ESB may seek funding of €500m

The ESB is expected to borrow over €500 million in 2005 following the high level of demand that accompanied its last fundraising exercise in the US. Emmet Oliver reports.

Official figures from the Department of Finance envisage the company borrowing €988 million in 2005, but the ESB yesterday said that any borrowing was likely to be half this amount.

A spokesman said the board of the company and the Government, as the shareholder, would have to approve any fundraising.

It is understood that the company is faced with three options when raising its next tranche of money. It could go back to the private placement market in the US, it could raise a euro bond or it might consider conventional bank debt.

The company concluded a $1 billion (€753 million) private placement deal in late 2003, which was significantly over subscribed. The money was raised even though the ESB did not have an official credit rating.

It is understood that some ESB executives would like to tap into this market again because of the healthy interest the first time.

The money was secured with an average 5 per cent interest rate and the deal was put together by ABN Amro and Barclays Bank.

Large-scale State-backed utilities normally have wide appeal with the capital markets.

While speculation continues about the company plunging back into the capital markets, a spokesman said: "A decision about returning to the markets has not yet been made".

Funding is required to support a major € 3 billion investment in the ESB network. This represents the largest ever non-Government investment in the State's infrastructure. The ESB believes it will provide "a 21st century electricity system" for the State, allowing all regions to take advantage of economic opportunities.

"Electricity is as important as broadband, road, air and port links to attract investment," said an ESB source.

The ESB is expected to report strong results for 2004 and is likely to pay the Government a dividend of about €100 million.

"The ESB has never required Government subvention, it has always been able to secure funding without burdening the State purse," said a spokesman.