Saturday 19 October 2019

ESB to refinance up to €453m of UK power station debt

Accounts show that operating profit at the ESB's retail Electric Ireland arm tumbled 19.3pc to €46m during the first half of 2017 as it cut prices and lost customers. Stock image
Accounts show that operating profit at the ESB's retail Electric Ireland arm tumbled 19.3pc to €46m during the first half of 2017 as it cut prices and lost customers. Stock image
John Mulligan

John Mulligan

The ESB could refinance as much as £400m (€453m) of debt attached to its Carrington power station in the UK before Christmas if market conditions present an opportunity to do so, according to group finance director Pat Fenlon.

The ESB has about €1bn of debt that matures over the next two years, but is not under time pressure to do any refinancing.

It issued a €500m worth of bonds in January to refinance more expensive debt, and had received more than €1bn in orders for the 12-year bonds. The bonds secured a coupon, or interest rate, of 1.75pc, and were used to retire €300m of debt that fell due this month and which carried a 6.25pc rate.

Mr Fenlon was speaking to the Irish Independent as the ESB reported a 3.5pc fall in operating profit, to €287m, in the first half of the year. The ESB also paid a €60m dividend to the State in the first half of the year.

But the accounts show that operating profit at the ESB’s retail Electric Ireland arm tumbled 19.3pc to €46m during the first half of 2017 as it cut prices and lost customers. The ESB officially opened its €820m gas-powered power plant at Carrington near Manchester earlier this year. There’s about £400m in project finance attached to it.

“The market conditions are still favourable. We have things like Carrington with project finance debt,” said Mr Fenlon. “We are examining opportunities to see, if market conditions are good, could we refinance that earlier.”

He said the refinancing could happen this side of Christmas, or early in the New Year, if conditions are right. The ESB saw profit after tax jump to €173m in the first half of 2017 from €109m in the first six months of 2016. It benefited from the non-recurrence of negative, non-cash fair value of movements of inflation-linked interest rate swaps. Revenue was flat at €1.69bn.

Figures from the Commission for Energy Regulation show that Electric Ireland lost a net 3,913 electricity customers in the first half of 2017. SSE Airtricity lost 1,238 electricity customers while Energia gained 2,594. Bord  Gáis Energy, owned by Centrica, gained 982 electricity customers. Mr Fenlon insisted that the market here remains competitive, with another new entrant, Canadian firm Just Energy, having just entered it.

The ESB has also entered the UK retail power market. Mr Fenlon said a full launch there won’t take place until early next year. A ‘soft-launch’ will happen in coming weeks, he added.

The ESB accounts note that it faces challenges in meeting the increase in infrastructure demand in Dublin, with data centres forming a significant part of that. However, Mr Fenlon said no data centre operators have been asked to delay projects because of any infrastructure deficit. ESB said that it invested €303m in energy infrastructure during the first half of the year, which was down from €332m in the first half of 2016.

This week, the broadband joint venture between ESB and Vodafone, called Siro, announced that it had pulled out of the tender process for the Government’s National Broadband Plan. Mr Fenlon declined to comment on what capital expenditure figure the venture had determined would have been required to meet targets under the plan.

Irish Independent

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