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Chief minister seeks support over £23.5m gas deal
CHIEF Minister Tony Brown will next week ask Tynwald to support spending £23.5m on an extension of the Isle of Man's natural gas network.
The aim is to expand the natural gas network to supply a further 6,500 homes, replacing LPG town gas supplies.
The cost of the conversion would be repaid by Manx Gas over 40 years, but some MHKs have expressed concern at the deal and referred to difficulties in the conversion of gas supplies in Douglas.
However, the government says it will lead to reduced costs for customers.
Mr Brown said: 'The proposed project is to provide an extended government-owned gas infrastructure to ensure uninterrupted supply to 6,500 homes and business in the north, west and south of the Island.'
It would be a 'significant step up' in converting to modern supplies.
WHAT DO YOU THINK?
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YOUR COMMENTS
I just did a quick calculation. Mr Brown says both that costs will reduce to consumers and that the loan of 23.5 million will be repaid by Manx Gas over 40 years. Assuming a modest 6% interest rate over the period the annual repayments of capital and interest will amount to 1,560,000 per annum. this of course will have to funded by gas users. Mr Brown needs to explain the steps he is taking to ensure that Manx taxpayers' monies advanced to Manx Gas is well secured? I understand that Manx Gas is ultimately owned by an Australian company, Prime Infrastructure that was part of the Babcock and Brown group that went into voluntary administration in 2009. The parentage of Manx Gas needs to be clear to manx taxpayers if they are being asked to advance so much money in a loan. If a private person was to look to purchase a property of, say, 235,000 they would need to put down at least a 10% deposit; they would pay for a proper valuation; they would pay the legal fees associated with the deal; they would provide detailed financial statments; they would give a lien over the property or find alternative securities to the value of the loan or find a guarantor. It does seem rather unusual that a commercial proposition involving updating and extending a private sector fuel distribution network has to be funded by taxpayers rather than through the banking system we are so proud of here. Before agreeing to this request MHKs, on behalf of those they are elected and paid to represent, need to seek open, transparent, explanations from the Chief Minister as to why Manx Gas has come to the Government rather than to the private sector to borrow money. They also need to obtain an equally open and transparent undertaking from him that the loan will be made on a 'commercial' basis on behalf of Manx taxpayers and that full and commercially satisfactory security will be provided against the monies advanced. Such undertakings should also be capable of scrutiny under any future FOI legislation as there are no competitive sensitivities involved with a monopoly gas supplier.
AB
This is a gas, Tony wants to subsidise a private company, which is Australian owned, why dosn't the government take it over, and the statement "It will lead to reduced costs for customers ", where have we heard that one before, when they allowed the size and weight of trucks to be larger, "the price of food will come down ", I'm not sure if that was Tony again. How do we know that all the 6500 homes will use gas, some may already be on oil. As for uninterrupted supplies, look what just happened with 750 homes cut off. This should have been done when it was Manx Gas years ago, and there was money flowing into government coffers, not now when there is a shortfall in VAT, if Manx Gas (Australia] want to expand and take all the profits, let them borrow from the banks like other private companies have to do.
EORH
I must come off the stupid pills as I cant quite get to grips with this article. Manx gas I thought was a private company owned by a company called Prime...something, owned by Babcock I think. Ultimately part of a huge international company! Why therefore is the taxpayer being asked to fund this? If the current infrastructure is so poor why has it not been gradually replaced over the years as part of ongoing preventative maintenance? It happens in the UK why is it so different here? Cant see British Gas going to Cameron asking for cash somehow! Even in his usual eloquent public school charm mode he would still be able to conjure up the words ! This company can probably arrange funding with a click of the fingers from a variety of sources so why dont they? There are a lot of questions and no clarity, again. An aquaintance has just announced they are off to live in NZ, they have a job in government and want to go before his pension is comandeered by his employers to pay for thier own, and "before the government bankrupt the IOM" (their words), worryingly, guess which dept. they work in?
FULL OF GAS AS USUAL
Really Tony, do you think the Island population are stupid….. The sooner the Island gets a new Chief Minister and replaces the current collection of 'yes men' the better. Vote carefully at the next election everyone, or this will continue until bankruptcy.
MAE
Why are we investing in resource that is already in decline? Europe is already experiencing shortages. Why not invest the money into the Wind Turbines the MEA wants to build.
TONY
Given the previous issues with the gas switchover in the Douglas and Onchan area, one can only hope that the cost has been adequately calculated. 23.5m expenditure for 6500 homes/users works out at 3615 switchover costs per home/user, which is a substantial sum that would need to be reclaimed (including interest) through either a raised gas rate or internal savings achieved at Manx Gas. The IOM Government is very generous when it comes to supporting Manx industry, but the normal IOM grant scheme requires also a capital input from the company undertaking that investment, so some capital investment from Manx Gas towards this scheme would clearly be a statement towards their commitment to the IOM. Likewise, if they are unable to afford the scheme, one needs to question the company's viability. There can be little doubt that the Council of Ministers will vote in favour of this scheme, so it is probably already a done deal. However, in the interest of transparency, it would be good practice to declare what security the IOM Government is getting for this substantial investment, by how much Manx Gas intends to reduce gas rates per annum and under what macro-economic circumstances, how the repayment is going to be structured, how the interest rate is being set, especially when compared to the MEA loans, and whether, and if so, how much, is being paid out in fees to facilitate this deal and who, if this is the case, is paying the fees.
HK
Nothing much to add to previous columns but hopefully Arkwright Brown will not get the support he so desperately craves. Why on earth should we be assisting an Australian privately owned company – surely this is for them to sort out. Unless of course any profits realised will be coming straight back into the treasury – somehow I doubt it
PEEJAY
Errrr Tony, should this not go out for public consultation too?
CONCERNED MANXMAN
Excellent comments. I wonder if our MHKs will be as capable in their evaluation of this 23.5 mllion spend at a time our coffers are in reduced circumstances? It will be a test of whether we have a truly indepenedent minded politicial system. What seems strange is that there has hardly been a peep out of any of them about this yet it is so obviously an unusual arrangement. At least (and heaven help us how it was managed by our politicians) the MEA was a state-owned business unlike Manx Gas. The questions I should like to see asked are: Why is Manx Gas not borrowing the money from the banks? Is there any concern for Manx taxpayers if Manx Gas has been unable to raise the funds in the private sector? What security is being offered for the loan to a private company? How much of its own, or its parent's, money is Manx Gas investing in this project? What interest rate is being paid? What is the schedule for repayments to be made? What alternative uses could the taxpayer money being advanced to this private sector non-Manx owned firm have been put? What guarantees have been given about reductions in gas costs? How copper-fastened are the guarantees? What contingencies exist in relation to repayments if Manx Gas' owners sell the business or if they go into administration? Is there any additional call on Manx taxpayers for loans if the pipeline project costs overrun their current budget? What professional advice has been obtained by the Government on behalf of taxpayers in relation the commercial feasibility of the Manx Gas project, the financial soundness of the company and its owners/ultimate owners and the terms and conditions proposed for the loan? How many additional households are expected to sign up for access to the gas network? What lessons in loan management have been learned by Ministers from their involvement in the MEA problems? If our MHKs already have satisfactory answers to these questions they need to let the people they represent know. If they do not have answers they should not, under any circumstances, agree to the request for a loan until they have received answers that will stand up to public scrutiny. We are about to see which MHKs have some commercial nouse and the interests of taxpayers at the forefront of their mind.
IT
Manx gas,(Babcock and Brown Australia], they need 23.5 million to do all this work, just a thought on this, what about the standing charges, which goes on top of the price of gas, I asked why they charge this, answer, to renew the infrastructure, renew pipelines, maintenance etc, whatever you want to call it, we don't see Manx Gas digging up the roads like the DOI do, so what is the state of the present areas of pipelines in Douglas/Onchan/Braddan which is covered by natural gas.
There is enough MHKs to vote this out, we will be watching.
EORH
In response to earlier posts I am an oil user in the area in question who would be looking to convert to gas when this pipeline is in place. I currently run bottled gas as my connection to the town supply was taken out by a previous occupant and was very antiquated – I found an original gas lamp hidden in the loft! Are most of those objecting residents of the areas that have already benefited from the gas pipeline? Why are they so keen to deny the rest of the Island the opportunity of an up-dated supply? My understanding is that the pipeline installation will provide work for a number of local companies and will then put money back into the economy by keeping local people in work. What will happen if this does not go ahead? Will these people still have jobs or will they have to go on the dole? It is important for the Island's economy that some capital projects go ahead in the near future. Surely 23.5 million for the gas infrastructure would be more beneficial than 45 million for a new marina to benefit a few who can afford expensive boats?
LIZ
If this proposal is such a great idea then why can't the parent company get a bank loan and not spend the tax payer's money? Surely company investment should be funded by the company and not require government backing? Or is there something basic, wrong and fundamental that I am missing in this ludicrous proposal?
FS
Thanks Liz finally someone is sticking up for for us folks who don`t have natural gas. I personally welcome the plans, I live in the North and would love to have natural gas. Why can`t the rest of Island have a chance to get natural gas, after all the rest of us on the town gas are subsidising the lucky few. It always seems to be that once people in Douglas, Onchan and the very close surrounding areas have got something e.g.. natural gas, iris, they seem very reluctant to share with the rest of the island. Us people up north always seem to forgotten about when it comes to things happening. We don`t look like we are getting our iris, marina, our pier done (but that's another story), All we get is the prison which people in Douglas didn`t want. Get it the pipe line installed soon, so the rest of can get the benefit! I can understand that people who have oil don`t want there tax payers money spent on it, but there are plenty of thing the government have spent money on that doesn`t benefit me or I will never use. They can be good at wasting money. We all know that gas will eventually run out, but so will oil and then what. Why don`t the Govt make Dandara, Heritage Home etc, build homes with solar panels installed on the roof, that make just decrease the the need for gas, oil etc. (Abit of the point, but it`s an idea)
NORTHERNER
Liz I think most of the comments here are asking a basic question - why is a private sector company coming to the Manx taxpayers to borrow money for its expansion and renewal work? If it has a viable business plan it should be raising money in the normal way that private sector companies do this - through the banking system. If the banks are not willing to lend money on this project - why? Should taxpayers be the people to lend on financially riskier ventures - and if so what extra risk premium should they be paid by Manx Gas for taking the risk?
IT
Liz and Northerner you both have good points about this subject,and want what we have,I live in Douglas and have natural gas,its expensive,more so than oil,you all want to share in this great plan,but would you want to share an all island rating system so we all pay,(same as gas],the same rate,I want what you have. Don't get excited by Tony's words of cheaper gas prices,remember this money has to be paid back with interest,and what is the first thing Manx Gas will do,put up the prices,they buy the gas from the MEA,and somewhere within IOM Newspapers items there was a report of how much they pay,and the retail prices,it was something like 40/50p buying and 1.64 selling to us,as the saying goes "the grass is not always greener on the other side of the hill"
EORH
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Weather for Isle of Man
Wednesday 08 February 2012
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