STORY OF THE WEEK: A decision on the post is expected shortly, but the new chief executive of the ESB will face many complex challenges, with concerns about pressures on the electricity network and a change of ownership on the cards, Arthur Beesley reports.

Expectation intensified this week that the ESB board will be asked to select a new chief executive at its monthly meeting next Tuesday morning.

With major concerns about constraints on the electricity network and a change of ownership mooted, the decision will be highly sensitive from a national perspective. The appointee will justly celebrate but, with complex challenges ahead, the party will be short.

According to a number of sources, about three people are still in the race to succeed Mr Ken O'Hara. They are: the ESB's head of international investments, Mr Dónal Curtin; the company's commercial director, Mr Padraig McManus; and a former Scottish Power executive, Mr Alan Richardson. These figures - and perhaps one other person - are believed to be involved in the endgame that follows the elimination of more than 50 other candidates.

ESB chairman Mr Tadhg O'Donoghue declined to discuss the names of those on the shortlist.

"It's going to be very tight," he said when asked whether the board would make the appointment on Tuesday. "It is my hope, but we're not ready yet. It's not an easy process and the only thing I can say is that."

The appointment of chief executives to semi-state companies is never straightforward and few would second-guess Mr O'Donoghue on the nomination. As well as the normal commercial skills, such jobs demand an ability to deal with powerful trade unions and the Government.

Indeed, State ownership means the stewardship of such companies is intrinsically political. To drive significant change, it is crucial for the chief executive to be able to call on the support of the company's board and Minister. Without such loyalty, delivery is difficult.

In addition, large State companies tend be closely scrutinised by the media and more information tends to flow out through unofficial channels than is the norm in the private sector. This can cause problems to the routine stewardship of the company.

While the Buckley reforms mean the candidate could expect to earn a basic package worth about €317,000, any high-ranking business person considering the position would also have to bear in mind that the names of candidates might be leaked to the press. Candidates or potential candidates who doubt the integrity of the process may withdraw or opt not to apply at all.

The recruitment process at the ESB began after Mr O'Hara announced on September 11th last year that he would retire next July. Speculation since then has centred on whether an internal candidate or an outsider would be chosen.

While the Department of Public Enterprise is believed to favour an external candidate, the view of the Minister, Ms O'Rourke, is not known. Ms O'Rourke appointed Mr O'Donoghue and they are friends. The Minister has no formal role in the process, although it is very likely that she will be informed beforehand of the likely nominee.

Supporters of an external appointment - and there are many - suggest that an outsider from the private sector would have the experience necessary to drive the commercial and cultural change required to prepare the ESB for life outside the State sector.

The view of Mr O'Donoghue's subcommittee is not known. On the face of it, however, such thinking favours Mr Richardson, who worked for 10 years in the upper levels of the privatised Scottish Power. Nine weeks ago, however, he was ousted after the company's US division, PacifiCorp, ran up exceptional charges of $1 billion (€1.15 billion) after the power supply crisis last year. If Mr Richardson was appointed, his departure from Scottish Power would be raised.

Mr Curtin and Mr McManus have not been insulated from the outside world in their long careers at the ESB.

Both have led the commercial and international divisions of the company in recent years. Mr McManus was managing director of ESB International before he was appointed commercial director in January 2001. Similarly, Mr Curtin was commercial director before he was appointed director of international investments.

Given the strategic importance of both roles, this indicates that Mr McManus and Mr Curtin are perceived as having the potential to operate at the highest level in the ESB.

In recent months, Mr McManus was a key figure in the negotiation of the PACT reorganisation programme, under which 2,000 of the ESB's 8,500 staff are voluntarily leaving the company. As such, he is perceived to have the confidence of the company's powerful trade unions, who secured a generous 21 per cent pay rise as part of the package.

For his part, Mr Curtin has led the development of an 800 megawatt power station at Bilbao, Spain, and a 400 megawatt plant at Coolkeeragh near Derry. However, a bid worth more than €1 billion for eight Polish electricity companies was blocked by the Government last year within hours of the deadline for a binding bid. This was highly embarrassing for the ESB, particularly as the company was seen as a front-runner in the process.

Mr O'Donoghue was willing to discuss the tasks that will face the appointee. On ownership of the company, he said last year that the ESB would realise "true value" for the State if floated on the stock exchange in the short-term. This week he said: "The challenge for the new chief executive is to give the shareholder options. At least we should be in a position that there are real options."

On a day-to-day level, Mr O'Donoghue said delivery of a major networks' upgrade programme costing more than €2 million per day will be a crucial task for the new chief executive.

Electricity is a basic requirement for industrial development but multinational investors during the heady Celtic Tiger era had to shun large areas of the State because of constraints on the network. Bodies such as IDA Ireland and Forfás, the umbrella body charged with developing industrial policy, expressed concern. It is safe to assume that the Government noted the constraints and spiralling demand for power that led to the use of emergency generation this winter.

Separately, the ESB is obliged to reduce its dependence on fossil fuels and increase use of "renewable" energy under the Kyoto principles. Any reduction in fossil fuel use will put the coal-burning power station at Moneypoint, Co Clare, in the frame. But while conversion of the existing station to gas is not seen as a realistic option, insiders believe the matter is unlikely to be addressed in earnest for some years.

Of more immediate concern is the state of competition in the market, which was partly liberalised two years ago.

To date, the deregulation process is believed to have cost the State about €30 million. Yet a number of mooted high-profiled investments have failed to materialise and, as yet, only one independent large-scale generation plant will come onstream soon.

Such a situation favours the ESB in the first instance. But under EU regulations the company is obliged to reduce its share of the generation market to 60 per cent in three years. With potential investors walking away from the market in droves, many senior figures in the industry believe such a reduction will be very difficult to achieve.

Still, the regulator Mr Tom Reeves defended the liberalisation process this week. However, a recent questionnaire his consultants sent to industry participants on the "bankability" of projects asked whether a "competition should be held to see who will develop the next independent power plant".

According to one well-informed observer, such a question suggested the present system is not at all conducive to investment in generation despite the price rise.

Mr Reeves said this week that he was examining the possibility of increasing the minimum tariffs at which an independent generator could sell electricity to the supply arm of the ESB. The State company would suffer in that context, so any such move is likely to be opposed.

For the moment, however, all eyes will be on the board's selection of a new chief executive. If no appointment is made on Tuesday, one will be expected not long afterwards - perhaps at the special meeting of the board. Should directors be unhappy with the nominations, they can call for the process to be restarted.

Whatever happens, it is fair to assume that Ms O'Rourke will receive a phone call from Mr O'Donoghue soon.