Several ESB unions are expected to serve strike notice on the company's management within days following the breakdown in talks over a four-year plan for the electricity company.

The company's €510 million pension deficit has become a major stumbling block, with management and unions failing to agree on how the shortfall should be addressed. While an actuarial valuation has put the deficit at €510 million, a review using the accountancy rule FRS 17 has put the deficit nearer €1 billion.

Unions have told the company they are prepared to be flexible about future pay rises in light of the pension issue. It is understood unions have sought lump sum payments for staff rather than superannuated pay increases, which have been part of previous ESB agreements.

The unions have accepted that traditional pay increases may have to be foregone because they would increase the pension fund deficit. As an alternative, they have suggested lump sums, a bigger equity stake in the ESB and proper consultation over organisation and structural change at the ESB.

Mr Paddy Reilly, spokesman for the group of unions, said all company unions would meet this Thursday to consider the talks' breakdown. He said the situation was very serious and there had been no meaningful movement by the ESB or the Government.

Strike notice would be served by several unions within days, he warned, and with a national pay agreement to be voted on, the "window of opportunity is narrowing". He said radical organisational change was being proposed for the company and energy regulator Mr Tom Reeves was also expected to press on with changes. It is understood the ESB unit ESB Networks will be separated from the main company in the months ahead.

Mr Reilly said the group of unions expected its members to be consulted on these and they had to be linked to the other issues. "We agree there has to be an integrated package. But it needs to be a fair one that recognises staff concerns," he said.

Mr Tony Dunne, of the ESBOA, which represents 2,300 administrative, clerical and technical staff, said staff accepted there was a need for organisational change but it had to be negotiated, not imposed.

An ESB spokesman said the company remained available for talks but acknowledged they had been "intense and difficult" up to now. He said management believed all issues were linked but the pension deficit was proving to be difficult.

There are also tensions over the €67 million paid by ESB to the Government in a dividend for 2003. Some union sources argue that the ESB should consider withholding dividends until the pension deficit is addressed.

At the ESB annual general meeting yesterday in Dublin, Mr David Beatty, chairman of the ESB Employee Share Option Plan, questioned the size of the dividend when there is a requirement for significant ongoing investment. Mr Beatty and several others consequently abstained on the resolution approving the dividend.