ESB/BORD GÁIS:ECONOMIST COLM McCarthy's review of State assets recommends the break-up and partial sale of both the ESB and Bord Gáis Éireann.
The State’s two biggest and most profitable energy companies are already competing with each other and with private-sector businesses in the supply of electricity and natural gas to businesses and households.
The McCarthy report recommends that the ESB’s electricity generation, supply and distribution businesses be sold, but that the national grid, a key part of the power network, be retained in State ownership.
Similarly, it recommends that the main gas distribution network owned by the gas board stay in the State’s hands, but that the rest of the group, including its electricity and natural gas sale and distribution operations, be sold as a single entity.
The Government is already committed to transferring ownership of the Republic’s national grid, which transmits electricity from power plants to the networks that distribute it to customers, from the ESB to another State company, Eirgrid.
The McCarthy review takes this a step further, and also recommends that Northern Ireland’s grid, which the ESB bought last year for €1.2 billion, also be transferred to Eirgrid.
Eirgrid already manages both grids, but does not own either of them. The McCarthy group also recommends that this company be given control of all hydro-electric generators, such as those on the Liffey and on Turlough Hill in Wicklow.
Beyond this, McCarthy calls for a further break up of the ESB. As a first step, the report recommends that the State’s energy regulator instruct the company to sell more of its generating plants.
In 2009, it sold Great Island in Wexford and Tarbert in Kerry for €440 million to Spanish operator, Endesa, which recently put them back on the market.
The report says that further sales of ESB power plants should be managed to ensure that no single operator ends up with more than 2,000 megawatts of generating capacity, which is about one-third of full peak electricity demand in the Republic.
It then recommends that the rest of its power plants, its electricity supply and distribution businesses, and its international investments and consulting arm, be sold as a single unit.
Mr McCarthy described the ESB’s low-voltage distribution network, which delivers power to customers, as a natural local monopoly, which could be privatised but would have to be regulated.
Launching the report yesterday, Mr McCarthy said that the review group came to the conclusion that the State should keep the electricity grids and the gas network and interconnectors, as these are of strategic importance.
The report says that there are greater risks involved in selling the two networks than in disposing of power plants or supply businesses.
The document does not rule out selling these assets in the long term, but says that it should only be considered in the context of overall developments in the EU.
McCarthy himself pointed out yesterday that the supply businesses owned by both the ESB and Bord Gáis Éireann are already competing with each other and with private sector operators, and argued that there was no real reason for the State to continue to own them in the long term.
“The ESB has already sold a number of its power stations,” he said, adding that private sector companies already own a number of electricity generating businesses in the Republic.
The ESB’s assets were worth €7.6 billion on its last balance sheet date, December 31st, 2009. It had net debt of €2.2 billion. Bord Gáis Éireann had assets worth €3.5 billion at that point and net debt of €1.8 billion.
Mr McCarthy said the ESB is by far the biggest State company, but said that it was not possible to say how much the State would raise from its sale. Both companies have extensive investment plans. The ESB plans to spend €22 billion between now and 2020.
