ESB's pension deficit slashed by €1.89bn in just four years
THE ESB managed to slash its pension deficit by about €1.89bn in just four years.
The commercial semi-state had a €1.96bn black hole in its contributory scheme in 2008, but that was reduced to €72m by the end of 2011.
Given the sheer scale of the deficit, the company has been trying to plug the hole in recent years by closing it to new members and freezing pay and benefits.
The contributory scheme was similar to a public service pension and was funded from contributions from members and the company.
Management at the semi-state and unions have struck a deal where deductions were reduced with the roll-out of Career Average Revalued Earnings (CARE) from January last year, a pension and pay freeze until 2014 and 2012 respectively and the capping of any future increases in pensions at 4pc.
All future increases in pensions paid will also be dependent on the solvency of the ESB scheme.
The Pensions Board approved a funding proposal in October, submitted by the trustees of the ESB scheme, changing the scheme from a defined benefit to a defined contribution.
"The change in accounting treatment gave rise to a once-off exceptional charge in the financial year ended December 31, 2010, of €330m," the investor document said.
The company warned in 2009 that the scheme would have to be radically overhauled and that remedial action would be needed to address the deficit.
It blamed the recession and the 38pc fall in equity markets in 2008 for the massive deficit.
Profits at the ESB, which has debts of about €4.5bn, hit almost €250m in the first half of last year, even as the semi-state company piled price hikes on hard-pressed householders.
The semi-state reported profits of €230m for the first six months of 2012 – up from €87m during the same period in 2011. Turnover was up €300m to €1.6bn for the period.
Some of the ESB's assets are due to be sold off this year by the Government under the Newera unit of the National Treasury Management Agency, as ordered by the troika.
The government target of raising €400m through the sell-off of power stations is being increased to ensure that some of the company's debt is paid off.
The ESB has 13 major power stations at home and abroad – including Ardnacrusha, Moneypoint, Coolkeeragh, Dublin Bay Power, Aghada, Poolbeg, Corby in the UK and Amorebieta in Spain.
Any move to sell power stations could be jeopardised by opposition from unions, which have threatened to ballot for industrial action over any disposal of plants employing hundreds of workers.