The Government has asked the ESB to pay up to half its post-tax profit this year to the Exchequer as a dividend, writes Arthur Beesley.
The ESB's profits this year are expected to exceed the €164 million made in 2001 and reported yesterday. No dividend was paid on last year's profits but the company's board agreed yesterday to pay an interim dividend of €20 million in respect of its performance this year, with €19 million going to the Government. Staff will receive €1 million through their 5 per cent shareholding in the firm.
The Government has sought the payment amid rising concern about the national finances after a memo erroneously released by the Department of Foreign Affairs referred to cuts of €900 million from services next year.
The decision to pay the interim dividend follows a decision by the independent energy regulator, Mr Tom Reeves, to increase electricity prices by an average of 9.85 per cent from the start of next year. Domestic customers face a 13.25 per cent rise.
A final dividend is not expected until the ESB reaches agreement with the Department of Finance on a dividend policy. Senior figures in the ESB are understood to be opposed to the State's demands because the company wants to increase its debt by some €2 billion in the next 18 months to fund a renewal of its networks.
The company is preparing to raise a bond of up to €1.5 billion and perhaps €500 million through a loan from the European Investment Bank. It is thought the ESB is pushing to pay only a quarter of its retained profit to the State. Based on last year's results, that implies a €41 million dividend, about twice the interim figure.
As the ESB published its 2001 annual report yesterday, its chairman, Mr Tadhg O'Donoghue, said it was in "very serious talks" on a dividend. He said: "I have no doubt we will be required to make a very significant dividend this year. The shareholder must also have regard to the ESB's financial situation and the need to go the markets and borrow."
Operating profits fell by €103 million to €199 million last year due to higher fuel and wage costs. Turnover rose €146 million to €2.04 billion. The board meeting yesterday followed the first annual general meeting since it granted a shareholding to its staff.
Mr Pádraig McManus, the ESB chief executive, said the company would double profits in the next five years.
Mr O'Donoghue said discussions with trade unions on the closure of a defunct peat-burning generation plant in Rhode, Co Offaly were at a delicate stage. However, it is thought that there has been only little progress so far in talks at the plant, which has not produced electricity for 16 months. Certain staff want compensation for exposure to asbestos in addition to a severance package, although the company refuses to discuss "health" with industrial relations issues.
The ESB's Joint Industrial Council set a deadline of the end of the month for an agreement on closure. If talks continue much longer after that, it is thought that an emergency board meeting might be called. The company is spending some €60,000 per week on wages at the plant.
With four other peat-burning stations also scheduled to close, Mr O'Donoghue said it was "very difficult to know" when asked whether similar stand-offs might occur. "Closing plant is always a difficult exercise, even more so in State companies."
On ownership and the possible privatisation of the company, Mr O'Donoghue said that the ESB was not preoccupied with the question. Its objective was to prepare for whatever decision the Government took, but energy markets were poor at present.
The ESB said it had warned the Government of a possible electricity shortage in winter 2004 if a new generation project did not commence soon.
The company also announced the appointment of Mr John Redmond as its secretary. An accountant at debis AirFinance, the former GPA, he succeeds Mr Larry Donald.
Separately, it is believed that an attempt to resolve a legal dispute with the independent national grid operator broke down in recent days. The case is due in the High Court next month.
