ESB's profits are to come under pressure as its Northern Ireland Electricity (NIE) subsidiary faces a shortfall of at least £454m (€564m) in capital following a ruling by the region's utility regulator.
NIE is also on a collision course with the UK's Competition Commission after the electricity firm this week rejected the regulator's ruling on transmission and distribution price controls.
The Northern Ireland company, which ESB bought in 2010 for £1.2bn (€1.5bn), said it has been left reeling by the utility regulator's decision not to grant it the price increases that it claims are necessary to enable it to be adequately financed until 2017.
NIE has already warned that its bond ratings will be in jeopardy if it can't secure adequate financing and that the ESB might choose not to invest any further money in the firm if it can get a better return elsewhere.
Because NIE's transmission and distribution network is a monopoly business, Northern Ireland's regulator dictates via a price control the amount of revenue the operation can achieve.
Last month, the regulator issued a final determination – known as RP5 – in relation to electricity distribution and price controls between 2013 and 2017.
NIE requested that the regulator grant the company operational expenditure of £345m (€429m) for the period as well as capital expenditure of £776m (€964m).
But the regulator said it was granting NIE £271m (€337m) in operational expenditure and £396m (€492m) in capital expenditure for the period to 2017, leaving it with a massive shortfall.
NIE also asked for £223m (€277m) that it would earmark for investment in renewables. The regulator has yet to determine the amount it will permit, but has provisionally pencilled in that sum.
During the summer, ratings agency Standard & Poor's said that based on a draft determination issued by the regulator then, ESB's earnings before interest, tax, depreciation and amortisation (EBITDA) margins could be lower over the near term than the agency had anticipated.
While the utility regulator's final determination of a £396m capital expenditure allowance is 26pc higher than what it set out in the draft determination, the figure is still only about half the amount NIE sought.
S&P said previously that if the draft determination was implemented it could also put pressure on ESB's liquidity.
NIE – which accounted for 9pc of ESB's operating profit in 2011 – warned in the summer that if its credit rating drops below BBB+ then NIE would be faced with "significant financeability problems".
"The allowances proposed by the utility regulator fall substantially short of the amounts required to enable NIE to meet its statutory and licence obligations," it said.
"NIE has advised the utility regulator that, regrettably, it is unable to accept the utility regulator's proposed terms for the RP5 price control.
"NIE now expects the utility regulator to refer the matter to the Competition Commission."