ESB will need private funding to expand

THE ESB will require outside investment if the State-owned electricity company is to continue with expansion plans.

Chief executive Padraig McManus says the company cannot continue to fund its expansion abroad and upgrade the Irish electricity network indefinitely by borrowing from banks.

With €2.3 billion in debt on its books and a further €2bn committed to upgrade the electricity grid, Mr McManus says some new mechanism of funding is required. As the Government has ruled out full privatisation - to keep the electricity grid in State control - a new model to inject capital was needed.

“Bearing in mind the Government requirement in relation to ownership of assets, some mechanism has got to be developed for the private sector to invest, as opposed to the company continuing to borrow.”

Mr McManus said all options, including a proposal for a holding company for all the semi-state bodies that private sector could invest in - first proposed by the trade union group ICTU as means for raising private equity for Aer Lingus - should be considered.

“If you look back at what ICTU were saying, they were actually looking at models whereby the private sector could invest in Aer Lingus and I think that all State companies will [require] that in time,” he said. “I’m not so sure that I would be in favour of that [the holding company], but I don’t have the model either. But in a general sense all the State companies, ESB included, will have to look at different models in the future for funding.”

Mr McManus spoke as the ESB opened its 500 million 755 megawatt Amorebieta power plant near Bilbao in Spain yesterday.

Speaking in Spain, Communications, Marine & Natural Resources minister Noel Dempsey said privatisation of the ESB was not on the agenda.

The Government has hired consultants Deloitte & Touche to review the Irish energy market, but ahead of its report, the minister said: “What the review will do is look at the electricity sector and outline a number of different options ... but privatisation is not included in the terms of reference.

The Amorebieta power station is one of several major projects the ESB has planned outside of Ireland. Mr McManus said he is looking to raise profits from the company’s international arm to more than 20% of groups earnings.

It is looking at several major projects, including a power station in Southampton in Britain, similar to the Amorebieta plant.

Mr McManus added the ESB’s profits this year should match last year’s record of nearly €270 million, boosted by the sale of its retail network to the Bank of Scotland and a sale of 50% of the Amorebieta plant to Japan’s Osaka Gas.