POWERING THE TRANSITION TO A CLEAN ENERGY FUTURE

ESB ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 2 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 3

POWERING THE 01 TRANSITION TO A CLEAN STRATEGY AND PERFORMANCE ENERGY FUTURE ESB is making a stand for ’s future, a future powered by clean, sustainable electricity. We are committed to leading the transition to a reliable, affordable, low-carbon energy future, a future that protects our customers and the economy by maintaining the security and affordability of energy. We are investing and innovating across our business to make this a reality; we are developing new, renewable sources of generation and flexible, low-carbon backup. We are also reinforcing and enhancing our network to accommodate unprecedented volumes of distributed energy resources and developing customer-led solutions that ABOUT ESB will empower everyone in society to live ESB was established in 1927 as a statutory cleaner, more sustainable lives, powered body under the Electricity (Supply) Act 1927. by electricity. With a holding of 95.7%, ESB is majority owned by the Irish Government. The remaining 4.3% is held by the trustees of an Employee Share Ownership Plan. As a strong, diversified, vertically integrated utility, ESB operates across the electricity market, from generation through transmission and distribution, to supply of customers, with an expanding presence in Great Britain’s generation and supply markets. In addition, we extract further value at certain points along this chain by supplying gas and using our networks to carry fibre for telecommunications. ESB is a leading Irish utility with a regulated asset base (RAB) of approximately €10 billion (comprising ESB Networks €8.1 billion and NIE Networks €1.9 billion), a 30% share of generation in the all- island market and a significant supply business supplying electricity and gas to approximately 1.5 million customers throughout the island of Ireland and Great Britain. ESB will continue to grow the scale of its generation, trading and supply businesses so that it can continue to compete within the all-island competitive environment. ESB is focused on providing excellent customer service and maintaining its financial strength. As at 31 December 2019, ESB Group employed over 7,900 people. 4 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 5

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KEY FACTS AND FIGURES CONTENTS STRATEGY AND PERFORMANCE

CHAPTER 1 STRATEGY AND PERFORMANCE OPERATING PROFIT* €’M EBITDA* €’M BUSINESS OVERVIEW 9 Chairman’s Statement 10 800 1,500 1,372 1,324 1,348 Chief Executive’s Review 12 682 1,276 635 ESB at a Glance 14 597 1,200 1,175 Highlights 15 600 490 455 900 STRATEGY, BUSINESS MODEL, RISK REPORT, AND KEY PERFORMANCE INDICATORS (KPIs) 16 400 600 Strategy 17 Business Model 22 200 300 Risk Report 24 Key Performance Indicators (KPIs) 38 0 0 2019 2018 2017 2016 2015 2019 2018 2017 2016 2015 OPERATING AND FINANCIAL REVIEW 41 €227 million Executive Team 42 €197 million Market Structure and Operating Environment 2019 44 * Before exceptional items. See Financial Review page 50. Financial Review 48 Generation and Trading (GT) 54 ESB Networks 56 TOTAL ASSETS €’M NET DEBT €’M Electricity Networks (NIE Networks) 58 Customer Solutions 60 Engineering and Major Projects 62 Enterprise Services 63 5ggggh2njjkhj RESPONSIBLE BUSINESS REPORT 65 14,159 13,304 6,000 5,239 15,000 12,907 13,157 12,294 4,915 4,975 Overview 66 5,000 4,524 12,000 4,377 People 66 4,000 Safety 68 9,000 Corporate Social Responsibility (CSR) 70 3,000 Environment and Sustainability 73 6,000 2,000 Using our Profits in a Sustainable Way 76

3,000 1,000

0 0 2019 2018 2017 2016 2015 2019 2018 2017 2016 2015 CHAPTER 2 €855 million €474 million CORPORATE GOVERNANCE 78

The Board in 2019 80 Chairman’s Corporate Governance Statement 84 The Board’s Governance Report 86 Audit and Risk Committee Report 95 GENERATION ALL-ISLAND MARKET SHARE SUPPLY ALL-ISLAND MARKET SHARE The Board Committees in 2019 101 Board Members’ Report 104

30% 66% CHAPTER 3 FINANCIAL STATEMENTS 106 34% Statement of Board Members’ Responsibilities 109 Independent Auditor’s Report to the Stockholders of Electricity Supply Board (ESB) 110 Financial Statements 116 Prompt Payments Act 210 Glossary 211

70%

■ OTHER POWER SUPPLIERS ■ OTHER POWER PRODUCERS ■ ESB ■ ESB 01 STRATEGY AND PERFORMANCE

CHAPTER 1 - STRATEGY AND PERFORMANCE • Business Overview • Strategy, Business Model, Risk Report and Key Performance Indicators (KPIs) • Operating and Financial Review • Responsible Business Report CHAPTER 1 STRATEGY AND PERFORMANCE 9 Business Overview 16 Strategy, Business Model, Risk Report and Key Performance Indicators (KPIs) 41 Operating and Financial Review 65 Responsible Business Report 8 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 9

01 STRATEGY AND PERFORMANCE

10 Chairman’s Statement 12 Chief Executive’s Review 14 ESB at a Glance 15 Highlights 10 ESB Annual Report 2018 -Leading the Way to a Brighter Future ESB Annual Report 2018 11

01 STRATEGY AND PERFORMANCE CHAIRMAN'S STATEMENT

reliable, affordable, low-carbon energy. its market share in ROI in 2019 by offering GOVERNANCE AND VALUES ENVIRONMENT In accordance with the ESB Acts 1927–2014, Under the Chief Executive’s leadership, the competitive pricing and discounts that The Board is committed to the highest While the company has enjoyed many the Board presents the Annual Report and organisation is well positioned to deliver the endure. We consolidated our retail market standards of corporate governance and ethics. successes in 2019, there have also been Financial Statements for the year ended 31 strategy and has the resources, skills and talent position in Northern Ireland and ESB Energy ESB has in place measures to comply with the challenges especially on environmental issues December 2019. in place to seize the opportunities presented by in Great Britain where our ESB Energy brand Code of Practice for the Governance of State which the Board and Management are working the transition. Significant progress was made in is attracting new customers. Our Smart Bodies (2016). In addition, ESB complies (on hard to address. We accept that our activities 2019. Energy Services business won significant a voluntary basis where reasonably applicable impact the environment and we are committed contracts in 2019 with innovative solutions to ESB as a statutory corporation) with the to working with all stakeholders to ensure that We are very encouraged by the ambition and to help business customers lower their revised UK Code of Corporate Governance ESB's impact on the environment is minimal Ellvena Graham OBE Chairman targets set out in the Government’s National carbon footprint. Electrification of transport 2018 (effective 1 January 2019) and the Irish and that we achieve the highest standard of 27 February 2020 Climate Action Plan. The Board is committed will be a key enabler of the transition to a Corporate Governance Annex. environmental stewardship. to playing its part by investing in critical national low carbon future. 2019 saw a tripling of the Ellvena Graham OBE Chairman infrastructure and in the development of number of new battery electric vehicles sold (Please also see my Corporate Governance CHIEF EXECUTIVE AND renewables. relative to 2018 and in 2019 we introduced Report on page 84). MANAGEMENT I am delighted as pricing for Fast Charging as we expand the I want to thank the Chief Executive Pat NETWORKS motorway charging infrastructure nationwide. Delivering a high-performance culture is one of O’Doherty, and all of his Executive Team for 02 Chairman to present ESB Networks made its Price Review 5 (PR5) Continually improving our customer service ESB’s five strategic objectives. The Board is their hard work and commitment throughout CORPORATE GOVERNANCE the 2019 Annual submission to the Commission for the Regulation experience and offering competitive products continually monitoring culture because we want 2019, and to welcome Marie Sinnott who was of Utilities in November. This is a very important and services ensures that the customer is at ESB to be a vibrant, modern and attractive appointed as our Company Secretary in July Report and Financial process for the company, which will set the level the heart of everything we do. place to work. As we transition to a low-carbon following the retirement of John Redmond. Statements for ESB. of investment and operating expenditure for ESB future, it is important that we continue to be The Board would like to thank John for his Networks for the coming five-year period. The GENERATION guided by Our Values, which encourage us to exceptional service to ESB. Board welcomes the Regulator’s proposal that Our Generation and Trading business is be courageous, caring, driven and trusted. FINANCIAL PERFORMANCE AND the submission should provide for the resources changing rapidly. We commissioned 89 MW CONCLUSION DIVIDEND and capability required to deliver on the National of with a further 338 MW HEAD OFFICE REDEVELOPMENT 2019 has been another year of change for the As we transition to a low carbon energy future, Climate Action Plan and we look forward to under construction (including our 50% stake The design and build work for Fitzwilliam 27, Group. We are heading into a new decade ESB delivered improved financial results in 2019 working constructively with the Regulator to in the 448 MW Neart na Gaoithe offshore our new Head Office, is progressing very well. with confidence and strength, building on our with operating profit of €682 million and profit finalise the proposal during 2020. wind farm). We entered into important new More importantly the building will be highly accomplishments of the past and consolidating after tax of €419 million (both before exceptional partnerships in 2019 and we look forward energy efficient helping ESB to meet both it's our position for the future - a Brighter Future items). ESB successfully issued its inaugural During 2019, ESB Networks connected another to working closely with them on a pipeline energy efficiency and carbon improvement for all. Green Bond in June 2019 – the first public 550 MW of new renewable generation to the of onshore and offshore development targets by 2030. corporate green bond in Ireland. We maintained network, bringing the volume of renewables opportunities. our Credit Ratings at A-/A3 (BBB+ standalone) connected to over 4,600 MW. This renewable ESB STAFF – which is critical for our ambitious investment energy is critical to the displacement of carbon in While our renewables portfolio continues to Our staff have a key role to play as we programme over the next decade. heat, transport and industry. grow, it has been a tough year for our peat transition to a clean energy future. We will and fired power plants. We announced continue to grow our future leaders and DIVIDEND PAYMENTS FROM 2010 UNTIL 2019 In line with ESB’s dividend policy, the Board is The transition to reliable, affordable, low carbon the cessation of electricity generation from invest in the development of the capabilities 03 FINANCIAL STATEMENTS recommending a final dividend of €49.8 million energy can be seen in the choices people are peat by the end of 2020 and we have needed for a very different tomorrow. Safety for 2019, which will bring the total dividends for making. Nearly all new homes being connected significantly rationalised Moneypoint in the continues to be a focus for the Board and Safe Paid in year 2010

2019 to €88 million and to €1.2 billion over the to the network have heat pumps or solar panels face of greatly reduced coal operation as and Sound, a major safety culture initiative, is 360 1300 last decade. Our dividend policy provides for a fitted and are wired to enable electric vehicles to we head towards the cessation of coal-fired achieving excellent engagement from our staff. 330 1200 dividend target of 40% of adjusted profit after tax be charged at home. Over 34,000 new customer generation by 2025. 300 1100 each year. connections were made by our Networks The Board was delighted to visit Cathleen's Fall 270 1000 businesses in 2019. Meanwhile, ESB Networks The Board is conscious of the impact that and Aghada generating stations during 2019 900 240

commenced the installation of smart meters - these accelerated changes have for our staff, and to see first-hand the commitment of our m ESB STRATEGY AND BUSINESS 800 ENVIRONMENT 15,000 were installed in 2019 and all 2.3 million suppliers and for the communities where we staff to safety performance improvement and m 210 700 In 2019 climate change and decarbonisation domestic meters are due to be replaced by have had operations for many decades. The behaviour change. 180 600 Cumulative €' has moved centre stage. In the Brighter Future 2025. Helping our customers to take control Board is satisfied that a process of engaging In year €' 150 500 Strategy, the Board has set out its long- and become more sustainable in their use of with staff and stakeholders to prepare for an The Board was also updated on the 2019 120 400 term vision of the transformation required to electricity is at the core of our strategy. orderly closure of the stations is underway. Employee Survey “Our Voice” and was 90 300 address the challenges of climate change and ESB continues to be committed to the encouraged by the levels of participation. 60 decarbonisation. Our Purpose is clear - to RETAIL Midlands where we will still be a significant The Board will further consider the insights 200 create a brighter future for the customers and 2019 has been a very successful year in employer. emerging from the survey during 2020. 30 100 0 0 communities we serve by leading the transition to Customer Solutions. Electric Ireland has grown 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Year 12 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 13

01 CHIEF EXECUTIVE’S REVIEW STRATEGY AND PERFORMANCE significant implications for local communities. and combined heat and power (CHP) €1,372 million and Operating Profit before Also, during the year, we reconfigured the installations for what will be the largest and exceptional items of €682 million. We are operation of Moneypoint coal station in order to most sustainable commercial greenhouses focused on maintaining ESB's financial secure its commercial viability in the short term in GB. strength to ensure we can deliver on our in the context of reduced running due to the Brighter Future strategy. During 2019 ESB impact of increasing renewables and carbon ESB Networks continued to improve digital invested €1,242 million including €340 pricing. In line with Government policy, we will services for customers, and commenced million in renewables as we continue to lead not generate electricity from coal beyond 2025. the roll-out of the National Smart Metering the transition to low-carbon generation. The programme which will see over 2 million dividend for 2019 amounted to €88 million, What is ESB doing to prepare the meters upgraded over a multi-year bringing the total dividends paid over the Qelectricity networks to meet future programme to smart digital technology, past decade to over €1.2 billion. customer needs? paving the way for all suppliers to develop We continue to invest and innovate in our new products and services that will enable Is ESB investing in talent as well ROI and Northern Ireland (NI) networks customers to take more control of their Qas in technology? businesses to increase the level of automation energy use. We recognise that a high-performance and resilience, to meet growing demand and culture requires an engaged and agile to facilitate significant increases in customers' How successful has ESB been workforce and a supportive work own distributed energy assets. ESB Networks Qin keeping up with changing environment that values diversity and is working with three communities – Limerick, customer expectation by leveraging inclusion. This year, we recruited 77 Dingle and the Aran Islands – to pilot new the potential of new technologies? graduates and 86 apprentices across a 02

network and customer technologies with a view ESB collaborates with industry, academia range of disciplines and backgrounds, and CORPORATE GOVERNANCE to gaining valuable insights into the network and start-ups to identify and deploy new provided extensive training and development required to meet future customer needs and technologies to improve efficiency and opportunities for our existing employees. inform future network planning and investment meet customers' needs. During the year, We also developed new volunteering decisions. During the year, ESB Networks we embarked on pilot projects with five opportunities for our employees through made its submission on Price Review 5 to the finalists from Free Electrons, an accelerator our Generation Tomorrow sponsorship Regulator which includes provision to support programme co-founded by ESB with other programme, which empowers young people the delivery of the Irish Government's Climate energy companies, which targets start-ups through STEAM (Science, Technology, Pat O’Doherty Action Plan. operating in the energy sector. We are also Engineering, Arts and Mathematics) Chief Executive incubating new commercial propositions in education and learning. How is ESB adapting its customer our offsite Innovation Hub, where we fast Qoffering in response to changing track new ideas in a start-up environment. What are the major challenges Pat O’Doherty discusses progress transition to reliable, affordable, low-carbon and Equinor will enable us to significantly energy needs? Qfacing ESB in the year ahead? against the Brighter Future Strategy energy. This presents a great growth increase our onshore and offshore wind Customers will play a critical role in the What progress is ESB making in The increasing need for climate action in 2019 and looks forward to the year opportunity for the electricity sector while also portfolio to grow earnings from renewables electricity system of the future and we have Qaddressing environmental and presents new opportunities for ESB to build ahead. playing a key role in addressing climate change. while also meeting carbon reduction therefore implemented new structures to safety concerns raised during the year on its core areas of expertise in the areas Each of our business units has a unique but targets. We are building a portfolio of assets support customer-centric product development regarding legacy infrastructure? of renewable generation, smart networks, What were the biggest interrelated role in making this a reality. in the offshore wind sector. In 2019 we for both business and residential markets. ESB has an ongoing programme of electric heating, transport and innovative Qdevelopments affecting ESB in acquired a 50% stake in Neart na Gaoithe During the year, we continued to build our maintenance and investment to ensure customer offerings. However, it also 2019? What progress have you made in the North Sea. We acquired a stake in portfolio and pipeline of products and services that its legacy infrastructure meets presents challenges in terms of managing 2019 was a watershed year for energy and during the year? the Oriel project off the coast of Dundalk to help customers manage their energy use applicable safety and environmental legacy infrastructure, securing community 03

Q FINANCIAL STATEMENTS climate change, particularly in Ireland where ESB’s new organisational structure has with our partners in Parkwind and we are more efficiently and reduce their carbon standards. We have invested significantly support for new infrastructure and engaging government policy and public sentiment focused on driving transformational change developing further onshore projects in the footprint. These included new green tariffs, a in the replacement of switch gear and citizens to ensure the electricity system is combined to significantly accelerate the pace across every area of our business during (ROI) at Clogherhead, home charging installation service and home fluid-filled cables in recent years and built around the future low-carbon energy and urgency of the transition to a low-carbon 2019. We successfully launched Ireland’s first and Kilmichael Point - all of which build retrofit supports. The new Brighter Together although considerable progress has been needs of all our customers, while at the energy system. It is widely accepted at a corporate Green Bond, and have invested on our investment in the Galloper offshore advertising campaign to promote this suite of made, we recognise the need for further same time ensuring that ESB has the people policy level that electricity will play a critical significantly in low-carbon technologies and wind farm (UK) in 2018. We also invested products went live in December. With €10 improvement. This will be a central part and financial capability to deliver our own role in the low-carbon energy system of solutions, including new low-carbon and significantly in onshore wind farms in ROI million support from the Government Climate of our 2020 transformation programme. growth ambitions. While challenging, the the future. This has big implications for all renewable generation, smarter, more resilient at Oweninny in Mayo, which we completed Action Fund, our eCars division began a €20 Safety and environmental responsibility are transformation of the energy sector that is parts of ESB, by way of both challenge and networks, and new products and services to in 2019, and in Grousemount in Co.Kerry, million upgrade of the national electric vehicle priorities at every level of the organisation happening before our very eyes is exciting opportunity. support our customers. which will be completed by the start of Q2 (EV) charging infrastructure. In Great Britain and we continue to encourage an and I believe that ESB is in a strong position 2020. (GB), we opened a new office in Manchester open reporting culture to identify and to take advantage of the many opportunities How has this impacted the delivery How is ESB managing the transition to serve our growing customer base there appropriately address issues as they arise. that lie ahead. Qof ESB’s strategy? Qaway from coal and peat? In 2019 we announced the closure, by and we completed the roll-out of electric Our strategy is fully aligned with emerging In 2019, we continued to increase volumes the end of 2020, of our two remaining vehicle (EV) infrastructure for the London Taxi How was ESB’s financial policies around low-carbon energy and of electricity generated from low-carbon peat-fired power stations, which will Fleet. Our Smart Energy Services business Qperformance in 2019? is anchored to our purpose of creating and renewable sources, while reducing our further reduce our carbon emissions. Over consolidated its position as a leading energy Following a challenging couple of years, a brighter future for the customers and dependence on high carbon thermal plant. seven decades Peat has been part of our services provider to businesses securing a ESB achieved an improved financial Pat O’Doherty, Chief Executive communities we serve by leading the New partnerships with Coillte, Parkwind, EDF generation fuel mix and its cessation has contract to design and deliver heat pump performance in 2019 with EBITDA of 27 February 2020 14 ESB Annual Report 2018 -Leading the Way to a Brighter Future ESB Annual Report 2019 15

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ESB AT A GLANCE HIGHLIGHTS STRATEGY AND PERFORMANCE

SHAREHOLDERS CUSTOMERS IRISH ECONOMY

DIVIDEND OF €88 MILLION FOR 2019

ENDURING SAVINGS OF UP TO 8.5% FOR RESIDENTIAL ROI CUSTOMERS OVER €1 BILLION INVESTMENT IN INFRASTRUCTURE 02 CORPORATE GOVERNANCE CUSTOMER SATISFACTION OF 84% OVER €2 NORTHERN MILLION GENERATION ESB IRELAND CUSTOMER OTHER DISBURSED BUSINESS AND TRADING ACROSS A SEGMENT NETWORKS ELECTRICITY SOLUTIONS SEGMENTS (GT) NETWORKS RANGE OF (NIE NETWORKS) COMMUNITY INITIATIVES

REVENUE €€1,518m €1,156m €303m €2,069m €326m

NATIONAL CUSTOMER CONTACT RE-AFFIRMED CREDIT CENTRE ACCREDITED WITH CUSTOMER OPERATING PROFIT* €198m €344m €61m €59m €20m RATING OF A- CONTACT GLOBAL STANDARD. ELECTRIC IRELAND AGAIN VOTED CUSTOMER CHAMPION IN THE UTILITIES SECTOR 03 CAPITAL FINANCIAL STATEMENTS EXPENDITURE €424m €581m €154m €28m €€55m OVER 15,000 OVER 7,900 EMPLOYEES SMART AVERAGE EMPLOYEE METERS NUMBERS 914 3,490 1,208 551 1,811 INSTALLED

See page 62 and 63 LINK TO OTHER See page 56 See page 58 NIE See page 60 For Engineering and See page 54 GT SECTIONS IN THE ESB Networks Networks Operational Customer Solutions Major Projects and Operational Review REPORT Operational Review Review Operational Review Enterprise Services Operational Reviews RETURN ON CAPITAL SEE NOTE 2 (SEGMENT REPORTING) IN THE FINANCIAL STATEMENTS FOR FURTHER DETAIL. * BEFORE EXCEPTIONAL ITEMS (SEE NOTE 5 IN THE FINANCIAL STATEMENTS FOR FURTHER DETAIL). EMPLOYED OF 5.9% JUST UNDER €2 BILLION CONTRIBUTION TO IRISH OVER 34,000 NEW ECONOMY CUSTOMER CONNECTIONS 16 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 17

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STRATEGY STRATEGY AND PERFORMANCE

During 2017, the Board undertook a review of commercially driven and are consistent with and 30%, respectively. Current EU policy aims ESB’s strategy to test and validate the underlying ESB’s overarching purpose and values, as to reduce total GHG emissions produced by assumptions, reaffirm the overall strategic described above. 80–95% by 2050. direction of the Group and extend the planning horizon out to 2030. Based on this analysis, a STRATEGY STATEMENT However, the level of ambition for 2030 and new multi-year strategic framework was approved Through our diverse businesses across 2050 is expected to increase at EU level by the Board in November 2017. Since then, the the Republic of Ireland, Northern Ireland with the advent of the European Commission Board has kept the key external drivers informing and Great Britain we aim to meet customer recently published European Green Deal. It this Strategy under continuous review including, energy needs by bringing the best of our is expected that Europe will legislate for a for example, Board Strategy Review days were capabilities together to deliver innovative and net zero emission target for 2050 with the held during May and November 2019 – as well value-driven solutions for a low-carbon world interim budget for emission reduction by 2030 as a series of updates throughout the year of key expected to increase also. There will be more emerging issues. clarity expected on this during 2020. STRATEGIC OBJECTIVES STRATEGY 2030 Strategy 2030 sets out the following five Over the past year, the policy impetus towards ESB’s strategy to 2030 (Strategy 2030) is strategic objectives described in further detail addressing global warming has continued to anchored in ESB’s ambition to create a brighter on page 21: grow in all of ESB’s markets. In the Republic future by leading the transition to reliable, 1. Put customers’ current and future needs at of Ireland, the Irish Government published its 02

affordable, low-carbon energy. It sets out a path the centre of all our activities Climate Action Plan – which will be critical in CORPORATE GOVERNANCE to achieve this ambition in a way that will ensure 2. Produce, connect and deliver clean, setting the long-term direction of Irish energy that ESB continues to grow as a successful secure and affordable energy policy over the next decade. The major features business while maintaining the financial strength 3. Develop energy services to meet evolving of this plan, which is highly aligned with the to invest in a low-carbon future at the necessary market needs ESB Brighter Future Strategy, are summarised pace and scale. It also recognises the potential for 4. Grow the business while maintaining in Figure 1 – and are part of an ambition to set new business growth arising from the transition. ESB’s financial strength Ireland on a trajectory to achieve a net zero 5. Deliver a high-performance culture that GHG emission energy system by 2050. This 17 Strategy The Strategy highlights the importance of being supports innovation and collaboration. trend is also mirrored in the UK, which in June 22 Business Model adaptable, responsive and opportunistic in an 2019 also passed legislation requiring the net 24 Risk Report era of unprecedented uncertainty and having ESB’S BUSINESS ENVIRONMENT zero greenhouse gas emissions by 2050. 38 a presence of scale across the utility value A summary of the key business environment Key Performance Indicators (KPIs) chain, with a mix of regulated and unregulated factors that significantly impact on the ESB A pan-European Emissions Trading Scheme businesses, while maintaining a strong investment Strategy are set out below. (ETS) imposes quotas on the quantity of grade credit rating. 1. Climate and energy policy permissible emissions from large installations 2. Advances in technology including electricity generation stations. These Since its establishment in 1927, ESB has 3. Changing customer needs quotas are being progressively lowered each been characterised by a commitment to driving 4. Emergence of new business models year to drive the technological innovation society forward and creating opportunities for 5. Broader economic and political necessary to achieve full decarbonisation the communities it serves. The challenge for ESB developments (e.g. Brexit). by 2050. The legal and market structures today is to be a leader in the transition to reliable, of the ETS make individual companies, not 03 FINANCIAL STATEMENTS affordable, low-carbon energy and so serve its CLIMATE AND governments, liable for reducing emissions. customers better and achieve sustainable growth. 1ENERGY POLICY The electricity sector, which accounts for 15% Climate change is one of the biggest of emissions in Ireland in 2018, is on track to ESB’S VALUES challenges facing humanity and there is a achieve the targets that have been set. This ESB’s values to be courageous, caring, trusted critical need to reduce global greenhouse is illustrated in Figure 3 which sets out the and driven are deeply rooted in the organisation gas (GHG) emissions to protect current and progress already made in ROI in reducing the and encapsulate the integrity and ambition future generations. This is acknowledged carbon content of the electricity sector and the that ESB stands for. They are integral to the in a range of international agreements and projected further progress. development and delivery of Strategy 2030 – they national policies that set ambitious targets to inform ESB’s day-to-day behaviour and decisions curtail global warming. In contrast to the ETS, the responsibility and and they underpin our commitment to earning In the near term, under the EU 2020 associated compliance costs of reducing the trust that customers and communities place framework, there are legally binding targets at emissions from agriculture, transport and in ESB. national levels to decrease carbon emissions buildings rests with each national government. for sectors such as transport, agriculture Together, these sectors account for around STRATEGIC FRAMEWORK and buildings. The Republic of Ireland (ROI) 75% of national emissions, significantly more The strategic framework for Strategy 2030 and the United Kingdom (UK) have also set than those from the electricity sector as (see page 20) will ensure that ESB’s strategic targets for the proportion of electricity to be illustrated in Figure 4. Government policy in objectives, which are outlined further below, are produced from renewable sources at 40% both ROI and the UK now explicitly recognises 18 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 19

FIGURE 3: CARBON INTENSITY OF ELECTRICITY IN ROI - HISTORIC AND PROJECTED 01

that removing carbon from transport and heat is about secure, affordable and increasingly STRATEGY AND PERFORMANCE FIGURE 1: CLIMATE ACTION PLAN key to meeting national emissions targets and low-carbon energy. In addition, technology is 1000 addressing climate change. As part of the Climate creating new types of customer and business Action Plan, Ireland has committed to a steadily opportunities for ESB. For example, the 900 2000: 771gCO /kWh ELECTRIFICATION increasing carbon tax on the non-ETs sector which advent of cloud computing and the rise of 2 800 1990: 896gCO /kWh • Increase the number of EV's to 936,000 (including will reach €30/tonne in 2030. Consideration is also large ‘hyperscale’ data centres is increasing 2

passenger EV's, vans, truck and buses) by 2030 being given to how the most equitable redistribution the demand for electricity and associated 700 • Renewable heating sources in 600,000 residential & of carbon tax revenues can be achieved. energy services in Ireland with the latest Eirgrid 25,000 commercial building by 2030 'Tomorrow’s Energy Scenarios' suggesting that 600 2018: 375gCO /kWh • Ban oil and gas boilers by 2025 and petrol/diesel power demand from such centres could grow 2 ADVANCES IN 500

/kWh car from 2030 2TECHNOLOGY significantly over the next decade. Another 2

Rapid advancements in technology have impacted example is the electrification of transport gCO 400 the cost and pace of change in the utilities sector and heating, which will create new customer 300 SERVICES/SMARTGRID across the value chain. The EU Clean Energy segments (e.g. EV drivers, fleet owners and

• Replace all mechanical meters by 2024 Package of 2017 cites an 80% reduction in solar- residential heat pumps) that can be served 200 • "Facilitate very high penetration of variable renewable photovoltaic costs between 2009 and 2015 and a with ESB services and products. Taken 2050: 38gCO /kWh electricity through system services and market arrangements" 30–40% reduction in wind generation costs (both together, recent scenarios published by Eirgrid 100 2

• Support microgeneration, allowing excess electricity to onshore and offshore) over the same period. During see aggregate electricity demand in Ireland 0 be sold back to the grid the past year, these trends have continued as both growing by between 40% and 61% over 2020 1990 2050 • 15% of demand met by corporate PPA's the cost and competitiveness of low-carbon power to 2040 (see Figure 2) Source: SEAI, UCC gCO2/kWh generation technologies (and of the battery and 02 other storage technologies required to support their EMERGENCE OF CORPORATE GOVERNANCE FIGURE 4: ROI GREENHOUSE GAS EMISSIONS IN 2018 usage) have continued to improve. For example, 4NEW BUSINESS RENEWABLES during the second half of 2019, Bloomberg New ■ ETS (26%) MODELS ETS Heat 6% Electricity ■ NON ETS (74%) • 70% Renewable electricity by 2030 (up from 55%) Energy Finance (BNEF) has estimated that globally ESB sees advances in technology, energy 3.5 Mt Generation 15% > 3.5 GW offshore the cost of power generated by solar, off-shore wind and regulatory policy combined with changing 9.4 Mt > 8.3 GW onshore and on-shore technologies fell by 11%, 12% and customer preferences resulting in a range of Transport > 1.5 GW solar 6% respectively compared to the start of the year. new business models. The business models Other (ETS) 5% 20% In the medium to long-term, there are choices to be create an increasingly competitive landscape, 12.2 Mt 2.7 Mt made to cover the intermittent sources of electricity leading to both challenges and opportunities generation and the best technologies to deliver the for traditional utilities as well as an imperative end result are not yet obvious – there is a range of to respond quickly. ESB expects that this THERMAL GENERATION options but no single solution. new landscape will see an increased focus 60.6 Mt CO2e • "Early and complete phase-out of coal & peat-fired on services both at a customer “energy as a Non-ETS electricity generation" The application of communications and digital service” level and at a wholesale level for the Heat 16% 9.9 Mt • Carbon price of €80 per tonne by 2030 technologies such as data analytics, the integration system to complement energy delivery. ESB of business IT systems with operational technology also expects that the traditional distinction Other (Non-ETS) systems, cloud computing and artificial intelligence between generation, supply and network 4% Source: ESB analysis based all have the potential to drive significant change in assets will become less easily defined as 2.3 Mt on EPA 2018 Reports the design and operation of electricity networks. business models seek to extract value from Technological advances will also enable a greater technologies such as storage or demand Agriculture FIGURE 2: EIRGRID SCENARIOS FOR FUTURE ENERGY DEMAND 34% level of electricity production, storage and control, response. To address this trend, and the 20.6Mt 03 FINANCIAL STATEMENTS 49.5 either directly by customers, or by service providers other major changes to our landscape, in 50 47.1 45.5 controlling and managing energy demand on their 2018 ESB completed a major review of 43.0 41.4 41.3 behalf. organisational effectiveness and implemented BREXIT: GLOBAL AND EUROPEAN MONETARY POLICY: 40 37.2 37.2 a new reporting structure and key business Following the 2016 referendum on the UK’s The period since 2017 has been marked by 35.3 CHANGING CUSTOMER processes in order to enhance agility and membership of the European Union, there has the continuation of Quantitative Easing by 30.7 NEEDS focus on emergent customer needs. These been significant uncertainty regarding Britain’s the European Central Bank and other global 30 3 Emerging technologies present a range of new continued to be embedded over the course future trading arrangements with Ireland and other central banks. This has translated into significant options for customers to engage with the electricity of 2019. European markets. During 2019, this uncertainty downwards pressure on Bond Yields and 20 system in different ways. This is creating a shift in was amplified with potential macroeconomic, increased the supply of low-cost capital available the energy landscape and the willingness and ability BROADER political and regulatory implications for ESB in to participants in the power utility industry. of people to adapt their lifestyles and adopt new 5ECONOMIC the various markets in which it operates. On 31 While increasing the access to funding, these 10 technologies will be at the heart of the transition AND POLITICAL January 2020, the UK left the EU. A transition factors are also putting additional competitive Total Electricity Requirement (TWh) to a low-carbon future. Customer expectations DEVELOPMENTS agreement is in place but is due to expire on 31 pressures on the returns that can be generated

0 are increasingly influenced by their experiences In addition, ESB Strategy is continuously December 2020 unless extended by agreement. from large-scale investment projects within the CE DT CA CE DT CA CE DT CA beyond the utility sector – such as digitally based shaped to respond to developments in the industry – as well as underpinning the movement 2020 2025 2030 2040 service offerings including real-time responses. broader societal context beyond the energy of non-traditional players such as pension and ■ Industrial (Inc. large energy users) ■ Tertiary ■ Residential ■ Transport ■ Losses These changing preferences are all in addition to, sector. In the period since 2017, this has infrastructure funds into the power sector. CE: Centralised Energy DT: Delayed Transition CA: Co-ordinated Action not instead of, customers’ ongoing expectations included consideration of such factors as:

Source: Eirgrid 'Tomorrow Energy Scenarios'. (October 2019) 20 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 21

01

STRATEGIC FRAMEWORK STRATEGIC OBJECTIVES STRATEGY AND PERFORMANCE

2019 BUSINESS ENVIRONMENT OUR PURPOSE • Climate and Energy Policy • Advances in Technology • Changing Customer Needs ESB’s purpose is to create a brighter future for the customers and communities we serve • Emergence of New Business Models • Broader economic and political developments and we will do this by leading the transition to reliable, affordable, low-carbon energy

OUR VALUES

Put customers’ Produce, connect Develop energy Grow the business Deliver a high current and future and deliver clean, services to meet while maintaining performance culture WE'RE WE'RE WE'RE WE'RE COURAGEOUS needs at the centre secure and evolving market ESB’s financial that supports CARING DRIVEN TRUSTED of all our activities affordable energy needs strength innovation and collaboration

 ESB will adopt a  ESB’s unique position  The transition away  Maintaining a strong  Our ambition to lead 02 Every one of us has We want to look the We do our very best Trust is precious – we customer-centric as a player of scale in from fossil fuels and financial performance is the transition to a CORPORATE GOVERNANCE a responsibility and next generation in to make a genuine must continue to earn culture across all of both Networks and the development of key to ESB’s strategy low-carbon future will the opportunity to the eye knowing that difference for our and be worthy of it its business activities Generation markets new technologies is as it will determine our depend on our ability which will not only build enables it to take a creating a demand ability to raise capital to to harness the talents, shape ESB into a we have done all we customers, our on our reputation for leading role in the for new services to invest in the transition creativity and intrinsic business we can all can to leave a positive colleagues and customer service and decarbonisation of both balance the grid to a low-carbon future motivation of our be proud of legacy and have built our communities, trust, but proactively society and give customers  ESB will continue to people to deliver on our a brighter future for continuously looking for look beyond traditional  We will strengthen and more control over their ensure activities are strategy everyone ways in which we can services to develop adapt our traditional energy use aligned to upholding  ESB will cultivate improve our services to new and innovative business models, and  This presents an its strong investment a high-performing, them insight-driven solutions actively encourage opportunity for ESB grade credit rating innovative and to meet diverse and adopt new to capture value in target (BBB+ on a customer-focused customer needs business models which this rapidly growing stand-alone basis) culture that encourages leverage existing and market – both in terms  It will seek to maximise collaboration to share STRATEGY STATEMENT new generation and of system services for the value of its existing knowledge and Through our diverse businesses across the Republic of Ireland, Northern Ireland and Great Britain networks assets to the grid and energy assets in order to insights on industry we aim to meet customer energy needs by bringing the best of our capabilities together to deliver develop other products services for supply maintain acceptable developments innovative and value-driven solutions for a low-carbon world and services customers levels of financial headroom

STRATEGY IN ACTION - SEE PAGES 54 TO 63 FOR DETAILS OF PROGRESS ON STRATEGIC OBJECTIVES BY BUSINESS UNIT STRATEGIC OBJECTIVES 03 STRATEGIC PERFORMANCE INDICATORS (SPIs) FINANCIAL STATEMENTS INDICATOR METRIC 2019 2030 TARGET Scale Across the Value Chain EBITDA* €Bn's €1.37 billion >€1.9 billion PUT PRODUCE, DEVELOP GROW THE DELIVER A HIGH- Market Shares % 30% of SEM Generation >30% SEM Generation CUSTOMERS’ CONNECT ENERGY BUSINESS PERFORMANCE 34% of SEM Supply c.40% SEM Supply CURRENT AND DELIVER SERVICES WHILE CULTURE THAT 42% SEM System Services ≥40% SEM System Services AND FUTURE CLEAN, TO MEET MAINTAINING SUPPORTS Carbon Intensity of the Electricity ESB Produce gCO2/kWh 406g CO2/kWh ≤200g CO2/kWh NEEDS AT SECURE AND EVOLVING ESB’S INNOVATION AND Scale of Low-Carbon Energy Connected to our GW of Renewables Connected 4.6 GW in ROI 5GW in ROI THE CENTRE AFFORDABLE MARKET NEEDS FINANCIAL COLLABORATION Networks 1.6 GW in NI 2GW in NI OF ALL OUR ENERGY STRENGTH Strong Investment Grade Credit Rating Rating Equivalents Credit ratings of A- or BBB+ ACTIVITIES equivalent and BBB+ on a on a stand-alone basis stand-alone basis Return on Capital Employed ROCE (%) 5.9% ROCE >WACC Staff Engagement^ Staff Survey Response Rate 6.9 7.3 Safety Culture Lost Time Incidents (LTIs) 43 employee LTIs 0 LTIs

See page 54 to 63 for short to medium-term priorities in the business unit sections. *Earnings before interest, taxation, depreciation, impairment, amortisation (including revenue from supply contributions) ^In 2019 ESB introduced a new digital approach to measuring employee engagement. As part of this change, the company has evolved the way in which engagement is measured, adopting a standard approach based on loyalty, satisfaction and belief. The score is represented as the average score on a 0 to 10 basis. 22 ESB Annual Report 2018 -Leading the Way to a Brighter Future ESB Annual Report 2018 23

BUSINESS MODEL 01 STRATEGY AND PERFORMANCE Our Purpose is to 'Create a Brighter Future for the customers and communities we serve, by leading the transition to reliable, affordable, low-carbon energy.'

CAPITAL INPUTS SUPPLY OUTPUT Manufactured Capital GENERATE TRANSMIT • 5,520 MW of generation capacity Supplying electricity, Customers • Over 229,000 km of Network across ESB develops, operates and ESB builds, manages gas and energy • Customer satisfaction 84% ROI and NI trades the output of ESB’s and maintains the services to customers • 34% market share electricity generation assets. transmission and in ROI, NI and GB. • Enduring residential customer Financial Capital The portfolio consists of 5,520 distribution network savings of up to 8.5% • A-credit rating MW of thermal and renewable in ROI and NI – over See page 60 for • 30% generation market share • Total net assets €3.9 billion generation assets across ROI, 229,000 km of further details • Liquidity of €1.5 billion NI and GB and a further 338 Network. Shareholders MW under construction • Dividend of €1.2 billion over the Intellectual Capital See pages 56 and 58 last decade • Promotion of innovation See page 54 for further detail for further details • Return on capital employed • Corporate governance Structure 5.9% • €1.4 billion EBITDA Human Capital • 7,974 employees Irish Economy • Employee development programmes • Invested €1 billion • Safety transformation programme • Contributes €1.8 billion to the Irish economy Social and Responsible Capital • Over €2 million disbursed over • Over 1.5 million customers a range of community based initiatives Natural Capital • 884 MW of renewable generation

WE'RE WE'RE WE'RE WE'RE PUT CUSTOMERS’ PRODUCE, CONNECT DEVELOP ENERGY GROW THE DELIVER A HIGH- COURAGEOUS CARING DRIVEN TRUSTED CURRENT AND AND DELIVER SERVICES TO MEET BUSINESS WHILE PERFORMANCE CULTURE FUTURE NEEDS AT CLEAN, SECURE EVOLVING MARKET MAINTAINING THAT SUPPORTS THE CENTRE OF ALL AND AFFORDABLE NEEDS ESB’S FINANCIAL INNOVATION AND OUR ACTIVITIES ENERGY STRENGTH COLLABORATION 24 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 25

CURRENT RISK APPETITE 01

RISK REPORT STRATEGY AND PERFORMANCE RISK LEVEL UNWILLING TO TAKE RISK HIGHER WILLINGNESS TO TAKE RISK

APPROACH TO RISK MANAGEMENT Prudent Financial Management  The effective management of risks and the pursuit bottom-up operational identification and reporting ESB also identifies and seeks to mitigate a range Presence of Scale Across Value Chain  of opportunities supports the development of process arising from a review and assessment of the of High Impact Low Probability (HILP) risks ESB's strategy while protecting the interests of its business unit risk registers. relevant to the Group. HILPs are a class of risks GTS of Scale (Republic of Ireland, Northern Ireland, Great Britain)  stakeholders and shareholders. ESB is exposed to with the potential to cause long-term, catastrophic Engaged and Agile Organisation  a number of risks and opportunities which could ESB’s Risk Management Policy and Governance damage to the business. A full review of HILPs  have a material impact on its performance and Framework was reviewed during 2019 ensuring is completed on a bi-annual cycle. A review was Sustainable Innovation long-term development. The effective identification, consistency of approach to risk management across last undertaken in 2018, with the outcome of Value, Ethics and Compliance  management and mitigation of these risks and the the Group. that review still considered relevant over 2019. Reputation  pursuit of opportunities is a core focus of the ESB Group Risk, Group Internal Audit and Group Group. RISK OVERSIGHT ACTIVITIES DURING Finance functions continued to meet quarterly Information Security  2019 to review internal control and risk reporting. This Smart Reliable Networks  HOW ESB MANAGES RISK In early 2019, the Audit and Risk Committee ensures alignment between the functions, better  The Board has overall responsibility for risk reviewed and recommended to the Board the information-sharing and opportunities to identify Actual Net Risk Assessment Further Planned Improvements management and internal control. The current Group Risk Plan for 2019 which set out the areas for improvement in the overall internal control Risk Appetite Range UK Corporate Governance Code 2018 (the Principal and Emerging Risks facing the Group, framework. UK Code) (Clauses 28, 29 and 31) and related including the controls and mitigating actions Dashboard introduced during 2019 provides GROUP PRINCIPAL RISKS 2019 • responsibility for risk is allocated to ensure guidance sets out the Board’s responsibility proposed to manage the risks over 2019. The RISK CULTURE assurance to the Board on the effectiveness with The 2019 Group Risk Plan takes at its starting accountability for determining the nature and extent of the Committee was provided with quarterly reports ESB's risk culture determines the way in which which the desired culture, aligned to ESB's values, point the Board’s approved strategy “A Strategy • a Communications Plan is in place to apprise 02 principal risks it is willing to take in achieving its which considered the status and impact of employees identify, understand, discuss and act has been embedded throughout the organisation. for a Brighter Future – ESB 2030” (Strategy the Board and the relevant sub-committees CORPORATE GOVERNANCE strategic objectives. The Code of Practice for the implementing the identified controls and mitigating on the risks they take and are faced with on a daily 2030). Additional external considerations on key risk topics throughout the year. Governance of State Bodies (Section 7.2) also actions and provided assurance of a robust risk basis. (See Our Values on page 20). RISK APPETITE included the 'National Risk Assessment 2018'1 refers to the Board’s oversight of risk management management process. ESB’s Risk Appetite Framework is focussed on and '2019 Global Risks Report'2, external market FINANCIAL RISKS including the requirement to “approve the risk To enhance risk awareness, ESB's values continue setting the risk appetite at the Group level across developments and other legal and regulatory The main financial risks faced by the Group relate management plan and risk register at least The Group Risk Plan also included a comprehensive to be a focus for discussions with all employees different risk dimensions and provides the basis considerations that can impact the business to liquidity, foreign exchange, interest rate, and annually”. Work Plan for the Committee detailing its risk to ensure we create a clear and consistent for communicating risk appetite down through the model. Emerging Risks are included, insofar as this commodity (electricity and fuel) price movements. oversight activities for the year. The Committee understanding of how we will work. To support organisation. Consideration is given to its presence is possible, for the period 2020 to 2023, to help Policies to protect the Group from these risks and The Board ensures that the Group’s risk exposure identified a number of specific topics they wished to the embedding of risk culture, ESB has adopted across all aspects of the industry value chain, its identify exposures as early as possible. other risk areas, such as credit risk, are regularly is proportional to the pursuit of its strategic focus on during the year including: policies which facilitate and encourages an commitment to prudent financial management and reviewed, revised and approved by the Board (and objectives and longer term shareholder value. • Monitoring key regulatory developments environment where people can feel comfortable the strong ethical approach to how ESB does The Principal Risks for 2019 are set out on the details are outlined in note 28 of the financial It has adopted a Risk Management Policy and • Maintaining focus on cyber risks and the impact in raising issues and where management business. page 28. These risks are considered material to statements). Governance Framework to support its oversight of of emerging technologies treat concerns seriously, professionally and in understanding how ESB creates value. A number risk throughout the Group. • Understanding preparedness for risks arising accordance with legal obligations that apply under Risk appetite guides the annual business planning of principal risks remain constant over 2019, EMERGING RISKS from Brexit the Protected Disclosures Act 2014. ESB’s process by defining the desired forward-looking including health safety and environment risk, The risk management framework enables the The Board delegates responsibility for oversight • Monitoring upcoming legislative and other legal Whistleblowing and Protected Disclosure Policy risk profile of the group in achieving strategic cyber/data leakage risk, infrastructure delivery risk, Group to identify, analyse and manage emerging of its principal and emerging risks to Board exposures, in particular the new UK Governance was revised during 2019 to ensure the framework objectives. It is embedded in day-to-day risk financial performance risk and political/economic risks to help identify exposures as soon as Committees in accordance with the Committees’ Code for reporting concerns is adequate and sufficiently management decisions through the use of risk risk. Other risks, as detailed below are considered possible. This is managed as part of the same Terms of Reference and their respective areas of clear. tolerances and limits for material risk types (e.g. to be increasing over the year. process that identifies the principal risks. These expertise. The Committee Chairs report to the full The Committee held a full day off-site workshop, energy trading and treasury operations). This are monitored and reviewed in conjunction with Board on key developments and matters requiring to which all members of the Board were invited, to Decision making is supported by having clear ensures the risk profile remains aligned with risk The Group Risk Plan for 2019 is designed to principal risks. While a core element of ESB's 03 FINANCIAL STATEMENTS further discussion and consideration. The Audit examine these topics and others that became more authority levels, the conduct of rigorous risk appetite, balancing risk and returns. provide adequate assurance that: strategy seeks to address climate change and Risk Committee has overall responsibility for material over 2019 in more detail. External speakers analysis as part of business/project planning • specific consideration has been given to the challenges, an emerging risk recognises that the ensuring that enterprise risks and opportunities provided additional insights for the Board members. and consideration of the alignment between The Group Risk Appetite Statement is approved risks of achieving our strategic objectives pace of change is accelerating, particularly in the are properly identified, assessed, reported and investments and our risk appetite detailed for all by the Board on the advice of the Audit and • risks have been properly identified and context of an increasing number and range of controlled on behalf of the Board and advises In addition, to facilitate the Committee in remaining Board approved submissions. Specific training Risk Committee. The Brighter Future Strategy is measured on a bottom-up basis by the obligations. the Board on its consideration of the overall risk current with movements in the risk landscape that is provided for high-risk activities including cyber consistent with the Risk Appetite signed off by the businesses and adequately challenged and appetite, risk tolerance and risk strategy of the are relevant to ESB, a range of additional papers risk awareness, network operations, data privacy Board in 2017 in terms of focus of investment, reviewed on a top-down basis by Group BUSINESS CONTINUITY Group. on key risk topics were provided to the Committee and energy trading activities. This approach has geographies, technology and customer focus. Risk, the Risk Management Committee and ESB is responsible for the provision of critical over the year. These considered topics such as ensured that risks and uncertainties are highlighted The principal risks continued to be monitored by the Executive Director Team Risk Forum infrastructure and disruptions to certain services The details of the activities undertaken by the the National Risk Assessment 2018 report and at an early stage so that prompt action can be reference to the approved Risk Appetite Statement • risks and risk appetite have been aligned and operations are potentially damaging to the Board and the Audit and Risk Committee during World Economic Forum Global Risk Review 2019, taken to minimise any impact they might have on throughout 2019. • appropriate controls and risk mitigations to economy, to society and to ESB’s business. ESB 2019 in respect of their risk responsibilities are in addition to reviews of material external incidents employees and other stakeholders. reduce the probability of risks emerging and has in place a robust set of business continuity outlined on page 93. relevant to the Group. A full review of the Risk Appetite will be undertaken recovery mechanisms to reduce the impact plans and processes to ensure that our responses The Board is ultimately responsible for setting by the Board in 2020. of an event are in place are well managed and executed. The exercising ESB’s approach combines a top-down strategic During 2019, ESB sought to identify and report the tone at the top of the organisation. The • emerging risk developments over time are and testing of these plans is key to ensuring ESB’s assessment of risk and risk appetite, which takes on a range of key performance indicators for the approaches outlined have provided the Board being tracked preparedness. account of the external business environment and Committee to aid them in monitoring the efficiency with assurance that the risk culture supports the • management preparedness to manage risk any changes to the business model, along with a and effectiveness of their risk oversight activities. effective management of enterprise risk. A Culture is understood 1 Published by Department of the Taoiseach 2 Published by World Economic Forum 26 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 27

01

RISK MANAGMENT FRAMEWORK RISK AND CONTROL HEAT MAP STRATEGY AND PERFORMANCE

25 IMPROVE MONITOR TOP DOWN HIGH CONTROL

20 ROLE OF BOARD A D B Approves ESB Approves Risk Policy, overall Risk Management G F H Group Strategy Framework, Risk Appetite, Risk Plans and E Performance Targets 15 C I AUDIT AND RISK FINANCE AND HEALTH, SAFETY AND REMUNERATION AND MANAGEMENT MARKETING AND CUSTOMER COMMITTEE INVESTMENT COMMITTEE ENVIRONMENT COMMITTEE DEVELOPMENT COMMITTEE COMMITTEE Advises on risk Advises on energy Advises on policies Ensures alignment between appetite, risk trading, treasury and and procedures to approved risk appetite, Ensures marketing and governance and investment / project ensure ESB meets compensation, selection and customer initiatives and CONTROLS other high-level related risk its health, safety related decision-making programmes are aligned to 10 risk related and environmental processes ESB's strategic objectives RISK EXPOSURE 02 Impact * Likelihood matters obligations CORPORATE GOVERNANCE

ROLE OF SENIOR MANAGEMENT

5 Formulate and implement Responsible for risk strategy within risk appetite governance and controls

RISK APPETITE ACCEPT MONITOR OPTIMISE Describes risks the Group is prepared to accept based on long-term strategy, core risk principles, 0 RISKS values and risk management competencies

LOW 0 2 3 4 5 RISK MANAGEMENT POLICIES AND THREE LINES OF RISK CULTURE INDEPENDENT RISK FUNCTION GOVERNANCE FRAMEWORK DEFENCE MODEL LOW MANAGEMENT PREPAREDNESS HIGH Ensures appropriate Defines roles and Empowers people to do the Ensures the necessary review oversight of accountability for responsibilities for risk right thing for stakeholders, and monitoring of risk management of risk management customers and employees

RISK MANAGEMENT PROCESSES AND PROCEDURES OPERATIONAL: REGULATORY: A Health, Safety and Environment E Brand / Reputation B Cyber and Systems Availability F Regulatory / Market Development 03 FINANCIAL STATEMENTS C Project Delivery / Infrastructure G Political / Economic Uncertainty PRINCIPAL AND RISK AND CONTROL BUSINESS PROCESSES TO IDENTIFY, MONITOR AND MITIGATE EMERGING RISKS HEAT MAP CONTINUITY TESTING RISKS THAT EXCEED THE RISK APPETITE H Governance / Compliance PROCESSES FINANCIAL: STRATEGIC: D Financial Performance I Organisational Transformation PRINCIPAL BUSINESS UNIT RISKS

Risks arising from business activities that are measured, monitored and managed

UNDERPINNED BY ESB VALUES Risk Climate

▲ INCREASE – UNCHANGED ▼ DECREASE

BOTTOM UP 28 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 29

01

PRINCIPAL RISKS STRATEGY AND PERFORMANCE The principal risks and opportunities that have the potential to have a significant impact upon the Group’s strategic objectives are set out below, together with an indication of the strategic objective to which they relate, any change in the risk climate during the year, who is responsible for monitoring the risk, the principal mitigations, developments in relation to the risk during 2019 and areas of focus for 2020.

OPERATIONAL Oversight: Health, A. HEALTH, SAFETY Risk Climate Safety & Environment AND ENVIRONMENT Committee What is the risk? Risk Drivers Mitigations Developments in 2019 2020 Area of Focus Risk of serious injury or death • Inadequate policies and procedures To prevent the risk materialising: If the risk materialises: • Improvements noted in the reduced number of serious safety incidents • Health, safety and the to employees, contractors or • Inadequate competence (training, knowledge & • Setting of Group Standards • Critical incident management and • Improvements noted in key performance indicators, including leading environment will continue to be the public or damage to the experience) • Detailed training, development and approvals processes response procedures indicators e.g. on time closure of actions from serious investigations and a central focus for the Group in environment arising from ESB's • Lack of compliance with standards & procedures • Safety Culture Transformation Programme • Scenario testing good catches 2020 and ESB strive to embed operations • Failure to maintain assets • Engagement programmes for employees, contractors and the • Crisis management/business • Ensuring public awareness of dangers of electricity continued to be a key a high-performance culture • Involvement in new sectors e.g. solar, offshore wind, public continuity processes focus, against the backdrop of one public fatality as part of the Brighter Future marine safety • Confidential disclosures facilitated via confidential helpline • Deployment of Occupational • Continued focus on mitigations, to address incidents of third party Strategy • Defective/unsafe third-party infrastructure (Managed by Group Internal Audit) Health & Wellbeing Services to interference and theft of electricity assets • Separate focus on Environmental • Security risks at home and abroad • Maintenance management systems, equipment inspection and support employees • Implementation of agreed reporting protocol in respect of cable fluid and Climate risk under the 2020 • Delay in actions to reduce top environmental risks certification, statutory inspections • Incident Investigation standard leakage risk register • Assurance & audit processes (external and internal) procedures • Full review of all EPA licence conditions and related business risks • External certification e.g. ISO • Monitoring, tracking and reporting completed in every Generation and Trading location and improvement 02 CORPORATE GOVERNANCE • External benchmarking of environment and sustainability of serious incident action plans have been developed as necessary performance level completions • Establishment of Environment and Sustainability leadership team • Completion of risk assessments pre-staff business travel or • Ongoing monitoring of EPA 'Candidate National 'Priority' site lists mobilisation overseas • Consolidation of group-wide security responsibilities in a new central Enterprise Security Manager role • Reporting on environment and sustainability performance indicators • Public safety programmes

STRATEGIC OVERSIGHT B. CYBER AND Oversight: Audit & Risk SYSTEMS Risk Climate Committee AVAILABILITY What is the risk? Risk Drivers Mitigations Developments in 2019 2020 Areas of Focus Risk of extended outage of critical • Successful cyber attack, including ransomware or To prevent the risk materialising: If the risk materialises: • ESB Cybersecurity Programme being implemented (due for completion by • As a key national infrastructure Information Technology (IT)/ phishing attack on ESB/outsource partners systems • Continuous monitoring of ESB's cyber environment • Activate crisis management plans end of H1 2020) provider, cyber risk is a priority Operational Technology (OT) • Significant hardware issue, software error, • Regular review of IT systems & their resilience • Implement lockdown of firewall, if • Significant ongoing investment in prevention and detection capabilities for the Board. The aim is to systems arising from malicious networking failure resulting in failure of IT • Suite of IT policies/procedures, in line with best industry appropriate • Preparations underway for Network and Infrastructure System (NIS) maintain top quartile maturity. or non-malicious IT infrastructure infrastructure /systems standards • Implement cyber incident response Directive implementation • Successful delivery of SAP 4 failures or successful cyber-attack • Availability of expertise • IT security awareness across the organisation plan and recovery plans • Implementation of 24 X 7 SIEM (Security Incident & Event Monitoring) Hana upgrade project and the 03 FINANCIAL STATEMENTS and/or significant data leakage • Increasing reliance on technology/systems for • Timely upgrade of key IT systems and applications • Continue to strengthen IT security's system IT and data aspect of SMART business processes • Disaster recovery and failover arrangements response and recovery capability • New OT cybersecurity roles identified Metering programme • Increasing frequency and sophistication of attacks • External maturity assessments with Cyber 2020 Action Plan • Provide accurate and timely • Embedding new cyber organisational effectiveness roles • Third party mobile network/ telecommunication being implemented over 2019/2020 to improve maturity ratings communications to Regulators, • Two cyber crisis management exercises carried out at Enterprise Services failure • Liaise with relevant national security experts and key stakeholders, employees and and Executive Director Team (EDT) level • Human error infrastructure providers customers in accordance with • Dedicated integration planning role put in place in project delivery to • Suboptimal data management processes • Risk assessments for new or upgraded systems ESB's values ensure strong planning around the multiple project go-live dates • Inadequate controls for third- party 'shadow' IT • Implementation of a data deletion project • Conduct immediate review of solutions business process to identify root • Inadequate business continuity arrangements for cause of breach and remedy core IT/OT systems • Implementation of Data Breach • Significant number of large-scale projects going Action Plan/process and notify live towards the end of 2020 - SAP upgrade, Smart Office of Data Protection Metering etc. Commission (ODPC) if appropriate for data leakage incident

PRODUCE, DELIVER A HIGH- PUT CUSTOMERS’ CONNECT AND DEVELOP GROW THE PERFORMANCE CURRENT AND DELIVER CLEAN, ENERGY BUSINESS WHILE CULTURE THAT FUTURE NEEDS AT SECURE AND SERVICES TO MAINTAINING SUPPORTS THE CENTRE OF ALL AFFORDABLE MEET EVOLVING ESB’S FINANCIAL INNOVATION AND OUR ACTIVITIES ENERGY MARKET NEEDS STRENGTH COLLABORATION 30 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 31

01 STRATEGY AND PERFORMANCE

C. PROJECT DELIVERY Oversight: Risk Climate / INFRASTRUCTURE Audit & Risk Committee

What is the risk? Risk Drivers Mitigations Developments in 2019 2020 Areas of Focus Challenges to the build out of • Step change in demand growth over a short time To prevent the risk materialising: If the risk materialises: • Work continued to transition to New Engineering and Major Projects over ESB will continue to innovate and electricity infrastructure frame, both commercial (e.g. data centre) and • Robust project management frameworks, systems and • Consider alternative innovative 2019 engage with all stakeholders to domestic processes in place approaches to connections • Data centre demand growth (particularly in ) has remained high understand and respond to their • Procurement or supply chain challenges • Collaborative development of a 10-year plan to determine • Review optimal resource model to • Despite significant challenges during its construction phase programme, infrastructural needs for the benefit • Privacy concerns related to roll-out of Smart Metering Dublin’s infrastructure and reinforcement requirements between deliver work programmes Oweninny wind farm (89 MW) (Phase 1) in North Mayo successfully of the economy, society and the • Issues that may arise related to deployment of new ESB Networks and EirGrid • Wider stakeholder engagement as entered commercial operation ahead of schedule environment technologies • Detailed transition plan developed and delivered to establish part of Brighter Future Strategy to • Grousemount wind farm (114 MW) in Co. Kerry is substantially • Increased reliance on key outsource/ third-party Engineering & Major Projects to deliver major infrastructure secure support for infrastructural progressed with the wind farm exporting 50 MW's of commissioning partners projects development power in Q4 2019 • Challenges to managing cost and time allocation in • Develop a Renewables Delivery schedule • Development of turnkey capabilities • ESB’s application to An Bord Pleanála seeking planning permission to the context of scale of delivery challenge • Review contracting strategy / possible contractor engagements in ESB to deliver large customer transition West Offaly Power from peat to biomass was rejected • Public resistance to infrastructure • Establish a clearly defined Smart Metering Project with connection projects. • Timeliness of delivery of legislative changes required appropriate governance structures and controls • Implement temporary connections to support offshore wind development • Preparation of a Strategic Resource Plan to ensure optimal while deeper reinforcement work is • Disruption arises during transition to new Engineering resource model underway & Major Projects business unit • Consider legislative options for 02 • Pressures related to connection of renewable Smart Metering CORPORATE GOVERNANCE generation within the timelines expected in Renewable Electricity Support Scheme (RESS) and Electricity Connection Policy (ECP)

FINANCIAL Oversight: D. FINANCIAL Risk Climate Finance & Investment PERFORMANCE Committee What is the risk? Risk Drivers Mitigations Developments in 2019 2020 Areas of Focus Failure to maintain the financial • Risk of exceeding regulatory allowances To prevent the risk materialising: If the risk materialises: • ESB issued Ireland’s first corporate public Green Bond in June 2019, • Ongoing regulatory and strength required to underpin the • Fail to negotiate financeable new price control • Implement business planning and budgeting processes focused • Revise ESB Group Strategy in successfully placing a €500 million 1.125% fixed-rate green bond stakeholder engagement in long-term viability of ESB contract on delivery of ESB's Brighter Future Strategy and protecting order to rebuild financial strength maturing in June 2030 respect of ESB Networks' PR5 • Lower generation energy market revenues and financial strength • Address regulatory challenges • Submissions were made for the ESB Networks Regulatory Period 5 submission spreads in 2019 due to commodity market • Setting of appropriate hurdle rates for investment decisions through direct engagement with (2020 – 2024) (PR5), with a draft determination due by Q2 2020 • Continued focus on identifying movements and / or regulatory changes • Continue to seek cost efficiencies regulatory authorities • ESB and Equinor announced a partnership to deliver potential offshore new businesses / technologies • Inability to secure or deliver the pipeline of projects • Continued focus on identifying new businesses /technologies to • Consider approach to future wind projects and developing a pipeline of required to renew and grow the Generation portfolio, drive future growth opportunities investment plans • ESB invested to take a 50% stake in 448 MW Neart na Gaoithe (NnG) generation assets options to particularly in relation to renewables • Keep capital allocation under review across the ESB Group • Consider range of financial UK offshore wind farm project drive future growth opportunities • Existing generation portfolio fails to meet performance • Continued focus on delivery of regulatory contracts management options • Proactive management of challenging performance improvement targets • Delivery of business plans targets • Continue to investigate and assess all opportunities to develop a set by the Board for all businesses • Delivering a high performance 03 • Failure to deliver required performance improvement pipeline of options to ensure generation asset growth targets are culture that supports innovation FINANCIAL STATEMENTS initiatives achievable and collaboration • Increased competitor activity • Optimise Generation Trading Strategy to capture all market opportunities • Proactively monitor competitor behaviour and adjust customer strategies appropriately

PRODUCE, DELIVER A HIGH- PUT CUSTOMERS’ CONNECT AND DEVELOP GROW THE PERFORMANCE CURRENT AND DELIVER CLEAN, ENERGY BUSINESS WHILE CULTURE THAT FUTURE NEEDS AT SECURE AND SERVICES TO MAINTAINING SUPPORTS THE CENTRE OF ALL AFFORDABLE MEET EVOLVING ESB’S FINANCIAL INNOVATION AND OUR ACTIVITIES ENERGY MARKET NEEDS STRENGTH COLLABORATION 32 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 33

01 STRATEGY AND PERFORMANCE REGULATORY Oversight: E. BRAND / Risk Climate Marketing & Customer REPUTATION Committee What is the risk? Risk Drivers Mitigations Developments in 2019 2020 Areas of Focus Risk of damage to brand or • Materialisation of any of our Principal Risks, Emerging To prevent the risk materialising: If the risk materialises: • A protected disclosure was made during 2019 alleging a number of • ESB will strive to enhance reputation Risks or High Impact-Low Probability Risks • Corporate Communications Team in place • Activate relevant emergency breaches by ESB Networks. While many of the issues raised in the its reputation in 2020 through • Storm fatigue and erosion of tolerance by customers • External support available on brand, public relations (PR) and plans, storm action plans, crisis disclosures were already being addressed, a full investigation was continued investment in its brands, to storm related outages media and stakeholder management/ undertaken to ensure all issues are identified and addressed leading the conversation about the • Risk that ESB's suppliers or partners behave in a way • Social Media and Digital Communications Strategy communications plans, as • ESB's values have been clearly articulated and communicated to all transition to a low carbon energy that is inappropriate / misaligned with ESB's values • Active monitoring of social media appropriate employees future and excellence in stakeholder • Adverse regulatory findings • Integrated stakeholder communication and reputation • Corporate Communications • Delivered full programme of brand, communications and sponsorship engagement • Failure to respond to a crises or negative media/social programme activate external PR support activities to raise awareness of ESB's Brighter Future Strategy • In depth research with priority media campaign or actual event in a timely manner • Regularly review, update and test crisis and stakeholder arrangements, as appropriate • Continue to engage with relevant stakeholders in relation to all principal stakeholders planned for 2020 with accurate information management plans • Supplement resources of and emerging risks • Reputation workshops with • Sustained negative public reaction to ESB activities • Stringent process for partner and supplier selection and clarity Corporate Communications Team business units scheduled to that are contributing to climate change or damaging regarding expectation/values in a crisis situation identify opportunities to further environment • Ongoing monitoring of customer satisfaction and reputation • Timely and accurate response to build reputation among priority metrics issues with the fullest information stakeholders • External Communications Strategy/Policy in place. possible provided • Ongoing engagement with media to facilitate open and clear • Ensure response to any crisis is 02 communication consistent with our purpose and CORPORATE GOVERNANCE • Formally assess key activities through the lens of reputation, values purpose and corporate values • Proactive engagement with business units to identify emerging opportunities and issues

F. REGULATORY Oversight: / MARKET Risk Climate Finance & Investment DEVELOPMENT Committee What is the risk? Risk Drivers Mitigations Developments in 2019 2020 Areas of Focus Failure to anticipate / react to • Lack of financial support mechanism for transition to To prevent the risk materialising: If the risk materialises: • The Irish Government launched a Marine Planning Policy Statement in ESB will continue to carefully regulatory or market developments biomass • Experienced project team established in ESB Networks to • Modify ESB's investment plans and June 2019, and a Marine Planning and Development Management Bill is monitor regulatory and market • Legislative changes required to support the prepare for and negotiate PR5 Strategy accordingly being progressed, which is a key enabler of the development of offshore developments with a view to development of offshore wind is not forthcoming or • Continued engagement with policy makers regarding their • Continued engagement with wind ensuring ESB continues to meet its not sufficiently timely advocacy and support for: regulatory authorities and policy • Following rejection of ESB’s application to transition West Offaly Power regulatory obligations, anticipates • Lack of clarity regarding policy on continued use of • appropriate new building and retrofit standards makers, as appropriate, being from peat to biomass, ESB undertook a review of the options for peat any material changes that will coal • clarity regarding the regime for facilitating offshore wind mindful in the latter case of stations post 2020. Having considered the key planning, environmental affect it, engaging with Regulatory • Lack of policy support for fabric upgrading of homes, • financial support arrangements for biomass obligations under the Lobbying Act and commercial issues associated with peat and biomass, regrettably Authorities and policy makers as the transition to electric heating and e-transport • arrangements for transposition and implementation of the 2015 there is no viable business model beyond 2020. appropriate in the context of the 03 FINANCIAL STATEMENTS • Flexibility (ancillary services) not adequately rewarded Clean Energy Package • Ongoing consideration of options for Lobbying Act 2015 obligations and in the I-SEM market • Participate in regulator-led consultation processes • Almost a year after the UK power capacity market was suspended by the is prepared to respond appropriately • I-SEM market does not provide sustainable, • Licence monitoring and reporting to regulators to demonstrate European Commission, the regulator reinstated the programme in October to developments predictable revenues ongoing compliance 2019, freeing up around £1 billion in deferred payments to energy • Capacity remuneration mechanism found to be providers unlawful in Ireland (similar to GB) • ESB eCars announced the introduction of pricing on a phased basis for • Adverse transposition and implementation of Clean the public electric vehicle charging network in November 2019 Energy Package (CEP) • ESB Networks continues to engage with Department of Communications, • Risk of adverse regulatory finding against ESB Climate Action and Environment regarding implementation of the CEP • Risk of required regulatory reporting timelines being missed

PRODUCE, DELIVER A HIGH- PUT CUSTOMERS’ CONNECT AND DEVELOP GROW THE PERFORMANCE CURRENT AND DELIVER CLEAN, ENERGY BUSINESS WHILE CULTURE THAT FUTURE NEEDS AT SECURE AND SERVICES TO MAINTAINING SUPPORTS THE CENTRE OF ALL AFFORDABLE MEET EVOLVING ESB’S FINANCIAL INNOVATION AND OUR ACTIVITIES ENERGY MARKET NEEDS STRENGTH COLLABORATION 34 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 35

01 STRATEGY AND PERFORMANCE

G. POLITICAL AUDIT AND RISK OR ECONOMIC Risk Climate COMMITTEE UNCERTAINTY What is the risk? Risk Drivers Mitigations Developments in 2019 2020 Areas of Focus Political and economic uncertainty • The risk of a disorderly or hard Brexit, including risk To prevent the risk materialising: If the risk materialises: • Great Britain is due to leave the European Union on 31 January 2020 - ESB will continue to proactively creates market volatility that it results in severe political turbulence in Great • Preparation of Brexit contingency plans, including continued • Modify ESB's investment plans the fourth deadline since the 2016 referendum. In the face of continued monitor political and economic Britain, which impacts on market principles engagement with key counterparties to ensure trading can and strategy accordingly in order uncertainty, ESB continued over 2019 to ensure that robust arrangements developments over 2020 in order • Risk of another financial crisis erupting, or moderating continue post- Brexit to address geo-political /economic were in place to deal with a disorderly or hard Brexit. Three updates on to ensure that ESB is positioned to GDP growth and hoped-for-inflation fails to • Closely monitor global geopolitical and economic changes volatility Brexit preparations were provided to the Audit & Risk Committee and one mitigate any risk that materialises materialise • Continue to monitor credit worthiness of counterparties and • Review and revise trading strategy update was provided to the Board during 2019 and leverage any related • Global uncertainty and strengthening popular headroom with banks providing credit facilities to identify any • ESB continued to monitor political and economic developments pro- opportunities discontent with existing political and economic order increase in exposure actively during 2019, providing updates to the Audit & Risk Committee • Severe energy price shock • Continue to deliver on our renewables and Electric Vehicle from both the National Risk Assessment 2018 and World Economic • Acceleration of the Climate Change agenda or infrastructure plans Forum Global Risk Review perceived unfairness of cost-sharing burden for • ESB continues to engage with Department of Communications, Climate climate change Action and Environment (DCCAE) regarding implementation of the CEP • Under-estimation of impact of social media/role of activists on shaping the political agenda

02 CORPORATE GOVERNANCE

H. GOVERNANCE / AUDIT & RISK Risk Climate COMPLIANCE COMMITTEE

What is the risk? Risk Drivers Mitigations Developments in 2019 2020 Areas of Focus Governance or compliance failure • Increasing levels of legal obligations in terms of To prevent the risk materialising: If the risk materialises: • ESB continued to monitor compliance with legislative and regulatory ESB will continue to evolve arising from increasing obligations volume, complexity and interconnectivity, which ESB’s • Ongoing monitoring of legal and compliance requirements • Investigate incidents or breaches obligations over 2019. A number of environmental compliance matters and strengthen its compliance and external scrutiny policy or compliance framework fails to keep pace • Appropriate frameworks for compliance with laws and and ensure actions identified are were dealt with over the year, namely cable fluid leakage, management of arrangements to ensure they are with regulations established and resourced implemented SF6 gas and cooling water discharges. It is in the context of addressing sufficiently robust to meet current • Compliance fatigue increases risk of governance • Continued enhancement of the Group Policy framework, • Activate communications plans to these matters that the risk is considered to have increased over 2019 and emerging obligations failure including communication and training to ensure compliance with update key stakeholders • During the year, a separate Compliance Function was established to • Increasing levels of external scrutiny obligations • Review the adequacy of current further enhance ESB's compliance frameworks, based on external best • Failure of governance and compliance controls • Continued refinement of internal control frameworks, including policies and procedures practice and ESB requirements for existing statutory or legal obligations, including evidence-based signoff processes • Review the adequacy of current environmental, or licence responsibilities • Ongoing oversight of regulatory licence compliance arrangement monitoring arrangements • Legitimate concerns raised by employees are not • Engage with Regulatory Authorities to review in detail all licence • Roll-out additional awareness appropriately addressed related complaints and challenges raised training, if required • Submission of ESB perspectives into consultations regarding • Share learning across the regulatory or legislation changes, where possible and appropriate organisation 03 • Ongoing monitoring of reportable • Appropriate confidential reporting mechanisms and investigation FINANCIAL STATEMENTS procedures in place and operated incidents for patterns of events that may signify an underlying issue or exposure • Ongoing engagement with relevant external stakeholders, including regulatory authorities (CRU, NIAUR, Central Bank of Ireland), OCEI, ODPC, SIPO, DCCAE • Regulatory Inspections Manual established and communicated

PRODUCE, DELIVER A HIGH- PUT CUSTOMERS’ CONNECT AND DEVELOP GROW THE PERFORMANCE CURRENT AND DELIVER CLEAN, ENERGY BUSINESS WHILE CULTURE THAT FUTURE NEEDS AT SECURE AND SERVICES TO MAINTAINING SUPPORTS THE CENTRE OF ALL AFFORDABLE MEET EVOLVING ESB’S FINANCIAL INNOVATION AND OUR ACTIVITIES ENERGY MARKET NEEDS STRENGTH COLLABORATION 36 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 37

01 STRATEGY AND PERFORMANCE STRATEGIC

I. ORGANISATIONAL Risk Climate ESB BOARD TRANSFORMATION

What is the risk? Risk Drivers Mitigations Developments in 2019 2020 Areas of Focus Fail to embed ESB’s new • Fail to enable strategy delivery and achieve the To prevent the risk materialising: If the risk materialises: • Arrangements to monitor cultural changes are being established, with the • ESB will continue to monitor its organisational design and achieve expected benefits of ESB's organisational re-design • Continued efforts across the Group to further embed • Review Brighter Futures Strategy introduction of a new culture dashboard. organisational design over 2020 the required transformation due to the slow adoption or ineffective use of new organisational effectiveness (OE), including work to evolve ESB’s in the context of the risk that has • Ongoing focus on strengthening of strategic resource planning processes to ensure we are appropriately technologies and / or process improvements culture materialised and governance frameworks to ensure skills and competencies organised to efficiently and • Failure to respond sufficiently to new forms of • Drive out Digital Accelerator programme and related process • Review options for short-term requirements are identified and sourced in a timely manner effectively deliver on the Bright competition and innovation that threaten the improvements effectively through a newly created centre of resourcing for critical capabilities Future Strategy established business models and capabilities excellence or skill sets, including options • ESB will roll-out additional • Failure to grow and integrate ESB brands • Complete and implement the strategic resource plan (SRP) for for short-term redeployment of leadership and communication • Failure to recruit or retain employees, especially for key skill sets, highlighting resource requirements in the short-to resources to key vacancies based programmes to its management specialised skill sets, resulting in a failure to develop medium-term on key skill sets from previous roles teams and sustain our organisational capability • Implement succession planning and, in parallel, fast track training of • ESB will continue to refine • Delivery of Senior Manager workshops on “Leading the Way we replacements for the critical roles strategic resource planning Work at ESB”, which focused on how values guide behaviours within the businesses approaches so that managers can shape an employee experience that enables employees to reach their potential, and in turn supports delivery of the Brighter Future Strategy 02 CORPORATE GOVERNANCE

03 FINANCIAL STATEMENTS

PRODUCE, DELIVER A HIGH- PUT CUSTOMERS’ CONNECT AND DEVELOP GROW THE PERFORMANCE CURRENT AND DELIVER CLEAN, ENERGY BUSINESS WHILE CULTURE THAT FUTURE NEEDS AT SECURE AND SERVICES TO MAINTAINING SUPPORTS THE CENTRE OF ALL AFFORDABLE MEET EVOLVING ESB’S FINANCIAL INNOVATION AND OUR ACTIVITIES ENERGY MARKET NEEDS STRENGTH COLLABORATION 38 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 39

01

KEY PERFORMANCE INDICATORS (KPIS) STRATEGY AND PERFORMANCE

ESB employs financial and non-financial key performance indicators (KPIs), which signify progress towards the achievement of ESB's Strategy to 2030 (Strategy CUSTOMER AND MARKET 2030). Each business unit has their own KPIs, which are in direct alignment with those of the Group. Retail Market Share % Residential Customer Satisfaction % Brand Awareness % 99% FINANCIAL 97% 97% 97% 95% 94% 95% EBITDA €’m Net Debt €’m Capital Expenditure €’m 85% 84% 84% 38% 5,239 4,975 1,242 37% 4,915 1,165 34% 1,372 34% 33% 1,324 1,348 897 1,276 4,524 873 1,175 4,377 867

2019 2018 2017 2016 2015 2019 2018 2017 2016 2015 2019 2018 2017 2016 2015

KPI DEFINITION STRATEGIC RELEVANCE PERFORMANCE STRATEGIC PRIORITY 2019 2018 2017 2016 2015 2019 2018 2017 2016 2015 2019 2018 2017 2016 2015 Retail Market Total Single Electricity Market Retention and growth of market Overall market share increased by 1% during 2019 Share (SEM) all-island market share. share is key to ESB so that it primarily as a result of customer gains in the industrial KPI DEFINITION STRATEGIC RELEVANCE PERFORMANCE STRATEGIC PRIORITY can compete within the all-island and commercial market sectors. For further detail, see EBITDA Operating profit before interest, taxation, EBITDA is a key measure of the cash The increase in EBITDA is driven by factors competitive environment. Customer Solutions business unit on page 60. depreciation, impairments (including non- generated in the Group during the year impacting on operating profit. For further detail, 02

trading net impairment losses on financial which is then available for strategic see financial review on page 48. Residential Provides a measure of residential ESB strive to provide excellent Residential Customer Satisfaction continued to perform CORPORATE GOVERNANCE assets), amortisation and revenue from supply investments, repayment of debt and Customer customer satisfaction (Source: customer service and introduce strongly in 2019 despite considerable competitive pressure. Satisfaction Research Perspective Monthly new initiatives to improve the contributions. dividend payments. Electric Ireland continues to outperform competitors in Survey Results). customer experience in order to areas such as brand, customer focus and new smart Net Debt Borrowings and other cash and cash Net debt is a measure of how leveraged Net debt has increased reflecting continued retain market share. solutions. The long term value campaign appears to be the Group is and is included in assessing capital investment, strenghtening of GBP, finance equivalents. 2019 includes the impact of IFRS enhancing loyalty among customers, while a range of its key covenants. Net debt will continue costs, dividends impact of IFRS 16' Leases and 16' leases which became effective 1 January initiatives designed to enhance customer experience have 2019. to grow as ESB partly funds its capital tax payments offset by EBITDA. For further detail investment programmes with borrowings. see financial review on page 48. also been rolled out. Capital Additions for property, plant and equipment, ESB is in a period of significant capital For further detail see financial review on page Brand Awareness of Electric Ireland Maintain the Electric Ireland Brand awareness performance remained strong in 2019, Expenditure intangible assets and financial asset investment for both its networks businesses 48. The increase in capital expenditure Awareness as an Energy Supplier (Source: brand as the leading energy with near universal awareness of Electric Ireland. Sponsorship IPSOS mrbi and Amàrach supply brand in Ireland. investments. 2015 to 2017 figures are net and Generation and Trading (GT). This is primarily reflects ESB's investment in the activity in particular helped to drive the brand presence and Customer Survey Results). of capital contributions, from 2018 onwards so that ESB can develop the electricity 448 MW Neart na Gaoithe wind farm. the launch of the new Brighter Together campaign towards Capital expenditure is shown gross of capital network and compete within the all-islands the end of the year should see Electric Ireland maintain and contributions in line with IFRS 15 'Revenue environment. develop this position in 2020. from Contracts with Customers.

OPERATIONAL PEOPLE Plant Availability % MW Renewable Operational* Customer Minutes Lost (CMLs)* Headcount No. Employee Lost Time Injuries (LTIs) No. 93% 92% 884 90% 816 7,974 7,874 52 87% 98 7,790 84% 735 88 90 52 7,597 79 83 642 43 624 7,305 30 29 03 FINANCIAL STATEMENTS

2019 2019 2019 2018 2017 2016 2015 2018 2017 2016 2015 2018 2017 2016 2015 2019 *wind, solar and hydro *ESB Networks 2018 2017 2016 2015 2019 2018 2017 2016 2015

KPI DEFINITION STRATEGIC RELEVANCE PERFORMANCE STRATEGIC PRIORITY KPI DEFINITION STRATEGIC RELEVANCE PERFORMANCE STRATEGIC PRIORITY Plant Availability Percentage of the time in the year Delivering strong operational Plant availability reduced in 2019 due to a number of Headcount Average number of employees The delivery of the strategy will require an Headcount has increased in 2019 as a result that generation plant was available performance across ESB's generation technical issues at Moneypoint. For further detail see GT in the year including temporary organisation that is of a certain scale and is of recruitment for new business lines along to produce electricity, whether they plant through best practice operations business unit section page 54. employees employed by ESB. flexible, highly motivated and adaptable. with apprentice and graduate recruitment. generated or not. and maintenance and timely completion For further detail, see note 9 of the financial of overhauls is critical to ESBs statements. commercial performance. Employee LTIs Employee LTIs are work-related Safety is at the centre of what we do. ESB The reduction in LTIs is linked to improvement MW Renewable Total MW’s of renewable Renewable generation is key to ESB's The increase primarily relates to ESB's 50% share of injuries that involve an absence of at continues to focus on reducing risks in plans, projects, training and auditing Operational generation where the assets have objective to reduce the carbon intensity Owenniny wind farm (89 MW) and 47% share of Tilbury least one day (not including the day the business that gives rise to injurious programmes where the focus is on injury reached their commercial operation of its generation fleet. biomass plant (40%) which were both commissioned in the injury occurred). incidents. For further detail, see safety on prevention. date includes wind, hydro and 2019. For further detail see GT business unit section on page 68. solar. page 54. PUT CUSTOMERS’ PRODUCE, DEVELOP GROW THE DELIVER A HIGH- Customer The average duration of unplanned The reliability of the grid and minimising The decrease in CMLs in 2019 is due in part to a reduced CURRENT AND CONNECT AND ENERGY BUSINESS WHILE PERFORMANCE Minutes Lost interruptions for all customers interruptions to customers is of key number of storms in 2019 compared to 2018 and the FUTURE NEEDS AT DELIVER CLEAN, SERVICES TO MAINTAINING CULTURE THAT THE CENTRE OF ALL SECURE AND MEET EVOLVING ESB’S FINANCIAL SUPPORTS (CMLs) ESB during the year. importance to ESB. intensive focus and interventions of ESB Networks. For OUR ACTIVITIES AFFORDABLE MARKET NEEDS STRENGTH INNOVATION AND Networks further detail see ESB Networks business unit section on ENERGY COLLABORATION page 56. 40 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 41

01 STRATEGY AND PERFORMANCE

02 CORPORATE GOVERNANCE 42 Executive Team 44 Market Structure and Operating Environment 2019 48 Financial Review 54 Generation and Trading (GT) 56 ESB Networks 58 Northern Ireland Electricity Networks (NIE Networks) 60 Customer Solutions 62 Engineering and Major Projects 63 Enterprise Services

03 FINANCIAL STATEMENTS 42 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 43

01

EXECUTIVE TEAM STRATEGY AND PERFORMANCE

The Executive Team focuses on the execution of the ESB Strategy to 2030 (Strategy 2030), technological and commercial developments, programme execution, financial and competitive performance, people development, governance, organisational development and Group-wide policies.

Geraldine Heavey Nicholas Tarrant Executive Director Enterprise Executive Director Engineering and Major Pat O’Doherty Jerry O’Sullivan Services Projects Chief Executive Deputy Chief Executive Appointed: June 2018 Appointed: June 2018 Appointed: December 2011, term extended by Appointed: October 2014 Career Experience: Geraldine Heavey Career Experience: Nicholas Tarrant was a further 3 years, effective 1 December 2018. Career Experience: Prior to his current was appointed to the position of Executive appointed Executive Director, Engineering and Career Experience: Pat joined ESB in 1981. role, Jerry was Managing Director of ESB Director Enterprise Services in June Major Projects in June 2018. Prior to this he Prior to his current role, Pat headed up ESB’s largest Networks DAC. He joined ESB in 1981 and 2018. Prior to this she held a number of senior financial and general held the position of Managing Director, Northern businesses as Executive Director of ESB International, held a number of positions in Power Station management positions across ESB Group including Finance Controller, Ireland Electricity Networks. Nicholas joined ESB in 1993 where he held Managing Director of ESB Networks DAC and Executive Director of Construction, Distribution and Transmission, Retail, Business Service Centre (BSC) and Electric Ireland, Manager, ESB a number of senior management positions including Generation Manager ESB Power Generation. Pat holds both primary and master’s degrees in Contracting, Marketing and Customer Service. He was appointed Head Trading and most recently Group Financial and Commercial Manager. with responsibility for ESB’s generation portfolio. He is a chartered engineering from University College Dublin. He completed the Advanced of Network Services in 2002 and Head of Sustainability and Network She is an accountant and holds a master’s degree in business engineer at the Institute of Engineers of Ireland; he holds an MSc Management Programme at Harvard Business School. He is Vice President Systems in 2008. He holds a primary degree in civil engineering from administration (MBA) from Dublin City University. (management) from Trinity College Dublin and completed the Stanford of Eurelectric, Director of Energy UK, Chair of the Apprenticeship Council of University College and is a Fellow of Engineers Ireland. Executive Programme in 2014. 02

Ireland and former trustee of The Conference Board of the United States. CORPORATE GOVERNANCE

Paul Mulvaney Marie Sinnott Executive Director ESB Networks Company Secretary Pat Fenlon Paddy Hayes Customer Delivery Executive Director Group Finance and Managing Director ESB Networks DAC Appointed: August 2019 Commercial Appointed: October 2014 Career Experience: Marie Sinnott was Appointed: June 2012 Career Experience: Paul Mulvaney was appointed Company Secretary in August Appointed: July 2016 Career Experience: Prior to his current role, appointed Executive Director, Customer 2019. Prior to this, she held the position of Career Experience: Prior to his current role, Paddy was Executive Director of Generation Delivery ESB Networks in May 2018. Group Head of Compliance and Enterprise Risk Pat held a number of senior financial, commercial and Wholesale Markets and held various Prior to this he held the position of Executive Management. Marie joined ESB in 1989 as part of the and general management positions across ESB positions in ESB including Head of Independent Director, Innovation. Paul joined ESB in 1985 and has held a number Business Graduate Development Programme and has held a number of including Group Finance and Commercial Manager, Group Treasurer, Generation. Paddy worked with British Steel before joining ESB in of senior management positions, including Manager of Great Island senior management roles in the Company. Marie is a UCD commerce General Manager of Electric Ireland and Corporate Change Manager. He is 1999. A chartered Engineer, he holds a master's degree from University and Moneypoint Generation Stations, Group Manager of Coal/Oil/Gas graduate, holds a master’s degree in economic policy studies from TCD a Fellow of Chartered Accountants Ireland and worked with PwC in Dublin College Dublin and an MBA from the University of Warwick. Stations, Asset Manager Power Generation and Programme Manager, and a postgraduate diploma in corporate governance from UCD. She also before joining ESB in 1993. Corporate Change. He was appointed Managing Director of eCars in has a certificate in data protection practice from the Law Society. Marie 2009 and Head of Distribution and Customer Service, ESB Networks is an external member of DCU’s Governing Authority Risk Management in 2012. Paul holds a primary degree in mechanical engineering and Committee. has completed the advanced management programme at the Business School of the University of Navarra, Spain. He is also a Chartered Director 03 FINANCIAL STATEMENTS and a Fellow of the Institute of Directors in the UK. Marguerite Sayers Jim Dollard Executive Director Customer Solutions Executive Director Generation and Trading Appointed: November 2014 Pat Naughton Career Experience: Prior to her current role, Appointed: July 2013 Executive Director People and Marguerite was Managing Director ESB Networks Career Experience: Jim Dollard was Organisational Development DAC. Marguerite joined ESB in 1991 and holds a appointed Executive Director, Generation & primary degree in electrical engineering from University Trading in May 2018. Prior to this he held the Appointed: June 2012 College Cork. Previously, she was Head of Asset Management for ESB position of Executive Director for Business Service Centre and Electric Career Experience: A mechanical Networks and Customer Service Manager for Dublin South, and has had Ireland. A chartered management accountant, Jim began his career at engineer, Pat has worked in a variety of roles roles in HR, Network Planning, Operations and Construction. Marguerite ESB in 1992 and has held a number of senior management positions since joining the Group in 1978. He previously was also Manager of ESB Generation where she was responsible for throughout the Group. Jim holds a bachelor’s degree in commerce and held senior positions as HR Manager in ESB Energy International, ESB’s generation portfolio in Ireland and the UK. She is a chartered a master’s degree in business studies from University College Dublin. He Manager Strategy and Portfolio Development, ESB Energy International engineer and currently President of Engineers Ireland. completed the Advanced Management Programme at Harvard Business and Manager of Hydro Stations, ESB Power Generation. School in 2017. 44 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 45

01 MARKET STRUCTURE AND OPERATING ENVIRONMENT 2019 STRATEGY AND PERFORMANCE

ELECTRICITY NETWORKS electricity from fuels such as gas, coal and oil as 2. OPERATING ENVIRONMENT 1. OVERVIEW OF THE The process for remunerating capacity in I-SEM auction and Aghada’s peaking unit (81 MW) was The electricity transmission system is a high- well as indigenous resources including hydro, THE GLOBAL ENERGY MARKETS ELECTRICITY MARKETS introduced an element of competition for capacity unsuccessful in the T-1 auction. voltage network for the transmission of bulk wind, peat and biomass. STRUCTURE IN THE REPUBLIC contracts via an auction process and also electricity supplies. The distribution system GAS PRICES OF IRELAND (ROI), effectively imposed reliability penalties on the ESB is currently assessing options for the delivers electricity to individual customers over the I-SEM has 5,283 MW of wind installed, which Gas prices have decreased throughout 2019 with NORTHERN IRELAND (NI) AND holders of those contracts (if they are called upon Moneypoint and Coolkeeragh units which failed to 38kV/medium/low voltage networks. In ROI, ESB is key to the government’s target of 40% of an annual average gas price of 34.77 p/therm, GREAT BRITAIN (GB) to deliver capacity and are unable to do so). Since receive capacity contracts in the T-4, T-2 and T-1 owns the transmission and distribution system electricity to be generated from renewable down from 58.81 p/therm in 2018. The main The structure of the electricity market in ROI, the first I-SEM capacity auction, in December auction. However, following rejection by An Board network and operates the electricity distribution sources by 2020, as well as the 40% renewable driver for this decrease is the supply of cheap NI and GB can be divided into four segments: 2017 a further three auctions have been held Pleanála of the planning application to transition system network, while EirGrid operates the generation target for Northern Ireland (which was LNG (Liquified Natural Gas) from Asia. Demand generation, transmission, distribution and allowing generators to compete for Reliability power station from peat to biomass, a transmission system network. In NI, NIE Networks announced as met by the Department for the was also reduced due to mild weather conditions, supply. Electricity generation and supply are Options on a 1-year (T-1) and 2-year (T-2) ahead review of operations at Lough Ree and West Offaly (owned by ESB) owns the electricity transmission Economy in September 2019). Wind contributed leading to large amounts of stored gas which open to full competition throughout ROI, basis as well as a time frame of 4 years (T-4) out. peat stations was conducted and generation will and distribution system network and operates 29% of generation in 2019, up from 25% in kept prices low. The monthly average gas price NI and GB. Electricity transmission and now cease at the end of December 2020. the electricity distribution system network. The 2018, with a maximum wind output of 3,991 MW in January 2019 was 58.01 p/therm, the price fell distribution are regulated monopolies in ROI, Final results for the 2019/20 T-1 auction were System Operator for Northern Ireland (SONI) being recorded on 18 December 2019. ESB had steadily throughout the year to 25.67 p/therm in NI and GB, with the respective regulator announced in February 2019. All of ESB’s BRITISH ELECTRICITY TRADING AND operates the transmission system network. a 30% generation market share I-SEM in 2019, September and rose again in November to 37.48 determining the allowed revenue for the price generating units, with the exception of North TRANSMISSION ARRANGEMENTS down 8% from last year due to Moneypoint being p/therm. review period. Wall gas plant (North Wall), received capacity (BETTA) INTERCONNECTION out of merit and the unavailability of Lough Rae contracts. North Wall continued operation until BETTA is the wholesale electricity market For geographical reasons, the electricity over the summer months. COAL PRICES ENERGY POLICY AND the end of September 2019 under its existing operating in GB. Unlike I-SEM, trading can take transmission systems on the island of Ireland Coal prices started the year on a high at c. $81/ 02 REGULATION contract after which it was decommissioned. place between generators and suppliers either are isolated compared to systems in mainland 2019 saw 78% availability of baseload thermal tonne before falling in the first half to c. $49/tonne CORPORATE GOVERNANCE Energy policies are set by the Minister The T-1 auction cleared at €40.65/kW which bilaterally or through exchanges, and both physical Europe and GB. The Moyle Interconnector generation in I-SEM, with gas being the dominant in June. Global demand for coal was down in for Communications, Climate Action and represented a reduction of €1.15/kW from the and financial contracts can be struck to manage links the electricity grids of NI and Scotland fuel in the market, as coal remained largely out 2019. Increasing concerns over the environmental Environment in ROI, the Department for the previous year’s auction price. The majority of price volatility, for time scales ranging from several through submarine cables running between of merit from January onwards driven by the impact of coal has led to decreased demand in Economy in NI and the Secretary of State for those awarded capacity contracts were existing years ahead to intra-day trading markets. As part converter stations in NI and Scotland; this link combination of low gas prices coupled with high the US and Europe and the closure of several Business, Energy and Industrial Strategy in assets although approximately 130 MW of new of its Electricity Market Reform (EMR) initiative to has a capacity of 500 MW. However, from 10 carbon prices. coal-fired plants. High carbon prices and low GB. Energy policy and regulation are heavily capacity was added. incentivise investment in low-carbon electricity and November 2017, there has been a limit of 80 gas prices have also resulted in gas plants influenced by European Union (EU) law. improve the security of supply and affordability, MW imposed on exports (West to East flow). ENERGY TRADING being cheaper to run than coal, leading to less The first T-4 auction for delivery in 2022–2023 the British Government operates a capacity This restriction was raised to 307 MW from 1 The electricity and gas markets in GB, ROI and running hours for coal plants. Demand was flat in The Commission for Regulation of Utilities was held in March 2019 clearing at a price of remuneration scheme, where generators are December 2019. NI are linked in two ways, through gas being used China but increased in South East Asia as these (CRU) is the independent regulator of the €46.15/kW with a total of 710 MW of new awarded capacity contracts (based on the outcome for electricity generation and through the physical countries still rely on coal for the majority of their energy market in ROI. The Utility Regulation capacity successful, comprising gas generation, of an auction) that enable them to receive payments The East-West Interconnector links the electricity interconnection of electricity and gas networks. In power generation. Coal prices increased in the (UR) is the independent regulator of the energy wind, demand side units and battery storage. for the provision of generation capacity while also transmission system in ROI to the electricity common with a number of other companies in the second half of the year to approximately $60/ market in NI. The Office of Gas and Electricity While the majority of ESB's existing capacity incurring penalties for non-delivery during scarcity transmission system in Wales, enabling two- Irish market, ESB is active in both Irish and GB tonne. The annual average coal price for 2019 Markets (OFGEM) is the regulator of the was successful, 335 MW (derated) capacity events. way transmission of electricity. The East-West markets in gas and electricity. was $60.69/tonne, down from $91.65/tonne. energy market in GB. was not. This includes Moneypoint Unit 2 (229 Interconnector runs between Deeside in north MW), the Lough Ree peat station (78 MW) and In late 2018, the General Court of the Court of Wales and Woodland, County Meath in ROI. In addition to ESB’s generation interests, ESB CARBON PRICES SINGLE ELECTRICITY MARKET one gas turbine at Coolkeeragh (48 MW). This Justice of the European Union ruled in favour of a Approximately 260 km in length, the underground is active in all sectors of the gas market, from Within the EU ETS, generators are required (SEM/I-SEM) unsuccessful capacity was more than offset challenge, brought by a demand-side response and undersea links can transport 530 MW. residential to large commercial and is one of the to buy carbon allowances for the carbon they The Single Electricity Market (SEM), which by 489 MW of new capacity, comprising 75% operator, to the European Commission’s decision biggest gas shippers on the island. emit while generating electricity. Carbon prices began operation in 2007 migrated to a new flexible generation (high-frequency gas turbines) to approve state aid for a UK capacity market. In 2019, there was a net import flow on both fluctuated at c€25/tonne mark throughout 2019. 03 FINANCIAL STATEMENTS set of trading arrangements known as the and 25% battery storage, which were awarded This resulted in the annulling of the European interconnectors but I-SEM has resulted in This is in comparison to 2018 where carbon Integrated Single Electricity Market (I-SEM) on 10-year contracts covering the period from Commission’s State Aid approval for the GB some significant periods of exports to GB in started the year at c.€8/tonne and finished at 1 October 2018. October 2022 to September 2032. capacity market scheme and introduced a standstill periods of high wind and extending across c€20/tonne. Carbon prices rose in 2018 due period resulting in a suspension of GB capacity daytime periods. This is a substantial change The new I-SEM market arrangements replaced In addition, T-1 and T-2 incremental auctions market payments, pending a new application for from SEM arrangements where day imports the centralised pool of the SEM with Day- were held in November and December 2019, state aid clearance. The European Commission and night exports were prevalent and is due to FIGURE 1: GAS, COAL AND CARBON PRICES Ahead, Intraday and Balancing Markets as with results published in January 2020. The T-2 started its formal investigation in February 2019, harmonised trading arrangements where efficient well as a competitive capacity remuneration auction cleared at a price of €45.95/kW and resulting in a decision on 24 October 2019 interconnector flows are driven by price in the ■ COAL ($/tonne) ■ NBP GAS (pence/therm) ■ CARBON (€/tonne) mechanism in place of the SEM’s capacity provided 183 MW of new capacity. The T-1 whereby the European Commission confirmed respective interconnected markets. payment regime. These changes were driven auction price was €46.15/kW and provided 156 that the GB capacity market scheme is compatible 80 primarily by the requirement to comply with EU MW of new capacity. Through the T-1 auction, with EU state aid rules, which allowed GB capacity ELECTRICITY GENERATION harmonised arrangements for cross-border Aghada station received a 10-year contract for market payments to resume. Suppliers were The I-SEM generation sector comprises 60 trading of wholesale energy and balancing an additional 11 MW following an upgrade earlier invoiced for the standstill collection period supplier approximately 15,887 MW of capacity connected 45 services across Europe and by EU State aid this year to increase its capacity. The majority of charge in November 2019 and the UK Government to the system on an all-island basis. The capacity guidelines for capacity remuneration. ESB had ESB’s existing capacity was successful in both stated that capacity market payments suspended connected to the system includes a mix of older 20 established a suite of I-SEM programmes to auctions, however, Coolkeeragh’s gas turbine by the General Court decision would reach generation plants alongside modern gas fired ensure that the business was ready for the new (48 MW) did not clear either auction. Moneypoint capacity providers in Q1 2020. CCGT plants and renewable energy sources GAS P/THERM COAL $/TONNE 0 market arrangements. Unit 2 did not receive a contract from the T-2 such as wind power. These stations generate JAN MAR MAY JULY SEP 2019 46 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 47

01

price exceeds €500/MWh are deemed scarcity FIGURE 5: BALANCE MARKET STRATEGY AND PERFORMANCE to the introduction of market reforms aimed at events and trigger pay outs from all generators reducing greenhouse gas emissions by at least holding Reliability Option contracts. Such events 4,000 FIGURE 4: DAM (€/MWH): 40% by 2030. The monthly average carbon occurred in the first few months of market 3,500 price in January 2019 was €23.58/tonne and it operation in 2018 and again on 24 January 2019 140 3,000 reached €28/tonne by July. Increasing concern where the price spike above €3,000 MWH. 2,500 over a no deal Brexit leading to the UK exiting 120 This situation arose primarily due to the rules the EU carbon trading system led to a decrease around operating the all-island market within 2,000

in prices towards the end of 2019, with carbon 100 the confines of the network between NI and the 1,500 prices ending the year with a monthly average of ROI rather than from any significant scarcity of 1,000 €24.64/tonne in December. The annual average 80 generation on the island. Consequently, a rule Average of Imbalance Settlement Price carbon price for 2019 was €24.93/tonne, up change was instigated to limit similar price spikes 500 60 from €14.84/tonne in 2018. This higher carbon from re-occurring. The Balancing Market has, 0 price was a significant factor for the decrease in on the whole, been short of power (i.e. system 40 JUL JAN JUN FEB SEP APR MAY OCT NOV MAR AUG

coal generation. DAM (€MWH) AVERAGE demand has exceeded the volume of generation 2019 20 contracted in the Day Ahead and Intraday markets FIGURE 2 ELECTRICITY GENERATION IN requiring the TSO to schedule on additional I-SEM BY FUEL TYPE 0 FIGURE 6: GB BASELOAD PRICES JAN 2019 MAR 2019 MAY 2019 JUL 2019 SEP 2019 NOV 2019 generating plant). However on average, prices have traded at a discount to the Day Ahead Market Price. This may reflect the fact that the 80 majority of balancing actions taken in the BM are 70 02 FIGURE 3: DAM VERSUS GAS PRICE, 2019 due to system security actions taken by the TSO, 60 CORPORATE GOVERNANCE ■ ■ which generally do not contribute to the setting of AVERAGE DAM €/MHW AVERAGE NBP GAS P/THERM 50 the balancing market price. 80 40 £/MWh GB ELECTRICITY MARKET AND PRICES 30 75 Overall electricity generation volumes in GB have 20 been broadly stable over the past four years, 70 with renewables continuing to play an ever- 10 increasing role in the overall electricity system 0 65 mix. Renewables output for Q3 reached 24TWh, JUL JAN JUN FEB SEP APR MAY OCT NOV MAR just below the 25TWh of power generated from AUG 60 fossil fuel plant for the same period. The rapid 2019 increase in solar photovoltaic generation capacity 55

AVERAGE DAM (€MWH AND AVERAGE OF NBP GAS DAM (€MWH AND AVERAGE AVERAGE observed from 2011 to 2017 has eased in the last 2 years, with a total capacity of more than 13 I-SEM WHOLESALE ELECTRICITY 50 GW installed on the system for the summer 2019 Competitive auctions to secure capacity through National Grid Electricity System Operator (ESO) PRICES JAN 2019 MAR 2019 MAY 2019 JUL 2019 SEP 2019 NOV 2019 generation season. A new solar generation peak the Capacity Market went ahead in the UK announced in April 2019 that it will be able to fully 2019 is the first calendar year where the market of 9.55 GW was recorded on 14 May 2019. In despite the suspension of the Capacity Market operate GB’s electricity system with zero carbon exclusively operated under I-SEM rules. I-SEM addition, a new wind generation record was set system for the majority of 2019.These auctions by 2025. This announcement, and the associated was introduced in October 2018 and consists shown any significant change in this behaviour I-SEM BALANCING MARKET in GB at 05:00 on 9 August 2019 when for the were generally significantly oversubscribed increased penetration of intermittent generation, of Day Ahead, Intraday and Balancing Markets. and is still fundamentally driven by the gas price One of the most significant changes introduced first time, over half (51.48%) of GB’s electricity forcing prices down. The latest T-1 capacity will lead to increased opportunities to provide 03 FINANCIAL STATEMENTS The most liquid of these markets has been the as can be seen from Figure 3, which shows how with the I-SEM trading rules has been the supply came from wind power. This record was auction for delivery in 2019–2020 concluded on system services. ESB began to explore how to Day-Ahead Market (DAM) where over 95% the DAM has tracked gas prices across the year. Balancing Market (BM). This market gives the TSO supported by the Hornsea One offshore wind 12 June 2019, resulting in the award of 3,626 maximise the value of its GB generation portfolio of market transactions took place. This trend However on a day by day basis several zero or flexibility to secure the system. Under the balancing farm (1,200 MW), which began supplying power MW of capacity at a record low price of £0.77/ through ancillary services contracts by the has continued in 2019, with supply companies negative price periods sustained over a number market the TSO takes control (after generators to the UK national electricity grid in February 2019. kW. No coal-fired generation was successful commissioning the 7 MW Millfarm battery project seeking to purchase their power requirements of hours coinciding with periods of high wind/low and suppliers have transacted) to ensure that in this auction, with gas-fired capacity securing in 2018, and it has continued to participate in and generators selling the vast majority of their demand (night time). supply meets demand when there is a deviation Year on year, coal generation volumes in GB 2,030 MW, interconnectors 1,025 MW, demand- the Firm Frequency Response market and the generation in the DAM. from the demand forecast or a change in generator continue to drop, with lower coal fleet generation side response 195 MW, waste-to-energy 264 Balancing Mechanism in 2019. Year on year, the 2019 DAM (see Figure 4) has output. Participation in the balancing mechanism volumes in 2019 compared to 2018 as a whole. MW, biofuels 76 MW and battery storage 8 MW. In 2019, 64% of metered generation (see figure decreased by €21% to an annual average value is mandatory for all generators who must submit The UK Government decision to close all coal 2) in I-SEM was met by fossil fuels, almost of €50.26/MWh, from €63.39/MWh, which has bids and offers in order for the TSO to be able to generation plants by 2025 coupled with the UK’s On 9 August 2019, the UK experienced a large exclusively gas while coal-fired generation has primarily been driven by decreased gas prices. move them from contracted positions if required to Carbon Price Support plays an important role in power outage, which resulted in over 1 million been out of merit for most of the year due to The year started off with a monthly average DAM maintain system integrity. driving this trend, which results in a substantially customers losing power and major disruption lower gas prices coupled with higher carbon price in January of just over €79/MWh, before higher effective carbon price relative to other to Friday evening rail services. The outage was prices. With large gas-fired units being the dropping steadily after Q1 in line with the fall in Volatility continues to be a feature of BM market European countries. The 2 GW Cottam coal caused by a combination of events in quick most efficient units on the system, the electricity gas price to c. €43/MWh. The year closed out pricing in 2019, as Figure 5 shows prices plant closed in September 2019, the 1.66 GW succession, starting with a lightning strike price has historically been very closely linked to with a monthly average price of €45.44/MWh reaching lows of -€200/MWh and highs in Aberthaw coal plant closed in December 2019, followed by two large generators dropping off the the wholesale gas price. Under I-SEM, the Day in December, compared to €75.50/MWh in excess of €500/MWh, and on occasion in excess while Fiddlers Ferry coal plant (1.4 GW) is due to system and back-up capacity not being sufficient Ahead Market (DAM) price on average has not December 2018. of €3,000/MWh. Trading periods in which the close in Quarter 1 2020. to stabilise the grid. 48 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 49

01 FINANCIAL REVIEW STRATEGY AND PERFORMANCE FIGURE 1: FIVE-YEAR SUMMARY

OPERATING PROFIT BEFORE CAPITAL EXPENDITURE2 € MILLION 2019 Operating Profit (before exceptional EXCEPTIONAL ITEMS1 € MILLION items) is up 50% on 2018, primarily HIGHLIGHTS reflecting improved energy margins from 1,242 our thermal gas plant, lower operating 1,165 682 costs reflecting reduced overhaul 635 897 597 867 873 spend, higher revenues in our Customer EBITDA Solutions business and foreign exchange. 455 490

Arising from our announcement to close €1,372 MILLION the midland peat stations at the end of Pat Fenlon 2020, the re-organisation of Moneypoint Executive Director, Group Finance arising from reduced coal running and the 2019 2018 2017 2016 2015 2019 2018 2017 2016 2015 and Commercial closure of North Wall power station an PROFIT AFTER TAX exceptional charge for related severance BEFORE EXCEPTIONAL 3 How would you describe financial and associated costs on these plants of ITEMS EBITDA € MILLION NET DEBT € MILLION performance in 2019? €60 million has been made. In addition, Q €419 MILLION ESB, Ireland’s leading energy utility, has a further impairment charge of €34 02 CORPORATE GOVERNANCE a stable business profile with over two million was made against shareholder 1,372 1,348 thirds of its earnings and assets accounted loans advanced to Tilbury Green Power 1,324 for by regulated electricity networks in Holdings Limited (a waste wood to 1,276 5,239 Ireland under established and transparent energy joint venture in GB). OPERATING PROFIT BEFORE EXCEPTIONAL 4,915 4,975 regulatory frameworks. In 2019 we delivered ITEMS 1,175 4,524 an improved financial performance following ESB invested €1,242 million in capital 4,377 profit reductions in 2017 and 2018 which expenditure in 2019. Almost 60% of €682 MILLION were both challenging years. As we which was invested in our two networks continue the transition to a low carbon businesses in line with agreed regulated future ESB delivered Earnings before capital programmes, including €64 million 2019 2018 2017 2016 2015 2019 2018 2017 2016 2015 Interest, Tax, Depreciation and Amortisation on Smart metering roll out in ROI. As part 2019 (EBITDA) of €1,372 million, Operating Profit of the transition to low-carbon generation DIVIDENDS before exceptional items of €682 million ESB invested €340 million in renewable 1. Before the following exceptional items: 2019: Severance and associated costs (€60 million) and Impairment charge (€34 million) 2018: impairment charge (€140 million) 2017: impairment charge (€276 million) 2015: impairment charge (€104 million) and capital investment of €1,242 million. generation projects. €88 MILLION 2. 2019 and 2018 Capex is gross of customer contributions for network connections Our gearing at the end of 2019 was at a 3. 2019 includes Lease liabilities (€132 million) relatively moderate level of 57% and during Notwithstanding the exceptional charge, 2019, ESB successfully issued Ireland’s as outlined above, ESB has delivered a first corporate public Green Bond. strong set of financial results in 2019, with Group EBITDA at €1,372 million, CAPITAL FIGURE 2: SUMMARISED INCOME STATEMENT Our 2019 performance reflects: a strong liquidity position of €1.5 billion EXPENDITURE 2019 2018 • ESB Networks and NIE Networks and credit ratings of A- or equivalent with REVENUE 03

€’m €’m FINANCIAL STATEMENTS continuing to deliver safe and reliable Standard & Poor’s and Moody’s (BBB+ €1,242 MILLION Revenue and other operating income before Revenue and other operating income 3,718 3,433 networks with significant capital and standalone). exceptional items at €3,718 million has maintenance programmes in accordance Operating costs* (3,036) (2,978) increased by €285 million compared to 2018 with their regulatory contracts; Operating profit 682 455 (€3,433 million). The increase is primarily • Generation and Trading (GT), operating RETURN ON Exceptional items (94) (140) driven by higher revenue in Customer Solutions successfully in the first full year of the CAPITAL EMPLOYED Operating profit after exceptional items 588 315 due to increased volumes and increased unit Integrated Single Electricity Market (I-SEM) rates arising from increased wholesale energy Net finance costs (167) (193) and delivering continued growth in our 5.9% prices in 2018. Fair value movements on financial instruments (16) (30) renewable portfolio (including further investment in offshore wind) with the 50% Share of equity accounted investees loss (8) (14) acquisition of the 448MW Neart na Gaoithe Profit before tax 397 78 project in GB; GEARING Tax charge (59) (18) • Customer Solutions continuing to Net debt divided by the sum of net assets Profit after tax 338 60 and gross debt (excluding joint ventures) innovate and create value for customers, *Includes non-exceptional impairments (see note 17) including the application of enduring long- 57% term savings to almost one million of its residential electricity and gas customers. 50 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 51

FIGURE 3: OPERATING COSTS 01 (EXCLUDING EXCEPTIONAL ITEMS) STRATEGY AND PERFORMANCE TAXATION FIGURE 5: RECONCILIATION OF ADJUSTED PROFIT BEFORE TAXATION 2019 2018 EXCEPTIONAL ITEMS EBITDA The higher tax charge of €59 million primarily €’m €’m In recent years the introduction of the I-SEM market Earnings before interest, taxation, depreciation, reflects the higher profit before tax outlined 2019 2018 Fuel and other energy and the growing volume of renewables on the impairments (including non-trading net impairment 1,287 1,141 above. ESB’s effective tax rate on profits before €’m €’m related costs system has led to a deterioration of margins in the losses on financial assets), amortisation and exceptional items has reduced due to a higher Profit before taxation 397 78 Depreciation and thermal fleet. In 2018 there was an exceptional revenue from supply contributions. proportion of profits in Ireland and a lower 806 779 amortisation impairment charge of €122 million relating to proportion of profits overseas. Further detail is Exceptional items 94 140 generation assets at Aghada Unit 2 (€87 million), EBITDA 2019 2018 included in note 20 to the financial statements. Fair value movement on RPI linked interest rate swaps 23 6 Employee costs 490 493 Synergen (€33 million) and (€2 million) across Operating Profit 588 315 Adjusted profit before taxation 514 224 Operating and 441 560 certain wind farms. In 2019 ESB closed North Exceptional items: SEGMENTAL PERFORMANCE Maintenance costs* 34 140 Wall, confirmed that there would be a cessation impairments The Group is organised into five main reportable Impairment (excluding of electricity generation from peat at Lough Ree segments or strategic divisions, which are 12 5 Depreciation 806 779 exceptional items) Power and West Offaly Power in the Midlands managed separately. Details on the financial Impairment (other) 12 5 3,036 2,978 at the end of 2020 and significantly rationalised performance of the business segments are FIGURE 6: TOTAL FINANCE COSTS Revenue from Supply operations at Moneypoint given reduced running (68) (64) included in the business unit review sections pages *Includes non-exceptional impairment of financial Contributions 2019 2018 assets (note 17) levels. 54 to 63 and in note 2 to the financial statements. EBITDA 1,372 1,175 €’m €’m Net interest on borrowings 152 177 OPERATING COSTS Arising from these re-structuring decisions ESB NET DEBT AND GEARING Financing charges 17 19 Overall operating costs before exceptional items at has recognised an exceptional severance provision ADJUSTED PROFIT BEFORE The increase in net debt to €5.2 billion in 2019 Finance income (2) (3) €3,036 million have increased by €58 million. of €55 million in respect of the expected costs TAXATION from €4.9 billion in 2018 reflects continued capital Net finance costs 167 193 02 • Fuel and other energy costs have increased by associated with the staff exits at these locations. Adjusted profit before taxation for 2019 is €514 investment, strengthening of GBP on sterling CORPORATE GOVERNANCE Inflation linked interest rate swaps 23 6 €146 million due to higher volumes in Customer Arising from the planned closure of the midland million (2018: €224 million). The variance relates denominated debt, inclusion of lease liabilities Fair value (gains) / losses on financial instruments (8) 24 Solutions. peat stations a charge of €5 million has been to the higher operating profit and lower total finance arising from the introduction of IFRS 16 ‘Leases’ in Total finance costs 182 223 • Depreciation is up by €27 million on 2018 included in operations and maintenance costs costs as described above and lower net finance 2019, finance costs, tax and dividend payments in reflecting a higher asset base in the Network representing ESB’s committed contribution to a costs (see figure 5). 2019 offset by positive EBITDA. businesses and the impact of IFRS 16 ‘Leases’ “Just Transition Fund” for the Midlands. offset by lower depreciation in GT business TOTAL FINANCE COSTS The gearing level has increased from 56% to 57% following 2018 exceptional impairments An impairment of €34 million (2018: €17.5 million) Total finance costs for 2019 are €41 million reflecting the higher net debt. FIGURE 7: SUMMARISED CASH FLOW STATEMENT • Employee costs are down €3 million as 2018 was also recognised in respect of loans advanced lower than 2018. The decrease in net interest non-exceptional severance costs have been to Tilbury Green Power Holdings Limited (a reflects lower average cost of debt following debt CAPITAL EXPENDITURE 2019 2018 offset by the impact of higher headcount joint venture waste wood to energy plant in GB) re-financing, in particular the re-financing of the Capital expenditure totalled €1,242 million in €’m €’m • Operating and maintenance costs have primarily due to the impact of technical issues on Carrington CCGT project finance debt in 2018. 2019 an increase of €77 million on 2018. Capital EBITDA (excluding exceptional items) 1,372 1,175 decreased by €119 million primarily due availability at the plant and lower GB spreads. The The primary decrease on the fair value loss on investment in the networks businesses continued Provision utilisation and other movements (91) (70) to lower plant overhaul costs, the impact of shareholder loans advanced have now been fully financial instruments relates to the settlement of in 2019 with €735 million (59% of the total capital Interest and tax (209) (264) IFRS 16 Leases (offset by depreciation), and provided for. the Carrington “out of the money” interest rate investment) invested in the networks infrastructure Net cash inflow from operating activities 1,072 841 non-cash foreign exchange translation gain on swaps which crystallised in 2018 when the project in ROI and Northern Ireland (NI) in line with agreed Sale proceeds 9 18 sterling denominated intercompany positions. OPERATING PROFIT financing was replaced with lower cost Group regulatory programmes. Capital expenditure and loans to equity accounted investees (1,157) (1,120) Operating profit before exceptional items has debt from the bond market. The movement on the Other 2 4 A breakdown of the operating costs by business increased by €227 million. The movement in inflation linked interest rate swaps is outlined on Expenditure in Generation and Trading in 2019 Net cash outflow from investing activities (1,146) (1,098) segment is provided in note 2 to the financial operating profit between 2018 and 2019 is set out page 176. Further detail is included in note 22 to amounted to €424 million (2018: €299 million). Net cash outflow from financing activities (34) (106) statements. in the reconciliation of operating profit in Figure 4. the financial statements. This expenditure primarily related to the continued Net increase/(decrease) in cash (108) (151) 03 FINANCIAL STATEMENTS investment in renewable generation including FIGURE 4 : RECONCILIATION OF OPERATING PROFIT 2018- 2019 €243 million in the 448 MW Neart na Gaoithe (GB) offshore windfarm and €97 million in the 114 FIGURE 8: CAPITAL EXPENDITURE MW Grousemount wind farm in Co.Kerry, which is 30 3 (27) 682 97 (94) expected to become fully operational by the start 124 588 of Q2 2020. Capital investment of €83 million in other segments includes various group projects 2019 581 424 154 83 455 such as the redevelopment of the Fitzwilliam Street Head Office and IT systems.

2018 590 299 171 105

0 200 400 600 800 1000 1200 1400 Operating Energy Net operating FX impact Employee Depreciation Operating Exceptional Operating margin and Cost profit 2018 profit 2019 item profit 2019 ■ ■ ■ ■ maintenance excluding including ESB NETWORKS GERERATION AND TRADING NIE NETWORKS OTHER SEGMENTS costs exceptional exceptional items items 52 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 53

01 STRATEGY AND PERFORMANCE TREASURY MANAGEMENT 2022, was the Group’s main source of standby By year end, the weighted average interest rate on matures, and is refinanced. Group Treasury monitors COUNTERPARTY RISK FINANCIAL REGULATION FRAMEWORK FOR TREASURY AND liquidity. At year end, negotiations to put in place Group borrowings had fallen to 3.0% (December market conditions closely in this regard and may seek The Group is exposed to credit risk in respect The regulatory environment for trading in financial of the counterparties with which it holds its TRADING OPERATIONS a new facility with a maturity of 2025 were at an 2018: 3.4%). In recent years the Group has been to pre-fund or pre-hedge future funding requirements and energy markets has become more complex bank accounts and trades with in financial and The main financial risks faced by the Group are: advanced stage. able to issue longer dated (10 to 20 year) bonds, if appropriate, subject to the necessary Board and in recent years, and the Group’s capability in this commodity markets. ESB policy is to limit exposure • Liquidity availability and maintenance of access reducing medium term refinancing risk. Around Shareholder approvals. regard has increased accordingly. The frequency to counterparties based on credit risk assessments. to the debt capital markets During 2019, despite sometimes volatile market a quarter of Group borrowings at 31 December Exposures and credit limits are subject to ongoing and scope of regulatory queries increased during • Foreign exchange volatility conditions, ESB raised over €600 million in new 2019 were repayable within 5 years, compared COMMODITY PRICE RISK review and monitoring in each business unit, and, 2019. Responding to queries from regulatory • Interest cost exposures on the Group’s borrowings. In January 2019 ESB issued a EUR to 42% at the end of 2016. This increase in the Fuel and carbon prices paid by ESB in connection at Group level, by the Group Trading Committee authorities and ensuring ongoing compliance projected future debt requirements €100 million 25-year bond with a coupon of 2%, average duration of the Group’s debt portfolio with its electricity generation activities can exhibit (GTC). Dealing activities are controlled by with financial regulation will continue to be an • Inflation movements, which have the potential to which extended the maturity profile of ESB’s debt (8.4 years at 31 December 2019) is consistent some volatility, depending on market conditions. In establishing dealing mandates with counterparties. area of focus in 2020. erode financial performance over time portfolio. In June 2019, following the launch of ESB’s with the long-term nature of Group assets. On 2019, coal use across Europe fell to historic lows. • Commodity price movements Green Bond Framework the previous month, the 21 January 2020, ESB successfully raised a European year-ahead coal prices are deflated, as Counterparty credit limits set by the GTC are OUTLOOK • Counterparty credit exposure, and counterparty Group issued a EUR €500 million 11-year Green STG£325 million, 1.875% fixed rate note maturing the penalty (i.e carbon price) for using the fuel has closely linked to their credit ratings as determined ESB’s position as Ireland’s leading energy utility, risk generally Bond with a fixed coupon of 1.125%. This was the on 21 July 2035. This transaction refinanced the increased, with the cost of carbon emission permits by the leading credit rating agencies, although its stable business profile and its solid financial • Operational risk, including risk of first ever Irish corporate public Green Bond. The STG£275 million 6.5% bond maturing in March in Ireland five times what it was in 2017. Stricter other factors, including security provided and the position ensures it is well placed to meet the misappropriation of funds, through fraud or error transaction was executed following an extensive 2020, which represented the majority of current clean-energy policies and an abundance of natural legal structure of the transaction, may also be challenges that lie ahead and to deliver its • Compliance with financial regulations European roadshow, involving more than 100 leading borrowings at 31 December 2019. gas also contributed to the reduction in coal usage. considered. The limit set for a counterparty is the Brighter Future strategy. investors and resulted in ESB’s lowest coupon ESB’s own coal-fired Moneypoint power station amount by which the sum of the settlement amount, Group Treasury is responsible for the day-to-day for a senior bond. There was strong participation FOREIGN EXCHANGE has had a reduced output over the past year, with a the mark to market value and the potential future treasury activities of the Group, and therefore for from socially responsible investors from a diverse AND INTEREST RATE RISK lower-running regime likely to persist into the future exposure may not be exceeded. These positions 02 the management, in whole or in part, of each of range of geographies, demonstrating confidence MANAGEMENT prior to eventual cessation of coal fired generation are reviewed on a regular (up to daily) basis. During CORPORATE GOVERNANCE these financial risks. Some of these risks can be in ESB’s Brighter Future Strategy and associated The Group’s business is primarily located in the by the middle of this decade. 2019, the majority of the Group’s fuel commodity mitigated using derivatives. Where this is the case, investment programme. A dedicated Green Finance Republic of Ireland and the United Kingdom (UK). trades by value were transacted through energy such instruments are executed in compliance Committee has been created to ensure compliance Accordingly, the majority of operating and investing The resulting exposures to fuel price movements market exchanges, rather than bilaterally. Exchange with the Specifications of the Minister for Finance with the Green Bond Framework and to oversee cash flows are denominated in euro or sterling. on future earnings are managed by ESB on a trading in general reduces, although it does not issued under the Financial Transactions of Certain the allocation of the net proceeds of this Green The main exceptions to this are coal purchases, selective-hedging basis. ESB has entered into eliminate, counterparty risk, as well as providing Companies and Other Bodies Act 1992. This Bond to eligible projects that are sustainable and which are generally denominated in US dollars, forward commodity price contracts in relation to trading liquidity and pricing transparency. Group Act enables ESB to enter into derivative contracts socially responsible in areas such as renewable and which are a declining element within ESB fuel gas, coal and carbon emissions allowances for Treasury hedging (regarding foreign exchange, to eliminate or reduce the risk of loss arising energy, energy efficiency, green buildings and clean mix. ESB’s policy is to hedge any material foreign up to three years ahead in order to reduce the interest rate, and inflation risk), continues to be from changes in interest rates, currency, inflation, transportation. currency exposures as they arise using currency Group’s exposure to movements in wholesale carried out bilaterally with rated relationship banks, commodity prices or other risk factors similar in derivatives such as FX forwards, at competitive electricity prices arising from such commodity through bilateral OTC contracts. nature. Cash flow hedge accounting treatment These public bond transactions enabled both the rates in the market. The maintenance by Group price fluctuations. The Group’s supply businesses under IFRS 9 was applied to the Group’s derivative growth of ESB’s portfolio of renewable assets Treasury of credit lines with a broad range of well- in Ireland and, increasingly, in Northern Ireland positions where feasible up to 31 December 2019, and the early repayment of a portion of ESB’s rated counterparties is essential to the execution and Great Britain, provide a natural hedge in this Even where hedge accounting treatment was not existing project finance debt. In November 2019 of this policy. respect. applied, these derivatives were still considered valid ESB acquired a 50% equity stake in the 448 MW economic hedges. offshore wind project, Neart na Gaoithe (NNG). At The Group’s policy is to finance its euro project financial close, NNG executed interest and denominated business by borrowing directly in The Finance and Investment Committee of the inflation linked swaps, de-risking the project from euro or to convert any foreign currency borrowing Board is updated on an ongoing basis on key movements in underlying rates. to euro using derivative instruments, such as cross treasury matters. Group Treasury’s approach currency swaps. Investments in the UK (including 03

* FINANCIAL STATEMENTS to the management of the key financial risks of FIGURE 9: LIQUIDITY NIE Networks) are generally funded by debt either FIGURE 10: ESB DEBT MATURITY PROFILE AS AT 31 DECEMBER 2019 ESB is set out in more detail within the Financial issued in, or swapped to, pounds sterling. At 31 €700m Risk Management and Fair Value note 28 in the December 2019 approximately 72% of ESB’s €600m Financial Statements. underlying debt is denominated in euro, with the Cash 8% remaining 28% in sterling. €500m LIQUIDITY AND FUNDING ACTIVITIES Group Treasury’s funding activities are of strategic The Group’s interest rate policy was last reviewed €400m importance to the Group, supporting ESB’s capital and updated by the Board in March 2019. Under expenditure programme, the refinancing of maturing this policy, ESB has a preference for fixed interest €300m debt, and the maintenance of an appropriate rate debt, and will target to have a significant €200m liquidity buffer to guard against future economic majority of its debt at fixed (or inflation linked) interest Committed shocks. rate to maturity, with a minimum of 60% fixed Facilities €100m 92% maintained at all times. At 31 December 2019, ESB had a strong liquidity position at 31 December approximately 95% of Group borrowings were fixed 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2044 2019 with almost €1.5 billion in cash and available to maturity, or inflation linked. The Group is however committed facilities. At 31 December 2019 ESB’s exposed to future interest rate movements which ■ EUR BONDS ■ PRIVATE PLACEMENTS ■ BILATERAL DEBT ■ GBP BONDS €1.44 billion Revolving Credit Facility, provided by may have an impact on the cost of future borrowing 14 relationship banks and extending out to January Available liquidity at 31 December 2019 (€1.5 billion) requirements, particularly as existing fixed rate debt *Cash flows associated with private placement repayments reflect hedging arrangements in place 54 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 55

UPDATE ON 2019 PRIORITIES AND PRIORITIES FOR 2020 01

GENERATION AND TRADING (GT) in July 2019, the planning application for West STRATEGY AND PERFORMANCE 2019 Priority 2019 Progress 2020 Priority Offaly Power was rejected by An Bord Pleanála. OPERATIONAL such as the decision to close the peat stations in 2020, • Optimising the operation of the ESB generation Following on from that decision, a review of the Continue to maintain a healthy and injury- • Phase 1 of Safe system of work started. • Continue to maintain a healthy and injury- overall the business was effective in managing this portfolio; options for both West Offaly Power and Lough free workplace. • Embedding of Process Safety . free workplace. transition. Key items of note were; • Delivering new energy assets to support the Ree Power stations post-2020 was carried out. Continuing to improve safety assurance. • Continued implementation of the safety culture • Commence phase 2 of Safe System • The enhancement of our approach to safety through transition to low-carbon energy; and Having considered the key planning, environmental Further embed process safety programme transformation project (Safe and Sound). of Work. the Safe & Sound programme • Engaging constructively in communities close to and commercial issues associated with peat and into the business. • Continue to improve safety assurance. • The delivery of financial targets for the year construction projects and operating assets. biomass, it has been concluded that there is no Continue with further implementation • Improve Process Safety performance in • Strong performance in plant reliability across the viable business model beyond 2020. As a result, groups in the Safe and Sound Programme. the business. portfolio and a successful first full year of operation in FINANCIAL PERFORMANCE both stations will close at the end of December • Continue with further implementation the new I-SEM market GT’s operating profit before exceptional items at 2020. groups in Safe and Sound Programme. • Ongoing realignment of our portfolio in terms of €198 million is up €161 million on 2018. This Safely build out the Grousemount and • The construction of the Oweninny wind • Safely complete final stages of build out Jim Dollard the closure of North Wall, the rationalisation of our primarily reflects higher margins in I-SEM gas GT CUSTOMERS Oweninny wind projects. farm (89 MW) was completed in 2019 with of the Grousemount wind project. commercial operation achieved in November • Oversee the initial stages of build out Executive Director operations in Corby and in particular the delivery plants and reduced operating expenditure (mainly GT continues to offer a variety of traded contracts 2019 and Grousemount wind farm (114 MW) of Neart na Gaoithe (NNG) offshore Generation and Trading of an agreement with our staff in Moneypoint to overhauls) offsetting the lower plant running in to all supply companies in I-SEM on a non- was substantially completed in 2019, with wind farm. rationalise the operation of the plant in light of the Moneypoint. Overall plant availability for the year was discriminatory basis via an over-the-counter trading commercial operation expected by the start What were the key achievements for significantly reduced running now expected in the 84.1% with a number of significant overhauls being platform in weekly trading windows. These trading of Q2 2020. Generation and Trading in 2019? market completed at Aghada, Dublin Bay and windows provide suppliers with the opportunity to Q Maintain a high level of performance in both • Annual availability of the generation fleet was • Maintain a high level of performance in There are two key achievements for the year; • The successful participation in I-SEM capacity stations in the year. GT has incurred an exceptional hedge their power exposures to mitigate against generation and trading lower than 2018 due to a number of technical both generation and trading. 1. Major progress in the delivery of GT's auctions and in particular the award of capacity charge of €94m in the year. The exceptional charge market volatility risk for their customers. Consolidate operations in I-SEM issues at Moneypoint. • Continue to evolve and adapt the renewable's strategy. ESB intends to have contracts for 600 MW of new capacity relates to the cost of severance schemes relating to • Improved trading performance in the first full thermal portfolio so that its commercial 02 3.5GW of renewables assets by 2030 and 2019 the restructuring of the Moneypoint plant, closure of PEOPLE year of operation of the new I-SEM market performance is maximised. CORPORATE GOVERNANCE has been a very positive year in meeting this How does the business help ESB fulfil its North Wall and also the planned closure of the two Employee numbers in GT at 914 are down on compared to 2018. objective. Q strategic and financial objectives? peat fired stations, West Offaly Power and Lough 2018 as the business continues to adapt and STRATEGIC • Delivery of 2 new major wind projects - ESB has a strategic objective to support the Ree Power in the midlands at the end of 2020. ESB evolve to the changing operating environment Increase the number of opportunities • Significant progress made in 2019 with the • Increase the number of opportunities Construction of Grousemount, ESB’s largest decarbonisation of the electricity sector. To meet this also impaired loans (€34 million) advanced to Tilbury brought about by higher renewables penetration for investment in low-carbon generation investments in NNG and Oriel wind farms. for investment in low-carbon generation The joint venture established with Coillte including solar and offshore wind. wind farm to date has progressed well, the 114 goal GT are investing in renewable energy assets Green Power Holdings Limited (an equity accounted and reduced running in certain generation stations. including solar and offshore wind. and partnership with Equinor will offer further MW project based on the Cork / Kerry border across a range of technologies including onshore and investee waste to energy plant located in the UK) GT continues to focus on maintaining the safe opportunities to explore in the future. Entered has made great progress and is on schedule to offshore wind and solar energy. GT are also developing due to delays in reaching commercial operation and effective performance of its asset base while into partnership with Parkwind on development be commissioned by the start of Q2 2020. The assets that will support the grid to transition to a low milestones and lower projected GB spreads. Capital delivering on its strategic goals. Health, safety and of Oriel amd Clogherhead offshore wind farms. 89 MW Oweninny wind farm in Co. Mayo was carbon future such as battery and storage assets and expenditure at €424 million is €125 million up on wellbeing is of fundamental importance and GT’s • Continuing development of up to 850 MW of brought into commercial operation late in 2019 flexible gas fired units that respond quickly to system 2018, primarily due to ESB’s investment in the safety improvement programme during 2019 wind generation in Scotland and 110MW of and is a great example of collaboration with our demand, which will be key to facilitating large scale 448 MW Neart Na Gaoithe offshore wind project was directed at embedding the process safety wind generation in Wales, in conjunction with joint venture partner Bord na Mona. renewables in the future. in the UK and the construction programme for the programme, increasing the focus on behavioural Coriolis and with REG Holdings, of which 150 • Development of a significant future pipeline of Grousemount windfarm (114 MW). safety through the Safe and Sound Programme, MW is now fully consented. onshore wind assets - ESB has announced its OPERATING PROFIT* and the promotion of health and wellbeing. The • Continuing development of potential Solar intention to partner with Coillte to create a joint OPERATING ENVIRONMENT Safe and Sound Programme is now up and running Projects, in conjunction with Terra Solar and by 2019 million means of joint ventures with Bord na Móna venture to develop onshore wind assets on €198 The Generation business has evolved rapidly in 14 locations across GT. All locations within GT • Development of potential flexible gas plants Coillte owned land in Ireland. In addition ESB 2018 over the last 20 years. Competition, regulation, are covered by externally-audited OHSAS-certified €37 million* and batteries in GB and ROI, with 10-year continues to grow a pipeline of c. 1 GW of and decarbonisation have significantly changed safety management systems for which accreditation €161 million capacity contracts achieved for a number of onshore wind assets in Scotland and Wales. the landscape creating a challenging operating was maintained in 2019, additionally five locations developments in ROI. 03 • Significant growth in ESB's footprint in offshore CAPITAL EXPENDITURE environment, particularly for thermal plants in the succeeded in moving accreditation from this • With the refusal of planning permission for • Manage the efficient and orderly closure Finalise plans for biomass conversion of FINANCIAL STATEMENTS wind. Building on the acquisition of a stake in market. Whilst commodity prices in general have standard to the replacement ISO450001 Standard. the Midland stations these stations in 2019, both stations will be of these stations. the Galloper windfarm in 2018, ESB acquired a 2019 €424 million fallen in 2019, carbon prices have increased Employee engagement is key to successful closed at the end of 2020. 50% shareholding in the Neart na Gaoithe 448 2018 markedly. This has directly impacted the economics performance for the GT business. During 2019, MW offshore wind farm project, located off the €299 million of coal fired generation and resulted in very low various business lines and stations have received €125 million east coast of Scotland. The construction phase running in 2019. The financial consequence of this or maintained the accredited quality standard for *before exceptional items of €94 million (2018: 140 of the project has commenced and ESB are million) reduction in coal generation has been mitigated Excellence Through People (ROI) and Investors in POWERING THE TRANSITION TO A Why did ESB invest in NNG? looking forward to partnering with EDF on this largely through hedging and increased generation People (UK). While working to increase diversity CLEAN ENERGY FUTURE Offshore wind is a key part of the ESB project. Offshore wind in Ireland is a key focus OVERVIEW from other elements of the GT generation portfolio. In and inclusion, GT's disability trainee programme Renewables strategy. Building on the recent for ESB. ESB is partnering with Parkwind in The GT business develops, operates and trades the light of the continuing challenges in the market for the recruited a further three employees in 2019. Neart na Gaoithe (NNG) investment in the Galloper offshore wind the development of the Oriel and Clogherhead output of ESB’s electricity generation assets. The thermal portfolio, GT are working towards ensuring NNG offshore wind farm will be located off the farm in 2018, this investment strengthens Wind farms and more recently GT has also portfolio consists of 5,520 MW of generation assets that the cost base is reflective of the business and at SUSTAINABILITY East coast of Scotland and will comprise 54 commitment at ESB to developing an offshore entered into key strategic partnering agreements across I-SEM and Great Britain (GB), with a further a sustainable level. GT operates its business with a focus on minimising turbines having a total capacity of c. 448 MW. wind portfolio in ESB’s core markets of Ireland with Equinor to co-develop offshore wind assets 338 MW under construction. With a strong focus on environmental impact, aiming to significantly increase It is a joint venture with EDF Renewables UK and Great Britain and NNG represents a solid in Ireland. safety, GT delivers value by: In addition to this, ESB’s peat-fired power stations renewable generation and reduce the overall carbon (EDF), with both EDF and ESB owning 50%. investment proposition in its own right. NNG • Providing wholesale and traded products to meet Lough Ree Power and West Offaly Power are intensity of electricity generation. ESB is committed to The project has secured a 15-year Contract for positions ESB well in delivering on the scale of 2. Effectively managing the transition of the market and customer needs; coming towards the end of their planning permission leading a secure and affordable transition away from Difference and is expected to reach commercial ambition in ESB's Brighter Future Strategy to operating business as it decarbonises - 2019 • Offering system services to support a robust in 2020. ESB had been working on extending the the use of coal and peat for power generation. CO2 operation by the end of 2022. significantly increase the volumes of zero-carbon presented a number of challenges to the business electricity grid and facilitate the integration of life of the stations beyond 2020 by developing a output from GT’s generation plants is lower than 2005 technologies in GT's generation portfolio. and while there have been some difficult outcomes renewables; phased transition from peat to biomass. However, (reference date) by approximately 59%, and the carbon intensity of generation reduced by 39% to 406 g/kWh. 56 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 57

01 engaged with a broad range of customers and ESB NETWORKS won the Shane Conlan Perpetual Trophy in ESB Sulphur Hexafluoride (SF6) as a safe insulator STRATEGY AND PERFORMANCE stakeholders through surveys, focus groups and Networks’ Apprentice Network Technician of the in switchgear. During 2019, ESB Networks OPERATING PROFIT workshops around the country. Discussions of ESB Year competition. deenergised older switchgear that was suffering Networks' investment plans and customers' views and leakages and continued to work to contain, reduce priorities, provided an important input to planning PR5. 2019 million SUSTAINABILITY and minimise the use of SF6. During 2019, ESB €344 • During 2019 ESB Networks prepared, and ESB Networks is committed to supporting the Networks signed up to the European Distribution 2018 €355 million published for a consultation a Strategic Stakeholder Irish Government’s target of 40% of energy System Operators’ Sustainable Grid Charter. (€11 million) Engagement Framework, setting out its approach to consumption coming from renewable sources by engaging with customers and stakeholders, together 2020. Some 550 MW of renewable generation CAPITAL EXPENDITURE POWERING THE TRANSITION TO with a Strategic Stakeholder Engagement Plan, setting was connected in 2019, bringing total renewable A CLEAN ENERGY FUTURE 2019 out specific areas of engagement activity over the generation connected to the network to over 4.6 million As part of the National Climate Action Plan, the €581 coming period. GW. During 2019, ESB Networks developed National Smart Metering programme installed Paddy Hayes Paul Mulvaney 2018 €590 million • In the first series of innovation events, ESB revised notification protocols in relation to leakages the first 15,000 meters in the Midlands (centred Managing Director Executive Director Networks hosted the 2019 Innovation Forum to from fluid filled cables with the relevant statutory around ) and in West Cork (centred ESB Networks DAC Customer Delivery, ESB Networks (€9 million) discuss strategies engaging with and recieving authorities, made significant progress on assessing around Bandon). Smart meters will allow REGULATED ASSET BASE (RAB) feedback from key stakeholders, including Industry potential environmental impact of historic leakages, customers to play their part in the low carbon What are the key achievements in 2019 Reacting to extreme weather: experts, government agencies and academia. and established a web page on www.esbnetworks. energy future, supporting the electrification of Several major storms occured in 2019 which required Q for ESB Networks? 2019 ie to provide public information in relation to fluid filled heat and transport, distributed generation and restoration responses from all teams in ESB Networks. €8.1 billion Connecting more renewable generation SAFETY cables. This web page will continue to be updated as microgeneration, and bringing benefits to both ESB Networks would like to thank our customers for ESB Networks connected 550 MW of renewable 2018 €7.9 billion ESB Networks is committed to protecting the safety, further reviews are undertaken. ESB Networks uses customers and the environment. their patience during the restoration effort for these generation to the network, of which 542 MW was €0.2 billion health and wellbeing of our employees, contracting 02 events. wind generation. In total, ESB Networks connected 31 partners, members of the public and others who may CORPORATE GOVERNANCE Commencing the roll-out of smart meters: UPDATE ON 2019 PRIORITIES AND PRIORITIES FOR 2020 separate generation projects to the network in 2019, FINANCIAL PERFORMANCE be affected by its activities. Implementation of the ESB Smart meters will be key to putting customers at bringing the total volume of renewables connected to ESB Networks operating profit for 2019 at €344 Networks Safety Strategy 2013-2019 was successfully 2019 Priority 2019 Progress 2020 Priority the centre of a sustainable energy future. ESB 4.6 GW of which over 4 GW is wind. million is down €11 million on 2018 mainly due to completed and the roll out of the Safe and Sound OPERATIONAL Networks successfully installed the first Smart Meter in Connecting more homes and businesses September 2019 and has continued to safely ramp up lower electricity volumes on the distribution network. safety culture transformation programme in all ESB ESB Networks’ Safety Strategy 2019– • The Safe & Sound safety culture • Build on the successful initial implementation ESB Networks connected over 30,206 homes and delivery with over 15,000 meters installed by the end Capital expenditure at €581 million is in line with Networks' locations was initiated. Safety engagement 2023 includes an organisation wide safety Transformation Project has been of the Safe and Sound safety culture culture programme: Safe & Sound. businesses this year, an increase of almost 12% of the year. 2018 with significant investment in delivering new and communications were important themes and the established and is vested in 31 Transformation Project to improve leading compared to 2018, and an increase of 24% compared connectors to homes, businesses and renewables, number of serious (P1) incidents and absenteeism due empowered leadership teams indicators for the safety of our employees, to 2017. How does ESB Networks fulfil its strategic delivery of the Smart Metering programme as well as to injuries both reduced in comparison to 2018. A full throughout ESB Networks. contract partners and the public. Supporting the widespread electrification of Qand financial objectives? renewal of the existing network. programme of competence and assurance auditing Facilitate the connection of more low- • 31 separate projects connected • Grow the capability for connecting and carbon electricity generation. adding 550 MW of low carbon accommodating even more renewables, transport and heat: In leading the transition to a low carbon future powered was completed, and following an external audit, ESB generation. consistent with the National Climate Action ESB Networks increased the design standards for new by secure and affordable clean electricity, ESB OPERATING ENVIRONMENT Networks was recommended for recertification to the Plan targets. connections at Low Voltage to provide the capability Networks continues to; The government’s REFIT programme, incentivised international safety standard OHSAS 18001. to support the electrification of heat and transport at • Connect greater volumes of renewable generation the delivery of a significant number of renewable In line with the PR4 contract, efficiently • During 2019 ESB Networks efficiently • n line with PR4 contract, efficiently deliver deliver transmission and distribution delivered €581 million of transmission transmission and distribution capital and domestic level. to decarbonise electricity; generation projects in 2019. In total, ESB Networks Public Safety capital and maintenance projects to and distribution capital projects. maintenance projects to reinforce the Responding to customers: • Develop the network to support widespread connected 550 MW of renewable generation, of • Public safety activities continued to be central to reinforce the resilience, performance resilience, performance and safety of the In 2019, ESB Networks successfully achieved the electrification, so that clean electricity can drive the which 542 MW was wind. the safe management of the network and the safe and safety of the network: and maximise Customer Contact Association (CCA) Global Standard network. decarbonisation of transport, heat and the economy; delivery of work programmes. These activities include networks utilisation and value for money. for Contact Centre performance. • Connect and respond to the changing needs of ESB NETWORKS’ CUSTOMERS hazard patrolling, media campaigns (TV, radio, print Facilitate the widespread electrification of • ESB Networks increased the design • Develop processes for enhancing the Consulting with customers and stakeholders: customers; Electricity customers are at the heart of all activities and digital), to increase public awareness of electricity, transport and heat, and the adoption of the standards for new connections at Low low voltage network for the seamless In 2019, ESB Networks increased the level of Clean Energy Package. • Reinforce and improve the resilience, performance for ESB Networks: including customers that use together with stakeholder engagement initiatives. Voltage to provide the capability to electrification of domestic transport while 03

engagement and consultation with customers and FINANCIAL STATEMENTS and safety of the network; and electricity, customers that supply or generate support the electrification of heat and enhancing customer continuity. stakeholders, particularly in relation to our Price Review electricity and customers that access our network for transport at domestic level. • Maximise networks utilisation and value for money PEOPLE 5 (PR5) proposals. the provision of services. for customers ESB Networks' 3,490 staff are vital to delivering ESB STRATEGIC Innovating for the future: Submit the 2021 – 2025 (PR5) • After widespread consultation and • Finalise, in agreement with CRU, a suite of ESB Networks’ challenge is to innovate further and Customer Interactions Networks strategy and meeting customer needs. investment plans to the CRU, detailing engagement, the 2021–2025 (PR5) financeable investment plans for the period faster. Throughout 2019, ESB Networks have been OVERVIEW Customers interact with ESB Networks across many It was affirming to see people from ESB Networks all capital investment and operational investment plans were submitted of 2021–2025 (PR5) consistent with the innovating with communities working on the smart ESB Networks is the licensed operator of the touchpoints including: being recognised by industry during 2019, including: expenditures and activities through this detailing proposals for facilitating a National Climate Action Plan, securing a electricity trial in Dingle, the smart city project in electricity distribution system in the Republic of Ireland • The Customer Care Centre: which deals with • Pat Horgan, ESB Networks Customer Contact critical period of the energy transition. secure, low-carbon future, protecting low-carbon future, protecting customers, Limerick City and the sustainable island community (ROI). With responsibility for building, operating, over 1.5 million calls per year, achieving customer Centre, was recognised in the Customer Service customers, and transforming the role and transforming the role of the Distribution in the Aran Islands. Innovation within ESB Networks' maintaining and developing the network and serving satisfaction ratings above 90% and in 2019 was Excellence Awards. of the Distribution System Operator, System Operator. Smart Metering Project won the award for “Intelligent all electricity customers across the country. ESB awarded the Customer Contact Association (CCA) • The ESB Networks Renewable North Team consistent with the National Climate Automation – Best Use of RPA & Cognitive” at the silver membership award for successfully achieving Networks also owns the Transmission System was recognised by the Sligo Business Awards for Plan. 2019 Artificial Intelligence Awards. Network in ROI, working closely with the Transmission the Global Standard for over 10 years. connecting of renewables. Reinforcing the network: • Social Media: where ESB Networks now has Deliver the Smart Metering project so that • The Smart Metering Project has made • Deliver phase II of the Smart Metering project System Operator, Eirgrid. ESB Networks invested customers can play their part in the low- Important projects to improve resilience, increase +48,000 Twitter and +30,000 Facebook followers, substantial progress during 2019 including 250,000 meter installations and €248 million in reinforcement, asset replacement Strong recruitment continued in 2019 with 121 carbon energy future. capacity and strengthen the network were completed achieving +19 million combined impressions, and with all key deliverables, including the the retail market services system required for and constructing new networks in 2019 whilst €118 new Network Technicians hired, 90 directly from in 2019 including new 110kV Stations as part of the ESB Networks' LinkedIn channel launched at the end installation of the first 15,000 meters, electricity supply companies to be able to million was spent on maintaining the existing network. ESB Networks’ Apprenticeship Programme. ESB Donegal Loop Reinforcement Project, energisation of 2019. achieved in line with project timelines. offer smart services in 2021. of the new Castlebaggot 220kV Station in Dublin, 2019 was the fourth year of the regulatory price Networks’ Apprenticeship recruitment campaign • Continue the transformation of ESB completing the major rebuild of Drybridge 110kV review period PR4 and ESB Networks has continued Engaging Widely in 2019 had another successful year with 83 apprentices Networks' environmental performance, Station in Louth, and uprating of 27km of the to make good progress on the approved investment • In preparing for the regulatory price control selected from over 6,800 applicants and a strong reducing the carbon footprint of operations Bellacorrick/Moy 110kV line in Mayo. and maintenance programmes. period covering 2021–2025 (PR5), ESB Networks increase in female participation rates. Caolán Carty and delivering on the Sustainable grid charter. 58 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 59

NORTHERN IRELAND ELECTRICITY NETWORKS (NIE NETWORKS) 01 STRATEGY AND PERFORMANCE UPDATE ON 2019 PRIORITIES AND PRIORITIES FOR 2020 readers, jointers to electrical engineers, and finance 2019 Priority 2019 Progress 2020 Priority 'Greater Access to the distribution Network' in 2019, FINANCIAL PERFORMANCE professionals to human resource experts. NIE OPERATIONAL seeking input from stakeholders and customers on NIE Networks’ operating profit for 2019 at Networks is an accredited 'Investors in People Gold exactly how its future model and operating structures €61 million is broadly in line with 2018. Capital Company'. NIE Networks engages annually with Ensure the health and safety of employees, • 3 lost time incidents. • Ensure the health and safety of contractors and the general public and • Retained both ISO accreditations employees, contractors and the might evolve. This consultation was well received and Expenditure at €154 million is down €17 million 18,000 young people in NI through the company’s achieve a zero-harm work environment • Implemented Health & Safety general public and achieve a zero- NIE Networks has now published its recommendations primarily due to a lower level of demand in the outreach and education initiatives, including as through implementation of injury and accident- management plan and Environmental harm work environment through paper on the pathway to DSO. NIE Networks is actively connections market. Investment in the network headline sponsor of Skills NI. free initiatives. management plan for 2019. implementation of injury and accident- engaging with the Department for the Economy and was in line with the level of expenditure required to free initiatives. • Implement a reduction in NIE other NI stakeholders on the development of a future successfully deliver the physical outputs specified in NIE Networks is striving to increase awareness of Networks' internal carbon footprint. energy framework for NI as well as implementing the current price control. 2019 capex was primarily the careers on offer within the energy industry and

an Innovation Strategy which seeks to meet the low related to the refurbishment and replacement of attract more female employees, through increasing Continue to consistently provide high • High customer satisfaction survey • Deliver a Customer Service Action Jerry O'Sullivan carbon future challenge head on by working with worn transmission and distribution assets to maintain awareness of STEM subjects, as well as strong standards in network performance and score following roll-out of Think Plan for 2020 that will drive further Deputy Chief Executive customers to provide faster, cheaper and smarter reliability of supply and ensure the safety of the partnerships with Women In Business and the customer service while delivering the RP6 Customer initiative. improvement in customer service and connection solutions. network. Institute of Directors. Since 2015, over one third of investment programme and the high level of • Continued management of outages to development of a customer centric generation connections. reduce customer minutes lost. culture. What were the key achievements in the company’s apprenticeship and graduate intake 2019 for NIE Networks? NIE Networks will be trialling six network innovation OPERATING ENVIRONMENT has been female. Q Operate successfully in a contestable • Retained significant market share while • Continue to operate successfully in a The Northern Ireland Strategic Energy Framework projects which are designed to create additional In 2019, NIE Networks has been focused on connections market. facilitating active competition and contestable connections market. 2010–2020 set an ambitious target for Renewable capacity on the distribution network at a lower cost implementing its RP6 plan, with 40% of the outputs NIE Networks has recently been awarded the Bronze customer choice. Energy Sources for Electricity (RES-E) of 40% than traditional reinforcement solutions and can be from the Network Investment Plan delivered to date. Diversity Charter Mark for its work in promoting Deliver RP6 programme while maintaining a • Substantial capital investment • Review business plans to 2024 and this was achieved in 2019. Latest figures deployed much faster in response to the forecast In line with targets set in the current price control, gender diversity. NIE Networks continues to invest safe and secure network (€154million) during 2019 with spend and the necessary slips to ensure 02 CORPORATE GOVERNANCE show that 45% of the total annual electricity changes in demand. This will help facilitate the NIE Networks reduced the number of customer in its people and was awarded Best Apprenticeship Deliver total expenditure in line with RP6 incurred in line with allowances. NIE Networks remain on track for consumption in Northern Ireland for the 12 months predicted high growth rate in the connection of complaints and overall customer minutes lost year Scheme for 2019 at the UK national Chartered allowances. successful delivery of RP6. ending September 2019 was generated from local low-carbon technologies such as electric vehicles, on year. Institute of Personnel and Development People STRATEGIC renewable sources. NIE Networks has played a photovoltaic cells, energy storage and heat pumps. Management Awards. Continue investment in employees through • Engagement with employees via a • Provide effective employee critical role in meeting the RES-E target by providing NIE NETWORKS’ CUSTOMERS effective employee development and number of forums throughout the year. engagement across the business the network connections for renewable generators OPERATING PROFIT NIE Networks has continued to manage outages in SUSTAINABILITY increased employee engagement with focus • Leadership capability across all levels through appropriate leadership and with a cumulative investment of over £365 million in order to minimise the length of time that customers NIE Networks is currently planning and working on on encouraging continuous improvement. enhanced through a variety of training communications. million and development initiatives. • Continue investment in employees the network to deliver these connections. 2019 €61 are off supply. The average number of customer over 50 new generation projects which will take • Awarded title of Best Apprenticeship through effective training and employee 2018 €62 million minutes lost due to planned interruptions to supply the total amount of renewable energy connected to Scheme for 2019 at CIPD People development. NIE Networks has continued to improve its network was 45 (2018: 41). The average number of minutes approximately 1,900 MW by the end of 2020, further Management Awards UK. (€1 million) performance and service to customers with another lost due to faults in the distribution network was 38 increasing the penetration of renewable energy. Continue effective engagement with key • Significant engagement undertaken • Continue effective engagement with significant reduction in Customer Minutes Lost (2018: 53). There were 2 complaints taken up by stakeholders. with customers and other stakeholders key stakeholders including consumer (CML) when compared to 2018, total CML in 2019 CAPITAL EXPENDITURE the Consumer Council for NI (CCNI) on behalf of NIE Networks has successfully connected in 2019. engagement advisory panel and other • Implementation of stakeholder customer representatives. represents the lowest on record. This has been customers during the year (2018:1). In the event of cumulatively over 20,000 customers who provide 2019 € million engagement strategy. achieved alongside the delivery of NIE Networks’ 154 a power cut or planned interruption to supply, NIE renewable generation capacity to the network, Continue to monitor funding market conditions • Funding requirements reviewed on a • Continue to monitor funding market RP6 commitments with an investment of over 2018 €171 million Networks offer a telephone information support significantly adding to the available market capacity. to assess optimal timing for next fund raising. regular basis. conditions to assess optimal timing for €100m in the network in 2019. (€17 million) service to customers who are dependent on life NIE Networks was awarded Platinum level for the next fund raising. supporting medical equipment. Over 10,000 people NI Environmental Benchmarking Survey for the third Prepare the network for transition to a low- • Actively involved in shaping NI energy • Contribute to the development of a NIE Networks continues to invest in its people REGULATED ASSET BASE (RAB) are currently registered on the company’s Medical consecutive year in 2019. The Survey recognises carbon future. policy. new energy policy for NI appropriate to and was awarded the title of Best Apprenticeship Customer Care Register. and rewards those organisations that are going • Trialling of six innovation projects achieve net zero carbon by 2050. designed to create distribution network Scheme for 2019 at the national Chartered 2019 billion above and beyond their legal requirements to 03 £1.6 capacity at a fraction of traditional FINANCIAL STATEMENTS Institute of Personnel and Development People 2018 Every customer is important to NIE Networks and improve their environmental impacts and better costs commenced. Management Awards UK. £1.5 billion in 2019 the company became an accredited 'Just manage their resources. NIE Networks continues £0.1 billion • Understand the impacts and A Minute' (JAM) Card friendly organisation. Over to lead the way in the industry, having been the only changes required going forward in How does the business help ESB fulfil OVERVIEW 90% of employees are trained to provide the highest utility to receive the Platinum accolade. a decarbonised, decentralised and Qits strategic and financial objectives? NIE Networks is the owner of the electricity standard of service to those customers with a digitised world evolving from a DNO to a DSO. NIE Networks is the owner of the electricity transmission and distribution networks in NI, learning difficulty, autism or communication barrier. transmission and distribution networks in Northern transporting electricity to over 880,000 customers Ireland (NI) and NIE Networks’ revenues are derived including homes, businesses and farms. NIE Networks’ SAFETY POWERING THE TRANSITION TO A pathways to 2050 net zero by assessing the primarily from its regulated businesses, significantly employees maintain and extend the electricity Ensuring the safety of employees, contractors and CLEAN ENERGY FURTURE deployment of various technologies such as increasing the proportion of ESB’s revenue from infrastructure across NI, connect customers to the the general public continues to be the number one NIE Networks are contributing to the development renewables, electric vehicles, photovoltaic cells, network and ensure that its equipment is safe and regulated businesses. value at the core of all NIE Networks’ operations. NIE of NI’s energy future as a member of the Energy energy storage and demand management. reliable. NIE Networks also provide electricity meters Strategy Electricity Stakeholder Group led by the Networks had 3 lost time incidents during the year and metering data to suppliers and market operators. Department for the Economy.The group is tasked NIE Networks is embarking on a journey to evolve (2018: 2). The aim is to provide a zero-harm working NIE Networks develops and reconfigures the electricity with actively contributing to the Department’s into a Distribution System Operator (DSO) meaning network to facilitate the connection of further renewable environment where risks to health and safety are ‘Northern Ireland Strategic Energy Framework to the company will be better placed to manage and generation. assessed and controlled. 2030’, which will define the government’s approach optimise the network for the future energy market to the evolution of the local energy sector over the in NI. As required under its regulatory licences, NIE Networks PEOPLE next decade, working towards a 2050 net zero is an independent business within ESB with its own NIE Networks employs a highly skilled work force of carbon economy. NIE Networks launched its consultation on the Board of Directors, management and employees. 1,208 people ranging from linespersons to meter NIE Networks are working collaboratively with other stakeholders to generate a range of different 60 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 61

01 • UPDATE ON 2019 PRIORITIES AND PRIORITIES FOR 2020 CUSTOMER SOLUTIONS Large energy users (LEU) across all jurisdictions STRATEGY AND PERFORMANCE are also seeking to improve their low carbon 2019 Priority 2019 Progress 2020 Priority credentials and deliver operational efficiencies, OPERATIONAL by creating innovative customer propositions, FINANCIAL PERFORMANCE leading to an increase in the number of energy • Deliver best in class digital customer • Delivery of Electric Ireland’s flexible • Deliver additional improvements providing technological solutions and investing in Revenue in Customer Solutions in 2019 was advisory companies operating in the LEU market. journey by improving personalisation, product manager provides customised to the online portals and prepare for the infrastructure that will enable society to transition €2.1 billion, an increase of 11% compared to online functionality, capability and insights analytics, market information and smart metering activation, improving to more efficient and more environmentally friendly 2018. This increase was driven predominantly by CUSTOMER SOLUTIONS' through continued investment in online empowerment to large energy customers. customer service and further empowering increasing volumes across all supply segments choices. CUSTOMERS portals. customers. as well as increased unit rates for residential In the 2019 Customer Experience Index Report, a • Strong and robust management of the • Cost management allowing for delivery • Deliver performance improvements electricity and gas customers arising from REVENUE cost base to allow Electric Ireland to deliver on commitment to reward loyal customers across the cost base to ensure Customer increased wholesale energy prices. Electric report which ranks all the main consumer brands on the price commitments across the with discounts every year. Solutions’ can continue to offer competitive Ireland’s overall market share increased by 1% in Ireland based on customers’ experience, Electric product and service range. pricing propositions for all customers. 2019 €2.1 billion during 2019 to 34% primarily as a result of Ireland again received the highest rating and was Marguerite Sayers customer gains in the industrial and commercial voted the customer champion in the Utilities sector. • Continue to deliver a customer focused • Range of products and payment plans • Continue to deliver a customer focused Executive Director 2018 €1.8 billion market sectors. Electric Ireland came top of Northern Ireland energy but effective credit management strategy in place coupled with proactive early but effective credit management strategy Customer Solutions and ensure vulnerable customers are €0.3 billion companies in 'Which magazines' annual energy interaction with customers. and ensure vulnerable customers are protected. • Disconnections of less than 20 per protected. What were the key achievements in Customer Solutions reported an operating profit customer satisfaction survey in September 2019. 10,000 customers, the lowest rate in • Ensure continued engagement with 2019 for Customer Solutions? OPERATING PROFIT of €59 million, this is a €16 million increase on Customer Solutions further developed its service Q recent years. state agencies and charities to support During 2019, Customer Solutions through its 2018’s financial performance. This increase was capability during 2019: driven by higher energy margin due to higher customers. brands Electric Ireland, ESB Energy, ESB Smart 2019 € • Smart Meters for residential customers in ROI are 59 million volumes compared to 2018 as well as the fact that • Deliver customers a range of innovative • Bundled electricity and gas offers • Deliver customers a range of Energy Services, eCars and ESB Telecoms being rolled-out as part of a national programme at 2018 €43 million profits were lower in 2018 due to the business products and services building on the including smart-home speakers and smart integration innovation products and continued to offer exceptional service and the end of 2020, and Electric Ireland has progressed 02 €16 million absorbing the cost of high energy prices for the Smarter Home offering. thermostats services. excellent value to all its customers. Specifically, 2018 winter months. the design of new products which will be enabled by • Heat Pump Solution products, and • Deliver the roll-out of high- power CORPORATE GOVERNANCE Electric Ireland continued to deliver on its value OVERVIEW the smart meters. EV charger installation propositions all charging hubs for EVs including commitment to residential customers by rewarding Customer Solutions brings together all of ESB’s • Smart Energy Services throughout 2019 have available to customers. replacement of standard chargers in line loyalty through competitive pricing and has now retail and business offerings in Ireland and GB, OPERATING ENVIRONMENT delivered bespoke solutions including low carbon with the Climate Action Plan. This will almost one million customers on automatically including Electric Ireland, ESB Energy, ESB Smart The energy retail market in ROI is a dynamic and heating projects, process re-engineering to reduce transform the driver experience for EV applied discounts which continue well beyond the Energy Services, ESB eCars and ESB Telecoms. competitive market with a high level of customer energy consumption and lighting upgrades in many owners across ROI. one year limit typical in the industry year after year. switching. Electric Ireland’s residential market customers’ premises STRATEGIC share increased in 2019. This was achieved Electric Ireland is the energy retail arm of ESB in • A contract to design and deliver heat pump and • Improving customer experience, • New eCars Connect App delivered to • through competitive pricing, excellent customer Customer Solutions business ongoing Business customers have also been offered a very ROI and Northern Ireland (NI), supplying electricity CHP installations for what will be the GB’s largest across all market segments, is of critical allow customers to make a journey using service, innovative products and commitment to focus on development of the digital service competitive range of products and services to and most sustainable commercial greenhouses in importance for Electric Ireland. Ongoing the upgraded public charging network. and energy services across the island as well as reward loyal customers with enduring discounts capability across the entire customer investment and development of digital manage their energy needs and improve energy gas in ROI. With over 1.4 million customers and year after year. Norfolk and Suffolk has been won by Smart Energy experience journey. efficiency. an electricity all-island residential market share of Services. This project is expected to deliver an capability is central to this. 34%, Electric Ireland serves all market segments, In NI, Electric Ireland competes with 4 suppliers estimated 1.2 million tonnes of carbon savings over • Electric Ireland will lead the way to a • Electric Ireland is on track to achieve its • Customer Solutions will lead the way, In GB, the ESB Energy business has grown to over from domestic households to large industrial and in the residential electricity market. The market the 20-year lifetime of the project. brighter future by focussing on delivering energy efficiency targets. encourage and reward more energy 110,000 customers by employing enhanced digital commercial businesses, in both ROI and NI, it also in NI is also competitive with all suppliers being on all energy efficiency targets as well as • Discounted All Electric Tariff available -efficient behaviours. offering customers new products and to customers with heat pump heating • SES will provide energy services offerings, and increased use of robotics as well as has 21% of the gas market in ROI. proactive with campaigns targeting acquisition and PEOPLE services to encourage more energy- systems. to customers by delivering low-carbon the deployment of gas and electricity smart meters customer retention. Customer Solutions’ could not meet its strategic efficient behaviours. • ESB Energy Electricity Tariffs 100% heat projects and growing offering of EV for the first time in 2019. ESB Energy is ESB’s electricity and gas retail and operational targets without the capability, green as standard. charging solutions. business in GB and launched in GB’s residential The GB market is intensely competitive which knowledge and performance of its employees, who • Continue to operate successfully within • Successful first year of trading and • Ensure value and stability for customers ESB Smart Energy Services have been successful market in 2017 and serves over 110,000 electricity has led to the “Big 6” incumbents losing share to are enthusiastic about delivering for customers in line the new I-SEM to competitively source operating within the I-SEM market by continuing to successfully manage in delivering over 145 Gigawatt hours of energy and gas residential customers. several mid- sized and small providers over the with ESB's Brighter Future objectives. 03

electricity for customers. ensuring market volatility was managed market liquidity and ensure effective FINANCIAL STATEMENTS savings across over 250 industrial and commercial last number of years. ESB Energy is constantly and ensured price stability for customers hedging of wholesale market risk. customers in Great Britain and Ireland. ESB eCars builds, owns and operates electric enhancing its digital capability with the aim of A continued strong focus on employee development • Electric Ireland will continue to grow • Significant growth within the NI & GB • Continue to grow our brands, offerings vehicles (EV) charging networks for public use being the most innovative, responsible and easy to and targeted recruitment across a range of brand and market share within the ROI and market by Electric Ireland and ESB Energy and market shares across the NI and GB ESB eCars was awarded €10 million under across ROI, NI and GB. This network contains over deal with energy supplier in GB. disciplines linked to the growth strategy will ensure NI market and also in GB through ESB • Provided the public charging network markets the Climate Action Plan by the Department 1,100 chargers on the island of Ireland, as well as that Customer Solutions continues to be a very Energy. across London, Coventry and Birmingham of Communications Climate Action and the 110 chargers in GB. The emergence of digitisation, increasing attractive place to work, while providing customers Environment and has commenced an upgrade of public interest in climate change issues and with competitive offerings, excellent customer service its public network to facilitate reliable rapid charging ESB Telecoms operates within the wholesale improvements in technology have resulted in a and new and innovative products to meet changing POWERING THE TRANSITION TO A quality and reduce emissions in the transport of electric cars as a significant step to support ROI Telecoms market, maintaining and operating step change in the range of services which are of needs. CLEAN ENERGY FUTURE sector. EVs are expected to account for circa electrification of transport in the Republic of Ireland circa 370 telecoms transmission towers and over interest to customers: 40% of cars in Ireland in 2030 and so ESB (ROI). 1,800km of fibre optic network. • For residential customers, smart energy SUSTAINABILITY Customer Solutions is the retail customer face eCars are now upgrading and extending the controls, smart security systems, peace of mind Electric Ireland is conscious of operating its business of the ESB business, providing smart energy national network of public EV chargers in Ireland How does the business help ESB ESB Smart Energy Services (SES) develops and services and data analysis tools are all becoming in a sustainable and environmentally responsible solutions to help our customers consume energy in anticipation of the growth in the electric car Qto fulfil its strategic and financial delivers integrated management solutions for part of customer propositions offered by utilities. way and is certified to ISO 14001 standard. Electric efficiently, as well as creating e-transport and market. objectives? large energy users in the UK and Ireland. Working • Within e-transport, the Climate Action Plan in Ireland actively works with customers to assist them e-heating propositions. Providing customers with the excellent services and in partnership with customers, SES designs, Ireland is targeting to increase the number of EVs in improving the sustainability of their homes and products has always been integral to the financial develops and delivers tailored solutions delivering in ROI to 950,000 by 2030. In GB, the public businesses through the efficient use of the energy Electric vehicles (EV) provide the most and strategic success of ESB. Customer Solutions energy efficiency, on site generation and demand electricity charging market is very active, with circa provided to them. commercial-available technology to improve air is also pivotal to driving national decarbonisation management technologies. 35 companies offering EV charging. 62 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 63

01

ENGINEERING AND MAJOR PROJECTS ENTERPRISE SERVICES STRATEGY AND PERFORMANCE

OVERVIEW

ESB International significantly completed the maintenance of existing assets across the Working in collaboration and partnership with As ESB’s internal service provider, Enterprise construction and commissioning of a 1.8 GW ESB Group, and work with Group Property the rest of ESB Group, Enterprise Services has Services enables ESB’s Brighter Future Strategy gas fired 'H' class power plant for Aluminium and Security and ESB International. an essential role to play in the delivery of ESB’s by leading, advising and delivering in its core Bahrain (Alba) that powers the largest smelter Brighter Future Strategy through a continued areas of expertise. Enterprise Services is: in the Middle East region. MAJOR PROJECT DELIVERY focus on operational/performance excellence There are separate functional areas within including cost leadership, process improvement • The strategic advisor to ESB Group in relation How does the business help ESB EMP with responsibility for generation leveraging centralised capabilities and technology to core Enterprise Services Qfulfil its strategic and financial projects and networks projects. These work leadership. • Responsible for providing business critical objectives? with the respective businesses and are processes and services to the rest of ESB Engineering and Major Project delivery bring building an enhanced capability to ensure Geraldine Heavey Group through its two delivery arms, Business Nicholas Tarrant the Brighter Future Strategy to life by delivery these projects are delivered and that ESB Executive Director Enterprise Operations and IT Delivery; and Executive Director Engineering of major projects and engineering solutions reaches the goals set out in the Brighter Services • Responsible for leading the digital and Major Projects (EMP) which enable the production, connection and Future strategy. transformation of ESB Group, as well as delivery of low-carbon electricity. What are the key achievements in leading process improvement across ESB. What are the key achievements in GROUP PROPERTY AND SECURITY Q 2019 of Enterprise Services? Q 2019 for EMP? Whether it is new wind farms, electricity Group Property and Security (GP&S) As the provider of a wide range of key business An overview of Enterprise Services’ functions is Engineering and Major Projects (EMP) was transmission or distribution projects, or manages ESB’s property portfolio. processes and services across ESB Group, summarised below: 02

established in 2018 following an internal re- technologies such as biomass, battery storage The flagship project for GP&S is the Enterprise Services’ achievements in 2019 included: CORPORATE GOVERNANCE organisation to effectively support the delivery or flexible power generation, a commercial development of ESB’s head office in FUNCTIONS AND PURPOSES FOR 2020 of ESB’s Brighter Future Strategy. Its purpose engineering capability is a core requirement Fitzwilliam St., Dublin 2. • Leading the IT direction of ESB Group, Function Purpose is to deliver the major projects and engineering for ESB. This capability also supports the ensuring excellent IT system availability including Legal The role of Legal is to provide legal advice and transactional services across a solutions required by ESB and its customers to ongoing maintenance of existing infrastructure, ESB commenced redevelopment of its management of cyber security risks and delivery of wide range of practice areas and to advise on legal risks across ESB Group. lead the transition to reliable, affordable and low- ensuring that these generation and network Fitzwilliam Street site in Dublin 2 in June the digital strategy carbon energy. EMP aims to ensure consistent assets perform efficiently throughout their lives 2017 and work progressed well during • Successfully managing IT programmes and best practice major project delivery across ESB to meet customer and market needs. 2019. This new 45,000 m² development projects; across the ESB Group Procurement The role of Procurement is to manage all procurement activity across ESB and to provide a centre of engineering to drive will deliver a near-zero energy building, • Providing the professional services necessary to Group while observing regulatory requirements. This includes development of ESB’s Brighter Future strategic objective to The aim of a centralised approach to one of the most efficient and sustainable support strategic business decisions and procurement strategy, policies and procedures, strategic procurement planning enable the production, connection and delivery of major project delivery is to deliver projects commercial office developments in Dublin • Managing all financial and people operations for and tendering services. low-carbon electricity. efficiently, which supports ESB’s financial city, while sensitively respecting and ESB Group. Pensions & Insurance The role of Pensions & Insurance is to manage all pensions and insurance objectives. This approach is based on enhancing the Georgian streetscape. The activities across ESB Group. This includes development of strategies, provision Working with Generation and Trading, the having best practice project and contract project involves the demolition of the existing How does Enterprise Services help of expert advice and risk management. It also manages staff insurance services construction and commercial operation of management capability that can be applied buildings, the retention and refurbishment of Q ESB fulfil its strategic and financial and the Medical Provident Fund. Oweninny 89 MW wind farm was completed, across the Group, while observing regulatory a number of protected Georgian structures objectives? Operational Excellence The role of Operational Excellence is to deliver process improvement projects a joint venture with Bord Na Mona, and the requirements. and the construction of a new seven-storey and drive a culture of continuous improvement across ESB Group. construction delivery of Grousemount 114 office block. Enterprise Services’ purpose is to enable ESB’s MW wind farm was significantly progressed. OVERVIEW Brighter Future Strategy by leading, advising and EMP also successfully managed the generation ESB INTERNATIONAL delivering in its core areas of expertise. Enterprise CIO The role of CIO is to shape world-class technology solutions that enable maintenance outage programme during 2019 in The EMP business provides a centre of ESB International, a global provider of Services’ strategic priorities are: business growth and efficiencies and to oversee cyber security. This includes 03 FINANCIAL STATEMENTS collaboration with Generation and Trading. engineering for ESB, delivers large projects engineering consultancy services, is leading the transformation of ESB Group from an IT, Digital and Analytics perspective. across the ESB Group, is responsible for currently working in the Middle East, Africa • Delivery of strategic advisory, business process Working with ESB Networks, a number of ESB’S Group Property and Security portfolio, and the Far East. It also continues to work and IT services effectively and efficiently so as IT Delivery The role of IT Delivery is to implement, scale and support IT and Digital projects, products and services and manage cyber security. large projects, including construction delivery and provides engineering and other services to across Europe including Ireland and the UK. to enable strategy delivery and support ESB’s of the North South interconnector project, external clients through ESB International. The During 2019, ESB International significantly financial objectives across ESB Group. are now under the responsibility of EMP. The business has over 800 people who work in completed the Alba CCGT project in • Accelerating delivery of digital and analytics Business Operations The role of Business Operations is to provide core business support functions delivery of major projects by EMP and other partnership with other business areas in ESB Bahrain. ESB International’s services are across ESB Group as an enabler of business such as people operations, finance operations, treasury operations, requisition work programmes by ESB Networks Customer and deliver engineering services to external strongly linked to ESB’s engineering, transformation and performance. to pay, facilities, as well as customer support. Delivery will maximise the delivery of the overall clients both at home and internationally. management and project delivery capabilities • Driving performance improvement and operational ESB Networks’ work programme. and allows it to bring these capabilities to / performance excellence across all parts of CENTRE OF ENGINEERING international clients. Enterprise Services; and Under Group Property and Security, the The Centre of Engineering includes civil • Continuing to build an engaged, safe and redevelopment of ESB’s head office, Project and environmental, networks and generation collaborative team. Fitzwilliam, progressed well during the year. engineering, and asset management services. ESB International continued the provision of a These engineering functions are involved A critical element in the successful delivery of range of engineering, operations and maintenance in new development projects from concept Enterprise Services’ strategic and operational solutions and consultancy services across a range through to construction and commissioning. priorities is the capability, knowledge and of national and international clients. During 2019, They also support the operation and performance of its employees. 64 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 64 ESB Annual Report 2019 65

01 STRATEGY AND PERFORMANCE

02 CORPORATE GOVERNANCE

66 Overview 66 People 68 Safety 70 Corporate Social Responsibility 73 Environment & Sustainability 76 Using our Profits in a Sustainable Way

03 FINANCIAL STATEMENTS 66 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 67

01

OVERVIEW STRATEGY AND PERFORMANCE culture and enabling ESB's leaders to set the tone for inclusion is an important driver for In our new operating model, we have brought this. In 2019 ESB's Senior Managers and HR together our HR, safety and sustainability Business Partners participated in an Inclusive functions. This year we leveraged this Leadership development programme. partnership by ensuring that our safe behaviours • Coaching and supporting people to programme, Safe & Sound, is integrated with reach their potential and enable collective our overall cultural development programme performance is key to ESB's success as a for those business areas with high-risk safety business and as individuals. In 2019 ESB environments. developed a new approach to managing performance through people, introducing the Pat Naughton Looking forward to 2020 as our industry OKR (Objectives & Key Results) methodology Executive Director, People and continues to evolve, the impact on capability which improved alignment of objectives with Organisation Development and development and the pace of change strategy. For 2020, ESB is building on this by therein will see ESB take a changed approach bringing an enhanced focus on behaviours to both resource assurance and learning & and how ESB works together as well as what This has been the first year of ESB’s new development. We will continue to work on ESB delivers. operating model, following a review in 2018 reshaping our culture and bringing an ongoing • Senior management leadership is critical to to align the organisation for delivery of our focus to performance, enabled through an setting and evolving ESB's culture. In 2019 Strategy for a Brighter Future. 2019 has been inclusive and connected employee experience. ESB brought together all senior managers in a 02

an important year in mobilising the organisation series of workshops to focus on their personal CORPORATE GOVERNANCE around our ambition. The development of our role in leading out on the Way We Work. People Strategy has brought a focus to the • Understanding how it feels to work at capability we need to succeed in a changing ESB and the impact that leader and manager context, and to the need to evolve our culture Pat Naughton, behaviours are having, is critical to ensuring of events held across ESB to celebrate WORKFORCE RENEWAL ACROSS • The Networks Apprentice Programme to deliver the performance required for our Executive Director. ESB is making progress. In 2019, ESB International Women’s Day - Balance for Better ESB to develop Network Technicians for ESB business to succeed. This strategy is built People and Organisation Development introduced a new approach to employee – Brighter Future, Performance, Impact and Over 2019, ESB continued to recruit across Networks, brought 83 people at a variety of on the foundation of our One HR model – a surveying using a digital platform to provide Success a number of key areas to ensure the capability levels including school leavers and graduates single people strategy for a single workforce. real-time people insights for managers. • Over the summer months, ESB partnered needed to deliver the Strategy for a Brighter into their first year of the 4-year programme. In PEOPLE This feedback will help managers to shape with EY to conduct a diagnostic of inclusion Future. addition, 10 apprentices were taken on in the Our values of being courageous, caring, driven a positive workplace culture and improve and diversity across ESB. This involved a field of finance and information technology. and trusted are the foundation for everything employee engagement. companywide survey, interviews with leaders, • Through the Graduate Recruitment • 121 new Network Technicians were recruited PEOPLE we do. In 2019, we began to execute our • Through the Way We Work, ESB will bring several employee focus groups and analysis Programme ESB recruited 77 people across in 2019 – 90 from ESB Networks Apprentice People Strategy by using these values to The Way We Work at ESB is a programme, a renewed focus to low-carbon leadership, of policies, procedures and processes to Engineering, Finance, HR, IT and Business Programme and 31 from outside industry. define and shape the culture we need to designed to guide the evolution of the culture by engaging its employees on leading and determine ESB's level of maturity in this area. realise our strategy and deliver a brighter across ESB, by enabling an employee enabling the transition to a low-carbon future. Through this ESB has identified where it is 2019 2018 future for those we serve. This has led to the experience to support performance at every ESB will bring this to life through initiatives strong and where more attention is needed, development of a programme to support this level. on electric cars and e-heat, which will see its to bring ESB to the next level of maturity. This cultural evolution called The Way We Work • ESB's values are the foundation of this employees in the position of advocates for a diagnostic will support the development of Average Number of 7,874 at ESB, which brings together a number of programme and they have been brought to low-carbon future. a comprehensive strategy on inclusion and Employees 7,974 elements in support of changing behaviours life for employees through a range of supports diversity in 2020. 03 FINANCIAL STATEMENTS and a connected employee experience to including a film and a guide for employees on INCLUSION & DIVERSITY AT ESB • As part of the Way We Work programme, enable our people to thrive. what these values mean and how they translate • Inclusion continues to be an area of focus Senior Managers and HR Business into the way we work. For managers, ESB and development for ESB. Partners participated in Inclusive Leadership Female 25% 24% We know that tone starts at the top and has provided a set of supports to help team • Throughout 2019, over 650 employees Development in 2019 significant effort has been deployed in engagement on how it works based on ESB's participated in BeMe@ESB’s Ally Awareness enabling our senior leadership to be proactive values. Programme. In June, highest ever numbers LEADERSHIP PROFILE and accountable in leading on this cultural • ESB has identified and called out a set of of employees, allies, friends and family took Following the development of ESB's People Senior Management Level change. The capability of our people mindsets for success – these are attributes and part in Dublin Pride to show ESB's support Strategy and the definition of the culture it 25% Female 30% managers at every level in the organisation is behaviours which are critical to delivering ESB's for LGBT+ colleagues. ESB was represented needs for success, ESB has developed a critical to making change happen. 2019 saw strategy and purpose. They are Performance, on Allies for Inclusion Panel discussion at leadership profile that articulates what this us enhance our Management Development Customer Centricity, Collaboration, Innovation OUTStanding Ireland members’ event. means for leaders in ESB. This provides a Framework to align with our strategy and the and Agility. Through the Way We Work at • ESB’s Managing Successful Parenting unifying framework for leadership development Employees with 3% need for a performance ethos in every team. ESB, ESB aims to foster and enhance these Transitions programme continues to go across the company and has informed the Disabilities* 3% This refocussed management development mindsets. from strength to strength and was awarded development of a leadership programme for will be deployed in 2020 and will include • Using the values, ESB is developing Our PWN Global Gender Balanced Leadership - Middle and Front-Line Managers which will be learning to use digitally-enabled people Code, an engaging and values-led approach to Training Initiative Award in October. delivered in 2020 and the selection of senior Average number of employees by business unit is included in note 9 of the financial insights to drive change. defining ethical behaviour to support a positive ESB's growing numbers of female apprentices managers in the organisation. statements. culture. and colleagues attended one of a number * ESB continues to exceed the 3% employment target for people with disabilities as set out • Inclusion is at the heart of a performance in the Disability Act 2005. 68 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 69

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SAFETY STRATEGY AND PERFORMANCE

OVERVIEW supervisor, team leader and employee. The The month on month differences in LTIs investigated to determine their root causes. • the establishment of a strong, full time, Health & Wellbeing Roadshows have also ESB’s Board, management and employees Health, Safety and Environment Committee demonstrates the random nature of these The most significant safety risks arising from Safe and Sound Coach Team (15 in taken place to ensure all employees are aware are committed to protecting the health and supports the Board’s monitoring and governance incidents. LTIs are occupational injuries which high potential incidents for ESB are: public/ total), providing Safe and Sound coaching of the services and supports available and safety of employees, customers, contractors of health, safety and wellbeing. Further details of result in at least one day’s absence from work, third parties, electricity, driving and transport support to the Leadership Teams, while also to enable them avail of health screening and and the people ESB serves; their safety is the Health, Safety and Environment Committee not including the day that the injury occurred. The and human behaviour which accounted for conducting Safe and Sound engagement attend proactive health & wellbeing seminars. always considered first in business actions are outlined on page 101. linear trend in all graphs is the mean average for 67% of all P1 incidents. sessions with staff (to encourage Staff to talk ESB continues to provide access to a digital and activities. ESB believes that all operational that indicator. about what Safe and Sound means to them); health and wellbeing tool. processes can be designed and operated in SAFETY PERFORMANCE IN 2019 A good catch is when someone intervenes • and the delivery of leadership development • The following Enterprise health and safety a safe manner. This belief guides its approach High Potential Incidents (P1) when they observe an unsafe act or unsafe training sessions - working with managers, risks are communicated to the Board and to safety across all business activities and is Lost Time injuries In addition to focusing on LTIs, ESB categorises condition, and helps prevent a safety incident supervisors and leadership Teams, supporting managed through a number of programmes: reinforced through strong and visible leadership The number of lost time injuries (LTIs) in 2019 all injurious incidents and near misses with a from occurring. Good catches are a key them develop the leadership skills required to electricity, driving, working at height, objects throughout the Group. was 65 compared to 69 in 2018, 63 in 2017 particular focus on high potential incidents that element in helping ESB achieve world class realize the Safe and Sound vision. falling from height, load handling, tools, plant and 72 in 2016. The majority of these injuries could lead to more serious outcomes. In 2019, performance. The final number of good catches & equipment, other hazardous energies, The Chief Executive has overall responsibility for were of low severity as indicated by the lower 138 high potential incidents were recorded. recorded by employees for 2019 was 11,901, HEALTH AND WELLBEING physical, chemical & biological hazards, fire the management of health, safety and wellbeing number of injuries that necessitated reporting Although this is a higher number than in 2018, an increase of 435 on the 2018 outcome. ESB is committed to proactively supporting & explosion, slips, trips & falls, lone working, in ESB. The ESB Group Safety Statement, to the statutory authorities. The most common the linear trend (see figure 2) for these incidents its employees in maintaining good health and stress and third party sites. as approved by its Board, sets out the overall causes of LTIs are slips and trips, road traffic is decreasing over the years 2016 to 2019. The There was one fatality when a member of wellbeing. ESB’s Health and Wellbeing team • Implementation of company-wide Fire policy and general arrangements in ensuring the collisions, other movements of the person, and totals for each previous year were; 2018 (102), the public was fatally injured when flying a helps its employees to reach their full potential Safety Review recommendations commenced health, safety and wellbeing of all employees. loss of control of the object the person was 2017 (163) and 2016 (255). micro-light plane near to overhead electricity in the workplace by providing proactive, during the year. 02

Functional responsibility is shared with all senior working on. Together these accounted for 71% networks. Investigations into the cause of the preventative and early intervention health and • Delivery of the Public Safety Strategy CORPORATE GOVERNANCE management and, in turn, with each manager, of all LTIs. All high potential incidents and LTIs are tragic accident are being carried out by the Air wellbeing services. It provides information and and Action Plan continued in 2019 with Accident Investigation Unit of the Department advice to employees to help them to create active engagement with stakeholders in the FIGURE 1: LTI TREND 2017-2019 of Transport, and separately by ESB Networks. and maintain a healthy lifestyle. The programme construction, farming and education sectors. There was also a significant near miss incident provides effective support where employees The revised and updated Code of Practice for 12 which involved a member of the public who face ill health and other personal life challenges Avoiding Danger from Overhead Electricity was attempting to retrieve a drone that was through an occupational health medical service, Lines was published with H.S.A. approval 10 caught in overhead electrical networks. The an Employee Assistance Programme (EAP), an and, together with the accompanying video 8 individual was very fortunate not to have been independent counselling service and through a is an important contribution to improving 6 fatally injured. range of other support measures. safety in the construction sector. TV, radio 4 and social media campaigns targeted the 2 ESB continues to focus on reducing risks KEY INITIATIVES AND risks associated when working near overhead in the business that give rise to injurious PROGRAMMES IMPLEMENTED and underground electricity networks, as well 0 incidents. Improvement plans, projects, training OR CONTINUED IN 2019 as risks with activities such as flying drones. and audit programmes, with a focus on injury • All ESB business units have health and The sponsorship of RTE Radio 1 weather prevention are maintained. safety management systems in place, many was used to highlight risks associated with JUL2017 JUL 2019 JUL 2018 JAN 2019 JAN 2018 JAN 2017 SEP 2019 SEP 2018 SEP 2018 SEP 2017 MAY 2019 MAY MAY 2018 MAY MAY 2017 MAY NOV 2019 NOV 2018 NOV 2017 MAR 2019 MAR 2018 MAR 2017 of which are externally verified and certified to the dangers of fallen wires especially during SAFE AND SOUND Total LTIs Linear (Total LTIs) the International ISO 45001, OHSAS 18001 storms and when operating tall machinery The focus of the Safety Culture Transformation standards or equivalent. near electricity networks. The ‘Stay Safe-Stay (‘Safe and Sound’) programme is to establish • ESB continued to progress and monitor Clear’ primary schools programme attracted a culture where safety is central to everything leading indicators of safety and health a large number of entries with regional and 03

FIGURE 2: HIGH POTENTIAL INCIDENTS TREND (P1) 2017-2019 FINANCIAL STATEMENTS ESB does, where there is a mind-set that performance. These are Good Catches, national winners recognised. 30 is intolerant of incidents and injuries, where Leadership Conversations, P1 Investigation, P1 employees take responsibility and care for Action closure and Audit non-conformances. their own safety and for those around them, • ESB continued to make progress in 2019 25 where they speak up when they see something on improving its safety performance through unsafe, where they choose to follow the safety delivery of key improvement projects in ESB 20 rules, where they are compliant, where they Networks and in Generation and Trading. implement sensible safety systems and where • Safety Assurance Audits against our Policy 15 they take pride in their achievements. and Standards were completed in ESB There was significant progress in the key Safe Networks, Generation and Trading, and in 10 and Sound programme modules in 2019. Engineering and Major projects. • In recognition of the diversity of employees 5 The key highlights include: and their wellbeing needs, ESB developed • establishment of 48 Leadership Teams a new Health and Wellbeing Strategy. A (approx. 500 staff) focused on embedding Wellbeing Handbook was developed in 0 the Safe and Sound principles at local levels, 2018. A second publication “Supporting the while working on the adaptive challenges Wellbeing of My Team” was developed and

JUL2017 JUL2018 JUL2019 raised; launched during Mental Health Week in 2019. JAN 2018 JAN 2019 JUN 2017 JUN 2018 JUN 2019 FEB 2017 FEB 2018 FEB 2019 SEP 2017 SEP 2018 SEP 2019 APR 2017 APR 2018 APR 2019 MAY 2017 MAY 2018 MAY 2019 MAY DEC 2017 DEC 2018 DEC 2019 OCT 2017 OCT 2018 OCT 2019 NOV 2017 NOV 2018 NOV 2019 MAR 2017 MAR 2018 MAR 2019 AUG 2017 AUG 2018 AUG 2019 70 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 71

CORPORATE SOCIAL RESPONSIBILITY 01 STRATEGY AND PERFORMANCE

SOCIAL PURPOSE Since its foundation in 1927, ESB has supported • Promoting young people in sport through ESB’s Generation Tomorrow STEAM communities and programmes that enhance the the Electric Ireland GAA All-Ireland minor education programme underpins the corporate economic and social fabric of Ireland, helping championship and Ireland’s under-20s rugby sponsorship portfolio and is both a key driver to bring light and energy to the people it serves, • Proud supporter and sponsor to the Pieta for brand reputation and a tangible proof allowing individuals and communities to fulfil their House Darkness into Light annual event point of the brighter future strategy. Through potential in every walk of life. • Supporting the arts and music through partnership with organisations like RDS (ESB sponsorships of Feis Ceoil, Electric Picnic and Science Blast), Camara Education Ireland ENERGY FOR GENERATIONS FUND the National Gallery of Ireland (TechSpace and ESB Creative TechFest) and Throughout 2019, ESB has invested over • Supporting the development of skills in Cool Planet Experience among others, the €2 million in good causes through its CSR science, technology, engineering, art and aim is to support children to develop the skills programme. ESB’s Energy for Generations maths (STEAM) to empower Ireland’s young they need to thrive in 21st century society, Fund is dedicated to fighting homelessness, people to reach their potential and power their helping them not only to become creative and preventing suicide and enabling access to collective brighter future through partnerships innovative problem solvers, but also active and Science, Technology, Engineering, Arts and with TechSpace, Science Blast, Cool Planet, engaged citizens, capable of making informed Maths (STEAM) education. In 2019, the fund Generation Apprentice, University of Limerick choices to tackle climate change and other supported 103 projects at local and national and Engineers Ireland. global challenges. level to the value of €1 million. This includes partnerships with TU Dublin Foundation for the 02

Access to Apprenticeship programme, the roll- CORPORATE GOVERNANCE out of Aware’s Life Skills for Schools initiative to promote mental health awareness in secondary schools throughout Ireland and Jigsaw’s My World Survey Two, the largest ever survey on youth mental health in Ireland.

EMPLOYEE VOLUNTEERING The ESB Energy for Generations Fund also promotes employee volunteering. Any ESB INTERNATIONAL CSR employee who volunteers for over 20 hours with ESB is a corporate partner of ElectricAid, a charity established by the staff of ESB in a charity can request that ESB donates €250 to 1987. Today, ElectricAid enjoys the support of 2,500 donors both serving and retired that organisation. In 2019, €25,000 has been staff with donations matched by ESB on a 2:3 ratio to a ceiling of €275,000 annually. donated through the Fund to a range of charities In 2019 ElectricAid funded 126 projects in 35 countries to a total of €1.2 million with each project directly addressing one or more of the United Nations Sustainable including Make A Wish Foundation, Debra Development Goals (UN SDGs). A copy of the ElectricAid Annual Report is available Ireland, Irish Kidney Association and Dublin from the ElectricAid website – www.electricaid.ie Simon Community. ESB employee volunteers participate in Time to Read and Time to Count in partnership with Business in the Community (BITC), to help improve literacy and numeracy Programmes like ESB Science Blast and • 99% of participant teachers surveyed said Creative TechFest ever, in Dublin’s Convention initiatives in 8 primary schools throughout Ireland. Generation Tomorrow STEAM workshops, they will participate again while 60% planned Centre on October 30th this year. 03 FINANCIAL STATEMENTS ESB volunteers also introduce transition year positively impact thousands of primary school to continue the project in the classroom pupils in 5 secondary schools to the world students in communities across Ireland, while • ESB Group Involvement (Over 60 staff GENERATION TOMORROW STEAM of work through BITC’s Skills@Work work through the youth work sector TechSpace across ESB, Electric Ireland, ESB Networks PROGRAMME experience programme. provides opportunities for young people to use and NIE Networks supported as volunteers or • ESB staff volunteers deliver STEAM digital media and STEAM to be creators and judges) workshops in primary schools across Ireland WIND FARM COMMUNITY FUND inventors of the future. across the year. ESB’s subsidiary wind farm companies operate TECHSPACE AND ESB CREATIVE • Over 600 children from local schools visited in the Republic of Ireland (ROI), Northern ESB SCIENCE BLAST TECHFEST our Gateway Head Office in Dublin for Science Ireland (NI) and Great Britain (GB) and its • ESB Science Blast, delivered by the RDS, • ESB has supported TechSpace since 2012 Week 2019 and participated in workshops Wind Farm Community Fund makes €1 million replaced the RDS Primary Science Fair, through the Energy for Generations Fund and hosted by 40 staff volunteers including six available to communities close to wind farm which existed for almost 10 years in a smaller continue to support as a partnership approach Executive Directors. sites for the development of local infrastructure format. Over 12,000 children from 496 primary between EFG and Corporate. and services, bringing a brighter future for the schools across the country participated this residents of its neighbouring rural communities year in one of three events (seven days in total) • ESB Creative TechFest celebrates the work in Dublin, Limerick and Belfast. The event grew of young people across Ireland that participate SPONSORSHIP in scale from 255 (2018) to 496 (2019) and in TechSpace hubs. Over 550 young people The Group manages an active sponsorship there was a 50% increase in new schools from 50 youth clubs in 25 out of the 26 ROI portfolio including the following: participating this year. counties participated in the biggest ESB 72 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 73

ENVIRONMENT AND SUSTAINABILITY 01 STRATEGY AND PERFORMANCE THE WAY WE WORK ESB’s Brighter Future Strategy puts sustainability at the heart of our strategic objectives and our purpose as an organisation. With the ambition to 'Create a Brighter AT ESB Future for the customers and communities we serve, by leading the transition to reliable, affordable, low-carbon energy’, our progress during 2019 in putting this into OUR CODE action has begun to deliver on that ambition. Aligning our activities and progress to the broader global efforts to deliver the Sustainable Development Goals, allows ESB to demonstrate its contribution to the global purpose and climate action focus that underpins the SDGs.

RENEWABLE ESB SIGNS LOW ESB NETWORKS GREW OVER 30,000 89 MW 50% CONNECTIONS: CARBON PLEDGE ITS REGULATED ASSET HOUSES OWENNINEY SHAREHOLDING 550 MW IN ROI, COMMITTING BASE BY €0.2BN CONNECTED WIND FARM IN THE 448 BRINGING TOTAL TO LESS THAN THROUGH DELIVERY DURING 2018 COMMISSIONED. MW NEART RENEWABLES OF TRANSMISSION 338 MW IN NA GAOITHE 200gC02/kWh (ALL ISLAND) BY 2030 (50% AND DISTRIBUTION CONSTRUCTION OFFSHORE CONNECTED TO THE REDUCTION) PROGRAMMES WIND FARM GRID TO 6.2GW CARBON IN UK INTENSITY 02 PRODUCE, CORPORATE GOVERNANCE CONNECT AND DELIVER CLEAN, SECURE AND AFFORDABLE ENERGY

ELECTRIC ELECTRIC ESB NETWORKS IRELAND IRELAND SUCCESSFULLY CONTINUES LAUNCHED ITS INSTALLED THE FIRST TO FOCUS ON ALL ELECTRIC SMART METER IN 2019 REDUCING DISCOUNTED AND HAS CONTINUED DISCONNECTION TARIFF FOR TO SAFELY RAMP RATES, NOW CUSTOMERS WITH UP DELIVERY WITH BELOW 20 PER ALL ELECTRIC OVER 15,000 METERS 10,000 HOMES OUR PURPOSE INSTALLED IN 2019 ESB’s purpose is to create a brighter future for the customers and communities PUT CUSTOMERS’ we serve and we will do this CURRENT AND by leading the transition to DEVELOP ENERGY SERVICES TO FUTURE NEEDS reliable, affordable, low- AT THE CENTRE MEET EVOLVING OF ALL OUR carbon energy MARKET NEEDS ACTIVITIES 03 FINANCIAL STATEMENTS

DELIVER A HIGH- GROW THE PERFORMANCE BUSINESS WHILE CULTURE THAT CLIMATE CHANGE MAINTAINING ESB is a signatory of the Vision for the the natural environment and to reduce its SUPPORTS ESB’S FINANCIAL INNOVATION AND STRENGTH ESB recognises that climate change is the European Electricity Industry, which commits greenhouse gas emissions while supporting a COLLABORATION greatest priority facing Ireland and the world. ESB to pursue the goal of carbon neutrality sustainable economy. In response, ESB's Brighter Future Strategy well before 2050. targets an accelerated transition to low-carbon The UN Sustainable Development Goals electricity. ESB will exit peat generation by the ESB is committed to leadership in (SDGs) provide a balanced set of objectives end of 2020 and coal generation by the mid- caring for the environment in which for development. The illustration on the decade. ESB’s target is to halve the carbon ESB's businesses operate and operating following page shows the alignment between intensity of its electricity generation by 2030 sustainably by minimising ESB's impact on ESB’s strategy and the SDGs. Throughout ESB IS NATIONAL 11 OF 83 APPRENTICESHIP ESB DELIVERED and to bring renewable electricity output to the earth’s resources. This means that it is this section, ESB highlights the SDGs SPONSOR OF BITC TIME STARTERS IN 2019 WERE EBITDA OF €1.4BN TO COUNT NUMERACY WOMEN IN 2019. CAPEX OF 50% of ESB's total electricity production by our responsibility to manage our impacts impacted by particular activities. PROGRAMME, BUILDING €1.2BN WAS SPENT the same date. to provide a high level of protection for STEAM CAPABILITIES ON INCREASING ESB'S FOR THE FUTURE ASSET BASE 74 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 75

01

ENVIRONMENT allows the switch gear to work efficiently Ireland, the Marine Institute and third levels SUSTAINABILITY OPERATIONAL ENERGY CONSUMPTION STRATEGY AND PERFORMANCE Each year ESB Group collates annualised and safely. During 2019, ESB Networks colleges (including The National University ENERGY 2019 2018 waste data from each business unit to build deenergised older switchgear that was suffering of Ireland, ; University College Cork Sustainability Targets SOURCE (GWh) (GWh) a consolidated waste report in line with the leakages and continued to work to contain, and Queens University, Belfast). In addition, Reduction in carbon 39% requirements of the Global Reporting Initiative reduce and minimise the use of SF6. ESB ESB involves local interest groups, including intensity: Coal 1,767 5,683 Standard. Waste is reported a year in arrears. Networks also addressed issues of fluid filled angling clubs in these programmes of work. Reduction in energy use 35% The overall ESB waste tonnage for 2018 was cables, developing response and reporting (cumulative): Natural Gas 18,999 22,925 12,130, a 10% decrease from the 2017 total. protocols with the relevant statutory authorities. Due to a 2009 EU Eel Regulation and a The overall recycling rate has increased to A web page on www.esbnetworks.ie has been National Eel Management Plan, ESB carry Peat 3,971 4,045 CO2 EMISSIONS 94.56%. created to provide public information in relation out Trap + and Transport of juvenile and Oil 413 205 to fluid filled cables; and this will continue to be adult eel on the three largest catchments *excludes construction spoil and ash from peat updated as further reviews are undertaken. where hydroelectric generation occurs. This ESB'S CARBON INTENSITY g/kWh OPERATIONAL ENERGY (PRIMARY ENERGY and coal generation. means that upward migrating juvenile eel and 800 EQUIVALENT IN KWH)* Midlands Generation stations downward migrating mature silver eel can Waste and recycling 2018 700 Electricity 52,051,152 53,489,805 During the drought conditions of 2017, bypass the potential negative effects of hydro 2005 12,130* tonnes 600 Thermal 3,790,805 4,986,783 Waste the thermal plume of exiting cooling water generation. Upward migrating juvenile eel 670g/C02kWh (-10%) led to a breach of conditions set out in the (called ‘elvers’), are captured each spring and 500 Transport 53,653,578 56,146,927 environmental licences of the two Midlands peat summer and transported upstream by ESB Recycling rate: 94.56% 2019 400 406g/C0 kWh stations. employees. 2 ENERGY PERFORMANCE INDICATOR (ENPI) 300 ESB has made improvements to address The quantities vary according to the year and 2030 Target kWh/FTE 02

200 CORPORATE GOVERNANCE ASSURANCE each of these issues. At the time of this report, environmental effects. Also over the past 200g/C0 kWh 19,749 20,852 2 Employee ESB maintains environmental management prosecutions are pending by the EPA. In the decade, ESB have utilised the expertise of 100 systems across the Group. These are audited meantime, a decision has been made to close former commercial eel fishermen to catch 0 to the ISO 14001 standard. ESB discloses the plants at the end of 2020. down ward migrating silver eel. These autumn *Operational Primary Energy Equivalent (non generation) as reported to 2005 2010 2015 2020 2025 2030 Sustainable Energy Authority of Ireland, Annual Report 2019 on public environment and sustainability information and winter migrating eel are then quantified sector energy efficiency performance. annually in the Sustainability Report in SINGLE-USE PLASTICS (by weight) and released downstream accordance with the GRI standards of On 15 March 2019, the sale of single-use of the stations. Each winter season sees CARBON DISCLOSURE Group is the Low Carbon Pledge – the first energy reduction against the national target disclosure. Alignment with the GRI standards plastic items and all single-use coffee cups– approximately 60 tonnes of healthy eel ESB is committed to progressively reducing the dedicated public commitment generated by of 33% for 2020 by year end. The Energy is independently confirmed each year. This including compostable cups – was discontinued released below the station where the eel carbon intensity of electricity generation in 2019 Irish business to lead on the transition to a low- Management System will be used to achieve disclosure will be augmented in 2020 with the in ESB catering services nationwide. This has continues their migration to the Sargasso Sea. and has set an ambitious carbon intensity target carbon economy, and it completed its first full further savings against the increased targets additional reporting requirements under the removed all coffee cups, lids, cutlery, straws, of 200g CO2/kWh, which represents a 50% cycle of reporting during 2019. ESB and other for 2030 of 50% energy efficiency and 30% Green Bond issued in May. drinking cups and smoothie bottles from use ESB operate three salmon conservation reduction on the current carbon intensity level. In founding members have committed to reduce absolute carbon emissions reductions.

and replaced them with reusable alternatives. hatcheries to try and maintain and conserve 2019, CO2 output from GT’s generation plants their carbon intensity by 50% by 2030. The The Safety Health and Environment group The impact of this measure has been to remove salmon stocks. The hatcheries are located remain lower than 2005 (baseline) by approximately leaders group is working on the introduction of ESB purchased 70 fully electric small vans to function oversee the development of Group almost 1,000,000 single-use plastic items upon the Shannon, Erne and Lee catchments. 59%, and the carbon intensity of generation has further best practises in 2019. replace 100 diesel vans involved in specific,

Safety Health and Environment Standards and from annual usage and disposal, removing Juvenile salmon are released within each reduced by 39% to 406g CO2/kWh. suitable duties. The fleet management carry out regular site audits of these standards. approximately 38 tonnes of CO2 emissions hatchery and a portion are released as ESB GROUP ENERGY MANAGEMENT system and the energy management system annually. Further measures are planned for juveniles into the catchment above each CARBON MANAGEMENT ESB established a group-wide energy are in place to identify further savings. The A cross-company group of senior managers - 2020. hydro station. A smaller portion are released Since 2009, ESB has disclosed its carbon management system for its buildings and redevelopment project of ESB headquarters the Environment and Sustainability Leadership at ‘smolt stage’ from each hatchery and emissions through CDP, a global disclosure not- transport fleet in 2019. This was successfully with a new state-of-the-art, energy-efficient Team – was established in 2019 to provide 2GOCUPS these return to the each hatchery as adult for-profit charity that runs the carbon disclosure certified to the ISO50001 standard in premises continued, while the construction of a 03 FINANCIAL STATEMENTS guidance and direction to overall environmental Single-use cups were replaced with an internal salmon the following year to begin the cycle system for investors, companies, cities, states November, 2019. ESB and other public bodies bespoke archives building was completed to a assurance in the Group. Overall environmental cup borrow scheme, subsequently leading to again. An annual smolt generation protocol and regions to manage their environmental are subject to energy reduction targets under BER A1 energy rating. performance is also monitored by the Health, a partnership with 2GoCup, an Irish company is implemented upon each catchment to impacts, representing the most comprehensive the transposition of the EU Energy Efficiency Safety and Environment subcommittee of the whose borrow and return cup scheme aims minimise loss of smolts as they migrate collection of self-reported environmental Directive. ESB achieved a 35.0% cumulative Board. to build a national network of cafes who will downstream each spring. data globally. In addition to capturing carbon remove all single-use cups from the growing emissions, the CDP assesses the performance CDP SCORING FRAMEWORK Audits of the Group Environmental standards café culture in Ireland. Collectively, the 2GoCup Some habitat works to improve both the of each company against sustainability and continued during the year and no issues were network saved 4.2 million single use cups in quality of the fisheries habitat and public climate cation best practices. ESB targeted noted. 2019. access to fisheries (car parks, stiles, signage, an improvement in ESB performance in 2018, etc.), are also carried out by ESB staff and resulting in an improvement in the score from D ENVIRONMENTAL ISSUES FISHERIES contractors. The works include some selective to B- on the CDP scoring methodology. Further A number of environmental issues were ESB carry out extensive fisheries development bank clearance, fencing construction of weirs efforts during 2019 improved ESB's score to B. addressed during the year: and conservation work as a primary fisheries and pools, addition of spawning gravel, large owner. This arises from the fact that ESB boulders etc. These areas are then surveyed ESB was joined the Leaders Group on ESB Networks operate several large-scale hydroelectric by ESB Fisheries staff to ensure that water Sustainability, a Business in The Community Sulphur Hexafluoride (SF6) is used widely generations stations on the Shannon, Erne, quality and the progress of the fish population Ireland (BITCI) led group of leading businesses around the world as an insulator in switchgear, Lee, Liffey and Clady Crolly river systems. ESB is maintained. who hold the Business Working Responsibly because its high electrical insulating properties maintains partnerships with Inland Fisheries Mark. One of the first actions announced by the 76 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 77

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USING OUR PROFITS IN A SUSTAINABLE WAY STRATEGY AND PERFORMANCE

INVESTMENT TAXES SUPPORTING Investing over €1 billion per annum Annual payments across various COMMUNITIES to facilitate a more sustainable headings Seek to empower and enrich energy environment as well as the lives of individuals and supporting economic growth communities through the through providing, safe and reliable OVER €450 MILLION corporate social responsibility electricity supply to homes and programme businesses OVER €2 MILLION

€1,242 MILLION

02 CORPORATE GOVERNANCE

03 FINANCIAL STATEMENTS

EMPLOYMENT RETURN TO THE RESIDENTIAL Making a long-term commitment to SHAREHOLDER DEBT INVESTORS CUSTOMER employees, giving them the time to ESB targets an annual dividend of Annual interest and repayments SATISFACTION build their skills and the opportunity 40% of adjusted profits after tax Developing new and innovative to advance their careers. products and services for customers Supporting jobs through contractor €741 MILLION aimed at improving customer and supplier service contracts €88 MILLION FOR 2019 experience and empowerment

163 APPRENTICES 84% AND GRADUATES RECRUITED IN 2019 01 0303 01 STRATEGY AND PERFORMANCE 02 CORPORATE GOVERNANCE FINANCIAL STATEMENTS 79 2019 Report Annual ESB The Board in 2019 The Board Governance Corporate Chairman’s Statement Report Governance The Board's Report Committee Audit and Risk in 2019 Committees Board Report Members’ Board 95 86 84 80 101 104 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 78 01 0303 01 STRATEGY AND PERFORMANCE 02 CORPORATE GOVERNANCE FINANCIAL STATEMENTS 81 2019 Report Annual ESB     Nine years. ANDREW HASTINGS Independent Board Member DAVE BYRNE DAVE Member Board Worker Appointment to the Board: July 2015. Four years and six months. Tenure: Career experience: Graduated with a B.Admin in 1985 from Dundee University. Independent Non-Executive Director and Mentor following a 30-year career in banking & financial services. A Chartered Director, Chartered Banker and Certified Bank Director, and held CEO position of Barclays Bank Ireland plc until March 2015, which included responsibility for NI. Previously CEO of BNP Paribas Ireland from 2007 to 2011. External appointments: Director of Elavon Financial Services DAC, the Dublin-based subsidiary of US Bancorp, Pepper Finance Corporation (Ireland) DAC Scottish Building LTD. Consulting Society and a Consultant to London-based Valuation January 2011 under the Worker Participation (StateAppointment to the Board: January 2011 under the Worker in September 2018 for a term of four yearsEnterprises) Act 1977. Re-appointed to the Board commencing 1 January 2019. Tenure: ServicesCareer experience: Member of a team that is now part of ESB’s Enterprise (now Customer Solutions).organisation and previously worked in Customer Supply April 2010External appointments: President of ESB Officers Association (ESBOA) until representative in Central Partnership. and then appointed as the Group of Unions’    Seven years and two months. One year. ANNE BUTLER Board Member Independent STEPHEN CARRIG Member Board Worker Appointment to the Board: November 2012.Appointment to the Board: Tenure: for Dublin local in engineering consultancy, Career experience: Chartered engineer. Worked Agency Director (Executive) of the Environmental Protection authorities and was a founding (EPA). of of Engineers and a member of the Irish Academy Former President of the Institution Engineering. including the National Roads Authority Served on a number of boards External appointments: and currently (DIT) (NRA), Ireland (OSI) and Dublin Institute of Technology Ordnance Survey Board. and the National Paediatric Hospital Development serves on REPAK Participation (State Enterprises)Appointment to the Board: January 2019 under the Worker Act 1977 Tenure: Career Experience: Joined ESB as apprentice electrician in 1985. Holds primary and master’s He is Controls and College Dublin and UCD respectively. degree in engineering from Trinity Instrument (C&I) Asset Management Specialist for the Generation Portfolio. External Appointments: Member of the Institute of Engineers Ireland (IEI) and former Chair of from 2014 to 2018. Energy Sector Professional Association (ESPA) 

ELLVENA GRAHAM OBE ELLVENA Chairman October 2010 andAppointment to the Board: effect from July 2015.appointed as Chairman with (four years and Nine years and three months Tenure: five months as Chairman). Career experience: Ellvena brings wide-ranging regulatory/policy issues toexperience of business and her role as Chairman of ESB. For over 30 years she worked in banking, most recently at senior executive level in Ulster Bank/RBS in both the Republic of Ireland (ROI) and Northern Ireland (NI) and managed large- scale operations in Europe, the Middle East and Africa. She is a Fellow of the Institute of Banking and a Fellow of the Insititute of Directors. External appointments: Chairman of the Belfast and Ulster Hall, Member of Queen’s Waterfront University Senate, Immediate Past President of the Northern Ireland Chamber of Commerce & Industry, inChairman of the Economic Advisory Group (EAG) Northern Ireland, Non-Executive Director of Camerata Council of Ireland and a member of the Prince’s Trust Northern Ireland.

  

Seven years as Board member.

PAT O’DOHERTY PAT Chief Executive ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 80

Appointment to the Board: January 2013 as Board member and December 2011 as Chief Executive. Tenure: Career experience: Holds primary and master’s degrees in engineering from University College Dublin (UCD). Prior to his current role, Pat headed up ESB’s largest businesses as Executive Director, ESB International, Managing Director, ESB Networks Generation. Heand Executive Director, ESB Power completed the Advanced Management Programme at Harvard Business School. External appointments: Vice President of Eurelectric, Director of Energy UK, Chair of the Apprenticeship Council of Ireland and former trustee of The Conference Board of the United States. THE BOARD IN 2019 THE BOARD 01 0303 01 STRATEGY AND PERFORMANCE 02 CORPORATE GOVERNANCE FINANCIAL STATEMENTS PAGE 95 PAGE 101 PAGE 103 PAGE 103 PAGE 102 PAGE 83 2019 Report Annual ESB   Appointment to the Board: October 2016. Three years and three months. Tenure: is an honoursCareer experience: A chartered accountant, who trained with PwC. He in Executive Leadership from BostonCommerce graduate from UCC, and has a Masters Managing Director of Cork-headquarteredCollege and the University of Ulster. Chairman and Scottish Board of its parent company, Beamish & Crawford plc for over 12 years and on the Council of IBEC, Director of Cork& Newcastle (UK) Ltd. Member of the National Executive Government Committee and served onChamber of Commerce, Chairman of the Cork Local He is a Fellow of the Irish Marketing Institute. the Board of Cork Airport Authority. Dalata HotelExternal appointments: Senior Independent Non-Executive Director of The and Corporate Finance), a Director of Taxation Group Plc, Chairman of Quintas (Accountancy, and Director of Oxfam Ireland.the Government-backed Social Innovation Fund Ireland, ALF SMIDDY Independent Board Member     Eight years and six months. Appointment to the Board: June 2011. Tenure: in the electricityCareer experience: Called to the Bar of Northern Ireland in 1976. Worked industry for 25 years and held a number of senior management posts in both Northern Ireland Electricity plc and Viridian Group plc, including Company Secretary and Head of Legal Services. External appointments: Lay Magistrate, member of both the Industrial and Fair Employment Non-Executive Tribunal. of Northern Ireland and the Northern Ireland Valuation Tribunals Director of Camerata Ireland. NOREEN WRIGHT Senior Independent Board Member NOREEN O’KELLY NOREEN O’KELLY Independent Board Member April 2013.Appointment to the Board: Six years and eight months. Tenure: who trained with KPMG. Held a number ofCareer experience: A chartered accountant and of Treasury News and Media Group including Head senior positions in Independent also Company Secretary of C&CGroup Secretary and was Group. She currently works governance.as a consultant on corporate Chair of Audit Committee of Rehab Director, Vice Chair and External appointments: the Audit Committee of University College Dublin. and external member of SAFETY AND ENVIRONMENT COMMITTEE  HEALTH, COMMITTEE  MARKETING AND CUSTOMER AND MANAGEMENT DEVELOPMENT COMMITTEE  REMUNERATION  FINANCE AND INVESTMENT COMMITTEE AUDIT AND RISK COMMITTEE RISK AND AUDIT MEMBERSHIP COMMITTEE KEY TO    Thirteen years. SEÁN KELLY SEÁN KELLY Board Member Worker Participation (State Enterprises) January 2011 under the Worker Appointment to the Board: commencing the board in September 2018 for a term of four years Act 1977. Re-appointed to 1 January 2019. Nine years. Tenure: currently in the delivery of largeCareer experience: A 20-year career in ESB Networks, in mediation and degree in business from UCD and a higher diploma projects. Holds an honours completed Holds a diploma in human resources University. conflict resolution from Maynooth in health and of Personnel and Development (CIPD) and certificates through Chartered Institute Ireland. directorship from the Institute of Directors in safety from UCD and in-company Defined BenefitExternal appointments: Former chairperson and current member of the ESB Directors Group. He is Officer for the National Worker Superannuation Committee and Training (IOD).a member of the CIPD and the Institute of Directors January 2007 under the Worker Participation (StateAppointment to the Board: January 2007 under the Worker Enterprises) Act 1977. Re-appointed to the board in September 2018 for a term of four years commencing 1 January 2019. Tenure: Career experience: Joined ESB as a network technician in 1979. Served as an officer with the ESB Group of Unions. External appointments: Board member of ESB Employee Share Ownership Plan (ESOP) Directors Group. Limited and Chairman of the National Worker Trustee TONY MERRIMANTONY Board Member Worker   Three years and three months. Holds a BSc in analytical science from Dublin City University (DCU),Career experience: Holds a BSc in analytical science from Dublin City a and an MBA from City University Seattle.postgraduate diploma in business studies from UCD Industrial Business with Brand Energy &Paul is a Director of Operations of the International served experience in business. He previously Infrastructure Services. He has a total of 25 years’ and CFO of CEO of Limited Ireland as CEO of the Whitfield Clinic in Waterford, 2010. Before his 10 years with Siemens,Siemens Limited Ireland in the period from 2008 to roles in both the Smurfit Group andPaul spent 14 years in Germany in various management Kappa Packaging. Director ofExternal appointments: Served as a Director of Siemens Limited Ireland and Whitfield Clinic associated companies. Appointment to the Board: October 2016 Tenure: Independent Board Member PAUL LYNAM PAUL ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 82 01 0303 01 STRATEGY AND PERFORMANCE 02 CORPORATE GOVERNANCE FINANCIAL STATEMENTS 85 2019 Report Annual ESB Ethics and compliance health and wellbeing Safety, Diversity and inclusion People and performance Employee engagement CONCLUSION In the following pages, we outline in detail how the Board and its Committees have fulfilled their responsibilities during the year to ensure that robust governance practices are embedded across the Group. Ellvena Graham OBE, Chairman 27 February 2020 Chairman, as detailed in our Board terms of Chairman, as detailed in been reviewed reference, which have recently for making and revised, I am responsible effectively by sure that the Board operates of each Board facilitating the full participation communication member and ensuring effective stakeholders. with ESB’s owners and Organisational Following on from last year’s in line with the Effectiveness Review and of the UK Code in principles and provisions dashboard was respect of Culture, a Cultural developed in 2019 as a means of assessing the alignment of culture with purpose, values and strategy. The board subscribes to the view that Culture is the “combination of values attitudes and behaviours manifested by a company in its operations and relations with its stakeholders” (FRC Report “Corporate Culture and the Role of Board”). A more succinct definition is: “the The Board way we do things around here”. gives careful consideration to how culture is assessed and reported through the employee through formal survey engagement survey, of our stakeholders and through Board site visits which involve direct engagement with employees. Culture is reported to the Board under the following headings: • • • • •

BOARD DIVERSITYBOARD The Board, both for itself and the Group as a whole, is fully committed to diversity as a key value, and an important factor in achieving ESB’s business objectives. It is committed to achieving the optimal balance of skills, experience and diversity among its members. the Chairman of In relation to Board diversity, the Board, in assisting the DCCAE in drawing up the specification for Board appointments, has regard to the benefits of diversity on the Board, as provided for under the State Code of Practice guidelines and the related “Guidelines Board on Appointments to State Bodies”. member details are set out on pages 80 to 83. CULTURE Good governance is good business and transparency and is built on competency, In pursuit of our goals, the accountability. Board and management remain committed transparency and to achieving competency, accountability in all we do. In my role as BOARD AND COMMITTEE CHANGES BOARD RISK MANAGEMENT Risk management and reporting continues to be a key area of focus for both the Board and the Audit and Risk Committee, with ESB’s approach to managing risk being defined and Governance by the ESB Risk Policy Framework and a strong internal control framework. While the Board has overall responsibility for the Group’s approach to risk, the responsibility for supporting the Board’s review of the effectiveness of internal controls and risk management has been assigned to the Audit and Risk Committee which played a key role in 2019 in ensuring that appropriate governance and challenge around risk and assurance were embedded across the Group. The approach to risk is set out in the Risk Report on pages 24 to 37. Stephen Carrig joined the Board as a worker Stephen Carrig joined the 2019 and sits on the board member in January Committee. Health, Safety and Environment to the Board this There were no other changes to benefit from the year as the Group continues of current members. experience and diversity of the Committees The terms of reference during the year were revised and updated and including those of the Remuneration Management Development Committee which were updated to reflect updated UK Code principles and provisions. There were no changes in Committee membership. Details of the Committees and their activities during the year are set out on pages 95 to 103.

The Board continually strives to improve its effectiveness. This is done informally by holding discussion amongst Board members with feedback to the Chairman and Company A formal evaluation is carried out Secretary. and every third year this is done annually, independently by an external evaluator. The most recent independent review was carried out in 2017. The results of the 2019 internal evaluation confirmed that the Board is operating effectively and a full description of the review is set out on page 89. BOARD EFFECTIVENESS BOARD code and a report on such compliance is made code and a report on such Risk Committee. annually to the Audit and ESB has complied The Board is satisfied that the State Code. A with the requirements of to the Minister report is also issued annually Action and for Communications, Climate which confirms Environment (DCCAE) of the State compliance with the requirements Code. appropriate steps The Board is satisfied that have been undertaken to monitor ESB’s Irish the applicable compliance with subsidiaries’ requirements of the Companies Act 2014. As a statutory body ESB is not subject to the disclosure requirements prescribed in the EU (Disclosure of non-financial and diversity information by certain large undertakings and Groups) Regulations 2017. However, on a voluntary basis ESB, in keeping with best practice, discloses non-financial information in relation to the Environment (page 73), Safety (page 68), Energy usage (page 75), Sustainability (page 75), Corporate social responsibility (page 70), People (page 66), Modern slavery policy (page 104) and Board diversity (page 89). ESB has adopted a Code of Ethics, which sets out our approach to responsible and ethical business behaviour which is underpinned by our values. The underlying principle of the Code of Ethics is that employees can best serve ESB by adhering to the highest standards of integrity, fairness and confidentiality and by loyalty, meeting all legal and regulatory requirements. The Code of Ethics is published on the ESB website. Any reported breaches of the code are investigated and relevant updates are provided to the Audit and Risk Committee. A detailed description of our governance compliance framework is set out on pages 86 to 94. statutory corporation) with the UK Code and with the Irish Corporate Governance Annex. A revised UK Corporate Governance Code was issued by the Financial Reporting Council (FRC) in July 2018 and applies for periods commencing on or after 1 January 2019. ESB completed a detailed review of the UK Code in model 2019 in line with its “comply or explain” and has implemented certain recommendations including the establishment of a Cultural Dashboard report, briefing the Board on the Stakeholder Mapping and Engagement Plan, updated code of conduct for Board members, carrying out a review of the terms of reference of the Remuneration Committee and revising ESB's Whistleblowing and Protected Disclosure policy to provide further guidance to employees on how to raise concerns. Exceptions to compliance with the UK Code are outlined on ESB adheres in so far In this way, page 91. as is resonably applicable to listed company government standards. ESB has put in place the appropriate measures to comply with the State Code, which sets out the governance framework established by the Government for the internal management and the internal and external reporting relationships of State Bodies. ESB has a robust process in place to confirm compliance with the state

GOVERNANCE ESB, in pursuit of its governance objectives, complies with the State Code. ESB also complies on a voluntary basis (in so far as is reasonably applicable, given that ESB is a Management has the knowledge and expertise for the operational requirements of the business. It is not the role of the Board to duplicate that. The Board establishes the company’s purpose, values and strategy and we challenge and support management in the light of ESB’s values and strategic direction. In the best decisions are made through our view, the dynamic interaction between Board and management. Good governance provides the foundation for long-term value creation and is a core focus for the ESB Board and for me as Chairman. In this regard, and in line with the UK Corporate Governance Code 2018 (the UK Code) and the Code of Practice for the Governance of State Bodies 2016 (State Code), we see our duties as including responsibility for the long-term success of the ESB Group, providing leadership and direction for the business as a whole, and supporting and challenging management to get the best outcomes for ESB and its stakeholders. CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT GOVERNANCE CORPORATE CHAIRMAN’S ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 84 01 0303 01 STRATEGY AND PERFORMANCE 02 CORPORATE GOVERNANCE FINANCIAL STATEMENTS

-

Alignment of marketing and customer initiatives and programmes with company strategic objectives New products and services and associated revenue projections Engagement with major customers Advertising and sponsorship programmes and assessment of their impact

Marketing & Customer Committee Chairman Alf Smiddy     87 2019 Report Annual ESB Is responsible for ensuring that correct Board procedures are followed and advises the Board on corporate governance matters Liaison between Board and Executive Team Assists the Chairman in ensuring that all Board members have access to all relevant information and in facilitating Board induction / professional development

   - Marie Sinnott Company Secretary - Review capital raising and capital expenditure proposals Review treasury and energy trading policies and procedures Review investment and divestment proposals aimed at ensuring the positioning of ESB for future success, consistent with the strategy approved by the Board

Andrew Hastings    Finance & Investment Committee Chairman

Approval of dividends financial performanceReview of operational and expenditure, borrowings and treasury policiesApproval of major capital and safety performanceOverall review of Group health ExecutiveAppointment of the Chief on the recommendation of the Chief Executive Team Appointments to the Executive SecretaryAppointment of the Company or retirements of assetsMajor acquisitions, disposals of the Group governance framework, internal controls Assessment and approval Mass Market Residential tariffs and policy matters legal, industrial relations, accounting regulatory, Key

Ellvena Graham BOARD

• • • • • • • • • and risk management • •

Noreen Wright EXECUTIVE TEAM

- Set the remuneration of (i) the Chief Executive and (ii) the Executive Team following consultation with the Chief Executive monitor the development To of current and future leaders of ESB

Remuneration & Management Development Committee Chairman - OBE   Leadership and Control of the Group Act as a sounding board for the Chairman Serving as an intermediary for the other Board members and the shareholders when necessary

Senior Independent Board Member   Biographical details of the Company Secretary can be found on page 43.

Biographical details of the Executive Team can be found on pages 42 to 43. can be found on pages Biographical details of the Executive Team Biographical details of the Board Members can be found on pages 80 to 83.

Leading the Board Determining the Board agenda by eachEnsuring its effectiveness and facilitating full participation Board member owners and stakeholdersEnsuring effective communication with the Group’s

Chairman - Ellvena Graham OBE     To advise the Board To on health & safety and environmental matters Monitor progress against agreed health, safety and key environmental performance indicators and risk management in these areas

Chairman, six independent Board members, four worker Board members and the Chief Executive Chairman, six independent Board members, four Health, Safety & Environment Committee Chairman - Anne Butler  

 Biographical details of the Chairman, Chief Executive and Senior Independent Director can be found on pages 80 and 83.Biographical details of the Chairman, Chief Executive and Senior Independent Director can be found on

Responsible for the long-term success of ESB and for its overall judgement on matters of strategy, performance, resources and governance performance, its overall judgement on matters of strategy, Responsible for the long-term success of ESB and for

 Financial reporting Internal control and risk management Compliance, whistle-blowing and fraud External and internal auditors

Executive leadership of the Group’s business Implementation of the Group’s strategies and policies Maintaining a close working relationship with the Chairman Leading the Executive Team To assist the To Board with its responsibilities in relation to: . . . .

Approval of ESB Group Strategy, annual budgets and annual and Approval of ESB Group Strategy, interim financial statements     Chief Executive - Pat O'Doherty Audit & Risk Committee Chairman - Noreen O'Kelly  THE WAY WE ARE STRUCTURED WE ARE THE WAY and efficient effective decision-making accountability. with clear for to allow is structured The organisation ROLE OF THE BOARD ROLE OF and direction to the business as a wholeThe Board provides leadership long-term success of ESB. Decisions are madeand is responsible for the has been made available to Boardonly after all appropriate information consideration of the risks identified throughmembers and following due and in the context of the Group level riskthe risk management process constructively challenges and helpsappetite statement. The Board which are then reviewed and approved bydevelop proposals on strategy, reserved the following key decisions for its ownthe Board. The Board has consideration: • Put customers’ current and future needs at current and Put customers’ Produce, connect and deliver clean, secure Develop energy services to meet evolving Grow the business while maintaining Deliver a high-performance culture that The Price Review 5 (PR5) determination Group’s preparedness for the impact of Brexit. (IT) Oversight of key Information Technology Monitor Groups development of culture in line central to which are effective relationships with are effective relationships central to which Chief Executive,the Board Committees, the Finance andthe Executive Director Group Team. Commercial and the Executive and operationalThere is ongoing financial papers are madereporting to the Board and electronically inavailable to each Board member to allow sufficient timeadvance of each meeting for discussion/ to review and consider matters include the minutes ofdecision. The Board papers Board Committee meetings. The aim of the Board meetings is to achieve the right balance of oversight of people, culture, operations, finance and governancestrategy, and risk management matters. This is monitored through the Board evaluation and informal feedback to ensure adequate time is devoted to each matter to maintain the required balance. The Board is satisfied that the Chairman and each of the Board members committed sufficient time during the year to enable them to fulfil their duties as Board members of ESB. The Board’s focus for 2020 will be the continued execution of the Strategy to 2030: leading the transition to reliable, affordable, low-carbon energy. This will be achieved by focusing on ESB’s five associated strategic objectives as follows: • the centre of all our activities. • and affordable energy. • market needs. • ESB’s financial strength. • supports innovation and collaboration. The Board will also continue to monitor: • process. • • projects, such as the Smart Metering Programme and SAP 4 HANA upgrade. Maintain strategic focus on environmental and sustainability issues. • with ESB’s values. DIVISION OF RESPONSIBILITIES BOARD MEETINGSBOARD The Board met on eleven occasions in 2019. The Board is responsible for reviewing the operational and financial performance of the Group and for ensuring effective internal control and risk management. The Board has a formal schedule of matters specifically reserved to it for decision, which are described on page 87. The Board has delegated authority to management for decisions in the normal course of business subject to specified limits and thresholds. Oversight of decisions which are delegated by the Board is retained through a robust reporting framework, 2 CONFLICTS OF INTEREST Board members make annual disclosures of any potential or any actual conflicts of interest under the ethics in Public Office Act 1995. In addition, Board members are responsible for notifying the Company Secretary on an ongoing basis should they become aware of any change in their circumstances regarding conflicts of interest, as detailed in the 'ESB Board Members' Code of Conduct. Biographical details for all the Board members, including details of their external appointments are set out on pages 80 to 83. ESB ANNUAL GENERAL MEETING (AGM) ESB holds an AGM each year, no later than 15 months after the last AGM. The requisite notice is given to ESB's ministerial stockholders Board of the ESB ESOP. and to the Trustee members including the Chairman of the Audit and Risk Committee are invited to attend. The Chairman gives an overview of the year and invites representatives of the ministerial of the ESB stockholders and of the Trustee ESOP to make any comments they may have. The external auditors attend the AGM. DIALOGUE WITH SHAREHOLDERS 95.7% by the Irish Government ESB is owned of the Employee and 4.3% by the Trustee (ESOP).Share Ownership Plan engages ESB with the in active and ongoing consultation and strategic Government on key policies and the issues as required by legislation detail on the State Code. It also provides plan and quarterly annual budget and five-year performance. ESB updates on its financial and consults with the also regularly engages the ESB ESOP. of Trustee

BOARD LEADERSHIPBOARD AND COMPOSITION

The Board has led the development of ESB’s The strategy was Strategy. “Brighter Future” approved by the Board after detailed discussion and assessment. The strategy is a purpose driven strategy which aims to meet the customers’ energy needs by bringing the best of ESB’s capabilities together to deliver innovative and value-driven solutions for a low-carbon world. The strategic objectives reflect a significant contribution to the wider society in terms of decarbonisation and is underpinned by the requirement for strong financial performance. THE BOARD The Board provides the leadership of the Group and, either directly or through the operation of Committees, applies independent judgement on matters of values, strategy, performance, resources and governance. During 2019, the Board comprised of the Board members detailed on pages 80 to 83, of whom the Chairman, the Chief Executive and the Independent Board members were appointed by Government and the four Worker Board members were appointed pursuant to Participation (State Enterprises) the Worker Act 1977. The Board size and structure is governed by the Electricity Supply Acts Participation 1927–2004 and by the Worker (State Enterprises) Act 1977. The roles of the Chairman and Chief Executive are not exercised by the same individual, with the responsibilities of each role formally defined in the Board terms of reference. 1 The revised UK Code sets out an updated five key principles of governance: (1) Board Leadership and Composition, (2) Division of Responsibilities, (3) Composition, Succession and Evaluation, (4) Audit, risk and internal control, and (5) Remuneration. The Board’s Governance Report is structured accordingly. ESB, in pursuit of its governance objectives, of its governance objectives, ESB, in pursuit of Practice for the complies with the Code 2016 (the State Governance of State Bodies is reasonably applicable Code) and in so far as Governance Code with the UK Corporate the Irish Corporate 2018 (the UK Code) and Irish Annex).Governance Annex (the A copy be obtained from the of the State Code can and Reform Department of Public Expenditure A copy of the UK website www.per.gov.ie. from the FRC’s website Code can be obtained and a copy of the Irish Annex is www.frc.org.uk available at www.ise.ie. PRINCIPLES OF GOVERNANCE PRINCIPLES THE BOARD’S GOVERNANCE REPORT GOVERNANCE THE BOARD’S ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 86 01 0303 01 STRATEGY AND PERFORMANCE 02 CORPORATE GOVERNANCE FINANCIAL STATEMENTS 89 2019 Report Annual ESB volume, quality and timing of ongoingvolume, quality provided to thereporting information Committees and madeBoard and Board reportingrecommendations to streamline Board.which were adopted by the implementedImprovements were also actions arisingregarding the tracking of meetings toat Board and Committees and closure byensure prompt attention management. The 2019 Board and Committee a number ofEvaluations have identified during 2020areas which will be addressed including an examination of board paper format, content of Chief Executive reporting and training requirements. In addition, the Chairman meets with Board members including the Senior Independent Board member for an open exchange among Board members concerning the efficiency and effectiveness of the Board. Non-Independent Independent Female Male

    COMPOSITION OF BOARD (GENDER) COMPOSITION OF BOARD INDEPENDENCE OF BOARD* The evaluation provides assurance that the provides assurance that The evaluation to the highest standardsBoard is committed by the The evaluation is led of governance. by the CompanyChairman and supported consists of a The annual evaluation Secretary. on Board members’ questionnaire and based to the Board on thereplies, a report is made actions to addressoutcomes with proposed the issues raised. based on one- An independent evaluation Board membersto-one interviews between is conducted everyand the external facilitator facilitatedthree years. An independently in early 2017 byevaluation was completed the Institute of Chartered Secretaries and Administrators (ICSA) Board Evaluation (who have no connection with the Group). The next external independent evaluation will take place in 2020. During 2019 management carried out a comprehensive of Reference of four review of the Terms Board Committees which has provided much greater clarity and precision regarding their role. Management considered the Engineering / Technical Business / Finance Legal 0 - 2 years 2 - 5 years 5 - 11 years

*Independence of Board excluding Chairman       LENGTH OF TENURE EXPERIENCE BOARD ONGOING TRAININGONGOING AND DEVELOPMENT is in development programme A continuing andChairman The members. Board all for place with Board membersCompany Secretary liaise as briefings byfor their specific needs, such or attendance atmanagers on specific topics to the business. conferences/courses relevant EFFECTIVENESS BOARD annual evaluationThe Board conducts an and that of theirof their own performance is undertakencommittees. This evaluation State Code and,in order to comply with the insofar as is reasonably applicable, with the UK Code. The evaluation relates to the Board’s collective performance and and Committees’ not to the individual performance of Board members. The purpose of the evaluation is to review the Board’s operation and to identify ways to improve its effectiveness. It also helps to identify specific skills required in Board members and the Chairman can make suggestions to Government for consideration when appointments are being made.

INFORMATION AND INFORMATION BRIEFINGS the effectiveness of the maintain and enhance To Board, it is essential that Board members are kept up to date with key business developments. A summary of the Board’s activities in 2019 is set out on page 90. The Board receives regular updates on the regulatory environment, the market and operations including monthly Key Performance Indicator Reports. Board meetings were also scheduled outside the head office location in 2019 including Cathaleen’s Station, Co. Donegal and Aghada Fall Power Station, Co. Cork. Site visits are arranged Power for individuals and groups of Board members to allow for a greater understanding of the ESB business. INDUCTION BOARD APPOINTMENTSBOARD are a matter forAs Board appointments appointment of workerGovernment (including the board members), not undertake an ESB does members. However,evaluation of individual Board with Governmentthe Chairman does engage appointment processin advance of the Board benefits of diversityabout the specific skills and The Departmentthat are required on the Board. Reform in Novemberof Public Expenditure and 2014 published Guidelines on Appointments to State Boards and these guidelines apply to appointments to the Board of ESB. Board members are normally appointed for terms of five years, or four years in the case of Worker Board members, and therefore are not subject to re-election to the Board at lesser intervals. The Chief Executive and Independent Board members may be re-appointed to the Board by Government Board and any reappointment of Worker Participation Members is pursuant to the Worker (State Enterprises) Act 1977. An induction programme is in place to familiarise new Board members with the operations of the Group. The programme is tailored to the experience, background and the requirements elements are: meeting of the individual. Key the executives, visiting sites and receiving a briefing on the ESB Group Strategy and on individual businesses and on the Enterprise Risk Management Framework. external environment and are therefore well and are therefore external environment See page informed decisions. placed to make process. detail on the induction 88 for further COMPOSITION, SUCCESSION AND A diverse and deep range of skills and Processes to ensure that all of the Board EVALUATION 3 MEMBERSHIPBOARD The ESB Board members in 2019 brought diverse experience, independence and challenges to support effective decision-making. The range experience in engineering/ of Board members’ technical, finance, legal, marketing and in ESB’s operations is set out in their biographies on pages 80 to 83. The Board is confident that all of its members have the knowledge, ability and experience to perform the functions required of them. The Board’s primary role is to exercise objective and informed judgement in constructively challenging and helping to develop and approve to ensure there is a the ESB Group Strategy, strong management team in place to execute the strategy and drive business performance and to maintain a framework of prudent and effective controls to mitigate risk. The State Code provides that the Chairman may engage with the Government on Board succession and this provides an opportunity for ensuring an appropriate mix of skills, diversity and experience on the Board. factors determine how the Board is critical Two equipped to fulfil those duties and obligations successfully: • experiences among Board members; • members develop and maintain a good understanding of the Group’s operations and INDEPENDENT PROFESSIONAL ADVICE furtherance of theirThe Board members, in the professional adviceduties, may take independent at the expense of ESB. All Board members have access to the advice and services of the Insurance cover is in place Company Secretary. to protect Board members and officers against liability arising from legal actions taken against them in the course of their duties. SENIOR INDEPENDENTSENIOR MEMBERBOARD one of the IndependentThe Board appoints Senior IndependentBoard members to be the a sounding board forBoard Member, to provide as an intermediary forthe Chairman and to serve and shareholders whenthe other Board members is the current Senior Noreen Wright necessary. Independent Board member. 11 11 11 11 11 11 11 11 11 11 11 11 MEETINGS ATTENDED

2019 BOARD MEMBERS Ellvena Graham OBE Anne Butler* Dave Byrne^ Stephen Carrig^ Andrew Hastings* Seán Kelly^ Paul Lynam* Merriman^ Tony Noreen O’Kelly* Alf Smiddy* Noreen Wright* Pat O’Doherty * Independent Board member Board member ^ Worker INDEPENDENCE The Board has determined that those Board members (details on pages 80 to 83) were independent during 2019. The determination of Board members independence takes account of the relevant provisions of the UK Code regarding independence in character and Board members’ judgement and the absence of relationships or circumstances which could compromise Board independence. In light of these factors, members’ the Board is satisfied as to the independence of the Board members identified above. There were 11 General Board meetings in 2019. The attendance by each Board member during to the Board In addition the year is set out below. a number members and Company Secretary, of executive directors/senior managers attend relevant sections of Board meetings, by invitation. ATTENDANCE AT MEETINGS AT ATTENDANCE IN 2019 BOARD COMMITTEESBOARD in the of the Board assist Five Committees Board its responsibilities and the discharge of to those Boarddelegates specific responsibilities their terms of reference.Committees as set out in Board by giving moreThe Committees assist the business, operational,detailed consideration to risk management issuesfinancial, governance and with any necessaryand they report to the Board have accessrecommendations. The Committees carry out their dutiesto adequate resources to of the Committees areand the terms of reference a regular basis. Thereviewed and updated on completed in 2019. Themost recent review was Committees and their membership are set out on pages 95 and 101 to103 of this report. ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 88 01 0303 01 STRATEGY AND PERFORMANCE 02 CORPORATE GOVERNANCE FINANCIAL STATEMENTS 91 2019 Report Annual ESB Effectiveness and efficiency of operations Effectiveness and efficiency internal and Reliability of reporting for laws and Compliance with applicable A code of ethics that requires all Board A clearly defined organisational structure, A corporate governance framework which A comprehensive set of policies and Large capital projects require the approval Comprehensive budgeting systems with an A comprehensive system of financial INTERNAL CONTROL The Board has overall responsibility for the Group’s overall responsibility for The Board has its control and for monitoring system of internal of internal control iseffectiveness. The system but not absolutedesigned to provide reasonable of theassurance regarding the achievement following objectives: • organisation’s assets and safeguarding of the against loss • external use • regulations In order to discharge their responsibilities in a manner which ensures compliance with legislation and regulations, the Board has established an organisational structure with clear operating and reporting procedures, lines of responsibility, authorisation limits, segregation of duties and delegated authority. The Group uses the integrated internal control framework as developed by the Committee of Sponsoring Organisations of the Treadway Commission (COSO) as guidance for designing, implementing and conducting internal control and assessing its effectiveness. The COSO framework was first released in 1992 and updated in 2013. ESB has in place a strong internal control framework, which includes the following: • members and employees to maintain the highest ethical standards in conducting business • with defined authority limits and reporting mechanisms to higher levels of management and to the Board, which support the maintenance of a strong control environment • includes risk analysis, financial control review and formal annual governance compliance statements by the management of business lines and joint ventures (JVs) • procedures relating to operational and financial controls • of the Board and are closely monitored on an ongoing basis by the Finance and Investment Committee and they are also subject to post- completion audits • annual budget approved by the Board • reporting The Board evaluation process has not to The Board evaluation process also Chairman The Board Chairman is members do The Independent Board The Government sets Chief Executive pay Committee chairs do not engage with As ESB is 95.7% state owned, with Neither UK nor Irish company law is directly Members of the Board of ESB are FINANCIAL AND BUSINESS REPORTING The Board recognises its responsibility in preparing the Annual Report and Financial Statements and in presenting a fair, balanced and understandable assessment of the Group’s position and prospects. responsibilities regarding The Board members’ financial statements and going concern are set out on page 109. PROCUREMENT ESB carries out its procurement activities in compliance with applicable procurement laws and the State Code. employment shareholding requirements relevantshareholding requirements employment areinterests in the stock of ESB as beneficial Employee participation in ESB's held only through is majority Plan (ESOP) and ESB Share Ownership owned by the Government. • performance of date evaluated the individual Board does not have a Board members as the its own composition. formal role in determining • Management of the Remuneration and given the importance Development Committee, with Government policy of compliance by ESB of the Chairman as the in this area and the role primary interface with Government. • not meet without the Chairman present to appraise the Chairman's performance as the appointment of the Chairman is a matter for the Government. • and establishes pay policy relevant to senior management. This limits the discretion of the Remuneration and Management Development Committee in relation to these matters. • Ministerial Stockholders as there is a process in place whereby the Chair enagages with the Ministerial Stockholders and ensures that the Board and management is aware of the views of the stockholders. • governance arrangements in place with its Ministerial Stakeholders, requirements in relation to consultation with shareholders in the event of 20% or more of votes being cast against a Board recommendation are considered not to be applicable. • attributable to ESB including Section 172 of the UK Companies Act 2006. • applicable in accordance with Section 2 of the Electricity (Supply) Act, 1927 (as Participation (State amended) and the Worker Enterprises) Acts. Therefore the requirement to take account of demands on directors time and the undertaking of additional external appointments is a matter for the Government.

AUDIT, RISK AND RISK AUDIT, INTERNAL CONTROL Appointments to the Board are a matter for Board members are appointed for terms of ESB’s Chairman has been a member of the ESB’s policies and disclosures in relation 4 COMPLIANCE WITH GOVERNANCE CORPORATE CODES Code, which sets outESB complies with the State governance which thethe principles of corporate required to observe.Boards of State Bodies are Corporate GovernanceESB also complies with the imposed by theGuidelines and other obligations 1995, the StandardsEthics in Public Office Act, and the Regulation ofin Public Office Act, 2001 Lobbying Act, 2015. ESB complies on a voluntary basis in so far as is reasonably applicable with the UK Code and the Irish Annex. The UK Code consists of principles (main and supporting) and provisions. Companies listed on the Irish Stock Exchange are required, as part of the Listing Rules, to describe how they apply the principles and comply with the provisions of the UK Code and the related Irish Annex and to provide an explanation in the event of non-compliance. ESB is a statutory corporation established under the Electricity (Supply) Act 1927 and is not obliged to comply with the UK Code or the Irish Annex. As stated above, ESB supports the principles and provisions of the UK Code and the Irish Annex and voluntarily complies with them subject to the following exceptions: • the Government and accordingly ESB does not have a Nominations Committee. • five years or four years in the case of Worker Board members and therefore are not subject to re-election to the Board at lesser intervals. • Board of ESB for nine years from October 2010. The requirement for the Chairman not to remain in the post for more than nine years from the date of first appointment to the Board is not considered to be applicable to ESB, as appointments to the Board are a matter for the Government. • to remuneration of the Chief Executive are in accordance with applicable Government guidelines. Notice periods in the Chief Executive contract are in accordance with Government guidelines. The details of Board members’ remuneration on page 94 do not include amounts Board members aspaid to the four Worker employees of ESB (as such pay is neither increased nor decreased because of their membership of the Board), but do include amounts paid to them by way of Board fees. Obligations regarding share awards are not relevant to ESB, nor are post- Chief Executive operations reports Chief Executive Health and safety reports Energy trading updates programme Plant investment and overhauls Property disposals Joint venture agreements charge point network Investment in Electric vehicle projects Investment in renewable submission update Regulated price review agreement Onshore wind services project Head Office redevelopment Enterprise services update Electricity price changes Engineering projects update Group risk plan Dam safety Market abuse policy control Effectiveness of risk management and internal Internal audit plan for the year Committees terms of reference Effectiveness of internal control and risk management Group treasury policies levels Group authority levels and group trading authority ESB Group’s risk policy and governance framework UK Modern Slavery Act Protected disclosures update Business continuity planning Updated Group tax policy Hurdle rates for new investments Group valuation Funding requirements OPERATIONS • • • • • • • • • • • • • • GOVERNANCE AND RISK MANAGEMENT • • • • • • • • • • • • • • • • •

Staff survey results High performance culture Severance scheme wellbeing report Group health, safety and Corporate culture update Climate Action Plan review Energy policy and market updates Engineering projects strategy update Offshore wind review Enterprise services review Capacity auctions ESBI strategy review Smart metering Strategy implementation updates Annual and half-yearly published results ESB Regulatory accounts Quarterly financial performance and forecasts Monthly key performance indicators (KPIs) Annual budget and five-year business plan Interim and final dividend Updated market abuse policy Senior executive appointments Senior executive Brexit implications • • • • • STRATEGY • • • • • • • • • FINANCE • • • • • • • • • PEOPLE EXAMPLES OF MATTERS CONSIDERED AND/OR APPROVED BY THE BOARD IN 2019 BY THE BOARD APPROVED AND/OR CONSIDERED OF MATTERS EXAMPLES ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 90 01 0303 01 STRATEGY AND PERFORMANCE 02 CORPORATE GOVERNANCE FINANCIAL STATEMENTS 93 2019 Report Annual ESB VIABILITY STATEMENT VIABILITY STATEMENT In accordance with the UK Code, the Board members have assessed the prospects of the Group over a longer period than that required in adopting the going concern basis of accounting. The Group’s assessment has been made over a five-year period, which is consistent with the time frame of the Group’s business planning process. The assessment is based on consideration of ESB’s current position and prospects, maintenance of its financial strength (pages 48 to 53), progress against ESB 2030 Strategy (page 21), risk appetite (page 25), principal risks (pages 28 to 37) and how these are managed. The Board believe that a five-year assessment is most appropriate as it aligns with the business and its exposure to credit and liquidity risks. The Group has considerable financial resources and the Board believes that the Group is well After placed to manage its risks successfully. making appropriate enquiries, the Board is satisfied that ESB has adequate resources to continue in operational existence for the the Board foreseeable future. Accordingly, continues to adopt the going concern basis in preparing the Group’s financial statements. Management, Internal Control and Related Financial and Business Reporting A number of environmental and safety compliance and reporting issues were identified in ESB Networks during the year. A programme of corrective actions was put in place with implementation well progressed. No other significant failings or weaknesses were identified in the review and where areas of improvement were identified, processes are in place to ensure necessary action is taken and progress is monitored until completed DETAIL DETAIL plan and recommended it reviewed and challenged the 2019 group risk The Audit and Risk Committee to the board for approval. of BCP plans to the Audit and Risk Committee on the effectiveness Review of the report submitted review based on the across the group including a lessons learned and resilience testing arrangements experiences in 2019. and governance framework. and Risk Committee of ESB Group’s risk policy Annual review by the Audit to the group principal considered and reported to the board any changes The Audit and Risk Committee of material changes to approved at the start of the year, including a review risks and emerging risks as the risk profile. risks , including the reviewed changes to the status of the principal The Audit and Risk Committee mitigating actions. effectiveness of operation of controls and status of Risk Committee was completed. It included anA thorough review of cyber risk with the Audit and covering best practice in cyber risk management.external perspective of the cyber risk environment a cyber crisis management exercise during the year. Separately the Committee received an overview on the quarterly GDPR risk reports and the 2018The Audit and Risk Committee reviewed and challenged data protection annual report. several times over the year regarding of ESB'sDetails were provided to the Audit and Risk Committee the implications of a disorderly or hard brexit. planning and preparedness arrangements to address regarding the processes to ensureAn update was presented to the Audit and Risk Committee applicable with the revised UK Corporatecompliance on a voluntary basis in so far as is reasonably Governance Code. enlarged to extend an invitation to the full board toA planned Audit and Risk Committee meeting was and emerging risks. spend a day examining in detail some of the principal GOING CONCERN The Group’s performance, business model, strategy and principal risks and uncertainties and how these are managed are set out in the strategy and performance report on pages 7 to 77. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review on pages 48 to 53. Note 28 of the financial statements includes an overview of financial risk management, details of its financial instruments and hedging activities • • Through its ongoing involvement and overview of internal control and risk management activities, the Board is satisfied that internal control and risk management processes are effective. Independent advice on the adequacy of the current risk management process operating in ESB (the last review was carried out in 2015, next review is planned for 2020) Review and consideration of certification from management of satisfactory and effective operation of systems of internal control, both financial and operational A review of the programme of Group Internal Audit and consideration of its findings and reports. Group Internal Audit also report regularly on the status of implementation of recommendations raised previously from its own reports. Independent assessment of the effectiveness of the internal audit function (this is carried out every five years; the last assessment was carried out in 2016) A review of reports of the external auditors which contain details of work carried out on the key audit risks There is an ongoing process for identifying, evaluating and managing the principal risks of the Group Systems of internal control have been in place for the year under review and up to the date of approval of this Annual Report The systems comply with the Financial Reporting Council (FRC) Guidance on Risk Group Risk Plan (BCP) and crisisBusiness continuity planning management review risk policy andReview of ESB group’s governance framework Mid-year risk review Risk reports Cyber risk General data protection regulation (GDPR) Brexit UK Corporate Governance Code Off-site risk day ACTIVITY ACTIVITIES UNDERTAKEN BY THE BOARD AND THE AND AND RISK COMMITTEE AUDIT BY THE 2019 DURING BOARD UNDERTAKEN ACTIVITIES INCLUDED: RESPONSIBILITIES OF ITS RISK IN RESPECT • • • • • the Board confirms On the basis of this review, the following for 2019: • • • Uses relevant information Communicates internally Communicates externally orConducts ongoing and / separate evaluations Evaluates and communicates deficiencies A designated risk management function in ESB Review and consideration of the half-yearly risk review process and regular risk management updates Information and Communication 13. 14. 15. Monitoring Activities 16. 17. THE 2019 REVIEW OF THE EFFECTIVENESS OF INTERNAL CONTROL AND RISK MANAGEMENT The Board retains overall responsibility for internal control and risk management. During 2019, the Board has directly and through the delegated authority to the Audit and Risk Committee, reviewed the effectiveness of the Group’s system of internal control covering financial, operational and compliance controls and risk management systems for 2019 and will ensure a similar review is performed in 2020. The process used by the Board and the Audit and Risk Committee to review the effectiveness of the system of internal control includes: • • call for clear boundaries, communication channels, and handoff points. The Board defines making adjustments as these elements clearly, needed. The Committee Chair's report to the full Board on key developments and matters requiring further discussion and consideration. The Audit and Risk Committee retains overall responsibility for ensuring that enterprise risks are properly identified, assessed, reported and controlled on behalf of the board. Risk appetite may also vary over time and the Board has explicitly considered the level of this appetite and how specific risks are managed within it. The propensity to take risk is always balanced by a focus on exercising control. Selects and develops control activities Selects and develops general controls over activities Deploys through policies and procedures responsibility Specifies suitable objectives Identifies and analyses risk Assesses fraud risk change Identifies and analyses significant Demonstrates commitment to controlDemonstrates commitment and ethical values Exercises oversight responsibility andEstablishes structure, authority to competence Demonstrates commitment Enforces accountability Assessing adequacy of the risk management Assessing the likely effectiveness of Risk Assessment 6. 7. 8. 9. Control Activities 10. 11. 12. Control Environment 1. 2. 3. 4. 5.

• and crisis management processes • management’s mitigation measures and controls. The Board has carried out a robust assessment of the principal risks facing the Group, including those that might threaten its business model, A future performance, solvency and liquidity. cyclical review process for identifying, assessing and managing significant risks has been in place for the year under review and up to the date of approval of this Annual Report. The principal risks and uncertainties facing the Group and the mitigating strategies are set out on pages 28 to 37. The Board is aware that it must lead by example in shaping and supporting the updated Group values that underpin the approach to risk. It also seeks to ensure that sufficient risk management skills and capabilities are available in the business and that the knowledge and experience of all the employees in ESB who understand the risks associated with operations is utilised. Regular reporting has facilitated the Board to stay abreast of emerging risks and uncertainties. The Board focuses primarily on those risks that could undermine ESB’s strategy or which could adversely affect the long-term viability or reputation of the Group. The Board delegates responsibility for oversight of specific risks to Board Committees in accordance terms of reference and its with Committees’ respective area of expertise. The Board agrees how committees will keep one another, and the Board itself, informed about risks and risk oversight practices. Efficiency and effectiveness ESB INTERNAL CONTROL FRAMEWORK

FUNCTION

OPERATING UNIT OPERATING

DIVISION

ENTITY COMPLIANCE

REPORTING

Information and

Control Activities Communication OPERATIONS Risk Assessment

Control Environment Monitoring Activities Assessing the adequcy of the process Overseeing that an appropriate risk culture is Establishing a clearly articulated risk appetite Cumulative actual results and key performance A telephone helpline and online webchat COSO FRAMEWORK Effective risk management is critical to the achievement of ESB’s strategic objectives and the long-term sustainable growth of its business. The rapid changes taking place in ESB (and the market and operating environment in which ESB operates) makes it all the more important to continuously reassess risks and have clear strategies to manage them, and as appropriate leverage any opportunities they present. The Board has overall responsibility for the Group’s approach to risk. Specifically the Board is responsible for: • designed to identify the principal risks and uncertainties is in place • embedded throughout the Group • position that clarifies the level of risk ESB is willing to accept, and which also ensures that management and the Board align their views on risk. RISK MANAGEMENT • indicators are reported against budget and considered by the Board on a regular basis • service provide employees with a confidential and if required, anonymous means of reporting any fraud or ethical concerns These controls are reviewed systematically by Group Internal Audit. In these reviews, emphasis is placed on areas of greater risk as identified by risk analysis. Where weaknesses in the internal control system have been identified through the monitoring framework above, plans for strengthening them are put in place and action plans are regularly monitored until completed. ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 92 01 0303 01 STRATEGY AND PERFORMANCE 02 CORPORATE GOVERNANCE FINANCIAL STATEMENTS 7 MEETINGS ATTENDED 7 7 7 95 2019 Report Annual ESB Continued focus on cyber risks, impact of emerging technologies and further General Data Protected Regulation (GDPR) developments Continued focus on ethics and compliance framework Monitor and assess the Groups ESG (Environmental,Social and Governance) reporting in the context of the Annual Report biographical details are set out on pagesbiographical bring a broad81 and 83. The members expertise from arange of experience and which is vital towide range of industries, The Boardsupporting effective governance. member of the Audithas confirmed that each and thatand Risk Committee is independent requirements ofthe membership meets the Code in terms ofthe State Code and UK experience andrecent and relevant financial the sector in whichcompetence relevant to the Group operates. The key areas of focus in 2020 for the Audit and Risk Committee will include the following: • • • 4 years and 3 months LENGTH OF SERVICE 3 years 4 years and 3 months 6 years and 6 months The Audit and Risk Committee has reviewedThe Audit and Statementsthe Annual Report and Financial these criteriaand is satisfied that it meets to the Board forand has recommended them Risk Committee alsoapproval. The Audit and issues in relation toconsidered the significant how these issuesthe financial statements and is summarised onwere addressed. This work pages 97 to 98. reviewed theThe Audit and Risk Committee and fraud, andprocedures around compliance approved an updated policy on Whistleblowing and Protected Disclosures and an updated Corruption and Fraud. policy on Anti-Bribery, The aim of these policies is to enhance and further clarify guidance to employees on what action to take in the event that they encounter a wrongdoing or suspected fraud. The Audit and Risk Committee also reviewed and assessed reports on incidents of fraud and attempted fraud during the year. The Audit and Risk Committee will keep its activities under review to ensure that future developments relating to the work of the Audit and Risk Committee are fully considered. The responsibilities of the Audit and Risk Committee are summarised on page 96 and are set out in full in its terms of reference. The Audit and Risk Committee currently consists of four Independent Board members whose Independent Board Member DESIGNATION Independent Board Member Independent Board Member Independent Board Member

1

2 3

1 MEMBERS Chairman Noreen O’Kelly, Noreen Wright Alf Smiddy Andrew Hastings Fellow of Chartered Accountants Ireland Senior banking and financial services experience Qualified Barrister and energy sector experience through previous roles in Northern Ireland Electricity Networks plc. THE AUDIT AND RISK COMMITTEE THE HELD 7 MEETINGS DURING 2019. MEMBERS OF THE COMMITTEE, ARE SET OUT BELOW: LENGTH OF SERVICE AND THE NUMBER OF MEETINGS ATTENDED 1 2 3 CHAIRMAN’S INTRODUCTION On behalf of the Audit and Risk Committee, I am pleased to introduce the Audit and Risk Committee Report for the year ended 31 December 2019. The purpose of the report is to provide an insight into the workings of the Audit and Risk Committee over the last 12 months. I confirm that the Audit and Risk Committee satisfied its responsibilities as set out in its terms of reference and under both the Code of Practice for the Governance of state bodies (the State Code),GovernanceCorporate and the UK Code 2018 (the UK Code), as applied on a voluntary basis insofar as us reasonably applicable. Under the UK Code, the Board has a responsibility to confirm that the Annual Report and Financial Statements taken as a whole, are fair, balanced and understandable and provides all the necessary information for shareholders/ stakeholders to assess the Group’s performance, business model and strategy. AUDIT AND RISK COMMITTEE AND RISK AUDIT REPORT - € € € 2018 2018 2018 31,500 15,570 52,166 10,816 15,750 15,750 15,750 15,750 15,750 15,750 15,750 15,750 15,750 385,819 318,083 152,556 - € € € 2019 2019 2019 15,750 15,750 15,750 15,750 15,750 15,750 15,750 15,750 15,750 15,750 31,500 52,166 15,570 157,500 385,819 318,083

3 1 2 Alf Smiddy Noreen Wright Andrew Hastings Seán Kelly Paul Lynam Merriman Tony Peter O’Sullivan CHAIRMAN BOARDINDEPENDENT/WORKER MEMBERS Ellvena Graham OBE CHIEF EXECUTIVE Anne Butler Dave Byrne Stephen Carrig Salary Pension contributions Taxable benefits Taxable Noreen O’Kelly Appointed 1 January 2019. part of her Board fees in 2018 fully waived Ms O’Kelly Retired in 2019 BOARD MEMBERS’ REMUNERATION REMUNERATION MEMBERS’ BOARD 1 2 3

REMUNERATION Based on the results of the above analysis, the results of the above analysis, Based on the have a reasonable expectationBoard members to continue in operationthat the Group will be able they fall due over the five- and meet its liabilities as year period of their assessment. BOARD MEMBERS’ EXPENSES MEMBERS’ BOARD In compliance with the State Code, disclosure is required of the expenses paid to Board members. During 2019, €68,304 was reimbursed to, or paid on behalf of, Board members for travel expenses, accommodation and other related expenses. The above expenses do not include those of the Board members in Chief Executive or the Worker respect of their Executive or employee duties. INDEPENDENT BOARD REMUNERATION MEMBERS’ The remuneration of the Independent Board members (including the Chairman) is determined by the Minister for Public Expenditure and Reform and the Minister for Communications, Climate Action and Environment and they do not receive pensions or any other remuneration. The terms and conditions are set out in their letter of appointment and this is available on request from the Company Secretary. WORKER BOARD MEMBERS’ MEMBERS’ WORKER BOARD REMUNERATION Board members appointed under the Worker Participation (State Enterprises) Act 1977 Worker and are employees of ESB. They are members board of the ESB Pension Scheme. Worker members are entitled to receive a separate fee in respect of their position as board members. 5 CHIEF EXECUTIVE’S REMUNERATION The Chief Executive’s remuneration is set withinThe Chief Executive’s remuneration Minister for Publica range determined by the and the Minister forExpenditure and Reform Communications, Climate Action and Environment. Pat O’Doherty was appointed Chief Executive, aeffective 1 December 2011 and was appointed Board member in January 2013. His remuneration consists of an annual salary of €318,083, a company car and employer pension contribution. He is a member of the ESB Pension Scheme. In line with Government policy that the Chief Executive of State companies should not receive performance related payments, he did not receive any performance related payments in 2019. The Board has carried out a robust risk assessment of the principal and emerging risks facing the Group. In addition, business continuity and disaster recovery testing is conducted annually to assess scenarios that could adversely impact the Group and to what degree these risks can be mitigated. These risks and the way they are being managed and mitigated are outlined on pages 28 to 37. The Board recognises the significance of maintaining a strong balance sheet. The Group’s funding operations are of strategic importance and support capital expenditure, the refinancing of maturing debt and the The maintenance of adequate liquidity. Group’s debt management strategy targets a debt portfolio profile with a diverse mix of counterparties, funding sources and maturities. The Group’s revolving credit facility of €1.44 billion provides ESB with a ESB’s substantial level of standby liquidity. funding position reflects its underlying financial strength and at least BBB+ (or equivalent) credit ratings from two major credit rating agencies. Further details on debt maturity are set out on page 53. planning process completed annually and completed annually planning process by regular Board briefingsis underpinned along withprovided by business units (SPIs)strategic performance indicators projections into measure progress. The the Group’sthe business plan consider and liquiditycash flows, committed funding fundingpositions and examine future covenants, andrequirements and financial including thoseother key financial ratios graderelevant to maintaining investment in the businesscredit ratings. The metrics analysis,plan are subject to sensitivity which involves flexing a number of the main assumptions underlying the plan to assess key financial metrics, such as Net Debt and EBITDA (Earnings Before Interest, Depreciation and Amortisation) where Tax, appropriate analysis is carried out to evaluate the potential financial impact of the Group’s principal risks actually occurring. As part of the Enterprise Risk Management (ERM) processes, all potential consequences of a principal risk materialising are identified and, where possible and appropriate, the financial impact estimated. In addition, the ERM processes identify the interdependency of principal risks, particularly in terms of impact. ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 94 01 0303 01 STRATEGY AND PERFORMANCE 02 CORPORATE GOVERNANCE FINANCIAL STATEMENTS 97 2019 Report Annual ESB These issues were discussed with managementThese issues time the with the auditors at the during the year, agreed the Committee reviewed and Audit and Risk Group audit plan, as part of the auditors’ auditors’ financial statementsreview of the half-year interim audit of the year-endand at the conclusion of the financial statements. Considered detailed papers prepared and presented by Considered detailed papers prepared and presented the Executive Director, Group Finance and Commercial, including details of the methodologies and assumptions applied in determining the recoverable values including used the discount rates and market and tariff assumptions Constructively challenged the assumptions and projections presented in the papers Considered the sensitivity analysis provided including and scenarios with different discount rates and market tariff assumptions of Considered the detailed reporting from, and findings the external auditors The Audit and Risk Committee recognises that the The Audit and Risk Committee carrying value of assets involve impairment reviews for the largely related to the a range of judgemental decisions the value-in-use of the assets assumptions used to assess being tested. level of impairment assist with their decision on the To the charge, the Audit and Risk Committee carried out following: • • • • The accounting for the obligations to be reflected of in the financial statements requires the exercise judgement. The Audit and Risk Committee is satisfied that the appropriate accounting treatment, determined in accordance with IAS 19 Employee Benefits, is to reflect its existing committed obligations, as set out in the notes of the financial statements. Following the review above, the Audit and Risk Committee Following the review above, the Audit and Risk Committee key is satisfied with the impairment review approach, 7 of the assumptions used and the charges reflected in note Financial Statements. HOW ISSUES WERE ADDRESSED BY THE AUDIT BY HOW ISSUES WERE ADDRESSED AND RISK COMMITTEE )

Carrying value of long-lived assets and Carrying value of long-lived goodwill Pension obligations and disclosures Legal contingent liabilities the Audit and Risk Committee determined the Risk Committee determined the Audit and financial in the Group’s key areas of judgement to the following: statements related • • • The Scheme is registered as a Defined Benefit Scheme with the Pensions Authority. The Scheme is registered as a Defined Benefit Scheme with the Pensions Authority. The regulations governing the Scheme stipulate the benefits that are to be provided and they also stipulate contributions to be paid by both ESB and the contributing members. The Scheme is not a typical balance of costs Defined Benefit Scheme (where the employer is liable to pay the balance of contributions required to fund benefits). ESB does not intend that any further contributions, other than the normal ongoing contributions and the remaining balance of ESB’s €591 million additional contribution (committed to under the 2010 Pensions Agreement will be made). Where a deficit arises in the future, ESB is obliged under the Scheme regulations to consult with the parties to the Scheme. However, ESB has no obligation to increase contributions to maintain benefits in the event of a deficit and its rate of contribution cannot be altered without the agreement of ESB and the approval of the Minister for Communications, Climate Action and Environment. The Scheme Actuary confirmed during 2019 that on an actuarial basis, the Scheme’s assets were broadly in balance with its liabilities at the end of 2018. There is however currently a shortfall in a wind-up scenario in a test known as the Minimum Funding are in the process of finalising a new funding plan Standard (MFS). The Trustees to resolve this MFS shortfall. It is expected that the plan will be submitted to the Pensions Authority after its approval by the Department of Communications, Climate Action and Environment. ESB does not intend that any further contributions, other than the normal on-going contributions and the balance of the Company’s €591.0 million additional contribution will be made. CARRYING VALUE OF LONG-LIVED ASSETS AND GOODWILL OF VALUE CARRYING portfolio and United Kingdom (UK) generation Republic of Ireland (ROI) performed on the ROI and UK generation assets Impairment reviews were future the carrying values are supported by forecast where necessary to ensure discounted cash flows. long-lived assets Networks transmission and distribution of of impairment of the carrying As at 31 December 2019, there were no indicators value of the asset base of ESB Networks (€8.1billion), which determines the future regulated income to be earned. Networks) long-lived assets Northern Ireland Electricity Networks (NIE and goodwill of impairment of the carrying As at 31 December 2019, there were no indicators billion),value of the asset base of NIE Networks (£1.6 which determines the future regulated income to be earned. as at 31 December 2019 Goodwill recognised in the NIE Networks business impairment test of the carrying amounted to €178 million. Consequently an annual with IAS 36 and no reduction value of NIE Networks was carried out in accordance judgements used to carry out in the value of goodwill was required. The significant statements. this test are explained fully in note 14 of the financial • • • • SIGNIFICANT ISSUES CONSIDERED SIGNIFICANT ISSUES - ESB DEFINED BENEFIT PENSION SCHEME (THE SCHEME PENSION OBLIGATIONS continues to reflect its existing In accordance with IAS 19 Employee Benefits, ESB out in note 23 of the financial committed obligations on the balance sheet as set statements. This treatment is based on the following key factors, none of which changed for the year ended 31 December 2019. FINANCIAL REPORTING and Risk Committee receives The Audit and interim and year-end financialconsiders the as well as receivingstatements from management team and discussingreports from the internal audit of the external auditors. the audit strategy and focus information from these activities, into account Taking Financial Reporting and Risk Management Internal Control and Fraud Compliance, Whistle-Blowing Internal Audit External Audit • • • • • Reviewed the clarity and completeness of the disclosures in the Annual Report and Financial completeness of the disclosures in the Annual Reviewed the clarity and information presented within them Statements and the material they were fair, balanced report and financial statements to ensure that Reviewed ESB Annual and understandable or unusual the methods used to account for significant Considered and challenged disclosed in the financial statements transactions and how these were presented and accounting standards and made Reviewed whether the Group had applied appropriate into account the views of the external auditors appropriate estimates and judgements, taking statement Reviewed going concern assumptions/viability financial statements and explanatory notes Reviewed the interim results which consist of the financial results publications Reviewed and considered the key messages for approval, the ESB regulatory financial Reviewed and recommended to the Board for statements ESB Finance DAC for approval, the ESB Reviewed and recommended to the Board of Finance DAC financial statements the Group’s system of internal control Reviewed and monitored the effectiveness of planning and crisis management Reviewed the arrangements for business continuity and Governance Framework, Risk Plan and regular Reviewed ESB’s Risk Management Policy for approval Risk Reports and recommended them to the Board and the impacts of emerging technologies Considered a detailed review of cyber security Considered updates on Brexit assessments Reviewed the Data Protection Annual Report to provide assurance of compliance with Reviewed the controls and procedures in place statutory obligations and detecting fraud and were informed Reviewed the procedures and policies for preventing of any instances of fraud and attempted fraud for raising concerns confidentially Reviewed the adequacy and security of the arrangements or other matters about possible wrongdoing in financial reporting Reviewed and considered updates on status of investigations into potential protected disclosures Reviewed and approved updated policy on Whistleblowing and Protected Disclosures Corruption and Fraud policy Reviewed and approved updated Anti-Bribery, Reviewed readiness for application of revised UK Corporate Code Reviewed updates on GDPR Reviewed the internal audit plan and monitored progress against this plan to assess the effectiveness of the function Reviewed reports detailing the results of key audits, management’s response and the timeliness of resolution of actions Met with the Head of Internal Audit without management being present Reviewed internal audit key performance indicators Assessed the effectiveness of the external audit process including auditor independence and objectivity Reviewed and challenged the proposed external audit plan to ensure that PwC had identified all key risks and developed robust audit procedures Reviewed the report from PwC on its audit of the financial statements and their comments on accounting, financial control and other audit issues Considered and reviewed non-audit services provided by PwC and adherence to ESB policy Met with the external auditors without management being present, giving PwC the opportunity to raise any matters in confidence Reviewed PwC ‘s internal control recommendations and management’s response to these recommendations ACTIVITIES CARRIED OUT IN 2019 ACTIVITIES CARRIED • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Financial reporting and FinancialReview the Annual Report when takenStatements to ensure that andas a whole, they are fair, balanced appropriate accountingunderstandable and that standards, estimates and judgements have been applied Internal control and risk management Review the effectiveness of internal control and risk management Compliance, whistle-blowing and fraud Review the adequacy and security of the arrangements for employees and contractors to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters Internal audit Monitor and assess the role and effectiveness of the internal audit function External Audit independenceMonitor and review the objectivity, and quality of the external auditors and review the findings of the audit with the external auditors DUTY KEY OBJECTIVES is set Audit and Risk Committee The role of the a copy of which canout in its terms of reference, The www.esb.ie. be found on the ESB website, the duties of the Auditterms of reference sets out the following headings: and Risk Committee under ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 96 01 0303 01 STRATEGY AND PERFORMANCE 02 CORPORATE GOVERNANCE FINANCIAL STATEMENTS 99 2019 Report Annual ESB Limiting the nature and value of non- audit services performed by the external auditors as covered under the policy for non-audit services Monitoring the changes in legislation related to auditor objectivity and independence PwC confirming that they have appropriate internal safeguards in place that are consistent with applicable standards Rotating the audit partner every five years Providing opportunities to meet with the Audit and Risk Committee privately Reviewing annually the effectiveness of the external auditors Annual confirmation of independence by the external auditors Auditor effectiveness The effectiveness of the external auditors taking into accountis reviewed annually, feedback from a questionnaire on the evaluation of the external auditors by the Audit and Risk Committee. The evaluation focuses on such areas as the robustness of the audit process, audit team, communications and governance. Independence The Audit and Risk Committee assesses the independence on an ongoing basis. auditors’ The Committee considers the appointment of the external auditors every five years and this process is subject to public tender. The last tender process was completed in 2016. Auditor independence and objectivity is safeguarded by a number of control measures, including: • • • • • • • The Audit and Risk Committee is satisfied that the auditors, PwC, are both independent and objective. After reviewing the presentations and reportsAfter reviewing taking and internal audit, and from management views expressed by the externalinto account Committeeauditors, the Audit and Risk statementsis satisfied that the financial judgements andappropriately address critical Risk Committeekey estimates. The Audit and assumptionsis also satisfied that the significant of assets andused for determining the value scrutinised,liabilities have been appropriately robust. challenged and are sufficiently and PwC wereThroughout the year, ESB communication onengaged in ongoing, open current matters as and when they arose.

Audit quality maintain audit quality and provide assurance To on the integrity of financial reporting, the Audit and Risk Committee reviews and challenges the proposed external audit plan, including its scope and materiality prior to approval, to ensure that the external auditors have identified the key audit risks and developed a robust approach. The Audit and Risk Committee considers the external response to accounting, financial control auditors’ and audit issues as they arise and meets with them at least once annually without management present, providing the external auditors with the opportunity to raise any matters in confidence. The Audit and Risk Committee met with PwC privately in February 2020. Discussions with external auditors AUDIT AND RISK COMMITTEEAUDIT AND RISK EFFECTIVENESS process, theAs part of the Board evaluation Risk Committee is alsooperation of the Audit and of this evaluationevaluated. One of the findings by the range andwas the challenge posed to be consideredvolume of material which had extensive remit. Theby the Committee given its Committee accepted that this is a common issue for Audit and Risk Committees, and by its nature a dynamic process with Committee and management needing to work together in a achieve this the Committee To supportive way. chairman meets regularly with management to ensure that key topics are identified and reported on, as succinctly as possible. Measures taken to improve effectiveness include the development of post meeting action logs to assist with timely follow up of Committee queries and a full review of Committee reporting to assess the ongoing requirement for, the frequency of and the content of reporting to the Committee. An end of year report was prepared for the Committee which reviewed materials that were presented to the Committee by reference to their terms of reference and annual workplan to provide assurance that the Committee had adequate coverage of its oversight responsibilities. EXTERNAL AUDIT The Audit and Risk Committee has received and discussed a report from the external auditors on the findings from the audit, including those relating to the judgemental areas noted on pages 97 to 98. whole, are fair, balanced and understandablewhole, are fair, all the necessary informationand provides the / stakeholders to assess for shareholders model andGroup’s performance, business strategy. All Board members received copies of the Annual Report and Financial Statements to review early in the reporting cycle to ensure the key messages in the Annual Report were aligned with the Group’s position, performance and strategy and the narrative sections of the Annual Report were consistent with the financial statements That a robust process was put in place by management for the preparation of the Annual Report and Financial Statements for the year ended 31 December 2019, including early planning, taking into consideration regulatory changes and best practice Clear linkages to the strategic objectives are provided throughout the report That the key performance indicators (KPIs) used and reported in the Annual Report are consistent with those provided by management to the Board throughout the year Review of data and information included in the Annual Report by internal audit report Review of the external auditors’ That all key events and issues reported to the Board during the year, both positive and negative, have been adequately referenced or reflected in the Annual Report FAIR, BALANCED ANDFAIR, UNDERSTANDABLE and of the Board, the Audit At the request whether, inRisk Committee has considered and Financialits opinion, the Annual Report are fair,Statements taken as a whole, and providesbalanced and understandable for shareholdersall the necessary information Group’s/ stakeholders to assess the and strategy.performance, business model to whether theConsideration is also given a clear and conciseinformation is presented in and is easilyformat, avoids the use of jargon understood by the reader. of supporting the fair, assist in the process To balanced and understandable assessment statement, management prepared a report to the Audit and Risk Committee setting out the key considerations in arriving at the statement and to assist in its challenge and testing of a fair, balanced and understandable assessment. In reaching their conclusion, the Audit and Risk Committee considered the following: • • • • • • • the Audit and RiskFollowing its review, Committee is of the opinion that the Annual Report and Financial Statements taken as a Considered both the internal and external legal advice Considered both the internal in relation to the case by management where Challenged the views taken necessary is Based on this work, the Audit and Risk Committee liability satisfied that the claim represents a contingent relation and it is appropriate not to make a provision in cases. to the UCC case and other related outstanding HOW ISSUES WERE ADDRESSED BY THE AUDIT BY WERE ADDRESSED HOW ISSUES COMMITTEE AND RISK The Audit and Risk Committee recognise that in relation to Risk Committee recognise The Audit and necessary on the appropriate levellegal claims, judgement is of disclosure and provisioning. the claim as assist with the decision on the classification of To Risk Committee carried out the Audit and a contingent liability, the following work: • • • On the basis of the internal and external legal advice received, and as the only ongoing appeal isOn the basis of the internal and external legal advice by UCC (which ESB does not believe will be successful), no provision has been made for such Financial Statement for further details.claims in the financial statements. See notes of the In addition to the UCC claim, ESB has, since the judgment of the High Court in the UCC case,In addition to the UCC claim, ESB has, since the judgment to the flooding in Cork in November 2009.been served with 388 sets of proceedings relating have not yet been received andDetails of amounts claimed in relation to these proceedings of their cost (should the Supreme Courttherefore it is not possible to make a reliable estimate time. However, ESB does not anticipatenot uphold the decision of the Court of Appeal) at this and related costs for all of the actions,that the total amount of damages awarded, if any, insurance cover. including the Aviva/UCC action, would exceed its applicable Based on legal advice received, ESB appealed the decision to the Court of Appeal. On 20 ESB appealed the decision to the Court of Based on legal advice received, is not liable for any Appeal delivered its judgment which held that ESB March 2018 the Court of Court granted property by the flood. In October 2018 the Supreme damage caused to UCC’s by thejudgment of the Court of Appeal. The appeal was heard UCC leave to appeal the It is anticipated 2019 and the judgement of the Court was reserved. Supreme Court in early July 2020. The issueSupreme Court may be delivered by the end of Q1 that the judgement of the cases is stayed pending the outcomeof the legal costs of the High Court and Court of Appeal of the Supreme Court appeal. Following flooding in Cork in November 2009, Aviva as University College Cork’s (UCC) in November 2009, Aviva as University College Cork’s Following flooding in Cork of €19 million for against ESB in the High Court seeking recovery insurer pursued a legal action in the case and 2015, the High Court delivered its judgement property damage. On 5 October the damage caused and UCC 40% contributory negligent. found ESB 60% liable for SIGNIFICANT ISSUES CONSIDEREDSIGNIFICANT DISCLOSURES LIABILITIES AND LEGAL CONTINGENT The above description of significant issues considered should be read in conjunction with the Independent Auditors’ Report on pages 110 to Report on pages 110 to should be read in conjunction with the Independent Auditors’ The above description of significant issues considered disclosed in note 1 of the financial statements on page 125. 116 and the statement of accounting policies ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 98 01 0303 01 STRATEGY AND PERFORMANCE 02 CORPORATE GOVERNANCE FINANCIAL STATEMENTS 4 5 5 5 MEETINGS ATTENDED 101 2019 Report Annual ESB 8 years and 1 month 3 years 4 years and 3 months LENGTH OF SERVICE 1 year Chief Executive Independent Board member Independent Board member DESIGNATION Worker Board member Worker Group Safety KPIs Projects Health Environment Improvement Group Safety, ESB Networks Environment Update Health, Safety and Environment Annual Report project updates Safe and Sound Transformation Environmental incident updates incidents, potential high injuries, time lost including updates risk safety Key near-misses and good catches Update on ESB participation in Bettercoal scheme Update on development of cultural dashboard Environment and sustainability updates ESB Networks Environmental Compliance audit Reports on incidents and non-compliance with legislation in relation to Engagement with Environmental Protection Agency (EPA) peat stations Fisheries update Update on working time directive Dam safety review Health and wellbeing update on staff mental health Update on ESB Networks storm safety management Public safety Business unit safety improvement projects Examples of activity Reviewed and considered: • • • • • • Reviewed and considered: • • • respect of:Reviewed, considered and suggested actions in • • • • • • Considered the risks in the following areas: • • • • • 1 HEALTH, SAFETY AND ENVIRONMENT COMMITTEE SAFETY AND HEALTH, Committee Meetings length of service and the during 2019. The members of the Committee, The Committee held 5 meetings are set out below: number of meetings attended Stephen Carrig Pat O’Doherty Paul Lynam Paul Lynam Anne Butler, (Chairman) MEMBERS Stephen Carrig joined the Committee from January 2019. Stephen Carrig joined the Committee from January 1 KEY ACTIVITIES OF THE HEALTH, SAFETY AND ENVIRONMENT COMMITTE IN 2019 SAFETY AND ENVIRONMENT COMMITTE KEY ACTIVITIES OF THE HEALTH, Duty Monitor the development of health, safety and environmental strategy and translation of the strategy into policies and programmes Review and consider information on key health, safety and environmental trends in Ireland, Europe and elsewhere, where relevant Review and consider reports on compliance with all applicable health, safety and environmental legislation Support the Board in carrying out Board responsibilities in ensuring that health, safety and environmental risks are properly identified, assessed, reported and controlled See pages 68

Anne Butler, Chairman Role The Health, Safety and Environment Committee’s responsibilities are set out in its terms of reference. The Committee Chairman meets as required with the Chairman of the Audit and Risk Committee to agree and update as appropriate the specific risk responsibilities of the Health, Safety and Environment Committee. to 69 for further information on Health, Safety and Environment in 2019 as set out in the Responsible Business Report Section. BOARD COMMITTEES 2019 IN BOARD The internal and external auditors have full and unrestricted access to the Audit and Risk Committee. The Audit and Risk Committee Chairman reports the outcome of its meetings to the Board. Meetings, or part thereof, are routinely attended by the Board Chairman, Chief Executive and / or Deputy Chief Executive, Executive Director, Group Finance and Commercial, Head of Group Internal Audit, Group Compliance Manager and representatives of the external auditors. Committee-only sessions are arranged at the beginning/end of meetings, as determined by the Audit and Risk Committee Chairman. On behalf of the Audit and Risk Committee Noreen O’Kelly, Chairman, Audit and Risk Committee 27 February 2020 MEETINGS Fees earned by ESB’s external auditors inby ESB’s external auditors Fees earned year, services in any financial respect of non-audit under non-audit services excluding permitted shall not exceedthe transitional arrangements, year. An update onthe annual audit fee for that services providedthe nature of PwC non-audit is presented toand the value of such services bi-annually tothe Audit and Risk Committee are in compliancedemonstrate that the services is within the cap.with the policy and the value non-audit fees paidA summary of the audit and set out in note 10 ofto the external auditors is primary non-auditthe financial statements. The related services provided by the external auditors during the year were in respect of permitted accounting, tax and treasury related advice. PwC also provided administrative assistance directly to the ESOP in relation to the ESOP auction process. The Audit and Risk Committee are satisfied that the fees paid in 2019 did not compromise the independence or integrity of the external auditors. The Committee will continue to monitor the type and level of services provided to prevent any perceived or actual impact on auditors’ independence. A review of the effectiveness of the externalA review of the effectiveness in 2019.process was formally conducted Risk Committee alsoMembers of the Audit and PwC's Publicmet with representatives from the quality andInterest Body (PIB) to discuss audit. effectiveness of the external Overall, the Audit and Risk Committee is and Risk Committee Overall, the Audit the effectiveness of the externalsatisfied with the quality of presentationsaudit based on of thereceived, management’s assessment of PwCaudit process, technical knowledge of ESB’sand their robust understanding business. The policy outlines the governance arrangements that apply to the provision of non-audit services. This policy includes a list of prohibited services, outline the governance arrangements that apply to the provision of such services and set out the transition arrangements for permitted non-audit services commenced prior to appointment of PwC. The revised policy includes a defined approval process and is in compliance with ESB procurement procedures and Group authority levels. As 2020 represents the fourth year of the audit engagement with PwC, the policy will be updated in line with the EU Audit Regulation which established that when a statutory auditor or audit firm has been providing non-audit services ('NAS'), to the audited Public Interest Entity (PIE) for a period of three or more consecutive financial years, the total fees for such services in the fourth year will be limited to a maximum of 70% of the average of the total fees paid in the last three consecutive years for the statutory audit of the audited entity and, where applicable, of its parent undertaking of its controlled undertakings and of the consolidated financial statement of that group of undertakings. The Audit and Risk Committee has approved a policy on the engagement of ESB’s external auditors for non-audit services to take account of the implementation of the EU Audit Regulation and Directive on non-audit services in compliance with Statutory Instrument No 312/2016 - European Union (Statutory Audits) (Directive 2006/43/EC, as amended by Directive 2014/56/EU, and Regulation (EU) No. 537/2014) Regulations 2016 in Ireland and with the Ethical Standard for Auditors issued in April 2017 by the Irish Auditing and Accounting Supervisory Authority (IAASA). Non-audit services ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 100 01 0303 01 STRATEGY AND PERFORMANCE 02 CORPORATE GOVERNANCE FINANCIAL STATEMENTS 4 3 4 4 3 3 3 MEETINGS ATTENDED MEETINGS ATTENDED 103 2019 Report Annual ESB LENGTH OF SERVICE 3 years 3 years 3 years 3 years 8 years 4 years and 3 months 8 years LENGTH OF SERVICE DESIGNATION Independent Board member Independent Board member Board member Worker Chief Executive Chairman Independent Board member Independent Board member DESIGNATION Review of succession planning and leadership competencies Review of succession planning and leadership Review of Senior management appointments career and Review of Chief Executive and Executive Director's personal development Reviewed performance against 2018 targets Set 2019 performance targets for the Executive Reviewed and approved remuneration packages Team Examples of Activity • • • • • • ESB Networks customer update ROI residential customer update NI market update Electric Ireland Business performance update ESB Energy update (GB) Electric vehicles update Smart metering update Winter storm preparedness ESB reputation and brand update review GB brand review changes Tariff External review of marketing strategies Marketing strategy updates Digital customer channel update Electric Ireland brand and advertising strategy update Examples of Activity Reviewed and considered: • • • • • • • • • Received an update on: • • • Reviewed and considered: • • • MEMBERS Alf Smiddy (Chairman) Anne Butler Merriman Tony Pat O’Doherty MARKETING AND CUSTOMER COMMITTEE MARKETING AND CUSTOMER Committee Meetings members of the Committee, length of service and the number ofThe Committee held 4 meetings during 2019. The meetings attended are set out below: REMUNERATION AND MANAGEMENT DEVELOPMENT COMMITTEE DEVELOPMENT AND MANAGEMENT REMUNERATION Committee Meetings length of service and the during 2019. The members of the Committee, The Committee held 3 meetings are set out below:number of meetings attended Ellvena Graham OBE, (Chairman) Andrew Hastings Noreen Wright MEMBERS KEY ACTIVITIES OF THE REMUNERATION AND MANAGEMENT DEVELOPMENT COMMITTEE IN 2019 AND MANAGEMENT DEVELOPMENT REMUNERATION KEY ACTIVITIES OF THE Duty under review senior management Keep succession and development plans Agree with the Chief Executive his specific annual performance targets Determine the remuneration packages for ESB’s Executive Team KEY ACTIVITIES OF THE MARKETING AND CUSTOMER COMMITTEE IN 2019 KEY ACTIVITIES OF THE MARKETING AND CUSTOMER Duty Review and consider marketing and customer initiatives and programmes and ensure they are aligned with ESB’s strategic objectives Review and consider new products and services and associated revenue projections Review and consider proposed advertising and sponsorship programmes and the assessment of their potential impact Each Board Committee has its terms of reference reviewed and approved by the Board annually. Terms of reference of all committees are Terms Each Board Committee has its terms of reference reviewed and approved by the Board annually. available upon request from the Company Secretary. , 1 Alf Smiddy, Chairman Ellvena Graham OBE Chairman Role The Marketing and Customer Committee’s responsibilities are set out in its Terms of Reference. Role The Remuneration and Management Development Committee’s responsibilities are set out in its Terms of Reference. 11 11 11 11 11 11 MEETINGS ATTENDED LENGTH OF SERVICE 4 years and 3 months 6 years and 9 months 4 years and 3 months 3 years 6 years and 9 months 4 years and 3 months DESIGNATION Independent Board member Board member Worker Board memberWorker Independent Board member Chief Executive Independent Board member 2020 Budget and the five-year business plan Quarterly financial and capital expenditure reports Quarterly loans, swaps and bonds report SIRO revised business plan Renewables investments and PR5 preparation ESB Networks progress on Price Review 4 (PR4) Joint venture agreements Major IT system upgrade Head office redevelopment project Participation in the I-SEM & UK capacity auctions Electric Ireland Field sales contracts Smart Energy Services investments Generation assets investment and overhaul programme Great Britain Civil and Electrical Framework contract Chargepoint framework Electric Vehicle Onshore wind services agreement Green Bond issue ESB funding requirements risk management update Treasury Group valuation and investment hurdle rates Credit rating updates (market, credit and operational) Risk Position ESB Trading Revised market abuse policy Strategy ESB Trading Update on I-SEM capacity auctions Examples of Activity applicable): Reviewed and recommended to the Board (where • • • • applicable): Reviewed and recommended to the Board (where • • • • • • • • • • • • Reviewed and recommended to the Board (where applicable): • • • • • Reviewed and considered: • • • • MEMBERS Dave Byrne Seán Kelly Paul Lynam Pat O’Doherty Noreen O’Kelly Andrew Hastings, (Chairman) The Committee held 11 meetings during 2019. The members of the Committee, length of service and themeetings during 2019. The members of the Committee, The Committee held 11 are set out below: number of meetings attended FINANCE AND INVESTMENT COMMITTEE FINANCE AND INVESTMENT Committee Meetings Examine major business proposals for investment and capital expenditure Examine key policy issues concerning the financial requirements of ESB including credit ratings, borrowings, financial instruments and debt management Review the energy trading policies and procedures of the Group KEY ACTIVITIES OF THE FINANCE AND INVESTMENT COMMITTEE IN 2019 KEY ACTIVITIES OF THE FINANCE AND INVESTMENT Duty Review annual capital budgets and financial performance prior to submission to the Board Role The Finance and Investment Committee’s responsibilities are set out in of its Terms Reference. Andrew Hastings, Chairman ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 102 01 0303 01 STRATEGY AND PERFORMANCE 02 CORPORATE GOVERNANCE FINANCIAL STATEMENTS 105 2019 Report Annual ESB for the 2021 financial year (in accordance with thefinancial year (in accordance for the 2021 7(2) of the Act,applicable provisions of Section are appointedwhich provides that the auditors annually). OF THE 2019APPROVAL ANNUAL REPORT AND FINANCIAL STATEMENTS taking into accountThe Board is satisfied, after Audit and Riskthe recommendation of the Report and FinancialCommittee, that the Annual are fair, balanced andStatements taken as a whole, understandable. Ellvena Graham OBE, Chairman Pat O’Doherty, Chief Executive 27 February 2020

so far as the Board member is aware, there is no relevant audit information of which ESB’s statutory auditors are unaware each Board member has taken all the steps that he or she ought to have taken as a Board member in order to make himself or herself aware of any relevant audit information and to establish that ESB’s auditors are aware of that information (within the meaning of Section 330). PwC were appointed as ESB’s auditors for the 2020 financial year at the AGM held in 2019 in accordance with Section 7(2) of the Electricity (Supply) Act 1927 (as amended), be confirmed at the AGM of the company. At the 2020 AGM, the shareholders will be asked (i) to authorise the directors to fix the remuneration of the auditors in respect of the year ended 31 December 2020 and (ii) to appoint PwC as auditors Communities (Late Payments in CommercialCommunities Regulations, 2012 (S.I. No. 580 of Transactions) Communities2012) as amended by European Transactions) (Late Payment in Commercial 2016 (S.I. No. 281 of(Amendment) Regulations satisfied that ESB has2016) 2002. The Board is of the Regulations.complied with the requirements AUDIT AND RISK COMMITTEE ESB has an Audit and Risk Committee, the members of which are set out on page 95. AUDITORS RELATED PARTY PARTY RELATED TRANSACTIONS are set out in note 30 ofRelated party transactions the financial statements. RESEARCH AND DEVELOPMENT ESB’s business is involved in innovative projects and programmes to develop the energy sector. A number of these projects and programmes are referred to in the Strategy and Performance Section on pages 7 to 63. UNDER SECTION STATEMENT ACT 330 OF THE COMPANIES 2014 The ESB Regulations require ESB to observe the provisions of the Companies Act 2014 applying to a Companies Act entity in regard to audit and/or auditors. This requires the Board members to make a statement in the form required by Section 330 of the 2014 Act. In compliance with this requirement, the Board confirms that it applies the standards in Section 330 of the Companies Act 2014 and in this regard, each of the Board members confirms that: • •

Sustainability and corporate social responsibility (CSR) concepts are embedded in all ESB operations and activities. Information on the Group’s approach to sustainability and CSR is set out on pages 70 to 77. PROMPT PAYMENTS PROMPT PAYMENTS REGULATION The Board acknowledges its responsibility for ensuring compliance, in all material respects, with the provisions of the Prompt Payment of Accounts Act, 1997 and European SUSTAINABILITY ELECTORAL ACT 1997 The Board made no political donations during the year. SUBSIDIARY, PRINCIPAL JOINT VENTURE AND ASSOCIATED UNDERTAKINGS joint ventureDetails of the principal subsidiary, and associated undertakings are outlined in note 35 of the financial statements. REGULATION OF LOBBYING REGULATION ACT 2015 of theIn accordance with the requirements ESB is registeredRegulation of Lobbying Act, at www.lobbying.ieon the Lobbying Register return for the periodand has made the required 2019.1 January to 31 December ACT MODERN SLAVERY Modern slavery is a criminal offence underModern slavery is a criminal 2015. The Actthe UK Modern Slavery Act of aimposes obligations on organisations certain size, which carry on a business in the United Kingdom. Modern slavery can occur in various forms, including servitude, forced and compulsory labour and human trafficking, all of which have in common the deprivation of a person’s liberty by another in order to exploit them for personal or commercial gain. As the parent of a number of subsidiary companies with significant operations in the UK, ESB has on Modern Slavery with theadopted a Policy aim of preventing opportunities for modern slavery occurring within its business and supply chains. In accordance with the Act, ESB publishes an Annual Statement setting out the steps that ESB has taken during the previous financial year to ensure that slavery and human trafficking is not operating within either its own business or its supply chains. The most recent Annual Statement was published in June 2019.

REPORT UNDER SECTION 22 OF THE PROTECTED DISCLOSURES ACT 2014 The financial risk management objectives and policies of the group along with a description of the use of financial instruments is set out in note 28 of the financial statements. ACCOUNTING RECORDS PRINCIPAL RISKS AND PRINCIPAL UNCERTAINTIES A description of the principal risks and uncertainties facing the Group is set out in the Risk Report on pages 28 to 37. FINANCIAL INSTRUMENTS FUTURE DEVELOPMENTS vertically integratedESB is a strong diversified, the electricityutility operating right across market: from generation, through transmission and distribution to supply of customers, with an expanding presence in the GB market. The Strategy to 2030 ensures that ESB continues to grow as a successful business while maintaining the financial strength to invest in a low-carbon future at the necessary scale and pace (see pages 17 to 21 for more information). expenditure commitment by ESB matchedexpenditure commitment by the ESOPthe expenditure committed ESB purchasedtrustee under the proposal. worth €4.6 millionand cancelled capital stock in 2019 (2018: €4.8 million). Further details 32. Details of theare outlined in notes 19 and outlined in note 19 ofGroup’s share capital are the financial statements. The Board members believe that they have employed accounting personnel with appropriate expertise and provided adequate resources to the financial function to ensure compliance with ESB’s obligation to keep proper books of account. The books of account East Wall Gateway, of ESB are held at Two Road, Dublin 3. Section 22 of the Protected Disclosures Act 2014 requires ESB to publish an Annual Report relating to protected disclosures made under the Protected Disclosures Act 2014. In accordance with this requirement, ESB confirms that in the full year ending 31 December 2019, three protected disclosures were made to ESB. The matters reported have been or are in the course of being investigated in accordance with the applicable ESB Group policies.

An Employee Share Ownership Plan (ESOP) market liquidity proposal was approved by ESB's Board in May 2015. ESB approved the expenditure of up to €25 million to acquire capital stock in internal ESOP markets, commencing in 2017, with the objective of improving liquidity in the market. This SHARE CAPITAL The financial results of the Group show a profit after tax before exceptional items of €419 million for the financial year 2019, compared with a profit of €181 million for 2018. Profit after tax and exceptional items is €338 million (2018: profit of €60 million). The dividend policy agreed with the Government in 2013 provides for targeted dividends of adjusted profit after tax of 40% in 2017 and thereafter. An interim dividend for 2019 of €38.2 million (1.94 cent per unit of stock) was declared and paid in November 2019. The Board is now recommending a final dividend for 2019 of 2.53 per cent per unit of stock, or €49.8 million, which brings the total dividend for 2019 to €88 million. This would bring the total dividends paid over the past decade to €1.2 billion. RESULTS AND DIVIDEND AND RESULTS FOR THE YEAR BUSINESS REVIEW Commentaries on performance in the year ended 31 December 2019, including information on recent events and potential future developments, are contained in the Chairman’s Statement and the Chief of the The performance Executive’s Review. business and its financial position and the principal risks faced by the Group are reflected in the reviews for each major business unit on pages 54 to 63, the Financial Review on pages 48 to 53 and the Risk Report on pages 24 to 37. PRINCIPAL ACTIVITIES PRINCIPAL Group are theThe principal activities of the distribution and supplygeneration, transmission, of Ireland (ROI) andof electricity in the Republic Northern Ireland (NI). The Group also operates and supply of in the generation internationally, (GB) and is involvedelectricity in Great Britain in a number of engineering consultancy projects in Asia and Africa. The Board members present their reportThe Board members financial statementstogether with the audited for the year ended 31of ESB and of the Group December 2019.

ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 104 BOARD MEMBERS’ REPORT MEMBERS’ BOARD 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS Statement of Board Member's Member's Statement of Board Responsibilties to the Report Independent Auditor's Board Stockholders of Electricity Supply Statements Financial Act Payments Prompt CHAPTER 3 FINANCIAL STATEMENTS 109 110 116 210 211 Glossary 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS

109 2019 Report Annual ESB Select suitable accounting policies and then apply them consistently; Select suitable accounting policies and then apply and prudent; Make judgements and estimates that are reasonable as adopted by the European Union, and as regards ESB, as applied in accordance with theState that the financial statements comply with IFRS basis unless it is inappropriate to presume that the Group and ESB will continue in business. Prepare the financial statements on the going concern Union and ESB's financial statements prepared inThe Group financial statements, prepared in accordance with IFRS as adopted by the European of Companies Act 2014 and as applied by theaccordance with IFRS as adopted by the European Union as applied in accordance with the provisions and of ESB at 31 December 2019 and of the profit of theESB Regulations, give a true and fair view of the assets, liabilities, financial position of the Group Group for the year then ended 31 December 2019; business and the position report contained in the annual report includes a fair review of the development and performance of the The Board members’ face; and of the Group and ESB, together with a description of the principal risks and uncertainties that they to assess the Group’s performance, business The annual report and financial statements, taken as a whole, provides the information necessary for shareholders to assess ESB's position model and strategy and is fair, balanced and understandable and provides the information necessary and performance, business model and strategy.

for ESB Group comprising (the Parent) and for ESB Group statements for ESB report, incorporating financial for preparing the annual are responsible The Board members subsidiaries “the Group”. ESB and its the Board is “the ESB Regulations”, the Electricity (Supply) Act 1927 (as amended) regulations, adopted pursuant to Section 6 (1) of Under ESB’s governing under the Companies Act 2014. statements as are required by companies established required to prepare financial ons, Climate Action and statements, to the Minister for Communicati its annual report, which incorporates the financial ESB is also required to furnish (Supply) Act 1927 (as meet its obligations under Section 32 of the Electricity with corporate governance guidelines and to Environment in accordance amended), year. a report of its proceedings during the preceding to make to the Minister and as applied in accordance with with IFRS as adopted by the European Union prepare ESB’s financial statements in accordance The Board has elected to of the Companies Act 2014 and ESB Regulations. the applicable provisions statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financialThe Board members must not approve the financial profit or loss for that year. position of the Group and of ESB and of the Group’s are required to: In preparing the financial statements the Board members • • • Companies 2014; and • adequate accounting records which disclose with reasonable accuracy at any time the assets, liabilities,The Board members are responsible for keeping enable them to ensure that the financial statements of ESB and the Group are prepared in accordancefinancial position and profit or loss of ESB, and which Union and as applied in accordance with applicable provisions of the Companies Act 2014 and ESBwith applicable IFRS as adopted by the European Regulations. the assets of ESB and the Group, and hence for taking reasonable steps for the prevention andThe Board Members are also responsible for safeguarding detection of fraud and other irregularities. and integrity of the corporate and financial information included on the Group’s and ESB’s website The Board members are responsible for the maintenance in other of Ireland governing the preparation and dissemination of financial statements may differ from legislation Legislation in the Republic www.esb.ie. jurisdictions. Each of the Board members, confirm that, to the best of each person’s knowledge and belief: • • • On behalf of the Board Ellvena Graham OBE, Chairman Pat O’Doherty, Chief Executive STATEMENT OF BOARD MEMBERS’ RESPONSIBILITIES MEMBERS’ OF BOARD STATEMENT 109 110 124 138 140 141 141 142 143 143 144 145 146 149 151 153 154 158 158 162 162 164 168 174 179 183 184 185 186 188 202 202 204 205 205 205 206 116 117 118 119 120 121 122 123

Independent Auditor’s Report to the Stockholders of Electricity Supply Board (ESB) to the Stockholders of Electricity Supply Board Independent Auditor’s Report Statement of Board Members’ Responsibilities Statement of Board Members’ Financial Statements The Notes To 1 Statement of Accounting Policies

2 Segment Reporting 3 Revenue from Contracts with Customers 4 Geographical Information 5 Exceptional Items 6 Other Operating Income / (Expenses) on Financial Assets) 7 Operating Costs (including Net Impairment Losses 8 Net Finance Cost and Other Financing Charges 9 Employees 10 Profit for the Financial Year Plant and Equipment 11 Property, 12 Intangible Assets 13 Right of use assets and lease libilities 14 Goodwill through Profit or Loss and Equity Accounted Investees 15 Financial Asset Investments at Fair Value 16 Inventories and Other Receivables 17 Trade 18 Cash and Cash Equivalents 19 Changes in Equity 20 Taxation 21 Borrowings and Other Debt 22 Derivative Financial Instruments 23 Pension Liabilities 24 Liability – ESB Pension Scheme and Employee Related Liabilities and Other Payables 25 Trade 26 Deferred Income 27 Provisions 28 Financial Risk Management and Fair Value 29 Commitments and Contingencies 30 Related Party Transactions 31 Estimates and Judgements Limited 32 ESB ESOP Trustee Balance Sheet Events 33 Post 34 Approval of Financial Statements Undertakings Equity Accounted Investees and Associate 35 Subsidiary, CONTENTS - Powering the Transition to a Clean Energy Future Energy Clean to a Transition the - Powering 2019 Report Annual ESB 108 Financial Statements Group Income Statement Group Statement of Comprehensive Income Group Statement of Comprehensive Group Balance Sheet Parent Balance Sheet in Equity Group Statement of Changes Parent Statement of Changes in Equity Group Cash Flow Statement Parent Cash Flow Statement 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS 111 2019 Report Annual ESB (continued) How our audit addressed the key audit matter on those thermal generation assets where there focused our audit effort We was a risk of impairment. of whether there were any considered the Group’s assessment We requiring an impairmentindications that an asset may be impaired, thereby test to be performed. of those thermal generation assets evaluated management’s assessment We critical assumptions in thewhich were potentially impaired by evaluating the level of headroom andfuture cash flow forecasts and considering the overall carrying value of the individual cash generating units. ofFor thermal generation assets, we obtained an understanding assumptions in themanagement’s approach in determining the key the latest Board approvedimpairment models, including comparing them to we compared thisbudgets. Where there was independent source data basis for theto the inputs to the models and understood management’s no observable data wejudgements made in the models. For inputs with assumptions in the contextconsidered these and challenged management’s of available internal data, including historical data and budget information. considered the appropriateness of the discount rates used in the We impairment models by assessing the assumptions used in the weighted also performed average cost of capital against external benchmarks. We sensitivity analysis to changes in key assumptions and we considered the likelihood of such changes arising. considered the disclosures in the financial statements in relation to these We matters. Based on our procedures we were satisfied that no impairment charge was required in the current year in respect of the thermal generation assets. Key audit matter Carrying value of Long-Lived Assets Report),Refer to page 97 (Audit and Risk Committee notes 1(vi), and notes 11 and(vii) and (viii) (Statement of Accounting Policies) 12 to the financial statements plant and equipment and intangible property, The carrying value of ESB’s assets designed toassets is €11.5 billion, most of which are long-lived to assess at the enddeliver a return over 20+ years. The Group is required that an asset mayof each reporting period whether there is any indication is required to performbe impaired. If any such indication exists, the Group impairment testing. UK and the lowerThe ongoing pressure on energy margins in the to in the Republic of Ireland in addition forecast electricity prices by Poyry the overall risk and level ofimpairments recorded in the prior year increases assets.audit focus required in respect of Irish and UK thermal charges to beThe Group has concluded that there were no impairment recorded in respect of the Irish and UK thermal assets. The Group’s assessment of the carrying value of these assets involves significant judgement in estimating the inputs to discounted cash flow models used to assess the recoverable amount of these assets, including assumptions in respect of future electricity prices, capacity income, future fuel costs, expected plant running (load factors), discount rates, inflation and plant closure dates. INDEPENDENT AUDITORS' REPORT TO STOCKHOLDERS OF STOCKHOLDERS TO REPORT AUDITORS' INDEPENDENT (ESB) BOARD ELECTRICITY SUPPLY The scope of our audit statements. In particular, we the risks of material misstatement in the financial audit, we determined materiality and assessed As part of designing our estimates that involved making example in respect of significant accounting members made subjective judgements, for looked at where the Board risk of management override of As in all of our audits we also addressed the future events that are inherently uncertain. assumptions and considering a risk of material misstatement due bias by the Board members that represented evaluating whether there was evidence of internal controls, including to fraud. audit matters Key in the audit of the financial statements of judgement, were of most significance professional in the auditors’ audit matters are those matters that, Key fraud) identified by the auditors, material misstatement (whether or not due to include the most significant assessed risks of the current period and and directing the efforts of the the allocation of resources in the audit; the greatest effect on: the overall audit strategy; including those which had our audit we make on the results of our procedures thereon, were addressed in the context of engagement team. These matters, and any comments is not a our opinion thereon, and we do not provide a separate opinion on these matters. This of the financial statements as a whole, and in forming complete list of all risks identified by our audit.

€25 million - Parent financial statements Carrying value of Long-Lived Assets Completeness of pension obligations Revenue Recognition – unbilled Electric Ireland revenue €25 million - Group financial statements and financial position as at 31 December 2019 and of the Group’s profit at 31 December 2019 and of the Group’s profit and financial position as of the Group’s and the Parent’s assets, liabilities give a true and fair view as as adopted by the European Union and, Reporting Standards (“IFRSs”) in accordance with International Financial have been properly prepared applied by the ESB Acts 1927 to 2014. the Companies Act 2014, as in accordance with the requirements of have been properly prepared December 2019; the Group and Parent Balance Sheets as at 31 of Comprehensive Income for the year then ended; the Group Income Statement and Group Statement for the year then ended; the Group and Parent Cash Flow Statements in Equity for the year then ended; and the Group and Parent Statements of Changes a description of the significant accounting policies. the Notes to the financial statements, which include

- Powering the Transition to a Clean Energy Future Energy Clean to a Transition the - Powering 2019 Report Annual ESB 110 INDEPENDENT AUDITORS' REPORT TO STOCKHOLDERS OF STOCKHOLDERS TO REPORT AUDITORS' INDEPENDENT (ESB) BOARD ELECTRICITY SUPPLY • • • audit matters Key • Based on c. 5% of profit before tax and exceptional items. We consider this to be an appropriate benchmark as the Group is profit orientated and the Based on c. 5% of profit before tax and exceptional items. We ongoing trading activity. exceptional items are significant non-recurring items which are not reflective of the Group’s Audit scope segments and the head office function. Our audit work covered in excess of 90% of Group conducted our work across the four reportable We revenues, profit before taxation and exceptional items, total assets and total liabilities. OUR AUDIT APPROACH Overview Materiality • for the Parent financial statements to €25 million, being that applied to the Group financial considered it appropriate to restrict materiality We statements. Independence to our audit of the financial statements in Ireland, remained independent of the Group in accordance with the ethical requirements that are relevant We these requirements. Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with which includes IAASA’s BASIS FOR OPINION Our responsibilities (Ireland)”) and applicable law. conducted our audit in accordance with International Standards on Auditing (Ireland) (“ISAs We that believe for the audit of the financial statements section of our report. We responsibilities Auditors’ under ISAs (Ireland) are further described in the and appropriate to provide a basis for our opinion. the audit evidence we have obtained is sufficient OPINION financial statements (the "financial statements"): consolidated financial statements and Parent In our opinion, ESB's Group • Parent’s cash flows for the year then ended; and the Group’s and the • and the provisions of the Companies Act 2014; statements, as applied in accordance with regards the Parent’s financial • "Annual Report"), have audited the financial statements, included within the Annual Report and Financial Statements (the We which comprise: • • • • • REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS REPORT ON THE AUDIT 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS 113 2019 Report Annual ESB Parent financial statements €25 million Based on Group materiality. materiality for the Parent considered it appropriate to restrict We to thefinancial statements to €25 million, being that applied Group financial statements. Outcome have nothing material to add or to draw attention to. We However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s or the Parent’s ability to continue as a going concern. Group financial statements €25 million tax and exceptional c. 5% of profit before items. tax and consider that profit before We exceptional items is an appropriate benchmark as the Group is profit orientated and the exceptional items are significant non-recurring the Group’s of items which are not reflective ongoing trading activity. Reporting obligation are required to report if we have anything material to add or draw attention to in We statement in the financial statements about whether respect of the Board members’ the Board members considered it appropriate to adopt the going concern basis of identification accounting in preparing the financial statements and the Board members’ of any material uncertainties to the Group’s or the Parent’s ability to continue as a going concern over a period of at least twelve months from the date of approval of the financial statements. Overall materiality How we determined it Rationale for benchmark applied We agreed with the Audit Committee that we would report to them misstatements identified during our audit above €500,000 in respect of the Group and Parent that we would report to them misstatements identified during our audit above €500,000 in respect of agreed with the Audit Committee We that, in our view, warranted reporting for qualitative reasons. audit as well as misstatements below that amount Going concern In accordance with ISAs (Ireland) we report as follows: INDEPENDENT AUDITORS' REPORT TO STOCKHOLDERS OF STOCKHOLDERS TO REPORT AUDITORS' INDEPENDENT (continued) (ESB) BOARD ELECTRICITY SUPPLY the audit scope How we tailored components, determined that there are five reporting office function. We across four key reportable segments and the head The Group is structured and one in Northern Ireland. four in the Republic of Ireland on the financial statements as a whole, taking enough work to be able to give an opinion the scope of our audit to ensure that we performed tailored We controls, and the industry in which the Group operates. of the Group, the accounting processes and into account the structure items, total assets and total liabilities. taxation and exceptional in excess of 90% of Group revenues, profit before Our audit work covered the Group team. in the Republic of Ireland was performed by work in respect of the four reporting components All of the required audit determined the segment. We performed an audit of the NIE Networks Group team, our network firm in Northern Ireland Under instruction from the evidence had been obtained as conclude whether sufficient appropriate audit needed to have in their audit work to be able to level of involvement we Ireland team and discussions with our Northern had regular communications the Group financial statements as a whole. We a basis for our opinion on and relevant findings in addition to an audit memorandum of examination on work performed received a detailed We throughout the audit process. of the segment. report which supplemented our understanding Materiality These, together with set certain quantitative thresholds for materiality. We of materiality. The scope of our audit was influenced by our application the scope of our audit and the nature, timing and extent of our audit procedures on the individual qualitative considerations, helped us to determine in aggregate on the financial of misstatements, both individually and in evaluating the effect financial statement line items and disclosures and statements as a whole. materiality for the financial statements as a whole as follows: Based on our professional judgement, we determined We assessed the IT general controls system application configuration and the assessed the IT general controls We and billing systems. business process controls in relation to revenue estimation used by the Group in calculating evaluated the integrity of the model We appropriateness of the estimates used in challenged the unbilled revenue. We and current data and current pricing. Our to historical the model by reference work included reconciling certain relevant inputs to the model to the underlying also considered the outturn from retrospective reviews of source data. We previous estimates made in comparison to actual billing data and considered other information as part of our consideration of the Group’s estimation techniques. concluded that the assumptions and methodologies adopted by We management to calculate the unbilled revenue at the year-end were reasonable and consistent with those used in prior years. How our audit addressed the key audit matter addressed the key How our audit in assessment of their obligations our understanding of ESB’s updated We the continued Scheme and considered Benefit Defined respect of the ESB treatment in the context of IAS 19appropriateness of the accounting “Employee Benefits”. counsel and enquiries of senior management and internal legal made We theinternal documentation and correspondence for read the board minutes, had been no changes to the Group’s position oryear to confirm that there since 31 December 2018. commitments made to employees do not intend to a representation from the Board that ESB received We to the Scheme other than the balance of themake any further payments 2010 under the by ESB €591 million contribution which was committed ongoing contributions of scheme agreement, and fixed continuing Pensions salaries. members’ Scheme is not a Pension Benefit has informed us that the Defined ESB the scheme where the employer is liable to pay typical “balance of costs” balance of contributions required to fund benefits. this position. reflects The accounting treatment in the financial statements We focused on this area given the level of complexity and estimates involved in We determining the unbilled revenue at year end. There is also significant complexity in the models used to estimate unbilled revenue at year end. In Electric Ireland, given the size of the customer base, estimates used in In Electric Ireland, given the size determining the values attributable to these volumes in the Republic of Ireland are material to the financial statements. In determining the unbilled revenue at the year end, volumes are estimated by to electricity volume purchases and other assumptions. reference Unbilled revenue is the revenue from energy supplied to the customerUnbilled revenue is the revenue from energy supplied between the date of their last bill and the year-end date and requires estimation. We focused on this area as there has been a high level of complexity focused on this area as there We Scheme rules and theand judgement involved in the interpretation of the of disclosures in thedetermination of the related accounting and adequacy financial statements. Policies) and noteRefer to note 1 (xvii) (Statement of Accounting 17 to the financial statements As set out in Note 23, the Defined Benefit Pension Scheme is not a typical Pension Benefit As set out in Note 23, the Defined balance of scheme where the employer is liable to pay the “balance of costs” contributions required to fund benefits. revenue Revenue Recognition - unbilled Electric Ireland ESB has determined that its legal and/or constructive obligations in respect has determined that its legal and/or ESB Scheme are Benefit Defined of contributions payable by it to the ESB the normal Rules, namely, limited to the amounts provided for in the Scheme million contributionongoing contributions and the balance of the €591 agreement. under the 2010 Pensions which was committed by ESB As set out in Note 23 to the financial statements, the regulations governingAs set out in Note 23 to that are to be Scheme stipulate the benefits Benefit Defined the ESB and the contributing to be paid by both ESB provided and the contributions members. Refer to page 97 (Audit and Risk Committee Report),Refer to page 97 (Audit 1 (xvi) note Policies) and note 23 to the financial(Statement of Accounting statements Key audit matter obligations Completeness of pension INDEPENDENT AUDITORS' REPORT TO STOCKHOLDERS OF STOCKHOLDERS TO REPORT AUDITORS' INDEPENDENT (continued) (ESB) BOARD ELECTRICITY SUPPLY - Powering the Transition to a Clean Energy Future Energy Clean to a Transition the - Powering 2019 Report Annual ESB 112 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS 115 2019 Report Annual ESB We have obtained all the information and explanations which we consider necessary for the purposes of our audit. have obtained all the information and explanations which we consider necessary for the purposes We statements to be readily and properly audited. In our opinion the accounting records of the Parent were sufficient to permit the Parent financial The Parent Balance Sheet is in agreement with the accounting records.

RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT AND STATEMENTS FOR THE FINANCIAL RESPONSIBILITIES members for the financial statements Responsibilities of the Board responsible for the preparation of set out on page 109, the Board members are in the Statement of Board Members' Responsibilities As explained more fully view. for being satisfied that they give a true and fair in accordance with the applicable framework and the financial statements are of financial statements that determine is necessary to enable the preparation also responsible for such internal control as they The Board members are whether due to fraud or error. free from material misstatement, to continue as a going concern, for assessing the Group’s and the Parent’s ability statements, the Board members are responsible In preparing the financial members either intend togoing concern basis of accounting unless the Board matters related to going concern and using the disclosing as applicable, alternative but to do so. Parent or to cease operations, or have no realistic liquidate the Group or the for the audit of the financial statements responsibilities Auditors’ about whether the financial statements as a whole are free from material misstatement, whether due toOur objectives are to obtain reasonable assurance assurance, but is not a guarantee that an report that includes our opinion. Reasonable assurance is a high level of fraud or error, and to issue an auditors’ will always detect a material misstatement when it exists. Misstatements can arise from fraud or error andaudit conducted in accordance with ISAs (Ireland) they could reasonably be expected to influence the economic decisions of users taken on the basisare considered material if, individually or in the aggregate, of these financial statements. audit of the financial statements is located on the IAASA website at: A further description of our responsibilities for the https://www.iaasa.ie/getmedia/b2389013-1cf6-458b-9b8f-a98202dc9c3a/Description_of_auditors_responsibilities_for_audit.pdf report. This description forms part of our auditors’ Use of this report as a body in accordance with section 391 of the for and only for the Stockholders of ESB This report, including the opinions, has been prepared do not, Acts 1927 to 2014, and for no other purpose. We adopted pursuant to the ESB by the Regulations Companies Act 2014, made applicable to ESB hands it for any other purpose or to any other person to whom this report is shown or into whose in giving these opinions, accept or assume responsibility prior consent in writing. may come save where expressly agreed by our INDEPENDENT AUDITORS' REPORT TO STOCKHOLDERS OF STOCKHOLDERS TO REPORT AUDITORS' INDEPENDENT (continued) (ESB) BOARD ELECTRICITY SUPPLY OTHER REQUIRED REPORTING OTHER Companies Act 2014 opinions on other matters • • • Companies Act 2014 exception reporting remuneration and transactions Board Members’ transactions specified by remuneration and board members’ Under the Companies Act 2014 we are required to report to you if, in our opinion, the disclosures of have no exceptions to report arising from this responsibility. sections 305 to 312 of that Act have not been made. We Mary Cleary For and on behalf of PricewaterhouseCoopers Chartered Accountants and Statutory Audit Firm Dublin 27 February 2020 In our opinion, based on the work undertaken in the course of the audit, the information given in the Board Members’ Report for the year ended 31 December course of the audit, the information given in the Board Members’ In our opinion, based on the work undertaken in the has been prepared in accordance with the applicable legal requirements. (CA14) 2019 is consistent with the financial statements and Group and Parent and their environment obtained in the course of the audit, we did not identify any materialBased on our knowledge and understanding of the Report. (CA14) misstatements in the Board Members’ to add or to draw attention to regarding: required to report to you if we have anything material the Group, they have carried out a robust assessment of the principal risks facing confirmation on page 92 of the Annual Report that The Board members’ future performance, solvency or liquidity. including those that would threaten its business model, those risks and explain how they are being managed or mitigated. The disclosures in the Annual Report that describe as to how they have assessed the prospects of the Group, over what period they explanation on pages 93 to 94 of the Annual Report The Board members’ have a reasonable expectation that the Group will behave done so and why they consider that period to be appropriate, and their statement as to whether they disclosures drawing attention to any due over the period of their assessment, including any related able to continue in operation and meet its liabilities as they fall necessary qualifications or assumptions. The statement given by the Board members’ on page 109 that they consider the Annual Report taken as a whole to be fair, balanced and understandable and balanced and on page 109 that they consider the Annual Report taken as a whole to be fair, The statement given by the Board members’ business model and strategy is materiallyprovides the information necessary for the members to assess the Group’s and Parent’s position and performance, inconsistent with our knowledge of the Group and Parent obtained in the course of performing our audit. not appropriately address matters communicated by usThe section of the Annual Report on page 96 describing the work of the Audit and Risk Committee does to the Audit and Risk Committee.

Board Members’ Report Board Members’ • • Bodies (the “Code”) Code of Practice for the Governance of State of of State Bodies (the “Code”) we are required to report to you if the statement regarding the system Under the Code of Practice for the Governance the Group’s compliance with paragraph 1.9(iv) of the Report on pages 86 to 94 does not reflect internal control included in the Board's Governance have nothing to report in of which we are aware from our audit work on the financial statements. We Code or if it is not consistent with the information respect of this responsibility. of the of the Group and of the principal risks that would threaten the solvency or liquidity assessment of the prospects The Board members’ Group applied the UK Corporate Governance Code (the “UK Code”), voluntary reporting on how they have As a result of the Board members’ under ISAs (Ireland) we are • • • have nothing to report in respect of this responsibility. We • have nothing to report in respect of this responsibility. We Other UK Code provisions voluntary reporting on how they have applied the UK Code, we are required to report to you if, in our opinion: As a result of the Board members’ • Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (Ireland) and the Companies Act 2014 (CA14),Based on the responsibilities described above and require Acts 1927 to 2014, adopted pursuant to the ESB by the Regulations of ESB statements of ESB which is made applicable to the audit of the financial described below (required by ISAs (Ireland) unless otherwise stated).us to also report certain opinions and matters as With respect to the Board Members’ Report, we also considered whether the disclosures required by the Regulations of ESB have been included. required by the Regulations of ESB we also considered whether the disclosures Report, Members’ With respect to the Board consider whether the other is to read the other information and, in doing so, of the financial statements, our responsibility In connection with our audit rs to be materially misstated. knowledge obtained in the audit, or otherwise appea inconsistent with the financial statements or our information is materially whether there is a material we are required to perform procedures to conclude material inconsistency or material misstatement, If we identify an apparent performed, we conclude that other information. If, based on the work we have statements or a material misstatement of the misstatement of the financial on these responsibilities. have nothing to report based We to report that fact. of this other information, we are required there is a material misstatement s’ report thereon. The Board s’ other than the financial statements and our auditor all of the information in the Annual Report The other information comprises we do not and, accordingly, statements does not cover the other information for the other information. Our opinion on the financial members are responsible in this report any form of assurance thereon. or, except to the extent otherwise explicitly stated express an audit opinion REPORTING ON OTHER INFORMATION ON OTHER REPORTING - Powering the Transition to a Clean Energy Future Energy Clean to a Transition the - Powering 2019 Report Annual ESB 114 INDEPENDENT AUDITORS' REPORT TO STOCKHOLDERS OF STOCKHOLDERS TO REPORT AUDITORS' INDEPENDENT (continued) (ESB) BOARD ELECTRICITY SUPPLY 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS 0.1 2.2 3.1 5.7 €m 30.1 32.0 30.1 60.2 19.2 15.9 38.6 (1.9) (3.3) (1.5) (4.7) (0.4) 2018 (89.1) (46.0) (30.1) -

3.0 8.9 2.4 0.6 2.6 €m (4.1) (0.4) (3.8) 2019 294.1 298.2 294.1 337.8 (17.5) (14.5) (18.9) (20.6) (29.2) (43.7) 117 2019 Report Annual ESB Non-controlling interest income for the financial year comprehensive Total Attributable to: holders of the Parent Equity Translation differences on consolidation of foreign subsidiaries differences on consolidation of foreign Translation on cash flow hedges to income statement Transferred Items that will not be reclassified subsequently to profit or loss: Items that will not be actuarial (losses) / gains NIE Networks pension scheme to profit or loss on items that will not be reclassified Tax loss: be reclassified subsequently to profit or Items that are or may investment in foreign subsidiary Effective hedge of a net on cash flow hedges Fair value (losses) / gains in equity accounted investees Fair value (losses) / gains on cash flow hedges statement on cash flow hedges in equity accounted investees to income Transferred year, net of tax Other comprehensive expense for the financial income for the financial year comprehensive Total Profit for the financial year Profit for the financial to profit or loss on items that are or may be reclassified subsequently Tax Tax on items that are or may be reclassified subsequently to profit or loss for equity accounted investees on items that are or may be reclassified subsequently Tax on items transferred to income statement Tax GROUP STATEMENT OF COMPREHENSIVE INCOME OF COMPREHENSIVE STATEMENT GROUP ended 31 December 2019 For the year

1.4 3.7 €m Total 78.3 60.2 62.1 60.2 (1.9) 315.4 (27.9) (19.4) (29.8) (14.0) (18.1) (177.6) (223.1) 3,431.8 (3,089.9) ------€m 18.5 items note 5 (17.5) (122.2) (139.7) (139.7) (121.2) (121.2) (121.2) 2018 Exceptional 1.4 3.7 €m (1.9) items 455.1 218.0 181.4 183.3 181.4 (10.4) (19.4) (29.8) (14.0) (36.6) (177.6) (223.1) 3,431.8 Excluding (2,967.7) exceptional

8.7 2.2 €m (8.3) (4.1) Total 587.9 397.2 337.8 341.9 337.8 (46.2) (16.6) (15.8) (59.4) (152.2) (182.4) 3,709.5 (3,084.1) ------€m 13.5 items (34.4) (59.8) (94.2) (94.2) (80.7) (80.7) (80.7) note 5 2019 Exceptional 8.7 2.2 €m (8.3) (4.1) items 682.1 491.4 418.5 422.6 418.5 (11.8) (16.6) (15.8) (72.9) (152.2) (182.4) 3,709.5 (3,024.3) Excluding exceptional 6 3 8 8 8 8 15 20 5/7 Notes 5/7/17 Other operating income (net) Other operating income financial assets Net impairment losses on Revenue Operating costs Operating profit

Net interest on borrowings Net finance cost Financing charges Fair value movement on financial instruments Finance income Share of equity accounted investees loss, net of tax taxation Profit before Profit after taxation Income tax expense Attributable to: holders of the Parent Equity Non-controlling interest Profit for the financial year Notes 1 to 35 form an integral part of these financial statements. Notes 1 to 35 form an integral part of these financial For the year ended 31 December 2019 For the year GROUP INCOME STATEMENT INCOME GROUP - Powering the Transition to a Clean Energy Future Energy Clean to a Transition the - Powering 2019 Report Annual ESB 116 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS - - -

9.1 € m 99.4 39.4 30.0 58.2 53.1 83.5 83.7 61.8 16.3 80.8 71.6 18.0 2018 804.9 271.0 434.5 295.8 106.5 107.7 122.3 959.3 390.3 326.8 (25.2) 4,502.1 7,793.2 3,398.6 3,718.2 1,970.8 1,451.5 3,406.2 2,638.5 5,466.7 8,105.2 7,201.0 11,511.4 11,511.4 . 1.6 € m 96.1 70.3 43.0 73.6 57.9 86.3 61.8 27.8 78.0 54.0 58.2 13.5 58.9 12.8 73.2 2019 843.4 246.5 429.0 296.5 212.3 106.5 201.4 887.3 155.7 402.0 (19.5) 4,751.2 8,049.4 3,691.2 4,006.4 1,966.4 1,774.6 3,735.0 2,674.5 5,646.3 8,320.8 7,300.1 12,055.8 12,055.8 119 2019 Report Annual ESB 24 24 26 27 20 22 24 24 25 26 27 22 15 15 22 20 16 22 17 18 19 21 13 21 13 11 12 13 Notes Liability – ESB pension scheme Liability – ESB Employee related liabilities income Deferred Provisions tax liabilities Deferred Derivative financial instruments non-current liabilities Total pension scheme Liability – ESB Employee related liabilities and other payables Trade income Deferred Provisions Derivative financial instruments current liabilities Total Investments in equity accounted investees Investments in equity accounted undertakings Investments in subsidiary Derivative financial instruments tax assets Deferred non-current assets Total Current assets Inventories Derivative financial instruments Current tax asset and other receivables Trade Cash and cash equivalents assets current Total assets Total EQUITY Capital stock Capital redemption reserve Cash flow hedging and other reserves Retained earnings Parent Equity attributable to equity holders of the LIABILITIES Non-current liabilities Borrowings and other debt Lease liabilities Current liabilities Borrowings and other debt Lease liabilities liabilities Total equity and liabilities Total ASSETS Non-current assets plant and equipment Property, Intangible assets Right of use assets Ellvena Graham OBE, Chairman Executive Pat O’Doherty, Chief Pat Fenlon, Executive Director, Group Finance and Commercial Parent profit after tax for the financial year ended 31 December 2019 amounted to €366.0 million (2018: profit of €151.4 million) Parent profit after tax for the financial year ended 31 December 2019 amounted to €366.0 million PARENT BALANCE SHEET PARENT 2019 As at 31 December - - - 9.1 €m 10.5 47.2 68.6 23.2 20.7 99.4 40.2 68.3 83.4 (5.9) (4.8) 2018 401.8 169.6 189.8 176.3 134.0 156.5 942.3 229.1 110.8 336.3 648.1 625.2 606.3 295.8 789.1 118.5 108.3 (223.3) 1,485.1 1,970.8 1,877.4 3,649.9 3,644.0 4,537.7 1,192.7 7,590.4 2,069.7 9,660.1 10,755.2 11,819.0 13,304.1 13,304.1

3.7 9.5 €m 13.4 12.4 65.5 13.5 96.1 70.4 19.6 79.7 88.3 2019 458.1 133.3 178.3 413.5 180.7 151.0 244.8 125.1 112.4 116.0 322.5 645.8 662.5 480.7 296.5 834.6 150.0 267.8 (10.0) (17.0) (233.2) 1,105.1 1,626.0 1,966.4 3,905.2 3,895.2 2,171.8 4,751.7 1,259.3 8,036.7 2,226.7 11,077.4 12,532.6 14,158.6 10,263.4 14,158.6 - 11 12 13 14 15 15 17 22 20 16 22 17 18 19 21 13 24 23 24 26 27 20 22 21 13 24 24 25 26 27 22 Notes ASSETS Non-current assets plant and equipment Property, Intangible assets Right of use assets Goodwill Investments in equity accounted investees Investments in equity accounted Financial asset investments at fair value through profit or loss at fair Financial asset investments Trade and other receivables Trade Derivative financial instruments Deferred tax assets Deferred Total non-current assets Total Current assets Inventories Derivative financial instruments Current tax asset Trade and other receivables Trade Cash and cash equivalents Total current assets current Total assets Total EQUITY Capital stock Capital redemption reserve reserve Translation Equity attributable to equity holders of the Parent Equity attributable to equity holders of the Non-controlling interest equity Total LIABILITIES Non-current liabilities Borrowings and other debt Retained earnings Cash flow hedging reserve Other reserves Lease Liabilities Liability – ESB pension scheme Liability – ESB Liability – NIE Networks pension scheme Employee related liabilities Deferred income Deferred Provisions Deferred tax liabilities Deferred Derivative financial instruments Total non-current liabilities Total Current liabilities Borrowings and other debt Lease Liabilities Liability – ESB pension scheme Liability – ESB Employee related liabilities Trade and other payables Trade Deferred income Deferred Provisions Current tax liabilities Derivative financial instruments Total current liabilities Total liabilities Total equity and liabilities Total Ellvena Graham OBE, Chairman Executive Pat O’Doherty, Chief Pat Fenlon, Executive Director, Group Finance and Commercial As at 31 December 2019 As at 31 December GROUP BALANCEGROUP SHEET - Powering the Transition to a Clean Energy Future Energy Clean to a Transition the - Powering 2019 Report Annual ESB 118 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS - - 4.0 4.6 1.3 3.6 €m 22.8 42.8 (3.5) (2.4) (8.3) (5.3) (1.5) Total (31.5) (23.3) 366.0 151.4 134.2 367.1 (10.8) (34.6) (62.8) (42.9) 3,735.0 3,302.6 3,406.2 3,365.4 3,406.2 ------€m 151.4 366.0 151.4 366.0 (34.6) (62.8) (42.9) 1,774.6 1,334.7 1,451.5 1,397.5 1,451.5 earnings Retained 121 2019 Report Annual ESB ------4.6 4.0 1.3 1.1 €m 3.6 22.8 42.8 (2.4) (8.3) (3.5) (5.3) (1.5) other (31.5) (19.5) (10.8) (23.3) (12.0) (17.2) (25.2) (12.0) (25.2) reserves Cash flow hedging and ------4.7 9.1 4.7 4.4 4.4 9.1 €m 13.5 for the Reserve loan stock repurchase of ------€m (4.4) (4.4) Capital reserve 1,966.4 1,975.2 1,970.8 1,975.2 1,970.8 redemption 1 1 1 1 Net fair value losses Net fair Net fair value gains Net fair to income statement Transfers - Finance cost (interest) - Finance cost (foreign translation movements) - Finance cost (interest) - Finance cost (foreign translation movements) - Other operating expenses - Other operating expenses

Refer to note 32 for information on the ESOP repurchase. to note 32 for information on the ESOP Refer Cash flow hedges: Cash flow hedges: Total comprehensive income / (expense) for the year comprehensive income / (expense) Total Profit for the financial year Repurchase of own shares Total comprehensive income / (expense) for the year comprehensive Total Profit for the financial year Balance at 1 January 2019 Change in accounting policy - IFRS 9 Change in accounting policy Restated total equity at 1 January 2018 Restated total equity at Transactions with owners recognised directly in equity Transactions Dividends Total comprehensive income / (expense) for the year comprehensive Total Balance at 31 December 2018 Balance at 1 January 2018 Repurchase of own shares Tax on items transferred to income statement Tax Reconciliation of changes in equity Reconciliation of changes 1 ESOP repurchase provision ESOP Total comprehensive income / (expense) for the year Total with owners recognised directly in equity Transactions Dividends Tax on items taken directly to OCI Tax Balance at 31 December 2019 ESOP repurchase provision ESOP Tax on items taken directly to OCI on items Tax transferred to income statement on items Tax - - - Transfers to income statement Transfers IN EQUITY CHANGES OF STATEMENT PARENT 2019 As at 31 December - - 2.2 4.0 3.1 5.7 8.5 5.4 2.6 0.6 4.6 €m (9.9) 38.6 27.8 60.2 19.2 30.1 (4.9) (8.0) (0.4) (1.4) (3.8) (2.4) (8.3) (4.6) Total Total 294.1 337.8 (23.3) (93.6) (62.8) (34.9) (17.5) (18.9) (42.9) 3,644.0 3,895.2 3,712.5 equity 3,649.7 3,644.0 ------€m Non- (3.7) (5.9) (3.7) (1.9) (4.1) (1.9) (0.3) (4.1) (5.9) (10.0) interest controlling - - 8.5 5.4 2.6 0.6 4.6 2.2 4.0 3.1 5.7 €m Total 38.6 27.8 (3.8) (2.4) (8.3) (9.9) (4.6) 62.1 19.2 32.0 (4.9) (8.0) (0.4) (1.4) 298.2 (17.5) (18.9) (42.9) 341.9 (23.3) (93.6) (62.8) (34.6) 3,905.2 3,716.2 3,649.9 3,653.4 3,649.9 ------€m (4.6) 62.1 62.1 (4.9) 341.9 (42.9) 341.9 (62.8) (34.6) 2,171.8 earnings 1,917.6 1,877.4 1,854.8 Retained 1,877.4 ------2 ------3.0 4.6 4.0 €m 19.2 15.3 (0.6) (3.3) Other (17.5) (14.5) (233.2) (242.6) (242.6) (223.3) (223.3) reserves

- - - - - 1 ------2.4 2.6 0.6 2.2 3.1 5.7 5.5 €m (9.9) 38.6 29.0 58.6 20.7 58.6 (3.8) (2.4) (8.3) 20.7 (4.7) (0.4) (17.0) (18.9) (23.3) (93.6) (37.9) (37.7) reserve hedging Cash flow ------4.4 4.4 4.7 9.1 4.7 9.1 €m 13.5 Capital reserve redemption ------3.7 8.5 2.7 2.7 8.5 €m (0.6) (4.8) (7.5) (6.9) (4.8) reserve Translation Translation ------€m (4.4) (4.4) stock 1,966.4 Capital 1,975.2 1,975.2 1,970.8 1,970.8

3 3 2 2 - Other operating expenses - Finance cost (foreign translation movements) - Finance cost (interest) investees investees - Finance cost (interest) - Finance cost (foreign translation movements) - Other operating expenses

- Net fair value gains - Net fair to income statement - Transfers - Net fair value losses

- Transfers to income statement

- Fair value loss for hedges in equity accounted

- Fair value gains for hedges in equity accounted - Fair value gains for hedges in equity accounted Refer to note 32 for information on the ESOP repurchase. on the ESOP to note 32 for information Refer Other reserves include (i) other reserves relating to the Northern Ireland Electricity Networks Limited (NIE Networks) pension scheme of (€219.5) million (2018:Other reserves include (i) other reserves relating to the Northern Ireland Electricity Networks Limited (NIE Included within the cash flow hedge reserve at 31 December 2019 are amounts of €1.3 million (2018: €0.5 million) relating to currency basis risk. Included within the cash flow hedge reserve at 31 December 2019 are amounts of €1.3 million (2018: Reconciliation of changes in equity Reconciliation of changes 3 1 2 Transfers to income statement for equity accounted to income statement Transfers investees

Change in accounting policy - IFRS 9 Change in accounting policy (€205.0) million), (ii) a non-distributable reserve of (€5.0) million which was created on the sale of the Group’s share in Ocean Communications Limited in 2001; and internal market (€7.5) million (2018: from the ESOP has committed to date to purchase repurchase provision which relates to the amount that ESB (iii) an ESOP repurchase. 19 for further details on other reserves and note 32 for information on the ESOP to note (€11.8) million. Refer Balance at 1 January 2018 Balance at 1 January ESOP repurchase provision ESOP Balance at 31 December 2018 Tax on items taken directly to statement Tax of comprehensive income (OCI) Restated total equity at 1 January 2018 Restated total equity Balance at 1 January 2019 Tax on items transferred to income statement Tax Total comprehensive income / (expense) for the year comprehensive income / (expense) Total Profit for the financial year Total comprehensive income / (expense) for the year comprehensive Total Profit for the financial year Tax on items taken directly to OCI for equity accounted Tax investees NIE Networks pension scheme actuarial gain NIE Networks pension scheme Total comprehensive income / (expense) for the year comprehensive Total Foreign currency translation adjustments Foreign currency translation Transactions with owners recognised directly in equity Transactions Dividends Cash flow hedges: Repurchase of own shares Foreign currency translation adjustments NIE Networks pension scheme actuarial losses Cash flow hedges:

Tax on items taken directly to OCI on items Tax Tax on items taken directly to OCI for equity accounted on items Tax investees Tax on items transferred to income statement on items Tax Transactions with owners recognised directly in equity Transactions Dividends Total comprehensive income / (expense) Total for the year ESOP repurchase provision ESOP Balance at 31 December 2019 Repurchase of own shares As at 31 December 2019 As at 31 December IN EQUITY OF CHANGES STATEMENT GROUP - Powering the Transition to a Clean Energy Future Energy Clean to a Transition the - Powering 2019 Report Annual ESB 120 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS - 1.0 5.1 4.4 4.7 9.1 €m 11.7 29.6 34.4 87.3 49.8 12.5 70.0 62.8 44.4 (9.1) (0.6) 2018 151.4 510.0 788.3 100.0 500.0 458.2 176.1 689.0 208.5 122.3 527.0 (49.3) (15.0) (66.1) (86.2) (40.9) (44.3) (90.8) (34.6) (45.0) (266.1) (177.2) (117.7) (524.5) (469.3) (1,071.4) - - - 8.3 8.3 9.3 6.5 9.1 €m 56.5 31.2 88.9 44.6 42.4 58.2 60.0 (8.7) (9.1) (4.4) (6.9) (5.6) (5.4) 2019 366.0 543.7 964.4 118.6 384.8 877.7 122.3 716.7 (55.0) (89.4) (64.1) (13.8) (43.0) (42.9) (11.0) (286.3) (197.2) (118.0) (549.4) (101.8) (825.4) (249.8) 123 2019 Report Annual ESB 26 24 24 18 18 19 Notes Cash flows from operating activities Cash flows from operating Profit after taxation Adjustments for: Depreciation and amortisation income and amortisation of other deferred Revenue from supply contributions subsidiary undertakings Dividend received from Inventory impairment Provision for amounts due from related undertakings Impairment charge working capital and provisions Operating cash flows before changes in (Credit) / charge in relation to provisions Charge in relation to employee related liabilities Utilisation of provisions Increase in trade and other receivables Proceeds on the drawdown of revolving credit facility Proceeds from loans from subsidiaries Net cash inflow from financing activities Net decrease in cash and cash equivalents Net emissions movements Income tax expense Payments in respect of employee related liabilities income received Deferred Decrease in inventories Repayments of term debt facilities Proceeds from borrowings Cash and cash equivalents at 1 January Impact of fair value movement on financial instruments in operating costs value movement on financial Impact of fair (Decrease) / increase in trade and other payables Cash generated from operations Current tax paid Cash and cash equivalents at 31 December Profit on disposal of non-current assets Profit on disposal of non-current Net finance cost Interest paid Net cash inflow from operating activities Purchase of intangible assets Proceeds from the sale of non-current assets Cash flows from financing activities Dividends paid Principal elements of lease payments Cash flows from investing activities plant and equipment Purchase of property, Amounts advanced to equity accounted investees as shareholder loans Dividends received from subsidiary undertakings Net cash outflow from investing activities Amounts advanced to subsidiary undertakings Interest received PARENT CASH FLOW STATEMENT CASH FLOW PARENT ended 31 December 2019 For the year - - - - 3.2 1.0 9.7 3.7 €m 60.2 18.9 14.0 18.1 17.2 81.3 17.1 (8.6) (4.7) (4.9) (0.2) 2018 779.4 223.1 145.0 106.4 840.6 894.5 170.4 106.3 380.4 229.1 (48.5) (16.0) (32.6) (15.2) (11.5) (50.3) (81.7) (11.8) (34.9) (95.6) (111.2) (113.6) (214.0) (804.7) (102.3) (129.0) (823.2) (151.1) 1,088.9 1,104.9 (1,098.0) - - - - - 9.2 8.3 8.6 1.6 2.2 3.8 €m 22.2 58.1 30.4 30.5 59.4 13.7 (7.1) (8.7) (1.6) (2.8) (4.6) 2019 151.5 337.8 806.2 182.4 131.2 592.9 229.1 125.1 (26.2) (30.8) (15.6) (42.9) (16.6) (15.2) (34.4) (122.7) (122.4) (208.6) (177.9) (846.6) (109.1) (246.6) (548.0) (107.8) 1,343.5 1,281.0 1,072.3 (1,145.7) 6 6 7 8 26 15 20 15 19 18 18 5 / 7 Notes Revenue from supply contributions and amortisation of other deferred income and amortisation of other deferred Revenue from supply contributions Net emissions movements assets Profit on disposal of non-current Inventory impairment costs value adjustments in operating Impact of fair Dividend received Impairment charge working capital and provisions Operating cash flows before changes in (Credit)/ charge in relation to provisions Payments in respect of employee related liabilities income received Deferred Increase in trade and other receivables Increase in inventories Increase / (decrease) in trade and other payables Cash generated from operations Current tax paid (net) Financing costs paid Net cash inflow from operating activities Cash flows from investing activities plant and equipment Purchase of property, Purchase of intangible assets Proceeds from sale of non-current assets Amounts repaid by equity accounted investees value through profit and loss Dividends received from investments measured at fair DAC Net cash outflow on acquisition of Castlepook Power Purchase of financial assets and equity accounted investments Interest received Profit after taxation Cash flows from operating activities Cash flows from operating Adjustments for: Depreciation and amortisation Net finance cost Losses from equity accounted investees (net) Income tax expense becoming a 100% subsidiary undertaking DAC Gain on Castlepook Power Charge in relation to employee related liabilities Utilisation of provisions Proceeds from sale of investments Amounts advanced to equity accounted investees as shareholder loans Dividends received from joint venture Net cash outflow from investing activities Cash flows from financing activities Dividends paid Principal element of lease payments shares Repurchase of ESOP Repayments of bonds and term debt facilities Proceeds from the issue of bonds and other borrowings Proceeds on the drawdown of revolving credit facility Payments on inflation linked interest rate swaps Net cash (outflow) / inflow from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at 1 January Effect of exchange rate fluctuations on cash held Cash and cash equivalents at 31 December For the year ended 31 December 2019 For the year GROUP CASH FLOW STATEMENT CASHGROUP FLOW - Powering the Transition to a Clean Energy Future Energy Clean to a Transition the - Powering 2019 Report Annual ESB 122 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS

125 2019 Report Annual ESB

(continued) STATEMENT OF ACCOUNTING POLICIES (continued) ACCOUNTING POLICIES OF STATEMENT BASIS OF CONSOLIDATION NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS Acquisitions prior to 1 January 2004 (date of transition to IFRS) Acquisitions prior to 1 IFRS,As part of its transition to 2003 in accordance combinations that occurred on or after 1 January the Group elected to restate only those business the amount recognised under prior to 1 January 2003, goodwill represents by the Group at the time. In respect of acquisitions with policy elections made framework, Irish / UK GAAP. the Group’s previous accounting financial statements IFRS 10 — Consolidated returns from its involvement with the an investee, exposure or rights to variable focuses on whether the Group has power over The IFRS 10 control model that it controls on the basis IFRS 10 requires the Group to consolidate investees its power to affect those returns. In particular, investee and ability to use control. of de facto an of control is performed on a continuous basis and the Group reassesses whether it controls In accordance with IFRS 10, the Group’s assessment control model. and circumstances indicate that there are changes to one or more of the elements of the investee if facts Subsidiaries is exposed to, or has rights to, variable returns from its involvement with the entity when ESB (control exists Subsidiaries are entities controlled by ESB its power over the entity).and has the ability to affect those returns through are included in the consolidated The financial statements of the subsidiaries commences until the date that control ceases. financial statements from the date that control IFRS 11 - Joint arrangements to the in joint arrangements as either joint operations or joint ventures depending on the Group’s rights Under IFRS 11, the Group classifies its interests of the When making this assessment, the Group considers the structure and legal form assets and obligations for the liabilities of the arrangements. and circumstances. agreed by the parties and when relevant, other facts arrangements, the contractual terms of the arrangement Joint operations and has rights to the assets and obligations is deemed to have joint control of the arrangement ESB Joint operations are those undertakings in which expenses and other comprehensive income are the Company's share of assets, liabilities, revenues, for the liabilities of the arrangement. Accordingly, consolidated financial statements. recognised in the respective categories within the Joint ventures the whereby exercises contractual control jointly with another party, those undertakings over which ESB Joint venture undertakings (joint ventures) are for its liabilities. Group has rights to net assets of the arrangement rather than rights to its assets and obligations the Group’s share of the profits or losses after tax of Joint ventures are accounted for using the equity method of accounting. Under the equity method, The Group’s share of items of other comprehensive joint ventures is included in the consolidated income statement after interest and financing charges. income is shown in the statement of comprehensive income. of the consolidated balance sheet at an amount The Group’s interests in the net assets are included as investments in joint ventures on the face values of the net assets at acquisition plus goodwill, acquisition costs, the Group’s share of post acquisition representing the Group’s share of the fair has incurred legal or constructive to the extent that ESB retained income and expenses less any impairment charge. Net liabilities are only recognised obligations or made payments on behalf of joint ventures. of joint ventures are taken from their latest financial The amounts included in the consolidated financial statements in respect of post-acquisition results information made up to the Group’s balance sheet date. charges. In the Parent financial statements, investments in joint ventures are carried at cost less any impairment and circumstances requires reassessment of whether joint control still exists. The Group has evaluated its The Group assesses if a change in the facts of joint ventures which continue to be accounted for using involvement in joint arrangements and has confirmed that these investments meet the criteria the equity method. Associates policies the Group is in a position to exercise significant Entities other than joint arrangements and subsidiaries and over whose operating and financial and are included in the consolidated financial influence but not control or joint control, are accounted for as associates using the equity method such influence ceases to exist. statements from the date on which significant influence is deemed to arise until the date on which In the Parent financial statements, investments in associates are carried at cost less any impairment charges. In the Parent financial statements, investments in associates are carried at cost less any impairment 1. (II) STATEMENT OF ACCOUNTING POLICIES (continued) ACCOUNTING POLICIES OF STATEMENT The policies set out below have been consistently applied to all years presented in these consolidated financial statements and have been applied consistentlyThe policies set out below have been consistently of new standards as set out at note 1(iii) below. by all Group entities – with the exception of adoption After making appropriate the Board believes that the Group is well placed to manage its risks successfully. The Group has considerable financial resources and continue in operational existence for at least twelve months from the date of approval of has adequate resources to enquiries the Board is satisfied that ESB details of the Group’s liquidity position are are prepared on the going concern basis of accounting. Further the financial statements. The financial statements provided in note 21 of the financial statements. may not add precidely due to rounding. Certain tables in the consolidated financial statements BASIS OF CONSOLIDATION financial statements of the Parent and of all subsidiary undertakings together with the Group’s share of theThe Group’s financial statements consolidate the made up to 31 December 2019. The results of subsidiary undertakings acquired or disposed of in theresults and net assets of associates and joint ventures Parent has availed of the exemption in section from the date of acquisition or up to the date of disposal. ESB year are included in the Group income statement its individual income statement, statement of comprehensive income and related notes that form part of the304(2) of the Companies Act 2014 not to present approved Parent financial statements. Going concern After making appropriate to manage its risks successfully. The Group has considerable financial resources and the Board believes that the Group is well placed months from the date of approval of has adequate resources to continue in operational existence for at least twelve enquiries the Board is satisfied that ESB of accounting. the consolidated financial statements are prepared on the going concern basis the financial statements. Accordingly, and cash equivalents that the Group had on hand at 31The funding and liquidity management of the Group are described in note 21 and the amount of cash December 2019 was €125.1 million. Accounting for business combinations is the date on which control is transferred to the Group.Business combinations are accounted for using the acquisition method as at the acquisition date, which Acquisitions on or after 1 January 2010 goodwill at the acquisition date as: The Group account for business combinations under IFRS 3 Business Combinations, the Group measures value of the consideration transferred; plus · the fair value of the existing is achieved in stages, the fair · the recognised amount of any non-controlling interests in the acquiree; plus if the business combination equity interest in the acquiree; less value) of the identifiable assets acquired and liabilities assumed. · the net recognised amount (fair When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. that the Group incur in connection with a businessCosts relating to the acquisition (other than those associated with the issue of debt or equity securities) combination are expensed as incurred. Acquisitions between 1 January 2004 and 1 January 2010 the cost of the acquisition over the Group’s interest in theFor acquisitions between 1 January 2004 and 1 January 2010, goodwill represents the excess of goodwill excess was negative, a bargain value) of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the recognised amount (fair other than those associated with the issue of debt or equity securities that the costs, purchase gain was recognised immediately in profit or loss. Transaction acquisition. Group incurred in connection with business combinations were capitalised as part of the cost of the BASIS OF PREPARATION BASIS OF Act, 1927 and is domiciled in Ireland. The consolidated established under the Electricity (Supply) is a statutory corporation Electricity Supply Board (ESB) or the to as ESB and its subsidiaries (together referred year ended 31 December 2019 comprise the Parent as at and for the financial statements of ESB in associates and jointly controlled entities. Group) and the Group’s interests IFRS) (EU adopted by the EU (International Financial Reporting Standards) as financial statements are prepared under IFRS The Parent and Consolidated individual financial statements 2014 provide a Parent entity that presents its with the Companies Act 2014. The Companies Act as applied in accordance of comprehensive income publishing the Parent income statement and statement financial statements with an exemption from together with its consolidated of the Parent and Group in accordance with the Act. The financial statements financial statements prepared and approved which forms part of the Parent Interpretations Committee) interpretations issued and IFRIC (International Financial Reporting IFRS standards with the EU have been prepared in accordance on the Consolidated financial statements have been prepared 31 December 2019. The Parent and for accounting periods ending on or before and effective value. fair financial asset investments which are measured at for derivative financial instruments and certain historical cost basis except been rounded to the nearest stated, all financial information presented has are prepared in euro, and except where otherwise These financial statements that affect IFRS requires management to make judgements, estimates and assumptions conformity with EU million. The preparation of financial statements in assets and liabilities, income and expenses. These estimates and associated assumptions are based onthe application of policies and reported amounts of be reasonable under the circumstances. that are believed to historical experience and various other factors IFRS that have a on an ongoing basis. Judgements made by management in the application of EU The estimates and underlying assumptions are reviewed discussed in note 31 to the statements and estimates with a significant risk of causing material adjustment in the next year are on the financial significant effect financial statements. NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS - Powering the Transition to a Clean Energy Future Energy Clean to a Transition the - Powering 2019 Report Annual ESB 124 1. (I) (II) 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS . 127 2019 Report Annual ESB (continued) NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS Grandfather exemption Low value exemption Short-term lease exemption Non-lease components NEW STANDARDS AND INTERPRETATIONS AND INTERPRETATIONS NEW STANDARDS The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot individual lessee would have to pay to borrow the funds for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the with similar terms, security and conditions. necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment to profit or loss over the lease period so as to produce a Lease payments are allocated between principal and finance cost. The finance cost is charged constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost comprising the following: - the amount of the initial measurement of lease liability - received the commencement date less any lease incentives any lease payments made at or before - any initial direct costs, and - restoration costs. life and the lease term on a straight-line basis. If the Group is Right-of-use assets are generally depreciated over the shorter of the asset's useful life. underlying asset’s useful reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the assets are recognised on a straight-line basis as Payments associated with short-term leases of equipment and vehicles and all leases of low-value Low-value assets comprise predominately of IT an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. equipment. IFRS 16 Leases (continued) Practical Expedients these are detailed below. in relation to IFRS 16, were availed of by ESB A number of practical expedients - required to reassess whether a contract is, or is not transition expedient in relation to IFRS 16. ESB Exemption' have availed of the 'Grandfather ESB is permitted: date of initial application. Instead, ESB contains, a lease at the whether an Arrangement applying IAS 17 Leases and IFRIC 4 Determining contracts that were previously identified as leases to apply this Standard to contains a Lease. 4. as containing a lease applying IAS 17 and IFRIC to contracts that were not previously identified not to apply this Standard financial lease obligation note in the 2018 consolidated has recognised all leases included in the operating has availed of this exemption and -ESB RoU asset / lease liability. statements in determining the opening IFRS 16 - lease of the underlying asset is less than €5,000) has been applied where relevant. The associated The low value lease exemption (where the value in the period in which they are incurred. payments are expensed to the income statement - of the leases with a term of 12 months or less and lease agreements that expire within 12 months Short-term lease exemption has been applied for expensed to the income statement as incurred. transition date. The associated lease payment is - components. The non-lease components comprise of service charges on property have elected not to separate non-lease components from lease ESB leases. Judgements Discount rates credit by contract currency and lease term using the forward interest swap rates plus an appropriate Discount rates were calculated at transition date by each lessee ranged from 0.1% to 2.6%. margin. The weighted average discount rate applied Lease terms were assessed on a case by to each lease agreement and decisions on extensions and break clauses Lease terms were determined with reference case basis in line with IFRS 16. Lease contracts typically made for fixed periods but may have land and motor vehicles. Rental contracts are farm The Group leases various land and buildings, wind and Lease terms are negotiated on an individual basis and contain a wide range of different terms extension options as described in note 13 leases. any covenants, but leased assets may not be used as security for borrowing purposes. conditions. The lease agreements do not impose IFRS 16 Leases: Accounting policies applied to leases from 1 January 2019 which the leased asset is available for 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at From value basis. Lease liabilities include the net present value use by the Group. Assets and liabilities arising from a lease are initially measured on a present are also included in the measurement of the liability of the lease payments. Lease payments to be made under reasonably certain extension options 1. (continued) ACCOUNTING POLICIES OF STATEMENT a) (i) b) (ii) (III) 6.6 €m €m (4.2) (0.8) (0.3) 132.9 168.4 (13.7) (14.9) (23.1) 132.9 (118.0) (132.9) (14.9) (118.0) amount Material effect New carrying 1 January 2019 No material effect No material effect position of the group €m 132.9 (14.9) (118.0) impact IFRS 16 transition - - - €m Material effect on the results and financial Material effect on the amount Original carrying 31 December 2018 Effective Date 01 January 2019 01 January 2019 01 January 2019 (continued) Different treatment of extension and termination options - - Short-term leases recognised on a straight-line basis as expense - Low-value leases recognised on a straight-line basis as expense - Timing of lease signings - Service charges included as part of IFRS 16 lease liability New standards or amendments Balance sheet extract IFRS 16 Leases Treatments IFRIC 23 Uncertainty over Income Tax (amendments) Plan Amendments, IAS 19 Employee Benefits Curtailment or Settlement Current liabilities Total Non-current asset Right of use (RoU) assets Lease liability recognised as at 1 January 2019 Analysed as follows: Non-current liabilities Non-current liabilities Lease Liabilities Add / (less) adjustments for: Current liabilities Lease Liabilities Operating lease commitments disclosed as at 31 December 2018 Discounted using the Group's incremental borrowing rate BASIS OF CONSOLIDATION BASIS OF CONSOLIDATION NEW STANDARDS AND INTERPRETATIONS NEW STANDARDS Transactions eliminated on consolidation Transactions are eliminated in preparing the expenses arising from intra-group transactions, transactions, and any unrealised income and Intra-group balances and against the investment to with equity accounted investees are eliminated Unrealised gains arising from transactions consolidated financial statements. but only to the extent that there eliminated in the same way as unrealised gains, interest in the investee. Unrealised losses are the extent of the Group’s is no evidence of impairment. The following tables summarise the impact of transition to IFRS 16 on the opening balance of Group assets and liabilities. The following tables summarise the impact of transition Impact on the consolidated financial statements on the adoption of IFRS 16 Impact on the consolidated financial statements to IFRS 16. Under this transition option: have selected the modified retrospective approach upon transition ESB the transition accounting period (1 January 2019) •The standard is applied from the beginning of rate, date (1 January 2019) for the remaining lease payments and are measured using the discount •Lease liabilities are measured as at the transition certainty of extensions, terminations, etc.) as at 1 January 2019. lease term, and other assumptions (reasonable IFRS 16 Leases 2019, comparatives for the 2018 financial year have not been restated. The Group has applied IFRS 16 Leases on 1 January NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 - Powering the Transition to a Clean Energy Future Energy Clean to a Transition the - Powering 2019 Report Annual ESB 126 1. (continued) ACCOUNTING POLICIES OF STATEMENT (II) (III) 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS 30 years 50 years 20 years 3 / 5 years

20/25 years 25/30 years up to 20 years 129 2019 Report Annual ESB

(continued) during that year. 2 is measured at the cost of purchased allowances up to the level of purchased allowances held, and then at the is measured at the cost of purchased allowances up to the level of purchased allowances held, 2 Software Other intangibles STATEMENT OF ACCOUNTING POLICIES (continued) ACCOUNTING POLICIES OF STATEMENT NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS General buildings and hydro stations General buildings and hydro Generation plant and thermal station structures Generation plant and thermal Distribution plant and structures plant and structures Transmission Wind farm generating assets Wind farm PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION EQUIPMENT AND DEPRECIATION PLANT AND PROPERTY, Subsequent expenditure is included in the asset’s carrying amount or recognised as a separate asset, as appropriate, plant and equipment Subsequent expenditure on property, the item will flow to the Group and the cost of the item can be measured reliably. associated with only when it is probable that future economic benefits in the income statement during the financial period in which they are incurred. All other repairs and maintenance costs are charged Capital stock in the Networks business plant and equipment are strategic spares in relation to the Electricity Generation business. Included in property, commissioning. is carried within assets under construction pending ASSETS AND GOODWILL INTANGIBLE Goodwill is presented separately on the balance sheet. Goodwill that arises on the acquisition of subsidiaries Subsequent measurement if the impairment losses. Goodwill is tested annually for impairment. An impairment loss is recognised Goodwill is measured at cost less accumulated unit (CGU) exceeds its recoverable amount. carrying amount of the asset or cash-generating less costs to sell. In assessing value in use, the estimated value the greater of its value in use and its fair The recoverable amount of an asset or CGU is current market assessments of the time value of value using a pre-tax discount rate that reflects future cash flows are discounted to their present money and the risks specific to the asset or CGU. Impairment losses in respect of goodwill are recognised in profit or loss, and are not reversed. Emission allowances and renewable obligation certificates (ROCs) are recorded as intangible assets at cost. Emission allowances purchased by ESB This the amount required to settle the liability to the relevant authority. As emissions arise, a charge is recorded in the income statement to reflect value of any additional allowances required to settle provision includes the carrying value of the emission allowances held, as well as the current market within four months of the end of that calendar year, in the obligation. These allowances are returned to the relevant Authority in charge of the scheme order to cover the liability for actual emissions of CO not amortised as they are held for settlement of the related liabilities in Emission allowances and ROCs held at cost as intangible assets are therefore the following year. Software costs and other intangible assets other acquired rights, are capitalised on the basis of the Acquired computer software licenses and other intangible assets including grid connections and cost less accumulated amortisation, which is estimated costs incurred to acquire and bring the specific asset into use. These assets are measured at line basis, and accumulated impairment losses. Major asset classifications and their allotted life spans are: lives on a straight over their useful market price of allowances ruling at the balance sheet date, with movements in the liability recognised in operating profit. market price of allowances ruling at the balance sheet date, with movements in the liability recognised Depreciation value over its expected plant and equipment to its estimated residual is calculated to write down the cost of property, The charge for depreciation No plant and equipment. of its property, Group’s business and to the character and extent using methods appropriate to the nature of the life useful plant and equipment is construction. Depreciation on other items of property, on freehold land or on assets in the course of depreciation is provided lives as follows: over their estimated useful method to allocate their depreciable amounts calculated using the straight-line ROCs are certificates issued to operators of accredited renewable generating stations in the UK for the eligible renewable electricity they generate. ROCs are certificates issued to operators of accredited renewable generating stations in the UK initially at cost (purchase price) within intangible assets. The Group purchases ROCs from certain of its joint ventures. Purchased ROCs are recognised The liability for actual emissions of CO

1. (c) (a) (b) (VI) (VII) No material effect No material effect No material effect Material effect on the results and financial position of the group Material effect on the results and financial position Effective Date 01 January 2020 01 January 2020 01 January 2020 (continued) NEW STANDARDS AND INTERPRETATIONS AND INTERPRETATIONS NEW STANDARDS Goodwill arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate Goodwill arising on the acquisition of a foreign operation are treated as assets and liabilities of PLANT AND EQUIPMENT AND DEPRECIATION PROPERTY, Recognition and measurement plant and equipment is stated at cost less accumulated depreciation and provisions for impairment in value, except for land which is shown at Property, plant and equipment includes capitalised employee, interest and other costs that are directly attributable to the asset and cost less impairment. Property, an appropriate portion of relevant overheads. The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency The results and financial position of foreign operations (none of which has the currency of a hyperinflationary different from the presentation currency are translated into the presentation currency as follows: date of that balance sheet - assets and liabilities for each balance sheet presented are translated at the closing rate at the are translated at average exchange rates (unless - income and expenses for each statement of profit or loss and statement of comprehensive income case income and expenses are of the rates prevailing on the transaction dates, in which this is not a reasonable approximation of the cumulative effect translated exchange rates at the dates of the transactions); and - all resulting exchange differences are recognised in other comprehensive income. entities, and of borrowings and other financial On consolidation, exchange differences arising from the translation of any net investment in foreign income. When a foreign operation is sold or any instruments designated as hedges of such investments, are recognised in other comprehensive are reclassified to profit or loss, as part of the gain or borrowings forming part of the net investment are repaid, the associated exchange differences loss on sale. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was value in a foreign currency are translated using the exchange rates at the date when the fair Non-monetary items that are measured at fair value gain or loss. For example, translation value are reported as part of the fair fair differences on assets and liabilities carried at determined. Translation or loss are recognised in profit or loss as part of the value through profit differences on non-monetary assets and liabilities such as equities held at fair value gain or loss. fair Functional and presentation currency in of the Group’s entities are measured using the currency of the primary economic environment Items included in the financial statements of each which the entity operates (the functional currency). The consolidated financial statements are presented in euro. and balances Transactions the functional currency using the exchange rates at the dates of the transactions. Foreign exchange Foreign currency transactions are translated into foreign of such transactions and from the translation of monetary assets and liabilities denominated in gains and losses resulting from the settlement in equity if they relate to qualifying cash flow hedges recognised in profit or loss. They are deferred currencies at year end exchange rates are generally to part of the net investment in a foreign operation. and qualifying net investment hedges or are attributable FOREIGN CURRENCIES which is the Parent’s functional currency. These financial statements are presented in euro, Non-current assets acquired under finance leases are included in the balance sheet at their equivalent capital value and are depreciated over the sheet at their equivalent capital value and under finance leases are included in the balance Non-current assets acquired term. will obtain ownership at the end of the lease if there is no reasonable certainty that the Group life and the lease term shorter of the asset’s useful is charged to the income the interest element of the finance lease payments are recorded as a finance lease payable and The corresponding liabilities basis over the lease are charged to the income statement on a straight-line periodic rate of interest. Operating lease rentals statement on a constant term. YET EFFECTIVE ARE NOT THAT STANDARDS PUBLISHED TO AND AMENDMENTS INTERPRETATIONS STANDARDS, 31 December 2019, and have not for the year ended and interpretations are not yet effective A number of new standards, amendments to standards statements. The items that may have relevance to the Group are as follows: been applied in preparing these consolidated financial Accounting policies applied to pre 1 January 2019 (IAS 17) Accounting policies applied operating leases are those in all the risks and rewards of ownership, while where the Group, as lessee, assumes substantially Finance leases are leases those risks and rewards of ownership. which the lessor retains STATEMENT OF ACCOUNTING POLICIES (continued) ACCOUNTING POLICIES OF STATEMENT New standards or amendments for Financial Reporting Revised Conceptual Framework to IAS 1 and IAS 8 of Material – Amendments Definition to IFRS 3 of a Business – Amendments Definition IFRS 16 leases (continued) NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS - Powering the Transition to a Clean Energy Future Energy Clean to a Transition the - Powering 2019 Report Annual ESB 128 1. (a) (b) (V) (III) (VI) (IV) 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS 131 2019 Report Annual ESB FINANCIAL ASSETS AND LIABILITIES FINANCIAL ASSETS Classification and measurement statements: Group's consolidated financial assets in the ESB policies apply to the measurement of financial The following accounting value through profit or loss (FVTPL) Financial assets at fair in profit or loss. any interest or dividend income, are recognised value. Net gains and losses, including measured at fair These assets are subsequently (FVOCI) value through other comprehensive income Financial assets at fair recognised in other comprehensive income. value. Net gains and losses are measured at fair These assets are subsequently cost Financial assets at amortised interest method. The amortised cost is reduced by impairment losses. cost using the effective These assets are subsequently measured at amortised in and impairment is recognised in profit or loss. Any gain or loss on derecognition is recognised Interest income, foreign exchange gains and losses profit or loss. and other receivables Trade the original invoiced amount and subsequently carried at amortised cost value, which is usually are initially recognised at fair and other receivables Trade interest method less allowance made for impairment. using the effective trade and to measuring expected credit losses which uses a lifetime expected loss allowance for all The Group applies the IFRS 9 simplified approach The loss advanced to equity accounted investees which are measured using the general approach. other receivables except on the shareholder loans in making these and expected loss rates. The Group uses judgement about risk of default allowances for financial assets are based on assumptions and forward existing market conditions credit loss calculations, based on the Group’s past history, assumptions and selecting the inputs to the expected period. looking estimates at the end of each reporting investees Loans and balances with equity accounted They are are non-derivative financial assets or liabilities which are not quoted in an active market. Loans and balances with equity accounted investees sheet the balance sheet, except for those with maturities greater than twelve months after the balance included in current assets or current liabilities on using the value and thereafter at amortised cost non-current liabilities and are initially recorded at fair date, which are included in non-current assets or allowance made for impairment. interest method less loss effective (Parent) Loans and balances with Group companies are not quoted in an active market. They are included Loans and balances with Group Companies are non-derivative financial assets or liabilities which than twelve months after the balance sheet date, in current assets or current liabilities on the balance sheet, except for those with maturities greater within trade and other receivables or trade and other which are included in non-current assets or non-current liabilities. Loans and balances are included value and thereafter at amortised cost. payables in the Parent balance sheet and are initially recorded at fair and other payables Trade value, which is usually the original invoiced amount, and subsequently carried at amortised cost and other payables are initially recorded at fair Trade method. interest rate using the effective Impairment debt instruments carried at amortised cost. The The Group assesses on a forward looking basis the expected credit losses associated with its credit risk. impairment methodology applied depends on whether there has been a significant increase in by IFRS 9, which requires 12 month expected credit For loans and balances with group companies, the Parent applies the general approach permitted risk occurs, this requires expected lifetime credit losses to be recognised on initial recognition of these receivables. If a significant increase in credit losses to be recognised on these receivables. Cash and cash equivalents highly liquid investments with original maturities of Cash and cash equivalents include cash in hand, deposits repayable on demand and other short-term payable on demand. Bank overdrafts are shown three months or less. Cash and cash equivalents for the purpose of cash flow include bank overdrafts within borrowings in current liabilities in the balance sheet. STATEMENT OF ACCOUNTING POLICIES (continued) ACCOUNTING POLICIES OF STATEMENT NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 1. (XI) . (continued) NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS INTANGIBLE ASSETS AND GOODWILL ASSETS INTANGIBLE Specific provision is made for damaged, deteriorated, obsolete and unusable items where appropriate. For power generation assets, value in use is based on the estimated cash flows expected to be generated by the asset and is based on estimates of on the estimated cash flows expected to be generated by the asset and is based on estimates For power generation assets, value in use is based and gas, carbon and capacity prices (where applicable) and the timing and extent of operating costs forecast power generation and forecast power, the current markets assessment of to their present value using a pre-tax discount rate that reflects capital expenditure. These cash flows are discounted the asset. the time value of money and the risks specific to BORROWING COSTS to of major assets, which necessarily take substantial time to get ready for intended use, are added Borrowing costs attributable to the construction are substantially ready for their intended use. The the cost of those assets at the weighted average cost of borrowings, until such time as the assets outstanding debt and where applicable, a project specific rate is applied. All other capitalisation rate applied equates to the average cost of ESB’s borrowing costs are recognised in the income statement in the period in which they are incurred. INVENTORIES purchase price and direct costs that have been incurred Inventories are carried at the lower of average cost and net realisable value. Cost comprises all on normal selling price less further costs expected to be in bringing the inventories to their present location and condition. Net realisable value is based incurred prior to disposal. Direct costs include the costs of software development, employees and an appropriate portion of relevant overheads. These assets are measured at employees and an appropriate portion of relevant overheads. These assets are measured Direct costs include the costs of software development, straight line basis, and accumulated lives (three to five years) on a over their estimated useful cost less accumulated amortisation, which is estimated impairment losses. Research and development costs that does not meet the criteria above is recognised as an expense as incurred. Development Research expenditure and development expenditure as an asset in a subsequent period. previously recognised as an expense are not recognised THAN GOODWILL ASSETS OTHER OF NON-CURRENT IMPAIRMENT Assets that are subject to depreciation life are not subject to amortisation and are tested annually for impairment. useful Assets that have an indefinite events or changes in circumstance indicate that the carrying amount may not be recoverable. and amortisation are tested for impairment whenever exceeds An impairment loss is recognised for the amount by which an asset’s carrying amount Assets not yet in use are tested annually for impairment. value less costs to sell and its value in use. For the purposes of assessing is the higher of an asset’s fair its recoverable amount. The recoverable amount for which there are separately identifiable cash flows (cash-generating units) impairment, assets are grouped at the lowest levels - management intends to complete the software and use or sell it - management intends or sell the software - there is an ability to use economic benefits how the software will generate probable future - it can be demonstrated and to use or sell and other resources to complete the development - adequate technical, financial the development and to use the intangible asset financial and other resources to complete - there are adequate technical, be reliably measured. to the software during its development can - the expenditure attributable Software costs and other intangible assets (continued) Software costs and other by the Group and that will and unique software products controlled are directly associated with the production of identifiable Development costs that assets when the following criteria are met: beyond one year, are recognised as intangible exceeding costs benefits probably generate economic STATEMENT OF ACCOUNTING POLICIES (continued) ACCOUNTING POLICIES OF STATEMENT - Powering the Transition to a Clean Energy Future Energy Clean to a Transition the - Powering 2019 Report Annual ESB 130 1. (c) (d) (X) (IX) (VII) (VIII) 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS , and it is ace of the income ful lives 133 2019 Report Annual ESB (continued) FINANCIAL ASSETS AND LIABILITIES FINANCIAL ASSETS statement for share of equity accounted investee profit/(loss),statement for share of equity accounted investee tax. net of Deferred tax of assets and balance sheet liability method, providing for temporary differences between the carrying amounts tax is provided using the Deferred amounts used for taxation purposes. liabilities for financial reporting purposes and the taxable profits from only to the extent that the Board consider that it is more likely than not that there will be suitable tax assets are recognised Deferred differences can be deducted. which the future reversal of the underlying temporary on tax rates and laws tax rates that are expected to apply in the periods in which temporary differences reverse, based tax is measured at the Deferred sheet date. enacted or substantively enacted at the balance PROVISIONS event, the Group has a present legal or constructive obligation that can be estimated reliably A provision is recognised if, as a result of a past Guarantees of the Parent and equity and bonds to third parties, subsidiary companies of business, the Group provides guarantees During the normal course model is applied. claims are probable, the expected credit loss accounted investees. Where STOCK CAPITAL Department of initially issued to the Department of Finance, the are measured at the price at which they were The units of capital stock Limited. Trustee ESOP Action and Environment and ESB Communications, Climate INCOME TAX statement, except to the extent tax. Income tax is recognised in the income current and deferred Income tax on the profit or loss for the year comprises comprehensive income or equity. that it relates to items recognised directly in other Current tax does on the basis of results for the year. The income tax expense in the income statement Current tax is provided at current rates and is calculated of joint venture undertakings, as this is included within the separate line on the f not include taxation on the Group’s share of profits the expected future will be required to settle the obligation. Provisions are determined by discounting probable that an outflow of economic benefits The unwinding of to the liability. current market assessments of the time value of money and the risks specific cash flows at a pre-tax rate that reflects the discount is recognised as a finance cost. Provision for asset retirement obligations Networks creosote treated wood poles represents and ESB The provision for retirement and decommissioning of mainly generating stations, wind farms of poles at the end of their use the present value of the current estimate of the costs of closure of the stations and the disposal in full at the outset of the asset life, but discounted to The estimated costs of closing stations and other asset retirement obligations are recognised the plant and equipment and are depreciated over present values using an appropriate pre-tax discount rate. The costs are capitalised in property, life. Subsequent economic lives of the stations or other assets to which they relate unless the related asset has reached the end of its useful useful life are recognised in the income statement as they occur. The changes in the liability in respect of assets that have reached the end of their useful costs are capitalised into the relevant assets and costs are reviewed each year and amended as appropriate. Amendments to the discounted estimated depreciated over the remaining life of those assets to the extent that the assets are still in use. by a financing charge in each period, which is As the costs are capitalised and initially provided on a discounted basis, the provision is increased (updated annually) and is included in the income calculated based on the provision balance and discount rate applied at the last measurement date economic lives of stations or the provision will equal the estimated closure costs at the end of the useful statement as a financing charge. In this way, obligations are met. other assets. The actual expenditure is set against the provision as stations are closed or other within current or non-current provisions as The provision for generating station closure costs and other asset retirement obligations is included appropriate on the balance sheet. STATEMENT OF ACCOUNTING POLICIES (continued) ACCOUNTING POLICIES OF STATEMENT NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 1. (c) (a) (b) (XI) (XII) (XIII) (XIV) . Where air value (continued) FINANCIAL ASSETS AND LIABILITIES FINANCIAL ASSETS Hedge of net investment in foreign entity differences arising on translation of the liability are Where a foreign currency liability hedges a net investment in a foreign operation, foreign exchange portion recognised in the income statement ineffective recognised directly in other comprehensive income, and taken to the translation reserve, with any immediately. When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or loss at When a hedging instrument or hedge relationship is terminated but the hedged transaction is policy when the transaction occurs. If the hedged that point remains in other comprehensive income and is recognised in accordance with the above income is recognised in the income transaction is no longer probable, the cumulative unrealised gain or loss recognised in other comprehensive statement immediately. Cash flow hedges a firm commitment or a highly of a recognised liability, Where a derivative financial instrument is designated as a hedge of the variability in cash flows derivative financial instrument is recognised directly in other comprehensive part of any gain or loss on the probable forecast transaction, the effective the cumulative gain or loss asset or liability, income. When the firm commitment or forecasted transaction results in the recognition of a non-financial Otherwise the cumulative gain or loss or liability. is removed from other comprehensive income and included in the initial measurement of that asset same time as the hedged transaction. The gain or loss is removed from other comprehensive income and recognised in the income statement at the is recognised in the income statement immediately. portion relating to the ineffective The designation of the hedge relationship is established at the inception of the contract. The treatment of gains and losses on subsequent re- The designation of the hedge relationship is established at the inception of the contract. The treatment value or cash flow hedge. is designated as either a fair measurement is dependent on the classification of the hedge and whether the hedge relationship the income statement within finance value movements on derivatives that are not designated as hedging relationships are recorded through All fair income and expense or other operating costs, as appropriate. and are re-measured to fair value at the balance sheet date. With the exception of the inflation linked interest rate swaps the majority of other derivative value at the balance sheet date. With the exception of the inflation linked interest and are re-measured to fair for hedging purposes. financial instruments are designated as being held Financial derivative instruments are used by the Group to hedge interest rate and currency exposures. All such derivatives are recognised at f Group to hedge interest rate and currency exposures. All such derivatives are recognised at Financial derivative instruments are used by the Commodity contracts which are not designated as own use contracts are accounted for as trading derivatives and are recognised in the balance sheet as own use contracts are accounted for as trading derivatives and are recognised in the balance Commodity contracts which are not designated exists and the contract has been designated as held for hedging purposes value when a hedge accounting relationship value. The changes in fair at fair value hedges. cash flow hedges or fair will be recognised in accordance with IFRS 9 as the contract was entered into and continues to be held for the purposes of receipt or delivery of the commodities in accordance with the Group’s be held for the purposes of receipt or delivery of the commodities in accordance with the Group’s the contract was entered into and continues to the contracts are designated as own use contracts and are accounted for as executory contracts. expected sale, purchase or usage requirements, not within the scope of IFRS 9 Financial Instruments. These contracts are therefore Within its regular course of business, the Group routinely enters into sale and purchase contracts for commodities, including gas and electricity Within its regular course of business, the Group Borrowings Interest bearing borrowings these borrowings transaction costs. Subsequent to initial recognition value less attributable are recognised initially at fair Interest bearing borrowings at amortised cost is modified without this resulting rate method. If a financial liability measured interest cost using the effective are stated at amortised the original contractual cash flows or loss is calculated as the difference between or loss is recognised in profit or loss. The gain in derecognition, a gain interest rate. discounted at the original effective and the modified cash flows and other hedging instruments Derivative financial instruments rate risk arising from to commodity price, foreign exchange and interest financial instruments to hedge its exposure The Group uses derivative interest rate swaps, currency used include interest rate swaps, inflation-linked investing activities. The principal derivatives operational, financing and sale of Commodity contracts are also used to hedge the Group's exposures to the purchase of fuel and swaps and forward foreign currency contracts. that hedge accounting relationships Group applies the general hedge accounting model in IFRS 9. This requires the Group to ensure The electricity. and strategy and to apply a more qualitative and forward looking approach to assessing hedge are aligned with its risk management objectives effectiveness. also uses interest rate and foreign currency to invest surplus funds. ESB funds its operations using borrowings and uses deposit instruments ESB risks that arise in the normal course of operations from US dollar and sterling denominated instruments to manage interest rate and currency and from the use of foreign currency suppliers. borrowings, from its foreign currency subsidiaries STATEMENT OF ACCOUNTING POLICIES (continued) ACCOUNTING POLICIES OF STATEMENT NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS - Powering the Transition to a Clean Energy Future Energy Clean to a Transition the - Powering 2019 Report Annual ESB 132 1. (a) (b) (XI) 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS

135 2019 Report Annual ESB STATEMENT OF ACCOUNTING POLICIES (continued) ACCOUNTING POLICIES OF STATEMENT is satisfied. operation by EirGrid. For this fixed price contract TUoS revenue the effective TUoS revenue is earned by maintaining the transmission assets to facilitate the balance sheet. is recognised over time on a straight line basis and a Use of System receivable is recognised on its existing network in respect of Networks receives non-repayable supply contributions income as a result of providing new connections to ESB plant and equipment. These contributions are held in trade payables as progress payments until their performance obligation is satisfied, property, income and released to revenue in the income when the work on the connection has met the performance obligation they are transferred to deferred life of these assets is estimated at 25 and 30 years for distribution The useful economic lives of the related assets. statement over the estimated useful and transmission respectively. PENSION OBLIGATIONS (continued) OBLIGATIONS PENSION Ireland Pension scheme in Northern Networks Limited (NIE Networks), subsidiary undertaking, Northern Ireland Electricity The Group’s wholly owned scheme which has operates a pension obligation benefit since 1998. The defined Focus has been closed to new members Focus. benefit contribution Options, defined two sections: Defined at a rate selected with the projected unit credit method, and discounted annually by independent actuaries using of NIE Networks is calculated scheme assets are to the liabilities. Pension bonds of equivalent currency and term to the current rate of return of high-quality corporate reference thereafter. Actuarial gains and losses are at least triennially and are updated annually actuarial valuations are obtained value. Full measured at fair in other comprehensive income. period in which they occur and are recognised recognised in full in the employees’ from periods benefiting is charged to the income statement over the scheme benefit under the defined The cost of providing benefits The interest income from in the income statement in the period they occur. including curtailment losses are recognised service. Past service costs are included within net finance cost. and the interest expense on pension scheme liabilities pension scheme assets REVENUE FROM CONTRACTS WITH CUSTOMERS values derived from the following: Revenue principally comprises the sales of sales to electricity and gas customers. - Customer Solutions revenues consist primarily in the Republic of Ireland and Northern Ireland respectively. Networks and NIE Networks earn Use of System income - ESB revenue derives mainly from electricity generation. (formerly Generation and Wholesale Markets) - Generation and Trading telecommunication and other services. - Revenue derived from the provision of engineering, Customer Solutions Revenue from sales to electricity and gas customers business from sales to electricity and gas customers. This revenue is earned from both residential and Customer Solutions derives revenues primarily customers in the Republic of Ireland (ROI), Northern Ireland (NI) and Great Britain (GB). Revenue is recognised over time on consumption of gas and of the last meter reading and the period end. and gas revenue includes the value of units supplied to customers between the date Electricity electricity. or bi- receivables in the balance sheet as retail electricity - unbilled, customers are billed monthly This estimate is initially included in trade and other and debtor are subsequently recognised as retail electricity receivables – billed. Residential credit terms monthly depending on the type of account, and 14 days. Credit terms for business customers vary by contract. days in respect of retail electricity receivables are revenue which is calculated by applying the tariffs applicable to specific customers types to estimatedUnbilled revenue is arrived at by using estimated customers types, less the total amounts already billed for the relevant period. This process includesvolume of electricity or gas consumed across those rates (in GWh and millions of therms) taking into consideration, movements in pricing tariffs, seasonalitythe analysis of calculated unbilled volumes and by I-SEM. There are a number of offerings such as sign-up bonuses, discounts and rewards availableand data on total consumption by supplier obtained consideration under IFRS 15. Discounts and rewards that are enduring and are applied over time toto customers which are all accounted for as variable bonuses are applied to customer accounts which are recognised over time in line with customer usage. our relevant customer bills. On joining the sign-up Other revenue value of services and services and represents the fair Other revenue comprises of income derived from the provision of energy and telecommunications and to the extent that, the entity has met its performance works delivered to customers. Services are deemed to have been delivered to customers when, in the income statement in line with the contract obligations under its contracts. Revenue is recognised over time in accordance with the input method is recognised as a trade receivable-non electricity and terms in proportion to the stage of completion, based on total costs of the contract. Billed revenue is normally settled in 30 business days. Unbilled revenue is recognised in other receivables. ESB Networks - Revenue from Use of System charges to customers Use of revenue and Transmission Networks mainly recognises revenue from Use of System that comprises of Distribution Use of System (DUoS) ESB Networks operates in the Republic of Ireland and is a regulated business, earning its revenue primarily from an allowed System (TUoS) revenue. ESB return on its Regulated Ass NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 1. (XVI) (XVII) ; and The ESB Defined Contribution Pension Scheme is a defined contribution scheme and contributions to the Scheme are accounted for on a defined the Scheme are accounted for on a defined contribution scheme and contributions to Scheme is a defined Contribution Pension Defined The ESB contribution charged to income in the period the contributions become payable. contribution basis with the employers’ Ongoing contributions (up to 16.4%) are recognised in the income statement as incurred. Any unpaid amounts at year end are recognised as liabilities Ongoing contributions (up to 16.4%) are recognised in the income statement as incurred. Any on the balance sheet. any remaining amounts to be paid in relation to the once-off contribution agreed pursuant to the 2010 Agreement (€591.0 million in 2010 money (a) any remaining amounts to be paid in relation to the once-off contribution agreed pursuant to the to be paid over a number of years); that relates to service prior to October 2010) (b) pre-existing commitments relating to past service (the present value of the agreed contributions the Company Company recognised a future commitment in respect of staff who have left Severance (VS) Programmes – in 2010 the (c) Past Voluntary value. will make pension contributions in respect of those staff and these are recognised at fair under past VS programmes. ESB The obligations to the Scheme reflected in ESB’s financial statements have been determined in accordance with IAS 19 Employee Benefits. Given that in accordance with IAS 19 Employee Benefits. financial statements have been determined in ESB’s The obligations to the Scheme reflected Scheme (where the employer is liable to pay the balance of contributions required to fund Benefit Defined the Scheme is not a typical “balance of costs” arise in the future, the Company, in the financial statements require the exercise of judgement. Should a deficit benefits), to be reflected the obligations has no obligation to increase contributions to maintain benefits as noted above, is obliged to consult with the parties to the Scheme. However, ESB Company does not intend that any further contributions, other than the normal on-going contributions and the balance and the in the event of a deficit has Agreement), ESB of the Company’s €591.0 million additional contribution (committed to as part of the 2010 Pensions will be made. Therefore, its obligations to the Scheme, which consist of: concluded that the financial statements should reflect Under the 2010 Pensions Agreement (approved by employees in July 2010 and formally ratified by the Board of ESB on 20 October 2010), on 20 and formally ratified by the Board of ESB Agreement (approved by employees in July 2010 ESB Under the 2010 Pensions at 1 payable over a number of years, which had an agreed valuation for actuarial purposes as agreed to a once off cash injection into the Scheme, rates for the employer and for employees were not changed. Under the Agreement membership January 2010 of €591.0 million. The fixed contribution of the Scheme has been closed to new joiners. The regulations governing the Scheme stipulate the benefits that are to be provided and the contributions to be paid by both ESB and the contributing to be provided and the contributions to be paid by both ESB that are the benefits The regulations governing the Scheme stipulate earned after 1 pension model for benefits to a Career Average Revalued Earnings (CARE) payable are determined by reference members. Benefits in the event of a deficit January 2012 (previously based on final salary). has no legal obligation to increase contributions to maintain benefits ESB and approval of the Minister for Communications, Climate Action and of ESB rate of contribution cannot be altered without the agreement and ESB’s Committee, is obliged under the Scheme regulations to consult with the Superannuation arise in the future, ESB Environment. Should an actuarial deficit Actuary to consider the necessity of submitting an amending Scheme for Ministerial approval. and the Scheme the Trustees Pensions for the majority of employees in the electricity business are funded through a contributory pension scheme called the ESB Defined Benefit Benefit Defined ESB in the electricity business are funded through a contributory pension scheme called the for the majority of employees Pensions The of employees and their dependants. and its members for the sole benefit nominated by ESB in Trustees Scheme. The fund is vested Pension Authority. Scheme with the Pensions Benefit Scheme is registered as a Defined Pension schemes in the Republic of Ireland Contribution Pension Defined Scheme and the ESB Pension Benefit Defined are called the ESB The Group operates two pension schemes, which Scheme. Restructuring liabilities Staff when an employee accepts and Union agreements between the Board of ESB are payable under various collective termination benefits Voluntary committed, without realistic when it is demonstrably The Group recognises termination benefits exchange for these benefits. voluntary redundancy in benefits the normal retirement age, or to provide termination before to a formal detailed plan to either terminate employment possibility of withdrawal, not covered by the aforementioned Ordinary termination benefits to employees to encourage voluntary redundancy. as a result of an offer made begins to implement and when the Group withdraw the offer of those benefits at the earlier of when the Group can no longer agreement are recognised Future sheet date are discounted to present value. more than twelve months after the balance expected to be settled the restructuring plan. Benefits provided for. operating losses are not related liabilities Other short-term employee to are recognised when employees render the service or performance that increases their entitlement The costs of holiday leave and bonuses accrued future compensated absences or payments. PENSION OBLIGATIONS to trustee schemes in the Republic of Ireland and Northern Ireland, which are funded through payments The Group companies operate various pension administered funds. EMPLOYEE RELATED LIABILITIES RELATED EMPLOYEE STATEMENT OF ACCOUNTING POLICIES (continued) ACCOUNTING POLICIES OF STATEMENT NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS - Powering the Transition to a Clean Energy Future Energy Clean to a Transition the - Powering 2019 Report Annual ESB 134 1. (a) (b) (XV) (XVI) 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS 137 2019 Report Annual ESB (continued) WITH CUSTOMER FROM CONTRACTS REVENUE OTHER OPERATING INCOME OPERATING OTHER accrues to the Group outside of the Group’s normal trading activities. Other operating income comprises of income which SEGMENTS - IFRS 8 OPERATING 8 Operating Segments to the Group. IFRS 8 specifies how an entity should disclose have voluntarily applied the disclosure requirements of IFRS ESB for approach" under which segment information is presented on the same basis as that used information about its segments using a "management and the Board, whose operating activities are regularly reviewed by the Executive Team internal reporting. Financial information for segments Decision Maker (CODM), Operating collectively the Chief in order to make decisions about allocating resources and assessing performance has been presented in note 2 to the financial statements. COSTS Employee costs contributions (PRSI),Salaries, overtime, expenses, bonuses, social welfare national insurance, paid annual leave and sick leave are accrued in the period in which the associated services are rendered by the employees of the Group. Energy costs Energy costs comprise direct fuel (primarily coal and gas), Use of System charges (other electricity costs) and net emissions costs. purchased electricity, power purchase agreements for and purchased electricity costs are recognised as they are utilised. The Group has entered into certain long-term Fuel are recoverable by the Group or repayable to the fixed amounts. Amounts payable under the contracts that are in excess of or below market rates market under the Public Service Obligation (PSO) levy. Operating and other maintenance costs costs and establishment costs. These costs are Operating and other maintenance costs relate primarily to overhaul and project costs, contractor recognised in the income statement as they are incurred. Finance income and finance costs deposit interest rates in addition to interest income on Finance income comprises interest income on bank deposits, which attract interest at prevailing loans. value gains and losses pension financing charges, fair Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, instruments that are not recognised in operating costs on financial instruments not qualifying or designated for hedge accounting, losses on hedging and reclassifications of amounts previously recognised in other comprehensive income. STATEMENT OF ACCOUNTING POLICIES (continued) ACCOUNTING POLICIES OF STATEMENT Great Britain Britain (GB). wholesale electricity market operating in Great Arrangements is the the I-SEM, trading Unlike and Transmission British Electricity Trading contracts can be struck to manage exchanges. Both physical and financial generators and suppliers either bilaterally or through can take place between capacity remuneration markets. The British Government operates a from several years ahead to on-the-day trading for timescales ranging price volatility, enable them to receive payments (based on the outcome of an auction) that generators are awarded capacity contracts scheme and under the scheme, in respect of capacity payments is non-delivery during scarcity events. Revenue capacity while also receiving penalties for for the provision of generation recognised over time. state aid decision to not raise objections to Commission’s European Union annulled the the General Court of the European On 15 November 2018, market payments to energy firms the UK government could not issue capacity market arrangements. The decision meant approval for the GB capacity or hold auctions. its formal Phase II Energy & Industrial Strategy that following advised the Department for Business, Commission European On 25 October 2019 the Capacity Market functions that had State aid rules. Accordingly all scheme is compatible with EU investigation, it has decided the GB Capacity Market standstill Body were instructed to make capacity payments to holders of agreements in respect of the been suspended were restarted and Settlement period. over time. was recognised when the market restarted. Revenue from capacity income is recognised Capacity revenue in respect of the standstill period are power to individual UK counterparties and is recognised over time when performance obligations Revenue derived from GB is through the sale of recognised as other electricity receivables on the balance sheet and settled daily or monthly depending satisfied. Revenue relating to the GB market is on the terms of the individual contract. Other Segments - Other revenue and the provision of electrical, mechanical, civil, environmental, engineering and consultancy services Other revenue comprises of income derived from value of services and works delivered to customers. respresents the fair its customers when, and to the extent that, the entity has met its performance obligations under Services are deemed to have been delivered to with the input method in the income statement in line with the contract terms in proportion contracts. Revenue is recognised over time in accordance in 30 of the contract. Billed revenue is recognised as a trade receivable-non electricity and settled to the stage of completion, based on total costs other receivables. business days. Unbilled revenue is recognised in NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 1. (c) (a) (d) (b) (XX) (XIX) (XVII) (XVIII) . . Refer to policy . Refer . (continued) STATEMENT OF ACCOUNTING POLICIES (continued) ACCOUNTING POLICIES OF STATEMENT WITH CUSTOMER FROM CONTRACTS REVENUE Capacity income is received through the 'Capacity Remuneration Mechanism' (CRM) where a capacity payment is made to a participant in respect of a Capacity income is received through the 'Capacity Remuneration Mechanism' (CRM) where a which is based on the Unit’s Availability Profile. Revenue is Availability, on the basis of the Unit’s Eligible Generator Unit in each Capacity Period within one month. recognised over time and recognised as an I-SEM receivable on the balance sheet and settled programme for provision of frequency response services Ancillary income is received through 'Delivering a Secure Sustainable Electricity System' (DS3) receivable on the balance sheet and settled within to the grid. Ancillary income is recognised over time. Ancillary income is recognised as a SEM/I-SEM one month. The I-SEM is a new wholesale electricity market arrangement for Ireland and Northern Ireland that went live on 1 October 2018. The SEM market is The I-SEM is a new wholesale electricity market arrangement for Ireland and Northern Ireland separate (although related) clearing and settlement now replaced by multiple markets or auctions, each spanning different trading time frames, with mechanisms. In addition, Energy balancing services are offered There are two ex-ante markets for physical energy: the Day-Ahead Market and the Intraday Market. into the Balancing Market by generators (energy producers) and suppliers (energy consumers). Capacity is a commitment by a generator or providers who are successful in the Capacity Market interconnector owner to be available to deliver energy into the grid, if called on to do so. Capacity are Revenue from the sale of electricity in the I-SEM markets receive a regular capacity payment, which assists with funding generation capacity. balance sheet and settled daily for the ex-ante market recognised over time on consumption of electricity and an I-SEM receivable is recognised on the and weekly for the ex-post market. Integrated-Single Electricity Market (I-SEM) Revenue in respect of the SEM pool was recognised on consumption of electricity. A SEM pool receivable was recognised on the balance sheet and A SEM pool receivable was recognised on the balance sheet Revenue in respect of the SEM pool was recognised on consumption of electricity. generally settled monthly Price volatility in the pool was managed by generators and suppliers who entered into fixed financial contracts (contracts for differences) Price volatility in the pool was managed by generators and suppliers who entered into fixed financial on hedge accounting. The Group operates power stations and wind farms and revenue earned derives mainly from the generation of electricity from such assets. Until 30 and revenue earned derives mainly from the generation The Group operates power stations and wind farms Northern (SEM) was the single wholesale market (pool) for electricity in the Republic of Ireland (ROI) and September 2018 the Single Electricity Market Ireland (NI). the pool. The pool gross pool, so all generators were required to sell and suppliers were required to buy power through It was a mandatory Price (SMP) every half hour. known as the System Marginal set the spot price for electricity, the Capacity Remuneration Mechanism (CRM) Generators also received separate payments for the provision of stable generation capacity through Single Electricity Market (SEM) Republic of Ireland Generation and Trading (formerly Generation and Wholesale Markets) revenue derives mainly from electricity generation (formerly Generation and Wholesale Markets) revenue derives mainly from electricity Generation and Trading NIE Networks receives non-repayable supply contributions income as a result of providing new connections to its existing network in respect of property, property, of respect in network existing its to connections new providing result of a as income contributions supply non-repayable receives Networks NIE the work in trade payables as progress payments until their performance obligation is satisfied, when plant and equipment. These contributions are held in the income statement over income and released to revenue they are transferred to deferred on the connection has met the performance obligation life of these assets is estimated at 25 and 30 years for distribution and economic lives of the related assets. The useful the estimated useful transmission respectively. NIE Networks - Revenue from Use of System charges to customers NIE Networks - Revenue suppliers and transmission the distibution system (DUoS) levied on electricity revenue principally through charges for use of NIE Networks derives its for Northern Ireland (SONI).the transmission system levied on System Operator mainly for use of service charges (TSC) NIE Networks operates in Base (RAB) from an allowed return on its Regulated Asset a regulated business, earning its revenue primarily Northern Ireland and is revenue is operation by SONI. For this fixed price contract TSC the effective revenue is earned by maintaining the transmission assets to facilitate TSC a Use of System receivable is recognised on the balance sheet. recognised over time on a straight line basis and ESB Networks - Revenue from Use of System charges to customers ESB Networks - Revenue services and is recognised from providing ancillary network from a number of unregulated sources. Revenue Networks also recognises revenue ESB on the balance sheet for point in time with a corresponding receivable carried All unregulated income is recognised at a other miscellaneous income. each item. within of the system by suppliers and any outstanding billed and unbilled usage for DUoS is included DUoS revenue is recognised in line with the use date. Use of System receivable at the balance sheet NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 136 1. (XVII) 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS - - €m €m (8.3) Total 397.2 587.9 315.4 (11.9) (46.2) (59.8) (27.9) (14.0) (78.3) Total (806.2) (182.4) (779.4) (127.5) (223.1) 3,709.5 3,709.5 3,431.8 3,431.8 (2,197.5) (2,181.6)

1 ------€ €m and and 1,662.7 1,650.3 (1,662.7) (1,662.7) (1,650.3) (1,650.3) eliminations eliminations 139 2019 Report Annual ESB Consolidation Consolidation 1 - - - €m €m 36.0 20.2 34.4 (0.7) (0.6) Other Other 290.0 326.0 248.7 283.1 (12.8) (93.2) (26.8) (19.1) (40.7) (13.0) (278.3) (100.6) (304.1) (124.8) (178.5) Segments Segments ------€m €m NIE NIE 34.8 60.8 18.2 29.4 61.5 16.8 (0.4) 267.7 302.5 273.0 302.4 (87.4) (42.6) (97.4) (44.7) (154.3) (143.1) Networks Networks 4.5 €m €m 70.9 (0.6) 557.3 961.0 103.2 517.3 973.8 (11.9) (34.4) (59.8) (36.8) (17.5) (51.3) (159.6) (192.2) (103.1) (124.4) (155.0) 1,518.3 1,491.1 (1,149.4) (1,260.1) Generation Generation and Trading and Trading ------€m €m ESB ESB (2.2) (0.3) (2.2) 787.3 368.7 344.3 342.1 751.4 386.9 354.5 352.3 (435.0) (376.7) (412.4) (371.1) 1,156.0 1,138.3 Networks Networks 1 - - - 8.2 €m €m 59.4 59.2 11.5 43.2 42.7 (0.2) (9.1) (3.1) (0.1) (0.4) (30.5) (11.1) (12.6) 2,061.2 2,069.4 1,855.7 1,867.2 Solutions (1,968.4) (1,799.2) Customer Customer Solutions The 2018 reported numbers have been restated due to the organisational effectiveness review that came into effect on 1 January 2019. A number of The 2018 reported numbers have been restated due to the organisational effectiveness review SEGMENT REPORTING (continued) SEGMENT Income statement Segment revenue - 2019 External revenues Inter-segment revenue Revenue Impairment charge Operating result - 2019 Operating profit including exceptional items Profit / (loss) before taxation Segment revenue - 2018 Segment operating costs - 2019 Segment operating costs Depreciation and amortisation Net other operating costs Net impairment losses on financial assets Exceptional operating costs excluding impairment profit / (loss) Share of equity accounted investees’ Net finance cost 1 External revenues Inter-segment revenue Revenue Segment operating costs - 2018 Depreciation and amortisation Net other operating costs Net impairment losses on financial assets Impairment charge entities transferred from Other Segments to the Customer Solutions reporting segment. Net finance cost Operating result - 2018 Operating profit / (loss) - including exceptional items loss Share of equity accounted investees’ Profit / (loss) before taxation All inter-segment revenues are eliminated upon consolidation and are reflected in the eliminations column above. All inter-segment revenues are eliminated upon consolidation and are reflected in the eliminations NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 2. (i) (i) (a) (ii) (ii) (iii) (iii) reasury is principally concerned with the ownership and operation of the electricity distribution network and the ownership of the electricity NIE Networks is principally concerned with the ownership and its regulated business earning an allowed return on its Regulated Asset Base (RAB) and derives transmission network in NI. NIE Networks is a and from charges for transmission services revenue principally from charges for the use of the distribution system levied on electricity suppliers collected from the System Operator for Northern Ireland (SONI). Group with support services. These Other Segments include the results of internal service providers, which supply the main business units of the that transactions between operating segments are on an segments are governed by regulation, and service level agreements are designed to ensure finance costs in the Group, as the majority of T arm's length basis similar to transactions with third parties. This segment also includes most Revenue by product consist of sales to electricity and gas customers Reportable segments are split by type of product revenue earned. Customer Solutions revenues generation. ESB Networks and revenue derives mainly from electricity amd other related services as set out at (a) above. Generation and Trading Revenue included within Other Segments relates primarily to engineering NIE Networks earn Use of System income in the ROI and NI respectively. services. operates, develops, constructs and trades the output of power stations and wind farms in ROI, NI and GB. This includes operates, develops, constructs and trades the Generation and Trading joint ventures. wholly owned subsidiaries and investments in between segments and to assess performance. The CODM monitors the operating results of the segments separately in order to allocate resources are not reported by segment to the CODM. Segment performance is predominantly evaluated based on operating profit. Assets and liabilities is principally concerned with the ownership and operation of the electricity distribution network and the ownership of the electricity ESB Networks is principally concerned with the ownership and its a regulated business earning an allowed return on its Regulated Asset Base (RAB) and derives transmission network in ROI. ESB Networks is the distribution system levied on electricity suppliers and from charges for transmission services revenue principally from charges for the use of regulation from the Group's generation and supply business. collected from Eirgrid Plc. It is ring-fenced by segments. Finance costs incurred centrally are not recharged to other operating activity is conducted centrally. A description of the Group's key reportable segments is as follows: A description of the Group's key reportable segments and service offerings through all of ESB’s customer-facing Customer Solutions develops, markets, sells and services innovative Britain (GB). and ESB Energy) in Ireland (ROI and NI) and Great ESB e-Cars, ESB Telecoms brands (Electric Ireland, Smart Energy Services, the GB and gas to domestic customers on the island of Ireland. Customer Solutions operates in Electric Ireland is a leading supplier of electricity in the non-domestic sector in both the ROI and NI. Electric Ireland also has a substantial market share domestic market through ESB Energy. and gas customers. Revenues are primarily derived from sales to electricity For management purposes, the Group is organised into four key reportable segments, being the Group's strategic divisions which are managed segments, being the Group's strategic the Group is organised into four key reportable For management purposes, Board being collectively supplied to Executive Management and to the of which internal management information is separately and in respect of the Group. Three further corporate divisions provide support and other services to the principal the Chief Operating Decision Maker (CODM) as Other Segments in the information below. operating divisions of the Group and are combined The Group has applied IFRS 8 Operating Segments, and has made the appropriate disclosures in these financial statements. IFRS 8 Operating Segments, and has made the The Group has applied SEGMENT REPORTING EXCEPTIONAL ITEMS EXCEPTIONAL disclosure by virtue of their size warrant separate view, describe certain items which, in management’s to term “exceptional” The Group has used the items may include restructuring, to be non-recurring in nature. Exceptional the fact that certain gains or losses are determined or incidence, or due to identification is important to in estimates or once off costs where separate profit or loss on asset disposals, material changes significant impairments, 5 of the financial statements. Group's exceptional items are provided in note of the financial statements. Further details of the gain an understanding NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 138 2. (c) (e) (a) (d) (b) 1. STATEMENT OF ACCOUNTING POLICIES (continued) OF ACCOUNTING POLICIES 1. STATEMENT (XXI) 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS

- - €m €m €m 28.4 2018 2018 2018 837.0 139.7 139.7 2,566.4 3,431.8 8,019.3 3,307.3 11,326.6 5.0 €m €m €m 29.0 94.2 34.4 54.8 2019 2019 2019 858.2 2,822.3 3,709.5 8,386.7 3,460.4 11,847.1 141 2019 Report Annual ESB Ireland UK including Northern Ireland External revenue by geographic market External revenue by Rest of world Total As a result of these developments in the business and after consultation with stakeholders a provision for the cost of severance schemes has been As a result of these developments in the business and after consultation with stakeholders a in respect of the severance schemes. put in place. At 31 December 2019 a charge of €54.8 million was taken to the Income Statement Operating costs and maintenance costs representing ESB’s In addition to the severance schemes, a charge of €5.0 million has been included in operations recognition of the economic impact on region in the wake of announcement of the planned for the midlands in Fund’ contribution to a ‘Just Transition closure of the two peat stations. 2019 Impairment charges plant that ESB jointly invested in along with UK Green Infrastructure Holdings Limited owns a 40MW biomass fuelled power Tilbury Green Power located approximately 30km east of London and uses sustainable, locally sourced, waste wood Platform and the EPC consortium. The plant is commercial operation in 2019. An impairment review of the shareholder loan to the project from the greater London area. The plant achieved plant impairment indicators primarily due to delays in achieving commercial operation and reduced was completed prompted by the existence of issues. The impairment assessment of the shareholder loan was based on forecast interest running versus expected levels arising from technical (2018: 12.56%) being the effective rate of interest on the loan in line with IFRS 9. Impairment and debt repayments and was discounted at 12.56% the loan have been recognised in operating costs in relation to the shareholder loan. The full value of charges of €34.4 million (2018: €17.5 million) outstanding has been impaired at 31 December 2019. Exit costs - severence schemes plant in Dublin ceased and the North Wall During the year the closure of the Peats stations in the midlands at the end of 2020 was announced rationalisation of operations at the Moneypoint plant. operations. Demand for coal fired generation has fallen in 2019 and this has led to a significant Ireland Ireland UK including Northern Total Impairment charges Exit costs - severance schemes Operating costs GEOGRAPHIC INFORMATION GEOGRAPHIC location assets by geographic Non-current ITEMS EXCEPTIONAL Non-current assets for this purpose consist of property, plant and equipment, intangible assets, right of use assets, and goodwill. Investments in and equipment, intangible assets, right of use plant this purpose consist of property, Non-current assets for and deferred tax assets are receivables, derivative financial instruments financial asset investments, trade and other equity accounted investees, excluded. NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 4. 5. (a) (b) - - €m €m €m 68.5 66.5 64.3 64.1 25.5 79.8 Total 2018 557.3 986.5 517.3 960.1 Total 589.6 298.6 171.3 2,030.7 3,709.5 3,709.5 1,826.0 3,431.8 3,431.8 1,164.8 1 ------€m €m and and €m 28.4 55.3 2019 (1,662.7) (1,650.3) (1,650.3) (1,662.7) 580.8 423.9 154.2 eliminations 1,242.6 eliminations Consolidation Consolidation 1 ------€m €m 36.0 34.4 34.4 36.0 Other Other 326.0 248.7 283.1 290.0 Segments Segments ------€m €m NIE NIE 15.0 16.1 29.4 34.8 267.7 302.5 258.0 251.6 273.0 302.4 Networks Networks ------€m €m 557.3 517.3 557.3 517.3 973.8 961.0 1,518.3 1,491.1 Generation Generation and Trading and Trading ------€m €m ESB ESB 49.3 52.4 702.1 734.9 751.4 386.9 368.7 787.3 1,156.0 1,138.3 Networks Networks 1 ------8.2 €m €m 29.7 11.5 30.5 2,061.2 2,069.4 1,826.0 1,855.7 2,030.7 1,867.2 Solutions Customer Customer Solutions 1 1 The 2018 reported numbers have been restated due to the organisational effectiveness review that came into effect on 1 January 2019. A number of The 2018 reported numbers have been restated due to the organisational effectiveness review fectiveness review that came into effect on 1 January 2019. A number came into effect on 1 January 2019. A number effectiveness review that have been restated due to the organisational The 2018 reported numbers 2019 IFRS 15 requires disclosure to reflect the nature, timing, amount and uncertainty of its revenue within its disclosure requirements. ESB has timing, amount and uncertainty of its revenue within its disclosure requirements. ESB has IFRS 15 requires disclosure to reflect the nature, segments and the nature of revenues is appropriate for its circumstances. determined that the disaggregation using existing REVENUE FROM CONTRACTS WITH CUSTOMERS 1 2018 entities transferred from Other Segments to the Customer Solutions reporting segment. External revenues Generation Revenue from Power Revenue from Use of System charges to customers Revenue from supply contributions Revenue from sales to electricity and gas customers External revenues Generation Revenue from Power Other revenue Revenue from Use of System charges to customers Revenue from supply contributions Revenue from contracts with customers Revenue from sales to electricity and gas customers Inter-segment revenue Other revenue Total ESB Group revenue Total Revenue from contracts with customers Inter-segment revenue Total ESB Group revenue ESB Group Total ESB Networks Generation and Trading NIE Networks Other Segments Total SEGMENT REPORTING (continued) SEGMENT Other disclosures Additions to non-current assets Additions to non-current Customer Solutions 1 Additions to non-current assets (excluding acquisitions) includes investments in property, plant and equipment, intangible assets (excluding emission plant and equipment, intangible assets includes investments in property, Additions to non-current assets (excluding acquisitions) allowances), financial assets and equity accounted investees. of entities transferred from Other Segments to the Customer Solutions reporting segment. Other Segments to the Customer Solutions of entities transferred from ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 140 NOTES TO THE FINANCIAL STATEMENTS THE THE FINANCIAL FINANCIAL TO TO NOTES NOTES STATEMENTS STATEMENTS 3. 2. (b) 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS - - 2.5 0.5 0.3 3.4 , €m €m 27.9 19.4 29.0 29.8 14.0 (0.5) (3.7) 2018 2018 549.4 779.4 127.5 492.8 223.1 226.8 203.0 177.6 (25.4) 1,140.8 3,117.8 - - 2.4 2.0 0.1 2.7 9.5 €m €m 46.2 11.9 16.6 18.1 15.8 (2.4) (2.2) 2019 2019 433.8 806.2 545.1 182.4 184.6 179.7 152.2 (27.5) 1,287.1 3,130.3 143 2019 Report Annual ESB 3 2 4 1 Included in energy costs is a charge of €8.7 million (2018: €10.7 million) relating to the fair valuing of fuel commodity swaps which have not been of fuel commodity swaps which have not been to the fair valuing relating is a charge of €8.7 million (2018: €10.7 million) Included in energy costs gain of €25.0 million (2018: €5.1 million loss) on sterling denominated exchange retranslation gain of €25.0 million (2018: €5.1 million loss) Included in operations and maintenance is a foreign (2018: €10.4 million) impairment losses incurred on trade and other receivables of €11.8 million Net impairment losses on financial assets include have been Plant and Equipment and Intangible Assets million) in respect of Property, Impairment charges of €11.9 million (2018: €127.5 Net impairment losses on financial assets (notes 15 / 17) Net impairment losses Operations and maintenance Depreciation and amortisation (notes 11 / 12 / 13) Depreciation and amortisation Other impairment charges Total Energy costs of future payment obligations as disclosed in the The financing charges on provisions are calculated in accordance with the policy for discounting accounting polices - see note 1. rate swaps and foreign exchange contracts disclosed In addition to the amounts transferred from other comprehensive income relating to interest flow hedging reserve to net finance cost and other above, a gain of €8.3 million (2018: gain of €23.3 million) has been transferred from the cash in the translation of the underlying hedged foreign financing charges during the year. However, these amounts are substantially offset by movements currency borrowings at the prevailing exchange rates. Holdings Limited €0.2 million (2018: €1.6 million) Included in finance income is interest on borrowings receivable from Aldeburgh Offshore Wind DAC €0.3 million (2018: €0.4 million)- Oweninny Power see note 15 for further details. Retail Price Index (RPI) in the UK have been Fair value movements on the inflation linked swaps reflecting lower interest rates and a lower for these instruments. recognised within finance costs in the income statement, as hedge accounting is not available Employee costs (note 9) - on other provisions (note 27) financing charges Total Net finance cost OPERATING COSTS (including net impairment losses on financial assets) losses on financial (including net impairment COSTS OPERATING FINANCING CHARGES NET FINANCE COST AND OTHER Fair value (gains) / losses on financial instruments: - currency / interest rate swaps: cash flow hedges, transfer from OCI - interest rate swaps and inflation-linked swaps not qualifying for hedge accounting - foreign exchange contracts not qualifying for hedge accounting fair value losses on financial instruments Total Finance cost Finance income Interest payable on borrowings Net interest on borrowings - on asset retirement costs (note 27) - on lease obligations (note 13) Less capitalised interest Financing charges: - on NIE Networks pension scheme (note 23) - on ESB pension scheme (note 24) - on employee related liabilities (note 24) 1 2 3 4 intercompany positions. in loans to equity accounted investees of €34.4 million (2018: €17.5 million) - see further detail and exceptional impairment charges incurred on notes 5 and 17. of which have been disclosed as exceptional items in the income statement. recognised in 2019, €nil (2018: €122.2 million) designated as accounting hedges. designated as accounting NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 7. 8. - 4.7 0.1 1.4 8.6 €m 2018 (12.0) - - - 1.6 8.7 7.1 €m 2019 1 2 Refer to note 15 for further information relating to the purchase of Castlepook Power DAC. to the purchase of Castlepook Power Refer to note 15 for further information relating These fair value movements relate to adjustments to the value of investments in renewables enterprises held by ESB Novusmodus Limited Fair value movements on assets held at fair value through profit and loss Fair value movements on assets held at fair value Other operating income Dividends received Total OTHER OPERATING INCOME / (EXPENSES) OPERATING OTHER Profit on disposal of property, plant and equipment and intangible assets Profit on disposal of property, Gain on Castlepook Power DAC becoming a 100% subsidiary undertaking Gain on Castlepook Power 2 1 Partnership, a subsidiary, as detailed in note 15. Partnership, a subsidiary, All forecast cash inflows for each asset and generation plant are based on the forecasted running profiles for the plants, regulatory support, forward plant are based on the forecasted running profiles for the plants, regulatory support, All forecast cash inflows for each asset and generation approved outflows reflect the forecast operating and capital expenditure plans based on the Board gas and carbon. The cash prices for electricity, production and cash flow forecasts. five-year business plans, and thereafter, on long-term The review of the I-SEM windfarm portfolio highlighted the requirement for an impairment charge of €1.4 million. The driver of the impairment charge the requirement for an impairment charge of €1.4 million. The driver of the impairment The review of the I-SEM windfarm portfolio highlighted to the in price at Hunters Hill windfarm based in Northern Ireland. The real discount rate applied is a reduction in market revenue due to a decrease the NPV was a pre-tax rate of 4.02%. cash flows of Hunters Hill windfarm to determine Aghada Unit Two (435 MW) and Synergen (410 MW) are Combined Cycle Gas Turbines (CCGT’s) based in Cork and Dublin respectively. Aghada Dublin respectively. based in Cork and (CCGT’s) Gas Turbines and Synergen (410 MW) are Combined Cycle (435 MW) Aghada Unit Two review undertaken has operation in August 2002. The impairment operation date in May 2010 and Synergen commenced reached its commercial in the Generation and and €33.4 million for Synergen which are included charge of €87.3 million for Aghada Unit 2 highlighted an impairment wholesale electricity margins for gas fired projected revenue due to lower forecasted The impairments arose as a result of lower segment. Trading real discount rate applied to the lower running volumes for these plants. The driven by lower spark spreads and forecast plants in the I-SEM market the NPV was a pre-tax rate of 6.11%. cash flows to determine 2018 Impairment charges 2018 Impairment exceeds its recoverable amount by which the carrying value of an asset Assets stipulates that an impairment loss is the IAS 36 - Impairment of in use is calculated by taking the Net of disposal and its value in use. Value is the higher of its fair value less costs amount. Recoverable amount are required to conduct at an appropriate discount rate. Entities future cash flows from the asset discounted (NPV) of expected Present Value in the new Integrated Single Lower forecast wholesale electricity margins there is an indication of impairment of an asset. impairment tests where assets at 31 December 2018. reviews on certain of the Group’s generation is an indicator that has prompted impairment Electricity Market (I-SEM) EXCEPTIONAL ITEMS (continued) EXCEPTIONAL ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 142 NOTES TO THE FINANCIAL STATEMENTS THE THE FINANCIAL FINANCIAL TO TO NOTES NOTES STATEMENTS STATEMENTS 6. 5. 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS - 1.0 0.5 5.3 0.2 0.5 0.1 €m €m 638 295 969 34.2 25.2 37.3 27.3 2018 2018 2018 496.9 457.4 334.9 3,429 5,331 367.6 (162.0) Number - 1.3 0.1 0.2 0.5 0.1 €m €m 636 343 30.6 30.4 55.2 34.9 33.4 2019 2019 2019 605.7 519.9 439.5 3,473 1,649 6,101 421.2 (166.2) Number 145 2019 Report Annual ESB 1 2 1

2 €0.4 million (2018: €0.4 million) related to the audit of Parent company. Additionally, €0.1 million is payable to PwC Belfast in respect of the 2019 Additionally, €0.4 million (2018: €0.4 million) related to the audit of Parent company. in respect of permitted services under a contract Included in other non-audit services for financial year ended 2019 is €nil (2018: €0.4 million) These benefits primarily include travel and subsistence allowances. These benefits primarily include travel and subsistence See the ESB Defined Benefit Pension Scheme and the ESB Defined Contribution Pension Scheme. The pension charge includes contributions to EMPLOYEES (continued) EMPLOYEES PARENT temporary employees: in year by business activity, including Average number of employees 1 2 1 2 PROFIT FOR THE FINANCIAL YEAR audit of NIE Networks (2018: €0.1 million). The audit of individual and Group financial statements includes the audit of subsidiary companies. awarded to PwC prior to their appointment as auditors. note 23 for further details. Capitalised payroll Payroll cost for employees - Other assurance services ESB (Parent) Board members' remuneration: - Emoluments Pension and other employee benefit costs Exit costs - severance programmes Generation and Trading The profit for the financial year is stated after charging / (crediting): Auditor's remuneration: - Audit of individual and Group financial statements Total employee related costs charged to the income statement employee Total Pension charge advisory services (Parent and NIE Networks entities only) - Tax - Pension contributions Customer Solutions - Other non-audit services The details of Board members remuneration do not include amounts paid to four Worker Board members as employees of ESB (as such pay is The details of Board members remuneration do not include amounts paid to four Worker neither increased nor decreased because of their membership of the Board), but do include amounts paid to them by way of Board fees. ESB Networks Other Segments Total Employee costs in year Current staff costs (excluding pension) Salaries Overtime Social welfare costs (PRSI) Other payroll benefits NOTES TO THE FINANCIAL STATEMENTS THE THE FINANCIAL FINANCIAL TO TO NOTES NOTES STATEMENTS STATEMENTS 9. (c) (a) (b) 10. 7.8 €m 459 51.8 36.8 13.7 44.6 40.4 2018 2018 708.7 1,760 492.8 3,440 7,874 635.4 1,009 513.6 1,206 (215.9) Number

7.9 €m 551 914 52.5 37.0 55.2 41.2 43.0 2019 2019 766.0 1,811 545.1 3,490 7,974 650.4 529.2 1,208 (220.9) Number

4 3

2 1 1 1 isational effectiveness review that came into effect on 1 January 2019. that came into effect on 1 January 2019. organisational effectiveness review numbers have been restated due to the The 2018 reported headcount The NIE Networks pension scheme charge relates solely to the Focus section of the Northern Ireland Electricity Scheme (the NIE Networks During the year the ESB announced the planned closure of two peat-fired powered generating plants in 2020, closure of North Wall station and plants in 2020, closure of North Wall During the year the ESB announced the planned closure of two peat-fired powered generating n (2018: €30.6 million) to the ESB Defined Benefit Pension Scheme, contributions of €30.1 million (2018: €30.6 million) to the ESB Defined Benefit The pension charge for other schemes include These benefits primarily include travel and subsistence allowances. These benefits primarily include travel and subsistence Capitalised payroll GROUP temporary employees: in year by business activity, including Average number of employees EMPLOYEES Employee costs in year 1 A number of entities transferred from Other Segments to the Customer Solutions reporting segment. A number of entities transferred from Other Segments 4 3 2 1 Scheme). See note 23 for further details. significant rationalisation of Moneypoint operations. Further details are set out in note 5. Included in severance programme costs for 2018 are significant rationalisation of Moneypoint operations. Further details are set out in note 5. Included pension curtailment costs in respect of NIE Networks of €4.7 million. €14.1 million (2018: €12.5 million) to the ESB Defined Contribution Pension Scheme, €7.3 million (2018: €6.0 million) to the Options section of Defined Contribution Pension Scheme, €7.3 million (2018: €6.0 million) to the Options section €14.1 million (2018: €12.5 million) to the ESB Great Scheme) and €1.0 million (2018: €0.8 million) to the stakeholder pension scheme for the NIE Networks Pension Scheme (NIE Networks Britain (GB) employees (FMUK Pension Scheme). This charge also includes past service costs of €nil (2018: €1.9 million). See note 23 and 24 for further details. NIE Networks pension scheme charge Total employee related costs charged to the income statement employee Total ESB Networks Total Total Payroll cost for employees Pension and other employee benefit costs Exit costs - severance programmes Pensions charge - other schemes Generation and Trading Generation and Trading Current staff costs (excluding pension) Salaries NIE Networks Customer Solutions Overtime Other Segments Social welfare costs (PRSI and national insurance) Social welfare costs (PRSI and national insurance) Other payroll benefits NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 144 9. (c) (a) (b) 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS ferred 147 2019 Report Annual ESB

During the year the Group capitalised interest of €27.5 million (2018: €25.4 million) in assets under construction, using an effective interest rate of 2.9% interest using an effective in assets under construction, (2018: €25.4 million) interest of €27.5 million the Group capitalised During the year (2018: 3.6%). is €94.4 million (2018: €89.9 million). assets (land) at 31 December 2019 The carrying value of non-depreciable €4,632.2 included above at a cost of €5,039.0 million (2018: book value of €nil at 31 December 2019 is plant and equipment with a net Property, million). note 15 (c) - Group See DAC. in relation to the acquisition of Castlepook Power 2018 is €55.6 million regarding assets acquired Included in additions in acquisitions for further details. retirement of assets that have been fully depreciated. in both 2019 and 2018 primarily relate to the Retirements / disposals Networks for and ESB Trading the asset retirement provision for Generation and in 2019 is the capitalisation of an increase in Included within additions million).€10.8 million (2018: €19.9 further details. See note 27 for income 1 January 2018, supply contributions are now accounted for as deferred on effective Due to the new accounting standard IFRS 15 becoming consistent with the depreciation policy of the underlying asset. Included in the transfers to de and released to the income statement on a basis reclassified and accumulated amortisation of €58.4 million at 1 January 2018 which have been income are €791.7 million of gross supply contributions income. to deferred Impairment charge amount. impairment loss is the amount by which the carrying value of an asset exceeds its recoverable IAS 36 - Impairment of Assets stipulates that an in use is calculated by taking the Net Present Value of disposal and its value in use. Value value less costs Recoverable amount is the higher of its fair where discounted at an appropriate discount rate. Entities are required to conduct impairment tests (NPV) of expected future cash flows from the asset (I-SEM) is Lower forecast wholesale electricity margins in the new Integrated Single Electricity Market there is an indication of impairment of an asset. on certain of the Group’s generation assets at 31 December 2019. an indicator that has prompted impairment reviews flows to displaying indications of impairment by comparing the net present value of future cash An impairment review has been carried out on assets in an impairment charge of €5.3 million (2018: €122.2 million).their net book value as at 31 December 2019 resulting is a requirement for an impairment charge of €5.3 million. The driver of the impairment charge portfolios highlighted the A review of the I-SEM wind farm rate applied to the cash flows to determine the NPV was a pre-tax rate of 3.5%. reduction in market revenue. The real discount in I-SEM and GB concluded an impairment charge of €nil (2018: €122.2 million).A review of a number of thermal generation assets The real discount NPV were pre-tax rates of 6.2% and 6.1% respectively. rates applied to the cash flows to determine the plant are based on the forecasted running profiles for the plants, regulatory support, forward All forecast cash inflows for each asset and generation Board approved five- the forecast operating and capital expenditure plans based on the reflect gas and carbon. The cash outflows prices for electricity, production, cash flow forecasts and plant closure dates. year business plans, and thereafter, on long-term on 2018 impairment charges. to note 5 for further details Refer PROPERTY, PLANT & EQUIPMENT (continued) PLANT & EQUIPMENT PROPERTY, NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 11. - - - - 5.3 0.6 €m 58.4 (3.6) (3.0) Total 716.6 103.5 735.3 122.2 791.7 914.5 887.7 260.8 (16.2) (43.3) (218.8) (162.9) (176.5) (220.3) 11,116.0 11,722.6 11,077.4 10,755.2 10,005.0 11,116.0 10,441.2 10,382.8 21,179.5 20,387.8 21,871.2 21,871.2 22,800.0 ------1.3 0.2 €m (6.6) 984.5 453.2 880.6 103.9 444.8 880.6 (314.5) (196.1) 1,236.3 1,236.3 1,366.8 1,236.3 1,366.8 construction Assets under - - 0.6 5.3 €m 58.4 (4.3) (3.6) 461.3 687.8 196.1 442.9 314.5 260.6 716.6 103.5 735.3 122.2 (43.3) (16.2) (169.9) (220.3) (218.8) (162.9) 9,518.9 9,124.4 9,710.6 20,195.0 19,507.2 20,634.9 20,634.9 21,433.2 11,722.6 11,116.0 11,116.0 10,441.2 10,382.8 commission Total assets in Total 5.3 0.6 €m 58.4 41.9 79.0 (0.3) (3.9) 696.1 103.4 708.8 122.2 461.3 687.8 175.9 430.5 288.9 260.1 (16.2) (43.2) (184.0) (125.6) (131.8) (184.9) 9,015.2 8,579.3 9,671.9 9,613.5 9,189.6 11,023.5 10,402.7 10,402.7 18,880.6 18,192.8 19,417.9 19,417.9 20,213.1 Plant and machinery ------

0.5 0.1 €m 20.2 12.4 25.6 20.5 26.5 (0.4) (0.1) (3.3) 521.0 503.7 545.1 699.1 713.3 713.3 769.3 769.3 (38.1) (79.0) (35.4) (34.8) (37.3) (41.9) 1,314.4 1,314.4 1,217.0 1,217.0 1,220.1 buildings Land and PROPERTY, PLANT & EQUIPMENT PLANT & EQUIPMENT PROPERTY, Additions Restated balance at 1 January 2018 Restated balance at Retirements / disposals IFRS 15 transfer to deferred income IFRS 15 transfer to deferred out of assets under construction Transfers Other transfers GROUP Cost 2018 Balance at 1 January from / (to) intangible assets Transfers differences Translation Balance at 31 December 2018 Balance at 1 January 2019 Additions Retirements / disposals Transfers out of assets under construction out of assets Transfers Transfers from intangible assets from intangible Transfers differences Translation Balance at 31 December 2019 Charge for the year Net book value at 31 December 2019 Net book value at 31 December 2018 Net book value at 1 January 2018 Retirements / disposals differences Translation Balance at 31 December 2019 Balance at 1 January 2019 Impairment Charge for the year Balance at 31 December 2018 Restated balance at 1 January 2018 Retirements / disposals differences Translation IFRS 15 transfer to deferred income IFRS 15 transfer to deferred Impairment Other transfers Depreciation Balance at 1 January 2018 Transfers to intangible assets to intangible Transfers NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 146 11.

03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS - - 3.0 3.6 1.2 6.6 7.2 €m 92.4 11.6 10.6 44.1 70.9 (1.7) (3.9) (1.1) (0.6) (3.9) Total 832.8 102.3 917.9 917.9 109.1 557.1 516.1 516.1 118.2 596.9 458.1 401.8 275.7 (88.8) (70.5) (88.8) (59.5) 1,055.0 ------0.1 €m 96.7 96.0 96.7 (2.6) under 169.5 109.2 109.2 105.7 169.5 109.2 (80.9) (45.5) 149 2019 Report Annual ESB Software development 1 ------0.8 €m 92.4 29.0 87.7 87.7 87.7 29.0 110.4 118.2 110.4 (70.5) (59.5) & ROCs Emission allowances - - - - 6.3 3.4 3.6 1.2 5.6 9.7 6.6 7.2 €m 11.6 80.9 45.5 44.1 70.9 (1.7) (3.9) (1.1) (0.6) (3.9) 178.2 707.1 721.0 721.0 775.1 557.1 516.1 516.1 596.9 204.9 150.0 (88.8) (88.8) Software and other intangible assets Emission allowances and Renewable Obligation Certificates (ROCs) are not amortised as they are held for settlement in the following year and Emission allowances and Renewable Obligation Certificates (ROCs) are not amortised as they INTANGIBLE ASSETS INTANGIBLE Settlement of allowances GROUP Cost Balance at 1 January 2018 Software additions Acquisitions Purchase of allowances under development out of software Transfers differences Translation Balance at 31 December 2018 Balance at 1 January 2019 Software additions Purchase of allowances Software retirements under development out of software Transfers Amortisation Balance at 1 January 2018 Charge for the year Retirements plant and equipment from property, Transfers Impairment differences Translation Balance at 31 December 2018 Balance at 1 January 2019 Charge for the year Transfers from / (to) property, plant and equipment plant from / (to) property, Transfers and equipment plant from to property, Transfers Balance at 31 December 2019 Retirements Settlement of allowances Software retirements differences Translation Impairment differences Translation Balance at 31 December 2019 Net book value at 31 December 2019 Net book value at 31 December 2018 Net book value at 1 January 2018 1 therefore are current assets under IAS 1. therefore details. See note 15 (c) - Group acquisitions for further DAC. Acquisitions in 2018 relate to the purchase of Castlepook Power being represented by internally developed assets. Software assets include both internally developed and externally purchased assets with the majority million).Other intangibles include grid connections with a net book value of €6.1 million (2018: €10.8 Impairment charge (continued) Impairment support, forward for the plants, regulatory running profiles are based on the forecasted and generation plant cash inflows for each asset All forecast plans based on the Board approved five- the forecast operating and capital expenditure The cash outflows reflect gas and carbon. prices for electricity, forecasts and plant closure dates. thereafter, on long-term production, cash flow year business plans, and charges. note 5 for further details on 2018 impairment to Refer PROPERTY, PLANT & EQUIPMENT (continued) PLANT & EQUIPMENT PROPERTY, NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 11. 12.

- - - - 0.6 8.3 €m 16.7 87.3 18.6 (3.1) (3.7) Total 571.0 561.1 401.4 473.0 479.8 (215.5) (171.3) (162.0) (214.4) 8,697.1 9,091.7 9,091.7 8,678.5 9,365.4 7,300.1 7,201.0 6,826.1 ferred 16,665.5 16,292.7 16,292.7 15,906.0 15,504.6 . ------1.3 €m (5.0) 288.3 325.3 935.4 103.9 831.5 831.5 (300.5) (161.4) 1,083.4 1,095.6 1,095.6 1,095.6 1,083.4 construction Assets under - - 0.6 8.3 €m 16.7 87.3 18.6 (4.4) (3.7) 300.5 282.7 161.4 235.8 297.5 473.0 479.8 (215.5) (166.3) (162.0) (214.4) 9,091.7 9,091.7 8,697.1 9,365.4 6,105.4 5,994.6 8,678.5 6,216.7 15,582.1 15,197.1 15,197.1 14,970.6 14,673.1 commission Total assets in Total 0.6 8.3 €m 14.5 51.5 87.3 34.4 18.6 (4.4) (0.4) 275.0 282.1 141.8 235.8 297.5 448.0 459.7 (183.7) (129.2) (125.0) (183.3) 8,398.7 8,398.7 7,954.4 8,683.4 5,611.5 5,481.4 7,935.8 5,715.3 14,398.7 14,010.2 14,010.2 13,714.7 13,417.2 Plant and machinery ------2.2 0.6 €m 25.5 19.6 25.0 20.1 (3.3) 501.4 693.0 693.0 742.7 682.0 493.9 513.2 742.7 (31.8) (51.5) (37.1) (37.0) (31.1) (34.4) 1,183.4 1,186.9 1,186.9 1,255.9 1,255.9 buildings Land and Retirements / disposals in both 2019 and 2018 primarily relate to the retirement of assets that have been fully depreciated. Retirements / disposals in both 2019 and 2018 primarily relate to the retirement of assets that income accounted for as deferred on 1 January 2018, supply contributions are now Due to the new accounting standard IFRS 15 becoming effective underlying assets. Included in the transfers to de and released to the income statement on a basis consistent with the depreciation policy of the the net present value of future cash flows using An impairment review has been carried out on assets displaying indications of impairment by comparing charge of €nil (2018: €87.3 million) a pre-tax discount rate of 6.2% to their net book value as at 31 December 2019 resulting in a During the year the Parent capitalised interest of €20.7 million (2018: €24.1 million) in assets under construction, using an effective interest rate of interest rate of under construction, using an effective During the year the Parent capitalised interest of €20.7 million (2018: €24.1 million) in assets 2.9% (2018: 4.5%). €85.3 million).The carrying value of non-depreciable assets (land) at 31 December 2019 is €77.8 million (2018: of €4,034.6 million (2018: €3,678.9 plant and equipment with a net book value of €nil at 31 December 2019 are included above at a cost Property, million). million at 1 January 2018 which have been reclassified income are €401.4 million of gross supply contributions and accumulated amortisation of €18.6 income. to deferred Impairment charge value of an asset exceeds its recoverable amount. IAS 36 - Impairment of Assets stipulates that an impairment loss is the amount by which the carrying in use is calculated by taking the Net Present Value value less costs of disposal and its value in use. Value Recoverable amount is the higher of its fair Entities are required to conduct impairment tests where (NPV) of expected future cash flows from the asset discounted at an appropriate discount rate. the new Integrated Single Electricity Market (I-SEM) is there is an indication of impairment of an asset. Lower forecast wholesale electricity margins in at 31 December 2019. an indicator that has prompted impairment reviews on certain of the Group’s generation assets Balance at 31 December 2019 Other transfers Transfers from intangible assets from intangible Transfers Transfers out of assets under construction out of assets Transfers Retirements / disposals Additions Balance at 1 January 2019 Balance at 31 December 2018 Balance at 31 December Transfers from / (to) intangible assets Transfers Other transfers Transfers out of assets under construction Transfers Retirements / disposals Additions Restated balance at 1 January 2018 Restated balance at IFRS 15 transfer to deferred income IFRS 15 transfer to deferred Cost 2018 Balance at 1 January PARENT PROPERTY, PLANT & EQUIPMENT (continued) PLANT & EQUIPMENT PROPERTY, Charge for the year Retirements / disposals Balance at 31 December 2018 Balance at 1 January 2019 Charge for the year Retirements / disposals Transfers to intangible assets to intangible Transfers Other transfers Restated balance at 1 January 2018 Impairment Other transfers Balance at 31 December 2019 IFRS 15 transfer to deferred income IFRS 15 transfer to deferred Net book value at 31 December 2019 Net book value at 31 December 2018 Net book value at 1 January 2018 Depreciation Balance at 1 January 2018 NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 148 11. 150 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 151

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NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS STRATEGY AND PERFORMANCE

12. INTANGIBLE ASSETS (continued) 13. RIGHT OF USE ASSETS AND LEASE LIABILITIES

GROUP Impairment An impairment review has been carried out on assets displaying indications of impairment by comparing the net present value of future cash flows using (a) Amounts recognised in the balance sheet a pre-tax discount rate of 3.5% to their net book value as at 31 December 2019 resulting in a charge of €6.6 million (2018: €1.2 million). Land and All forecast cash inflows for each asset are based on the forecasted running profiles for the asset, regulatory support and forward prices for electricity. Right of use assets buildings Motor vehicles Total The cash outflows reflect the forecast operating and capital expenditure plans based on the Board approved five-year business plans, and thereafter, on €m €m €m long-term production and cash flow forecasts. Balance at 1 January 2019 127.6 5.3 132.9 Refer to note 5 for further details on 2018 impairment charges. Additions 8.3 2.9 11.2 Depreciation (16.2) (2.5) (18.7) Remeasurement of RoU Assets 6.5 - 6.5 Software Software Translation differences 1.2 0.2 1.4 and other Emission under Balance at 31 December 2019 127.4 5.9 133.3 intangible assets allowances development Total PARENT €m €m €m €m Lease liabilities Total Cost €m Balance at 1 January 2018 545.5 29.1 87.4 662.0 02

Balance at 1 January 2019 (132.9) CORPORATE GOVERNANCE Software additions - - 90.8 90.8 Purchase of emission allowances - 89.3 - 89.3 Additions (11.2) Software retirements (81.7) - - (81.7) Interest expense (2.0) Settlement of emission allowances - (36.6) - (36.6) Effect of modification of lease liability (3.2) Transfers out of software under development 72.1 - (72.1) - Lease payments1 18.6 Transfers from / (to) property, plant and equipment 4.5 - (1.4) 3.1 Translation differences (1.3) Other transfers 1.3 - - 1.3 Balance at 31 December 2019 (132.0) Balance at 31 December 2018 541.7 81.8 104.7 728.2 Analysed as follows: Balance at 1 January 2019 541.7 81.8 104.7 728.2 Non-current liabilities (112.4) Current liabilities (19.6) Software additions - - 101.8 101.8 Total (132.0) Purchase of emission allowances - 71.8 - 71.8 1Lease payments include principal elements shown as financing activities of €16.6 million. Software retirements (2.6) - - (2.6) Settlement of emission allowances - (46.2) - (46.2) (b) Other amounts recognised in the statement of profit or loss Transfers out of software under development 40.4 - (40.4) - 2019 Transfers from to property, plant and equipment (0.6) - - (0.6) €m Other transfers 1.6 - - 1.6 Balance at 31 December 2019 580.5 107.4 166.1 854.0 Expenses relating to short-term leases 1.4 Expenses relating to low-value assets that are not short-term leases 0.1 Amortisation Expenses relating to variable lease payments not included in lease liabilities 2.0 Balance at 1 January 2018 442.4 - - 442.4 Total 3.5

Charge for the year 37.0 - - 37.0 Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. 03 Retirements (81.7) - - (81.7) Short-term leases are leases with a lease term of 12 months or less. FINANCIAL STATEMENTS Transfers from property, plant and equipment 3.7 - - 3.7 Balance at 31 December 2018 401.4 - - 401.4

Balance at 1 January 2019 401.4 - - 401.4

Charge for the year 51.6 - - 51.6 Retirements / disposals (2.6) - - (2.6) Other transfers 1.6 - - 1.6 Balance at 31 December 2019 452.0 - - 452.0

Net book value at 31 December 2019 128.5 107.4 166.1 402.0 Net book value at 31 December 2018 140.3 81.8 104.7 326.8 Net book value at 1 January 2018 103.1 29.1 87.4 219.6

Emission allowances are not amortised as they are held for settlement in the following year and therefore are current assets under IAS 1.

Software assets include both internally developed and externally purchased assets with the majority being represented by internally developed assets.

Other intangible assets include grid connections with a net book value of €1.9 million (2018: €6.6 million). 152 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 153

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NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS STRATEGY AND PERFORMANCE

13. RIGHT OF USE ASSETS AND LEASE LIABILITIES (continued) 14. GOODWILL

PARENT €m

(a) Amounts recognised in the balance sheet Balance at 1 January 2018 171.0 Translation differences (1.4) Balance at 31 December 2018 169.6 Land and buildings Balance at 1 January 2019 169.6 Right of use assets €m Translation differences 8.7 Balance at 31 December 2019 178.3 Balance at 1 January 2019 77.6

Additions 3.1 Goodwill was recognised on the acquisition of Northern Ireland Electricity Networks (NIE Networks) in December 2010. Goodwill is reviewed Depreciation (12.3) annually in December for impairment, by assessing the recoverable amount of the investment, based on its value in use. Remeasurement of RoU Assets 4.8 Balance at 31 December 2019 73.2 The annual impairment test of goodwill was carried out in December 2019 in accordance with IAS 36. No reduction in the value of goodwill was deemed to be required. Lease liabilities Total The Group calculates the value in use using a 20-year discounted cash flow model and a terminal value based on the Regulated Asset Base (RAB), €m corresponding to the expected useful life of the underlying asset base. The future cash flows are adjusted for risks specific to the investment and are discounted using a post-tax discount rate of 5.6% (2018: 5.6%). 02 Balance at 1 January 2019 (77.6) CORPORATE GOVERNANCE Key drivers of the discounted cash flow include inflation and regulatory assumptions. Inflation rates used were sourced from the UK Office of Additions (3.1) Budget Responsibility and Bloomberg and a long-term rate of 3.08% (2018: 3.0%) was applied. Assumptions in relation to regulatory return and capital Interest expense (0.8) expenditure are made by reference to previous regulatory decisions for NIE Networks. The discount rate used is also a key driver for valuation and Effect of modification of lease liability (1.9) the rate was determined by building up an appropriate Weighted Average Cost of Capital (WACC) for the NIE Networks business. Lease payments1 11.7 Balance at 31 December 2019 (71.7) Key drivers also include expectations of future levels of capital spend and the allowed return on the RAB. Both are agreed with the Utility Regulator in Northern Ireland (NIAUR) as part of the Regulatory Price Reviews, the most recent of which, RP6, was published on 30 June 2017. Analysed as follows: Non-current liabilities (58.9) Current liabilities (12.8) Total (71.7)

1Lease payments include principal elements shown as financing activities of €11.0 million.

(b) Other amounts recognised in the statement of profit or loss 2019 €m

Expenses relating to short-term leases 0.8 Expenses relating to low-value assets that are not short-term leases 0.1 Expenses relating to variable lease payments not included in lease liabilities 0.2 Total 1.1

Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short- 03 term leases are leases with a lease term of 12 months or less. FINANCIAL STATEMENTS 154 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 155

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NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS STRATEGY AND PERFORMANCE

15. FINANCIAL ASSET INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS AND EQUITY ACCOUNTED INVESTEES 15. FINANCIAL ASSET INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS AND EQUITY ACCOUNTED INVESTEES (continued) Aldeburgh Offshore Wind Holdings Limited (AOWHL) Equity Financial assets at In March 2018 the Group acquired 50% of the issued share capital of AOWHL. The Group also acquired 50% of the loan notes issued by Aldeburgh Offshore accounted fair value through Wind Investments Limited (AOWIL) a 100% owned subsidiary of AOWHL from Macquarie Corporate Holdings Pty Limited to become a 50% Joint Venture Partner investees profit or loss Total with Sumitomo Corporation Europe Limited. The amount invested by ESB to date amounts to €126.8 million, all of which was advanced as equity. The shareholder (a) GROUP €m €m €m loans were repaid in full in January 2019. Balance at 1 January 2018 68.3 22.2 90.5 AOWHL has a 25% stake in the Galloper Wind Farm project. The Galloper project is a 353 MW development located in the Outer Thames estuary, 30km off the Additions 135.2 1.3 136.5 coast of Suffolk, England. The 50% investment in AOWHL indirectly provides ESB with a 12.5% stake in the Galloper project. Share of loss (net) (14.0) - (14.0) Fair value movement on cash flow hedges 1.7 - 1.7 AOWHL is legally separated from the parties and the legal form and the contractual arrangement do not give the parties direct rights to the assets and liabilities of the vehicle. Having assessed the investment in AOWHL/AOWIL ESB have concluded that they have joint control under IFRS 10 and IFRS 11. Accordingly, ESB’s Fair value movement through profit or loss (note 6) 3.1 (12.0) (8.9) 50% investment in AOWHL/AOWIL is equity accounted in line with IAS 28. Repayments - (1.0) (1.0) Impairments (2.8) - (2.8) SIRO Limited (SIRO) Translation differences (1.7) - (1.7) SIRO is an unlisted joint arrangement in which the Group has joint control and a 50% ownership interest. SIRO was founded by the Group with Vodafone Ireland Balance at 31 December 2018 189.8 10.5 200.3 Limited acquiring a 50% stake in November 2014.

Balance at 1 January 2019 189.8 10.5 200.3 Vodafone’s acquisition of shares in SIRO was pursuant to a Joint Venture Arrangement (JVA) concluded between both parties. SIRO is structured as a separate vehicle, is jointly controlled by the Group and Vodafone Ireland Limited, and the Group has a residual interest in the net assets of Additions 242.9 2.9 245.8 the Company. Accordingly, the Group has classified its interest in SIRO as an equity accounted investee. ESB has committed to provide capital funding to SIRO Share of loss (net) (8.3) - (8.3) of €93.0 million, of which €93.0 million has been advanced as a short-term shareholder loan to date. The Group's share of capital commitments at 31 December Fair value movement on cash flow hedges (3.2) - (3.2) 2019 amounts to €37.5 million (2018: €47.1 million). Dividends received (13.7) - (13.7) 02

Translation differences 6.0 - 6.0 The Group has guaranteed 50% of the drawings on a €200.0 million loan facility of SIRO, the amount drawn down at 31 December 2019 is €123.0 million (Group CORPORATE GOVERNANCE Balance at 31 December 2019 413.5 13.4 426.9 share: €61.5 million). (2018: €28.0 million (Group share: €14.0 million)). Tilbury Green Power Holdings Limited (Tilbury) Castlepook Power DAC became a 100% subsidiary undertaking in 2018 from the purchase of the remaining 50% of shares from the joint venture The Group is a 47% partner in Tilbury, a joint arrangement formed with Green Investment Bank (47%) and Scandinavian equipment suppliers BWSC and AET partner Coillte Teoranta. The carrying value of the Group’s investment in Castlepook Power DAC at the date of full acquisition was €nil. The details of (6%). The purpose of this joint arrangement is to construct and operate a waste wood to energy plant in Great Britain. this acquisition are included in the disclosures in section (c) of this note. The amount invested in Tilbury to date amounts to €nil (after impairment). Interest on borrowings receivable from Tilbury amount to €nil (2018: €nil). Loans to Equity accounted investees Tilbury were impaired by €51.9 million at 31 December 2019 (2018: €17.5 million) in relation to outstanding loans and accrued interest. The fair value movement on cash flow hedges for equity accounted investees relates to derivatives held in Aldeburgh Offshore Wind Holdings Limited Tilbury is legally separated from the parties and the legal form and the contractual arrangement do not give the parties direct rights to the assets and liabilities of the and Raheenleagh Power DAC which have been designated as cash flow hedging relationships in these entities. vehicle. Accordingly, the Group has classified its interest in Tilbury as an equity accounted investee as both parties have a residual interest in the net assets of the arrangement. Translation differences for equity accounted investees relate to Aldeburgh Offshore Wind Holdings Limited and NNG Windfarm Holdings Limited as these companies' functional currency is sterling. The Group has entered into a 15-year arrangement with Tilbury to purchase physical power and renewable obligation certificates from the plant. Payments made under this contract are contingent upon actual production.

Raheenleagh Power DAC (Raheenleagh) Interests in equity accounted investees Holding Holding 2019 2018 The Group is a 50% partner in Raheenleagh, a joint arrangement with GR Wind Farms 1 Limited. This joint arrangement operates a 35 MW wind farm in Co. % of share % of share Wicklow. The amount invested in Raheenleagh to date amounts to €3.3 million of which €3.1 million was advanced as equity and €0.2 million as shareholder loans. Name of the company Country capital owned capital owned Raheenleagh is legally separated from the parties and the legal form and the contractual arrangement do not give the parties direct rights to the assets and liabilities of the vehicle. Accordingly, the Group has classified its interest in Raheenleagh as an equity accounted investee as both parties have a residual interest in the net NNG Windfarm Holdings Limited Great Britain 50 0 assets of the arrangement. Aldeburgh Offshore Wind Holdings Limited Great Britain 50 50 SIRO Limited Republic of Ireland 50 50 The Group entered into a 15-year arrangement with Raheenleagh in 2015 to purchase physical power from the wind farm. Payments made under this contract are Tilbury Green Power Holdings Limited Great Britain 47 47 based upon actual production. Raheenleagh Power DAC Republic of Ireland 50 50 03

Raheenleagh reached commercial operation in 2016. FINANCIAL STATEMENTS Oweninny Power DAC Republic of Ireland 50 50 Emerald Bridge Fibres DAC Republic of Ireland 50 50 Oweninny Power DAC (Oweninny) Terra Solar Limited Republic of Ireland 25 25 The Group is a 50% partner in Oweninny, a joint arrangement formed with Bord na Móna. The purpose of this joint arrangement is to develop a 172 MW wind Kingspan ESB Limited Great Britain 50 50 farm located in Bellacorrick, Co. Mayo. As at 31 December 2019 the amount invested in Oweninny as a shareholder loan amounts to €12.2 million. Interest on borrowings receivable to date from Oweninny amounts to €1.4 million (2018: €1.1 million). The Group's share of capital commitments at 31 December 2019 NNG Windfarm Holdings Limited (Neart na Gaoithe) amounts to €7.5 million (2018: €38.6 million). During the year ended 31 December 2019, the Group acquired a 50% stake in NNG Windfarm Holdings Limited (NNGWH), a joint arrangement with EDF Renewables UK Limited. The amount invested to date is €242.7 million. Investment in Oweninny was held at €nil at 31 December 2019 (2018: €nil). Oweninny reached commercial operation in November 2019. NNGWH owns 100% of Neart na Gaoithe Offshore Wind Limited (NNGOW). The purpose of this joint arrangement is to develop a 448 MW wind farm off the east coast of Scotland. The 50% investment in NNGWH indirectly provides ESB with a 50% stake in NNGOW. Emerald Bridge Fibres DAC (EBFD) The Group is a 50% partner in EBFD, a joint arrangement with ZAYO Group. The purpose of this joint arrangement is the development and provision of NNGWH is legally separated from the parties and the legal form and the contractual arrangement do not give the parties direct rights to the assets telecommunication infrastructure between Ireland and the United Kingdom in the form of a subsea fibre optic cable network. The amount invested in EBFD to and liabilities of the vehicle. Having assessed the investment in NNGWH, ESB have concluded that they have joint control under IFRS 10 and IFRS 11. date amounts to €6.2 million of which €2.5 million was advanced as equity and €3.7 million as shareholder loans. Loans and interest on borrowings receivable from Accordingly, ESB’s 50% investment in NNGWH is equity accounted in line with IAS 28. EBFD were impaired by €5.7 million at 31 December 2019 (2018: €5.5 million).

Investment in EBFD was held at €nil at 31 December 2019 (2018: €nil). The Group's share of capital commitments at 31 December 2019 amounts to €352.6 million (2018: €nil). Terra Solar Limited During the year ended 31 December 2016, the Group invested €2.5 million in Terra Solar Limited for a 25% equity shareholding in the company. Terra Solar Limited is a developer of ground mounted solar parks. This investment is classified as an associate and is accounted for using the equity method. ESB's investment in Terra Solar was impaired by €1.8 million at 31 December 2019 (2018: €1.8 million).

Please refer to note 30 for further information regarding transactions with equity accounted investees for the years ended 31 December 2019 and 2018. 156 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 157

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NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS STRATEGY AND PERFORMANCE

15. FINANCIAL ASSET INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS AND EQUITY ACCOUNTED INVESTEES (continued) 15. FINANCIAL ASSET INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS AND EQUITY ACCOUNTED INVESTEES (continued)

The Group’s aggregate share of the non-current assets, current assets, non-current liabilities, current liabilities, income and expenses related to its interests in these joint ventures are as follows: (b) PARENT Equity Aldeburgh accounted Subsidiary NNG Windfarm Offshore Wind Tilbury Green Other equity investees undertakings 1 Summarised income statement Holdings Holdings Power Holdings accounted €m €m Limited Limited SIRO Limited Limited investees4 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Balance at 1 January 2018 100.0 61.8 €m €m €m €m €m €m €m €m €m €m Additions 6.5 - Balance at 31 December 2018 106.5 61.8 Revenue - - - - 15.0 8.0 15.7 - 11.9 9.5 Depreciation - - - - (23.0) (17.4) (9.3) - (2.1) (3.8) Balance at 1 January 2019 106.5 61.8 Interest income / (interest paid) - - (0.4) - (1.9) (0.9) (14.0) - (3.0) (3.3) Balance at 31 December 2019 106.5 61.8 Income tax - - 0.2 0.1 5.5 5.0 - - 0.1 0.1 Total gain / (loss) - - 10.5 7.6 (25.1) (26.0) (61.5) (24.6) 1.9 (0.9) Group share of (loss) / gain - - 5.3 3.8 (12.6) (13.0) (28.9) (11.5) 0.8 0.5

Other adjustments2 - - (1.7) - - - 28.9 8.0 (0.1) (0.3) Group share of fair value movements on cash flow hedges - - (2.7) (1.5) - - - - (0.5) - (c) GROUP ACQUSITIONS Total comprehensive (loss) / gain - - 0.9 2.3 (12.6) (13.0) - (3.5) 0.2 0.2 On 20 December 2018 the Group completed the acquisition of the remaining 50% shareholding in Castlepook Power DAC, an Irish based wind farm. 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 02

Summarised balance sheet €m €m €m €m €m €m €m €m €m €m The acquisition was completed in order to acquire the wind farm following the decision by Coillte Teoranta to dispose of their 50% shareholding. CORPORATE GOVERNANCE

Cash 49.9 - 2.7 - 3.5 27.7 5.5 14.9 14.4 10.8 The details of the assets and liabilities recognised as a result of the acquisition are as follows: Current assets 148.1 - - 9.0 6.4 16.4 8.0 35.5 8.3 3.9 €m Non-current assets 1,092.7 - 43.2 116.6 419.3 312.5 190.7 197.4 202.2 134.2 Current liabilities (16.3) - (3.5) (12.9) (226.6) (255.8) (23.1) (22.3) (21.1) (7.6) Property, plant and equipment 55.6 Non-current liabilities (1,257.1) - - (51.1) (127.4) (0.6) (263.7) (246.6) (223.5) (144.4) Intangible assets 11.6 Cash and cash equivalents - Net assets / (liabilities) 17.3 - 42.4 61.6 75.2 100.2 (82.6) (21.1) (19.7) (3.1) Trade and other receiveables 0.8 Deferred tax liabilities (1.3) Reconciliation of the above amounts to the investment recognised in the consolidated balance sheet. External borrowings (44.9) Financial instruments (1.5) Group equity interest 50% 50% 50% 50% 50% 50% 47% 47% Trade and other payables (2.7) Net assets / (liabilities) 17.3 - 42.4 61.6 75.2 100.2 (82.6) (21.1) (19.7) (3.1) Asset retirement provision (1.1) Group share 8.7 - 21.2 30.8 37.6 50.1 (38.9) (9.9) (10.6) (2.9) Net identifiable assets and liabilities 16.5 Other adjustments3 234.0 - 101.7 98.9 6.0 6.0 38.9 9.9 14.9 6.8 Carrying value of Group's equity interest 242.7 - 122.9 129.7 43.6 56.2 - - 4.3 3.9 Fair value of the Group's previously held 50% interest in Castlepook Power DAC at the acquisition date 4.7 1The numbers included in the above table are based on unaudited management accounts. When audited financial statements become available, any Cash consideration paid - equity 4.7 adjustments are reflected in the following year. Cash consideration paid - repayment of Coillte Teoranta shareholder loan 7.1 Total deemed purchase consideration 16.5 2Where the Group's share of losses of an associate or joint venture equals or exceeds its interest in the associate or joint venture, the Group discontinues recognising its share of further losses unless there is legal or constructive obligation to recognise further losses. Unrecognised losses in The assets and liabilities acquired as set out above were reflected in the Group financial statements at their fair value on acquisition. 2019 include Tilbury Green Power Limited of €28.9 million (cumulative unrecognised losses to date of €38.9 million); Oweninny Power DAC of €nil (cumulative unrecognised losses to date of €1.6 million); Emerald Bridge Fibres DAC of €0.3 million (cumulative unrecognised losses to date of €0.3 In order to account for the acquisition, the Group completed an exercise to fair value its interest in Castlepook Power DAC as at 20 December 2018. million) and Kingspan ESB Limited of €nil (cumulative unrecognised losses to date of €0.3 million). The acquisition gave rise to a €4.7 million gain, which is included within other operating income (see note 6). 03 FINANCIAL STATEMENTS 3Other adjustments represent the difference between the carrying value of the Group's share of the net assets acquired and the investment amount. Purchase consideration - cash outflow €m 4Other equity accounted investees' includes ESB's 50% share in Emerald Bridge Fibres DAC, Kingspan ESB DAC, Raheenleagh Power DAC, Oweninny Outflow of cash to acquire subsidiary, net of cash acquired Power DAC and 25% share in Terra Solar Limited. Cash consideration paid - equity (4.7) Cash consideration paid - repayment of Coillte Teoranta shareholder loan (7.1) Interest in financial assets held at fair value through profit and loss Less balances acquired: The Group owns a venture capital fund, ESB Novusmodus Limited Partnership, in which seed capital is invested into emerging technology entities. Cash and cash equivalents - These investments are managed purely for an investment return and are consequently carried at fair value through the income statement. No financial Net outflow of cash - investing activities (11.8) assets held at fair value through profit or loss are controlled by ESB. The investments comprise of a number of clean energy and new technology companies. These investments have been fair valued at the year end and the movement is reflected in the income statement. The fair value movements in 2018 primarily relate to adjustments to the value of certain investments in the fund. During the year, the Group invested €2.4 million for a 5% share in Oriel Windfarm Limited. This investment is accounted under fair value as a financial asset investment in line with IFRS 9. 158 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 159

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16. INVENTORIES GROUP PARENT 17. TRADE AND OTHER RECEIVABLES (continued) 2019 2018 2019 2018 €m €m €m €m The general approach is applied to the Group's shareholder loans advanced to equity accounted investees. Under the general approach, an entity must determine whether the financial asset is in one of three stages in order to determine the amount of ECL to recognise; Materials 33.4 39.8 12.7 19.6 Fuel 48.8 59.5 41.3 52.0 Stage 1 is where credit risk has not increased significantly since initial recognition. For financial assets in stage 1, entities are required to recognise 12 Construction work in progress 68.8 34.7 - - month ECL and recognise interest income on a gross basis – this means that interest will be calculated on the gross carrying amount of the financial Total 151.0 134.0 54.0 71.6 asset before adjusting for ECL.

Inventories consumed during the year ended 31 December 2019 totalled €57.6 million (2018: €95.7 million). Provision for impairments recognised Stage 2 is where credit risk has increased significantly since initial recognition. When a financial asset transfers to stage 2 entities are required to during the year was €9.2 million (2018: €3.2 million). recognise lifetime ECL but interest income will continue to be recognised on a gross basis.

Construction work in progress includes property assets which are being constructed for resale and stated at the lower of cost and net realisable value. Stage 3 is where the financial asset is credit impaired. This is effectively the point at which there has been an incurred loss event. For financial assets in stage 3, entities will continue to recognise lifetime ECL but they will now recognise interest income on a net basis. This means that interest income will be calculated based on the gross carrying amount of the financial asset less ECL. 17. TRADE AND OTHER RECEIVABLES The general approach applies to all loans and receivables not eligible for application of the simplified approach, which for the Group are primarily loans to equity accounted investees and for Parent also includes amounts due from subsidiary undertakings. Assessment of the probability of default for loans GROUP PARENT to equity accounted investees is included below. For further details of these loans see note 15. 2019 2018 2019 2018 €m €m €m €m The maximum credit exposure of the Group at 31 December 2019 and 31 December 2018 is set out on the following tables. In the case of the Parent company balances stated in the following tables also exclude amounts due from subsidiary undertakings of €3,065.3 million (2018: €2,937.4 million). Current receivables: 02 Retail electricity receivables - billed 70.6 58.6 41.6 45.3 CORPORATE GOVERNANCE Retail electricity receivables - unbilled 212.8 200.7 137.2 132.7 Simplified approach - Expected Credit Losses Total retail electricity receivables 283.4 259.3 178.8 178.0 2019* I-SEM / SEM pool related receivables 26.0 14.8 21.6 10.3 GROUP PARENT Use of System receivables (including unbilled) 235.0 217.4 48.4 44.1 Gross amount Loss Net amount Gross amount Loss Net amount Other electricity receivables 27.8 13.5 - 0.9 receivable allowance receivable receivable allowance receivable Total electricity receivables 572.2 505.0 248.8 233.3 €m €m €m €m €m €m Trade receivables - non-electricity 286.9 111.8 243.8 78.5 Amounts due from equity accounted investees 111.8 141.4 97.2 96.4 Not past due receivables 547.9 (4.3) 543.6 229.5 (2.8) 226.7 Other receivables 58.8 94.5 21.7 15.5 Past due < 30 days 321.5 (2.7) 318.8 265.9 (2.3) 263.6 Amounts due from subsidiary undertakings - - 3,065.3 2,937.4 Past due 30 - 120 days 22.4 (5.0) 17.4 11.3 (4.1) 7.2 Prepayments 75.4 89.6 14.4 37.5 Past due > 120 days 37.7 (11.0) 26.7 19.2 (9.0) 10.2 Total 1,105.1 942.3 3,691.2 3,398.6 Past due by more than one year 29.4 (18.0) 11.4 19.4 (12.8) 6.6 Total 958.9 (41.0) 917.9 545.3 (31.0) 514.3 GROUP PARENT 2019 2018 2019 2018 €m €m €m €m 2018* Non-current receivables: GROUP PARENT Trade receivables - non-electricity - - - - Gross amount Loss Net amount Gross amount Loss Net amount Amounts due from equity accounted investees 12.4 47.2 - - receivable allowance receivable receivable allowance receivable Total non-current receivables 12.4 47.2 - - €m €m €m €m €m €m

Total receivables 1,117.5 989.5 3,691.2 3,398.6 Not past due remaining receivables 534.4 (3.2) 531.2 212.9 (2.4) 210.5 03 Past due < 30 days 152.8 (3.0) 149.8 94.3 (2.8) 91.5 FINANCIAL STATEMENTS Past due 30 - 120 days 21.6 (5.4) 16.2 13.9 (4.6) 9.3 Wholesale and retail credit risk Past due > 120 days 28.2 (11.2) 17.0 23.4 (10.6) 12.8 Trade and other receivables can be divided into final retail electricity customers (billed and unbilled), I-SEM pool related receivables, Use of System Past due by more than one year 24.8 (17.0) 7.8 15.3 (12.1) 3.2 receivables, other (non-electricity) receivables, equity accounted investees and amounts due from subsidiary undertakings. Total 761.8 (39.8) 722.0 359.8 (32.5) 327.3

Expected credit loss allowance *Included in the above are amounts due from equity accounted investees at 31 December 2019 of €8.3 million (2018: €10.7 million) in respect of Under IFRS 9 an expected credit loss (ECL) impairment model is in place for the calculation of impairment loss allowances. Under this impairment normal trading activities. model, it is assumed that all receivables carry a risk of default. This impairment model is used to calculate the probability of default at a range of possible outcomes, weighted by the probability of their occurrence. These ECLs are measured under the general approach or simplified approach.

The simplified approach is applied to ESB's trade and other receivables within the scope of IFRS 15. Under the simplified approach, an entity will recognise a loss based on the lifetime ECLs. It allows an entity to use a provision matrix for calculating the ECLs. This matrix considers the historical default rates over the expected life of the trade receivable and is adjusted for forward-looking estimates. 531.2

160 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 161

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17. TRADE AND OTHER RECEIVABLES (continued) 17. TRADE AND OTHER RECEIVABLES (continued)

General approach - Expected Credit Losses Amounts due from equity accounted investees Amounts due from equity accounted investees include shareholder loans, interest on these loans and trade receivable balances. Trade receivable GROUP PARENT balances from equity accounted investees are assessed for probability of default using the simplified approach under IFRS 9. All other balances due 2019 from equity accounted investees are assessed for probability of default using the general approach. In applying the general approach, the Group has Gross amount Loss Net amount Gross amount Loss Net amount used judgement in making assumptions and selecting the inputs to the expected credit loss calculation based on market conditions as well as forward receivable allowance receivable receivable allowance receivable looking estimates at the end of the reporting period. The Group has no purchased credit impaired loans. €m €m €m €m €m €m Stage 1 - 12 Month ECL (not credit impaired) 124.2 - 124.2 97.2 - 97.2 Following the assessment of the carrying value of all ESB's shareholder loans advanced to equity accounted investees, it was determined that there Stage 2 - Lifetime ECL (not credit impaired) ------was an increase in the credit risk of loans to one of ESB's equity accounted investees since initial recognition; Tilbury Green Power Holdings Limited Stage 3 - Lifetime ECL (credit impaired) 51.9 (51.9) - - - - (TGPHL). The assessment on the amount due from TGPHL was based on the expected available cash flows, and discounted cash flows at the effective Total 176.1 (51.9) 124.2 97.2 - 97.2 rate of interest on this shareholder loan, in line with the requirements of IFRS 9. As a result, this loan was accounted for as a stage 3 (credit impaired) asset and expected credit losses of €34.4 million (2018: €17.5 million) in relation to TGPHL, and €nil (2018: €1.6 million) in relation to EBFD are recognised in the income statement. Both TGPHL and EBFD shareholder loans are fully impaired at 31 December 2019. GROUP PARENT 2018 The remaining shareholder loans to equity accounted investees are assessed as stage 1 (not credit impaired) financial assets. The 12 month expected Gross amount Loss Net amount Gross amount Loss Net amount credit loss approach has been applied to the stage 1 loans consisting of analysis on both historical and forward looking qualitative and quantitative receivable allowance receivable receivable allowance receivable information to determine the credit risk. These loans are deemed to be of low credit risk given no indications of an increase in credit risk since initial €m €m €m €m €m €m recognition. As a result, no expected credit loss has been recognised in relation to these loans. The total amount of undiscounted expected credit losses Stage 1 - 12 Month ECL (not credit impaired) 144.6 - 144.6 96.4 - 96.4 at initial recognition on financial assets that were initially purchased or originated credit-impaired during the year ended 31 December 2019 is €nil Stage 2 - Lifetime ECL (not credit impaired) ------(2018: €nil). Stage 3 - Lifetime ECL (credit impaired) 50.8 (17.5) 33.3 - - - 02 Total 195.4 (17.5) 177.9 96.4 - 96.4 Retail electricity receivables CORPORATE GOVERNANCE Retail electricity receivables which includes electricity and gas customers relate to both residential and business customers. The credit risk on electricity accounts is managed through the ongoing monitoring of debtor days, putting in place appropriate collateral and a collection policy based on the credit worthiness, size and duration of debt. The concentration of risk in Customer Solutions is in relation to retail electricity accounts that have closed in GROUP PARENT arrears. In addition, given the continuing increase in competition, certain customers may switch suppliers before they have settled their outstanding Expected Credit Losses Reconciliation 2019 2018 2019 2018 balances. These accounts are managed within the Group's debt collection policy by a combination of internal debt follow-up, the use of debt collection €m €m €m €m agencies and legal action where necessary including the obtaining of publication of judgements. Simplified approach 917.9 722.0 514.3 327.3 General approach 124.2 177.9 97.2 96.4 Providing for future expected losses in relation to retail electricity receivables, including both billed and unbilled, is based on analysis of recent Prepayments1 75.4 89.6 14.4 37.5 debt performance and an evaluation of the impact of economic conditions and particular industry issues. An additional provision may be made on a Amounts due from subsidary undertakings - - 3,065.3 2,937.4 portfolio basis to cover additional anticipated losses. Collateral is held in the form of security deposits on new customer accounts not on direct debit Total 1,117.5 989.5 3,691.2 3,398.6 arrangements.

1Prepayments are excluded from the analysis as no credit exposure is perceived in relation to this balance. Controls around electricity receivables are focused on the full recovery of amounts invoiced. Electricity receivables to the value of €41.0 million (2018: €39.8 million) were provided for at year end. The single largest customer amount written off during the year was €31,000 (2018: €48,000) relating PARENT to a customer that went into liquidation. Retail electricity receivables arise largely in the Republic of Ireland (ROI), with 12% (2018: 10%) relating to Amounts due from subsidiary undertakings Northern Ireland (NI) revenue and 2% (2018: 1%) relating to Great Britain (GB) revenue. At 31 December 2019, the Parent company had balances receivable of €3,065.3 million (2018: €2,937.4 million) from its subsidiaries. These receivables mainly relate to management services and loans to subsidiaries as well as electricity charges including Use of System charges. Total Unbilled electricity receivables represent estimates of consumption not yet invoiced. Credit risk in relation to unbilled electricity is managed in line with provision in respect of amounts due from subsidiary undertakings at 31 December 2019 is €396.5 million (2018: €365.3 million). billed electricity receivables as discussed above.

The impairment loss recognised in the Parent company in respect of amounts due from subsidiary undertakings has been calculated using expected Integrated Single Electricity Market (I-SEM) receivables credit loss model as required by IFRS 9. In determining the impairment loss, amounts due from subsidiaries were classified as either amounts repayable Credit risk in relation to the I-SEM related receivables is managed by the Energy Trading and Risk functions (ET&R) within those business units on demand, low credit risk receivables or amounts for which there has been a substantial increase in credit risk since initial recognition. In determining engaged in electricity trading through the I-SEM. Each of these functions is ring-fenced from each other and segregation of responsibilities between the 03 the expected credit loss (including probability of default and loss given default), regard was given to the historic performance of the relevant loan as back office, middle office and front office functions is maintained in each case. The Trading back office function is responsible for invoicing customers FINANCIAL STATEMENTS well as forward looking information for the relevant subsidiary including detailed discounted cash flow forecasts. For repayable on demand loans where and maintaining all accounts receivable. Payment terms for all trading balances relating to each of the I-SEM revenue streams are governed by the the loan could not be repaid at the reporting date, expected credit losses were calculated by considering the likely recovery strategies of the Parent I-SEM settlement calendar. company, including consideration of ‘repay over time’ strategies. For loans with a substantial increase in credit risk, consideration was given to the future activities and cash flows of the subsidiary and life time expected credit losses were recognised accordingly where appropriate. Use of System receivables Use of System income in ROI comprises of Distribution Use of System (DUoS) income, Transmission Use of System (TUoS) income and Operation Movement in the expected credit loss of trade and other receivables and Maintenance (O&M) charges for generators connected to the Distribution System. The credit terms for DUoS are 10 business days and there are The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Group uses judgement in making currently 51 suppliers. TUoS is collected by EirGrid, and the Transmission Asset Owner (TAO) allowed revenue is invoiced to EirGrid over 12 monthly these assumptions and selecting the inputs to the expected credit loss calculations, based on the Group’s past history, existing market conditions as well instalments with each invoice due 36 days after month end. Invoices were issued in respect of 208 generators during 2019 for O&M charges, credit as forward looking estimates at the end of each reporting period. The movement in the expected credit loss in respect of trade receivables during the terms for O&M charges are 30 days. Generators are invoiced on a staged basis, as approved by CRU, with 65% of the capital contribution recouped in year was as follows: advance of construction, 90% in advance of energisation and the balance post energisation. Included in amounts due from subsidiary undertakings in Parent are amounts billed and collected through ESB Networks DAC, a subsidiary of the Parent in respect of Use of System receivables €233.9 million GROUP PARENT (2018: €222.9 million). 2019 2018 2019 2018 €m €m €m €m The credit risk in relation to DUoS is managed by the invocation of section 7 of the DUoS Framework Agreement approved by CRU on 1 August Balance at 1 January 39.8 38.9 32.4 32.0 2002. This section provides for the provision of security by each supplier. Before a supplier can register as a customer they must sign up to the DUoS Impairment loss recognised (net) 11.8 10.4 8.3 9.8 agreement. All suppliers must provide security in accordance with section 7.2. The DUoS credit risk is also managed through the timely collection Bad debts recovered (0.7) - - - procedures in place which are in line with what is outlined in section 6 of the DUoS Framework Agreement and the monitoring of debtor days to keep Provision utilised (9.9) (9.5) (9.7) (9.4) these to a minimum. In the event of a supplier defaulting in line with section 7 of the DUoS Framework Agreement there is security cover in place for all Balance at 31 December 41.0 39.8 31.0 32.4 suppliers. 162 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 163

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17. TRADE AND OTHER RECEIVABLES (continued) 19. CHANGES IN EQUITY (continued)

Use of System receivables (continued) (ii) Capital redemption reserve TUoS credit risk is managed through the timely collection procedures in place and the monitoring of debtor days to keep these to a minimum. In May 2015, the ESB Board approved an ESOP market liquidity proposal. The objective of the proposal is to improve liquidity in the Employee Share Procedures for the payment by EirGrid of TUoS income due to ESB Networks DAC as TAO are governed by the Infrastructure Agreement between Ownership Plan (ESOP) market whereby the ESOP Trustee is committing to spend €25.0 million of funds to acquire capital stock in the ESOP internal EirGrid and ESB. This is not a normal bilateral contract freely entered into by the will of the parties, but an arrangement required by legislation and many market. ESB will match the expenditure committed by the ESOP Trustee up to €25.0 million from 2014. of whose terms are specified in that legislation. Accordingly, the credit risk in relation to TUoS receivables is considered to be low. The amount due in respect of TUoS income at 31 December 2019 was €48.4 million (2018: €44.1 million), which is the largest Use of System receivable balance in ROI. During 2019, ESB continued to repurchase ESOP capital stock and consequently the capital redemption reserve increased due to the purchase and cancellation of own share capital €4.4 million (2018: €4.4 million) for a consideration of €4.6 million (2018: €4.9 million) and represents the nominal In respect of the Networks business in NI, revenue is derived principally from charges for use of the distribution system, PSO charges levied on amount of the share capital cancelled (note 32). electricity suppliers and charges for transmission services levied on SONI (System Operator for Northern Ireland). Credit risk in respect of Use of System receivables from electricity suppliers is mitigated by security received in the form of cash deposits, letters of credit or Parent company (iii) Cash flow hedging and other reserves – Group and Parent guarantees. With the exception of public bodies, payments in relation to new connections or alterations are paid for in advance of the work being carried The hedging reserve primarily represents the fair value of derivatives which are part of effective cash flow hedging relationships at year end. As the out. Normal credit terms and debtor days in respect of trade receivables from electricity suppliers are less than 30 days. The largest Use of System derivatives are held for hedging purposes as defined by IFRS 9 and designated as hedges, their fair value movements are retained in OCI instead of electricity receivable in NI at 31 December 2019 is €10.7 million (2018: €9.4 million). being charged to the income statement during the year and will be charged to income in the same period as the corresponding transaction.

Other electricity receivables (iv) Other reserves Other electricity receivables include amounts in relation to ancillary services and amounts in relation to electricity trading in the UK market which is not Group other reserves include the following: included in the I-SEM. • Non-distributable reserves of (€5.0) million which was created on the sale of the Group's share in Ocean Communications Limited in 2001; and • Actuarial movements on the NIE Networks defined benefit scheme, net of the related deferred tax adjustments, totalling (€219.5) million (2018: Trade receivables - non-electricity (€205.0) million); and Trade receivables (non-electricity) relate to balances due in respect of the Group's non-electricity trading and other operations. It includes amounts due • ESOP repurchase provision of (€7.5) million (2018: (€11.8) million) which relates to the amount that ESB has committed to date to repurchase from in respect of the Group's telecommunications, consultancy, facility management and other ancillary operations. Credit risk with regard to these balances the ESOP internal market. 02 is not considered to be significant. The largest unsecured single balance included within this category at 31 December 2019 is an amount of €11.8 CORPORATE GOVERNANCE million (2018: €3.1 million) due from an external company. Included within these categories are collateral amounts pledged by the Group to bilateral Parent other reserves include the following: parties and clearing banks for exchange trading of gas, carbon and power of €195.9 million (2018: €115.6 million). The amounts pledged cover initial ESOP repurchase provision of (€7.5) million (2018: (€11.8) million) which relates to the amount that ESB has committed to date to repurchase margin and daily mark to market movements which are returned to ESB prior to or on settlement. from the ESOP internal market.

(v) Non-controlling interest - Group 18. CASH AND CASH EQUIVALENTS Non-controlling interests at 31 December 2019 relate to the minority shareholdings in Crockahenny Wind Farm DAC, Mountain Lodge Power DAC, Airvolution Energy Limited and wind farms associated with Coriolis Energy. GROUP PARENT 2019 2018 2019 2018 €m €m €m €m Dividends 2019 2018 Cash at bank and in hand 125.1 229.1 58.2 122.3 GROUP €m €m Dividends of capital stock: Total dividend paid 2.18 (2018: 1.75) cents per capital stock unit 42.9 34.6 19. CHANGES IN EQUITY Dividend to non-controlling interest - 0.3 Total 42.9 34.9 (i) Capital stock There are 1,966,381,855 units of capital stock in issue at a par value of €1.00 each (2018: 1,970,781,855 units) 2019 2018 2019 2018 PARENT €m €m €m €m Dividends of capital stock: Total dividend paid 2.18 cent (2018: 1.75) cents per capital stock unit 42.9 34.6 Comprised as: Total 42.9 34.6 03

Stock issued from converted reserves 1,880.9 1,880.9 FINANCIAL STATEMENTS Stock issued for subsciption by ESOT 85.5 89.9 Total dividends paid during 2019 amounted to €42.9 million and include a final dividend of €4.9 million (0.25 cents per unit of stock) in respect of 2018 Total 1,966.4 1,970.8 and an interim dividend, declared and paid, of €38.0 million (1.94 cents per unit of stock).

In accordance with the Electricity (Supply) (Amendment) Act 2001, on 30 December 2001, the equity of ESB was converted to capital stock which was The Board is now recommending that a final dividend of 2.53 cent per unit of capital stock, or €49.8 million in aggregate, in accordance with the issued to the Department of Finance. At the same time, ESB ESOP Trustee Limited, established to act as Trustee for an ESB employee shareholding dividend policy of 40% of adjusted profit after tax agreed with the government. scheme, subscribed for 5% of the stock. The principal rights attaching to each unit of capital stock include the rights to exercise a vote at annual meetings, entitlements to dividends from profits when declared and the rights to proportionate participation in a surplus on winding up.

The Energy (Miscellaneous Provisions) Act 2006 amended Section 2 of the 2001 Act and as a result 10.1% of issued capital stock in ESB now stands vested in the Minister for Communications, Climate Action and Environment, with the Minister for Finance retaining 85.6% of ESB's capital stock and the ESOP retaining 4.3% of the stock at that date.

The Ministers and Secretaries Amendment Act 2011, which came into force on 6 July 2011, establishes the office of the Minister for Public Expenditure and Reform. The 2011 Act has the effect of transferring ownership of the stock previously held by the Minister for Finance in ESB to the Minister for Public Expenditure and Reform as and from 6 July 2011. 164 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 165

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20. TAXATION 20. TAXATION (continued)

2019 2018 (b) Deferred tax assets and liabilities (a) Income tax expense €m €m 2019 2018 Current tax expense GROUP €m €m Current tax 62.0 34.0 Prior year (over) / under provision (2.4) 2.6 Deferred tax assets Value of tax losses surrendered by equity accounted investees 3.6 2.6 Property, plant and equipment and intangible assets 6.7 4.5 63.2 39.2 Liability – NIE Networks pension scheme 19.8 18.9 Deferred tax expense Liability – ESB pension scheme 49.1 49.4 Origination and reversal of temporary differences (3.6) (14.8) Borrowings 5.4 7.2 Prior year over provision (0.2) (6.3) Provisions 1.0 2.5 (3.8) (21.1) Tax losses forward 7.9 9.7 Total 59.4 18.1 Derivative financial instruments 90.8 84.1 Total deferred tax assets 180.7 176.3

2019 2018 Reconciliation of effective tax rate €m €m Deferred tax liabilities Property, plant and equipment and intangible assets 611.3 623.4 Profit before tax 397.2 78.3 Provisions 7.2 7.2 Plus: after tax share of equity accounted investees 8.3 14.0 Derivative financial instruments 26.0 16.3 02 Profit before tax (excluding equity accounted investees loss) 405.5 92.3 Capital gains tax 1.3 1.2 Total deferred tax liabilities 645.8 648.1 CORPORATE GOVERNANCE Taxed at 12.5% 50.7 11.5 Net deferred tax liability (465.1) (471.8)

Expenses not deductible 6.9 9.5 The movement in temporary differences for the Group were as follows: Higher tax on chargeable gains 2.2 0.7 Income taxed at higher rate of corporation tax 1.5 0.3 Higher tax rates on overseas profits 0.7 (0.2) Prior year over provisions (2.6) (3.7) Income tax expense 59.4 18.1 2019 Balance at Recognised Recognised Translation Balance at 31 1 January in income in OCI differences December €m €m €m €m €m

ASSETS Property, plant and equipment and intangible assets 4.5 2.2 - - 6.7 Liability – NIE Networks pension scheme 18.9 (2.1) 3.0 - 19.8 Liability – ESB pension scheme 49.4 (0.3) - - 49.1 Borrowings 7.2 (1.8) - - 5.4 Provisions 2.5 (1.5) - - 1.0 Tax losses forward 9.7 (1.8) - - 7.9 Derivative financial instruments 84.1 5.3 2.5 (1.1) 90.8 Total deferred tax assets 176.3 - 5.5 (1.1) 180.7

LIABILITIES Property, plant and equipment and intangible assets 623.4 (13.7) - 1.6 611.3 03 Provisions 7.2 - - - 7.2 FINANCIAL STATEMENTS Derivative financial instruments 16.3 9.8 (2.5) 2.4 26.0 Capital gains tax 1.2 0.1 - - 1.3 Total deferred tax liabilities 648.1 (3.8) (2.5) 4.0 645.8 Net deferred tax (liability) / asset (471.8) 3.8 8.0 (5.1) (465.1) 166 ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future ESB Annual Report 2019 167

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NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS STRATEGY AND PERFORMANCE

20. TAXATION (continued) 20. TAXATION (continued)

(b) Deferred tax assets and liabilities (continued) (b) Deferred tax assets and liabilities (continued) 2018 Acquisition of Balance at Recognised in Recognised Translation Castlepook Balance at PARENT (continued) 1 January Income in OCI differences Power DAC 31 December €m €m €m €m €m €m The movement in temporary differences for the Parent were as follows:

ASSETS Property, plant and equipment and intangible assets 2.2 2.3 - - - 4.5 2019 Balance at Recognised Recognised Balance at Liability – NIE Networks pension scheme 24.3 (2.2) (3.2) - - 18.9 1 January in income in OCI 31 December Liability – ESB pension scheme 49.3 0.1 - - - 49.4 €m €m €m €m Borrowings 9.0 (1.8) - - - 7.2 Provisions 2.0 0.5 - - - 2.5 ASSETS Tax losses forward 6.2 3.5 - - - 9.7 Liability – ESB pension scheme 49.4 (0.3) - 49.1 Derivative financial instruments 94.7 (4.1) (6.7) 0.2 - 84.1 Borrowings 7.2 (1.8) - 5.4 Total deferred tax assets 187.7 (1.7) (9.9) 0.2 - 176.3 Provisions 18.0 (0.1) - 17.9 Derivative financial instruments 6.2 - (0.6) 5.6 Total deferred tax assets 80.8 (2.2) (0.6) 78.0 LIABILITIES Property, plant and equipment and intangible assets 646.0 (23.5) - (0.3) 1.2 623.4 LIABILITIES Provisions 6.7 0.5 - - - 7.2 Property, plant and equipment 429.1 (5.2) - 423.9 02

Derivative financial instruments 24.0 0.3 (7.7) (0.3) - 16.3 Derivative financial instruments 4.2 - (0.3) 3.9 CORPORATE GOVERNANCE Capital gains tax 1.2 - - - - 1.2 Capital gains tax 1.2 - - 1.2 Total deferred tax liabilities 677.9 (22.7) (7.7) (0.6) 1.2 648.1 Total deferred tax liabilities 434.5 (5.2) (0.3) 429.0 Net deferred tax (liability) / asset (490.2) 21.0 (2.2) 0.8 (1.2) (471.8) Net deferred tax (liability) / asset (353.7) 3.0 (0.3) (351.0) There is no expiry date to when tax losses in the Group can be utilised.

2018 Deferred tax has not been provided for in relation to unremitted reserves of the Group's overseas subsidiaries for two reasons; either there is no Balance at Recognised Recognised Balance at 1 January in income in OCI 31 December commitment for these reserves to be distributed in the foreseeable future or it has been established that no tax would arise on the remittance. Deferred €m €m €m €m tax has not been provided for in relation to unremitted reserves of the Group's overseas joint ventures as the Group has the ability to control the repatriation of these reserves to the Republic of Ireland. Cumulative unremitted reserves of overseas subsidiaries and joint ventures totalled €673.4 million (2018: €648.5 million) as at 31 December 2019. ASSETS Liability – ESB pension scheme 49.3 0.1 - 49.4 Borrowings 9.0 (1.8) - 7.2 Provisions 17.9 0.1 - 18.0 Derivative financial instruments 7.4 - (1.2) 6.2 Total deferred tax assets 83.6 (1.6) (1.2) 80.8

LIABILITIES 2019 2018 Property, plant and equipment 439.3 (10.2) - 429.1 PARENT €m €m Derivative financial instruments 3.7 - 0.5 4.2 Capital gains tax 1.2 - - 1.2 Deferred tax assets Total deferred tax liabilities 444.2 (10.2) 0.5 434.5 Liability - ESB pension scheme 49.1 49.4 Net deferred tax (liability) / asset (360.6) 8.6 (1.7) (353.7) Borrowings 5.4 7.2 Provisions 17.9 18.0 03 Derivative financial instruments 5.6 6.2 FINANCIAL STATEMENTS Total deferred tax assets 78.0 80.8

Deferred tax liabilities Property, plant and equipment 424.0 429.1 Derivative financial instruments 3.8 4.2 Capital gains tax 1.2 1.2 Total deferred tax liabilities 429.0 434.5 Net deferred tax liability (351.0) (353.7) 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS - €m 32.3 32.0 (0.3) (0.2) 2018 1.6 1.2 €m 32.0 22.4 2019 (11.2) 169 2019 Report Annual ESB BORROWINGS AND OTHER DEBT (continued) AND OTHER BORROWINGS finance debt long-term project Non-recourse . outstanding debt of €nil (2018: €44.9 million) December 2018 and at 31 December 2019 has became a 100% subsidiary in DAC Castlepook Power in Great Britain (GB). is fully in relation to a wind farm The remainder of this debt Sterling Bonds Non-recourse NIE Networks sterling bond with a fixed coupon rate of 6.375%. Limited issued a Stg£400.0 million 15 year In June 2011, NIE Networks 2.5%. 7 year sterling bond with a fixed coupon rate of Networks Limited issued a Stg£350.0 million In September 2018, NIE Long-term bank borrowings while the remainder is fixed. of floating rate debt borrowed on a bilateral basis, include €233 million (2018: €267 million) Long-term bank borrowings is available to the bank finance as required up to February 2022 with a syndicate of 14 banks to draw down credit facility A €1.44 billion revolving million). down as at 31 December 2019 (2018: €70.0 Group. €70.0 million is drawn renewable connections to the electricity network in the southwest of Investment Bank (EIB) to support with the European A €200.0 million facility 2019 (2018: €200.0 million).Ireland was drawn down in full at 31 December Private placement borrowings were were issued, to a range of institutional investors, in December 2003. These fixed rate notes The first private placement senior unsecured notes 2023. 2019 comprise US$237.5 million, maturing in 2023, and Stg£10.0 million, maturing in issued in US dollars and sterling and at 31 December at notes were issued in June 2009. These notes were issued in US dollars, sterling and euro and The second private placement senior unsecured as maturing in 2021. USD$226.0 million and €40.0 million of this debt was repaid in June 2019 31 December 2019 comprise Stg£50.0 million, to maintain certain interest cover and asset have conditions which require ESB other facilities scheduled. The private placement debt and certain with all the covenant requirements associated with the private placement debt and other is fully in compliance covenants. At 31 December 2019 ESB facilities. Hedge of net investment in foreign operations bank loans, which have been designated as a hedge of the Group’s investment in a sterling Included in borrowings above are sterling denominated as outlined below: denominated subsidiary in the United Kingdom, a hedge of Group's investment in subsidiary Sterling denominated loans designated as Value at 1 January Value Gain / (loss) on translation to Euro at 31 December Value Repayments in year Gain / (loss) on translation of intragroup euro loan to subsidiary (taken to OCI) NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 21. 2. 3. 4. 5. 1.8 €m €m €m 85.9 85.9 58.8 Total 2018 2018 2018 520.4 606.3 220.0 406.3 712.2 307.4 305.4 214.2 152.9 237.4 606.3 835.0 653.4 305.9 3,212.7 3,825.5 4,537.7 5,144.0 2,684.6 4,537.7 Coupon 6.500% 3.494% 2.125% 1.875% 1.750% 2.125% 2.000% 1.125% - 1.9 €m €m €m 88.7 75.7 57.6 12.7 2019 2019 2019 Total 392.0 586.1 480.7 216.2 294.2 553.7 323.2 155.6 480.7 878.5 573.4 314.0 3,554.3 4,165.6 4,751.7 5,232.4 4,751.7 2,973.1 Tenor 10 years 10 years 12 years 15 years 12 years 15 years 25 years 11 years - - - 1.9 1.9 2.0 6.5 4.2 €m 12.7 878.5 878.5 891.2 893.1 borrowings Non-recourse 1 2 4 5 1 2 3 4 5 €m Ref Ref 86.8 73.7 57.6 392.0 478.8 209.7 290.0 573.4 553.7 2,675.8 3,287.1 3,860.5 4,339.3 Recourse borrowings Issue Date March 2010 November 2013 June 2015 June 2016 January 2017 November 2018 April 2019 June 2019 Value Stg£275.0 million €300.0 million Euro €500.0 million Euro €600.0 million Euro €500.0 million Euro €500.0 million Euro €100.0 million Euro €500.0 million Euro BORROWINGS AND OTHER DEBT AND OTHER BORROWINGS GROUP Current borrowings - Repayable by instalments - Repayable other than by instalments - Repayable other than Total current borrowings Total Non-current borrowings - Repayable by instalments two years Between one and After five years - Repayable other than by instalments Between one and two years Between two and five years Between two and five years Between two and After five years Total non-current borrowings non-current Total Total borrowings outstanding borrowings Total ESB was rated A- by Standard & Poor's (outlook stable) and A3 (equivalent to A-) from Moody's (outlook stable) during 2019. was rated A- by Standard & Poor's ESB See section (b) for details of applicable interest rates. See section (b) for details of applicable interest Current borrowings by facility Eurobonds ESB Non-recourse long-term project finance debt Long-term bank borrowings Private placement borrowings Non-current borrowings by facility Eurobonds ESB Non-recourse long-term project finance debt Non-recourse NIE Networks Sterling Bonds Long-term bank borrowings Private placement borrowings against specific assets, none of the borrowings are With the exception of borrowings relating to non-recourse project finance debt, which is secured secured against the Group assets. Issuer 1. ESB Eurobonds included in borrowings at 31 December 2019: Eurobonds The table below provides details of ESB ESB Finance DAC ESB Finance DAC ESB Finance DAC ESB Finance DAC ESB Finance DAC ESB Finance DAC ESB Finance DAC ESB Finance DAC ESB ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 168 NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 21.

03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS - €m €m years years 956.2 996.1 882.7 4,086.5 3,355.2 3,090.4 4,311.4 2,965.8 . The fair . The fair More than 5 More than 5 . 6.5 €m 255.2 508.2 €m 884.3 120.3 764.0 128.0 2 - 5 years 1,016.4 1,144.4 171 2019 Report Annual ESB 2 - 5 years 2.0 €m 58.8 72.5 1 - 2 years €m 40.4 42.5 541.6 501.2 270.4 227.9 - 1.9 €m 1 - 2 years 478.8 Within 1 year €m 41.2 42.6 776.6 735.4 643.4 600.8 €m Total 314.0 893.1 4,025.3 Within 1 year % 6.29 4.28 3.08 €m 6,289.0 1,198.0 5,091.0 1,169.3 5,200.3 6,369.6 Effective outflows / interest rate (inflows) - net Contractual cash €m 895.6 893.1 5,144.0 4,248.4 4,339.3 5,232.4 Carrying amount Interest rate risk management 2019 and the target is to have a significant majority of its debt at fixed (or inflation linked) interest The Group’s interest rate policy was updated in directly at fixed interest rates or via with a minimum of 60% fixed (or inflation linked) at all times. This is achieved either by borrowing rate to maturity, of the Group’s debt was fixed to maturity or inflation linked (31 December 2018: 94.8%) interest rate swaps. At 31 December 2019, 97.2% 22. value of interest rate swaps is disclosed in note the balance sheet date taking into account interest rates at the following table indicates their effective In respect of interest-bearing financial liabilities, and cross currency swaps: of interest rate swaps the effect Total borrowings Total Non-recourse borrowings 31 December 2018 Recourse borrowings Private placement borrowings (fixed interest rate) Non-recourse borrowings (fixed interest rate) Other long-term borrowings (fixed and variable interest rate) million (31 December 2018: €267 million) Included within other long-term borrowings in this analysis are floating rate liabilities of €233 interest rate on the private placement borrowings has been fixed through the use of cross currency swaps and interest rate swaps. The The effective rate of non-recourse sterling borrowings of £12.8 million has been fixed using interest rate swaps. In the absence of these interest rate effective would be 1.68%, in line with prevailing interest rates in swaps, the floating rate on the underlying sterling and euro borrowings at 31 December 2019 equivalent nominal interest rate levels. those monetary areas on borrowings of a similar duration. Inflation linked swaps are included at Total borrowings Total Non-recourse borrowings 31 December 2019 Recourse borrowings BORROWINGS AND OTHER DEBT (continued) AND OTHER BORROWINGS (continued) liquidity management Funding and Borrowings with a carrying including the associated interest payments. out the contractual maturities of Group borrowings, The following table sets balances below. (2018: €3,794.4 million) are included in the Group value of €4,189.4 million NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS (b) 21. (a) - - - - - €m €m 84.1 85.2 Total 2018 2018 306.2 390.3 216.3 354.3 655.8 303.5 303.5 959.3 1,349.6 1,370.0 1,370.0 - - - acilities are as €m - 2019 and Parent 1,370.0 1,370.0 €m 86.8 68.9 73.7 57.6 2019 Total 209.7 256.3 313.9 155.7 290.0 573.4 887.3 1,043.0 Undrawn Facility - Group RECOURSE BORROWINGS RECOURSE €m 85.2 2018 354.3 519.8 390.3 1,349.6 €m 2019 290.0 466.0 131.3 155.7 1,043.0 Drawn Debt - Parent €m 2018 525.4 393.3 606.3 5,144.0 3,619.0 €m 2019 769.9 133.3 480.7 5,232.4 3,848.5 Drawn Debt - Group In more than five years Between two and five years Between one and two years In one year or less Maturing Between two and five years Group’s borrowings, and the expiry of material undrawn committed bank borrowing f The maturity profile of the carrying amount of the follows: The Group’s debt management strategy targets a debt portfolio profile with a diverse mix of counterparties, funding sources and maturities. Structured a debt portfolio profile with a diverse mix of counterparties, funding sources and maturities. Structured The Group’s debt management strategy targets used where appropriate, taking into account both funding costs and risk mitigation. All borrowing non-recourse and limited recourse financing is regulatory requirements. are in compliance with the Electricity Acts and relevant facilities At 31 December 2019 the Group had €1.5 billion available in cash or cash equivalents and committed bank facilities, ensuring liquidity demands can be ensuring liquidity demands available in cash or cash equivalents and committed bank facilities, At 31 December 2019 the Group had €1.5 billion with a large number of well-rated financial institutions. a syndicated loan facility comprise met as required. The committed bank facilities The principal liquidity risks faced by the Group relate to cash flow requirements arising from day-to-day operations, maturing debt obligations and the by the Group relate to The principal liquidity risks faced and cash Group’s treasury function manages this risk through a combination of liquid investments, cash funding of capital investment programmes. The with relationship banks and raises funds in debt capital markets to Group negotiates facilities The equivalents and undrawn committed bank facilities. arising from maturing debt, capital expenditure and general business requirements. pre-fund, or pre-hedge, any funding requirements Between two and five years Between two and Funding and liquidity management BORROWINGS AND OTHER DEBT (continued) AND OTHER BORROWINGS PARENT Current borrowings - Repayable by instalments by instalments - Repayable other than current borrowings Total Non-current borrowings - Repayable by instalments two years Between one and After five years - Repayable other than by instalments Between one and two years After five years borrowings non-current Total outstanding borrowings Total ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 170 NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS (a) 21. 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS 31 €m €m €m €m 60.6 14.6 at 31 at 31 543.3 806.3 835.0 878.5 729.0 314.0 729.0 314.0 806.3 543.3 1,349.6 5,144.0 2,898.8 3,296.3 5,232.4 1,043.0 Balance Balance December December December December Balance at Balance at 31 - - 2.0 6.3 3.7 - €m €m 88.1 67.3 16.3 (3.8) (0.4) 6.4 1.9 8.3 Other Other €m €m (40.7) (37.4) Other Other (40.7) (40.7) 173 2019 Report Annual ESB 0.8 7.8 €m €m 19.2 11.5 15.8 43.9 12.6 80.9 (2.5) (0.1) (3.7) (1.4) foreign foreign 7.8 €m €m 12.6 19.2 17.8 20.4 (1.4) exchange exchange Effects of Effects of foreign foreign exchange Effects of exchange Effects of ------of €m €m 44.9 44.9 Disposal/ subsidiary €m €m Acquisition Acquisition of subsidiary (85.1) (83.7) (93.5) (201.2) (177.2) (286.3) - - €m €m Repayments Repayments (93.5) (84.0) (46.8) (85.1) (823.2) (445.2) (200.5) (214.9) (201.2) (548.0) - - - - Repayments Repayments €m €m ------170.0 170.0 €m €m Proceeds Proceeds 592.9 394.5 500.0 170.4 592.9 1,064.9 Proceeds Proceeds €m €m €m €m 806.3 543.3 715.0 615.7 60.6 1,330.7 January January 1,349.6 615.6 444.7 648.5 715.0 835.0 806.3 543.3 4,757.8 2,334.0 2,898.8 January January 5,144.0 Balance at 1 Balance at 1 Balance at 1 Balance at 1 PARENT 2019 Debt Facilities Long-term bank borrowings Private placement borrowings Total 2018 Debt Facilities Total Private placement borrowings Non-recourse long-term project finance debt Non-recourse NIE Networks Sterling bonds ESB Eurobonds ESB Long-term bank borrowings Non-recourse long-term project finance debt Non-recourse long-term Sterling bonds Non-recourse NIE Networks 2018 Debt Facilities ESB Eurobonds ESB Long-term bank borrowings Private placement borrowings Total BORROWINGS AND OTHER DEBT (continued) AND OTHER BORROWINGS liabilities) (excluding lease of external borrowings Reconciliation GROUP 2019 Debt Facilities Long-term bank borrowings Private placement borrowings Total NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 21. (c) 0.2 €m (1.4) 50 (61.4) decrease gain / (loss)

1.4 €m 57.4 (0.8) 50 bp increase 31 December 2018 gain / (loss) 0.3 0.4 €m 50 bp (62.5) decrease gain / (loss)

€m 58.6 (0.3) (0.8) 50 bp increase 31 December 2019 gain / (loss) In managing interest rate risk, the Group aims to reduce the impact of short-term fluctuations on the Group's earnings. Over the longer term however, short-term fluctuations on the Group's earnings. risk, the Group aims to reduce the impact of In managing interest rate of 50 basis points in interest earnings. It is estimated that a general increase rates will have an impact on consolidated permanent changes in interest shown taxation and reduced equity by the amounts increased profit before real interest rates) at 31 December would have rates (and corresponding assumption that there is no currency rates, remain constant, including the that all other variables, in particular foreign below. This analysis assumes change in inflation rates. BORROWINGS AND OTHER DEBT (continued) AND OTHER BORROWINGS (continued) risk management Interest rate - the floating leg of any swap or any floating rate debt is treated as not having any interest rate already set, therefore a change in interest rates affects debt is treated as not having any interest rate already set, therefore - the floating leg of any swap or any floating rate portion of the sensitivity calculations. a full 12-month period for the accrued interest - changes in the carrying value of derivative financial instruments not in hedging relationships affect the income statement only; and - changes in the carrying value of derivative financial - derivatives designated as cash flow hedges against movements in interest rates are assumed to be fully effective, recorded fully within equity with no movements in interest rates are assumed to be fully effective, - derivatives designated as cash flow hedges against impact on the income statement; - the sensitivity of accrued interest to movements in interest rates is calculated on net floating rate exposures on debt, deposits and derivative in interest rates is calculated on net floating rate exposures on debt, deposits and derivative - the sensitivity of accrued interest to movements instruments; Other comprehensive income Fair value gains / (losses) of the sensitivity analysis above: The following assumptions were made in respect cost relates only to derivative financial instruments, as debt and other deposits are carried at amortised - the balance sheet sensitivity to interest rates interest rates move; and so their carrying value does not change as Fair value movements on financial instruments Profit before taxation Interest payable ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 172 NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS (b) 21. 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS . air value 175 2019 Report Annual ESB transactions with offsetting risks. INSTRUMENTS (continued) FINANCIAL DERIVATIVE offsetting (continued) financial instrument by class of derivative Fair value that meet the specific into hedge relationships for certain arrangements whether to designate financial instruments The Group decides at inception with of IFRS 9. hedging accounting criteria with underlying it should be noted that they are matched values of derivative financial instruments, and negative fair When interpreting the positive transactions (i) Interest rate swaps portion of its borrowings held Stg£470.7 million) in connection with a certain interest rate swaps of Stg£431.1 million (2018: The Group has executed have all been classified as cash flow assets within the Group. These in other wind farms and certain debt held Finance DAC by the Parent and ESB hedges. As interest rate swaps rates prevailing at the balance sheet date. takes into account the fixed, floating and market value the fair For interest rate swaps, value. carrying value is equal to their fair are marked to market at 31 December 2019, their positive mark to market movements in the underlying million. The movement reflects value of the interest rate swaps has increased by €2.6 The fair of €1.6 million during the year. swaps of €1.0 million and payments on the swaps (ii) Inflation linked interest rate swaps in December 2010 as part of the purchase value liability on acquisition of €272.5 million were acquired Inflation linked interest rate swaps with a fair interest rate swaps did not qualify for hedge accounting under IFRS 9 on acquisition of the of the NIE Networks business. The inflation linked interest rate swaps is affected by relative movements in interest rates and in market value of the inflation linked NIE Networks business. The fair in the United Kingdom (UK).expectations of future retail price index (RPI) movements f UK RPI forward prices, foreign currency exchange rates and payments during the year, the Arising from movements in forward interest rates, by €94.9 value of the liability decreased these swaps in the year ended 31 December 2019 (2018: fair of the liability has increased by €37.1 million on million). (2018: negative movement €6.5 million), negative mark to market movements in the underlying swaps of €23.3 million The movement reflects the swaps during the income statement (note 8) and payments of €15.2 million (2018: €95.6 million) arising under in finance costs in the reflected of €29.0 million (2018: positive translation movements of €5.8 million) during the year on translation year. In addition, negative translation movements in the OCI. of the swaps from sterling to euro are reflected (iii) Currency swaps currency swaps are primarily classified as foreign exchange and interest rates. ESB's value of currency swaps is affected by movements in The fair in note swaps entered into in connection with the private placement debt, which is described cash flow hedges and relate mainly to the cross-currency debt to into in order to swap US dollar and sterling interest and principal repayments on the underlying 21. These cross-currency swaps were entered swaps over the years to maturity from 2010 to 2023. During 2019, a portion of the cross currency euro, thereby hedging the risk on these payments debt being repaid. matured due to US$226.0 million of private placement under the meaning of IFRS 9 arose on the currency swaps during the year (2018: debit €0.1 million).No ineffectiveness in the Separately included million) arising on cross currency swaps which is income statement for the year 31 December 2019 is a gain of €8.3 million (2018: gain of €23.3 borrowings at the prevailing exchange rates (see note 8) substantially offset by movements in the translation of the underlying hedged foreign currency In addition to foreign exchange contracts entered into in relation to the Group's borrowings, the Group has entered into foreign exchange contracts in In addition to foreign exchange contracts entered into in relation to the Group's borrowings, the and fuel purchase requirements (which are in US dollar and sterling). These contracts Service Agreements (LTSAs) relation to energy costs, Long Term value movements of €2.3 million (2018: positive movements of €11.2 million) were recognised positive fair have maturities extending until 2024. Total value movement of €7.1 million (2018: positive movements during the year in relation to such foreign exchange contracts, of which a negative fair positive movement of €10.9 million) was value movement of €9.4 million (2018: of €0.3 million) was recognised through OCI and a positive fair recognised in the income statement. Fair value hierarchy information on the methods of valuing financial instruments is included in note 28. Further NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 22. (a) 0.4 0.7 1.3 0.8 €m €m 1.1 3.8 €m €m 10.3 18.3 18.3 82.8 17.6 12.6 81.3 (9.1) Total Total

Total Total (53.3) (19.9) (26.1) (97.4) (24.9) (24.9) (558.3) (508.4) (595.4) (620.0) air value of ------€m €m €m €m (1.8) (0.1) (0.1) (5.3) (5.4) (2.1) (0.9) (83.7) (81.8) (13.9) (16.9) (91.3) (207.0) (245.5) (108.3) Current Current Current Current (212.3) (267.8) liabilities liabilities liabilities liabilities - - €m €m €m €m (3.7) (7.7) (0.9) (0.3) (0.1) (7.2) (1.9) (0.1) (7.3) (30.0) (21.3) (21.3) (55.4) (10.9) (49.9) (24.9) (24.9) (43.0) (544.4) (578.5) (625.2) (662.5) liabilities liabilities liabilities liabilities Non-current Non-current Non-current Non-current 2019 2019 2018 2018 ------2.3 2.3 4.6 €m €m €m €m 35.5 82.9 35.8 35.5 69.9 21.1 39.2 20.7 107.7 156.5 201.4 180.3 180.3 244.8 assets assets assets assets Current Current Current Current - - - - 5.1 4.1 0.9 0.9 0.9 4.1 1.1 1.1 9.0 4.6 €m €m €m €m 10.5 48.0 68.6 16.3 10.4 42.1 17.7 17.7 27.8 65.5 assets assets assets assets Non-current Non-current Non-current Non-current Interest rate swaps Inflation linked interest rate swaps Currency swaps Foreign exchange contracts Forward fuel price contracts Forward electricity price contracts Foreign exchange contracts Forward fuel price contracts Currency swaps Interest rate swaps Derivative financial instruments are carried at fair value. The fair value of a financial instrument is the price that would be received to sell an asset or is the price that would be received to sell value of a financial instrument value. The fair are carried at fair Derivative financial instruments used to calculate the f at the measurement date. The method in an orderly transaction between market participants paid to transfer a liability DERIVATIVE FINANCIAL INSTRUMENTS FINANCIAL DERIVATIVE financial instrument by class of derivative Fair value credit risk. This method counterparty discount rate and reflecting coupon a zero is discounted cash flow analysis, using the Group's financial instruments maturity and credit margin. market rate of interest taking into account the cash flows at a rate equal to the prevailing enables the Group to discount grouped by class of instrument, are as follows: values of financial instruments, The fair GROUP Interest rate swaps PARENT Forward electricity price contracts Interest rate swaps Forward fuel price contracts Currency swaps Foreign exchange contracts Forward fuel price contracts Inflation linked interest rate swaps Currency swaps Foreign exchange contracts ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 174 NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS (a) 22. 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS 5.6 €m Total (20.6) (37.7) (22.7) . Where ffectiveness 0.2 €m price 27.6 (1.7) (29.5) 1 Forward contracts electricity 177 2019 Report Annual ESB 4.6 0.1 €m price (36.2) (31.5) contracts Forward fuel - 0.7 €m (5.3) (4.6) Foregin Cash flow hedging reserve contracts exchange 0.1 8.8 €m 0.1 (8.8) swaps interest rate Cross currency The cash flow hedge reserve includes an amount of €1.3 million relating to the cost of hedging. The cash flow hedge reserve includes an amount Deferred tax movements Deferred Transfers to the income statement Transfers Net fair value movements Net fair 1 for interest rate swaps is measured using the same principals as for hedges of foreign exchange contracts. It may occur primarily due to differences in for interest rate swaps is measured using the same principals as for hedges of foreign exchange critical terms between the interest rate swaps and the loans. Hedge ineffectiveness assessments to ensure at the inception of the hedge relationship and through periodic prospective effectiveness is determined Hedge effectiveness hedged item and the hedging instrument. that an economic relationship exists between the Foreign exchange contracts exactly Group enters into hedge relationships where the critical terms of the hedging instrument match For hedges of foreign currency purchases, the If changes in circumstances affect the terms of the a qualitative assessment of effectiveness. with the terms of the hedged item. The Group performs match exactly with the critical terms of the hedging instrument, the Group uses the hypothetical hedged item such that the critical terms no longer derivative method to determine ineffectiveness. the timing of the forecast transaction changes from what was originally estimated, may arise if In hedges of foreign currency purchases, ineffectiveness or if there are changes in credit risk. Forward fuel and electricity contracts contracts, the Group enters into hedge relationships where the critical terms of the hedging For hedges of forward fuel and forward electricity may arise if the timing or quantity of the forecast transaction changes from what item. Ineffectiveness instrument match with the terms of the hedged contracts is measured using the for forward fuel and electricity in credit risk. Hedge ineffectiveness was originally estimated, or if there are changes hypothetical derivative method. for commodities, including gas and electricity Within its regular course of business, the Group routinely enters into sale and purchase contracts of the commodities in accordance with the Group’s the contract was entered into and continues to be held for the purposes of receipt or delivery and are accounted for as executory contracts. These expected sale, purchase or usage requirements, the contracts are designated as own use contracts the scope of IFRS 9 - Financial Instruments. not within contracts are therefore Cross currency interest rate swaps rate, payment dates, maturities and as reference The Group enters into interest rate swaps that have similar critical terms as the hedged item, such the notional amount of the swaps. Hedge ine notional amount. The hedged item is identified as a proportion of the outstanding amount up to DERIVATIVE FINANCIAL INSTRUMENTS (continued) FINANCIAL DERIVATIVE Hedging Reserves instruments: movements relate to the following hedging The Group's hedging reserves NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 22. (c) ------0.4 0.1 0.1 €m 0.1 15.9 15.4 (0.8) (0.2) years (23.5) (10.3) (428.4) (444.3) (420.0) (425.2) (435.7) (435.6) More than 5 - - 3.8 0.2 1.9 3.8 0.2 0.1 0.2 €m 6.0 23.7 26.3 (1.6) (0.5) (0.8) (3.1) (3.9) (4.7) (0.7) (24.2) (179.3) (205.6) (180.1) (188.2) (200.6) (194.6) 2 - 5 years 6.8 0.5 4.5 0.4 4.2 €m 24.1 31.9 15.7 38.1 58.7 (0.1) (0.3) (3.7) (0.1) (1.0) (4.6) (2.8) (0.4) (13.9) (30.6) (45.8) (13.7) (46.5) (17.9) (72.2) (13.5) 1 - 2 years 7.7 5.2 0.3 1.7 €m 49.8 35.9 83.2 39.1 20.6 31.7 (0.8) (2.3) (4.2) (5.3) (0.4) (1.3) 245.5 160.2 180.6 (92.3) (14.0) (17.0) (27.2) (110.4) (245.8) (272.7) Within 1 year 8.8 5.8 6.2 €m 83.7 93.8 81.0 25.3 41.8 (0.9) (2.6) (1.7) (3.9) cash 310.3 234.3 198.2 (23.8) (23.0) (12.8) (571.8) (806.1) (147.1) (627.8) (295.4) (648.3) (981.2) (670.9) outflows / Contractual (inflows) - net 5.7 €m 3.2 5.1 81.3 25.3 83.8 93.4 39.6 (1.0) (2.4) (1.9) (3.8) 310.3 198.0 225.1 (21.3) (24.9) (12.7) amount (508.4) (733.5) (146.7) (558.3) (295.4) (595.4) (930.3) (620.0) Carrying Forward electricity price contracts assets Total Forward fuel price contracts Foreign exchange contracts Currency swaps Total liabilities Total Net derivative assets / (liabilities) 31 December 2018 Interest rate swaps Forward fuel price contracts Inflation linked interest rate swaps Currency swaps Foreign exchange contracts Interest rate swaps Forward fuel price contracts Forward electricity price contracts assets Total Foreign exchange contracts Interest rate swaps 31 December 2019 DERIVATIVE FINANCIAL INSTRUMENTS (continued) FINANCIAL DERIVATIVE financial instruments - maturity of derivative liquidity management Funding and net cash flows instruments, including the associated undiscounted out the contractual maturities of derivative financial The following table sets to the cash outflows. Net to impact profit or loss over a time period similar derivative financial instruments are expected attributable to them. These but do not comprise part of million) are included in the Group balances below, liabilities of €593.9 million (2018: €518.7 derivative financial instrument and Parent financial assets See note 28 (b) for further analysis of Group liabilities as they are not held directly by the Parent. the Parent's assets and and liabilities. Net derivative assets / (liabilities) Total liabilities Total Forward fuel price contracts Forward electricity price contracts Foreign exchange contracts Inflation linked interest rate swaps Currency swaps Interest rate swaps ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 176 NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS (b) 22. 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS SB . Pension . Pension 179 2019 Report Annual ESB PENSION LIABILITIES PENSION (UK) and the United Kingdom Ireland, Northern Ireland in both the Republic of Schemes for staff a number of pension The Group operates (a) below. Pension seconded overseas are set out in section employees of staff in the Republic of Ireland including ESB arrangements in respect in section (b) and (c). of staff in the UK and Northern Ireland are described arrangements in respect of Ireland Parent and Group - Republic Pension Scheme (The Scheme) ESB Defined Benefit Benefit Defined Scheme called the ESB business are funded through a contributory pension for the majority of employees in the electricity Pensions and their dependants. The of employees the sole benefit and its members for nominated by ESB The fund is vested in Trustees Scheme. Pension Authority. and is registered as such with the Pensions Scheme benefit Scheme is a defined and the contributing contributions to be paid by both ESB that are to be provided and the the Scheme stipulate the benefits The regulations governing to maintain those benefits has no legal obligation to increase contributions ESB nature of the benefits, benefit the defined members. Notwithstanding Minister for Communications, and approval of the without the agreement of ESB rate of contribution cannot be altered ESB’s in the event of a deficit. is obliged under the regulations to consult with the Superannuation arise in the future, ESB Climate Action and Environment. Should a deficit of submitting an amending Scheme for Ministerial approval. This is different and the Scheme Actuary to consider the necessity Committee, the Trustees required to fund benefits. approach, where the employer is liable to pay the balance of contributions benefit defined to the normal ‘balance of cost’ History been fixed by the Scheme regulations for long periods. On a number of occasions since and members have Historically the contributions of both ESB has, in accordance with its obligations On each occasion ESB Actuary. in the Scheme has been reported by the Scheme the early 1980s, a deficit by were resolved Following discussions with the unions, deficits and the Actuary. the Trustees under the Scheme rules, consulted with the Committee, members. and pension Scheme increasing contributions by both ESB It was recognised that it was not feasible to address of €1,957.0 million. Agreement followed a 31 December 2008 actuarial deficit The 2010 Pensions Group of Unions (employee representatives) concluded with the and ESB contributions. Negotiations between ESB through increased such a deficit on 20 October 2010). formally ratified by the Board of ESB Agreement (approved by employees in July 2010 and The main landmark 2010 Pensions earned after 1 January of a Career Average Revalued Earnings (CARE) pension model for benefits features of the Agreement included the introduction the application of a solvency test in relation the cessation of the historic link between salary and pension increases, and 2012, pension and pay freezes, E rates for the employer and for Scheme members were not changed. Under the Agreement to any future pension increases. The fixed contribution at 1 payable over a number of years, which had an agreed valuation for actuarial purposes as agreed to a once off cash injection into the Scheme, by the membership of the Scheme has been closed to new joiners. The changes brought about January 2010 of €591.0 million. Under the Agreement subsequently approved by the Minister. Agreement were 2010 Pensions end of on an actuarial basis, the Scheme’s assets were broadly in balance with its liabilities at the The Scheme Actuary confirmed during 2019 that consult with the parties to the as set out in the Scheme regulations, to arise in the future, the obligation on ESB, 2018. Should an actuarial deficit Standard (MFS). The Trustees in a wind-up scenario under the Minimum Funding currently a shortfall Scheme remains unchanged. However, there is after its approval by Authority to the Pensions This plan will be submitted shortfall. to resolve this MFS are in the process of finalising a new funding plan and Environment. the Department of Communications, Climate Action (described below) will be does not intend that any further contributions, other than those currently provided for under the scheme regulations ESB made. Definitions There are three different methods of assessing the financial status of the Scheme: • Ongoing Actuarial Valuation. Act. Standard, under the Pensions • Minimum Funding • Accounting, as set out in International Accounting Standard 19, Employee Benefits. projections which may differ. Each of these methods assesses the Scheme from specific perspectives using assumptions and Ongoing Actuarial Valuation continue in existence for the foreseeable future - it is no NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 23. (a) (i) 3 - - 3.0 1:1 price 81.3 24.0 Mwh (23.8) Jan-20 Dec-22 Forward contracts electricity (Level 3)

3 - - €m 3.0 1:1 Gas 21.2 Mwh (77.5) (21.2) Jan-20 Dec-22 Forward fuel price (Level 3) contracts - Tn €m 1.2 0.1 1:1 Coal (0.6) (1.2) €/Tn 89.05 Dec-20 Dec-21 Forward fuel price contracts - 1 €m 5.5 1:1 €/£ EUR EUR 75.5 0.95 (4.9) (5.5) EUR Jan-20 Jan-24 Foreign exchange contracts - €m 0.4 4.6 1:1 $/€ USD 16.6 1.10 (4.6) USD Feb-20 Foreign Dec-21 exchange contracts - % €m 0.7 1:1 1.53 EUR EUR 51.0 (2.1) (0.7) swaps Jul-31 Jul-31 Interest rate €m % / 1:1 24.4 GBP Cross swaps 339.0 (20.3) (24.4) 0.8882 Nov-28 Nov-28 3.37%/ FX rate currency interest rate Interest rate

€m % / 1:1 10.1 (0.7) USD Cross swaps 173.5 (10.1) FX rate Dec-23 Dec-23 currency 6.07/1.19 Interest rate interest rate 2 tem. The appropriate hedge ratio is determined based on per quantity of hedged item. The appropriate hedge ratio is determined The hedge ratio is the quantity of hedging instrument EUR exposures for UK operations EUR Weighted average hedged rate/price is not applicable to the Level 3 contracts above. Level 3 hedge instruments link electricity more is not applicable to the Level 3 contracts above. Level 3 hedge instruments link electricity average hedged rate/price Weighted specific factors such as volumes of commodities required, contracted foreign exchange and interest rate exposures. specific factors DERIVATIVE FINANCIAL INSTRUMENTS (continued) FINANCIAL DERIVATIVE and performance the financial position hedge accounting on Effects of position and performance taxation) on the Group's financial accounting has been used (before of the hedging instruments for which hedge The effects are as follows: 1 2 3 closely to fuel inputs. Carrying amount - asset / (liability) Carrying amount - asset as at 31 December 2019 value of outstanding Change in fair hedging instruments since 1 January Notional amount Change in value of hedged item used to determine hedge effectiveness Notional unit Weighted average hedged rate / average hedged rate / Weighted price Maturity date - earliest Unit of rate/price Maturity date - latest Hedge ratio ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 178 NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 22. (d) 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS At At 7.8 0.3 4.7 1.9 0.3 €m 7.0 €m 34.7 17.9 31.2 31.8 (1.8) (9.4) 2018 2018 (50.1) (94.3) (51.7) (10.3) (64.7) (94.3) (33.5) 256.7 259.8 422.6 233.4 (110.8) 1,429.4 1,290.3 1,286.4 1,179.5 1,179.5 (1,290.3) 28.6 30.2 Years 31 December 31 December Females

- - At At 6.1 0.3 0.1 0.3 €m €m 35.7 69.2 33.0 28.6 63.5 14.4 (3.0) (1.7) 2019 2019 127.9 107.4 140.4 253.3 369.1 443.2 253.2 (77.4) (77.4) (116.0) 1,290.3 1,449.2 1,179.5 1,333.2 181 2019 Report Annual ESB 1,333.2 (1,449.2) At 31 December 2018 26.2 27.8 Years Males 31 December 31 December 28.7 30.3 Years Females At 31 December 2019 26.3 27.9 Years Males Net deficit Equities – quoted Equities Bonds – quoted Multi-asset credit investments Diversified growth – quoted Cash Fair value of plan assets Present value of funded obligations Movement during the year: Current service cost Change in benefit obligation of the year obligation at the beginning Benefit Interest cost Plan members' contributions Actuarial loss / (gain) - impact of financial assumption changes Actuarial gain - impact of demographic assumption changes Curtailment cost Benefits paid Benefits Past service cost year obligation in the difference on benefit Translation Actuarial (gain) / loss - experience loss Benefit obligation at the end of the year Change in plan assets Fair value of plan assets at the beginning of the year Movement during the year: Interest on plan assets Actual returns on assets less interest Plan members' contributions Actual admin expenses (incl PPF Levy) paid Employer contributions paid Benefits difference on assets in the year Translation Fair value of plan assets at the end of the year Actual return on plan assets for the year the past service costs associated with the employees leaving the company under a restructuring exit The curtailment loss (cost) arising in 2018 reflects arrangement. for male and female members. Equalisation Pension Past service costs in 2018 arose from clarification of the law in respect of Guaranteed Minimum The Group expects to make contributions of approximately €28.7 million to Focus in 2020. PENSION LIABILITIES (continued) PENSION Scheme (continued) Electricity Pension Northern Ireland Mortality assumptions on standard actuarial mortality are set out below. These assumptions are based to life expectancy at retirement for members The assumptions relating for future improvements in life expectancy. tables and include an allowance Current pensioners at aged 60 Current pensioners at aged Future pensioners currently aged 40 (life expectancy age 60) pensioners currently aged 40 (life Future Pension assets and liabilities the NIE Networks Scheme are: The assets and liabilities in the Focus section of NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 23. (c) 2.80 2.10 3.20 2.10 % at fined rustees on the 31 December 2018 2.00 2.10 2.75 2.10 % at 31 December 2019 1 - Past service contributions – the on-going rate of contribution by ESB includes a contribution towards past service accrued in 2010. The present includes a contribution towards past of contribution by ESB - Past service contributions – the on-going rate service are recognised on the balance sheet. Amounts yet to be paid are subject to an annual value of future contributions in respect of that past statement. financing charge and this is expensed in the income the Company a future fixed commitment in respect of staff who had left recognised Severance (VS) Programmes – in 2010 ESB - Past Voluntary value of those future contributions in respect of those staff and the fair will make pension contributions under previous VS programmes. ESB yet to be paid are subject to an annual financing charge and this is expensed in the income are also recognised on the balance sheet. Amounts statement. - 2010 Pension Agreement Injection – ESB committed to making an exceptional cash injection of €591.0 million (PV in 2010 money based on a an exceptional cash injection of €591.0 million committed to making Agreement Injection – ESB - 2010 Pension request the Scheme. The outstanding payable at 31 December 2019 is €286.9 million, following a rate of 6.25%) over an agreed period of time into charge. part of this payment. This is subject to an annual funding in 2018 to defer by the Scheme Trustees

The discount rate used in the calculation of the pension liability at 31 December 2019 was 2.0% (2018: 2.8%).The discount rate used in the calculation of the pension liability at 31 December 2019 was 2.0% This was determined by reference 1 to market yields as at that date on high quality corporate bonds. The currency and term of the corporate bonds was consistent with the currency and to market yields as at that date on high quality corporate bonds. The currency and term of the obligations. estimated term of the post-employment benefit Rate of interest applied to discount liabilities Price inflation (CPI in the United Kingdom) Rate of increase of pensionable salaries Rate of increase of pensions in payment The financial statements reflect the following obligations to the Scheme: the following obligations reflect The financial statements are recognised as liabilities on the as incurred. Any unpaid amounts at year end - these are recognised in the income statement • Ongoing contributions balance sheet. balance sheet, made up of; million to the Scheme are also included on the • Obligations of €395.2 Accounting ESB’s in should be reflected benefits accounting standard to determine the way post-employment is the relevant Benefits IAS 19 (revised) Employee financial statements. PENSION LIABILITIES (continued) PENSION Ireland (continued) Group - Republic of Parent and Pension Scheme (The Scheme) (continued) ESB Defined Benefit UK legislation requires that pension schemes are funded prudently. The last funding valuation of the Focus section of the scheme was carried out by a The last funding valuation of UK legislation requires that pension schemes are funded prudently. contributions of €19.4 million per annum of €154.7 million. The Company is paying deficit qualified actuary as at 31 March 2017 and showed a deficit of 46.8% of pensionable salaries in respect of current (increasing in line with inflation) from 1 April 2018. The NIE Networks also pays contributions accrual plus €90,000 monthly expenses (2018: 40.3% and €90,000 respectively), with active members paying a further 6% of pensionable salaries. Profile of the Scheme about 20% of the liabilities are attributable and current pensioners. Broadly, for current employees, former employees The net liability includes benefits duration is an indication of the weighted average time until to current employees, 5% to former employees and 75% to current pensioners. The Scheme payments are made. For the NIE Networks Scheme, the duration is around 14 years (2018: 14 years) based on the last funding valuation. benefit Financial assumptions the purpose of IAS 19 disclosures is based on the The valuation of the Focus section of the NIE Networks Scheme by independent actuaries for following assumptions: employer contribution and amounted to €1.0 million (2018: €0.8 million).employer contribution and amounted to €1.0 million Northern Ireland Electricity Pension Scheme Scheme (the NIE Networks Scheme). Pension The majority of the employees in NIE Networks are members of the Northern Ireland Electricity This has matches the members' contributions up to a maximum two sections: Options, which is a money purchase arrangement whereby the employer generally been closed to based on pensionable salary at retirement or earlier exit from service. Focus has and Focus which provides benefits of 7% of salary, method the current service cost for members of this section as a percentage of under the projected unit credit new members since 1998 and therefore are held under trust and invested by the T salary will increase as they approach retirement age. The assets of the NIE Networks Scheme advice of professional investment managers. ESB Defined Contribution Pension Scheme subsidiary Scheme for employees of ESB Contribution Pension Defined Scheme called ESB contribution also operates an approved defined ESB employer 1 November 2010, new staff of the Parent. Contributions are paid by the members and the companies (other than NIE Networks) and, from at that time. Death each employee's accumulated fund and the cost of purchasing benefits secured at retirement reflect at fixed rates. The benefits represents survivor’s pension. The pension charge for the year basis and may be paid in the form of a lump sum and/or are insured on a Group benefits and amounted to €14.1 million (2018: €12.5 million). employer contribution the defined FM United Kingdom Stakeholder Scheme paid by the members and the employer operates a stakeholder pension scheme in the UK for all its GB employees. Contributions are In addition, ESB at that time. Death each employee's accumulated fund and the cost of purchasing benefits secured at retirement reflect at fixed rates. The benefits Scheme are held in basis and may be paid in the form of a lump sum and / or survivor’s pension. The assets of this are insured on a Group benefits & General Assurance Society Limited. The pension charge for the year represents the de individual stakeholder accounts managed by Legal ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 180 NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 23. (a) (i) (c) (ii) (b) 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS - - - - 5.1 €m €m 66.9 70.4 79.7 49.8 97.5 97.5 70.3 73.6 Total Total 112.0 108.5 108.5 123.3 150.1 150.1 100.6 118.6 143.9 143.9 (70.4) (81.7) (52.9) (77.3) ------5.1 €m €m 50.8 53.2 54.6 54.6 68.1 56.9 56.9 40.6 44.5 44.5 44.5 63.4 50.9 50.9 56.9 50.9 Other Other (49.4) (65.8) (40.6) (62.1) 183 2019 Report Annual ESB - - - - - Employee related liabilities Employee related Employee related liabilities 5.3 €m €m 61.2 13.7 53.9 53.9 55.2 93.2 70.4 22.8 60.0 53.0 53.0 55.2 93.0 70.3 22.7 93.2 93.0 (21.0) (15.9) (12.3) (15.2) liabilities liabilities Restructuring Restructuring - - - - - 9.5 9.5 €m €m 14.1 96.1 14.1 96.1 394.3 395.2 395.2 392.6 296.5 392.6 394.3 395.2 395.2 392.6 296.5 392.6 (13.2) (12.1) (13.2) (12.1) scheme scheme Liability - Liability - ESB pension ESB pension LIABILITY - ESB PENSION SCHEME AND EMPLOYEE RELATED LIABILITIES RELATED AND EMPLOYEE - ESB PENSION SCHEME LIABILITY GROUP Balance at 1 January 2018 Balance at 1 January Movements during the year: Charge to the income statement Utilised during the year Financing charge Balance at 31 December 2018 Balance at 31 December Balance at 1 January 2019 Movements during the year: Charge to the income statement Utilised during the year Financing charge Balance at 31 December 2019 Analysed as follows: Non-current liabilities Current liabilities Total PARENT Balance at 1 January 2018 Movements during the year: Charge to the income statement Utilised during the year Financing charge Balance at 31 December 2018 Balance at 1 January 2019 Movements during the year: Charge to the income statement Utilised during the year Financing charge from Group company Transfers Balance at 31 December 2019 Analysed as follows: Non-current liabilities Current liabilities Total NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 24. €m €m €m €m 15.7 83.9 19.2 31.2 (3.5) (1.9) (1.8) (7.8) (4.7) 2018 2018 (14.6) (44.9) (64.7) (34.7) (16.2) 2018 2018 - €m €m €m €m 19.1 33.0 (2.7) (7.9) (1.7) (0.1) (6.1) 2019 2019 2019 107.4 2019 (55.3) (17.8) (17.5) (35.7) (124.9) (increase) / decrease Impact on scheme liabilities Future mortality (1 year increase) Future the the full distribution of cash flows expected under the plan, it does provide an approximation of Although the analysis does not take account of sensitivity of the assumptions shown. Discount rate (0.1% increase) Inflation rate (0.1% increase) Pension liability Net actuarial (loss) / gain Sensitivity analysis to one of the relevant actuarial assumptions, holding other assumptions constant, would have Reasonably possible changes at the reporting date below. obligation by the amounts shown benefit affected the defined Actuarial (loss) / gain on liabilities Actual returns on assets less interest Net pension scheme charge statement of comprehensive income (excluding Analysis of the amounts recognised in the translation) Interest on pension scheme assets Interest on pension scheme liabilities Total defined benefit charge in year defined benefit charge in Total pension scheme interest: recognised in the finance costs, as net Analysis of the amounts Curtailment cost Past service cost (incl PPF Levy) paid Actual admin expenses Current service cost Analysis of the amounts recognised in the employee costs as part of the employee benefit recognised in the employee costs as Analysis of the amounts charge were as follows: PENSION LIABILITIES (continued) PENSION Scheme (continued) Electricity Pension Northern Ireland NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 182 23. (c) 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS €m €m 20.6 88.3 55.0 98.3 57.9 (4.9) 469.6 382.8 852.4 858.0 858.0 901.3 843.4 510.1 733.3 148.8 173.6 901.3 (49.4) (55.0) (111.2) (122.7) Supply Supply 1,347.6 1,259.3 1,347.6 1,243.4 1,276.1 1,276.1 and others and others contributions contributions ferred income and 185 2019 Report Annual ESB PARENT Analysed as follows: Non-current liabilities Current liabilities Balance at 1 January 2018 plant and equipment IFRS 15 transfer from property, Restated balance at 1 January 2018 Receivable Balance at 31 December 2018 Restated balance at 1 January 2019 Receivable Balance at 31 December 2019 Analysed as follows: Non-current liabilities Current liabilities Translation differences Translation differences Translation Balance at 31 December 2019 Total Released to the income statement Released to the income statement Total DEFERRED INCOME DEFERRED GROUP 2018 Balance at 1 January and equipment plant IFRS 15 transfer from property, 1 January 2018 Restated balance at Receivable statement Released to the income 2018 Balance at 31 December Balance at 1 January 2019 Receivable Released to the income statement income and released to the income as deferred Non-repayable supply contributions and capital grants received prior to July 2009 were recorded statement on a basis consistent with the depreciation policy of the relevant assets. 2017) are now recorded as de As set out in note 1 all supply contributions (including contributions from July 2009 to 31 December assets. Included in the Group balances above are released to the income statement on a basis consistent with the depreciation policy of the related plant and equipment on 1 January 2018, due to this supply contributions with a net book value of €733.3 million which were transferred from property, change in accounting treatment. income €40.1 million €1,229.9 million) and deferred Included in the above Group closing balance are supply contributions €1,307.5 million (2018: (2018: €46.2 million). NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 26. 4.5 €m 71.0 48.4 37.8 12.8 13.4 28.7 40.7 2018 200.0 4,044.8 4,502.1 ero discount 4.7 €m PARENT 94.8 59.0 33.2 12.2 14.7 49.7 41.8 2019 183.1 4,258.0 4,751.2 - 5.3 €m 89.6 66.4 56.9 13.7 42.8 78.8 2018 309.2 126.4 789.1 - 5.7 GROUP €m 78.9 58.3 13.7 42.6 79.3 2019 136.1 252.1 167.9 834.6 TRADE AND OTHER PAYABLES TRADE AND OTHER Current payables: Progress payments on work in progress payables Trade Capital creditors Other payables Payroll taxes Pay related social insurance Value added tax Value Accruals Amounts owed to subsidiary undertakings Accrued interest on borrowings Total Other accrued for employee remuneration liabilities, including provision has been made of IAS 19 Employee Benefits, In accordance with the requirements related payments. holiday leave and performance curve at the reporting date plus an appropriate credit spread. curve at the reporting date Restructuring liabilities those amounts covered by the payments to former employees, other than the estimated cost of providing post-employment This provision represents are expected to past voluntary severance initiatives, which under who left liabilities for continuing payments to employees pension scheme. It includes rates based on a z to present value using long-term interest by 2035. Expected future cash flows are discounted be materially discharged Liability - ESB pension scheme Liability - ESB See note 23 (a) part (i). LIABILITY - ESB PENSION SCHEME AND EMPLOYEE RELATED LIABILITIES (continued) LIABILITIES RELATED AND EMPLOYEE - ESB PENSION SCHEME LIABILITY NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 184 24. 25. 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS arms and ESB arms and ESB 187 2019 Report Annual ESB emission allowances, in addition to the market 2 during the year. The provision represents the obligation to return emission allowances during the year. The provision represents the obligation 2 emissions trading scheme, a provision is recognised to cover the liability for actual emissions emissions trading scheme, a provision is recognised 2 value of any additional allowances required to settle the year end liability. value of any additional allowances required to settle Other provisions to third parties, in respect of claims notified or provided for at year end. The year end provision Other provisions represent estimates of liabilities yet reported. includes an estimate for liabilities incurred but not of insurance claims payable. Other receivables include €1.6 million insurance recoveries in respect Included in other provisions is an amount for gross these claims. PROVISIONS (continued) PROVISIONS provision Asset retirement the present value of the current million) for asset retirement represents 31 December 2019 of €289.3 million (2018: €283.2 The Group provision at stations, wind f and decommission of mainly generating from certain obligations in relation to the retirement estimate of the costs arising economic lives. wood poles at the end of their useful Networks creosote treated financing charge is included in the costs are provided on a discounted basis, a of generating stations are up to 2040. As The expected closure dates and the liability re-calculated in retirement provision is re-examined annually credited to the provision each year. The asset the income statement and recent expected estimate. accordance with the most million (2018: €22.1 million the asset retirement provision increased by €4.0 during the year ended 31 December 2019 Due to changes in estimates increase). site remediation and associated at the balance sheet date includes physical dismantling, The estimated value of future retirement costs costs. the the calculation of the provision for asset retirement obligations, including the impact of regulation, There are a number of uncertainties that affect made the impact of alternative technologies and changes in the discount rate. The Group has accuracy of the site surveys, unexpected contaminants, in any of the assumptions of these uncertainties in the calculation of the provision, but future material changes its best estimate of the financial effect provision. Expected future cash flows are discounted to present value using an appropriate pre-tax could materially impact on the calculation of the discount rate. Emissions provision CO In accordance with the provisions of the European during the year. Allowances purchased during the year are returned to the relevant Authority in charge of the scheme within four months from the end year are returned to the relevant Authority in charge of the scheme within four months from during the year. Allowances purchased during the of CO of that calendar year, in line with the actual emissions equal to the actual emissions. This obligation is measured at the carrying amount of the capitalised CO equal to the actual emissions. This obligation is NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 27. 2.1 0.3 3.2 1.7 0.9 2.0 3.1 2.1 2.4 0.3 4.0 2.0 0.9 2.2 €m €m 86.3 47.9 11.8 48.4 10.8 19.9 11.8 15.0 69.7 (9.7) (7.5) (4.0) (6.8) (9.7) (0.1) Total Total 332.8 246.5 332.8 354.5 354.5 347.2 472.5 150.0 322.5 472.5 105.4 454.8 454.8 413.9 (58.0) (56.6) (90.8) (80.5) ------0.3 3.2 0.9 3.1 0.5 0.3 4.0 0.9 €m €m 18.5 40.9 59.4 75.5 75.5 11.8 59.4 78.3 22.6 46.4 69.0 92.3 92.3 11.8 15.0 (9.9) 69.0 84.3 (9.7) (0.5) (9.7) (0.1) (0.5) Other Other (18.1) (18.4) (19.1) ------0.2 €m €m 54.6 54.6 47.9 52.9 52.9 48.4 54.6 41.1 79.3 79.3 69.7 68.9 114.2 114.2 114.2 105.4 (46.2) (36.6) (70.5) (59.5) provision provision Emissions Emissions ------2.1 2.2 2.0 1.6 2.4 2.5 2.2 €m €m 13.2 13.2 10.8 19.9 (1.9) (7.5) (1.9) (4.0) (1.9) (6.8) (0.2) (1.9) 218.8 205.6 218.8 226.1 226.1 227.8 289.3 276.1 289.3 283.2 283.2 260.7 provision provision Asset retirement Asset retirement Asset retirement Utilised in the year Financing charge Total Current liabilities Analysed as follows: Non-current liabilities Balance at 31 December 2019 Financing charge Utilised in the year ESOP provision charged to equity (note 32) ESOP Reduction in other provisions capitilised - Asset retirement - Legal and other Charged / (credited) to the income statement - Emission allowances Balance at 1 January 2019 Balance at 31 December 2018 Financing charge Utilised in the year ESOP provision charged to equity (note 32) ESOP Provision capitalised in the year - Asset retirement Legal and other capitalised in the year - Legal and other Charged / (credited) to the income statement - Emission allowances Balance at 1 January 2018 PARENT Total Current liabilities Analysed as follows: Non-current liabilities Balance at 31 December 2019 Translation differences Translation Provision capitalised in the year (net) - Asset retirement Reduction in other provisions capitalised provision charged to equity (note 32) ESOP - Legal and other Charged / (credited) to the income statement - Emission allowances Balance at 1 January 2019 Balance at 31 December 2018 Translation differences Translation Financing charge Utilised in the year ESOP provision charged to equity (note 32) provision charged to equity (note ESOP Provision capitalised in the year Provision capitalised in - Asset retirement in the year Legal and other capitalised - Legal and other Charged / (credited) to the income statement Charged / (credited) to - Emission allowances Balance at 1 January 2018 Balance at 1 January GROUP PROVISIONS PROVISIONS NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 186 27. 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS - - €m 68.6 10.5 47.2 2018 108.3 727.4 606.3 625.2 156.5 229.1 852.7 126.3 6,604.9 1,442.0 5,162.9 4,537.7 1,364.6 1,238.3

Total €m 19.6 91.3 65.5 13.4 12.4 2019 662.5 112.4 267.8 772.6 480.7 244.8 125.1 5,526.6 4,751.7 1,490.9 7,067.3 1,540.7 1,399.6 1,029.7 ------€m 189 2019 Report Annual ESB 94.7 94.7 85.4 65.6 65.6 19.8 19.8 2018 649.3 554.6 554.6 ------€m 28.1 28.1 2019 839.1 228.3 228.3 610.8 610.8 228.5 200.4 200.4 Derivative financial instruments with no hedging relationships ------€m 84.2 13.6 13.6 70.6 70.6 90.9 90.9 48.8 48.8 2018 139.7 ------€m 91.2 39.5 39.5 51.7 51.7 81.8 44.4 44.4 37.4 37.4 2019 instruments with Derivative financial hedging relationships ------€m 47.2 47.2 2018 727.4 606.3 229.1 852.7 5,871.4 1,333.7 4,537.7 4,537.7 1,129.0 1,081.8 - - - - - cost €m 19.6 12.4 12.4 2019 112.4 772.6 480.7 125.1 6,137.0 1,272.9 4,864.1 4,751.7 1,167.2 1,154.8 1,029.7 held at amortised Assets / liabilities ------€m 10.5 10.5 10.5 2018 ------€m 13.4 13.4 13.4 2019 profit or loss fair value through fair Financial assets at Total financial liabilities financial Total Total current financial liabilities current Total Derivative financial instruments Trade and other payables** Trade Current liabilities Borrowings and other debt Lease liabilities Total non-current financial liabilities non-current Total Derivative financial instruments LIABILITIES Non-current liabilities Borrowings and other debt Lease liabilities Total financial assets financial Total Total current financial assets current Total Derivative financial instruments Cash and cash equivalents Current assets and other receivables* Trade Total non-current financial assets non-current Total Derivative financial instruments Financial asset investments ASSETS Non-current assets and other receivables Trade GROUP FINANCIAL RISK MANAGEMENT AND FAIR VALUE (continued) AND FAIR VALUE RISK MANAGEMENT FINANCIAL liabilities financial assets and Overview of alysed as follows: 2019 and at 31 December 2018 can be an excluding employee related liabilities, at 31 December Financial assets and liabilities, * Prepayments have been excluded as they are not classified as a financial asset. * Prepayments have been excluded as they are and employment taxes have been excluded as these are statutory liabilites. ** VAT in the further analysis on the following page. The Group's provisions and employee related liabilities are not analysed in the table above, or This includes the liability for pension obligation of €392.6 million at 31 December 2019 (2018: €395.2 million).This includes the liability for pension obligation of €392.6 million at 31 December 2019 (2018: See notes 23 and 24 in relation to this and employee related liabilities. NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 28. (b) . Where Within its regular course of business, the Group routinely enters into sale and purchase contracts for commodities, including gas and electricity Within its regular course of business, the Group routinely enters into sale and purchase contracts In addition, the Group enters into certain commodity hedging transactions to fix fuel costs and to link electricity revenues more closely to fuel inputs, In addition, the Group enters into certain commodity hedging transactions to fix fuel costs and hedge relationships. Certain arrangements meet the where possible. The Group decides at inception whether to designate financial instruments into specific hedging accounting ctriteria of IFRS 9. of the commodities in accordance with the Group’s the contract was entered into and continues to be held for the purposes of receipt or delivery and are accounted for as executory contracts. expected sale, purchase or usage requirements, the contracts are designated as own use contracts not within the scope of IFRS 9 - Financial Instruments. These contracts are therefore Hedge accounting also uses interest rate and foreign currency to invest surplus funds. ESB funds its operations using borrowings and uses deposit instruments ESB risks that arise in the normal course of operations from US dollar and sterling denominated instruments to manage interest rate and currency Hedge accounting pursuant to IFRS 9 is used both for borrowings, from its foreign currency subsidiaries and from the use of foreign currency suppliers. hedges of foreign currency liabilities and interest rate risks from current and non-current liabilities. The Middle Office function in each business unit maintains a separate reporting line to the Group Trading Risk Management function, which is maintains a separate reporting line to the Group Trading The Middle Office function in each business unit to movements in commodity or other price movements is adequately managed in accordance responsible for ensuring that the Group’s net exposure Risk Management Policy. with Group Trading In both Generation and Trading and Customer Solutions, separate Trading Risk Management Committees meet on a monthly basis (or more frequently Risk Management Committees meet on a monthly basis and Customer Solutions, separate Trading In both Generation and Trading as required),include the head of the overseer of trading risk at individual ring-fenced business unit level. These committees and serve as the primary Risk Management, and the business unit Financial Risk (Middle Office) Manager, a representative from Group Trading Office function, the Trading Front Risk for formulating trading risk strategy in accordance with the Group Trading Risk Management Committees are responsible Controller. The Trading framework is in place. control risk limit management, and for ensuring that an effective and ensuring compliance with same, trading Management Policy Risk reporting structure trading risk in a manner consistent of managing ESB’s the broader responsibility Executive, the Board has delegated to the GTC Through the Chief limit trading risk exposure at Group and has established risk limits to manage and The GTC with the Group’s risk tolerances and business strategies. the Group businesses engaged in wholesale trading activities. Furthermore for each of the ESB business unit level. These limits are documented is applicable to each of these businesses. Policy Risk Management Trading Contracts entered into in order to hedge exposures arising from the production and sale of electricity may be divided into forward fuel price contracts, arising from the production and sale of electricity may be divided into forward fuel price contracts, Contracts entered into in order to hedge exposures contracts. Financial instruments are derecognised on settlement or sale. forward electricity price contracts and foreign exchange Commodity price risk is managed by the front and middle office functions of the relevant business units: ESB Trading (within Generation and Trading) Trading) (within Generation and Trading of the relevant business units: ESB managed by the front and middle office functions Commodity price risk is are reviewed regularly by Group risk management framework. These activities This is done in the context of an overall Group and Customer Solutions. to ensure Committee (GTC)) (overseen by the Group Trading Risk Management Committees responsibility of the Trading Internal Audit and it is the that the Group’s Risk Management function ensures The Group Trading and recommendations are adequately addressed. that internal audit findings in in a way designed to protect the Group from loss, while respecting the ring-fencing obligations market, credit and operational risks are managed place between the business units. Risk environment sterling and the US movements in the value of the euro relative to Group relate to foreign exchange (particularly by the faced The main financial risks are key long-term financial risks risk, and exposure to interest rate volatility, and fuel) price movements. Liquidity dollar) and commodity (electricity such as credit risk, are the Group from these risks and other risk areas, to protect addressed in the short run. Policies also, but have been substantially the Group's Interest Rate, During 2019 the Board has reviewed and approved and approved by the Board as appropriate. regularly reviewed, revised treasury activities of the Group. The Finance and is responsible for the day-to-day policies. Group Treasury & Liquidity Funding Foreign Exchange, and and associated mitigants. regularly updated on key treasury matters, risk Investment Committee is FINANCIAL RISK MANAGEMENT AND FAIR VALUE RISK MANAGEMENT FINANCIAL financial risk management Overview of NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 188 (a) 28. 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS - - - - 0.1 0.1 €m 0.1 0.1 €m 47.1 10.3 23.5 15.9 15.9 years 87.0 15.9 15.9 388.9 388.8 331.5 388.6 412.1 396.2 years 435.7 444.3 4,311.4 4,086.5 4,530.8 4,514.9 4,834.1 4,834.0 More than 5 More than 5 - - - - 6.0 6.0 €m 8.3 6.6 1.1 2.6 2.6 6.6 €m 25.8 26.3 26.3 15.4 200.6 884.3 205.6 562.0 555.4 538.3 608.8 609.9 607.3 1,144.4 1,089.9 1,063.6 1,370.8 1,364.8 2-5 years 2-5 years 191 2019 Report Annual ESB - - - - 6.5 7.1 3.6 3.6 €m €m 20.5 18.4 20.5 10.4 58.7 72.2 31.9 45.8 31.9 58.7 193.4 172.9 168.5 122.1 129.2 125.6 270.4 353.0 294.3 541.6 587.4 555.5 1-2 years 1-2 years €m €m 11.2 84.7 15.1 202.2 197.1 202.2 439.0 216.7 110.0 110.0 643.4 693.3 245.5 245.5 272.7 648.6 776.6 160.2 110.4 160.2 4,677.8 4,430.7 4,954.4 4,844.4 5,102.8 4,900.6 1,535.6 1,375.4 1,624.5 1,379.0 Within 1 year Within 1 year €m 80.2 €m 229.4 229.4 253.7 116.4 132.1 132.1 138.3 693.3 310.3 310.3 981.2 648.6 234.3 806.1 234.3 1,235.4 1,558.5 4,677.8 4,430.7 6,105.6 5,973.5 6,247.1 6,017.7 6,369.6 6,289.0 7,743.7 7,509.4 8,182.4 7,872.1 Contractual inflows - net Contractual inflows - net cash outflows / cash outflows / €m 71.7 €m 229.2 229.2 255.3 113.7 124.0 124.0 amount 1,043.0 1,349.6 4,677.8 4,430.7 5,894.0 5,770.0 6,047.8 5,818.6 132.0 693.3 310.3 310.3 930.3 648.6 225.1 733.5 225.1 Carrying amount 5,232.4 5,144.0 6,526.1 6,301.0 6,988.0 6,677.7 Carrying PARENT 31 December 2019 Borrowings Lease liabilities Derivative financial instruments 31 December 2018 Borrowings Trade and other payables (excluding tax Trade balances and accrued interest on borrowings) Derivative financial instruments liabilities Total assets Total Net liabilities and other payables (excluding tax Trade balances and accrued interest on borrowings) Derivative financial instruments liabilities Total Derivative financial instruments assets Total Net liabilities FINANCIAL RISK MANAGEMENT AND FAIR VALUE (continued) AND FAIR VALUE RISK MANAGEMENT FINANCIAL liquidity management Funding and (and assets of a similar nature), out the contractual maturities of financial liabilities The following table sets associated including the interest payments a carrying value of €4,189.4 financial instruments. Borrowings with undiscounted net cash flows attributable to derivative with borrowings and the are included in the Group liabilities of €593.9 million (2018: €518.7 million) million) and net derivative financial instrument million (2018: €3,794.3 See notes 13, 21, 22 and 25 as they are not held directly by the Parent. not comprise part of the Parent's assets and liabilities balances below, but do and Parent financial assets and liabilities. for further analysis of Group GROUP 31 December 2019 Borrowings Lease liabilities Trade and other payables (excluding tax and other payables Trade balances and accrued interest on borrowings) Derivative financial instruments Total liabilities Total Derivative financial instruments Total assets Total Trade and other payables (excluding tax and other payables Trade balances and accrued interest on borrowings) 31 December 2018 Borrowings Net liabilities Total liabilities Total Derivative financial instruments Derivative financial instruments Total assets Total Net liabilities NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 28. (c) - - €m 83.7 30.0 16.3 16.3 959.3 2018 390.3 989.3 107.7 122.3 5,934.7 4,945.4 4,471.4 3,607.5 3,591.2 3,361.2 Total €m 58.9 12.8 43.0 58.2 27.8 27.8 2019 887.3 212.3 155.7 989.2 201.4 3,676.8 6,089.6 5,100.4 4,719.6 3,964.2 3,936.4 ------6.7 6.7 €m

87.5 80.8 80.8 81.2 65.6 65.6 15.6 15.6 2018 ------€m 30.4 30.4 23.4 23.4 2019 241.8 211.4 211.4 223.8 200.4 200.4 Derivative financial instruments with no hedging relationships ------2.9 2.9 0.7 0.7 €m 26.2 23.3 23.3 42.8 42.1 42.1 2018 ------0.9 0.9 5.4 1.0 1.0 4.4 4.4 €m 13.5 12.6 12.6 2019 instruments with Derivative financial hedging relationships ------€m 959.3 959.3 2018 390.3 122.3 5,821.0 4,861.7 4,471.4 3,483.5 3,483.5 3,361.2 - - - - - cost €m 58.9 12.8 58.2 2019 946.2 887.3 155.7 5,834.3 4,888.1 4,719.6 3,735.0 3,735.0 3,676.8 held at amortised Assets / liabilities ------€m 2018 ------€m 2019 profit or loss fair value through fair Financial assets at See notes 23 and 24 in relation to this and employee related liabilities. * Prepayments have been excluded as they are not classified as a financial asset. * Prepayments have been excluded as they are have been excluded as these are statutory liabilites. and employment taxes ** VAT analysed in the table above, or in the further analysis on the following page. The Parent's employee related liabilities are not €395.2 million).This includes the liability for pension obligation of €392.6 million at 31 December 2019 (2018: Total financial liabilities financial Total Total current financial liabilities current Total Derivative financial instruments Trade and other payables** Trade Current liabilities Borrowings and other debt Lease liabilities Total non-current financial liabilities non-current Total Derivative financial instruments LIABILITIES Non-current liabilities Borrowings and other debt Lease liabilities Total financial assets financial Total Total current financial assets current Total Derivative financial instruments Cash and cash equivalents Current assets and other receivables* Trade Total non-current financial assets Total ASSETS Non-current assets Derivative financial instruments PARENT FINANCIAL RISK MANAGEMENT AND FAIR VALUE (continued) AND FAIR VALUE RISK MANAGEMENT FINANCIAL liabilities (continued) financial assets and Overview of NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 190 (b) 28. 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS - 0.3 9.3 4.1 0.9 2.1 2.7 €m 32.4 38.1 13.7 (1.1) (0.2) (27.7) (13.5) (12.9) (14.3) (25.5) (39.8) Net amount - - 7.8 1.6 €m 86.0 76.6 10.6 12.5 (0.8) (7.2) (1.1) 215.5 192.4 (20.8) (77.6) (85.9) 193 2019 Report Annual ESB (193.9) (215.5) offset on the Amounts not balance sheet 1.1 0.9 3.2 €m 30.1 39.6 80.3 (2.7) (0.2) 229.2 124.0 198.0 (89.5) (24.9) (12.5) (21.3) (113.7) (217.9) (255.3) of financial Gross amount instruments in the statement of financial position Foreign exchange contracts Forward fuel price contracts FINANCIAL RISK MANAGEMENT AND FAIR VALUE (continued) AND FAIR VALUE RISK MANAGEMENT FINANCIAL (continued) or similar agreements Master netting PARENT 31 December 2019 Financial assets Interest rate swaps Foreign exchange contracts Forward fuel price contracts Financial liabilities Currency swaps Foreign exchange contracts Forward fuel price contracts 31 December 2018 Financial assets Interest rate swaps Currency swaps Foreign exchange contracts Forward fuel price contracts Financial liabilities Interest rate swaps Currency swaps NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 28. (d) 0.9 2.4 3.8 4.0 5.2 0.7 € m 26.8 75.3 28.7 13.7 (0.1) (0.1) (7.9) (2.4) (0.6) (1.0) 134.1 (73.7) (22.1) (14.6) (642.5) (558.3) (595.4) (633.7) fault on fault Net amount - - 0.9 2.3 1.4 0.9 €m 91.0 73.0 13.4 12.1 10.3 (2.3) (2.7) (5.0) 296.6 273.3 (91.0) (57.0) (18.1) (10.9) (77.5) (20.1) (194.0) (296.6) offset on the Amounts not balance sheet 3.2 5.1 5.7 €m 83.8 93.4 39.6 81.3 25.3 (1.0) (2.4) (3.8) (1.9) 225.1 310.3 198.0 (21.3) (12.7) (24.9) (733.5) (146.7) (558.3) (295.4) (595.4) (930.3) position of financial of financial the statement Gross amount instruments in Forward fuel price contracts Forward electricity price contracts Foreign exchange contracts Currency swaps Inflation linked interest rate swaps Financial liabilities Interest rate swaps Forward electricity price contracts Forward fuel price contracts Foreign exchange contracts Currency swaps 31 December 2018 Financial assets Interest rate swaps Forward fuel price contracts Foreign exchange contracts Currency swaps Inflation linked interest rate swaps Financial liabilities Interest rate swaps Forward electricity price contracts Forward fuel price contracts Foreign exchange contracts 31 December 2019 Financial assets Interest rate swaps GROUP The following table sets out the carrying amounts of recognised financial instruments that are subject to the above agreements. out the carrying amounts of recognised financial The following table sets the bank loans or other credit events. the bank loans or other FINANCIAL RISK MANAGEMENT AND FAIR VALUE (continued) AND FAIR VALUE RISK MANAGEMENT FINANCIAL or similar agreements Master netting agreements. The ISDA master netting and Derivatives Association (ISDA) transactions under International Swaps The Group enters into derivative not have any current legally sheet. This is because the Group does the criteria for offsetting in the consolidated balance agreements do not meet events such as a de is enforceable only on the occurrence of future recognised amounts, because the right to offset enforceable right to offset NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 192 28. (d) 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS - - 51 49 65 35 1.6 3.0 €m (%) (%) 100 100 (2.3) (2.0) 2018 2018 taxation

gain / (loss) Profit before Profit before urozone. - - 9.8 €m 66 34 72 28 (8.1) (%) (%) 100 100 Other 151.8 2019 2019 After swaps After swaps income (185.5) 195 2019 Report Annual ESB gain / (loss) 31 December 2018 comprehensive 8 1.3 €m 32 51 17 65 27 15.9 (%) (%) (1.6) 100 100 (19.5) 2018 2018 taxation gain / (loss) Profit before 4 22 58 20 69 27 0.5 0.6 €m (%) (%) 100 100 2019 2019 154.1 Other Before swaps Before swaps (188.3) income 31 December 2019 gain / (loss) comprehensive PARENT US dollar Total the is either denominated in or swapped into euro for both principal and interest, thereby reducing As shown above, the majority of the debt portfolio the managing its foreign operations, the Group is cognisant of borrowings in currencies that match foreign currency risk exposure in the Group. In debt is sterling-denominated primarily as a result of the NIE Networks acquisition a proportion of functional currency of the foreign operation. Therefore Limited. and the operations of Carrington Power taxation by the amount set out rates at 31 December 2019 would increase equity and profit before A change of 10% in foreign currency exchange remain constant. below. This analysis assumes that all other variables Currency Euro Sterling GROUP US dollar Total The foreign currency forward purchase contracts in place at 31 December 2019 relate to forecast cash flows expected to occur up to 2028. 2019 relate to forecast cash flows expected purchase contracts in place at 31 December The foreign currency forward amounted to €5.2 billion (2018: €5.1 billion), total debt portfolio At year end, ESB's €1.0 billion (2018: €1.3 billion). of which the Parent held in the following currencies: and after swaps, was denominated The underlying debt, before Currency Euro Sterling FINANCIAL RISK MANAGEMENT AND FAIR VALUE (continued) AND FAIR VALUE RISK MANAGEMENT FINANCIAL risk management Foreign currency denominated in foreign and power, station overhaul costs, other purchases arise mainly through the purchase of fuel Foreign currency exposures outside the E as described in note 21) and investments foreign currencies (including the private placement currencies, borrowings in currency exposures. are used to reduce volatility arising from foreign purchase contracts and cross currency swaps Foreign currency forward GROUP 10% strengthening US dollar Sterling 10% weakening US dollar Sterling The following assumptions were made in respect of the sensitivity analysis above: affect the income statement only; - changes in the carrying value of derivative financial instruments not in hedging relationships other comprehensive income only; - changes in the carrying value of derivative financial instruments that are cash flow hedges impact hedges arising from movements in the euro to sterling - changes in the carrying value of derivative financial instruments designated as net investment assumed. ineffectiveness with no exchange rate are recorded directly in equity, NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 28. (f) 4.7 €m €m 2018 122.3 124.0 365.5 289.0 659.2 3,398.6 3,644.9 PARENT SB business otal collateral 2018 €m 899.8 229.1 225.1 1,354.0

GROUP 3.4 €m €m 58.2 2019 333.0 653.2 229.2 316.8 3,676.8 3,964.2 PARENT 2019 €m 125.1 310.3 1,042.1 1,477.5 GROUP FINANCIAL RISK MANAGEMENT AND FAIR VALUE (continued) AND FAIR VALUE RISK MANAGEMENT FINANCIAL Credit risk institutions, as well as credit and deposits with banks and financial and cash equivalents, derivative financial instruments Credit risk arises from cash and committed equity accounted investees, outstanding receivables and retail customers, including amounts due from exposures to wholesale from subsidiary undertakings. risk also arises in respect of amounts due transactions. In Parent credit Financial assets Trade and other receivables* Trade Financial Guarantees consist of financial guarantees, letters of credit and other commitments. The Group enters into various commitments. These Trading in derivatives is performed to mitigate financial risks and is executed in compliance with the Specification and Requirements of the Minister performed to mitigate financial risks and is executed in compliance with the Specification and in derivatives is Trading of Certain Companies and Other Bodies Act 1992, most recently in December 2017. Transactions for Finance issued under the aegis of the Financial must satisfy can transact and the associated requirements which ESB type of derivatives which ESB The Specification and Requirements outline the are controlled by putting in place robust dealing mandates with counterparties. The Group Dealing activities regarding each derivative counterparty. and speculative purposes. Exposures, related limits and compliance with the Minister’s Specification does not hold or trade derivative instruments for to deliver of such counterparties monitoring. The Group has not experienced any losses due to failure Requirements are subject to ongoing review and on their obligations. Treasury related credit risk (relating to cash and derivative instruments) Treasury The with whom it holds its bank accounts and transacts with in the financial markets. The Group is exposed to credit risk from the counterparties institution based on accepted credit ratings of not less than BBB- or equivalent. Group's policy is to limit its exposure to each financial Trade and other receivables Trade and other receivables in Parent include other receivables has been disclosed in note 17. Trade Wholesale and credit risk arising from trade and amounts due from subsidiary undertakings. below: The nominal values of such commitments are listed Cash and cash equivalents Derivative financial instruments not classified as a financial asset. *Prepayments have been excluded as they are as they commit the not be recognised on the Group balance sheet, credit risk exists in relation to these instruments though these obligations may Even they form part of the overall risk of the Group. companies in the event of a specific act and therefore Group to make payments on behalf of subsidiary Letters of credit Other Total Commodity credit risk (relating to derivatives) financial instruments that are entered into to hedge The Group also has credit risk associated with commodity positions. These arise from derivative of Certain Requirements (Financial Transactions energy and fuel price risks and are managed in accordance with the Minister's Specification and Companies and Other Bodies Act 1992). The Group establishes counterparty credit risk limits to restrict uncollateralised exposure. Net exposures, of bonds and guarantees, is required by E collateral requirements and compliance are monitored on an ongoing basis. Collateral, in the form for Differences (CfD) counterparties. T units from various parties, specifically in the form of Letters of Credit from certain power Contract held at year end 31 December 2019 was €42.2 million (2018: €35.2 million). The Group is cognisant of any changes in the creditworthiness of by negotiating adequate protections in advance in the counterparties, and all appropriate steps are taken to further secure the Group's position, both where indications exists of a deterioration in the underpinning contractual master agreements and active management of any exposures, particularly financial standing of counterparties. Financial guarantees NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 194 (e) 28. 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS

- - €m €m 71.7 975.5 177.2 988.4 398.6 (58.2) (122.3) 4,719.6 1,387.0 4,471.4 2,374.9 1,224.4 2,209.0 (3,676.8) (3,361.2) Fair value Fair value

- - €m PARENT €m PARENT 71.7 197 2019 Report Annual ESB 887.3 155.7 959.3 390.3 (58.2) (122.3) 4,719.6 1,349.6 4,471.4 2,337.5 1,114.7 2,099.3 (3,676.8) (3,361.2) Carrying value Carrying value

€m €m 505.6 132.0 772.6 626.3 727.4 (12.4) (47.2) (125.1) (852.7) (229.1) 5,351.6 5,991.0 5,589.4 5,364.7 5,989.2 5,594.6 (1,029.7) Fair value Fair value

GROUP €m GROUP €m 480.7 132.0 772.6 606.3 727.4 (12.4) (47.2) (125.1) (852.7) (229.1) 4,751.7 5,144.0 4,742.4 4,537.7 5,364.4 4,969.8 (1,029.7) Carrying value Carrying value Short-term borrowings Lease liabilities Non-current trade and other receivables Current trade and other receivables Cash and cash equivalents Net liabilities 31 December 2019 Long-term debt borrowings Total payables Current trade and other FINANCIAL RISK MANAGEMENT AND FAIR VALUE (continued) AND FAIR VALUE RISK MANAGEMENT FINANCIAL Fair value are as follows: the carrying amounts shown in the balance sheet liabilities carried at amortised cost together with values of financial assets and The fair Short-term borrowings borrowings Total Current trade and other payables Non-current trade and other receivables Current trade and other receivables Cash and cash equivalents Net liabilities carrying other payables are all due within one year, and have been provided for where impaired, their Current trade and other receivables and trade and value. their fair value is considered to be materially in line with value of these bonds are derived from observation of the values. The fair and NIE Networks Sterling bonds are regarded as Level 1 fair Eurobonds ESB values. The primary and debt are Level 2 fair most recent traded values for these bonds in liquid markets at the balance sheet date. Other borrowings of the future associated cash flows using the values is discounting valuation technique used for borrowings and other debt classified as Level 2 fair coupon discount curve of the relevant currency. zero Fair value - discount rates or LIBOR yield curve at the the applicable EURIBOR The interest rates used to discount future estimated cash flows, where applicable, are based on reporting date plus an appropriate constant credit spread. 31 December 2018 Long-term debt NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS . 28 (h) - - 1.4 1.4 €m €m €m €m loss gain gain 1.15 2018 58.06 64.51 85.90 before before before before before before before before 0.8945 taxation taxation taxation taxation Profit Profit Profit Profit . Where gain / (loss) - 9.7 €m €m €m €m loss gain gain 25.9 1.12 2019 Other Other Other Other 39.70 51.41 56.50 (19.1) income income income income 0.8508 31 December 2018 31 December 2018 31 December 2018 31 December 2018 gain / (loss) comprehensive comprehensive comprehensive comprehensive - - €m €m €m € m loss (2.0) (2.0) (loss) (loss) Profit Profit Profit Profit before before before before taxation taxation taxation taxation gain / (loss) - 8.3 0.1 €m €m €m €m loss gain gain (16.8) Other Other Other Other income income income income 31 December 2019 31 December 2019 31 December 2019 31 December 2019 gain / (loss) comprehensive comprehensive comprehensive comprehensive The sensitivity analysis provided above for the Group and Parent has been calculated as at 31 December 2019 using the following base commodity The sensitivity analysis provided above for the Group and Parent has been calculated as at 31 prices and foreign currency rates: Gas (Stg. p/therm) Wholesale Electricity Prices (€/MWh) Coal (US$/tonne) Foreign currency rate (US$ = €1) Foreign currency rate (Stg£ = €1) the contract was entered into and continues to be held for the purposes of receipt or delivery of the commodities in accordance with the Group’s of receipt or delivery of the commodities in accordance into and continues to be held for the purposes the contract was entered for as executory contracts. as own use contracts and are accounted or usage requirements, the contracts are designated expected sale, purchase amount set out taxation by the 2019 would impact equity and profit before in the price of gas and coal at 31 December A general increase of 10% the impact of the value of exchange rates remain constant and includes that all other variables, in particular foreign below. This analysis assumes the basis that all other variables remain constant. on opposite effect, A 10% reduction would have an equal and commodity swaps in place. Within its regular course of business, the Group routinely enters into sale and purchase contracts for commodities, including gas and electricity and purchase contracts for commodities, including of business, the Group routinely enters into sale Within its regular course Commodity price risk management Commodity and the resulting exposures to activities has been significant in recent years prices required for the Group's electricity generation The volatility of the fuel price contracts in relation basis. The Group has entered into forward commodity managed by the Group on a selective hedging fuel price movements are are valued 22 for further details. Forward fuel price contracts to note refer coal required for electricity generation activities, to the purchase of gas and balance sheet date, discounted prices of products of a similar nature, at the contracted and outstanding, and on the forward based on physical volumes on an appropriate forward interest curve. where necessary based FINANCIAL RISK MANAGEMENT AND FAIR VALUE (continued) AND FAIR VALUE RISK MANAGEMENT FINANCIAL GROUP Gain / (loss) due to 10% increase in gas and coal prices Gain / (loss) due to 10% increase in gas and coal PARENT Gain / (loss) due to 10% increase in gas and coal prices Gain / (loss) due to 10% increase in gas and coal A general increase of 10% in the Wholesale Electricity Price of the I-SEM at 31 December 2019 would impact other comprehensive income and profit Price of the I-SEM at 31 December 2019 would impact other comprehensive income A general increase of 10% in the Wholesale Electricity remain constant. A 10% set out below. This analysis assumes that all other variables, in particular foreign exchange rates taxation by the amounts before on the basis that all other variables remained constant. reduction would have an equal and opposite effect, GROUP Loss due to 10% increase in the Wholesale Electricity Price PARENT Gain / (loss) due to 10% increase in the Wholesale Electricity Price NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 196 (g) 28. 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS 0.9 3.2 1.1 €m €m 39.6 80.3 10.3 30.1 (0.2) (2.7) Total Total 198.0 229.2 124.0 (21.3) (89.5) (26.1) (24.9) (12.5) (113.7) (255.3) (217.9) ------€m €m Level 3 Level 3 199 2019 Report Annual ESB 0.9 3.2 1.1 €m €m 39.6 80.3 30.1 10.3 (0.2) (2.7) 229.2 124.0 198.0 (21.3) (24.9) (12.5) (89.5) (26.1) Level 2 Level 2 (217.9) (113.7) (255.3) - Currency swaps 31 December 2018 ASSETS Derivative financial instruments - Interest rate swaps - Currency swaps - Foreign exchange contracts - Forward fuel price contracts LIABILITIES Derivative financial instruments - Interest rate swaps Net Liability - Foreign exchange contracts FINANCIAL RISK MANAGEMENT AND FAIR VALUE (continued) AND FAIR VALUE RISK MANAGEMENT FINANCIAL hierarchy (continued) Fair value - Forward fuel price contracts PARENT 31 December 2019 ASSETS Derivative financial instruments - Interest rate swaps - Foreign exchange contracts LIABILITIES Derivative financial instruments - Currency swaps - Foreign exchange contracts - Forward fuel price contracts - Forward fuel price contracts Net asset NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 28. (i)

3.2 5.1 5.7 €m €m 10.5 83.8 93.4 39.6 13.4 81.3 (1.0) (2.4) 25.3 (3.8) Total (1.9) , Total 235.6 323.7 198.0 (21.3) (12.7) (24.9) (497.9) (558.3) (733.5) (146.7) (606.6) (595.4) (930.3) (295.4) ------

€m €m 49.0 10.5 83.8 13.0 13.4 81.3 17.2 94.7 (1.0) 107.3 (58.3) (57.3) (77.5) (77.5) Level 3 Level 3 - - - - -

3.2 5.1 5.7 €m €m 80.4 39.6 25.3 (2.4) (3.8) (1.9) 128.3 229.0 198.0 (89.4) (21.3) (12.7) (24.9) Level 2 Level 2 (546.9) (558.3) (675.2) (595.4) (217.9) (623.8) (852.8) When interpreting the positive and negative fair values of derivative financial instruments, it should be noted that they are matched with underlying When interpreting the positive and negative fair value of derivative financial instruments is determined by discounting the difference between the contractual forward price and offsetting risks. The fair rate. interest the current forward price for the residual maturity of the contract using a risk-free Net (liability) / asset - Inflation-linked interest rate swaps - Forward fuel price contracts - Forward electricity price contracts - Foreign exchange contracts - Currency swaps LIABILITIES Derivative financial instruments - Interest rate swaps Financial assets at fair value through profit or loss Financial assets at fair - Forward electricity price contracts - Forward fuel price contracts - Foreign exchange contracts - Currency swaps ASSETS Derivative financial instruments - Interest rate swaps 31 December 2018 Net (liability) / asset - Inflation-linked interest rate swaps - Forward fuel price contracts - Foreign exchange contracts - Currency swaps LIABILITIES Derivative financial instruments - Interest rate swaps Financial assets at fair value through profit or loss Financial assets at fair - Forward electricity price contracts - Forward fuel price contracts - Foreign exchange contracts 31 December 2019 ASSETS Derivative financial instruments - Interest rate swaps GROUP either directly (i.e. as prices) or indirectly (i.e. derived from prices);either directly (i.e. as prices) market data (unobservable inputs). asset or liability that are not based on observable - Level 3: inputs for the FINANCIAL RISK MANAGEMENT AND FAIR VALUE (continued) AND FAIR VALUE RISK MANAGEMENT FINANCIAL hierarchy Fair value to financial assets and by valuation method. The different levels relevant value, financial assets and liabilities carried at fair The table below analyses follows: as have been defined liabilities held by the Group for the asset or liability for identical assets and liabilities, that are observable than unadjusted quoted prices in active markets - Level 2: inputs, other NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 198 (i) 28. 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS

- - 2.1 8.5 7.3 €m €m 49.0 49.0 17.2 (3.8) Total 117.3 (12.0) (66.9) (35.3) taxation gain / (loss) Profit before Profit before , carbon and gas - 1.8 9.7 €m 36.6 €m (57.3) (25.4) (44.3) (44.3) (26.1) (16.8) (77.5) 16.2 Other (19.1) income 201 2019 Report Annual ESB 31 December 2018 Forward fuel price contracts gain / (loss) comprehensive -

€m 93.3 58.1 82.8 82.8 30.5 81.3 - - (28.1) (40.5) (13.5) (18.5) €m Forward contracts Profit before taxation electricity price gain / (loss) - - - 1.3 2.9 €m 22.2 10.5 10.5 13.4 (1.0) (12.0) or loss 8.3 €m at fair value at fair (16.8) Other through profit income Financial assets 31 December 2019 gain / (loss) comprehensive

FINANCIAL RISK MANAGEMENT AND FAIR VALUE (continued) AND FAIR VALUE RISK MANAGEMENT FINANCIAL hierarchy (continued) Fair value value measurements 2019 for fair January 2018 to the year ended 31 December a reconciliation from opening balances at 1 The following table shows value hierarchy: in Level 3 of the fair GROUP Balance at 1 January 2018 Additions Total gains / (losses): Total - in profit or loss - in OCI Settlements Balance 31 December 2018 - net Balance 1 January 2019 Additions Total gains / (losses): Total - in OCI Settlements Balance 31 December 2019 - net inputs for longer term periods. Sensitivity analysis - Level 3 fair values values of forward fuel and electricity price contracts, reasonably possible changes at the reporting date to one of the significant unobservable For the fair inputs, holding other inputs constant, would have the following effects: Financial assets at fair value through profit or loss are carried at fair value. Where applicable, valuations are based on the most recent independent value through profit or loss are carried at fair Financial assets at fair any other known and relevant factors. information available at year end, taking into account enterprise value using one of the following methodologies: Unquoted investments are valued by deriving an • the price of a recent investment; • revenue multiple; • cost, less any required provision; • realised value. value through profit or loss techniques, with a number of unobservable inputs, all financial assets at fair As this requires the use of model based valuation in the current year. have been categorised as Level 3 investments whose value hierarchy relate to long-term contracts price contracts included at Level 3 in the fair Forward fuel price contracts and forward electricity including assumed forward electricity valuations are based on a number of forward price assumptions, with some unobservable inputs, Loss due to 10% increase in the Wholesale Electricity Prices GROUP Gain due to 10% increase in gas prices NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 28. (i) Inter relationship between significant Inter relationship between and fair value unobservable inputs measurement The estimated fair value would increase / The estimated fair (decrease) if Wholesale Electricity Price was higher / (lower). in gas prices Generally a change in is accompanied by a directionally similar change Wholesale Electricity Price. Novusmodus typically assess the value of investments based on its expectations of the proceeds which could be realised in a disposal. See note 7 and 15. This value will usually be driven by a number of inputs including the ability of the investee to grow its revenue and associated margins leading to thus higher values. higher EBITDA Significant unobservable inputs Forward electricity prices Forecast annual revenue growth rate. Forecast gross margin Valuation techniques Valuation Level 2 - Present valuation of future cash flows Level 2 - Present valuation observable inputs and contracted using market value. discounted back to present contracts is value of forward fuel Level 2 - The fair to gas, coal and carbon determined by reference prices with the resulting value discounted to present values. value of some specific forward Level 3 - The fair fuel and electricity contracts are determined by prices which are to forward electricity reference unobservable. Level 2 - Independent valuations are used and validated using the present valuation of expected the cash flows using the interest rate yield curve of relevant currency. curve is based on using the The zero-coupon interest rate yield curve of the relevant currency. value through profit or Financial assets at fair value. Where applicable, loss are carried at fair valuations are based on the most recent information available at the period end, taking into account any other known and relevant factors. Unquoted investments are valued by deriving an enterprise value using one of the following methodologies: • the price of a recent investment; • revenue multiple; • cost, less any required provision; • realised value. Measurement of fair values - valuation techniques and significant unobservable inputs values - valuation techniques and significant Measurement of fair unobservable inputs used. values, as well as the significant 2 and Level 3 fair the valuation technique used in measuring Level The following table shows Type Fair value hierarchy (continued) Fair value FINANCIAL RISK MANAGEMENT AND FAIR VALUE (continued) AND FAIR VALUE RISK MANAGEMENT FINANCIAL Currency swaps, foreign Currency swaps, foreign exchange contracts and interest rate swaps Forward fuel and electricity price contracts Inflation-linked interest rate swaps Financial assets at value through fair profit or loss NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 200 (i) 28. 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS

------6.5 1.3 €m 2018 126.6 134.4 . ------0.2 €m the year 2019 242.7 242.9 203 2019 Report Annual ESB Equity advanced during - - - 2.0 0.3 €m 33.9 13.9 28.6 3&4 2018 107.3 186.0

- - - - - 0.2 0.1 €m 17.5 2019 106.0 123.8 as at 31 December Amounts owed (to) / from ------7.5 €m 18.5 26.0 2018 2 ------9.3 €m services 23.4 32.7 2019 Purchase of goods / - - - - 8.3 3.3 0.3 2.1 0.1 €m 14.1 2018 1 - - - - 9.4 1.2 0.4 2.6 0.2 €m 13.8 2019 / services Sale of goods

5 ESB has purchased power and services in relation to telecoms and maintenance during the year from equity accounted investees as set out in the above table. has purchased power and services in relation to telecoms and maintenance during the year from equity accounted investees ESB of any impairments),Amounts owed (to) / from equity accounted investees include shareholders loans (shown net interest on these loans and trade and Emerald Holdings Ltd. from Tilbury Green Power Included in the bad debt provision is an amount of €1.3 million in respect of the balances owed of which €93.0 million has been advanced as a short-term shareholder loan as of €93.0 million, committed to provide capital funding to SIRO Ltd ESB ESB provided electricity sales, management and other professional services during the year to equity accounted investees as set out in the above table. provided electricity sales, management and other professional services during the year to equity accounted investees ESB Equity accounted investees Tilbury Green Power Holdings Tilbury Green Power Ltd. GROUP Raheenleagh Power DAC Raheenleagh Power NNG Windfarm Holdings Ltd. NNG Windfarm Oweninny Power DAC Oweninny Power Aldeburgh Offshore Wind Holdings Ltd. Emerald Bridge Fibres DAC SIRO Ltd. Terra Solar Ltd. Terra Kingspan ESB DAC Kingspan ESB Total 5 1 3 4 receivable and payable balances of €1.0 million (2018: €2.6 million). investees relates to Oweninny Interest receivable on loans to equity accounted €nil (2018: €1.6 million). €1.4 million (2018: €1.1 million) and Aldeburgh Offshore Wind Holdings Ltd For further details on the impairment DAC Power see note 15. and Emerald Bridge Fibres DAC Holdings Ltd charges in relation to Tilbury Green Power Bridge Fibres DAC. down as at 31 December held by SIRO of which €123.0 million was drawn has guaranteed a 50% share of a €200.0 million loan facility disclosed above. ESB 2019 (2018: €28.0 million). in respect of this guarantee amounted to €1.3 million (2018: €nil). Fees payable by SIRO to ESB and conditions Terms course of business. The outstanding balances includedSales to and purchases from equity accounted investees and associates are conducted in the ordinary investees and associates are unsecured andin receivables and payables as at the balance sheet date in respect of transactions with equity accounted party receivables and payables. settlement arises in cash. No guarantees have been either requested or provided in relation to related RELATED PARTY TRANSACTIONS (continued) TRANSACTIONS PARTY RELATED interests Board members' year. or its subsidiaries at any time during the interest in ESB Board members had no beneficial under ESOP, Other than agreed allocations ESOP to note 32 for details of Please refer €0.1 million) on behalf of ESOP. paid fees of €0.1 million (2018: December 2019, ESB During the year ended 31 repurchase. ESOP Pensions Kingdom. See note 9 and note of Ireland, Northern Ireland and the United of pension schemes for staff in the Republic The Group operates a number 23 for further details. Subsidiary undertakings of €113.3 consulting and other services, including rental services Parent purchased engineering, December 2019, ESB During the year ended 31 from its subsidiaries. million (2018: €99.8 million) services, as These sales mainly relate to management of €350.3 million (2018: €170.6 million) to subsidiaries. Parent had sales During the year, ESB Charges and sales of electricity and gas. well as electricity charges including Use of System interest of €68.4 million (2018: €55.6 Parent earned interest of €55.5 million (2018: €43.5 million) from subsidiaries and paid During the year, ESB million) to subsidiaries on inter-company loans. to its subsidiaries. These payables mainly Parent had gross amounts payable of €4,258.0 million (2018: €4,044.8 million) At 31 December 2019, ESB and loaned to ESB Finance DAC and other amounts due to subsidiaries, borrowings raised by ESB relate to amounts held on deposit for subsidiaries and consulting services. Parent and amounts due in respect of engineering its subsidiaries (net of provisions). Parent had balances receivable of €3,065.3 million (2018: €2,937.4 million) from At 31 December 2019, ESB These total and loans to subsidiaries as well as electricity charges including Use of System Charges. The receivables mainly relate to management services by subsidiary undertakings at 31 December 2019 was €396.5 million (2018: €365.3 million) impairment provision in respect of amounts owed 2 NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 30. 2.7 €m €m 85.7 SB 2018 2018 355.4 358.1 , in SB in the High fore it is not €m €m 12.4 2019 2019 397.6 306.3 318.7 relation to the role of owner of the transmission system. Banks owned by the Irish State transacts with certain Irish banks which have become wholly or partially controlled by the Irish Government. All of In the normal course of business ESB with any such banks during the had no material concentration of borrowings transactions with such banks are on normal commercial terms. ESB ESB's 18 was on deposit with such banks. period or at 31 December 2019. A portion of the cash and cash equivalents as disclosed in note RELATED PARTY TRANSACTIONS PARTY RELATED Ultimate controlling party 85.6% of the issued share capital is held by the Minister for Finance (whose shares now stand transferred to the The Group is a state-owned company. Minister for Public Expenditure and Reform), a further 10.1% of the issued share capital is held by the Minister for Communications, Climate Actions retaining 4.3% of the stock (see note 19 for further details).and Environment and the ESOP Related party disclosures is exempt from disclosing related party transactions with another entity that is a related party Group In accordance with Paragraph 25 of IAS 24, ESB the Group and that entity. solely because the Irish Government has control, joint control or significant influence over both Semi-state bodies controlled by the Irish Government such as , Bord In the ordinary course of business, the Group purchased/sold goods and services from entities na Móna, EirGrid and Coillte Teoranta. peat and the utilisation of ancillary services for the running The Group operates a long-term agreement with Bord na Móna in relation to the purchase of to €60.9 million (2018: €60.2 million) and amounts due to of power stations. Receipt of these services in the year ended 31 December 2019 amounted these entities at 31 December 2019 amounted to €nil (2018: €3.1 million). the Commission for Regulation of Utilities (CRU) An infrastructure agreement is in place between the Group and EirGrid under the auspices of In addition to the UCC claim ESB has, since the judgement of the High Court in the UCC case, been served with 388 sets of proceedings relating to the has, since the judgement In addition to the UCC claim ESB amounts claimed in relation to these proceedings have not yet been received and there flooding in Cork in November 2009. Details of In October 2018 the Supreme Court granted UCC leave to appeal the judgement of the Court of Appeal. The appeal was heard by the Supreme Court leave to appeal the judgement of the Court of Appeal. The appeal was heard by the Supreme In October 2018 the Supreme Court granted UCC end of was reserved. It is hoped that the judgement of the Supreme Court will be delivered by the in early July 2019 and the judgement of the Court appeal. the High Court and Court of Appeal cases is stayed pending the outcome of the Supreme Court Quarter 1 2020. The issue of the legal costs of have arisen in the normal course of business. While any Other than as disclosed above, a number of other lawsuits, claims and dispute with third parties Board members believe that there were no contingent liabilities which would have a material the litigation or dispute has an element of uncertainty, on the Group's financial position. adverse effect ESB appealed the decision to the Court of Appeal. On 20 March 2018 the Court of Appeal delivered its judgement which held that ESB is not liable for 2018 the Court of Appeal delivered its judgement which held that ESB appealed the decision to the Court of Appeal. On 20 March ESB any damage caused to UCC's property by the flood. believes that it is more probable than not that the judgement of the Court of Appeal received, ESB On the basis of the internal and external legal advice no provision has been made for such claims in the financial statements. will be upheld and accordingly, Fuel contract commitments in place for different periods up to 2022. These arrangements provide for pricing changes in lineThere are a number of long-term gas supply arrangements appropriate, embedded derivatives have been separated and valued in accordance with IFRS 9. with changes in inbuilt energy market indicators. Where Other disclosures 2009, Aviva as University College Cork’s (UCC) insurer pursued a legal action against E Following on from flooding in Cork in November liable for the damage caused by the flood but damage. The High Court judgement found ESB Court seeking recovery of €19 million for property UCC's contributory negligence. discounted the award to UCC by 40% to reflect E (should the Supreme Court not uphold the decision of the Court of Appeal) at this time. However, possible to make a reliable estimate of their cost actions, including the Aviva / UCC action, would and related costs for all of the awarded, if any, does not anticipate that the total amount of damages exceed its applicable insurance cover. Contracted for Share of equity accounted investees commitments Share of equity accounted Intangible assets contracted for Intangible assets contracted assets contracted for Tangible contracted for Total COMMITMENTS AND CONTINGENCIES COMMITMENTS Capital commitments NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 202 (c) (a) (b) 30. 29. 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS 205 2019 Report Annual ESB February 2020. th ESB ESOP TRUSTEE LIMITED ESB ESOP and the (ESOT) Trust Employee Ownership to the ESB as Trustee with a €1 investment, during 2001, by ESB was incorporated Limited Trustee ESOP ESB over has no ability or rights to exert control Limited, ESB Trustee Approved Profit Sharing Scheme (APSS). ESOP ESB of ESB Under the terms of the creation representing ESB with four directors Trustee is chaired by an independent professional Company The Trustee of the Company. the assets or management assets and over the of ESB which substantially hinder the exercise of the rights As such, severe restrictions representing ESB. employees and two directors Limited are Trustee ESOP for ESB Financial Statements, the financial statements exist. In accordance with IFRS 10 Consolidated management of the company Group. results of the ESB not consolidated with the internal markets. of capital stock in future ESOP entered into an agreement to support the acquisition December 2015, ESB During the year ended 31 €0.3 provision of up to a value of €25.0 million. An ESOP Trustees match the acquisitions made by the ESOP committed to ESB As part of the agreement 2019, During Trustee. ESOP in relation to the capital stock repurchase by the was recognised in the 2019 financial statements million (2018: €0.9 million) €4.4 million (2018: €4.4 million) arose from the consequently a capital redemption reserve of capital stock and continued the repurchase of the ESOP ESB the of €4.6 million (2018: €4.9 million) and represents share capital (2018: 4.4 million) for a consideration of the 4.4 million ESOP purchase and cancellation the ESOP provision by €4.6 million and at 31 December 2019, repurchase ESOP capital cancelled. The repurchase reduced the nominal amount of the share €7.5 million (2018: €11.8 million). 27) recognised in other provisions amounts to repurchase provision (note POST BALANCE SHEET EVENTS are set out in note 19. Details of dividend declared since the year end July 2035. successfully raised a GBP £325 million, 1.875% fixed rate note maturing on 21 On 21 January 2020, ESB the directors believe require adjustment to or disclosure in the financial statements. There are no other post balance sheet events that OF FINANCIAL STATEMENTS APPROVAL 27 The Board approved the financial statements on NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 32. 33. 34. 0.4 3.6 3.2 €m 2018 0.4 4.1 3.7 €m 2019

ion more broadly, and the and the accounting profession more broadly, (i) The accounting for supply contributions area remains under active consideration within the industry be impacted by the outcome of these ongoing discussions. accounting treatment ultimately adopted by the Group in this area could therefore Other disclosures, please refer to note 29 for further details of estimates and judgements regarding ongoing legal claims. (h) Other disclosures, please refer The measurement of a number of assets, liabilities, income and costs at year end which require a high degree of estimation and judgement, including, the(f) The measurement of a number of assets, liabilities, income and costs at year end which require a high plant lives of property, the cost of fuel consumed, the useful calculation of unbilled electricity income and trade and other receivables, the valuation of fuel stocks, have not yet been received. These items are estimated inand equipment and also accruals for goods received or work carried out for which supplier invoices Standards. accordance with the accounting policies of the Group and current International Financial Reporting not be paid will due to ESB provide services to around 1.4 million individuals and businesses, mainly on credit terms. It is known that certain debts (g) ESB of a small number of customers. Estimates, based on historical experience are used in determining the level of debts that is believed will not through the default issues (see note 17). as the current state of the Irish economy and particular industry be collected. These estimates include such factors Future costs required to settle current provisions and employee related liabilities, such as the power station closure costs and severance obligations. These costs required to settle current provisions and employee related liabilities, such as the power station closure costs (e) Future liabilities are disclosed in notes 23, 24 and 27. (d) As described in note 28 section (i), and assumptions which on a number of judgmental factors the valuation of certain financial instruments is based have been classified as level 3 financial instruments, under the meaning of IFRS 13 Fair Value of necessity are not based on observable inputs. These Measurement. economic factors associated with these assets. these with associated on the estimated cash flows expected to be generated by the asset and is based on an external review ofFor power generation assets, value in use is based factors carbon and capacity prices (where applicable) and the timing and extent of operating costs and capitalforecast power generation and forecast power, gas, the current market assessments of the time value their present value using a pre-tax discount rate that reflects expenditure. These cash flows are discounted to of forecasted revenues and the timing of expenditure requires judgement and is dependent on theof money and the risks specific to the asset. The estimation economic The employees in NIE Networks are entitled to membership of the NIE Networks Scheme which has both defined benefit and defined contribution and defined benefit of the NIE Networks Scheme which has both defined (b) The employees in NIE Networks are entitled to membership actuaries. This obligation involves judgements made in conjunction with independent for retirement benefits arrangements. The estimation of and accounting the life expectancy of scheme members, future salary and pension increases and inflation as well asinvolves estimates about uncertain future events including and a sensitivity analysis of a change in these assumptions are described in note 23. discount rates. The assumptions used by the Group of Assets, of long-lived assets and associated goodwill, as described in note 14 and as described (c) The value in use, in accordance with IAS 36 Impairment below: (see note 24). note judgement. The Board is satisfied that the appropriate accounting treatment, - pension liability requires the exercise of (a) The accounting for the ESB in the notes to the financial statements its existing committed obligations, as set out is to reflect Benefits, determined in accordance with IAS 19 - Employee (see It should be noted that the impact of variation in some assumptions and estimates can have a particularly material impact on the reported results. These It should be noted that the impact of variation in some include but are not limited to: The key management compensation amounts disclosed above represent compensation to those people having the authority and responsibility for compensation to those people having the authority amounts disclosed above represent The key management compensation board members. the remuneration of senior executives and the activities of the Group. These include planning, directing and controlling AND JUDGEMENTS ESTIMATES and estimates to be made. Thesea significant number of judgemental assumptions and Consolidated financial statements requires The preparation of Parent the balance sheet. Such estimates and the valuation of the assets and liabilities in expenses contained within the income statement impact on the income and under the of future events that are believed to be reasonable including expectations on historical experience and other factors, and judgements are based to continual re-evaluation. circumstances and are subject Post-employment benefits Post-employment Salaries and other short-term employee benefits Salaries and other short-term RELATED PARTY TRANSACTIONS (continued) TRANSACTIONS PARTY RELATED compensation Key management NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 204 31.

30. 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS Finance Dormant Dormant Non-trading Engineering Consultancy Supply company Holding company Holding company Power generation Power generation Power Power generation Power Power generation Power Power generation Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Computer services Telecommunications Facility management Nature of business Business development Business development Carbon emission reduction 207 2019 Report Annual ESB Engineering and consultancy Engineering and consultancy Engineering and consultancy Clean technology investment Power transmission and distribution Power Management and operation services Operations and maintenance services Operations and maintenance Electricity generating assets investment Provision of energy and electromobility services Provision of energy and Business and management consultancy activities Business and management consultancy activities Business and management 8 8 8 8 10 10 10 89 91 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 85.9 Group share % 2 4 6 2 6 6 6 2 6 2 4 9 9 2 5 2 9 4 2 9 9 2 4 4 1 2 1 2 2 2 2 2 5 2 2 2 2 27 27 25 10 26 11 30 12 17 office Registered Registered Indirect subsidiary (continued) SUBSIDIARY, EQUITY ACCOUNTED INVESTEES AND ASSOCIATE UNDERTAKINGS (continued) UNDERTAKINGS ASSOCIATE INVESTEES AND EQUITY ACCOUNTED SUBSIDIARY, Company name Sillahertane Energy Project Two Ltd. Sillahertane Energy Project Two REG Knockodhar Ltd. REG REG Greenburn Ltd. REG Planet 9 Energy Ltd. Northern Ireland Electricity Networks Ltd. Orliven Ltd. Northern Ireland Electricity Ltd. NIE Networks Services Ltd. NIE Ltd. Mountainlodge Power DAC. Mountainlodge Power NIE Finance PLC. Mount Eagle Wind Farm Ltd. Knottingley Power Ltd. Knottingley Power Kirk Hill Wind Farm Ltd. Kirkan Wind Farm Ltd. Kerry Wind Power Ltd. Wind Power Kerry Hunter's Hill Wind Farm Ltd. Hibernian Wind Power Ltd. Hibernian Wind Power Greystone Knowe Wind Farm Ltd. Greengate Energy Recovery Ltd. Gort Windfarms Ltd. Gort Windfarms Glendye Wind Farm Ltd. Geothermal International Polska Sp Zoo (Spolka Z Organiczona Sp Zoo Geothermal International Polska Odpowiedzialnoscia). Geothermal International Ltd. Garvary Wind Farm Ltd. Garvagh Glebe Power Ltd. Garvagh Glebe Power ESBI Luxembourg S.A.ESBI Facility Management UK Ltd. ESBII UK Ltd. ESBII ESBI Engineering and Facility Management (Botswana) ESBI (Proprietary) Ltd. ESBI Engineering & Facility Management (Liberia) Ltd. ESBI Engineering and Facility Management Ltd. ESBI ESBI Contracting Ltd. ESBI ESBI Consultants Ltd. ESBI ESBI Carbon Solutions Ltd. ESBI Computing Ltd. ESBI ESB Trading Ltd. Trading ESB Wind Development Ltd. ESB ESB Services BV (Holland).ESB Solar (IRE) Ltd. ESB Solar (NI) Ltd. ESB Ltd. Telecoms ESB ESB Innovation ROI Ltd. ESB International (Malaysia) Sdn. Bhd ESB ESB Novus Modus GP Ltd. ESB ESB Power Generation Holding Company Ltd. Power ESB NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 35. Finance Dormant Dormant Dormant Supply company Holding company Holding company Holding company Holding company Holding company Holding company Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power generation Power Power distribution Power Nature of business Property management Property management Business development Electricity and gas sales Electricity and gas sales Electricity and gas trading Engineering and consultancy Pension scheme administration Pension Provision of energy and electromobility services 8 8 8 75 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Group share % 2 2 4 4 2 2 4 2 4 2 4 4 9 5 2 5 5 2 3 5 2 9 2 4 2 6 4 9 7 7 7 7 2 5 8 2 2 2 2 4 2 4 office Registered ESB Independent Energy (NI) Ltd. ESB Ltd. Independent Generation Trading ESB Innovation UK Ltd. ESB ESB Group (UK) Ltd. ESB Independent Energy Ltd. ESB ESB Electric Ireland Ltd. ESB ESB Energy Ltd. ESB ESB Commercial Properties Ltd. ESB ESB Asset Development (UK) Ltd. ESB ESB 1927 Ltd. ESB EC02 Cambrian Ltd. EC02 Devon Wind Power Ltd. Devon Wind Power Dell Wind Farm Ltd. Curryfree Wind Farm Ltd. Crockahenny Wind Farm DAC. (NI) Ltd. Crockdun Windfarm Crockagarran Windfarm Ltd. Crockagarran Windfarm Corvoderry Wind Farm Ltd. Corby Power Ltd. Corby Power Coolkeeragh ESB Ltd. Coolkeeragh ESB Clogherhead Offshore Wind DAC. Clogherhead Offshore Wind DAC. Chirmorie Wind Farm Ltd. Castlepook Power DAC. Castlepook Power Carrington Power Ltd. Carrington Power Cappawhite Wind Ltd. Cappawhite Wind Ltd. Capital Pensions Management Ltd. Capital Pensions Cambrian Renewable Energy Ltd. Blarghour Wind Farm Ltd. Airvolution Energy Ltd. (UK) Airvolution Energy Ltd. Airvolution Energy (Tarvie) Ltd. Airvolution Energy (Tarvie) Airvolution Energy (Shotts 2) Ltd. Airvolution Energy (Car Ban Wind Farm) Ltd. Indirect subsidiary Airstream Wind Energy Ltd. ESBNI Ltd. ESBNI ESB Networks DAC. ESB ESB International Ltd. ESB ESB International Investments Ltd. International Investments Ltd. ESB ESB Financial Enterprises Ltd. ESB ESB Finance DAC. ESB ESB Electric Ireland Ltd. (UK) Electric Ireland Ltd. ESB ESB Energy International Ltd. Energy International Ltd. ESB Direct subsidiary (UK) Electric Ireland Ltd. Subsidiary undertakings Company name SUBSIDIARY, EQUITY ACCOUNTED INVESTEES AND ASSOCIATE UNDERTAKINGS ASSOCIATE INVESTEES AND EQUITY ACCOUNTED SUBSIDIARY, NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 206 35. 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS

209 2019 Report Annual ESB

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, Northamptonshire, MN17 1Q7 , Northamptonshire, MN17

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Atria One, 144 Morrison Street, Edinburgh, United Kingdom EH3 8EX Atria One, 144 Morrison Street, Edinburgh, ESB International, One, Dublin Airport Central, Dublin Airport, Cloghran, Co. Dublin, K67 XF72 Dublin Airport, Cloghran, Co. Dublin, K67 International, One, Dublin Airport Central, ESB Gateway Two Corby Parkway, Mitchell Road, Phoenix Services E Tricor 6 UL BT47 , 2 Electra Road, Maydown, BT9 5HT 120 Malone Road Belfast, Street, London, W1F 7TA Palladium House, 1-4 Argyll Court, Dublin 2, D02 CV61 Clanwilliam House, Clanwilliam 22-24 King Street, Maidenhead, SL6 IEF W Shellingwood House, Westwood Office Park, Gaborne, Botswana Deloitte House, First Floor, Plot, 64518, Fairgrounds Bank, Lala Raja Laut, 50350, K 22nd Floor, Menara, EON Blue Area, Islamabad, Pakistan 94-W, 3rd Floor, AAMIR Plaza, Jinnah Avenue, Dublin Bay ESB 43 Merrion Square, Dublin 2, D02 R997 T Level 1, Menara Yavasan, Lumpur, Malaysia Raja Laut, 50350 Kuala 10th Floor, Wisma Havela, Thakardos, No 1 Jalan Park, Clonshaugh, Dublin 17, D17 A662 Clonshaugh Business and Technology 24, D24 DKP4 3015, Lake Drive, Citywest Business Park, Dublin Building Bramah Avenue, East Kilbride, Glasgow, G75 0RD Kelvin Park, Model Farm Road, Cork, T12 PW29 Cork Business and Technology (Cayman) Limited, Cricket Square, Hutchins Drive, P Company C/O Codan Trust Minnesota, 55431 Avenue South, Minneapolis, 9231 Penn 6, D06 V8N4 57 Hollybank Avenue Lower, Ranelagh, Dublin Parkova 21 lok 7, 00-759 W Geothermal International Polska, Ruppert, L 6, Rue Eugene E House, 2nd Floor Edgeborough 8AD EC4N St. Swithin's Lane, 4th Floor, London, England, Windmill Hill Business Park, Whitehall Way 25 Benson Street, East Corner of Benson & McDonald Streets Monrovia, Liberia 33 Fitzwilliam Square, Dublin 2

SUBSIDIARY, EQUITY ACCOUNTED INVESTEES AND ASSOCIATE UNDERTAKINGS (continued) UNDERTAKINGS ASSOCIATE INVESTEES AND EQUITY ACCOUNTED SUBSIDIARY, 32 ESB's principal place of business is T ESB's 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS 35. Notes: activities Dormant Dormant Holding company Holding company Holding company Holding company Holding company Holding company Power generation Power generation Power generation Power generation Power generation Power generation Power generation Power Power generation Power generation Power generation Power generation Power generation Power generation Power generation Power generation Power Power generation Power generation Power Power generation Power Fibre to the building Telecommunications Nature of business Staff shareholding scheme Clean technology investment Clean technology investment Clean technology investment Clean technology investment Clean technology investment Clean technology investment Business and management consultancy 5 7 4 50 50 50 50 50 50 50 50 50 50 50 50 47 47 25 30 4.5 100 100 100 100 100 100 100 100 100 100 12.5 12.5 36.2 17.2 34.3 42.3 Group share % 4 4 2 2 4 4 4 2 2 2 2 2 2 2 2 2 4 4 14 28 28 29 29 32 32 24 18 19 20 21 31 16 13 23 22 15 office Registered Company name SUBSIDIARY, EQUITY ACCOUNTED INVESTEES AND ASSOCIATE UNDERTAKINGS (continued) UNDERTAKINGS ASSOCIATE INVESTEES AND EQUITY ACCOUNTED SUBSIDIARY, (continued) Indirect subsidiary Synergen Power Ltd. Synergen Power Tilbury Energy Recovery Limited Tilbury Energy Recovery Holding Company Limited Tilbury Energy Recovery Ltd. Power Tullynahaw Ltd. Waterfern Wind Farm (Holdings) 2 Ltd. Durham West Wind Farm (Holdings) Ltd. Durham Ltd. West Wind Farm Ltd. Woodhouse Equity accounted investees Aldeburgh Offshore Wind Holdings Ltd. Aldeburgh Offshore Wind Investments Ltd. Emerald Bridge Fibres DAC. Galloper Wind Farm Holding Company Ltd. Galloper Wind Farm Ltd. DAC. Kingspan ESB Neart Na Gaoithe Wind Farm Holdings Ltd. Neart Na Gaoithe Offshore Wind Ltd. DAC. Oweninny Power Holdings DAC. Oweninny Power 2 DAC. Oweninny Power DAC. Raheenleagh Power SIRO Ltd. Sundew Solar DAC. Holdings Ltd. Tilbury Green Power Ltd. Tilbury Green Power Associate undertakings Solar Ltd. Terra Investments Cylon Controls Ltd. Ltd. Endeco Technologies Ltd. Heliex Power Nualight Ltd. Oriel Wind Farm Ltd. Pesaka Technologies. Pesaka Rousch Pakistan Power. TenKsolar Inc. TenKsolar VantagePoint Cleantech Partners II, L.P. VantagePoint Other Ltd. Trustee ESOP ESB NOTES TO THE FINANCIAL STATEMENTS THE FINANCIAL TO NOTES STATEMENTS ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 208 35. 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS 211 2019 Report Annual ESB 20. Lost Time Injuries (LTIs) 20. Lost Time for injury causing an absence A work related counting from theone or more working days, the person returns to before day after the injury, normal or restricted work. 21. Megawatt (MW) of power equal to 1 Megawatt, being the amount million watts. 22. Megawatt Hours (MWh) amount of energyMegawatt hours, being the million watts of power equivalent to delivering 1 for a period of one hour. 23. Novusmodus Fund is a venture capital fund The Novusmodus Fund in which seed capital is invested into emerging technologies. 24. OHSAS 18001 OHSAS 18001 Occupational, Health and Safety Management Certification is an international standard which provides a framework to identify, control and decrease the risks associated with health and safety within companies. Platform 25. Over the Counter Trading Financial instruments (specifically electricity price contracts) which enable participants in the SEM electricity price to reduce their risk (and therefore volatility for their customers) by trading these products directly (over the counter) with each other, rather than via an intermediary or through an exchange, in order to hedge their exposure to movements in the wholesale price of electricity. 26. P1 Incidents Incidents which have a high probability of causing high consequence injuries such as amputation, loss of eye, multiple injuries, fatality, major fracture, 2nd/ 3rd degree burns, being unconscious (major / serious), Road Traffic excessive Collision reportable injuries, fatalities, material damage. Go 27. Pay As You products allows users to control Go Pay As You electricity usage and track usage from a monitor to enable them to know how much they are spending on electricity at all times. 28. Price Review 4 (PR4) Regulatory periods are of 5 years' duration and the Price Control Review (PR4) covers the period 2016 to 2020 and sets out the total regulated 10. Energy for Generations Fund 10. Energy the Energy launched 2013, ESB In November a corporate responsibility for Generations Fund, over €1 million perinvestment which will see of community and year disbursed across a range issues-based initiatives. Agency 11. Environmental Protection (EPA) Agency is anThe Environmental Protection established under theindependent public body Agency Act, 1992. It is Environmental Protection protection andat the front line of environmental policing. 12. Gigabit (Gb/s) Gigabit (Gb/s) is a unit of data transfer rate equal to: 1,000 megabits per second 13. Gigawatt (GW) Gigawatt, being the amount of power equal to 1 billion watts. 14. Gigawatt Hours (GWh) Gigawatt hours, being the amount of energy equivalent to delivering 1 billion watts of power for a period of one hour. 15. Great Britain (GB) and Scotland. England, Wales 16. Impairment An impairment charge is determined when the carrying value (book value) of assets exceeds its recoverable amount. 17. Integrated Single Electricity Market (I-SEM) is a development Model Target This European flowing from the Third Energy Package and is an umbrella term for a detailed list of new common guidelines, procedures and codes to be put EU wholesale in place to enable a single EU-wide electricity market. The implementation of these guidelines, procedures and codes common EU will allow electricity and gas to be across the EU traded freely across the Union (JV) 18. Joint Venture A company or other entity which is controlled jointly with other parties. 19. Liquefied Natural Gas (LNG) natural gas, a clear, colourless, non-toxic Liquefied liquid that forms when natural gas is cooled to -162ºC (-260ºF).

A)

Dark Spread EBITDA Electricity Market Reform (EMR) British Electricity Trading and British Electricity Trading Brexit Commission for Regulation of Utilities Contracts for Difference (CfDs)

4. The difference between the price of a unit of electricity and the cost of the coal used to generate it. 8. interest, taxation, depreciation, Earnings before impairments (including non-trading net impairment losses on financial assets), amortisation and revenue from supply contributions. 9. (EMR) is a UK Electricity Market Reform Government policy to incentivise investment improve the in secure, low-carbon electricity, and security of Great Britain’s electricity supply, improve affordability for consumers. 1. Balancing Market/Balancing 1. Balancing Mechanism Balancing MechanismThe Balancing Market or to balance electricity supply (BM) allows the TSO time. and demand close to real 2. Arrangements (BETT Transmission and Transmission British Electricity Trading is the wholesale Arrangements (BETTA) in Great Britain (GB).electricity market operating 3. Brexit is the departure of the United Kingdom Union. from the European The Commission for Regulation of Utilities, (CRU) is the independent regulator of water and energy in the Republic of Ireland. 5. A contract for difference (CfD) is a contract between two parties, a buyer and a seller, stipulating that the buyer will pay to the seller the difference between the current value of an asset and its value at contract time. If the difference is negative, the seller pays instead of the buyer. 6. DAM The Day-Ahead Market allows market participants to buy or sell wholesale electricity It is the the operating day. one day before largest market for trading power and the bigest component of the wholesale electricity price. 7. GLOSSARY ayment P ayments P SB is a signatory to this Code ayment in ayment P .I. No. 580 of 2012) as amended by European Communities amended by European .I. No. 580 of 2012) as ommunities (Late ommunities ransactions) Regulations, of (S.I. No. 580 2012 Transactions) ransactions) (Amendment) Regulations (Amendment) 2016 (S.I. No. ransactions) T cial ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy a Clean to the Transition -Powering 2019 Report Annual ESB eport of Board Members on Compliance with the Prompt the Prompt with on Compliance Members of Board eport (Late Payment in Commercial Transactions) (Amendment) Regulations 2016 (S.I. (Amendment) Regulations in commercial No. 281 of 2016) to combat late payments (Late Payment in Commercial Transactions) for goods and services supplied to ESB. transactions. These Regulations apply to contracts Construction Contracts Act 2013. This Act applies to construction contracts over €10,000. Construction Contracts Act 2013. This Act applies European Communities (Late Payments in Commercial Transactions) Regulations, 2012 (S in Commercial Transactions) Communities (Late Payments European The Prompt Payment of Accounts Act, 1997. The Prompt Payment of

10 R 2 27th February 2020 Pat O’Doherty Executive Chief Ellvena Graham OBE, Chairman Details of late payment interest in respect of 2019 Details of late payment interest in respect No such payments were made in policy to pay interest due on such late payments. ESB’s validates a late payment request from a supplier, it is When ESB (2018: Nil).respect of late payments during the year 2019 Construction Contracts Act 2013 to relevant has reviewed its responsibilities under this Act and has communicated these responsibilities on 25 July 2016. ESB This Act came into effect staff. in Commer suppliers guidance to suppliers on payment procedures; and encourage the adoption of the Code by and undertakes to pay suppliers on time; give clear within their own supply chains. Prompt Payment Code of Conduct Payment Code of Conduct, which can be found at www.promptpayment.ie. E In 2015 the Government launched the Prompt  Procedures and controls in place provide assurance roles and responsibilities. These procedures implemented including clearly defined Appropriate internal financial controls have been against material non-compliance with the legislation. Statement of payment practices their agreed terms of payment. is committed to paying all undisputed supplier invoices within ESB of Accounts Act, 1997 and European Communities (Late (Late Communities Act, European 1997 and of Accounts Commercial   Introduction 2019 were governed by: Payments terms during 281 of 2016) 2012) as amended by European C by European 2012) as amended 03 02 01 STRATEGY AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL STATEMENTS 213 2019 Report Annual ESB 47. Vertically Integrated Utility 47. Vertically to Utility (VIU) refers Integrated The Vertically of, assets across presence within and ownership electricity value chainall of the elements of the trading, transmission,including the generation, power to customers. distribution and supply of 38. Smart Meter Programme 38. Smart Meter programme is the nextThe smart meter They will replace thegeneration of energy meter. meters removing the traditional electricity and gas the meter and willneed for a home visit to read estimates whenever aeliminate the need to use meter cannot be read. Strategy 39. Safety Leadership a clear and simple way of A framework that shows obligationsarticulating the safety responsibilities, in has in ESB and expectations that everyone order to maintain a safe environment. 40. Spark Spread The difference between the price of a unit of electricity and the cost of the gas used to generate it. 41. Sustainable Energy Authority of Ireland (SEAI) The Sustainable Energy Authority of Ireland was established as Ireland's national energy authority under the Sustainable Energy Act 2002. 42. System Operator for Northern Ireland (SONI) The System Operator for Northern Ireland ensures the safe, secure and economic operation of the high voltage electricity grid in Northern Ireland and in co-operation with EirGrid colleagues is also responsible for running the all-island wholesale market for electricity. 43. System Marginal Price (SMP) The wholesale price of electricity for each half hour period. 44. The way we work at ESB brings together ESB’s at ESB Work We The Way the purposepurpose, strategy and values. In ESB, exists – the statement tells the world why ESB is, reason for being, beyond profit. It's who ESB and it's lived through its values. puts the purpose into action. are how ESB Values It encapsulates and aligns the culture and informs behaviours. 45. United Kingdom (UK) Scotland and Northern Ireland. England, Wales, 46. Utility Regulator (UR) The independent non-ministerial government department set-up to ensure the effective gas and water and regulation of the electricity, sewerage industries in Northern Ireland. . 37. Smart Grid A transformed electricity transmission and distribution network or Grid that uses robust two-way communications, advanced sensors and distributed computers to improve the efficiency, reliability and safety of power delivery and use. Smart Energy Services is a complete energy management solution that brings all of the skills and experience of a global energy innovator to businesses 36. Smart Energy Services 35. SIRO which will bring A joint venture with Vodafone, 1 gigabit per second (Gb/s) broadband to 500,000 customers in fifty towns across Ireland using the existing distribution network. 34. Single Electricity Market Operator (SEMO) The SEM is operated by SEMO, a joint venture between EirGrid and SONI, the transmission system operators in Ireland and Northern Ireland respectively. 33. Single Electricity Market (SEM) The Single Electricity Market is a wholesale pool-based electricity market operating north and south of the Irish Border. 32. Safe and Sound culture change program that will An ESB serve to build a world-class safety culture and environment that is sustainable over time. 31. Return on Capital Employed (ROCE) The return on capital employed shows the overall return on capital provided by both debt and equity. 30. Regulatory Period 6 (RP6) 30. Regulatory Period 6 (RP6),Regulatory Period is a regulatory period for price control, covering the period 1 October 2017 to 31 March 2024, determined by the Utility Regulator in Northern Ireland. 29. Regulatory Period 5 (RP5) 29. Regulatory Period 5 (RP5),Regulatory Period is a regulatory period duration for price control, covering of 5 years’ 31 March 2017,the period 1 April 2012 to in Northerndetermined by the Utility Regulator Ireland. allowed revenues over that period as determinedallowed revenues for Regulation of Utilities,by the Commission (CRU). ESB Annual Report 2019 -Powering the Transition to a Clean Energy Future Energy Clean to a the Transition -Powering 2019 Report Annual ESB 212 ) (Continued GLOSSARY