WATER, WATER: Minister Alan Kelly, pictured alongside Elizabeth Arnett, head of communications at Irish Water and John Tierney Managing Director of Irish Water, has come under fire

Environment Minister Alan Kelly has given Irish Water consent to borrow a further €550m from commercial banks - but is refusing to say what interest rate the utility company is being charged because it is "commercially sensitive".

This year's additional loans will bring Irish Water's borrowing so far to €850m to establish the company, meet initial running costs and invest in water services, including the installation of water meters.

Earlier this year, it was reported that the commercial bankers behind the €550m loans were AIB, Barclays, BNP Paribas, BOI, Danske, HSBC, Ulster, Royal Bank of Scotland and Royal Bank of Canada.

At the time, informed market sources were reported to have said that the company was likely to have secured the financing at "very competitive rates" of less than 1.75pc.

However, since then the Government has altered the financial model behind Irish Water with a result that the interest rate is now likely to be significantly higher.

The issue has emerged at a time when serious questions have been raised over Irish Water's potential income stream following the disclosure last week that just 46pc of households have paid water charges in the first three months of the year.

Irish Water, which began billing people for water in January, has confirmed that it has collected €30.5m when it has been estimated it had hoped to collect €66.8m in the period concerned.

Mr Kelly has said he is "very, very satisfied" and "very happy" at the rate of water charge payment and a spokeswoman for Irish Water said it "represents a solid start" for the company.

However, anti-water charge campaigners were buoyed by the information and intend to renew their campaign against the charge and company.

Earlier this year, Mr Kelly gave approval for Irish Water to "enter into a number of committed facilities" with commercial banks totalling €550m.

In a letter to Fianna Fail's environment spokesman Barry Cowen last week, sent shortly before the Dail adjourned for summer, Mr Kelly said the interest rate was "commercially sensitive" as Irish Water was currently in negotiations to take on "further debt facilities." Such further borrowings are expected to take the Irish Water total debts to over €1bn.

In his letter to Mr Cowen, Mr Kelly confirmed that Irish Water had been given approval to borrow €250m in 2013, which was subsequently increased to €300m in 2014. That total €300m loan facility was between Irish Water and the National Pension Reserve Fund (NPRF).

In a Dail exchange with Mr Cowen last month, Mr Kelly was unable to confirm the interest rate on those €300m loans, but in his letter he confirmed the rate was 2.5pc.

At the time, Mr Cowen pointed out that an interest rate of 1pc applied to Government borrowings through the National Treasury Management Agency.

However, last year the Government introduced caps on annual water charges and the rate per 1,000 litres of water was reduced from €4.88 to €3.70. This measure, designed to take political heat out of the water charge controversy, also had the effect of reducing Irish Water's immediate revenue stream.

It is likely, therefore, that the interest rate to be applied on Irish Water's €550m borrowings this year will be in excess of the 1pc applied to Government borrowings and also more than the 2.5pc rate applied to Irish Water loans from the National Pension Reserve Fund under the old financial model.

Speaking in the Dail last month, Mr Kelly repeated that a key component of the strategy to establish Irish Water was that the utility would be classified as a "market corporation" under Eurostat rules. A Eurostat decision is still awaited.

If, as the Government expects, the Eurostat decision allows Irish Water debt to be off the balance sheet, total Government debt would be just under 1pc less by 2020.

Yesterday Mr Cowen told the Sunday Independent: "Regardless, the public will pay. It's a farcical position that so much taxpayers' money has already been invested in Irish Water.

"The public interest is being ignored and information is being hidden or has to be dragged out when it should be made available in the Dail.

"This type of cloak and dagger activity is exposing the Government more and more. It's a far cry from the democratic revolution we were promised.

"What we are left with now is the worst of all worlds -water meters without water conservation; water charges without water investment and a water company without water customers."

Sunday Independent