THE ESB will be "in serious financial trouble" if the £270 million Cost and Competitiveness Review (CCR) is rejected by the workforce, says the company's new chairman, Mr Billy McCann, as the 9,200 employees begin balloting on the package.

"This is a major rationalisation programme. The largest ever undertaken by any company in Ireland. Effectively the ESB is going to reduce its workforce by 2,000 people, or over 20 per cent in three years", says Mr McCann.

Rejection of the CCR would place the long-term viability of the company in jeopardy. If Mr McCann finds that prospect daunting he doesn't let it show. He is one of those big, affably phlegmatic men who seem to take crises in their stride.

Indeed, as a former managing partner of Craig Gardner Price Waterhouse, he has spent much of his career saving troubled companies. His most formidable challenge was the Insurance Corporation of Ireland, to which Garret Fitzgerald, as Taoiseach, appointed him administrator in March 1985. He instituted a profit improvement programme that helped ICI achieve a remarkable recovery subsequently.

Mr McCann is anxious to stress that the ESB does not face the scale of difficulties that confronted ICI. "The ICI was totally different," he says. "It was a company that got itself into trouble within its core business.

The ESB is actually in good shape. What it has done is see the future and plan for it. The ESB is entering a new, competitive market from a position of being a top class company. It's a measure of the ESB's planning that it has seen the future and is preparing for it."

Which brings us back to the CCR. "It is so obviously vital for the company that it should be seen by everyone as the next logical step we need to take. The ESB set the CCR going, involving the unions and working with TEC (the Department of Transport, Energy and Communications) solely to put the ESB in a position where it can compete."

The ESB estimates the redundancy package will cost £100,000 per employee leaving the company. Mr McCann rejects media reports that the real cost of the redundancy package works out at nearer £175,000 per employee. He is confident that costs will be contained and the target of recouping the cost of the CCR within 4.4 years will be met.

"The reality is that restructuring and rationalisation is expensive. But the benefits are fully justified in financial and economic terms."

What if the workers reject the proposals, as the shift workers in the power stations are threatening to do? "It'll be very bad news." Mr McCann says. Effectively the ESB would be heading for. well it would probably be too strong, to say crisis, but it would be very, very serious.

"The CCR is a three legged stool. There are the unions, the board and the Department. That is a good stable foundation on which to develop. But if it doesn't go through, well we won't have any Government approval for price increases for a start and that will put us in very serious financial difficulty."

Effectively any withdrawal of support by a significant group within the workforce would be matched by the department removing its "leg" of the stool. The ESB board would then be left with a very precarious balancing act to perform.

After 10 years of price freezes, Mr McCann says that, increases are vital for the ESB's £1.5 billion investment plan. "If we don't get the price increase we won't have money for new investment. That means we wouldn't be in a position to refurbish the existing generating stations, or renew the networks and we wouldn't be ready for the competition.

"And the one thing that is going to happen is that there is going to be competition. Effectively we would be picked off by foreign competitors. So it would be very, very serious for the board if the CCR isn't accepted. No doubt our competitors would see us as an easy target. I wouldn't want to underestimate how serious the situation would be.

There is a public perception that, after 70 years of comparatively well paid and secure employment, the ESB workforce has become insulated from the harsh realities of the market place. Mr McCann rejects this notion. He points out that the unions were involved with the company in preparing for competition through the CCR.

"We all saw there would be competition and we went out and saw what was best practice in the world. The result was the McKinsey report, which showed how savings of £100 million could be achieved.

Under the CCR savings of up to £60 million are hoped for by year three and £80 million subsequently. Mr McCann points out that if the CCR is adopted "it means we will have best practices in place and we will be competitive. If we don't get the CCR accepted we could be in serious trouble."

He also points out that rejection would jeopardise the generous severance scheme, as well as the prospect of a five per cent shareholding for employees in the company.

Mr McCann denies that relations between the ESB and the Government have been strained over the issue of a power procurer - an agency which will centrally purchase electricity in a deregulated market and sell it on to big consumers.

Two weeks ago the Government did a U-turn on the issue. It agreed reluctantly to locate the power procurer outside the ESB. If it had stuck to its original intention of locating the procurer in a subsidiary company of the ESB, the board's ability to compete for new power contracts could have been jeopardised.

The Government has been "a genuine partner and engaged with us and the unions in a really positive way," Mr McCann says. "They've approved price increases, which is very difficult for any Government to do, and they've committed themselves to keeping the ESB as one company."

He regards the price increases of 6.5 per cent over the next three years as modest and feels consumers should not be afraid that the difficulties that followed privatisation of the British electricity industry will occur in the Republic.

While cross-subsidisation of electricity prices from big industrial customers to domestic users will end, Mr McCann says that "the best reassurance the consumer has of low cost electricity "is the fact that competition will keep the price down".

On the issue of whether the ESB can hang onto its 250 big industrial users, who account for 25 per cent of ESB business, Mr McCann says that it will not simply be a question of pricing. Other factors will come into play when big customers choose a supplier, such as location and when they need peak demand.

But he accepts that pricing will be important. "If we don't get our costs in line we won't be able to offer them electricity as cheaply as we could.

The first competitive test facing the ESB will be the tender for the new £85 million peat-fired station in the East Midlands. Mr McCann confirmed that the company will be in the running for the contract and there is no doubt that it will regard the exercise as an important measure of its ability to compete in the open market.

He also said that the company would be willing to look at business opportunities outside its core business, if they arose. It had already done so through ESBI, its international consultancy business.

Asked if the company would be prepared to give access to its sites for telecommunications purposes to newcomers to the mobile phone market like Esat, he says: "We would see that as an opportunity for us and would use it in the best way we can. But he also stressed that "electricity will remain the core business".

Given the trials ahead, how does Mr McCann feel about taking over as a part-time chairman from P J Moriarty, who was over 50 years with the company, the last 15 as full-time chief executive or chairman? "Paddy Moriarty was a huge asset to the ESB and had a prodigious knowledge of everything that happened in the ESB," Mr McCann says. The real strength of what he has left behind is a really super management team. The ESB was not a one man band, it's a whole orchestra of very, very good players." Mr McCann conducts.