Sale of ESB stake 'to boost company's independence'
Published 23/12/2011 | 05:00
The sale of a stake in the ESB -- planned for sometime in 2012 -- should boost the company's independence from Government, an influential ratings agency has said.
The Government is expected to sell about 25pc of the company at some point next year, but so far no consultants have been appointed to undertake the sales process.
Fitch, one of the 'big three' ratings agencies, said it did not expect the sales process to conclude in the short term. The agency made its comments as it affirmed ESB's long-term issuer default rating at BBB+.
The affirmation reflected ESB's "improved liquidity position" after it attracted more than €1.2bn of new debt during 2011.
"The Irish Government decided in September 2011 to sell a minority stake in ESB. The agency does not anticipate the privatisation to conclude shortly, but a reduced ownership by the Government would possibly enhance ESB's independence," said the agency.
ESB is to remain focused on Ireland as it represents more than 80pc of earnings, with the rest in Northern Ireland. The ESB had suffered recently because Ireland's credit rating had fallen, but this process should not halt, said Fitch.
"The sovereign rating of Ireland would have to be downgraded to speculative grade for sovereign constraint to cause a downgrade of ESB from the current rating level," it added.
"ESB's ratings continue to be supported by the high proportion of regulated network assets and related earnings from electricity transmission and distribution in Ireland and Northern Ireland."
The agency said the ESB's generation portfolio was diversified by fuel source and the firm commanded a strong market share and was well placed in the single electricity market.
"The rating is constrained by the limited geographical diversification of ESB's asset base and earnings, and the challenges facing ESB's electricity supply business, which is suffering from the market liberalisation (increased competition).
"Fitch does not expect the thin supply margins to recover in the foreseeable future due to a slow recovery in electricity demand and an aggressive competitive landscape."
ESB's liquidity position is supported by around €900m of cash and undrawn loans from the banks.