, 1961, as a private limited liability company, having as its main object the acquisition, erection and operation of a nitrogen fertilizer industry in Ireland.

The possibility of producing the country’s nitrogen fertilizer requirements had been under consideration by successive Irish Governments for more than thirty years. An Inter-Departmental Committee was set up as far back as November, 1935, to consider the steps necessary for the establishment of a nitrogen fertilizer industry. This Committee, although it was in contact with commercial organisations abroad, had not, however, reported by the outbreak of the Second World War.

Further investigations into the industry were halted by the War and were afterwards re-opened on the basis of using peat in substitution for coal as the main raw material for gasification to produce synthetic ammonia. Pilot tests on peat gasification were carried out at a number of European chemical factories.

Technical developments in the use of heavy fuel oil for the production of synthesis gas, required for ammonia manufacture, resulted in a changeover to oil as the main raw material for ammonia production.

In August, 1960, the Minister for Industry & Commerce appointed a Committee to carry out a further full investigation of the proposed factory, in consultation with technical experts from the foremost chemical and engineering firms in Britain, France, Germany and the USA. The Committee in their report submitted in June, 1961, unanimously concluded that a nitrogen fertilizer factory operated by a State company at Arklow, using fuel oil, limestone and sulphur from Avoca pyrites, could produce nitrogen fertilizers for sale, without subsidisation, at prices in line with prevailing import prices. The Government accepted the Committee’s recommendations and established Nítrigin Éireann Teoranta to secure tenders for the factory.

The Company reported back favourably, on the basis of tenders received, in September, 1962 and the Government then gave approval for the contract for the erection of the factory at Arklow. The overall financial objectives of NET are to supply fertilizers to the Irish farmer at prices not out of line with world prices, while at the same time, servicing the capital invested in the Company. This is in line with the statements made by the Minister for Industry & Commerce in the course of the Dáil debates leading to the enactment of the statute, the Nítrigin Éireann Teoranta Act, 1963, which provided the initial capital for the Company.

HISTORY OF CAPITAL STRUCTURE

Legislation

The NET Act, 1963, provided for £6,000,000 Exchequer Advances (repayable with interest) to the Company, based on the tender of £5,272,667 for the Arklow factory, site development; preproduction expenses, spare parts, catalysts, additional equipment and minor price escalation; the Company had already been incorporated in 1961 with £100 Ordinary Share Capital.

The 1970 NET Act provided for a reconstruction of the capital of the Company, to change from one of all loan capital to a combination of loan and share capital, and to authorise a nominal share capital of £7,500,000. The main features of the restructuring were the conversion of £3,500,000 of the Advances to share capital; the creation of further shares against the £1,212,000 accrued interest on the Advances up to 30th June, 1967, the remaining £2,500,000 Advances to be repayable by way of annuity over 25 years commencing 1st January, 1971; the issue to the Minister for cash, for working capital purposes, of a further 650,000 shares; and an increase of the statutory limit of the Minister’s powers to guarantee company borrowings from £1 million to £2 million.

The NET Act, 1975, provided for the issue of additional share capital for the Marino Point Project. The Act increased the Authorised Share Capital to £27,500,000, authorised the issue of additional £15,000,000 ordinary shares and increased the statutory limit of the Minister’s powers to guarantee company borrowings to £30 million.

The NET Act, 1977, increased the guarantee borrowing limit to £100 million.

Issue of Ordinary Shares to the Minister for Finance

The original concept under the 1963 Act was for total financing by way of repayable loan capital. It became clear that this method was not appropriate to enable the Company to carry on a commercial undertaking. Interest on the advances during construction and early years of operation, which amounted to £1,212 million by 30th June, 1967, was capitalised under the 1970 Act which provided an equity investment for the first time. The further equity investment in 1975/76 represented only a minor share of the total investment in the Company to date. The very high borrowing ratio and the high level of interest rates place an unduly severe burden on the Company’s cash flow.

HISTORY OF EXPANSION OF PRODUCTION FACILITIES

Arklow

The Company’s original factory commenced production in 1965 with a capacity of 42,000 tonnes per annum of ammonia and 150,000 tonnes per annum of nitrogen fertilizers, initially calcium ammonium nitrate and ammonium sulphate. This represented the original £6 million investment at Arklow.

The present manufacturing facilities at Arklow comprises:—

It will be seen, therefore, that the investment at Arklow has grown from the original £6 million to a figure of £32.5 million at present. This additional investment has been financed by £8 million out of the Company’s cash flow and the remainder by borrowings without recourse to the Exchequer.

FERTILIZER PRODUCTION

Arklow Complex

The Company commenced production and trading in May, 1965. The initial Arklow factory complex was designed to produce 85,000 tons of Ammonium Sulphate (21%N) and 65,000 tons of granulated Calcium Ammonium Nitrate (C.A.N. 23%N) using Ammonia, Nitric Acid and Sulphuric Acid manufactured at Arklow. The raw materials used were: Heavy Fuel Oil, Air, Water, Sulphur and Limestone. The Arklow factory complex was equipped with all the necessary utilities (i.e. electricity, water treatment plant, steam boilers), bulk storage for raw materials, intermediate and finished products. Bagging and loading facilities to rail and road were provided. These utilities were expanded in succeeding years as plant capacities were increased. The Avoca river provided process and cooling water.

Before the initial plants were completed, an assessment of the requirements of the Irish market showed that there would be a rapid move to the use of concentrated compound fertilizers (C.C.F.’s). The Company decided, with Government approval, to broaden its base by installing Phosphoric Acid capacity and a fertilizer unit with capacity of 100,000 tons per annum of different grades of high-grade C.C.F. products. These units were brought into production in 1967.

In 1965 the Irish market for Ammonium Sulphate was 100,000 tons and for C.A.N. was 35,000 tons. With the availability of C.A.N. from Arklow, the growth in demand for C.A.N. very quickly outstripped the initial plant capacity, while sales of sulphate of ammonia began to decline. To cater for the growth of C.A.N., the company in 1969 added an additional Nitric Acid plant and expanded the C.A.N. plant to produce 140,000 tons of a higher grade product i.e. 26%N as against the former 23%N. The growth continued and a third Nitric Acid plant was commissioned in 1973. A new Prilling plant to produce an additional 250,000 tons of C.A.N. came on stream in 1974 and a fourth Nitric Acid unit was commissioned in 1976. This prilling plant was originally intended to produce the high-grade pure Ammonium Nitrate 34%N but, because of the potential abuse of the material by subversives, the Government banned production of this material and the plant had to be completed as a C.A.N. unit producing 27.5% C.A.N. The Company experienced extreme difficulty in commissioning this plant and as a result suffered severe losses. Major modifications had to be carried out by the NET technical staff before the plant produced output at acceptable levels. A legal action is pending with the contractor and damages of over £3 million are being claimed by NET. This Prilling Unit is a source of local pollution arising from fall-out of fertilizer dust. The Company is implementing plants to rectify this effluent problem.

The expansion of the C.A.N. and high-N.C.C.F. production resulted in Ammonia usage outstripping the ammonia production capacity at Arklow so that imports of Ammonia have been necessary for many years. At present, the Company has capacity to use approximately 160,000 tons of ammonia against the capacity to make only 42,000 tons on the original production unit. The continued increase in costs of fuel oil and electricity, arising out of the energy crisis, has made the production of Ammonia at the Arklow plant uneconomic. The Company have, therefore, decided to shut this unit down and to supply the full ammonia needs of Arklow from Marino Point.

Present plans for rationalising and improving the output of the Arklow complex will increase the Arklow ammonia requirement to 190,000 tonnes per annum. These plans include, on the fertilizer side, the replacement of the Prill Tower and the original C.A.N. granulating plant with the most up-to-date granulating system available to give a total output of C.A.N. of 450,000 tonnes. It is hoped that this unit will be commissioned before the end of 1981.

By-products and Other Developments

In line with the objectives for which the company was established, NET examined possible utilisation of by products which arose from diverse chemical plant operations.

In 1968, a Carbon Dioxide Liquefaction and a Dry Ice plant were commissioned to supply CO₂ to the beer and mineral water trade and Dry Ice to the meat trade. This business has flourished on the liquid CO₂ side and as a result a second plant was added in 1972. Because of shutting down the Arklow Ammonia plant in 1980, the Carbon Dioxide recovery plant has to be transferred to Marino Point, where adequate supplies of CO₂ are available from the ammonia plant there.

The gasification of Fuel Oil at Arklow to make Hydrogen for Ammonia manufacture produces about 700 tonnes per annum of highly Activated Carbon as a by-product. In the original plant this material was either dumped, burnt or recycled. NET investigated a number of ways how this might be recovered and sold commercially. Finally, a joint venture Company, NET-Ketjen Co. Ltd., was formed with Akzo of Holland who had developed a process for recovering this material. A recovery plant was commissioned in 1972, and marketing of this material since then has developed into a very profitable sideline. Unfortunately, the business is not large enough to support the continuation of the Arklow ammonia production unit but the Company do intend to operate the carbon recovery plant for some further time by importing raw carbon of similar quality.

Arising out of the re-opening of the Avoca Copper Mines, NET replaced Sulphur as the raw material for Sulphuric Acid production with iron pyrites, arising from the production of copper concentrate from the Mine. A Pyrites Roasting Unit was installed at Arklow and this was commissioned in 1972. The Cinder from the Roasting plant is mainly exported for use in cement manufacture. The Iron pyrites produced as a by-product and at low cost by Avoca Copper Mines would have otherwise been unsaleable and the revenue arising from its sale to NET has been significant to the mining company.

Gypsum is a by-product of Phosphoric Acid production and is difficult to dispose of for environmental reasons. NET had installed a Japanese process for Phosphoric Acid which produces a very pure Gypsum by-product. This was initially dumped in low-lying areas near the factory but eventually the company had to build a pipeline to sea, to dispose of the Gypsum.

From the time of the installation of the Phosphoric Acid process, NET had been examining the use of this by-product Gypsum. After extensive tests, including a full-scale trial on a wallboard plant in Europe, the company decided to build a Plaster and Plasterboard factory at Arklow Harbour with product mainly destined for the export market. A subsidiary company was set up by NET—Arklow Gypsum Ltd.—to operate the factory and market the products. Great difficulty, including a major equipment failure, was experienced in the commissioning of this plant. The Company commenced to trade only in 1979, and has now managed to overcome most of the technical production problems. However, as in the case of fertilizers, because energy, materials, labour and other costs have been escalating at a far higher rate than product prices, this operation is currently very marginal, and its future is under review by the Board.

The NET development programme has been carried out by the combined efforts of a number of departments within the Company. It should be noted that, in addition to the normal Operating and Technical Service departments, the Company has a small but very active Research and Development department which has made significant contributions to by-product Gypsum and fertilizer developments.

Marino Point Complex

The growth of nitrogen usage in Ireland since the Company commenced trading has been in excess of 10% per annum. The growth of the Arklow complex illustrates how the company has tried to keep pace with this demand. In 1972, the Company started its examination of future Ammonia production possibilities. Because of the limitations of Arklow harbour and the need, as it appeared at that time, to continue to import oil feedstock, alternative locations in Ireland for a major plant for Ammonia production were examined. Cork harbour was considered the best location and the company had already viewed possible sites for an Ammonia plant based on imported Naphtha or Fuel Oil, when the discovery of Natural Gas in commercial quantities was announced in the autumn of 1973. Natural Gas is the most suitable feedstock for Ammonia production and the Company immediately made known its desire for a supply of gas. The use of gas feedstock also made it possible to consider a quantum jump in capacity which would make Ammonia available to meet the nitrogen needs of the Irish market into the mid-1980’s. In this way also, the Company was able to choose the optimum size plant.

In 1973, NET purchased a total of 26 hectares (65 acres) of land at Marino Point. The peninsular site adjoins deep water, is connected to the railway system, is in close proximity to all mainshore services and has access to a pool of labour at nearby Cork city and in the local area. Through reclamation, the total site area was increased to 41 hectares (103 acres). Marino Point is located approximately 16 kilometres from Inch Beach where Natural Gas is brought ashore from the Kinsale Head gasfield.

The installations at Marino Point comprise an Ammonia plant with a production capacity of 435,000 tonnes per annum and a Urea plant with a capacity of 310,000 tonnes per annum. Bulk storage of 30,000 tonnes of Ammonia and 15,000 tonnes of Urea is provided, together with bagging plants, boiler units, water treatment and effluent plants. The site is equipped with a jetty to handle Ammonia tankers and Urea bulk or bag shipments, workshops, engineering stores and welfare buildings. The jetty can handle ships up to 25,000 tonnes capacity.

Planning permission was obtained from Cork County Council on 27th August, 1974, but, because of objections, a Public Enquiry had to be held and planning approval for the Marino Point complex was not received from the Minister until 23rd April, 1975, and this delayed the site development programme. The construction phase was protracted due to unofficial strikes, demarcation disputes and high absenteeism. In addition, extremely wet weather conditions during the winter of 1977/78 hampered progress at a time when the site was operating at its peak manpower level. Overall the completion was delayed by about 15 months. The ammonia plant commenced production in May, 1979, and the Urea Plant in September, 1979. The Natural Gas supply was available to the site in September, 1978, and was in use immediately to produce steam which was needed in large quantities in the final completion stages, e.g. cleaning and testing pipework, of the plants.

Because of the complexity of initial commissioning, it is necessary to allow 6 months from the date of availability of Natural Gas to the actual production of Ammonia. In the event, mechanical problems during the start-up delayed ammonia production to May, 1979. Both production units, i.e. Ammonia and Urea plants, are now operating at design capacity.

Environmental Aspects

Because of the nature of the raw materials and some of the intermediate products at Arklow, pollution, particularly of the atmosphere, may arise. The company have endeavoured to use the most up-to-date technology to avoid atmospheric pollution. This is very well illustrated in the four Nitric Acid plants which are now operating in Arklow, where continued improvements in technology, as they were developed, were made with each installation. In the process of the gasification of Heavy Fuel Oil, the Sulphur content is converted to Hydrogen Sulphide and this is subsequently converted to Sulphur Dioxide and Sulphuric Acid via the Pyrites Roaster Plant. However, the merest trace of Hydrogen Sulphide creates an obnoxious smell and has led to complaints from time to time. Closure of the Ammonia plant at Arklow will eliminate any problem in this area. Our main environment problem is connected with the Prilling Tower which was commissioned in 1974. At the time of writing, this matter is the subject of a High Court action against the contractor, and is, therefore, sub judice. We are planning at present to replace this Tower with a granulating plant which will not have an effluent similar to the Prilling Tower.

The visual appearance of the vapour plumes from the six water cooling towers located on the site is also the subject of local comment. These plumes consist of air saturated with water vapour. They are harmless, but under certain atmospheric conditions they give an extremely bad visual effect.

The company keeps a close control on its effluents through constant monitoring and we keep in close touch with the local authorities, the Environment Inspectorate and the IIRS who have carried out surveys on the plant.

Marino Point is in complete contrast to Arklow in respect to its feedstock and has no inherent effluent problems. The Natural Gas supplied to Marino Point is very pure and the sulphur-containing compound which Bord Gais Éireann puts into it, to make it smell for safety reasons, has to be removed by NET before the gas can be processed. The Marino Point plant has been built to the very highest standards with the lowest possible liquid and vapour effluents. It has to meet the most stringent noise specifications. Since its employs seawater for cooling purposes on a once-through basis, it does not produce vapour plumes. While there were some problems with slight Ammonia leaks during the start-up and commissioning period, the plants are now performing with no pollution. It can be seen from examination of the Marino Point site that the company has paid particular attention to the environment and has preserved and refurbished the old gardens and grounds and also planted thousands of trees for landscaping purposes.

FERTILIZER HOME MARKET

Nitrogen is purchased by Irish farmers in two distinct forms:

(a)as a single nutrient fertilizer called Straight Nitrogen, e.g. Calcium Ammonium Nitrate (which N.E.T. call NET NITRATE or C.A.N.), Urea and Ammonium Sulphate. Straight nitrogen fertilizer in the form of Calcium Ammonium Nitrate and now Urea compose more than 80% of N.E.T. total sales N.E.T. is the sole manufacturer of nitrogen fertilizer in Ireland.

(b)in combination with Phosphorus (P) and Potassium (K) in compound fertilizers (C.C.F.’s). These C.C.F.’s are produced by N.E.T. from primary raw materials manufactured at Arklow, ammonia and phosphoric acid. Other fertilizer manufacturers produce C.C.F.’s from imported materials.

In 1965 when N.E.T., commenced production the Irish market was 35,000 tonnes of C.A.N.. In 1979 N.E.T. had increased sales of C.A.N. to over 500,000 tonnes, a more than seventeen-fold increase, in terms of N nutrient, applied as straight fertiliser to Irish grassland.

N.P.K. USAGE IN IRELAND

Tons of Nutrient

Index of N Fertiliser Consumption in Western Europe

The Irish market is the fastest growing nitrogen market in Europe. NET has made a significant contribution to this growth.

Fertilizer Years Ended 30th June

MARKETING

The method chosen by NET in 1965 was to market products through the existing distributors of nitrogen fertilizers, i.e. all those firms who were then selling imported C.A.N. in Ireland. The system has so far proved successful and the number of Wholesalers has increased from 8 to 14 by the addition of the 6 major farmer co-operatives in Ireland.

PRICING AND DISTRIBUTION

The objective was to have from the outset a highly efficient distribution system to reduce handling to the minimum and to equalise prices throughout the country. Under this system NET offered their products on a flat price delivered to the nearest railway station. Over the years, and in co-operation with CIE, NET have established one of the most sophisticated distribution systems in Europe. Product can now be delivered in two-ton palletised lots to any station in Ireland in specially-built palletised wagons carrying 400 tons of product. There are now 159 rail delivery points, 40 of which are now fully mechanised. The flat price delivered on a national basis to any station has enabled all farmers to have their nitrogen on a fair and competitive basis.

When the industry was being set up in 1961, a formal undertaking was given to the NFA (now IFA) that the industry would operate without protection. NET has operated its production plants at full capacity and has had to compete with imported products.

NET has supplied the ever-increasing requirements of Irish farmers for nitrogen with product which is competitively priced and has established a stable market despite occasional upsets caused by dumping of fertilizer from outside the EEC.

With both C.A.N. and Urea now available, NET is now in a position to meet the estimated requirements of Irish agriculture up to the middle 1980’s. In the meantime, any surplus not required in Ireland will be sold in export markets.

The net result of our production and sales of nitrogen fertilizers in Ireland means a saving of about £60m. p.a. in the Balance of Payments. In addition, we hope to provide the Irish farmer with his requirements of nitrogen for many years to come and to maintain the high quality level of our products which has now been attained by competing with imported products.

MARKET GROWTH

That there is a huge potential for nitrogen consumption in Ireland is abundantly clear. Although rates of application in the arable sector are high, land under tillage accounts for only one-tenth of the cultivated area, the remainder being under permanent grassland. While the rate of application to grassland has expanded enormously, the average application rate overall is still very low compared with other EEC Countries. In 1977, it averaged only 40kgN/ha against, for example, 217 kgN/ha in the Netherlands where dairying is also a predominant farming activity. With a longer growing season for grass than any other West European country, the potential for nitrogen fertilizer consumption at intensive stock rates is huge. Experts estimate optimum usage to be of the order of 800,000 tonnes N, almost four times the existing level and just twice the present total capacity of NET.

Existing C.A.N. capacity in Arklow together with the output from the Urea plant at Marino Point will make it possible to accommodate growth in the domestic nitrogen fertilizer requirement to around 400,000 tonnes N and NET is optimistic that this level of farm consumption can be achieved by the mid-1980’s, thus ensuring total absorption of the plant’s production.

AMMONIA AND UREA EXPORTS

The disposal of surplus production of ammonia and urea from Marino Point is being carried out in co-operation with a Dutch company, Windmill Holland, B. V. This company has extensive expertise in the marketing and distribution of fertilizers in international markets. The position in regard to those products, in relation to the international scene, is as follows:

Ammonia

The world market for Ammonia, i.e. merchant Ammonia, is some 4 million tonnes, about 4% of current world capacity; the US being the largest importer.

While the capacity of the Marino Point Ammonia plant is some 435,000 tonnes per annum, only about a fifth of this volume will be available for export on the world market. The product will largely be placed in Western Europe where current demand is in the range of 1.5 to 1.75 million tonnes. The ammonia requirements of Albatros Fertilizers Ltd. Ltd. of New Ross will be supplied from Marino Point.

Urea

Of the annual Urea capacity of 310,000 tonnes at Marino Point, about 100,000 tonnes will be placed on the home market in 1980, the remainder being exported, largely to India/China with some to the US and European markets where consumption figures for 1977/78 were:—

However, by 1985, it is expected that the total production of 310,000 tonnes Urea will, like our C.A.N., be required on the expanding Irish market.

FINANCIAL RESULTS 1965-1978

The Company commenced to trade in 1965/66 and turnover increased from £2.34m in that year to £52m in 1979.

The Company traded successfully until 1973/74. By the end of 1974 the Company had generated an accumulated cash flow of £7.8m after finance charges; the funds were reinvested in the Company in expansion of production facilities to meet the growing market.

This favourable situation disappeared after the substantial increases in materials and other costs which followed the rise in oil prices after the 1973 Middle East war. Between 1973 and 1975, Heavy Fuel Oil prices rose by 300%, ammonia prices by about 200%, rock phosphate prices by around 600% and potash prices by over 100%. These increases arose mainly from increases in producers prices and partly from the devaluation of sterling. Labour costs and electricity costs also rose substantially in this period.

These adverse events were worsened by a recession in demand due to farmer reaction world-wide to increases in prices in a period when farm incomes fell substantially, largely because of a recession in the cattle trade.

The world-wide recession in demand which arose in 1974 was severe and prolonged and resulted in the Company incurring increasing losses annually from 1974 onwards.

Briefly, manufacturers were unable to recover the cost increases in the selling prices of fertilizers, and this trend has continued to date.

The Company’s dependence on heavy fuel oil, electricity and imported Ammonia made it extremely vulnerable to movements in the cost of energy. This position has now been corrected to a great extent with the bringing on line of the Marino Point Ammonia Plant. The Marino Point plant uses natural gas as its basic raw material, and consequently has stabilised the Ammonia supply and has removed totally the country’s dependence on imports of Ammonia at unpredictable prices.

The Arklow factory has suffered from prolonged industrial relations problems which have increased costs of production to a serious extent. Restrictive practices have been introduced and have undermined the beneficial results in the earlier years. The major strike from 6th October, 1978 to 31st January, 1979 seriously affected the financial results for these two years.

NÍTRIGIN ÉIREANN TEORANTA

Profit and Loss Statistics

Financial Years Ended

EMPLOYMENT

The establishment of Nítrigin Éireann Teoranta in the 1960’s as a major manufacturer introduced to this country a level of chemical technology which had not been experienced here previously. Ireland up to that time had relatively little experience or technology in the field of heavy chemicals.

To meet the challenge of operating a continuous process plant and maintaining a complex and sophisticated factory at Arklow, it was necessary to recruit and, in many cases, train personnel in a wide range of skills. From the outset, the plant was operated on a 24-hour—365-day basis and this called for the employment of experienced personnel to recruit and train the workforce and to organise the operation and management of the business.

A broad breakdown of the numbers employed in the various functions is as follows:

When the Company went into production at Arklow in 1965, the employment content was in the region of 300. This has grown annually and has now reached nearly, 1,700 between Arklow, Marino Point and subsidiary companies. So successful has been the calibre of employee that when the Marino Point project was being considered in 1974, the Company had the qualified personnel to research, plan, organise and eventually, control a programme for the construction and operation of this massive complex. It is an acknowledgement of the professionalism of Irish graduates and other staff that a project of this size could be brought from the drawing board stage to completion under their supervision.

The Company has a policy of developing human resources and annually recruits graduates, technicians and apprentices from the various disciplines. In this way, these employees are gaining valuable experience and the company is striving to maintain a skilful and professional workforce to achieve its objectives. Indeed, staff who were recruited and trained by NET have been attracted to many other chemical and process industries recently established in this country.

The conditions of employment for the main groups of employees were negotiated in 1964/65 with the Trade Unions. Supervisory and administrative personnel were not unionised for some years, and then jointed Unions catering for these categories. A number of staff are still not unionised and these are mostly represented by the Staff Association.

The management supervisory structure and the manning levels for the different sections of the factory were decided after consultation with the management of similar industries elsewhere. Recruitment for the more experienced and qualified staff was mostly from within Ireland and many engineering graduates returned from abroad to join the Company. The vast majority of the process and maintenance employees came from the local catchment area within a radius of the factory at Arklow.

The establishment of a large semi State company in the district meant the opportunity to gain good secure employment in an area which had just experienced the closure of the Avoca Copper Mines. The early years of the Company, which was for most employees a learning period, saw little emphasis on demands for improved pay or conditions and there was a high level of co-operation between management and employees in striving to make a success of the factory.

Evidence that the early enthusiasm was on the decay was sensed when management introduced the concept of productivity deals to offset the cost of claims for improvements in pay and conditions which had begun to emerge. In the event these productivity agreements did not realise their full potential. Realising the situation that was evolving, management studied what new approaches could be explored in order to maintain a good management/employee relationship.

In 1972 the Company engaged the Tavistock Institute, London, to carry out a three-year programme of investigations into working methods and attitudes with a view to achieving progress in worker participation in the Company. At the meetings arranged by the Tavistock specialist staff, the disparity of conditions between groups of employees in the factory was constantly highlighted, and was said to be a hindrance to greater co-operation between management and employees. In December, 1974, management organised a conference of Shop Stewards, Staff Group representatives and Union Officials as well as management staff. It was made clear that the removal of disparity of employment conditions between Staff and non-Staff was essential to future co-operation. This resulted in the presentation of a report by a Working Party in regard to the removal of inequities in the organisation. Negotiations between management and the various categories were immediately undertaken but became prolonged by the serious problems of removing inequities without consequential leapfrogging, which would have had the effect of restoring the inequities once again. Staff status has, in the main, been now applied to all categories of employees in NET.

Company Development Proposals for the Future

The Company has completed its major development at Marino Point, which eliminates the dependence of the Arklow fertilizer plants on imported ammonia, and establishes urea as a major fertilizer product in Ireland.

The objectives of the Company are to remunerate and repay its substantial borrowings, while at the same time reviewing every opportunity to further develop and utilise the infrastructure and expertise which the company has acquired.

Since the decision in 1974 to proceed with the Marino Point project, there has been a dramatic change in world trading conditions, and massive rises in the costs of essential raw materials have resulted in major increases in production costs. The high level of inflation could not have been anticipated by industry and the burden of financing charges fell particularly heavy on firms relying on borrowing.

NET has put forward a wide range of development proposals to the Industrial Development Consortium set up by the Government. In the present circumstances, it is difficult to progress any of these projects. The Company has, however, particular problem areas which have to receive immediate attention but which also provide the means of expanding and improving the business. NET would like to expand away from its fertilizer base which is so subject to the world market fluctuations continuously experienced in this industry. While the heavy chemical industry has fertilizer as one of its base outputs, most of the international companies engaged in fertilizer manufacture have also got a wide range of other chemical interests e.g. ICI, Hoechst, Norsk Hydro. Profitability of these companies is closely associated with diversification.

NET has the technological ability to operate a diverse range of chemical manufacture. The immediate prospects of diversification are in joint ventures. NET are having discussions with international companies on a number of possibilities.

The Company has two major industrial sites at Marino Point and Arklow. These sites have substantial investment in infrastructures in the form of site services i.e. water, steam, electric power and transport facilities by rail, road and sea. It is economic to utilise those services to the maximum possible and this is achieved by adding new production facilities to the existing plants, as well as phasing out uneconomic units. The Marino Point site, in particular, has major development potential for chemicals manufacture based on Natural Gas.

Considerable thought has gone into the analysis of a suitable base for NET which would provide a product range with greater added value and market stability than fertilisers. Examination of the following aspects will be useful in defining corporate development objectives:

The Company could manufacture chemicals and other materials utilised in Ireland’s agricultural sector, to limit importation of expensive materials, and other maximum support to this major industry.

The Company could manufacture natural gas-based chemicals which can be blended into gasoline and thus reduce Ireland’s dependence on expensive imported fuel.

Two chemicals under active consideration by NET are:—

(i)Methanol which can be blended with gasoline at levels of up to 15% to produce additional motor fuel, and

(ii)Methyl Butyl Tert-Ether (MBTE) which can be added to gasoline to improve octane number and replace Tetra Ethyl Lead.

These products are quite logical for NET to manufacture as Methanol is manufactured from Natural Gas by established, proven processes similar to ammonia synthesis, and MBTE is synthesised from Methanol.

A product with high added value is well examplified by the chemical Pentaerythritol, which is expected to have an exciting future as a synthetic lubricant in special applications, such as aero engines.

Pentaerythritol is now commanding a price of approximately £800 per tonne in Europe, and as its precursor can be Methanol valued at £100 per tonne, an indication of the value added potential can be readily ascertained.

The technical base which NET has built up could also be used for exploitation of chemicals manufacture from any offshore oil discoveries.

SUMMARY

The Company has achieved its objective in ensuring stable supplies of nitrogen to the Irish farmer at competitive prices without protection and despite occasional upsets caused by dumping of fertilizer from outside the EEC. The Company traded reasonably successfully up to 1974; the effects of inflation of all costs since the energy crisis of 1973/74 and the escalation of costs of the Marino Point factory, due to delays in construction and completion, have led to the imposition of heavy interest and repayment commitments. The present objectives are to remunerate and repay the massive borrowings incurred, but this will absorb the Company’s entire resources for the immediate future. It will, therefore, be necessary to have a further investment of equity capital in order that the Company may avail of every opportunity to develop and utilise the infrastructure and expertise which the Company has acquired. The Company has major development potential for chemicals manufacture based on Natural Gas which will provide diversification into a product range with greater added value and market stability than fertilizers.

January 1980

*Metric Tonnes.

*18 months period.

**3 months strike.