Thursday 21 February 2019

ESB staff face new wait to trade €200m of shares

ESOP trustee has concerns over market liquidity

Staff from The ESB
Staff from The ESB
John Mulligan

John Mulligan

PLANS to allow nearly 11,000 current and former ESB staff to trade their lucrative shares in the semi-state company are set to be delayed over "serious concerns" among Employees Share Ownership Plan (ESOP) trustees about the ability to "deliver a fair solution for all participants".

ESB ESOP members own 5pc of the company, with 99 million stock units having been acquired by the ESOP in 2011 for almost €76m. The shares are notionally allocated to eligible ESOP participants.

Based on a valuation of around €4bn for the ESB as a whole, the members of the ESOP control a €200m stake between them – making their minority holding larger than many entire stock market-listed companies.

It had been intended that a trading day for the shares – only the second to be held – would take place towards the end of May. But in a letter to ESOP members, which has been seen by the Irish Independent, the chairman of the ESOP trustee, David Beattie, said this would now be postponed.

"Without a mechanism for introducing some liquidity to the market, the trustee has very serious concerns about the potential outcomes of this market," he said. The trading date has now been delayed until July 31.

The so-called internal, or grey market, for the ESB shares is currently dysfunctional.

ESOP participants who are no longer employed by the ESB have to sell their shares within three years of leaving the semi-state company, while only ESB workers who were with the company during or prior to 2002 can buy shares.

The ESOP has pointed out that about 60pc of the shares under the scheme are held by so-called 'leavers', with the remainder held by current ESB employees.

That has resulted in a situation where there are more sellers than buyers. There is also no minimum price set for the shares.

The trustee is obliged to buy any unsold shares following a market date, but only has to do so if it has the funds.

But as ESOP shares are appropriated by ESOP members, the trustee no longer receives dividends in respect of those shares, further diminishing the cash pool it has available to buy unsold shares on the market.

That increases the prospect that forced sellers won't secure fair value for their holdings.

During the first market – held in 2012 – the ESOP participated as a bidder, buying 3.6 million ESB shares, but it does not intend at the moment to participate in the next market in July.

FAIRNESS

Mr Beattie said that he wants to allow time for the ESB and the ESB Group of Unions to deliver a viable solution to deal with the market illiquidity issue.

"We are pleased that ESB and the Group of Unions is engaging on this and look forward to the outcome of their talks," said Mr Beattie.

The market administrator – PwC – will write to ESOP members in June to update them on the progress of talks and on whether or not the trustee will take part in the market.

Mr Beattie said the trustee would have to see "and be confident that very substantial progress has been made to allow it to participate in the market".

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