‘Right and proper’ government takes back huge profits from energy companies

The Tanaiste said it is “right and proper” that the government takes back some of the huge profits energy companies have been making on the back of the energy crisis.

Leo Varadkar made the comments after the ESB Group reported a significant increase in profits for the first half of the year.

The Fine Gael leader said that with ESB, the government can claim some of its profits in two ways, either through a windfall tax or taking a large dividend from the energy firm.

As customers face soaring energy bills, ESB saw revenues of 3.7 billion euro in the first six months of 2022, a 1.5 billion euro increase on the same period last year.

Mr Varadkar said energy firms, like ESB, are making huge profits amid the international energy crisis.

“That’s in part because of the way electricity is priced, it’s linked to the price of gas,” he said on Friday.

“That’s something we need to change, that made sense in the past – doesn’t make sense anymore.

“That’s going to change at a European level and will help to bring down electricity rates. But also, I think it’s right and proper that the government should take back some of the profits of some of the energy companies are making.

“When it comes to ESB, we could do that through one of two ways.

“Either windfall tax or taking a bigger dividend from the company because it is owned by the people ultimately, and we would use that money to help bring down costs for families and businesses.

“Interest rates are rising, which means credit rate are going to be more expensive for people.”

The electricity company’s profit after tax and exceptional items rose to 390 million euro – almost three times higher than last year’s figure.

According to the company’s half-year results, it made a profit of 128 million euro in the first six months of 2021.

The significant increase in profits reflects soaring energy prices in international markets and rises in consumers’ bills.

The government said this week it will introduce a windfall tax on the soaring profits of energy firms.

Mr Varadkar confirmed on Thursday that the tax will be backdated to before the energy crisis, meaning profits for the full year will be targeted.

In a statement published alongside its interim financial results, ESB said: “ESB’s generation and supply businesses are required to operate separately, so increased profits from ESB’s generation business cannot be used to offset costs incurred by Electric Ireland.

“However, group profits are invested in critical networks, renewable generation and other important energy infrastructure, as well as used to pay tax and dividends to the Government.”

It said that, over the past 10 years, ESB has invested more than 10 billion euro in energy infrastructure and paid more than 1.2 billion euro in dividends.

Chief financial officer Geraldine Heavey said: “Volatility and high wholesale market prices continue to be a feature of energy markets in 2022.

“In the first six months of 2022, ESB delivered an operating profit before exceptional items of 357 million euro and capital investment of 532 million euro.

“This provides the basis for continued strong investment in energy infrastructure to decarbonise electricity, improve resilience and empower customers in line with our 2040 net zero strategy.”