Report urges State to provide €125m to Iarnród Éireann

The State has been urged to provide €125.1 million in once-off funding over the next three years to Iarnród Éireann to avoid a potential insolvency of the rail company.

This emerges in a review prepared for Government by the State-owned rail operator and the National Transport Authority, supported by work carried out by consulting groups, Aecom and Roland Berger.

This is just one element of the €640 million in overall funding being sought from Government, out to 2021, to fund all elements of Iarnród Éireann.

The report notes that Iarnród Éireann’s shareholder funds declined from €122.1 million in 2010 to just under €44 million last year and are at a level where the “balance sheet cannot sustain any unexpected financial shock”.

Financial crisis

“This situation needs immediate remediation to avoid a financial crisis,” the report adds. Two options to repair Iarnród Éireann’s balance sheet are outlined.

One is a new issuance of share capital while the other is a once-off funding payment that would effectively compensate the rail firm for losses incurred over the past six years.

Accumulated losses between 2010 and 2016 are forecast at €125.1 million, with the report suggesting the Government could compensate Iarnród Éireann to the same level by providing €41.7 million annually over the next three years.

Cost savings

The report states that a “short window of opportunity” is available to the Government to bolster Iarnród Éireann’s shareholder funds in this way as, once a new public services contract is signed in 2019, compensation for these legacy losses can no longer be provided.

“Alternatively, it would require in excess of 30 years reasonable profits to restore shareholder funds to a reasonable level,” the report states.

The State-owned rail company, a subsidiary of CIÉ, accumulated losses of €150 million between 2007 and last year, in spite of achieving cost savings of €76 million over that period.

A loss of €11 million is forecast for 2016, up from the €7.7 million deficit recorded in last year’s accounts.

There is no mention of Iarnród Éireann’s potential insolvency in its 2015 annual report.

The report was signed off in April and lodged with the companies office recently.