ESB North unit in watchdog price row
The ESB's NIE Networks unit has warned that price controls proposed by the regulator in Northern Ireland are cause for "very significant concern" for its directors and will result in a £105m (€121m) combined revenue and earnings shortfall between 2017 and 2024.
The company - bought for £1.2bn by the ESB in 2010 - has also warned that the draft pricing decision from the regulator could also be detrimental to NIE Networks' financial position, threaten its credit rating plans, and could have an "adverse impact" on the ESB.
NIE Networks is the owner of the electricity transmission and distribution networks in Northern Ireland and serves all 860,000 customers connected to the network. Its activities are policed by the utility regulator.
Last year, NIE Networks submitted its new business plan to the regulator.
The company said that under that plan, which covers the period 2017 to 2024, its borrowings would rise to £950m (€1.1bn) and that it will raise £500m of new debt.
The regulator recently published a draft determination on pricing control that established how much the watchdog intends to allow for NIE Networks' investment in its network in that period, and for other capital expenditure.
The regulator sets the costs that all consumers of electricity in Northern Ireland pay to NIE Networks through their suppliers.
The watchdog said that it intends to allow for £662m (€766m) in network investment in the period, and also makes an allowance for the construction of the second north-south electricity interconnector.
The regulator also identified £169m of cost savings that can be made by NIE Networks. It also envisages a small decrease in the period in the network charges paid by consumers.
NIE Networks has claimed that the regulator has erred in making its calculations, and argued that the watchdog's proposed pricing model means the company would have a more than £140m (€162.1m) shortfall in funds required to cover planned capital expenditure and other costs in the period.
The company has also claimed that the regulator has not made an allowance for the planned improvement of network reliability in rural areas.
NIE Networks has argued that if the draft determination is adopted by the watchdog, the company would be hit financially. The regulator will issue its final determination next month.
NIE Networks is rated BBB by ratings agency Fitch, and A- by Standard & Poor's on a standalone basis.
The company warned that under the regulator's pricing plan, it would not be able to secure a hoped-for BBB+ rating.