Annual Report 2016

Planning for your Energy Future

At EirGrid Group, one of our roles is to make sure that the electricity transmission grid is ready for the future. We consider how electricity may be generated and used years from now - and what this means for the electricity grid of today. This year’s Annual Report shows how our activities in 2016 supported this role.

Who Are EirGrid Group?

EirGrid Group is responsible for a safe, secure and reliable supply of electricity – now and in the future.

We develop, manage and operate the electricity transmission grid through EirGrid in Ireland and SONI in Northern Ireland.

Our transmission grid brings power from where it is generated to where it is needed throughout Ireland and Northern Ireland. We use this grid to supply power to industry and businesses that use large amounts of electricity.

Our grid also powers the distribution network. This supplies the electricity you use every day in your homes, businesses, schools, hospitals, and farms.

EirGrid Group includes SEMO - the Single Electricity Market Operator. SEMO operates the wholesale electricity market across the island of Ireland.

EirGrid Group also owns and operates the East West Interconnector, a high-voltage link between the electricity grids in Ireland and Great Britain.

We develop new electricity infrastructure only when it is needed. We support competition in energy, promote economic growth, facilitate renewable energy and provide essential services.

EirGrid plc is a commercial, state-owned company, and answers to Government and to regulators. We work for the benefit and safety of every person in Ireland and Northern Ireland. We follow strict laws and safety standards.

Chairperson's Report

John O'Connor, CHAIRPERSON

A year of accomplishments after a decade of ensuring a secure supply of electricity

I am delighted to present the 2016 EirGrid plc annual report under the theme of “Planning for your Energy Future”.

Our Purpose

The goal of the EirGrid group of companies is to provide systems of transmitting and trading electricity that meet the demands of people on the island of Ireland. I am proud to say that all of our work is carried out in the context of an industry that is transitioning towards a low-carbon, smart-technology future. It is our ambition to be at the forefront of that transition.

A Challenging Future

At EirGrid, we are planning for an energy future that supports growth for future generations. This will meet the need for clean energy and limit the impact of climate change. In doing so we face unique challenges as an island isolated from larger markets.

This can be seen through key innovations supporting increased amounts of renewable energy. These are facilitated by an upgraded transmission infrastructure and interconnection to Great Britain and beyond. It can also be seen through our work with new large demand customers. They are coming to Ireland with a clear preference for sustainable sources of energy.

Accommodating More Renewable Energy

We have responded to binding national and European renewable energy targets with a multi-year programme. This meets the challenges of operating the electricity system in a secure manner while achieving these targets. The DS3 programme in Dublin and Belfast is ensuring that we can securely operate the power system with increasing amounts of renewable generation over the coming years.

Achieving this level of renewable integration on a synchronous system such as ours is unprecedented. It presents significant challenges for the real-time operation of the power system.

Public Engagement

The way we engage with local communities is an integral part of future grid development. Previously, EirGrid outlined our commitment to improve how we do things in this regard. We changed how we communicate with communities along proposed new grid development routes. We also made a commitment to earlier and deeper public consultation, putting people at the heart of our grid development strategy.

To support these goals, we recruited new staff to take on the role of community and agricultural liaison officers. This allows us to reach out directly to the people most affected by our plans for new infrastructure. I believe that this is an extremely important role for our staff. They are tasked with getting out on the ground to meet and talk to people. They can then take on board their views and ensure they have a voice and that voice is heard by EirGrid and SONI.

North South Interconnector

This important project was to the forefront during 2016, and moved to the planning stage. When completed, it will strengthen the links between the grids of Ireland and Northern Ireland. An oral hearing in the first half of the year gave people the opportunity to make their views known to An Bord Pleanála. The southern element of the project was granted planning approval by An Bord Pleanála in December 2016. Our staff will work hard in the year ahead, not just in progressing the project itself, but also in reaching out to landowners and local communities along the route to discuss their concerns.

Community Fund

Another innovation during 2016 was the introduction of the first EirGrid Community Fund. We made a fund of €360,000 available to community organisations located closest to the Mullingar to Kinnegad 110 kV Project.

When we develop or expand our grid, we acknowledge that this work will affect communities near new transmission lines. This is why we developed the new fund, which recognises the importance of local communities.

There were 37 local organisations selected to receive grants of between €1,000 and €50,000. I am delighted that so many organisations along the project route applied for this funding.

I-SEM Project

During the year we made further progress on the Integrated Single Electricity Market (I-SEM) project. This is a new wholesale electricity market arrangement for Ireland and Northern Ireland. It will integrate the all-island SEM electricity market with European electricity markets.

It will also promote increased competition and efficiency across the industry by enabling the free flow of energy across borders.

Ireland-France Interconnection

In July, 2016, we were very proud to sign the Celtic Interconnector Memorandum of Understanding with our French counterparts Rté.

This took place in the presence of the French President François Hollande; An Taoiseach Enda Kenny; and Minister for Communications, Climate Action and Environment, Denis Naughten.

We look forward to progressing with the next phase of initial design and pre-consultation on this project in the year ahead.

In Conclusion

This year, we celebrated EirGrid’s tenth year as transmission system operator. Year on year, we have made significant advances - and 2015/2016 was no different.

This report shows the last year was one of real achievement, and solid progress towards delivering on our mandate.

I would like to thank each of my fellow Directors for their significant contribution and support during the year. In particular, I would like to express my appreciation to Gerry Walsh, Bride Rosney, and Gary Healy whose work on the Board concluded over the last year. I also want to thank our Chief Executive, the Executive Team and all of our staff for their commitment and achievements during the year.

I wish to thank the Minister for Communications, Climate Action and the Environment, Denis Naughten and the Minister for the Economy, Simon Hamilton, their predecessors, and their respective officials for their ongoing cooperation and support.

Chief Executive's Review

Fintan Slye, CHIEF EXECUTIVE

Working for a smarter, more sustainable energy future

2016 was another year of steady performance for EirGrid Group. During 2016, revenue dropped slightly from €706.2m to €672.7m. Profit before tax was €7.9m, with underlying profits at €16m. As a result, we were able to deliver a proposed dividend of €4 million to the shareholder.

In an ever-changing energy industry, it is a challenge to manage this change, and to operate a reliable power system. We continue to deliver and operate a safe, secure and reliable supply of electricity. We do so for all the people, communities and business in Ireland and Northern Ireland.

Grid Development

In 2016, we changed our approach to developing the electricity grid. This followed a review of our public consultation process. Our new approach uses a six-step process to explain why and how we develop the grid. More importantly, it also explains how the general public and stakeholders can influence the decisions we make.

This approach is reflected in our on-going work in 2016 to develop stronger links with the community. Over the last year, our Agricultural and Community Liaison Officers were active and on the ground. They worked closely with communities, local farmers and landowners as we developed the grid in different regions.

Apart from developing new infrastructure, we also upgraded and strengthened the grid where necessary. We made live a number of new transmission stations in 2016. These include Ballyvouskill, Ballynahulla and Knockanure stations in the south-west of Ireland, and Tamnamore station in Northern Ireland.

These stations connect our grid to customers that use or generate large amounts of electricity. They also secured the supply of electricity to homes and businesses across the island.

The United Kingdom’s June 2016 referendum on EU membership has introduced new considerations. But regardless of the UK leaving the EU, there will always be many shared benefits of working closely with our nearest neighbours. We aim to maintain a strong relationship between Ireland, Northern Ireland and Great Britain on energy matters.

This includes the North South Interconnector. This is a project that will connect the electricity grids of Ireland and Northern Ireland. It is needed to improve the security of electricity supply across the island of Ireland.

2016 was an important year for the North South Interconnector –undoubtedly the most important infrastructure project on the island. It will help deliver very real benefits to domestic and commercial customers.

However, we acknowledge the challenges faced when building overhead infrastructure. We will work closely with landowners and communities in the coming year to manage these challenges.

An Bord Pleanála finished their oral hearing into the North South Interconnector in May 2016. In December, they granted planning approval for the southern element of the interconnector. In Northern Ireland, a public inquiry into the project began in June.

If granted planning permission, we estimate the North South Interconnector will create savings of €20m each year by 2020. These savings will rise to €40 million - €60 million each year by 2030.

Throughout 2015 and 2016, we worked with some of the biggest companies in the world to foster jobs and prosperity across the island. We also supported the work of the Industrial Development Authority and Invest NI.

In particular, EirGrid has developed the infrastructure and systems needed to supply power to new data centres. These facilities house networked computer servers that store a huge volume of digital information.

They are a core part of every high-tech company’s infrastructure, and need a large amount of electricity to power and cool the servers. Work on the successful connection of such data centres to the grid –under strict deadlines – was a key challenge for the group this year.

These kinds of large-scale developments bring significant benefits to the local and national economies. These include construction jobs, long-term employment and increased council rates that fund local facilities. At EirGrid, we work hard to ensure that the electricity grid can deliver a reliable and secure supply of energy at a competitive price. This is attracting new industry to Ireland and Northern Ireland, and will continue to do so in the future.

Accommodating Renewable Electricity Generation

Last year also saw great progress on our Delivering a Secure and Sustainable Electricity System (DS3) programme. This initiative is helping to make the grid ready for a larger proportion of renewable energy generation.

Renewable sources, like wind power, vary depending on factors beyond our control, such as weather. We cannot easily store electricity generated from renewable sources, nor can we “turn on” these sources when we need them. This means we can’t automatically match renewable generation of electricity with the overall consumption of electricity.

In 2016, we launched new system services for customers that take part in the electricity market. This took place after an extensive design and procurement process. As a result of this and also of our work to develop new systems, policies and tools, we will be able to increase power system operational limits. This will allow us to continue to securely operate the electricity system using high levels of renewable electricity.

The DS3 Programme puts EirGrid on the leading edge in the field of integrating renewable electricity generation to the grid.

Consumer Participation

One of our main aims is to create flexibility in the electricity system, so it can adapt to the ever-changing needs in the energy sector.

We also support government policies that encourage increased participation from energy users. Because our grid serves a small island, this creates an opportunity to do things differently. We explore and deliver solutions that have tangible benefits for our customers and for the wider community.

This year, we launched the Power Off & Save programme in partnership with Electric Ireland. We are piloting this programme over the coming year. We are delighted to be one of the first national grid operators in Europe to trial this idea for residential customers.

We know the system of managing demand works in industry, as it is already in operation for business customers. We believe it will also work for residential customers. This will help them play a role in managing usage – for the benefit of the grid and for the environment.

Further Interconnection

In 2016, we continued to partner our French colleagues, Rté, to progress the Celtic Interconnector project. This is a proposed electricity link between Ireland and France. We signed a new memorandum of understanding with Rté. This will progress the Celtic Interconnector into the next phase of development. This is a key milestone in the development of this project. The agreement was signed in the presence of the French President François Hollande, An Taoiseach Enda Kenny, and Minister Denis Naughten.

If progressed to completion, this project will deliver key benefits. Primarily, it will connect the Irish and French electricity grids to make the supply of electricity more secure on both sides. It will also allow for increased competition in the all-island Single Electricity Market. Finally, it will support the further development of renewable energy, particularly in Ireland.

Towards an Integrated Single Electricity Market

One of the businesses in the EirGrid Group is SEMO, the Single Electricity Market Operator. This “Single Electricity Market” includes both Ireland and Northern Ireland. SEMO allows those who generate or consume large amounts of electricity to buy and sell power across the island of Ireland.

By 2018 the Single Electricity Market will use the same set of common standards as other electricity markets across Europe. This will open our market to greater competition and more opportunities. As an integrated part of a much larger market, we can facilitate greater choice and cheaper energy for homes and businesses.

We are working closely with the regulators in Ireland and Northern Ireland to achieve this goal. We established a dedicated team from SEMO, EirGrid and SONI to manage the change to an integrated market. In 2016, work has progressed on the design and development of new market systems. We also established formal connections with pan-European bodies from the energy industry.

Appreciation & Thanks

I would like to thank Minister for Communications, Climate Action and Environment, Denis Naughten, and Minister for the Economy of Northern Ireland, Simon Hamilton for their positive engagement and support. I would also like to pay tribute to Minister Naughten’s predecessor, Alex White and Minister Hamilton’s predecessor, Jonathan Bell.

I would like to thank our regulators, the Commission for Energy Regulation (CER) and the Utility Regulator (UR). Their feedback helps us achieve our shared goals of providing value to electricity consumers.

I want to acknowledge the contribution of all of our people, and to commend their hard work and commitment to making each year a success. Their work ensures that the electricity network, market and infrastructure meets the needs of our customers and of the communities we serve.

Finally, I would like to thank the Board, management and staff of EirGrid Group for their effort, support and dedication during the year. We look forward to another year of progress in 2017.

Financial Review

Aidan Skelly, EXECUTIVE DIRECTOR, FINANCE & LEGAL

Regulatory adjustments affect reported profits as underlying performance remains steady

While 2016 has been another year of satisfactory performance for the Group, profit before tax declined from €40.7m in 2015 to €7.9m in 2016. EirGrid Group is a regulated entity and its reported profitability is subject to periodic adjustments in respect of prior year over and under recoveries. Disregarding such adjustments, underlying profit before tax for the Group was €16m in 2016. This compares to €16.9m in 2015.

Regulation

The Group’s TSO activities in Ireland and Northern Ireland are regulated by the CER and the UR respectively. In its role as Market Operator for the SEM, the Group is regulated by the SEM Committee, which comprises the CER, the UR, an independent member and a deputy independent member. The Group also holds two licences as Interconnector Operator, one from CER and one from Ofgem.

In advance of each tariff period the Group submits forecasts of customer demand, operating costs and other revenue requirements to the relevant regulatory authority. Following a detailed review process the regulators will issue a formal determination of the allowable revenue to be recovered by the business.

As with any forecast there can be variations between the projections and the actual revenue recovery, or cost out-turn, resulting in regulatory under or over recoveries. Any such under or over recoveries are adjusted for in the price determinations for subsequent periods. This can give rise to volatility in the reported statutory earnings of the Group, as current accounting regulations do not permit results to be smoothed through the anticipation of under or over recoveries.

CER published its final decision on the EirGrid 2015-2020 TSO Price Control in December 2015. A revised control for SEMO was also published during the year. We are continuing to engage with UR on the finalisation of the SONI TSO 2015-2020 Price Control.

Revenues and Profitability

The Group’s revenue is primarily derived from regulated tariffs, specifically the Transmission Use of System (TUoS) tariff, a charge payable by all users of the transmission systems in Ireland and Northern Ireland and its share of tariffs as Market Operator for SEM. Revenues are also derived from auction receipts for the sale of capacity on the East West Interconnector (EWIC).

Group’s revenue for the year to 30 September 2016 of €672.7m was €33.5m, (4.7%) lower than the previous year, of which €28.1m was due to lower EWIC revenues. The lower revenue reflects a return to TUoS customers in 2016 of higher than anticipated revenues earned in prior years from EWIC capacity auctions. There was also a decline in actual interconnector receipts earned during the year (dropping by €9.7m in 2016), due to carbon price floor reforms in Great Britain.

The profit before tax for 2016 was €7.9m. This includes a €7.1m impairment charge to the carrying value of the SONI Transmission System Operator (TSO) licence. This reflects the Utility Regulator’s current proposals in respect of the SONI TSO Price Control for the period 2015 to 2020. Excluding the return of over-recoveries for prior years and the impairment charge, management’s estimate of the underlying profit before tax for 2016 was €16.0m, subject to regulatory uncertainties.

EirGrid paid a dividend of €3.5m in May 2016 in respect of 2014/15. A dividend of €4.0m is proposed to be paid in early 2017.

Financing

The Group continues to be in a sound financial position. Its borrowings have long repayment dates and are fully hedged against interest rate fluctuations. EirGrid plc and SONI Limited are currently seeking to put new facilities in place to meet the funding needs of the business over the medium term.

Key Financial Highlights €M

    All Other Activities EWIC Total
2016        
Revenue   630.0 42.7 672.7
Direct Costs   (527.5) - (527.5)
Other Operating Costs   (97.3) (21.8) (119.1)
Operating Profits   5.2 20.9 26.1
Finance Costs   (0.7) (17.5) (18.2)
Profit Before Tax   4.5 3.4 7.9
         
Key Financial Highlights Non EWIC EWIC Total
2015
Revenue 635.4 70.8 706.2
Direct Costs (531.1) - (531.1)
Other Operating Costs (91.5) (19.7) (111.2)
Operating Profits 8.8 51.1 59.9
Net Finance Costs (0.4) (18.8) (19.2)
Profit Before Tax 8.4 32.2 40.7

Developing the Grid & Interconnection

John Fitzgerald, EXECUTIVE DIRECTOR, GRID DEVELOPMENT & INTERCONNECTION

Maintaining a strong, flexible grid - and planning for an uncertain future

Throughout the year, we worked to ensure that people across this island have a strong, reliable transmission grid. We achieved this with a focus on safety, engagement and innovation. These are our key principles as we develop and maintain the grid.

A New Approach to Grid Development

In 2016, we developed a new approach to developing the grid in Ireland. This is a “beginning-to-end”, six-step process that clearly outlines how and why we develop the grid. This process begins as we identify the future needs of the electricity grid. It ends, when necessary, with construction and energisation of a new grid project.

We now aim to apply this approach to all our grid projects in Ireland. We will support this through increased engagement with the public, communities, landowners and stakeholders.

In combination, this will create a more inclusive and effective process for developing the grid.

Next year we will work towards full implementation of this approach across our grid development projects in Ireland.

Developing the Transmission Grid

The oral hearing held by An Bord Pleanála into the North South Interconnector finished in May 2016. This lasted for 11 weeks. The southern element of the North South Interconnector was granted planning approval by An Bord Pleanála in December 2016.

A separate and parallel planning process also resumed in Northern Ireland in 2016. A preliminary module of the public inquiry was held in June 2016. This examined legal issues associated with the proposed development. The proposal moved into the full public inquiry stage, which is due to conclude in February 2017.

Each year Market Operations publishes the Generation Capacity Statement. This document identified the importance of the proposed North South Interconnector. It states that this project, if carried out, will enhance security of supply across the island of Ireland.

This is particularly important for Northern Ireland. Without this new interconnector, Northern Ireland will face a shortfall of electricity over the next decade. This is due to the planned closure of a significant amount of generation plants due to emission restrictions.

The United Kingdom’s June 2016 referendum on EU membership does not diminish the need for this project. It also does not lessen the benefits that will accrue across the island of Ireland from this project.

A number of key strategic projects progressed this year. They are as follows:

A new 220 kV station is under construction at Belcamp in North County Dublin. This will relieve load congestion at the existing Finglas 220 kV station.

In West Dublin, planning consent has been achieved for a new 220 kV station in the Grangecastle area. This will supply new demand customers, mainly new data centres.

In the South-west, two cables were laid across the Shannon estuary. These connect the new 220 kV station at Kilpaddoge in North Kerry to Moneypoint 220 kV station in County Clare. This will facilitate the transfer of renewable generation from the region to the east of the country, via the existing 400 kV network.

Construction has been completed on the new Mullingar – Kinnegad 110 kV line in County Westmeath.

We also received grants of planning permission for two transmission projects in Northern Ireland. These projects are the Curraghamulkin 110 kV Project and the Brockaghboy 110 kV Project. The Northern Ireland projects are significant for two reasons. First, they allow for the connection of new renewable generation onto the grid. Secondly, they are the first applications to use the planning process now devolved to the new Northern Ireland local Councils. Previously the Department of Environment in Northern Ireland would have decided these applications.

Maximising Existing Infrastructure

One of our main focus areas when it comes to innovating is the integration of new technologies and services. These are designed to complement each other, and to improve the electricity system.

This year, in particular, we focused on using existing infrastructure rather than building new lines. In Waterford, we trialled Smart Wire’s Powerline Guardian device. This controls power flows along an existing line using real-time sensing capabilities.

From this, we are now moving to roll-out technology called distributed series reactance by 2018. This will allow us make better and greater use of the capacity on existing lines. In the long term, this will help reduce the need for new infrastructure.

Interconnection

East West Interconnector

EirGrid Group owns and operates the East West Interconnector (EWIC) that links the grids in Ireland and Great Britain. This helps provide a safe, secure, reliable and affordable energy supply for both systems. Auction receipts for electricity transmitted on this interconnector were ahead of forecast this year. This was mainly due to the trend towards higher levels of exports, due to tightening of power supplies in the UK. EWIC also became the first interconnector to provide a black start service to National Grid in the UK in May 2016.

In 2016, we achieved a significant safety milestone of 1,000 days of operation of this interconnector without a lost time injury.

The East West Interconnector is now back in service, after being out of operation for a number of weeks at the end of 2016. This was due to a fault that occurred in early September at the converter station in Meath.

Celtic Interconnector

EirGrid and Rté, the French Transmission System Operator, have completed the feasibility phase for a new interconnector.

This project, if completed, would join the electricity grids in Ireland and France using an undersea cable. We call this project the Celtic Interconnector. We are now considering the initial design and starting the process of pre-consultation.

The Celtic Interconnector is an EU Project of Common Interest (PCI). This means it is considered an essential step towards EU policy goals of affordable, secure and sustainable energy.

It has also been designated as one of a small group of just 25 EU wide projects called “Electricity Highways”, as part of the e-Highway 2050 initiative. These projects are judged to have a positive role in securing Europe’s low-carbon energy future by 2050.

In April 2015, we made an application for project funding to the Connecting Europe Facility (CEF). The application was successful and the project was awarded €3.86 million funding in July 2015. This represents 50% of the eligible costs in the feasibility study stage.

Market Operations

Rodney Doyle, EXECUTIVE DIRECTOR, MARKET OPERATIONS

Preparing our electricity market for greater European integration

The all-island wholesale Single Electricity Market (SEM) has been in place since 2007. The Single Electricity Market Operator (SEMO) runs this market as a joint venture between SONI and EirGrid. This is one of our key responsibilities at EirGrid Group.

Over the past year, SEMO has registered 13 new parties who requested access to buy or sell electricity in our market. A total of 39 new units were also registered in 2016. These are market participants with the capacity to generate electricity, or who need to consume a great deal of electricity. These new units included users of the Moyle Interconnector and the East West Interconnector.

We also have a role to develop the future market model. This involves moving towards closer integration with markets across Europe. We do this in collaboration with the Utility Regulator (UR) for Northern Ireland and the Commission for Energy Regulation (CER) in Ireland.

Transition to a new Electricity Market

The European Union (EU) is developing a common internal market for electricity and gas. This is to ensure that Europe’s citizens have access to affordable, secure and sustainable energy. The EU has defined how such a market should operate using legislation, network guidelines and harmonised rules. Known as the “EU Target Model”, this new approach creates a common standard for the cross-border trade in electricity and gas.

The existing rules that govern the Single Electricity Market (SEM) on the island of Ireland are not compatible with the EU Target Model. Given this, both Governments have asked the SEM Committee to develop the market arrangements so they can meet this new standard. The SEM Committee comprises the CER in Dublin, the UR in Belfast, plus an independent member and a deputy independent member.

The new market design will result in an Integrated SEM (I-SEM). This will allow our market to fully connect with the electricity market in the rest of Europe. I-SEM will ensure that the vision of the EU is effectively implemented in the wholesale electricity market on the island of Ireland. This will benefit all electricity customers.

Regulatory authorities published the high level design for the new I-SEM in September 2014. Now, the I-SEM project has entered its final phase. This is the detailed design and implementation work needed before the new market goes live.

In 2016, EirGrid continued to work with the Regulatory Authorities and key stakeholders on this project. This included developing market rules and aiding industry preparedness for the I-SEM. We also made significant progress on implementing the necessary systems infrastructure and operational arrangements. The systems design phase is now complete and build activities are underway.

We also completed a highly successful trial of Euphemia in 2016. This is the pricing algorithm that governs the European markets for single day-ahead trading. This initiative gave all key stakeholders the opportunity to understand how this algorithm will work in the new market.

The I-SEM design is underpinned by complex sets of rules and regulations. Some of these are outlined in the Trading and Settlement Code set by Regulators in Ireland and Northern Ireland. These new rules were completed in 2016. Significant progress was also made on the development of other market regulations. These include the Capacity Market Code. We also saw the agreement of the rules that will govern I-SEM’s status as a NEMO, or Nominated Electricity Market Operator.

A key to I-SEM succeeding will be that market participants and stakeholders play an active part in its design and development. We set up a variety of liaison groups to allow key stakeholders to engage with us. These included the Project Managers’ Group, Business Liaison Group, Technical Liaison Group and Rules Working Group. Feedback from these groups so far has been invaluable and engagement has been positive.

Operations, Planning and Innovation

Robin McCormick, EXECUTIVE DIRECTOR, OPERATIONS, PLANNING AND INNOVATION

Laying the foundations for the future while meeting day-to-day needs

One of our biggest challenges is running an increasingly diverse and complex power system. This must be capable – in real time – of accommodating changing demand and growing levels of renewable generation.

At the same time we are always looking ahead. We plan the all-island transmission system to ensure it remains fit for purpose. To achieve this, we must find innovative solutions to planning your energy future.

It is reassuring to look at the degree of all-island energy security achieved by EirGrid Group. In the twelve months to September 2016, the total energy not supplied over the year was the equivalent of only 0.88 minutes of peak demand.

Operations

In March, the new all-island Energy Management System (EMS) was introduced. The EMS is the main operational tool that our control centres use to monitor and manage the transmission system on a real-time basis.

This system integrated the EirGrid and SONI EMS platforms. For the first time, we now have true all-island control of our system from either control centre – Dublin or Belfast.

2016 was also the first year of full operation of the 10MW battery pilot project at Kilroot. This is the largest storage facility of its type in Ireland and the UK, and it has performed well over the year. It delivers flexible support to the electricity transmission system. It also provides us with valuable experience of an exciting and innovative technology.

January 2016 saw the start of a local reserve contract for 290MW of generation capacity at Ballylumford Power Station. This contract was awarded to safeguard security of supply in Northern Ireland. This extra capacity in Northern Ireland is needed pending delivery of the North South Interconnector by 2020.

Planning Ireland’s Energy Future

One of our roles is to make sure that the electricity transmission grid is ready for the future. The key to this process is that we examine a range of ways that energy use may change. This year, we have gathered data to understand a number of possible energy futures. We did this by working closely with external bodies, state agencies, and government departments. This then allows us to explore and propose solutions for any problems we find.

This approach means we can plan for more than one potential impact, rather than basing our plans on just one assumption. This will make the grid stronger and more flexible. We call this scenario planning.

Innovation

EirGrid Group is working towards facilitating ambitious levels of renewable energy. This is in response to binding National and European targets that are due by 2020.

Most of the newer renewable sources of energy are weather dependent. Growth of this type of generation creates significant uncertainties as we work to ensure energy balance at all times.

Furthermore, the characteristics of this newer generation is electronic rather than electromagnetic. Much of the strength of the grid is due to the characteristics of electromagnetic generation.

With the advent of larger amounts of renewable generation, some of the predictable strength of electromagnetic generation is displaced. This displacement presents unique challenges. Our pioneering DS3 Programme (Delivering a Secure Sustainable Power System) seeks to address these. This multi-year programme has two equal aims. We must achieve our governments’ 2020 energy targets, yet also maintain the reliability and security of our power system.

In 2016 there were two significant achievements from the programme. The first was an increase in the maximum limit for System Non-Synchronous Penetration (SNSP) to 60%. This means we can securely operate the power system with up to 60% of the energy coming from newer forms of electronic generation. It also allows us maintain the resilience in the power system that society has come to expect.

To facilitate this increase in SNSP we developed a range of innovative operational policies and tools. We will continue to push the boundaries of renewable integration – we raised the SNSP limit again in November 2016, and have a target of 75% by 2020.

The second achievement under DS3 was the introduction of a new set of arrangements to pay for system services. These are the services, other than energy, that we need to maintain system resilience. The DS3 System Service interim arrangements went live on 1 October. They replaced the Harmonised Ancillary Services that have been in place since 2010.

The new arrangements include an increase in the number of services procured from new and existing service providers from 7 to 11. EirGrid Group has now signed 107 contracts for services. These include generators, demand side participants and other connected parties.

Power Off & Save

The Power Off & Save pilot programme was launched in June in partnership with Electric Ireland. This initiative rewards residential customers who agree to change their energy use on request. They do this by reducing their use of power when the system experiences peak demand. This allows us to maintain a resilient power system. Under this initiative, we provide residential participants with up to €100 in incentives for the period of the trial. In the long term, this kind of demand-side energy management will help to reduce system services costs.

EirGrid developed the Power Off and Save programme based on an open tender competition in late 2015. The Power Off and Save programme involves 1,500 residential customers over a 12 month period. Those who sign up will be asked to switch off appliances for about 30 minutes on ten occasions. Participants will then be rewarded with €100 off their bill.

Our People & Our Systems

Siobhán Toale, EXECUTIVE DIRECTOR, HUMAN RESOURCES & CORPORATE SERVICES

Delivering the people and systems needed to achieve EirGrid Group goals

Human Resources and Corporate Services has a wide and varied remit. Our role is to ensure that the people who work for the Group have the supports that they need to do their jobs.

We provide the Information Systems foundations to our corporate strategy. This is achieved through the design, delivery, and support of application solutions for the business.

We provide line managers with the people they need to deliver the required future organisation, which included developing a future talent pipeline.

We ensure that all our employees have easy access to the services required to carry out their roles effectively. This includes, for example, technology and facilities.

Finally, we deliver our activities in a cost effective way, without compromising the services delivered to our staff.

Employee Engagement

In 2016 we delivered an employee engagement programme aligned to our company values. Our objective is to ensure that staff understand the important part they play in the success of the group.

Our five company values are:

  • We deliver on our promises;
  • We behave with integrity;
  • We recognise that our people are our greatest asset;
  • We innovate to drive value for all our customers;
  • We behave in a socially responsible manner.

We launched our health and well-being initiative ‘Be Well’ this year and there was a tremendous response from staff. The aims of the programme were to engage and energise staff on their health. We did this by providing insights on how making small changes can have a positive impact on well-being.

The programme was categorised into two areas: Think Well and Live Well. The programme included seminars from experts in the fields of psychology, nutrition and fitness. We also provided some online material in the form of webinars and a stress buster series.

Our staff recognition programme ‘Going the Extra Mile’, launched in 2015. It continued to be a success with staff in 2016. This year saw a greater emphasis on team nominations. This demonstrates collaboration and teamwork within the Group.

Staff Development

Over 250 staff participated in our skills development programme (EirSkills). This has helped our people develop their professional competencies to carry out their roles.

To further support staff development, we introduced a talent development centre. This will help develop our key talent for their future within the organisation. We have also introduced new leadership development programmes. These help provide our senior leadership team with the supports they need to engage our staff and deliver on the company strategy.

Information Systems

The Information Systems team worked hard in 2016 to maintain the availability of the technology we use to run the business. This is evidenced by the 99%+ availability of critical systems in 2016.

Energy Management System (EMS)

In March of 2016, the Information Systems team implemented a new all-island Energy Management System.

This is used by SONI and EirGrid in the Power System Control Centres in Belfast and Dublin.

The new Energy Management System (EMS) allows for increased use of renewable energy, in support of the 2020 targets.

We have also delivered key telecommunications infrastructure during 2016. This was to facilitate the growth in renewable connections onto the grid in Northern Ireland.

These new connections were driven by the Renewable Obligation Certificate (ROC) incentive scheme.

DS3 (Delivering a Secure Sustainable Energy System)

Work continues to support system services for the DS3 (Delivering a Secure Sustainable Electricity System) Project. These services are the support systems necessary for the secure operation of the electricity system.

I-SEM (Integrated Single Electricity Market)

The Information Systems team continues to provide extensive support to the I-SEM (Integrated Single Electricity Market) project. This work included IS infrastructure, IS applications and IS architecture. I-SEM is a significant business priority for the Group. It will change the way electricity is traded in the European market, resulting in lower bills for consumers.

Energy Use & Environmental Policies

EirGrid has a strategic goal to be a ‘World Leader in Smart Grids and the integration of renewables’. We also reflect this goal in the way we manage our own energy use.

In May 2016 we achieved re-certification of the Carbon Trust Standard. This recognises organisations that take a best practice approach to measuring and managing their environmental impacts.

EirGrid Group has an overall goal of encouraging and facilitating increased energy efficiency. As part of this, we track and report our own energy use.

Across the group, energy usage can be broken down into electricity, and fossil fuel - mainly natural gas for heating.

In 2016 EirGrid consumed 3,736 MWh of energy in our Dublin locations of Ballsbridge and the Business Continuity Centre (This is an off-site location with a fully functional back up of the National Control Centre in Ballsbridge). This can be broken down as follows:

  • 3,165 MWh of electricity;
  • 571 MWh of fossil fuels.

In 2016 SONI consumed 2,130MWh of energy, broken down as follows:

  • 1,588 MWh of electricity;
  • 541 MWh of fossil fuels.

In 2016 we undertook a number of initiatives to improve energy performance. This included optimising our main chiller in Ballsbridge. This increased the effectiveness and energy efficiency of our cooling system.

We also continue to use a real-time energy management solution in our Ballsbridge offices. It has been a valuable tool in accurately controlling our use of energy. It allows us to improve the performance of heating and cooling to best suit our needs on a daily basis.

External Engagement

Rosemary Steen, EXECUTIVE DIRECTOR, EXTERNAL AFFAIRS

Maintaining and improving relationships to improve effectiveness and performance

EirGrid is committed to being a socially responsible company. We aim for this standard in our relationships with employees, customers, stakeholders, and the community.

We also work hard to reflect this goal in our environmental footprint. One of our strategic objectives as a business is to be a ‘Respected and Trusted Organisation’. This includes a key goal to ‘Be Socially Responsible in all our activities’. We are very proud of the fact that EirGrid has held the Business Working Responsibly Mark since 2012. We were re-accredited with this mark in 2016. This is proof of the responsible way in which we do business.

Corporate Social Responsibility

Education is a core interest of ours, and we remained focused on this in 2016. We continued to work with the National Adult Literacy Agency (NALA) to make our documents easier to understand.

Two of our key public facing documents were ‘plain English certified’ in 2016, and we now use ‘plain English’ guidelines in everything we do.

Through this partnership we sponsored the EirGrid Family Literacy Project. This initiative provided a reading resource pack for parents of children in Delivering Equality of Opportunity in Schools (DEIS) schools.

We also provided sponsorship and support for Science and Technology in Action. With our help, they developed electricity-related content in a teaching pack for physics teachers.

In Northern Ireland, we launched a partnership with the Book Trust NI to fund their Book Start Baby programme aimed at toddlers in Armagh.

Our staff participated in the Business in the Community Ireland Skills@Work education programme for the third year in a row. This year, we supported the fifth year students from Margaret Aylward Community College in Dublin. Staff from across the company gave workshops to these students on a variety of topics to increase their life and educations skills. We got positive feedback from all of the students that participated.

As well as volunteering, our staff were busy fundraising in 2016 for our two staff-nominated charity partners. This year they were the The Irish Hospice Foundation and Cancer Research UK.

As part of our community engagement, we broadened our relationship with the GAA. As an organisation at the heart of every community, they embody the respect and trust that we strive for. In 2016, we became the first ever Official GAA Timing Sponsor. This primarily involves sponsorship of the Croke Park clock and timer.

This year also marked the second year of the EirGrid GAA Football Under-21 All-Ireland Championship. In conjunction with our Timing Sponsorship, we ran a competition to win a digital clock and scoreboard for local GAA clubs. Four clubs - one per province - were drawn to receive this prize in November 2016.

In Northern Ireland, we continued our partnership with Ulster Rugby. This included our sponsorship of the newly named SONI Ulster Rugby Premiership for the second year. We also increased our involvement in this sport as a result of our partnership. We launched a two-year sponsorship of Armagh Rugby club in December 2015. Then, in May 2016, we launched the SONI Community Rugby Champions Award. This award recognises volunteers involved in rugby at a grassroots level, and was presented at the Ulster Rugby Awards.

Community Fund

A highlight for us this year was the launch of the EirGrid Community Fund for the Mullingar - Kinnegad project. This is a new 110 kV transmission line that runs for 25km between Mullingar, County Westmeath and Killaskillen, County Meath.

This fund was the first of its kind that EirGrid has launched. The Community Fund recognises the importance of the local communities who support our work. In the case of the Mullingar - Kinnegad project, we created a total fund of €360,000 to support local community projects.

We invited applications for projects under the following themes:

  • employment,
  • education,
  • environment and,
  • community facilities.

Thirty-seven projects were chosen for funding. We hope that all of these projects will make a lasting contribution to the Mullingar - Kinnegad region.

A New Approach to Consultation

When we work together, we can create a stronger and better electricity grid with the least possible impact on communities. In 2015, we reviewed our public consultation process. As a result, we promised to improve the way we consult with the public and other stakeholders. Over the past year, we have worked on getting this right.

There is one very important principle that is at the heart of our consultation process: the earlier the public get involved in our projects, the more influence they can have in them. To make sure this message is heard, we have implemented a number of consultation and engagement initiatives over the past year.

In November 2016 we launched ‘Have Your Say’. This is an information leaflet that details our approach to developing the electricity grid. Using the ‘plain English’ standard, it explains how the public and other stakeholders can influence our plans. This approach will evolve and change for the better as we work closely with the public and other stakeholders into the future.

Of course, our presence on the ground is important in gathering feedback at the earliest possible stage. This year, we opened a new information office in Armagh. This allows us to invite the public in Northern Ireland to visit, and to ask any questions they might have. Regional offices in Mayo, Leitrim, and Monaghan also remained open.

In April 2016 we launched our mobile unit, which attended many agriculture and trade shows over the summer. This is another useful tool to help us engage with the public and other stakeholders.

In 2016, we attended a number of agricultural shows. These included the National Ploughing Championships, the Clogher Valley Show, and the Armagh Show. Our presence at these events allowed us to directly discuss projects and other areas of our business with those in attendance.

Our Community and Agricultural Liaison Officers have been busy this year. They travelled around the country to meet with the public and stakeholders. This allowed them to provide an update on projects in Ireland and Northern Ireland.

At a political level, we continue to work with elected representatives. This ensures we are accessible, and can provide them with the information they and their constituents need. In November 2015, we appeared in front of the Oireachtas Committee. This allowed us to brief them on the new and innovative approach that was being adopted to reinforce the electricity network.

Our Customers

The electricity sector continued to evolve this year and there are significant changes on the horizon for us and for our customers. We play an important role in helping our customers influence and implement these changes.

This year we hosted a large number of working groups, advisory council meetings, industry workshops and bilateral consultations. Our 2015 annual conference was held in Belfast.

The theme was ‘Europe’s Energy Roadmap - Putting the Customer at the Heart of Policy’. Over 200 customers and stakeholders attended from across the island.

Our customers from across the business continued to grow this year. For example, there has also been growth in demand side units. This is a new type of customer that “produces” electricity for the grid by reducing their consumption of electricity when asked. They receive market payments for this electricity, in much the same way a generator does.

The growth in this customer type has been considerable. There is now approximately 400MW of demand capacity participating in the market.

The continued growth indicates there is an appetite within the demand sector to be less passive users of electricity.

New Connections

EirGrid connected a number of large-scale energy users and renewable electricity generators onto the grid in 2016.

We have made significant progress in the South-West region, with three new major stations now operational. We expect the final station, Kilpaddoge in North Kerry, will be energised next year.

These new stations will allow us to connect renewable energy sources in the area. Several major wind farms were also successfully commissioned and connected to the grid during the year.

2016 saw continued interest in connection from businesses and industries with a high demand for electricity. We call these “demand customers”. Many of these are due to the development of major data centre facilities. We are working closely with the IDA to facilitate the connection of these demand customers to the transmission system.

We also continued to find innovative solutions. In this past year, we facilitated and managed the first construction of a station by a demand customer. This is a new 220 kV station sited near Clonee in County Meath.

In 2016, SONI needed to work closely with NIE Networks and industry participants to connect new customers. This was necessary to respond to an unprecedented level of connection applications.

In response, we established an approach that allows the most efficient use of current capacity on the grid. This approach has already enabled the provision of connection offers totalling over 200MW to new customers.

John O'ConnorChairman

John O’Connor was appointed Chairperson of the Board of EirGrid with effect from 12 November 2013. From 2000 to 2011, he was the Chairperson of An Bord Pleanála, the independent national tribunal for the determination of planning appeals and strategic infrastructure projects.

Prior to that, he served for 35 years as a civil servant in the Department of the Environment where he occupied senior positions as Finance Officer, Principal Housing Policy and Finance and Assistant Secretary in charge of the Planning and Water Services Division.

He has also served as director of three commercial State Bodies: the Housing Finance Agency, Temple Bar Properties and the Dublin Docklands Development Authority. He is also the Chairperson of the Pyrite Resolution Board. He holds a Diploma in Public Administration from UCD.

Fintan SlyeChief Executive

Fintan Slye was appointed Chief Executive of EirGrid on 1 October, 2012. He had previously held the position of Director of Operations of EirGrid, in which he had responsibility for the operation of the power system in Ireland and Northern Ireland, as well as for managing EirGrid and SONI’s programme of work to facilitate the integration of world-leading levels of renewables on the power system.

Before his appointment to that position, Fintan worked for McKinsey & Co in their Dublin office, supporting companies across Ireland, UK and Europe. Prior to that, he held a number of project and management roles in ESB National Grid and ESB International. Fintan completed a Masters in Business Administration from UCD in 2001 and a Masters in Engineering Science in 1993.

Dr. Joan SmythDeputy Chair of the Board

Dr. Joan Smyth was appointed to the Board of EirGrid in June 2009 and reappointed for a further 5 years in 2014. In September 2015, the EirGrid Board appointed her as Deputy Chairperson of the EirGrid Board. She was Chairman of the Progressive Building Society based in Belfast and was a Director of Trinity Housing Association. She currently chairs the Woman's Fund for Northern Ireland and was, for more than five years, Chair of the Chief Executives’ Forum.

She served two terms as Chair of the Northern Ireland Transport Holding Company from 1 July 1999 to 30 June 2005 and was Chair of the Equal Opportunities Commission for NI from 1992 (Chair & Chief Executive until 1 October 1998) remaining in post until the new Equality Commission was established in October 1999. She was elected to the Board of the British Council in September 1999 and has chaired its Northern Ireland Committee.

Dr. Smyth has a BSc (Econ) from Queen’s University, Belfast and is a Companion of the Institute of Personnel and Development. Dr. Smyth is a past Federation President of Soroptimist International of Great Britain and Ireland and a member of the International Women's Forum. She is Vice President of the Railway Preservation Society of Ireland. She was awarded a CBE in the 1998 New Year’s Honours List.

Richard SterlingBoard Member

Richard Sterling is former Managing Director of Coolkeeragh Power Limited based in Derry and is a past President of Londonderry Chamber of Commerce. He was appointed a Board Member of Ilex, the Urban Regeneration Company for the Derry City Council area in 2003, and during his six year term he served as Acting Chairman and Deputy Chairman. Richard was awarded an OBE in 2003 for services to the Basic Skills Committee and to business in Northern Ireland.

Doireann BarryBoard Member

Doireann Barry was appointed to the Board of EirGrid in December 2011 for a period of five years, following her election as the EirGrid staff representative. She has been involved in the electricity industry since 1999 and has worked in many areas across EirGrid. In her current role, as Smart Grid Programme Manager, she has responsibility for the coordination of all Smart Grid-related activities in EirGrid Group. She has represented the company both nationally and internationally, as a speaker at conferences. She is an Electrical Engineering graduate of University College Cork and is a member of Engineers Ireland.

Michael HandBoard Member

Michael Hand was appointed to the EirGrid Board in July 2015 for a period of five years. Michael has extensive experience over 30 years as a senior leader in the consulting engineering and construction sectors in Ireland and latterly as CEO and Director of Grangegorman Development Agency.

During his career he has played a lead role in the growth and development of PH McCarthy Consulting Engineers, a leading multidisciplinary business as Director, Managing Director and Executive Chairman. Following the merger of the business with WYG Group plc he was Managing Director of the WYG Engineering Ireland business for 3 years before joining GDA in 2010. He has a track record in the design and delivery of major strategic infrastructure projects throughout Ireland.

Michael is highly qualified in engineering and business and is a Chartered Engineer, a Chartered Director and a Chartered Water & Environment Manager. He holds a degree in Civil Engineering and a Masters in Business Administration. In 2014, he was conferred with a Honorary Doctorate by DIT in recognition of his contribution as an engineer, a public servant and as a servant to his community. He is a Fellow of four professional institutions.

Liam O'HalloranBoard Member

Liam O’Halloran has extensive senior management experience in multinational electronic and telecommunications companies. Liam previously held the position of Senior Vice President of DEX Europe, a US based company providing repair and logistics services to major electronics multinationals and Vice President of European Operations for Jabil Global Services, a global electronics services company.

Liam was also Director of Customer Operations and Regulation at Magnet Networks and later served as Executive Chairman of ALTO, the Association of Alternative Telecommunications Operators. He is a Director of Alcomis, a company development consultancy with clients in Software, eLearning and Services sectors.

Fintan SlyeChief Executive

Fintan Slye was appointed Chief Executive of EirGrid on 1 October, 2012. He had previously held the position of Director of Operations of EirGrid, in which he had responsibility for the operation of the power system in Ireland and Northern Ireland, as well as for managing EirGrid and SONI’s programme of work to facilitate the integration of world-leading levels of renewables on the power system. Before his appointment to that position, Fintan worked for McKinsey & Co in their Dublin office, supporting companies across Ireland, UK and Europe. Prior to that, he held a number of project and management roles in ESB National Grid and ESB International. Fintan completed a Masters in Business Administration from UCD in 2001 and a Masters in Engineering Science in 1993.

Siobhan ToaleDirector, Human Resource & Corporate Services

Siobhan Toale was appointed Director of Human Resources & Corporate Services in July 2015 having previously held the position of Director of Human Resources since joining EirGrid in 2013. Siobhan has extensive HR, Leadership Development and Change Management experience from the Telecommunications and Banking Industries. She has previously held senior HR positions in eircom, Telefonica 02 Ireland and Bank of Ireland Group. Siobhan has a BSc(Comp) from Trinity College Dublin and an MSc in Organisational Behaviour from Birkbeck College, University of London.

Rodney DoyleDirector, Market Operations & General Manager, SEMO

Rodney Doyle was appointed Director of Market Operations and General Manager, Single Electricity Market Operator (SEMO) in July 2015 having previously held the position of Director of Information Services since February 2013. Rodney also held a number of other positions in EirGrid including European Market Integration Manager; Manager of the East West Interconnector business readiness project, and Ancillary Services Manager. Rodney has across his roles led projects to deliver major systems and policies which are in use today across the electricity market and the TSO's. Before his time with EirGrid and ESB National Grid Rodney worked as the chief adviser in the networks division of the Competition Authority of New Zealand concentrating on electricity and gas regulation/market design issues and before that worked in consultancy. Rodney is a member of a number of key European TSO and market cooperation groups. Rodney has a BA (Economics), MA (Economics) and an MBA from UCD.

John FitzgeraldDirector, Grid Development & Interconnection

John Fitzgerald was appointed Director of Grid Development & Interconnection in July 2015, having previously held the position of Director of Grid Development since February 2013. Prior to this, John was Project Director of the East West Interconnector. Before joining EirGrid, John was involved in the area of business development for ESB International where he held a number of management positions including Business Development Manager, Manager for Trading and Supply (Northern Ireland) and Commercial Manager for Coolkeeragh ESB. John has been involved in the successful development of major energy infrastructure projects and corporate initiatives in the electricity and gas sectors across Ireland, UK and Europe. A graduate of University College Dublin, he is a Bachelor of Electronic Engineering and holds an MBA from the UCD School of Business.

Robin McCormickDirector, Operations, Planning & Innovation and General Manager, SONI Ltd.

Robin McCormick was appointed Director of Operations, Planning & Innovation in July 2015 and is also the General Manager of SONI Ltd. Robin previously held the role of General Manager of the Single Electricity Market Operator (SEMO) and SONI.

He has significant experience in the power industry in a regulated utility environment. In his role as Director, he is responsible for the operation and planning of the power system in Ireland and Northern Ireland, Robin is a fellow of the Institution of Engineering and Technology and Vice Chairman of the IET Engineering Policy Group – Northern Ireland. He holds an MBA from the University of Ulster, Jordanstown, and an MSc from Napier University, Edinburgh.

Aidan SkellyDirector, Finance & Legal

Aidan Skelly was appointed Director of Finance & Legal in July 2015. Aidan previously held the position of Chief Financial Officer since June 2005. He was formerly Finance Director with Waterford Stanley Limited.

He worked with Waterford Crystal from 1987 to 2002, during which time he held a number of finance and commercial positions in Ireland and in the UK. He trained as a Chartered Accountant with PricewaterhouseCoopers and is a Commerce graduate of University College Dublin. He also holds an MBS from Dublin City University.

Rosemary SteenDirector, External Affairs

Rosemary Steen was appointed Director of External Affairs in July 2015 having previously held the position of Director of Public Affairs since joining EirGrid in 2014. Rosemary also serves on the board of the AsIAm charity organisation.

Rosemary has extensive Corporate Affairs, Government Relations and Corporate Social Responsibility experience from the Telecommunications, Utilities and Business Industry Body sectors.

She has previously held senior positions in Vodafone, Shell and IBEC. Rosemary has a BA in Economics and Philosophy from Trinity College Dublin, an MBS in Logistics and Manufacturing from University College Dublin and a Postgraduate Diploma in Legal Studies from Dublin Institute of Technology.

Tom FinnCompany Secretary

Financial Statements

Director's Report

The Directors present their annual report and the audited Financial Statements of the Group for the financial year ended 30 September 2016.

Principal Activities

The Group’s principal activities are to deliver quality connection, transmission and market services to generators, suppliers and customers utilising the high voltage electricity system in Ireland and Northern Ireland. EirGrid plc also has the responsibility to put in place the grid infrastructure required to support the development of Ireland’s and Northern Ireland’s economies. The Group is also responsible for the operation of the wholesale electricity market for the island of Ireland. The Group owns and operates the East-West Interconnector (EWIC) linking the electricity grids in Ireland and Great Britain.

The Group collects tariffs to support these activities. These tariffs allow for incentives and a regulated return for capital invested in the business, generating value for the Group over the longer term.

Results and Review of the Business

Details of the financial results of the Group are set out in the Consolidated Income Statement on page 71 and the related notes 1 to 30.

The current period being reported on is the financial year ended 30 September 2016. The comparative figures are for the financial year ended 30 September 2015. The impact of EWIC on the Income Statement has been split out to aid comparability. Further detail on EWIC is included in Note 7 including the impact on current financial year reported profit.

In December 2015, the Commission for Energy Regulation (CER) in Ireland issued a Final Determination in respect of the EirGrid TSO Price Control for 2016-2020. In February 2016 the Utility Regulator Northern Ireland (URegNI) in Northern Ireland issued a Final Determination in respect of the SONI TSO Price Control for 2016-2020, however, the Licence Modifications are yet to be published.

Commentaries on performance during the financial year ended 30 September 2016, including information on recent events and future developments, are contained in the Chairperson’s Report and the Chief Executive’s Review.

Corporate Governance

The Group is committed to maintaining the highest standards of corporate governance. During the year the Group was compliant with the Code of Practice for the Governance of State Bodies (‘the Code’) issued by the Department of Finance on 15 June 2009. The Code sets out the principles of corporate governance which the Boards of State Bodies are required to observe.

The Group also complies with the corporate governance and other obligations imposed by the Ethics in Public Office Act, 1995 and the Standards in Public Office Act, 2001. The Group also has regard to the principles of the UK Corporate Governance Code revised in September 2014 and the Irish Corporate Governance Annex issued in December 2010.

Principles of Good Governance

Board Members

The Board constitutes a non-executive Chairperson, the Chief Executive, in his role as an executive Director, an employee representative Director and seven non-executive Directors. All Directors are appointed by the Minister for Communications, Climate Action and Environment and their terms of office are set out in writing.

The Board

While day to day responsibility for the leadership and control of the Group is delegated to the Chief Executive and his Management Team, within defined authority limits, the Board is ultimately responsible for the performance of the Group.

The Directors are aware of, and have individually resolved to comply with, the Group’s Code of Business Conduct for Directors.

Procedures are in place for the annual review of the performance of the Board and the Chairperson. The Board has a formal schedule of matters specifically reserved to it for decision at the Board Meetings normally held monthly. Board papers, which include monthly financial statements, are sent to Board members in the week prior to Board Meetings.

The Board Members, in the furtherance of their duties, may avail of independent professional advice. All Board Members have access to the advice and services of the Company Secretary. Insurance cover is in place to protect Board Members and Officers against liability arising from legal actions taken against them in the course of their duties.

The Board conducts an annual review of the effectiveness of the system of internal controls including financial, compliance and risk management. As noted in the Internal Controls section of the Directors’ Report, the Board has not identified, nor been advised of, any failings or weaknesses which it has determined to be significant.

Board Committees in 2016

The Board has an effective committee structure to assist in the discharge of its responsibilities, consisting of a number of committees. During the financial year the standing committees were: the Audit Committee, the Remuneration Committee, the Grid Infrastructure Projects Committee, the Pensions Committee, the Public Affairs Committee and the Risk Committee (established 14 April 2016). The Pensions Committee discontinued on 15 June 2016 as the Board deemed responsibility for pension matters was a direct responsibility of the Board. During the financial year the Board reviewed and updated the membership of its committees.

The Audit Committee’s function is to assist the Board in fulfilling its oversight responsibilities relating to the financial reporting process, the system of internal control, the audit process, monitoring the independence of the auditors and compliance with laws and regulations including the Code of Practice for the Governance of State Bodies. The Board is satisfied that at all times during the financial year at least one member of the Committee had recent and relevant financial experience.

EirGrid plc has adhered to Government policy in relation to the total remuneration of the Chief Executive.

The Remuneration Committee, with the consent of the Department of Communications, Climate Action and Environment and the Department of Public Expenditure and Reform, determines the level of the Chief Executive’s remuneration. The Committee also approves the structure of remuneration for Senior Management.

The Grid Infrastructure Projects Committee’s function is to oversee the implementation of grid development strategy and review infrastructure projects which are expected to come forward for approval in the near future.

The Pensions Committee’s function is to monitor the sustainability of the various EirGrid Group pension obligations entered into and the ongoing viability of each of the schemes. The Pensions Committee discontinued on 15 June 2016 as the Board deemed responsibility for pension matters was a direct responsibility of the Board.

The Public Affairs Committee’s function is oversight of public affairs and stakeholder engagements across the Group.

The Risk Committee’s function is to oversee and monitor the Risk Management Policy and Risk Management Framework, review EirGrid’s risk appetite and review the effectiveness of responses to key risk exposures.

Attendance at Meetings

Board Meetings
There were 12 Board meetings held during the year ended 30 September 2016. The Board Members’ attendances at these meetings were as set out below:

Eligible to Attend Attended
John O’Connor (Chairperson) 12 12
Doireann Barry 12 12
Michael Hand 12 11
Gary Healy (retired 14 September 2016) 12 11
Liam O’Halloran 12 12
Bride Rosney (retired 14 September 2016) 12 12
Fintan Slye 12 12
Joan Smyth 12 12
Richard Sterling 12 11
Gerry Walsh (resigned 28 May 2016) 8 8

Members of the Board at the date of signing of the financial statements were John O’Connor (Chairperson), Doireann Barry, Liam O’Halloran, Michael Hand, Fintan Slye, Joan Smyth, and Richard Sterling.

Audit Committee

There were 5 Audit Committee meetings held during the financial year ended 30 September 2016. The Committee Members’ attendance at these meetings were as set out below:

Eligible to Attend Attended
Richard Sterling (Chairperson) 5 5
Doireann Barry 5 5
Gary Healy (retired 14 September 2016) 5 5
Gerry Walsh (resigned 28 May 2016) 3 3

Members of the Audit Committee at the date of signing of the financial statements were Richard Sterling (Chairperson), Doireann Barry, Joan Smyth (appointed 20 October 2016).

Remuneration Committee

There were 5 Remuneration Committee meetings held during the financial year ended 30 September 2016. The Committee Members’ attendances at these meetings were as set out below:

Eligible to Attend Attended
Joan Smyth (Chairperson) 5 5
Liam O’Halloran 5 5
John O’Connor 5 4

Members of the Remuneration Committee at the date of signing of the financial statements were Joan Smyth (Chairperson), John O’Connor and Liam O'Halloran.

Grid Infrastructure Projects Committee

There were 4 Grid Infrastructure Projects Committee meetings held during the financial year ended 30 September 2016. The Committee Members’ attendance at these meetings were as set out below:

Eligible to Attend Attended
John O’Connor (Chairperson) 4 4
Michael Hand 4 3
Bride Rosney (retired 14 September 2016) 4 4
Richard Sterling 4 4

Members of the Grid Infrastructure Projects Committee at the date of signing of the financial statements were John O’Connor (Chairperson), Michael Hand, and Richard Sterling.

Pensions Committee

There were 4 Pensions Committee meetings held during the financial year ended 30 September 2016. The Committee Members’ attendance at these meetings were as set out below:

Eligible to Attend Attended
Gary Healy (Chairperson) 4 3
Doireann Barry 4 4
Michael Hand 4 4
Fintan Slye 4 4
Joan Smyth 4 4

The Pensions Committee discontinued on 15 June 2016 as the Board deemed responsibility for pension matters was a direct responsibility of the Board.

Public Affairs Committee

There were 4 Public Affairs Committee meetings held during the financial year ended 30 September 2016. The Committee Members’ attendance at these meetings were as set out below:

Eligible to Attend Attended
Bride Rosney (Chairperson) (retired 14 September 2016) 4 4
Liam O’Halloran 4 4
Joan Smyth (appointed Chairperson 20 October 2016) 4 4
Gerry Walsh (resigned 28 May 2016) 2 2

Members of the Public Affairs Committee at the date of signing of the financial statements were Joan Smyth (Chairperson), Doireann Barry (appointed 19 October 2016) and Liam O’Halloran.

Risk Committee

The Risk Committee was established on 14 April 2016. There were 3 Risk Committee meetings held during the financial year ended 30 September 2016. The Committee Members’ attendances at these meetings were as set out below:

Eligible to Attend Attended
Liam O'Halloran (Chairperson) 3 3
Doireann Barry 3 2
Michael Hand 3 2
Gerry Walsh (resigned 28 May 2016) 1 1

Members of the Risk Committee at the date of signing of the financial statements were Liam O'Halloran (Chairperson), Doireann Barry and Michael Hand.

Principal Risks and Uncertainties

Risk Management

The Group has in place an appropriate risk management process that identifies the critical risks to which it is exposed and ensures that appropriate risk mitigation measures are taken. During the financial year the Directors have carried out a robust assessment of the principal risks facing the Group. The Group’s internal audit function continually reviews the internal controls and systems throughout the business and makes recommendations for improvement to the Audit Committee. A Risk Committee was established in April 2016 to oversee and monitor the Risk Management Policy and Risk Management Framework, review EirGrid’s risk appetite and review the effectiveness of responses to key risk exposures.

Financial

The main financial risks faced by the Group relate to liquidity risk, market risk (specifically foreign exchange rate risk, interest rate risk and cash flow risk) and credit risk. Policies to protect the Group from these risks are regularly reviewed, revised and approved by the Board as appropriate.

The Group’s principal financial risk is that there is inadequate liquidity in the event of a significant regulatory under-recovery. The Board seeks to ensure that adequate banking lines are in place to enable it to fund such a requirement, pending recovery in a subsequent regulatory pricing period.

As a regulated business, operating in Ireland and Northern Ireland, the Transmission System Operator activities do not involve any significant pricing risks. The Group derives approximately 24% of its revenues from the UK and hence has an exposure to Euro/Sterling currency fluctuations. This risk is partially mitigated by the majority of both revenue and expenditure from UK operations being denominated in Sterling. The Group has sought to further reduce this exposure by funding UK operations using Sterling borrowings.

The Group funds some of its operations using borrowings. The Group seeks to minimise the effects of the interest rate risks arising from its operational and financial activity by using derivative financial instruments to hedge risk exposures. The Group has entered into interest rate derivatives to fix interest rates on its debt. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

The Group discharges its Market Operator obligations through a contractual joint operation. Under the terms of the Trading and Settlement Code for the Single Electricity Market (SEM) each participant is required to provide credit cover at a level notified to it by the Market Operator. Such credit cover can be provided by means of an irrevocable standby letter of credit or a cash deposit held in a SEM collateral reserve account (security accounts held in the name of market participants). Any bad debt arising in the SEM, to the extent that it exceeds the available credit cover, is shared by generators and is not borne by the Market Operator. Appropriate arrangements are also in place to effectively manage the Group’s credit risk arising from its Transmission System Operator activities.

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group is exposed to credit risk from the counterparties with whom it holds its bank accounts. The Group mitigates its exposure by spreading funds across a number of financial institutions which have a credit rating, from an independent rating agency, consistent with the Treasury Policy approved by the Board. The Group is also exposed to counterparty risk on undrawn facilities and interest rate swap instruments.

Consistent with our Treasury Policy the Group deals only with counterparties with high credit ratings to mitigate this risk.

The Group’s policy and practice is to settle invoices promptly according to terms and conditions agreed with suppliers.

System and Market Operations

The Group is responsible for the secure operation of the transmission systems in Ireland and Northern Ireland and for the operation of the all-island Single Electricity Market. A complete programme is in place to discharge this responsibility. This includes:

  • Back-up sites for the control centres in Dublin and Belfast, which are regularly tested;
  • Comprehensive insurance program placed in conjunction with expert insurance advisors;
  • Comprehensive power system operational procedures which are regularly reviewed and are in line with best international practice;
  • Grid maintenance standards and policies, supported by a detailed Infrastructure Agreement with ESB as the Transmission Asset Owner in Ireland;
  • Transmission System Security and Planning Standards, supported by a Transmission Interface Arrangement with NIE as the Transmission Asset Owner in Northern Ireland;
  • Support of the pre-construction phase of the development of the network in Ireland and Northern Ireland by a fully functioning Program Management Office, which has effective and appropriate policies, processes and controls; and
  • Continuous management focus on all aspects of health and safety. A Safety Management System (certified to OHSAS 18001) has been approved and implemented.

Pensions

EirGrid operates two defined benefit schemes for qualifying employees. Risks to the cost of providing such schemes include changes in interest rates, level of return on pension assets, changes in life expectancies and changes in price and salary inflation. The current IAS19 deficit included in the financial statements at 30 September 2016, before deferred tax, is €53.9m (2015: €27.2m).

Network Development

EirGrid has the responsibility to put in place the grid infrastructure required to support the development of Ireland’s and Northern Ireland’s economies. EirGrid’s principal activities in this regard are the planning for, and delivery of, new connections to generators and customers utilising, or seeking to utilise, the high voltage electricity system and transmission network reinforcement projects across Ireland and Northern Ireland. There is a risk of delay and consequential increase in cost associated with complex network projects of this nature.

To manage this, EirGrid publishes guidance on network development and has a robust project assessment framework in place. It also continually assesses its processes and procedures to ensure that they are in line with best practice and appropriate for the business and meets the needs of the public and those communities we engage with.

Regulated Environment

EirGrid operates in a regulated environment (with the exception of its Telecoms business). Regulatory policy changes could materially affect how we operate and our financial performance. We have a dedicated Regulatory team in place and seek to engage constructively and pro-actively at all times with the Regulatory Authorities.

East-West Interconnector

The Group is responsible for the asset management and operation of the East-West Interconnector (EWIC) which links the electricity grids in Ireland and Great Britain. There is a risk of physical damage to the EWIC resulting in possible prolonged outage of the EWIC together with significant reinstatement costs; however there are comprehensive operational procedures and maintenance arrangements for the East-West Interconnector in place, including appropriate insurance arrangements.

Brexit

A Review Group has been established by EirGrid to monitor risks associated with Brexit. The group reports regularly to the Board.

Cyber Security

EirGrid recognises Cyber Security as a critical risk. We operate a full suite of security policies and standards and have deployed comprehensive perimeter defence mechanisms. Security Awareness training is rolled out to all staff and we have ongoing IT Security monitoring and compliance reporting.

Internal Controls

An internal control system encompasses the policies, processes, tasks, behaviours and other aspects of a Group that, taken together:

  • Facilitate effective and efficient operations by enabling the Group to respond to risks;
  • Ensure the quality of internal and external reporting; and
  • Ensure compliance with applicable laws, regulations and internal policies.

The Board has overall responsibility for the Group’s systems of internal control and for monitoring their effectiveness and in this regard the Board’s objective is to maintain a sound system of internal control to safeguard shareholders’ interests and the Group’s assets. These systems are designed to provide reasonable, but not absolute, assurance against material misstatement or loss. In order to discharge its responsibility in a manner which ensures compliance with legislation and regulations, the Board established an organisational structure with clear reporting procedures, lines of responsibility, authorisation limits, segregation of duties and delegated authority.

The key elements of the Group’s internal control processes are:

  • Defined policies and procedures in relation to expenditure and treasury matters;
  • Timely financial reporting on a monthly basis;
  • Preparation of, and monitoring performance against, annual budgets which are reviewed and approved by the Board;
  • An internal audit function which reviews critical systems and controls;
  • An Audit Committee that considers audit reports and approves Financial Statements before submission to the Board and Shareholders;
  • Regular performance of a risk management process; and
  • Procedures to ensure compliance with laws and regulations.

The Board established a Risk Committee during the year to assist the Board in fulfilling its oversight responsibilities relating to the management of risk.

The Group has put in place a framework for monitoring and reviewing the effectiveness of internal controls, including its risk management process. The Directors confirm that they have reviewed the effectiveness of the system of internal control operated during the period covered by these Financial Statements. During the course of this review, the Board has not identified, nor been advised of, any failings or weaknesses which it has determined to be significant. Therefore a confirmation in respect of necessary actions has not been considered appropriate.

The Group has an Internal Audit function which delivers an annual programme of audits to ensure that there are effective controls operating across key financial processes and those areas of higher risk exposure. The Group’s Head of Internal Audit & Compliance reports to the Audit Committee quarterly and, on an annual basis, presents an assurance statement on the effectiveness of internal control, risk management and corporate governance.

Under the internal audit arrangements in place, Internal Audit has access to external specialist resources to support its activities.

Directors’ Remuneration

The Financial Statements include €117,000 (2015: €112,000) for Chairperson’s and Directors’ fees, in accordance with the Department of Finance approved levels of remuneration for the Chairperson and Board Members of State Bodies and the revised arrangements for payment of board fees to public sector employees under the Department of Public Expenditure and Reform’s “One Person One Salary” Principle. In 2009 the Department of Communications, Climate Action and Environment issued an instruction that Chairperson and Directors’ fees be reduced. Prior to this instruction being issued the Chairperson and Directors had already decided to take a voluntary 10% reduction in their fees. Under the approved remuneration levels, the Chairperson’s fees were equivalent to €21,600 per annum during the financial year (2015: €21,600 per annum). Directors’ fees were equivalent to €12,600 each per annum during the year (2015: €12,600 each per annum).

The only executive Board Member during the year was the Chief Executive, Fintan Slye. The Chief Executive’s remuneration is set by the Department of Public Expenditure and Reform and the Department of Communications, Climate Action and Environment.

The remuneration of the Chief Executive consists of basic salary, taxable benefits and certain retirement benefits. The retirement benefits of the Chief Executive are calculated on basic pay only and aim to provide in retirement a pension of one-eightieth and a gratuity of three-eightieths of salary for each year of service as Chief Executive. The increases in accrued pension and accrued gratuity excluding inflation during the financial year to 30 September 2016 were €2,125 (2015: €2,125) and €6,375 (2015: €6,375) respectively. The total accrued pension at the end of the financial year was €18,295 (2015: €16,170) and the total accrued gratuity was €60,035 (2015: €53,660). The transfer value of the relevant increase was €30,406 (2015: €28,541).

Dividends

In evaluating the annual dividend that the Group may propose the Board considers the following key factors:

  • Available Cash: The Group receives tariff revenues, which are reflected through the Income Statement which fund operational expenses of the Group and capital projects which are capitalised and depreciated over the future periods. This creates a mismatch between available cash and reported profits.
  • Expected adjustment for under/over recovery: Any under or over recovery of costs through tariff revenue is not recognised in the Financial Statements. The dividend policy reflects the expected impacts on future profits of the adjustment for the current financial year under/over recovery in future tariff rates.
  • Future investments: The Group funds a portion of capital projects through existing resources. The dividend policy considers expected and committed future investments.
  • Liquidity: As noted previously the Group’s principal financial risk is that there is inadequate liquidity in the event of a significant regulatory under recovery. The dividend policy considers the prudent management of this risk.

Having considered these factors the Directors of the Group propose the payment of a final dividend of €4,000,000 (2015: €3,500,000) for the financial year ended 30 September 2016.

Directors’ and Secretary’s Interest in Shares

The Directors and Secretary who held office between 1 October 2015 and 30 September 2016 had no beneficial interest in the shares of the Group.

One ordinary share of the Company is held by the Minister for Communications, Climate Action and Environment and the remainder of the issued share capital is held by the Minister for Public Expenditure and Reform, or on his behalf.

John O’Connor, Fintan Slye and Tom Finn hold one share each in the share capital of the Company on behalf of the Minister for Public Expenditure and Reform. Following the appointment of Tom Finn as Company Secretary, the shareholding previously held by Niamh Cahill (previous Company Secretary) transferred to Tom Finn.

Political Donations

The Group does not make political donations.

Going Concern

The Financial Statements are prepared on a going concern basis as the Board, after making appropriate enquiries, is satisfied that the Group has adequate resources to continue in operation for the foreseeable future.

Accounting Records

The measures that the Directors have taken to secure compliance with the requirements of Sections 281 to 285of the Companies Act 2014 with regard to the keeping of accounting records are the employment of appropriatelyqualified accounting personnel and the use of suitable accounting systems and procedures. The accounting records are kept at The Oval, 160 Shelbourne Road, Ballsbridge, Dublin 4.

Post Balance Sheet Events

The measures that the Directors have taken to secure compliance with the requirements of Sections 281 to 285 of the Companies Act 2014 with regard to the keeping of accounting records are the employment of appropriately qualified accounting personnel and the use of suitable accounting systems and procedures. The accounting records are kept at The Oval, 160 Shelbourne Road, Ballsbridge, Dublin 4.

Auditors

The auditors, Deloitte, Chartered Accountants and Statutory Audit Firm, have indicated their willingness to continue in office in accordance with Section 383(2) of the Companies Act 2014.

Disclosure of Information to Auditors

So far as each of the Directors in office at the date of approval of the financial statements is aware:

  • there is no relevant audit information of which the Company’s auditors are unaware; and
  • the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

Directors' Compliance Statement

For the purposes of section 225 of the Companies Act 2014 (the “Act”), we, the Directors:

  • Acknowledge that we are responsible for securing the Company’s compliance with its relevant obligations as defined in section 225 (1) of the Act (the “relevant obligations”); and
  • Confirm that each of the following has been done:

(i). a compliance statement (as defined in section 225(3)(a) of the Act) setting out the Company’s policies (that in our opinion, are appropriate to the company) respecting compliance by the Company with its relevant obligations has been drawn-up;

(ii). appropriate arrangements or structures, that are, in our opinion, designed to secure material compliance with the Company’s relevant obligations, have been put in place; and during the financial year to which this report relates, a review of the arrangements or structures referred to in paragraph (ii) above has been conducted.

Directors’ Responsibilities Statement

The Directors’ are responsible for preparing the Directors’ Report and the financial statements in accordance with the Companies Act 2014 and the applicable regulations.

Irish company law requires the Directors to prepare financial statements for each financial year. Under the law, the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (“relevant financial reporting framework”). Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position of the company as at the financial year end date and of the profit or loss of the company for the financial year and otherwise comply with the Companies Act 2014.

In preparing these financial statements, the Directors are required to:

  • select suitable accounting policies for the Parent Company and the Group financial statements and then apply them consistently;
  • make judgements and estimates that are reasonable and prudent;
  • state whether the financial statements have been prepared in accordance with applicable accounting standards, identify those standards, and note the effect and the reasons for any material departure from those standards; and
  • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The Directors are responsible for ensuring that the company keeps or causes to be kept adequate accounting records which correctly explain and record the transactions of the company, enable at any time the assets, liabilities, financial position and profit or loss of the company to be determined with reasonable accuracy, enable them to ensure that the financial statements and Directors’ Report comply with the Companies Act 2014 and enable the financial statements to be audited. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website.

Approved by the Board and signed on behalf:

21 December 2016

Independent Auditors’ Report to the Members of EirGrid Plc

We have audited the financial statements of EirGrid Plc for the financial year ended 30 September 2016 which comprise the Group Financial Statements: the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Cash Flow Statement, and the Parent Company Financial Statements: the Company Statement of Comprehensive Income, the Company Balance Sheet, the Company Statement of Changes in Equity and the Company Cash flow Statement and the related notes 1 to 30. The relevant financial reporting framework that has been applied in the preparation of the group and the parent company financial statements is the Companies Act 2014 and International Financial Reporting Standards (IFRSs) as adopted by the European Union (“relevant financial reporting framework”).

This report is made solely to the company’s members, as a body, in accordance with Section 391 of the Companies Act 2014. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view and otherwise comply with the Companies Act 2014. Our responsibility is to audit and express an opinion on the financial statements in accordance with the Companies Act 2014 and International Standards on Auditing (UK and Ireland).

Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report for the financial year ended 30 September 2016 to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements

In our opinion:

  • the group and parent company financial statements give a true and fair view of the assets, liabilities and financial position of the group and parent company as at 30 September 2016 and of the profit of the group for the year then ended; and
  • the group and parent company financial statements have been properly prepared in accordance with the relevant financial reporting framework and, in particular, with the requirements of the Companies Act 2014.

Matters on which we are required to report by the Companies Act 2014

  • We have obtained all the information and explanations which we consider necessary for the purposes of our audit.
  • In our opinion the accounting records of the parent company were sufficient to permit the financial statements to be readily and properly audited.
  • The parent company balance sheet is in agreement with the accounting records.
  • In our opinion the information given in the directors’ report is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

  • Under the provisions of the Companies Act 2014 we are required to report to you if, in our opinion the disclosures of directors’ remuneration and transactions specified by law are not made.
  • Under the Code of Practice for the Governance of State Bodies 2009 (“the Code”), we are required to report to you if the statement regarding the system of internal financial control required under the Code as included in the Directors’ Report does not reflect the Group’s compliance with paragraph 13.1 (iii) of the Code or if it is not consistent with the information of which we are aware from our audit work on the financial statements.

Ciarán O'Brien
For and on behalf of Deloitte
Chartered Accountants and Statutory Audit Firm Dublin

22 December 2016