Saturday 24 February 2018

ESB to hike debt by €200m to pay Government

Staff from The ESB in front of the West Offaly Power Station.
Staff from The ESB in front of the West Offaly Power Station.
John Mulligan

John Mulligan

The ESB is to borrow more than €200m in order to pay a €400m dividend to the Government after shelving plans to sell two power stations.

Semi-state ESB said that it has taken two peat-fired power stations off the market - the 150MW West Offaly Power station in Shannonbridge and the 100MW Lough Ree Power station in Lanesboro, Co Longford.

The Lough Ree plant had been commissioned in 2004 and the West Offaly station in 2005.

They were put up for sale last year in order to raise funds to meet a demand from the Government for a €400m special dividend from the energy group. The ESB had decided to sell some non-strategic generation capacity in order to meet that target.

Last year, it sold a 50pc stake in the UK-based Marchwood Power subsidiary, as well as a 50pc holding in a Spanish power plant.

Those sales generated €197m, leaving another €203m to be raised to meet the dividend target.

But the ESB said yesterday that it will not now sell the two peat-fired power plants to make up the shortfall.

It said it had made "detailed analyses" that showed it would be better for the group from a financial point of view to hold on to the stations and instead use debt facilities to pay the rest of the money due to the Government.

"It will be financially more beneficial to both ESB and the Government for ESB to retain ownership of the peat plants and fund the payment of the remaining amount of the special dividend target by drawing down additional debt from ESB's bank facilities," it said.

ESB's debt stood at €4.1bn at the end of last December, with the figure having been reduced by €270m in 2013.

An ESB spokesman refused to say what type of debt facility would be used to make the rest of the dividend payment, how much interest it would pay, or when it expected to have repaid the new debt.

He also declined to elaborate as to precisely how the retention of the plants rather than their sale will result in a better financial outcome for the group.

He said the answers to those questions were "commercially sensitive".

"However, we can say that the method of structuring the dividend payment approved today maximises the value of the peat assets for both ESB and the Government and results in strong financial metrics for the company than selling the assets," he said.

Up to 10,000 current and former ESB workers will also split €21m in dividends that will be due to their Employee Share Ownership Plan (ESOP). The ESOP is an ESB shareholder and must be paid a proportional dividend to that being paid to the Government.

The two peat plants are subsidised by the taxpayer through so-called public service obligation (PSO) levies that all electricity users pay on their bills to help bankroll energy production, primarily from wind and peat.

Yesterday, the Commissioner for Energy Regulation said €42.1m in PSO payments have been earmarked for the West Offaly peat plant between October this year and September 2015. An additional €39.6m has been set aside for the Lough Ree plant.

A spokesman for the CER said he expected the two power plants to draw down all of the PSO funds that have been set aside for them.

The power plants each operate under 15-year power purchase agreements.

An ESB board meeting yesterday approved the peat plants decision and it said that no further transactions under the special dividend programme are envisaged.

Irish Independent

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