Monday 23 September 2019

ESB must pay bigger dividend to State in new energy cost hit

Businesses face power price squeeze as semi-state to hand over more of its profits, writes Sarah McCabe

ESB owns the country’s biggest electricity provider Electric Ireland
ESB owns the country’s biggest electricity provider Electric Ireland

Sarah McCabe

ESB must pay 35pc of its profits in a dividend to the State this year, and 40pc by 2017.

The semi-state company, which owns the country's biggest electricity provider Electric Ireland, will hand over two fifths of any profit it makes to the Government in just over a year. The current requirement is 30pc but the payment is being increased gradually between now and 2017.

ESB has only just finished paying a €400m special dividend agreed with the Government during the financial crisis to help boost the State's finances; a payout of €214m in January completed the crisis-era agreement.

The company borrowed to pay a chunk of this. It had considered the sale of assets like the 150MW West Offaly Power station in Shannonbridge and the 100MW Lough Ree Power station in Lanesboro, Co Longford, to raise money for the dividend.

It has now paid around €1.5bn to the State in dividends over the last decade.

Critics have argued that requiring public utility companies to pay dividends amounts to stealth taxation as the money paid out in dividends could be otherwise used to improve efficiencies and ultimately cut business and consumer bills.

"The goal for the ESB should be to build a good energy network and lower costs for businesses and consumers. Neither of those things are achieved by paying a big lump sum to the State," said Dermott Jewell, head of the Consumers Association of Ireland.

"There's clearly a determination to bring back money to the Exchequer here. But consumers would be far better off if those profits were used to create savings in their bills.

"The cost of electricity has risen 25pc in five years. And although the electricity retail market has been deregulated and opened up to competition, the majority of people are still with the ESB for electricity. It is the market leader and it sets the pace for the other providers."

The utility company, whose chief executive is Pat O'Doherty, has a number of business units.

It generates power, maintains the country's electricity network, sells electricity via Electric Ireland, and is also involved in international energy projects.

It made a profit of more than €200m in the first half of the year, almost double what it made in the same period last year.

This sharp increase in profitability was mainly attributable to a drop in the group's cost of borrowing.

Last week, the company unveiled a fee plan for the public electric car charging stations it has installed around the country.

Charging an electric car at these stations has been free until now, to encourage people to take up the technology.

From January 2016, customers will face a monthly bill of €16.99.

The cost of "fast chargers" will be higher, in line with the price of diesel.

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