Thursday 18 October 2018

ESB puts €1bn UK power station 'on ice' as price slumps

Chief financial officer Pat Fenlon said it’s difficult to see the commercial case at present for the UK project. The latest results showed that the ESB wrote €21m off its Poolbeg station in Dublin. Picture: Iain White
Chief financial officer Pat Fenlon said it’s difficult to see the commercial case at present for the UK project. The latest results showed that the ESB wrote €21m off its Poolbeg station in Dublin. Picture: Iain White
Poolbeg
John Mulligan

John Mulligan

Plans for a €1bn ESB power station in the UK have now been put on ice for "one or two years", according to chief financial officer Pat Fenlon, after the UK's latest capacity auction made the proposed plant unviable.

This time last year, the ESB was waiting until the end of 2017 before making a decision on the project's immediate future.

A capacity auction held by the UK's National Grid at the end of last year resulted in an energy auction price per kilowatt that was just a third of the auction result the previous year.

The auctions are held to ensure that the UK has adequate power supplies during winter periods, when demand peaks.

Mr Fenlon told the Irish Independent that there would have to be a capacity price that would make commercial sense in order for construction of the 1,600 megawatt power station in Yorkshire to proceed.

The ESB also wants to build the plant as a joint venture.

"Right now, in the absence of something changing, it's difficult to see the commercial case, certainly over the next year or two," said Mr Fenlon.

"We will essentially keep that project on ice until the conditions would make sense for us for that investment."

He said that the ESB's full-scale rollout of its domestic energy offering in the UK - ESB Energy - will start later this year, after it successfully cleared regulatory hurdles. It currently has about 5,000 residential customers in the UK following a soft launch in the market last year.

Mr Fenlon was speaking as the ESB reported an 18pc decline in its operating profit for 2017, to €490m.

The semi-state company plunged to a €32m loss after tax after it incurred non-cash write-offs as it slashed the value of its generating assets by €276m. Its profit after tax before the impairment was €209m, while group revenue was flat at €3.26bn.

ESB, whose CEO is Pat O'Doherty, said it took the "prudent decision" to impair the its generating assets based on the estimated impact on projected revenues from the introduction of the new Integrated Single Electricity Market in May this year, and lower wholesale electricity margins.

The impairments saw €142m written off the value of the ESB's huge 915 megawatt, coal-fired Moneypoint power plant in Co Clare. It also wrote €69m off its Aghada 2 gas-powered energy plant in Co Cork, and €21m off its Poolbeg power station.

"The Integrated Single Electricity Market - a new wholesale electricity market for the Republic of Ireland and Northern Ireland - will introduce a number of fundamental market changes, including an anticipated reduction in revenue for ESB," noted ESB chairman Ellvena Graham.

The power company also owns Northern Ireland Electricity Networks. ESB ended 2017 €4.4bn in debt, compared to €4.5bn at the end of 2016. The company said that reflected positive ebitda and the impact of weakening sterling, offset by continuing capital investment.

Mr Fenlon said the repair and maintenance costs from last week's snow deluge would not be anywhere close to the €9m incurred by ESB Networks in the aftermath of storm Ophelia last October, which resulted in gusts of up to 155km per hour.

That saw the ESB reconnect 385,000 customers who were left without supply.

ESB Networks deployed 2,500 staff and 1,000 contractors, and received assistance from the Defence Forces.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business