STATE AIMING TO SEIZE BULK OF ESB PROFIT
Government poised to act after energy firm reveals huge earnings
THE Government is preparing to take the bulk of ESB’s profits through a ‘special dividend’ in the Budget, the Irish Daily Mail can reveal.
The energy firm has almost tripled its profits in the first half of the year – despite hammering customers with price hikes, which it has blamed on the war in Ukraine.
The semi-State body took in revenues of €3.7billion in the first six months of 2022 and profits jumped to €390million, more than three times the €128million profit it made in the same period in 2021.
And with Opposition TDs criticising ESB for what they called ‘immoral’ and ‘eye-watering’ profits, senior Government sources told the Irish Daily Mail last night they expect the ‘vast majority’
of profits recorded at the ESB would be paid to the State this year.
Typically, ESB pays 12.5% tax on its profits and 30% to 40% of the net figure is paid through a dividend to the State, which owns 95% of the company.
It is likely the divident measure will be announced in the Budget on September 27, with the Government under pressure to address exorbitant energy costs.
Under the current policy, the State could receive up to €156million from the dividend payment based on the ESB’s profits in the first six months of 2022. But as the cost-of-living crisis grows, sources say the State wants more given its 95% ownership of the ESB.
The Mail understands there is a strong appetite within Government for this approach.
The ESB will have to make a case for what it wants to retain, based on its plans for carbon reductions and operational costs.
Fianna Fáil TD Willie O’Dea told the Mail that a ‘substantial amount’ of the ESB’s profits should be paid to the Government. He said: ‘I don’t know what they’re [ESB] going to use these profits for. If it’s for carbon emissions reductions and improving systems, then that’s fair but they won’t need to keep it all and a substantial amount should be given back.’
However, sources in the Department of Public Expenditure warned last night that any ‘abrupt’ changes to the dividend policy could be damaging in the long run. As the ESB raises debt on corporate markets, raising the dividend could affect the company’s credit rating and ‘adversely impact the
‘It’s something we need to change’
value of the State’s investment’, the sources said.
They said changing the dividend policy is unlikely while the Government awaits the outcome of EU plans for a windfall tax on the profits of energy companies.
EU energy ministers will meet again on September 30 to agree a deal on a European-wide windfall tax, three days after the Budget. If agreed, it is expected to be in operation by the start of November.
Government sources said that they were confident that the main framework of a deal would be agreed in advance of this.
Earlier this month Electric Ireland, which is run by the ESB, announced another electricity and gas price hike for its 1.25 million customers – the third increase in just five months.
This latest increase, which comes into effect in the next fortnight, will add an extra €2,200 to annual bills for dual customers. The chief executive of the ESB Paddy Hayes earns a basic salary of €318,000 per year – which rises to almost €380,000 when pension and benefits are taken into account.
Speaking in Kerry yesterday, Tánaiste Leo Varadkar said that it would be ‘right and proper’ for the Government to recoup some of the profits made by the ESB and other energy suppliers.
‘We’re seeing companies like the ESB making a lot of profits this year,’ he said. ‘That’s in part because of the way electricity is priced [compared] to the price of gas. That’s something we need to change. That’s going to change the European level and will have to bring down electricity bills. It’s right and proper that the Government should take back some of the big profits that some of the energy companies are making.’
Taoiseach Micheál Martin said that the Government will use the dividend from the ESB profits in order to help consumers, as well as the windfall tax measures that form part of the EU plan to tackle the energy crisis. ‘The Government is the shareholder on behalf of the Irish people,’ Mr Martin said. ‘We have the capacity through the dividend... we receive from the ESB so that we can recover that. ‘Obviously from the scale of the profits on the back of the energy crisis, I think the Government can look forward to a much higher dividend than will have been the case prior to the crisis. And we can use that to underpin the Government’s efforts to reduce pressures on households and also protect jobs and that’s what we’re going to do in the cost-ofliving package next week and in the Budget. We’ll do that with the ESB profits. But also through the windfall measures that will be taken at a European level.’ Sinn Féin leader Mary Lou McDonald said there could be ‘no more dithering or excuses’ from the Government. ‘ESB, a State-owned energy company, trebles its profits while families, workers and businesses are pushed to the brink,’ she tweeted. ‘FF/FG govt act as onlookers, commentators, fence sitters, kite flyers for months on end. Govt action is needed.’
Sinn Féin deputy Darren O’Rourke branded the ESB’s profits ‘obscene’ and said people would be ‘livid’, while Social Democrats TD Jennifer Whitmore said it was ‘immoral’ to allow energy companies to profit off the back of households.
She criticised Vermillion, a Canadian company which holds a 20% stake in the Corrib gas field, which has seen profits increase four-fold to €152.9million. ‘The average price it received for its gas in the final quarter of 2021 was more than nine times the average price for 2020,’ she said. ‘While it was expected that its revenues for this year would be substantial, the projected profits reported are simply off the Richter scale.’
She added: ‘We also learned today that ESB saw its profits soar for the first six months of 2022. This was largely driven by a fairvalue gain on fuel commodity of almost €162million, where the company pre-purchased fuel at an agreed rate before prices went up. With many households facing a winter of fuel poverty, people will find it difficult to understand why they are being squeezed at a time when energy companies are continuing to generate such eyewatering levels of profit.’
‘Eye-watering levels of profit’