ESB profits fall 40% on costs rise

The ESB recorded a sharp decline in profits in the first half of last year.

Profits at the dominant provider in the Irish electricity market fell 40% from €112.6m to €87.7m for six months ending on June 30.

Finance costs rose after ESB finalised the acquisition of the Northern Ireland Electricity business in late 2010, which impacted negatively on ESB’s ability to generate profits.

The results came just weeks after Pat Rabbitte, the minister for communications, energy & natural resources, confirmed that the Government is considering plans to sell a stake in the ESB.

The decision to sell state assets despite adverse market conditions was made after the Government won approval to use some of the proceeds of a sale of state infrastructure to invest in the economy, as well as pay down debt.

Mr Rabbitte has insisted that the Government will not participate in any “firesales”.

Revenues from ESB Electric Ireland, which is considered to be the most likely arm of the ESB to be sold off, have fallen from €947m to €801m this year.

The transmission network, which it is argued should not be sold as it is a vital piece of state infrastructure, was the most profitable part of the ESB group. ESB Networks had an operating profit of €120m.

The ESB group which includes ESB Networks, ESB Energy International and Northern Ireland Electricity, recorded a strong growth in revenue. The groups revenue increased from €1.35bn to €1.38bn. Operating profits for the group grew strongly as operating costs across the group fell by €37m. There was also a reduction in operational losses at Electric Ireland falling from a loss of €32m to €13m.

ESB continues to pay an impressive wage bill, meaning the company’s payroll was a significant operational cost last year. Employees received €248m in salaries, an increase of €15m on last year.

ESB is also obliged t to pay out significant pension contributions until 2021. The figures released yesterday reveal a pension deficit of €895.4m at the end of June, a slightly improved situation from €896.7m at the end of 2010.