ESB board divided on privatisation
The ESB board is sharply divided on the company's future. A majority is expected to support a partial Initial Public Offering (IPO) as the best alternative to recommend to the Minister for Public Enterprise, Ms O'Rourke, when it meets tomorrow. However, a significant minority, including most of the worker directors, is likely to oppose any move towards privatisation.
The Minister has given the board until this month to make its decision.
Yesterday MSF2, which represents engineering, technical and management grades in the company, came out with a major restructuring document thought to reflect much of senior management thinking. It proposes that, regardless of the type of ownership model adopted, the company must be given greater commercial freedom to reshape its investment programme and generating plant portfolio to meet the challenges of competition and international environmental criteria agreed at the Kyoto summit.
It estimates the lead-in to an IPO at three years, which more or less coincides with the opening of 40 per cent of the energy market to competition. In its document MSF2 says the semi-state structure has served ESB well in the past but does not "allow the speedy decision making required for commercial success" in the future.
The document also opposes an Eircom type flotation and says the "current climate" favours an initial placement with financial investors. These should be allowed to buy 15 per cent of the ESB. The employees' shareholding could be expanded to 15 per cent (from the already agreed 5 per cent) in return for change, and 15 per cent of shares should be issued free to ESB customers.
It says a full IPO might be possible at a later date, when the environment is more suitable, "to maximise the benefit to the company and the country and when ESB is in a strong enough position to deflect potential hostile takeovers. MSF2 believes therefore that a public listing of the shares should not be sought for at least three years after the issue, or until a further tranche of shares are offered to the public or financial institutions. The employees' share should be held in a trust and thus not be available for sale on the open market."
However, the secretary of the ESB group of unions Mr Paddy Reilly said later: "We want the ESB to remain a vertically integrated publicly owned utility. That's group policy. It is the majority view of the group." He dismissed the MSF2 document as "an attempt by well-off engineers to hijack our agenda and they are in no doubt where group policy lies."
This open split in union ranks may well be reflected among worker directors at tomorrow's board meeting. Three of the four, Mr Sean Geraghty of SIPTU, Mr John McGinley of the ESBOA and Mr Pat Smith of the ATGWU are likely to support union group policy.
However, Mr Joe La Cumbre of the TEEU, who topped the poll, said in a recent newsletter the "ideological argument of pro and anti privatisation is not the way forward". His newsletter included a questionnaire seeking employees' views on a partial IPO.
Only MSF2 and the TEEU have distributed it. The other unions have so far refused to do so. It is unlikely the union group will review its position on privatisation before seeking at least one further meeting with Ms O'Rourke.
Some members of the ESB board would prefer a greater element of privatisation while at least one is likely to oppose any move in that direction. Although board decisions are usually taken by consensus, informed sources suggest that if the partial IPO option were pressed tomorrow there would be a vote. The outcome is not in doubt but the opposition will be anxious to record its reservations.