ESB/Bord Gais legislation move

Legislation to convert both the ESB and Bord Gáis to plc status will have been prepared by the beginning of 2003, a senior civil servant said yesterday. Mr Martin Brennan, head of the energy division at the Department of Communications, Marine and Natural Resources, said legislation to allow the ESB to become a plc was currently at "the legal drafting stage", while similar legislation for Bord Gáis could be expected "before the end of the year or shortly thereafter".

"It is clear to me that the conversion to plc status of both the ESB and Bord Gáis Eireann is the way forward," said Mr Brennan, who was addressing an Energy Ireland conference in Dublin. "Legislation should be and will be prepared."

This legislation would clear the way for both semi-state companies to be sold either in an initial public offering or trade sale and, while its drafting does not automatically indicate that this will happen, it could be interpreted as a move in such a direction. The drafting of plc legislation for the ESB before Bord Gáis may also provide some hint as to which privatisation would come first in the event of both occurring.

The issue of the sale of semi-states is understood to have represented a significant sticking point in the negotiations between Fianna Fáil and the Progressive Democrats on forming the Government, with the PDs pushing for the selling-off of such entities. The Programme for Government finally agreed contained no specific commitment.

Speaking to The Irish Times yesterday, chief executive designate of the ESB, Mr Padraig McManus, said the conversion of the ESB to plc status had been on the agenda for some time, emphasising that "the issue of sale is an issue for Government" and was, in his view, unlikely to materialise in the short term.

"ESB has enough to do over the next two or three years anyway to achieve value," said Mr McManus, adding that he did not expect privatisation to occur during that period.

The company is currently committed to a multi-million investment programme aimed at facilitating the opening of the Republic's electricity market to competition, and thus reducing the ESB's share of electricity generation for the Republic to 60 per cent by 2005.

Investment is also required in connection with the Republic's obligations under the Kyoto treaty on climate change, with Mr McManus indicating yesterday that environmental considerations would probably see ESB's Moneypoint generating station in Co Clare being rebuilt by 2008. A decision on the matter would be taken next year, he said, noting that coal would offer welcome fuel-diversity for the plant at a time when the Republic was becoming increasingly dependent on gas.

Earlier, delegates heard Mr John FitzGerald, research professor at the ESRI, put forward a stern argument for delaying the privatisation of both the ESB and Bord Gáis as long as the two companies remained "monopoly players". "The worst possible thing to do would be to privatise the existing model," said Mr FitzGerald, who argued that any reform undertaken should focus on "putting maximum downward pressure on price so that the price for the consumer in the long run will be as low as possible".

In a paper submitted to the conference, Mr FitzGerald maintained that privatisation of the ESB and Bord Gáis as they stand would have almost the opposite result.

"The swapping of a public monopoly for a private monopoly, while realising efficiency gains, would see these gains accruing to shareholders rather than to the consumer," the paper reads. "This was the option pursued in Northern Ireland, with disastrous consequences for Northern consumers."