ESB profit grew 45% as pandemic restrictions were lifted

First half of 2021 saw significant recovery compared with same period last year

The pandemic had a ‘significant impact’ on the 2020 half year operating profit for the ESB

The pandemic had a ‘significant impact’ on the 2020 half year operating profit for the ESB

 

The ESB grew its operating profit by more than 45 per cent in the first six months of the year as restrictions imposed to curb the spread of the Covid-19 pandemic were lifted, its interim report shows.

The operating profit before exceptional items of €363 million represented an increase of €114 million on the same period in 2020.

The pandemic had a “significant impact” on the 2020 half-year operating profit with reduced revenue due to a sharp fall in demand in the second quarter.

The company also dealt with restrictions on its capital programme, leading to more costs being charged to the income statement.

The easing of Covid-19 restrictions, an improvement in electricity demand, regulated network tariff changes and positive foreign exchange movements were cited as the primary drivers of the increase in operating profit in 2021.

ESB is a joint venture partner in the Neart na Gaoithe project, a 448-megawatt offshore wind farm development off the east coast of Scotland.

Delays to the project and an expectation of significant additional construction costs due to more challenging sea-bed conditions than anticipated caused an exceptional impairment charge of €106 million.

In June 2021, the ESB completed the sale of its 47 per cent stake in Tilbury Green Power, a waste wood energy plant in Britain.

A gain on sale of €82 million has been recognised in the income statement in respect of this transaction, most of which is accounted for as a reversal of previous impairment charges on ESB shareholder loans to the project.

Regulated tariffs

ESB Networks operating profit of €206 million was up €74 million on the same period last year. This was primarily due to an increase in regulated tariffs and electricity demand compared with 2020.

The impact of Covid-19 in the first half of 2020 led to 4 per cent lower overall electricity demand. This led to reduced revenue and a restriction of certain capital work programmes.

The positive income statement impact of the easing of restrictions on the capital programme was offset by a higher depreciation charge in 2021 due to the growing and changing nature of the asset base.

ESB Networks expenditure of €289 million was up €20 million mainly due to increased spend on smart metering as well as distribution and transmission network projects.

This was primarily due to the increase in the ESB Networks capital programme as well as the impact of Covid-19 on the capital programme in 2020.

Other segments expenditure of €40 million was €4 million below the prior period and included spend on the redevelopment at the Fitzwilliam Street head office complex.

Site closure

This was lower than 2020 due to the extended site closure due to pandemic restrictions during the first half of 2021.

At the end of June, ESB had more than €550 million cash on hand. Included in this was just over €450 million relating to cash collateral amounts received in relation to mark-to-market positions of exchange traded gas, carbon and power contracts.

Excluding these collateral amounts but including the revolving credit facility and an undrawn facility with the European Investment Bank, the group had just under €1.7 billion in available liquidity at the end of June.

This was significantly more than scheduled debt repayments due over the next 24 months of just over €150 million.