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Mr O'Brien said house-building in Cork - relative to the national average - has probably peaked in 2005 with a 20pc increase comparing with an increase nationally of just 2.5pc. "I expect the market to stabilise for a year or two at current levels with the outlook for housing in the south-west more positive as the population in this region is predicted to grow by in excess of 20pc over the next 15 years, representing a demand for 130,000 houses," Mr O'Brien said. Volume increases in the general construction and civil engineering sectors driven - largely - by the Public Capital Programme should offset the stability in residential output and ensure continued growth overall in the construction industry, according to the CIF. Momentum "Prospects for private, non-residential construction are dictated in the main by economic and employment growth and indications are that the increase experienced in 2005 in this area will gather momentum in 2006," said Mr O'Brien. Public sector construction will be influenced by Public Capital Programme expenditure, and consequently by the expenditure of all capital allocated, together with that carried over from 2005. "Here in Cork the number of commercial/residential urban renewal construction projects in progress or about to get underway is at an all time high for our city. "The Web Works and Civic Centre extension to City Hall on either side of Eglington Street are nearing completion while the redevelopment of the former Guys site on Cornmarket Street site and the School of Music are well underway," he said. The imminent development of the former An Post site in Eglington Street, the planned Watercourse Road development, the development of Dunnes Stores on Patrick Street, the plan for the former Sunbeam site, the proposals for the Good Shepard convent and the total redevelopment of the former Examiner site and adjacent Johnson & Perrott block are all major projects. The Irish Independent also reports that the energy market in Ireland is set to be hit with the departure of another major international player, with German energy giant E.ON set to sell its Offaly power plant. Bord na Móna is understood to be ready to bid between €70m and €90m for the Edenderry Power Station, according to sources. AIB Corporate Finance is advising Bord na Móna on the deal, with Barclays acting for PowerGen. The peat and bone meal-burning power plant is owned by British group PowerGen, which is in turn owned by giant German utility E.ON. This comes after it emerged last month that Norwegian oil giant Statoil was pulling out of Ireland. The company has sold its 30pc stake in the Synergen Power Plant in Dublin and is now engaged in selling its petrol forecourts. At the same time another German energy giant, RWE, has decided to exit the gas market here. The plans by the three energy majors to leave the market are being interpreted as a massive blow to efforts to promote greater competition in the Irish energy market. Bord na Móna has been known to be anxious to develop new businesses, such as waste management and power generation, as peat reserves diminish. It is understood that Bord na Móna will turn the Edenderry plant into an experimental power generator, using alternative fuels such as wood chippings and certain types of grass, alongside peat. The €70m acquisition will be funded by non-recourse debt and will not breach the company's State-imposed borrowing ceiling. Bord na Móna is also preparing a number of possible investments in the waste management sector. It has held talks with NTR-owned Greenstar and Oxigen about buying minority stakes in the firms. The Edenderry plant saw its after-tax profits dive 43pc in 2004. Pre-tax profits dropped from €7.4m in 2003 to €4.3m, with after-tax profits falling from €6.8m to €3.8m last year. No reason is given in the accounts for the sharp fall in profits, but when Edenderry Power sought permission to burn bonemeal it argued the plant's sustainability would be greatly increased if it were allowed to burn a mix of fuels
However it has yet to reach agreement on a way to speed up High Court planning cases, which have taken an average of 13 months to be processed through the courts and are now the principal cause of delay in major infrastructure cases. The Cabinet is to be asked today by the Minister for the Environment, Dick Roche, to approve the introduction of the new critical infrastructure Bill, which will lead to the introduction of a new division of the An Bord Pleanála to deal with major public infrastructure projects. Qualifying projects will move directly to the division and will not apply for planning permission to a local authority. There will also be mechanisms to provide for ongoing consultation between planning officials in the division and the promoters of the infrastructure project before an application is made. The new legislation is considerably different to the original proposals, which had to be abandoned in the face of stiff opposition from Minister for Justice Michael McDowell and officials in An Bord Pleanála. Mr McDowell, who is opposed to the siting of an incinerator in his Dublin South East constituency at Ringsend, has received assurances that the project will not be included in the new fast-track planning process. The original plans, announced in 2003 at the Fianna Fáil ard fheis by the then minister for the environment, Martin Cullen, would have seen the establishment of a new entity, separate from An Bord Pleanála, which would also have attempted to limit the scope for taking judicial reviews against planning decisions. The proposals were dropped last year by Mr Roche, who last May said there was no need to remove responsibility for projects from An Bord Pleanála which he said was now dealing with major projects in a speedy manner. There have also been discussions between officials at the Department of the Environment and the Department of Justice on the possibility of streamlining planning cases through the courts to reduce delays. Environmental groups have already stated their opposition to fast-track planning procedures, claiming that they were designed to push through infrastructure projects without proper process. The Irish Times also reports that the return of Irish chilled beef exports to Saudi Arabia appeared a little closer yesterday when President McAleese, Bord Bia and Enterprise Ireland combined in a charm offensive on the President's last day in the kingdom. In a speech to a business breakfast in Riyadh attended by the head of food safety with the Saudi ministry of commerce, the President said Ireland looked forward to the reappearance of Irish beef in Saudi in the near future. The presence of the head of food safety was regarded as a hopeful sign by officials who have been working on retrieving the market since European beef was banned by Saudi and the Gulf states as a result of BSE five years ago. In 2000, the trade was worth €100 million a year to Ireland and amounted to over 50 per cent of the beef market. Some 250 people, including some of Saudi's "top decision makers", attended the breakfast, at which up to 40 Irish companies were represented, said Gerry Murphy of Enterprise Ireland. Irish exports increased by around 14 per cent last year and the President noted that with Saudi Arabia investing heavily in IT infrastructure, there is substantial potential for Irish companies there in process control and automation, construction, oil and gas sectors, engineering services and third level education. In 2005, 60 per cent of the approximately €300 million worth of Irish exports to Saudi Arabia was food, mainly in the form of infant milk formula. While the Irish contingent was not inclined to gloat over the Danes' troubles across the Muslim world - "there but for the grace of God go we", said one - the reality is that the sudden collapse of much of the Danes's half €500 million dairy market in the region has left a vacuum to be filled. Owen Brooks of Bord Bia noted that while it would "certainly" take some time for Denmark to resume business as usual, Australia and New Zealand would find it easier to fill the gaps in the short term because of the difficulty in "turning on" milk supplies in Ireland, due to EU quotas and the fact that we are in the winter season. Meanwhile, Riverdeep Interactive Learning - which is probably the biggest supplier of e-learning software in the world - announced that it has entered into a joint venture with the large Saudi publishing and packaging company, Obeikan Investment Group. The Irish Examiner reports that Ryanair bosses last night said the airline's safety and security policies were vindicated by an undercover exposé on British television. But the programme-makers failed to mention full and rigorous checks are carried out beforehand at check-in, security and passport control.
Revisions to the way business investment in software is measured will instantly boost figures for economic output, business investment, and prosperity, lifting Britain’s position in international economic league tables. The changes will raise gross domestic product by 1 per cent — more than half the level of economic growth last year — and revise annual growth rates upwards by close to 0.1 per cent for all years since 1992. China recently overtook the UK as the fourth largest economy in the world, but history may even show the UK held its position a little longer than had been thought. The Office for National Statistics said the value of software developed within a company would be five times higher than had been thought. The ONS said its estimate for such investment in 2003 was likely to rise from £2.5bn to £13bn. ONS officials told the Financial Times on Monday that estimates for software investment had been based on outdated assumptions stemming from a Department of Trade and Industry survey of the computer services industry between 1971 and 1991. The new method will use current employment surveys to estimate the number of people working in the software sector, along with assumptions about how much of their time is sorting out present IT problems versus developing new products. The changes are likely to enter official statistics in summer 2007. Nicholas Oulton, a senior fellow at the Centre for Economic Performance and the London School of Economics, said there had long been a puzzle over the UK’s low recorded levels of software investment: “There was something odd about UK software, it didn’t relate well to the recorded purchases of computers, and you would expect the two to be related.” Higher levels of measured output will give an immediate boost on many fronts to the chancellor. It will improve the UK’s relative position in the international league tables for prosperity; boost measured productivity; show business investment to be considerably higher than thought; and lower the recorded burden of tax and public expenditure in GDP. The results will put the UK’s total software investment on par with other countries and show that UK in-house software development as a share of gross domestic product is higher than that in the US. The ONS said this was a reasonable result given the large share of financial services in the UK economy. The industry on Monday welcomed the ONS’s consultation document. As software investment is to be recorded at about 1.9 per cent of GDP, Beatrice Rogers of Intellect, the hi-tech trade association, said the Treasury should give the sector more prominence in its deliberations. The FT also reports that much has been said about the need for Europe and the US to improve their energy security. Last weekend finance ministers discussed the topic at a meeting of the Group of Eight countries in Moscow, while US voters were still digesting President George W. Bush’s claim that they were “addicted to oil”. But while consuming countries are holding high level discussions and floating ambitious plans to reduce their reliance on oil from unstable parts of the world, countries in the Middle East are starting to build new refineries that will ensure their region becomes more, not less, important in the race to fuel the world’s economic growth. Rodrigo de Rato, managing director of the International Monetary Fund, at the G8 meeting acknowledged that the doubling of the oil price in the past four years was not only related to demand. He said: “We are facing more and more supply constraints...which could produce macroeconomic disturbances we haven’t seen yet.” The supply bottlenecks are not only at the dwindling oil reserves outside the Middle East, Russia and west Africa. After more than a decade of refining infrastructure overcapacity, China’s rampant demand and America’s continued love affair with the car have again created a shortage in the world’s ability to turn oil into petrol, diesel, heating oil and other petroleum products. But rigid environmental regulations and unfriendly local governments mean few, if any new refineries will be built in Europe and the US. Together Europe, North America and Russia only plan to add a total 2.5m barrels a day of refining capacity, increasing their existing base by less than 5 per cent. This is also in part because international oil companies are reluctant to venture again into an industry that suffered from poor margins for much of the past decade. Lee Raymond, until recently chief executive of ExxonMobil, the world’s biggest energy group by market capitalisation, recently testified to US Congress “current refining economics are almost relevant.” Refiners would need the confidence of high margins for the next 20 years before sanctioning a project, he said. But national oil companies, such as Saudi Aramco, are less concerned with such things. Flush with cash from high oil prices and guided by governments eager to hold on to economic dominance, they have plans to increase their refining capacity by 60 per cent in the next decade. In a report to be released on Tuesday, analyst Wood Mackenzie calculates that the Middle East plans to add more than 4m barrels a day of refining capacity in the next decade, second only to Asia, which intends to add 6.6m. But Asia’s new capacity will not be able to match the region’s growing demand, while the new Middle Eastern refineries – some of them big enough to process 400,000 b/d – are being built expressly to ship oil products abroad. This would create a new, long-distance trade in petroleum products, traders said, adding that bigger tankers were already being built to improve the economics of the longer journeys. Aileen Jamieson, analyst at Wood Mackenzie, said: “You are going to see a lot more trade, a lot more tankers moving around.” But bigger tankers will not be the only side effect of the US and Europe’s willingness to leave refinery building to countries in the Middle East. It will also mean political unrest, such as the current crisis over Iran’s nuclear ambitions, will threaten not only oil supplies, but also those of refined fuels critical to run cars, tractors and aircraft; and to heat homes in Asia, the US and Europe. The US and Europe may have little power to boost the dwindling production from their ageing oil and natural gas fields. But their increasing dependence on imported petroleum products is a matter of choice. The New York Times reports that the the federal government is on the verge of one of the biggest giveaways of oil and gas in American history, worth an estimated $7 billion over five years. New projections, buried in the Interior Department's just-published budget plan, anticipate that the government will let companies pump about $65 billion worth of oil and natural gas from federal territory over the next five years without paying any royalties to the government. Based on the administration figures, the government will give up more than $7 billion in payments between now and 2011. The companies are expected to get the largess, known as royalty relief, even though the administration assumes that oil prices will remain above $50 a barrel throughout that period. Administration officials say that the benefits are dictated by laws and regulations that date back to 1996, when energy prices were relatively low and Congress wanted to encourage more exploration and drilling in the high-cost, high-risk deep waters of the Gulf of Mexico.
"We need to remember the primary reason that incentives are given," said Johnnie M. Burton, director of the federal Minerals Management Service. "It's not to make more money, necessarily. It's to make more oil, more gas, because production of fuel for our nation is essential to our economy and essential to our people." But what seemed like modest incentives 10 years ago have ballooned to levels that have alarmed even ardent supporters of the oil and gas industry, partly because of added sweeteners approved during the Clinton administration but also because of ambiguities in the law that energy companies have successfully exploited in court. Short of imposing new taxes on the industry, there may be little Congress can do to reverse its earlier giveaways. The new projections come at a moment when President Bush and Republican leaders are on the defensive about record-high energy prices, soaring profits at major oil companies and big cuts in domestic spending. Indeed, Mr. Bush and House Republicans are trying to kill a one-year, $5 billion windfall profits tax for oil companies that the Senate passed last fall. Moreover, the projected largess could be just the start. Last week, Kerr-McGee Exploration and Development, a major industry player, began a brash but utterly serious court challenge that could, if it succeeds, cost the government another $28 billion in royalties over the next five years. In what administration officials and industry executives alike view as a major test case, Kerr-McGee told the Interior Department last week that it planned to challenge one of the government's biggest limitations on royalty relief if it could not work out an acceptable deal in its favor. If Kerr-McGee is successful, administration projections indicate that about 80 percent of all oil and gas from federal waters in the Gulf of Mexico would be royalty-free. "It's one of the greatest train robberies in the history of the world," said Representative George Miller, a California Democrat who has fought royalty concessions on oil and gas for more than a decade. "It's the gift that keeps on giving." Republican lawmakers are also concerned about how the royalty relief program is working out. "I don't think there is a single member of Congress who thinks you should get royalty relief at $70 a barrel" for oil, said Representative Richard W. Pombo, Republican of California and chairman of the House Resources Committee. "It was Congress's intent," Mr. Pombo said in an interview on Friday, "that if oil was at $10 a barrel, there should be royalty relief so companies could have some kind of incentive to invest capital. But at $70 a barrel, don't expect royalty relief." Tina Kreisher, a spokeswoman for the Interior Department, said Monday that the giveaways might turn out to be less than the basic forecasts indicate because of "certain variables." The government does not disclose how much individual companies benefit from the incentives, and most companies refuse to disclose either how much they pay in royalties or how much they are allowed to avoid. But the benefits are almost entirely for gas and oil produced in the Gulf of Mexico. The biggest producers include Shell, BP, Chevron and Exxon Mobil as well as smaller independent companies like Anadarko and Devon Energy. Executives at some companies, including Exxon Mobil, said they had already stopped claiming royalty relief because they knew market prices had exceeded the government's price triggers. About one-quarter of all oil and gas produced in the United States comes from federal lands and federal waters in the Gulf of Mexico. As it happens, oil and gas royalties to the government have climbed much more slowly than market prices over the last five years. The New York Times reported last month that one major reason for the lag appeared to be a widening gap between the average sales prices that companies are reporting to the government when paying royalties and average spot market prices on the open market. Industry executives and administration officials contend that the disparity mainly reflects different rules for defining sales prices. Administration officials also contend that the disparity is illusory, because the government's annual statistics are muddled up with big corrections from previous years. Both House and Senate lawmakers are now investigating the issue, as is the Government Accountability Office, Congress's watchdog arm. But the much bigger issue for the years ahead is royalty relief for deepwater drilling. The original law, known as the Deep Water Royalty Relief Act, had bipartisan support and was intended to promote exploration and production in deep waters of the outer continental shelf. At the time, oil and gas prices were comparatively low and few companies were interested in the high costs and high risks of drilling in water thousands of feet deep. The law authorized the Interior Department, which leases out tens of millions of acres in the Gulf of Mexico, to forgo its normal 12 percent royalty for much of the oil and gas produced in very deep waters. Because it take years to explore and then build the huge offshore platforms, most of the oil and gas from the new leases is just beginning to flow. The Minerals Management Service of the Interior Department, which oversees the leases and collects the royalties, estimates that the amount of royalty-free oil will quadruple by 2011, to 112 million barrels. The volume of royalty-free natural gas is expected to climb by almost half, to about 1.2 trillion cubic feet. Based on the government's assumptions about future prices — that oil will hover at about $50 a barrel and natural gas will average about $7 per thousand cubic feet — the total value of the free oil and gas over the next five years would be about $65 billion and the forgone royalties would total more than $7 billion. Administration officials say the issue is out of their hands, adding that they opposed provisions in last year's energy bill that added new royalty relief for deep drilling in shallow waters. "We did not think we needed any more legislation, because we already have incentives, but we obviously did not prevail," said Ms. Burton, director of the Minerals Management Service. But the Bush administration did not put up a big fight. It strongly supported the overall energy bill, and merely noted its opposition to additional royalty relief in its official statement on the bill. By contrast, the White House bluntly promised to veto the Senate's $60 billion tax cut bill because it contained a one-year tax of $5 billion on profits of major oil companies. The House and Senate have yet to agree on a final tax bill. The big issue going forward is whether companies should be exempted from paying royalties even when energy prices are at historic highs. In general, the Interior Department has always insisted that companies would not be entitled to royalty relief if market prices for oil and gas climbed above certain trigger points. Those trigger points — currently about $35 a barrel for oil and $4 per thousand cubic feet of natural gas — have been exceeded for the last several years and are likely to stay that way for the rest of the decade. So why is the amount of royalty-free gas and oil expected to double over the next five years? The biggest reason is that the Clinton administration, apparently worried about the continued lack of interest in new drilling, waived the price triggers for all leases awarded in 1998 and 1999. At the same time, many oil and gas companies contend that Congress never authorized the Interior Department to set price thresholds for any deepwater leases awarded between 1996 and 2000. The dispute has been simmering for months, with some industry executives warning the Bush administration that they would sue the government if it tried to demand royalties. Last week, the fight broke out into the open. The Interior Department announced that 41 oil companies had improperly claimed more than $500 million in royalty relief for 2004. Most of the companies agreed to pay up in January, but Kerr-McGee said it would fight the issue in court. The fight is not simply about one company. Interior officials said last week that Kerr-McGee presented itself in December as a "test case" for the entire industry. It also offered a "compromise," but Interior officials rejected it and issued a formal order in January demanding that Kerr-McGee pay its back royalties. On Feb. 6, according to administration officials, Kerr-McGee formally notified the Minerals Management Service that it would challenge its order in court. Industry lawyers contend they have a strong case, because Congress never mentioned price thresholds when it authorized royalty relief for all deepwater leases awarded from 1996 through 2000. "Congress offered those deepwater leases with royalty relief as an incentive," said Jonathan Hunter, a lawyer in New Orleans who represented oil companies in a similar lawsuit two years ago that knocked out another major federal restriction on royalty relief. "The M.M.S. only has the authority that Congress gives it," Mr. Hunter said. "The legislation said that royalty relief for these leases is automatic." If that view prevails, the government said it would lose a total of nearly $35 billion in royalties to taxpayers by 2011 — about the same amount that Mr. Bush is proposing to cut from Medicare, Medicaid and child support enforcement programs over the same period. The NYT reports that at first glance, Mark E. Koenig appeared to be the perfect lead-off witness for the government in the criminal trial of Jeffrey K. Skilling and Kenneth L. Lay, Enron's former chief executives. Clean-cut and articulate, Mr. Koenig, 50, ran investor relations for Enron and was a polished performer on Wall Street who was present at many of the crucial discussions, prosecutors say, where Mr. Skilling and Mr. Lay lied to the public about Enron's true financial condition in the days leading up to its spectacular collapse in late 2001. But after seven days on the stand, including four days of withering cross-examination, Mr. Koenig may have served to advance the defense's argument as much, if not more, than the government's. Indeed, by using Mr. Koenig broadly to cover many aspects of the far-ranging case, some outside lawyers argued, the government opened the door to the defense to lay out its own contention that Mr. Skilling and Mr. Lay did nothing wrong. And they allowed the defense lawyers to showcase Enron's former top executives favorably to the jurors through hours of audio and video tapes. On Monday, Mr. Koenig nearly got off the stand — but not quite. Michael Ramsey, Mr. Lay's lead lawyer, finished his questioning late in the afternoon, and Kathryn H. Ruemmler, a government prosecutor, completed her redirect questioning in about an hour and a half. But then Daniel Petrocelli, Mr. Skilling's lead lawyer, said he would need another half-hour to question Mr. Koenig early on Tuesday. "It may be shorter after you reflect on it overnight," responded the frustrated judge presiding over the case, Simeon Lake. Last week, the defense lawyers were clearly on the offense. They exploited the opening Mr. Koenig provided to play seven hours of video and audio tapes of investor presentations and employee meetings in their entirety. The tapes showed Mr. Skilling and Mr. Lay in their element at the peak of their power, winning plaudits from awed analysts and cheering employees. In the early days of a trial expected to last more than four months, the defendants have already in effect testified, leaving jurors with an impression of their command of Enron's complex businesses and of their enthusiastic cheerleading about the company's future prospects. Whether the hours of tapes will stick in jurors' minds remains to be seen. Outside legal analysts said Mr. Koenig's long stint on the stand allowed the defense to deflect an early barrage of accusations against Mr. Skilling and Mr. Lay. "If they could do it all over again," said Christopher Bebel, a former federal prosecutor, "the prosecutors would be inclined to call a different lead-off witness." Mr. Koenig's testimony for the government, he added, "allowed the defense attorneys to paint their theory of the case with an unduly broad brush and make sweeping inferences in the first leg of the trial. That in effect gives them reason to be hopeful and positively influence the jurors at this very early juncture." But other outside lawyers argued that the prosecution used Mr. Koenig well and that the lengthy cross-examination by the defense might have backfired by testing the patience of Judge Lake, who grew particularly irritated with Mr. Ramsey. "I am not going to warn you again," the judge told Mr. Ramsey at one point on Monday. "I have said you cannot question him about the indictment. He is not a lawyer. Ask him a question about the facts." The judge repeatedly tried to stop both Mr. Petrocelli and Mr. Ramsey from arguing aspects of the case and pushing their cross-examination to the edge. He did not always succeed. Last Thursday, the judge realized after an objection outside the presence of the jurors that the defense had introduced a BusinessWeek article that the government had never discussed. Mr. Petrocelli defended the move by saying it had been Web-linked to an article in the magazine that the government used in questioning Mr. Koenig. Joel M. Androphy, a Houston trial lawyer and author of books on white-collar crime, argued that prosecutors got off to a decent start. "We have to assume that Koenig was the government's best fact witness" and the one "least tainted by the activities of Enron," Mr. Androphy said. His testimony showed that Mr. Lay and Mr. Skilling "decided to close their eyes to what was occurring inside Enron and not take any corrective action." Under the legal concept of "willful blindness," Mr. Androphy argued, the men could be convicted without a smoking-gun meeting or other eyewitness to a crime being discussed. In any event, jurors clearly paid attention to the scenes of the former executives in action. In one video from Aug. 16, 2001 — two days after Mr. Skilling abruptly resigned — Mr. Lay, in shirtsleeves wearing a red tie, returned as chief executive to a standing ovation from Enron employees in a packed auditorium. At that meeting, Mr. Lay displayed toughness and resolve, lawyers said, defending Enron against criticism of its role in California's electricity crisis, saying, "I have never seen such demagoguery, such vile and poisonous allegations." The meeting came just weeks before Enron spiraled into oblivion. Mr. Lay told the employees that day, "We have faced a number of challenges but the worst is behind us, and the business is doing great." When Ms. Ruemmler, the prosecutor, returned to the witness late Monday, she used her final questioning of Mr. Koenig to emphasize to jurors his main assertions: that revenues claimed by Enron's broadband unit were misleading and that a transfer of more than $700 million from the retail Energy Services unit to Enron's wholesale energy division was done intentionally to disguise losses in the retail unit.
And Mr. Koenig was able to remind jurors that Mr. Skilling was in control of every aspect of Enron's operations. "Mr. Skilling was a hands-on C.E.O.," he testified. "He knew a lot more about what was going on at the company than I did. I wouldn't have had to tell him what was going on at the company." Still, defense lawyers repeatedly badgered Mr. Koenig, contending he had limited understanding of the suspected fraud and needed to rely on accountants and managers in business units for the information he disseminated to investors. His own credibility was called into question, including why he initially lied to federal regulators and bank examiners looking into Enron's collapse. Mr. Koenig, who has agreed to plead guilty to aiding and abetting securities fraud, did not cooperate with prosecutors until 2004. He faces a maximum sentence of 10 years in prison. And his plea deal, defense lawyers stressed in trying to cast further doubt on his testimony, allows him the possibility of avoiding prison altogether. © Copyright 2007 by Finfacts.com |
