Mr. Seamus McCarthy:

At previous meetings, I outlined the financial difficulties of the Dublin Docklands Development Authority in 2010, which was the first year in respect of which my office was required to carry out an audit of the authority’s financial statements. The report was compiled in that context, and chapter 2 outlines the nature of the financial difficulties. Chapter 3 provides an overview of the authority’s participation in a joint venture with private developers to buy and develop the Irish Glass Bottle Company site in Poolbeg, which was a key factor contributing to the authority’s financial position. The final chapter of the report gives an overview of the operation of the authority’s planning function. It also outlines the implications for the authority of losing the High Court case concerning the North Quay Investments Limited development in October 2008, and the subsequent revision of the authority’s key planning processes.

Given that the focus of today’s meeting is the Irish Glass Bottle Company site joint venture, I will briefly mention the key findings in that regard. On 25 October 2006, the authority and its partners in a joint venture company called Becbay Limited submitted a bid of €412 million to acquire the Irish Glass Bottle Company site. Other related expenses brought the total acquisition cost to €431 million, of which €291 million was bank borrowing.

The authority provided equity and loan funding for the joint venture up front, and guaranteed the repayment of a share of the Becbay Limited loans, which were initially provided by Anglo Irish Bank. Following a deal done with the National Asset Management Agency on 27 July 2011, the final cost to the authority of its involvement in the Irish Glass Bottle Company site venture was around €52 million.

During October 2006, the authority’s management presented to the executive board of the authority an assessment of the level of investment, benefits and risks of the Irish Glass Bottle Company site project, but there is no evidence that a detailed analysis of those factors, commensurate with the scale of the proposed investment, was carried out. Management advised the board that the property market in 2006 was overheated, but they nevertheless recommended the investment to achieve the authority’s strategic objectives in Poolbeg.

The information submitted on 12 October 2006 to support the authority's application to the then Department of the Environment and Local Government to increase its borrowing capacity stated that the value of the site was approximately €220 million. It appears the authority did not formally update the Department when it decided to bid almost double that amount. Consequently, consent by both the then Minister for the Environment and Local Government and the then Minister Finance for increased borrowing and for the authority's participation in the joint venture was evidently given on the understanding that an investment to the value of around €220 million was being contemplated.

The authority did not obtain its own independent valuation when it was deciding on the bid that Becbay Limited should make for the site.

In the course of the examination, my office also reviewed the management by the executive board of conflicts of interest around the decision to invest in the joint venture. In deciding to purchase the Irish Glass Bottle site, a number of board members disclosed their connections as directors of banks that were providing project finance. The authority took steps to assure itself that its decision-making in the provision of finance was in accordance with its code of conduct.