Eamon Ryan wanted ESB to halve State dividend to pay for green investment

Minister for Environment believed cutting dividend on after-tax profits to 20% was ‘more appropriate’

Minister for the Environment Eamon Ryan wanted to cut in half the dividend being paid to the State by ESB so that the company could reinvest its profits in energy infrastructure and renewables.

However, he was told there could be “possible reputational issues” if ESB was seen to cut its dividends with a risk of a “negative outlook” from credit ratings agencies.

This created a risk the electricity supply company would face a “negative impact” in trying to finance its existing plans for investment.

In discussions, Mr Ryan suggested cutting the dividend being paid on after-tax profits by ESB from 40 per cent to 20 per cent, according to records released under Freedom of Information.


He said the existing “large dividend” from the company had been set when the State “needed more shareholder return”.

The discussions took place in the early months of this year during which ESB paid a dividend to the State of €126 million for 2021. The dividend for the exchequer should be even higher this year after ESB reported an operating profit of €357 million in the first half of 2022.

A submission said Mr Ryan believed a 20 per cent level of dividend was “more appropriate” and would allow for reinvestment of more profits by ESB, especially for green energy projects.

The submission said: “Note that at the current gas and carbon price, the delivery of more renewables directly saves the consumers and taxpayers of Ireland significant costs.”

However, the Department of Public Expenditure disagreed, saying that an assessment of ESB dividends had been carried out by NewERA [the State’s financial advisory service] in 2021 and “remains valid”.

The department said that even with a 40 per cent dividend, ESB should still be able to finance its ambitious plans for electricity networks, renewables and other areas.

The submission said: “We do not see any evidence to support the contention that a lower dividend is necessary for the company to make the required investments.

“Introducing uncertainty into ESB’s outlook via a review of dividend policy could actually have a negative impact on [their] ability to finance its capital investment programme.”

It also warned that the plan would in effect be asking the exchequer – and Irish taxpayers – to take on a greater share of the cost of decarbonisation.

The submission added that there were alternatives if ESB needed to raise extra funding, including the sale of assets, partnership programmes and slowing investment in “non-core” activities such as the rollout of broadband.

The department concluded by saying that the higher 40 per cent dividend expected from ESB had already been factored into revenue and spending decisions made by the Government.

It added: “As such, any reduction in projected exchequer incoming receipts from dividends would have implications for the spending levels committed to in the National Development Plan review.”

The Department of Environment’s own financial adviser said proposals around cutting the dividend were “a reasonable request” from Mr Ryan.

He suggested an analysis of how it would affect ESB, as well as the possibility of setting the dividend at its 40 per cent rate for five years, rather than 10.

A final submission for Mr Ryan from his officials recommended retention of the 40 per cent dividend on profit after tax as providing the “most certainty”.

However, it suggested that rather than maintain this rate for 10 years as requested by ESB, a review should instead take place in 2026.

Asked about the records, a spokesperson for the Department of the Environment said dividend policies for commercial State bodies can be revisited from time to time by Ministers.

He said: “In line with existing dividend policy, equating to a payout level of 40 per cent of adjusted profit after tax, ESB would be expected to return significantly higher dividends to the State for this financial year. Given the current energy market volatility, forecasts are highly indicative at this juncture.

“Our long-term priority and the best long-term approach for Ireland is to insulate consumers from volatility on international wholesale energy markets, to invest in energy efficiency, renewable energy and expand interconnection with European and neighbouring markets and deepen internal market integration.”