ESB joins Bord Gáis in deciding it is better to borrow from Peter to pay Paul

So ESB has joined Bord Gáis in deciding it is better to borrow from Peter to pay Paul.

Bord Gáis, which is being renamed Ervia, earlier this month announced a complex financial restructuring that boils down to it borrowing €300 million to pay a dividend it has promised the State.

The ESB, which is committed to paying the State a €400 million dividend, yesterday said it has decided to reverse an October decision to sell two peat power plants in Offaly and Longford to raise the cash.

It, too, will now borrow the remaining €203 million it has yet to kick upstairs to the exchequer, having already paid over €197 million. It will use cashflow from the two peat plants, boosted by a levy on taxpayers, to fund the repayments.

In both cases, a State entity is borrowing – using a private facility – to lessen by the same amount the State’s borrowing requirements. This only makes sense for taxpayers if the firms borrow at a lower rate than the Government, which can buy 10-year money at just over 2 per cent.

Otherwise, it is just financial engineering, cycling Government borrowings through two State energy companies as flags of convenience.

The ESB’s decision has the added benefit of solving a potentially messy industrial dispute, as its unions were dead set against sale of the plants.

Having endured blackout threats in the run-up to Christmas over a separate pensions issue, the ESB will be glad to avoid another dispute. Pulling the peat plants sale has certainly made the unions happy.

The ESB was traumatised by the Christmas dispute and multiple sources have described how management was split over how hard to fight the unions.

It is worth noting that the ESB last week announced its deputy chief executive Bríd Horan, a unions hawk, is leaving. It has now emerged that John McSweeney, its head of innovation and another whom unions disliked, is also due to retire.

It appears the union doves at the ESB, led by chief executive Pat Doherty, are now firmly in the ascendancy.