The Government's decision to block the ESB from making a bid for eight electricity distribution companies in Poland has significantly damaged the company's reputation in international markets, analysts and union officials said yesterday.

They delivered their assessment as the Taoiseach denied reported differences between himself and the Minister for Finance, Mr McCreevy, over the ESB's Polish plans. There was no truth to these reports, Mr Ahern said yesterday.

"In actual fact he (Mr McCreevy) wasn't even central to that discussion. There were a couple of ministers involved in that, but it wasn't the Minister for Finance. All of the reports about the conversations I've had about these issues last week are totally untrue. I was dealing with him on other issues last week but with absolutely no difficulties," the Taoiseach added.

One electricity sector analyst said yesterday that the Government's decision would raise questions in the market as to whether the ESB should be taken seriously. The manner in which the ESB had been forced to pull out of the deal, and the timing of the Government's decision - just hours before the bid was due to be made - had damaged the company and was a source of embarrassment, he said.

"Pulling out of a deal is not in itself a bad thing, but this would seem to be a straight case of pulling out not for anything it saw in the due diligence but just a political decision that this wasn't on the agenda," he added.

The ESB is understood to be annoyed by the Cabinet decision and to accept that it has done significant damage to its international business. This is unlikely to impact on current projects, but the company will have to work hard to reestablish its position for future deals and face difficulties trying to form new alliances and partnerships.

Mr Denis Rohan of the ATGWU, the ESB's biggest union, said decision had destroyed the semi-State company's credibility in foreign markets.

The cabinet sub-committee is understood to have made its decision on commercial grounds and because the ESB had major commitments in the next five years to its Irish operations. But Mr Rohan questioned the rationale involved.

"It couldn't have been down to financial issues," said Mr Rohan. "From my understanding, the finance had been put in place and the backers had been secured. So if it was an issue, why hadn't it been an issue much earlier on?"

He added: "I have a concern that infighting is taking place at cabinet level that is impacting on the future of ESB employees and the future viability of the company."

The Government's decision may affect on future privatisation plans for the semi-State company, especially if potential investors feel the company's management and its strategies are being undermined and the company is diminished in the international market and confined to a shrinking home market.