Storm repair costs hit profitability at ESB

A combination of storm repair costs, declining wholesale electricity prices and impairment costs in the UK hit profitability at energy supplier ESB in 2014.

Operating profits fell by €132 million on the previous year, down to €552 million, while pretax profits slumped by 80 per cent to €82.6 million, according to its annual report released on Wednesday.

ESB’s chief executive, Pat O’Doherty said that “in the face of some challenges in 2014, these results reflect a solid performance across the group.”

The hit to earnings is, however, unlikely to dissuade ESB’s trade unions from pursuing a claim for a pay increase of 3.5 per cent annually for three years, backdated to last March.

ESB and its unions are currently awaiting a ruling from an internal industrial relations tribunal over the claim, which management has rejected. The company confirmed on Wednesday that the tribunal’s ruling is non-binding.

Donal Flynn, group finance director, said it would "not be very helpful" to comment upon the pay claim. "But in general terms, we need to keep the cost base at a sustainable level," he said.

Revenues at ESB fell by 4 per cent to €3.3 billion last year. ESB said the hit on profitability was as a result of Storm Darwin repair costs of €25 million and a decline in wholesale electricity prices.

It also suffered impairment costs of €50 million in its generation and wholesale markets, primarily relating to a decline in wholesale electricity prices in the UK, and plant outage costs of €15 million at its Moneypoint power plant.

Mr Flynn said its performance is likely to improve in 2015, however, as it has recently boosted the availability of Moneypoint and suffered less storm damage of late. The future consolidation of figures from its Northern Ireland business should also be boosted by the strength of sterling versus the euro.

ESB paid a dividend of €214 million to the exchequer in January 2015, completing the special dividend programme of € 400 million agreed with the Government in 2012.

This brings the total dividends paid during the past ten years to almost €1.5 billion, ESB said. Mr Flynn company that ESB has committed to paying 40 per cent of its after tax profits in dividends by 2017.

He also said the company “would like to do more” investment in wind energy, although he insisted it would take a “disciplined” approach to capital deployment.