ESB full-year profits down as it pays €116m dividend to the State

Energy group sees €38m decline in operating profits to €597m in 2016

The ESB, which employs over 7,000 people in Ireland, reported pretax profits of €194 for 2016

The ESB, which employs over 7,000 people in Ireland, reported pretax profits of €194 for 2016

 

ESB Group recorded a 37 per cent decline in pretax profits last year as revenues also declined due to lower volumes and price reductions.

The energy group, which employs more than 7,000 people in Ireland, reported pretax profits of €194 million for 2016. This compares to €307 million a year earlier when profits jumped 43 per cent from €214 million.

Pre-tax profits were hit by a €188 million charge relating to a financial instrument ESB acquired when it bought NIE Networks in the North in 2010. While these instruments – interest rate swaps – were taken on to reduce ESB’s risk to changes in inflation and interest rates, the current low interest rates and rising inflation in the UK meant a non-cash charge had to be taken in the company’s income statement for 2016.

Operating profit before exceptional items declined 6 per cent to €597 million from €635 million in 2015 – hit by the impact of a fall in sterling on UK earnings . Revenue fell by €117 million to €3.2 billion versus €3.36 billion in the prior year.

ESB said it invested €897 million in energy infrastructure during 2016 as the dividend it paid to the State declined from €214 million in 2015.

The energy group has paid dividends totalling nearly €1.5 billion to the exchequer over the last 10 years.

“It was a strong operating performance right across the ESB, which is important as it allows us to retain a strong credit rating which helps us to borrow money for our substantial capital investment programme.” group finance director Pat Fenlon told The Irish Times.

Earnings before interest, taxes, depreciation and amortisation (ebitda) was down €24 million to €1.3 billion last year as operating cost decreased by €79 million to €2.65 million.

ESB Network’s operating profit rose €27 million to €314 million primarily on the back of higher regulated tariff income, the group said.

Electric Ireland, the retail arm, reported an operating profit of €72 million with revenues falling 10 per cent versus 2015 to €1.9 billion due to reduced unit rates for residential customers and a 1 per cent decline in market share to 37 per cent overall.

“ We passed on significant price reductions in 2016, including 6 per cent on residential electricity and 5 per cent on gas. On top of that there were further reductions available up to 8.5 per cent,” added Mr Fenlon.