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ESB Boss Fails O’Leary Test

Posted on: July 25th, 2010

TWO mighty Irish companies rose above the radar last week.

The cream of the private sector and the jewel in the semi-state crown were both hit by natural disasters in recent months. Ryanair responded to being smothered by an Icelandic volcano; the ESB, top of the privatisation hit list, was facing fierce flak for its handling of last year’s floods in Cork.

On Tuesday while Ryanair was revealing how the volcano hit its profits, the ESB’s reaction to the flooding catastrophe was being scrutinised by Deputy Sean Fleming’s Oireachtas Committee on the Environment.

So I sought both companies’ latest reports to see how they had met their Waterloos.

It turned out to be a telling tale of two outfits.

Ryanair reported first-quarter figures (from April to June 30) and related Michael O’Leary’s response to May’s volcano.

It was typically robust. He wrote off a cool €50m. The magician of the airlines showed adjusted profits of €139m for the first quarter, bang up-to-date to June 30. Ryanair’s information was barely three weeks old.

ESB’s year had ended way back on December 31. I wanted to know from its 2009 accounts if it had provided for a liability, as a result of the flooding episode; but seeking the ESB annual report for 2009 was a wild goose chase. It is not ready. The most up-to-date news provided by the ESB dates all the way back to 2008. The ESB’s latest information is 18 months old.

Shareholders will be able to ask Ryanair about its activities at the company’s AGM in September. The ESB does not do AGMs.

The Ryanair annual report was published on Thursday. It has a later year-end (March 31) than the ESB’s (December 31). Yet its annual report is out earlier.

Ryanair has even provided unaudited quarterly figures right up to the end of last month.

I tried ringing ESB chief executive Padraig McManus to find out why his accounts are so hopelessly late. They are normally published before the end of April in accordance with the code of practice for State bodies. Not this year, naturally enough giving rise to raised eyebrows.

Mr McManus sent the usual squad of ESB press officers in hot pursuit to intercept the questions, no doubt ready to make the ritual excuses about why the semi-state is unable to publish its figures on time.

Word within the Department of Energy suggests that most of the other sleepy dinosaurs have delivered their accounts . Even Donal O’Connell’s slovenly An Post is ahead of the ESB. The delay from the electricity giant is said to be due to the department’s search for further information. The ESB accounts are being ” analysed”. Between the lines it is easy to detect that there are “issues”.

I wanted to ask Padraig about the issues.

Padraig never returns calls.

But that is Padraig. And that is the ESB. And that is the semi-states. Keep the head down. Keep information tight. We are a State monopoly. We can be late with our figures if we like. We employ spinners at the State’s expense to keep inquisitive hacks at bay. Meanwhile Padraig is holed up in his Fitzwilliam Square concrete bunker.

Michael O’Leary is not frightened of journalists. Some humble hacks ringing his office report that he often answers his own phone without having a clue who is about to ambush him. Indeed he frequently sends the questioner off with a flea in his ear. O’Leary has refreshing confidence, is accessible and fearless.

Semi-state chiefs, like the vastly overpaid Padraig and the elusive Donal O’Connell, employ an army of spinners to defend them from contact with media or ordinary people. No wonder. They are featherbedded. O’Connell even has a chauffeur-driven car to escort him from post box to post office.

O’Leary solved his driving problems by buying a taxi. No doubt it costs less and works better than Donal’s little luxury of a driver-on-demand for his 450 Lexus.

Despite Padraig’s determination to avoid public scrutiny, happily we have plenty of raw information about him and the ESB. The company’s profits after tax fell from €431m in 2007 to €273m in 2008. Padraig’s salary hit an all-time high of €654,000 in 2008 when profits fell by 37 per cent. Not a bad snatch from a company in decline.

Similarly, Donal’s package rose from €493,000 in 2008 (when An Post made a small profit of €33m) to €500,000 in 2009 when it made a loss of €29m. Such a stunt is the height of financial perversity, not to mention of doubtful morality in tough times.

Donal is as unwilling to face questioning as Padraig. That is the way of the semi-states.

No one can blame them. They are presiding over quasi- monopolies with work practices and bearded trade union intransigence that would send O’Leary off the wall.

Michael dealt firmly with the prospect of unions. He has done everything to root them out short of forcing passengers and crew to remove beards when boarding the aircraft. Do not be surprised if there is a surcharge on both beards and baggage if profits dip.

The semi-states are infested with the whiskered ones.

Perhaps it is unfair to compare Ryanair to the ESB? One is a semi-state convalescent home while the other is a go-go public company.

Unfair maybe, but essential in today’s dire straits when the State is exploring selling the semi-states. The ESB could be on the block.

Such a comparison may soon become a compelling reality as Finance Minister Brian Lenihan and the king of the cutbacks, economist Colm McCarthy, eye up the ESB and An Post as candidates for privatisation. How would the coy duet of McManus and O’Connell measure up to the demands of the market?

How would they rate against Michael O’Leary?

Please do not laugh.

Wildly optimistic estimates of the value of the ESB range in the €3bn to €6bn region. Almost the same size as Ryanair, now valued at close to €6bn on the stock market.

While Ryanair is expected to make in the region of €390m net profit this year, the ESB will be lucky to hit half that figure.

How would the cold eyes of the market view Padraig and the ESB? The man who joined the ESB in 1973, took a short break, but then returned to the semi-state womb; the man who is deeply imbued with the semi-state culture; the man sitting on a €12,500- a-week package, a 22 per cent increase on 2007 at a time of national austerity and declining ESB profits; the man who has never faced an AGM; the man whose comfort zone is the protected sector; the man who is chief executive of a politically appointed board, some of whom would be more at home at Fianna Fail cumann meetings than offering advice about taking over Northern Ireland Electricity.

Padraig’s package would make a banker blush.

Last year Ryanair’s profits rose by 204 per cent to €318m. Despite that, for the second year in a row, O’Leary took a pay cut because he had not hit demanding targets set by the board.

If the ESB is the jewel in the crown of the semi-state sanatorium, God help the rest of them.