A strong increase in the demand for electricity and a drop in fuel prices has led to a 9 per cent increase in profits at the ESB. Pretax profits last year rose to £218 million from £182 million the previous year.

The company's turnover was up to £1.26 billion from £1.19 billion in 1997, while after-tax profits increased to £195 million from £181 million.

The company retained a surplus of £7.7 million at the end of the year, compared to a deficit of £189,051 for the year before. It is the first time since the early 1970s that the ESB has produced a surplus.

Similar to 1997, growth in demand was dramatic, with the ESB connecting 44,619 new customers. Electricity sales continued to grow at about 5 per cent annually, reflecting the vibrant economy. The results include a charge of £21 million for an employee shareholding scheme. This involves the company devoting some of its profits to a fund which will eventually entitle staff to a 5 per cent stake in the company.

The company produced a return on capital of 12 per cent and said this was the "minimum required" to fund its large capital investment programme and "meet the competitive challenges ahead".

The ESB plans to invest £2 billion, over the next five years, in capital projects. Total borrowings amounted to £701 million, a reduction of £87 million on the year before. Operating costs rose to £939 million from £926 million.

In terms of turnover, over £1 billion came from electricity, with "retail, contracts and other services" chipping in £90 million and other activities contributing £70 million.

Some £1.2 billion in turnover came from operations in the Republic, while Europe produced £29 million and other areas netted £25 million. In terms of costs, payroll was down from £251 million to £243 million, fuel dropped to £298 million from £307 million, although operations and maintenance costs were up from £367 million to £398 million.

The Cost and Competitiveness Review, agreed between the company, the Government and unions and completed in 1996, has resulted in cumulative annual savings of £85 million.

Finance director, Mr Tony Donnelly, said the results took place against a "benign background" of falling interest rates and fuel costs. He said that "had it not been for the benign external cost environment" the company's profitability "would have been significantly weakened".