Alan Dillon (Mayo, Fine Gael)

I move: "That the Bill be now read a Second Time."

I am pleased to address the House on the Second Stage of the Electricity (Supply) (Amendment) Bill 2025. The Bill will provide the legal mechanism for the payment of €1.5 billion of equity investment in ESB, as committed to by the Government under the national development plan. I will set out the broader context for why Government equity investment is required, before outlining the subject matter of the Bill.

As Deputies will be aware, Ireland’s electricity demand will grow significantly over the coming decade. It is estimated that electricity demand will double by 2035; this is in addition to the 25% growth that has taken place over the past ten years. The International Energy Agency has advised that expanding and modernising electricity grids is essential for a secure, affordable and sustainable electricity system. It has expressed concern that globally, investment in grids is failing to keep pace with spending on generation and electrification. In Ireland, every five years our electricity network companies, ESB Networks and EirGrid, present their five-year forecast investment plans to the Commission for Regulation of Utilities, CRU, which then approves the revenues allowable for their operating and investment programmes.

These revenues are charges to electricity customers known as network tariffs. This process is known as a price review.

The next price review, PR6, covers the period 2026-2030. The CRU published its draft determination for PR6 in July of this year. As part of the draft determination, an overall network expenditure programme of between €14.1 billion and €18.1 billion is being considered for the period 2026-2030. A final determination will be made by the CRU later this year.

The level of investment being considered under PR6 marks a significant step change. The current price review, PR5, which spans the period 2021 to 2025, will see an investment of at least €7.6 billion. PR6 will more than double that.

This unprecedented package of investment will enable the network companies to support Ireland through this period of change in terms of our use and demand for electricity. It will support key priorities in infrastructure, housing, competitiveness, investment, growth and climate action.

It is a critical period for Ireland in terms of improving security of supply, realising targets and ambition around decarbonisation, expansion of renewables and development of the offshore grid.

The benefits to extending and reinforcing the grid are many, including: improving the resilience of Ireland's electricity system and future-proofing it for generations to come; ensuring that every home and every business have a reliable and secure source of electricity, including the 300,000 new homes we have committed to build by 2030; safeguarding against damage from future weather events and storms; and accelerating the connection of new sources of renewable electricity which contributes to Ireland's transition to greater levels of renewable energy and achievement of our climate goals.

The investment also has huge importance for our economy and will be key to ensuring that the State can increase the critical infrastructure it needs to ensure continued economic growth and employment in our economy, in addition to continued foreign direct investment. The investment will ensure we can support the expected 50% growth in electricity by 2035 and deliver on Ireland's energy needs.

The scale of the increase, however, means that both companies need financial support to deliver the ambitious infrastructure investment programmes. In July of this year, as part of the national development plan, Government agreed the investment of up to €3.5 billion in additional equity to support the PR6 grid investment programmes over 2026-2030 and beyond. This represents the largest single investment ever made in Ireland's electricity network. Some €2 billion will be invested in EirGrid to support the financing of its offshore grid investment plans and €1.5 billion will be invested in ESB to support the financing of its onshore grid investment plan.

In respect of the equity investment mechanism for EirGrid, it is to be noted that this will be agreed and legislated for separately. Investment by EirGrid in offshore grid will begin next year. However, the majority of its investment will not occur until later this decade. The €2 billion Government investment will be allocated over the next five years to support EirGrid access the capital markets and fund its investment.

In terms of the investment in ESB, this Bill has been progressed as matter of priority. The equity investment in ESB is required by the end of this year to ensure payment from the Central Fund of Government approved NDP funding in the 2025 budget and to ensure ESB is sufficiently financed to deliver the ambitious onshore grid investment programme, continuing and expanding its existing investment in our grid. As such, the Minister, Deputy O'Brien, and I sought a pre-legislative scrutiny waiver from the Joint Committee on Climate, Environment and Energy. The waiver was granted following a technical briefing on the Bill being provided to the committee by officials from my Department.

The €1.5 billion equity investment in ESB is to support ESB's ability to finance the overall investment plan for 2026-2030 as part of PR6. This overall investment plan will be financed by debt issuance on the bond market, supported by Government's equity investment and ESB Network's regulated income, as approved by the CRU. It will see delivery of over 500 capital projects across transmission and distribution networks. This includes 81 km of new overhead lines, 319 km of new underground cables, nearly 70 new and upgraded substations across the country and 50,000 pole replacements.

ESB Networks will expand, modernise and reinforce our onshore electricity network infrastructure. Without Government equity investment, ESB would be unable to deliver such an extensive and rapid programme of work in the five years to 2030. The Government equity injection into ESB will support the strength of its balance sheet and ultimately assist in it maintaining excellent credit ratings.

While the investment does not directly lower current customer electricity bills, maintaining strong credit ratings ensures that ESB can borrow at the most competitive interest rates which ultimately lowers the impact of network charges on customer bills. The equity investment by Government sends strong market signals and demonstrates shareholder support at a time when credit rating agencies have noted general market concerns in relation to the high levels of capital expenditure required in electricity infrastructure across Europe. In fact, since announcing the Government equity investment, Standard and Poor's rating agency has announced an improvement in its credit opinion for ESB, upgrading ESB's issuer credit rating to A from A minus. It is important to note that the State will receive an increased stock holding in ESB in return for this investment. The State will continue to receive dividends in proportion to its shareholding.

I will now turn to the Bill's subject matter. I will begin by providing a brief overview of the most important measures the Bill addresses before providing a section by section summary of the Bill. The legislation before the House today has two main objectives. The first is to increase the statutory borrowing limit of ESB from €12 billion to €17 billion to finance the delivery of the PR6 investment programme. This increase is necessary to support the potential €15.2 billion expenditure by ESB Networks in the 2026-2030 PR6 period. The second objective is to provide for the issuance of capital stock by ESB in return for payment up to the value of €1.5 billion. The stock shall be issued to the Minister for Public Expenditure, Infrastructure, Public Service Reform and Digitalisation and the Minister for Climate, Energy and the Environment.

Issuing capital stock which will be fully subscribed to by the State allows importantly for Government to attach the condition that the €1.5 billion investment be used specifically for grid infrastructure projects carried out by ESB Networks. It also ensures that the investment is reflected in the shareholding percentages of the company.

At present, the State's shareholding in ESB stands at 97.4%, whereas the employee share ownership plan, ESOP, holds 2.6%. Employee shareholding ownership came about in 2001 when stock was granted to employees of ESB as part of an overall cost and competitiveness review agreement with the ESB group of unions.

It is important to note that the Bill has been drafted to also enable ESB to issue stock to the ESOP in return for payment, should it choose to also invest in ESB to maintain its current shareholding percentage. The ESOP will have a period of up to 12 months following Government investment to make its investment. Should the ESOP choose not to participate in the equity investment, the State's shareholding will increase.

An independent valuation is currently being carried out by EY for ESB and the shareholders, which will provide a valuation range for ESB.

The valuation determines the price per stock and, therefore, the number of shares the Government will receive from its €1.5 billion investment and its final percentage holding in the company. ESB management has advised my Department that ESB employees are supportive of both the equity investment by Government and the ambitious PR6 investment programme. On a separate but important note, legal consideration has determined that the equity investment does not give rise to any issue of state aid.

I will provide a section by section summary of the Bill, which has five sections. Section 1 provides for the relative definitions of the Bill. Section 2 amends section 4 of the Electricity (Supply) (Amendment) Act 1954 to provide for the increase of the statutory borrowing limit of the ESB from €12 billion to €17 billion.

Section 3 amends section 2 of the Electricity (Supply) (Amendment) Act 2001 by inserting new subsections. The new subsection (5) provides for the issuance of capital stock by the ESB in return for payment up to the value of €1.5 billion; that 90% of such stock shall be issued to the Minister for Public Expenditure, Infrastructure, Public Service Reform and Digitalisation; and 10% of such stock shall be issued to the Minister for Climate, Energy and the Environment.

The new subsection (6) provides for the procedure for the Minister for Finance to make payment to the ESB up to the value of €1.5 billion for the capital stock from the Central Fund; and the new subsection (7) enables the ESB to make a concomitant capital stock issue to the trustees of the employee share ownership plan, should the trustees choose to participate, to maintain their current shareholding percentage.

Section 4 amends section 11 of the Electricity (Supply) (Amendment) Act 2001 to insert a reference to the Minister for Public Expenditure, Infrastructure, Public Service Reform and Digitalisation in relation to expenses incurred in the administration of the Act. Section 5 contains standard provisions outlining the Short Title of the Bill and its collective citation.

I commend the Bill to the House and I look forward to the debate.

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