A DEDICATED CENTRE OF CORPORATE FINANCE EXPERTISE

• A Shareholder Expectations Framework is now in place for all commercial State bodies within NewERA’s remit on the Government’s strategic priorities, policy objectives, financial performance and reporting requirements:
  • In 2015 NewERA further enhanced the Framework with a focus on development of formal financial targets for commercial State bodies.
  • Work to agree formal dividend policies for each body is at an advanced stage.
  • Combined dividends of €475m were paid during 2014/15.

• NewERA provided commercial and financial advice to Government on a range of issues in 2015 including:
  • €2.6bn of capital expenditure requests from the commercial State bodies within its remit.
  • Re-organisation of Ervia with operational establishment of Gas Networks Ireland, following on from the sale of Bord Gáis Energy.
  • Sale of the State’s shareholding in Aer Lingus plc to IAG.
  • The first joint venture between Bord na Móna and Coillte to finance, construct and operate a 64 MW wind farm.
  • Coillte Telecoms disposal to Infravia Capital Partners.

State Bodies within NewERA’s Remit
Playing a Crucial Role in the Economy

Core Areas of Activity - Energy & Land Management

For 2014/15, on a combined basis, they:

NewERA provides financial and commercial advisory services to Government in respect of a number of major commercial State bodies: ESB, Ervia, Irish Water, Bord na Móna, Coillte and EirGrid. It takes a commercial approach to the oversight of these bodies providing advice in relation to financial performance, corporate strategy, capital and investment plans, proposed acquisitions or disposals, restructuring and board appointments. NewERA’s role also involves the provision of financial and commercial advisory services in respect of other State bodies or assets at the request of the relevant Minister.

Shareholder Expectations Framework

NewERA has developed a Shareholder Expectations Framework intended to provide clarity and guidance for each of the commercial State bodies within its core remit in relation to the Government’s strategic priorities, policy objectives, financial performance and reporting requirements for each body. Shareholder expectations letters based on the Framework and tailored to the body concerned have now been issued by the relevant Minister to each of these bodies. Work on the further enhancement of the Framework in 2015 has focused on development of formal financial targets for the relevant bodies. These targets typically include:

• Capital structure target, reflecting the underlying business mix.
• Profitability target, reflecting the risk profile of the expected business mix.
• Dividend target.

One of the key financial performance measures outlined in the Framework is Total Shareholder Return (TSR), which will assist in measuring financial value creation for the State by each body. It is expected that the bodies will undertake commercial equity valuations on an annual basis so that TSR can be measured and monitored. TSR will be analysed on an ongoing basis with the expectation that the analysis will be increasingly meaningful when reviewed over the medium term (e.g. five years) rather than on an annual basis.

Dividends are also a component of TSR. Combined dividends of €475m were received for 2014/15. These dividends comprise of €361m arising either from proceeds from the sale of assets or a special dividend request from Government and €114m in respect of ordinary dividends.

Dividends Paid by Bodies within NewERA’s Remit.

A key focus in agreeing dividend policies is to ensure that an appropriate balance is struck between the payment of dividends and re-investment in the business. The work to date in this area has seen ESB announce an increase in its dividend pay-out from 30% to 40% of normalised profits after tax by 2017, subject to ESB sustaining a minimum credit rating of BBB+. During 2015 EirGrid paid an ordinary dividend of €3m for the first time and an increased ordinary dividend of €3.5m will be paid during 2016. Coillte paid an interim dividend of €4m and a further €1m will be paid in 2016 relating to 2015. The boards of Bord na Móna and Ervia have engaged with NewERA and the relevant Government Departments with a view to implementing formal dividend policies during 2016.

NewERA Portfolio Financial Overview

Key Features

Each year NewERA prepares a Portfolio Financial Overview of the commercial State bodies within its core remit. The most recent Overview covered the 2014/15 financial year ends¹.

Advisory Services

During 2015 NewERA provided detailed financial analysis and recommendations (where appropriate) to relevant Ministers on a total of 72 submissions for Ministerial consideration and consent, made by the commercial State bodies within its remit. This included €4.6bn in financing-related requests (including bond issuance, revolving credit facilities, EIB and commercial debt facilities), €2.6bn in relation to capital expenditure budget requests and €0.5bn in specific capital expenditure project requests.

NewERA also provided financial and commercial advice to the relevant Minister on a range of issues related to other State bodies and projects during 2015.

Selected NewERA Advisory Projects 2015