The Government is expecting the ESB to produce a record dividend in 2006 of €80 million, almost a 10 per cent increase on the figure for 2005, new figures show.

Department of Finance forecasts show that the Government believes the electricity company is capable of posting an €80 million dividend. If the Government goes ahead and accepts the dividend payment it is likely to draw sharp criticism from unions and business interests.

IBEC, the business lobby group, recently said the ESB should retain the dividends so they could be used to keep prices lower. Several key union figures at the company, including deputy chairman Joe La Cumbre, believe the company should not be paying dividends until its €500 million pension deficit is addressed.

The different approaches to the pension issue by Mr La Cumbre and the ESB chairman Tadhg O'Donoghue created tension earlier this year and led to Mr La Cumbre claiming he had effectively been dismissed from the ESB board.

This row was eventually settled following intervention by the Minister for Communications Noel Dempsey. The immediate trigger for the row concerned who should chair meetings of the company's board, but in the background was the issue of dealing with the pension problem.

Based on the Government projections, the ESB is set to remain highly profitable over the next few years despite liberalisation of the electricity market and higher fuel prices.

While the company's profits often attract criticism for being too high, the company claims it needs to generate a lot of cash to meet its considerable debt obligations.

The dividend payment is worked out according to a formula designed by the Department of Finance. The higher the level of ESB's post-tax profits the higher the dividend. In 2003 the ESB was able to propose a dividend of €67.1 million; this increased in 2004 to €77.4 million and in 2005 it is likely to be €73.5 million, rising to €80 million in 2006.

These are based on Department of Finance figures, but are subject to change. The figures are disclosed in the 2006 Estimates of Receipts and Expenditure published by the Department of Finance late last week.

These figures also show that the Department expects Bord Gáis to produce a dividend in 2006 of €9.1 million, slightly down on the 2005 figure of €10 million.

Other State-owned companies, for instance An Post, rarely pay a dividend and RTÉ traditionally retains any surpluses it makes. The Dublin Airport Authority sometimes pays dividends but decided not to last year.

The ESB only resumed paying dividends in 2002 following a new deal with the Department of Finance.