The Government has blocked the ESB from making its biggest bid to date for an overseas power group. The semi-State had been due to submit an offer, believed to be in excess of £1 billion (€1.27 billion) for eight electricity distribution companies in Poland yesterday.
However, a Cabinet sub-committee met earlier in the day and decided not to allow the company to proceed. The move has been condemned by Labour's public enterprise spokesman Mr Emmet Stagg who said it was an act of sabotage which would seriously undermine the ESB's credibility.
The ESB intended to make a binding bid yesterday for a cluster of eight electricity supply companies based in the industrial city of Gdansk. The companies' annual revenues are around €970 million (£764 billion). They have access to 2.5 million customers, representing 16 per cent of the market.
The Cabinet sub-committee - comprising the Taoiseach, Mr Ahern, The Tanaiste, Ms Harney, the Minister for Finance, Mr McCreevy, and the Minister for Public Enterprise, Ms O'Rourke - had to decide whether the Government, as the shareholder, should sanction the bid.
It is understood the sub-committee decided the investment was a substantial one and that the ESB had major commitments in the next five years to its Irish operations. It will have to spend more than £2 billion upgrading its transmission network. A spokesman for Ms O'Rourke said she had been supportive of the bid and the sub-committee had recognised the ESB's need to diversify to offset increasing competition in the Irish market. He said the sub-committee's decision "was purely a commercial decision".
The ESB said in a statement last night that it was disappointed it had been unable to proceed with the bid. It said the project was part of the ESB's strategy to achieve business growth "against a background of significant change in the electricity industry, both in Ireland and internationally".
The ESB is understood to be very annoyed by the Cabinet decision and feels it undermines its credibility abroad and in the financial markets. It had already spent several million pounds on the bid, a final decision on which was due in August.
Because of its scale, the ESB would have had to fund the acquisition with debt from Irish and international banks. The company faced strong competition from other European utilities groups including Eon of Germany and Endesa and Iberdrola of Spain.
Mr Denis Rohan, of the ATGWU, the ESB's biggest union, said he was "disappointed the Cabinet sub-committee took this decision.
"We had an understanding with the Government that, in return for allowing accelerated competition in the home market, the ESB would be allowed to expand internationally. The unions will now have to seriously reassess their relationship with the Government in the energy industry in the light of these developments."
