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NEWS

Oct/Nov 2011 www.esb.ie/em

Taking control now to secure our future

PERFORMANCE IMPROVEMENT PROGRAMME PROGRESS UPDATE

Executive Director Human Resources & Sustainability
John Campion

ESB has served its customers and the people of Ireland well over its 84 year history. Over the last 20 years we have transformed the company. There is no doubt however that we are facing into some of our greatest challenges ever. The future ownership structure of the company looks set to change, we face uncertainty in international funding markets, our market share is under attack and we are subject to an increasing level of scrutiny from external parties. While we understand that ownership is a matter for government, we also know that the prudent and efficient management of our company is a matter for ourselves.

“ While we understand that ownership is a matter for government, we also know that the prudent and efficient management of our company is a matter for ourselves

We all want ESB to be successful, to provide good quality employment and capable of sustaining a strong pension fund. To achieve this we must get our cost base into the best possible shape. We all must understand the nature of the challenge facing us. There are tough messages involved and there are no easy solutions. I believe that when this information is absorbed, each and every one of us will look at the best interests of the company, to long term sustainable employment and to a secure future for ESB.

The Performance Improvement Programme (PIP) is already well on the road of delivering cost reduction but we now need to address our payroll cost base which is out of line with external market rates and is the subject of continuous media commentary.

This task will not be easy. However, difficult as it may be, I believe that the tools of partnership - mutual trust and respect, the development of shared objectives followed by engagement, the exploration of issues, and the development of solutions – will be the key to our ultimate success.

Throughout our history we have developed and delivered change of very significant scale that has had a profound impact on our company, our industry and our country. ESB has sustained and strengthened through challenging times in the past, and each generation of staff contributes to building the organisation we are today. We should view the cost and payroll reductions we must deliver as a necessary step towards achieving our long-term goals. If ESB has one hallmark, it is that we deliver what we promise – and we will do so again this time round!

Executive Director Finance & Commercial
Donal Flynn

ESB HAS A VERY rare and proud claim – in its 84 year history it has been entirely self-funded and has never received an equity injection from its owner. At the core of this remarkable history are two things – an ability to adapt and our continued financial strength. In a time of unprecedented financial turmoil in Europe and Ireland, we must now respond to protect our financial strength and ensure the long term survival of our business.

Financial strength in ESB is important for two reasons. Firstly it ensures we can compete. If we do not respond to the competitive and regulatory pressures being placed on all our business areas, then ESB faces an uncertain future.

Secondly, only a financially strong ESB can continue to fund itself. We have ambitious investment plans of €6.5 billion for the next five years, the vast majority of which needs to be funded by borrowings. These investment plans have very real and tangible benefits and are essential for the whole group.

The acquisition of NIE has enhanced the credit profile of ESB. It has modest borrowings and adds a well-run regulated business to the group.

“ We must respond now to protect our financial strength and ensure the long term survival of our business

Without cost base savings being made ESB will quite simply lose its financial strength and the ability to compete and fund its investment plans. Delivery of €280m cost-base savings by 2015 (of which together we have already delivered in excess of €100m) is the minimum we need to protect our financial strength. And to do that we must together adapt and change, as we have done many times in the past.

Performance Improvement Plan Targets

The Performance Improvement Plan (PIP) target of €280M comes from a very detailed analysis of ESB finances to 2015 – our revenue, costs, investment plans etc. Achieving this amount is the minimum necessary to maintain a