DR Eddie O'Connor has resigned from Bord Na Mona following the agreement of a settlement package with the Government. The announcement was made late last night after a day of intensive negotiations.

A brief announcement on behalf of company chairman, Mr Pat Dineen, said that Dr O'Connor had resigned from Bord na Mona, where he was managing director until suspended earlier this week, and that neither side would be making any further comment.

It is believed that the package includes a lump sum severance payment, a pension, the remainder of Dr O'Connor's contract and some agreement on legal costs. Sources speculated last night that the package might be worth somewhere in the region £750,000 to £900,000, with around £600,000 accounted for by the pension.

Last night's statement said. "The parties record their satisfaction that the conclusion of this controversy is in the interests of the company and its employees."

The latest round of talks is under stood to have got underway in earnest yesterday morning after contact between Dr O'Connor's advisers and advisers to the Department of Energy. The Minister for Energy, Mr Lowry, is believed to shave been involved as the talks continued late into the night and was understood to be keen to conclude the Bord na Mona affair, having become involved last week after the board referred its conclusions to him.

Earlier this week, Dr O'Connor's advisers informed Mr Lowry's Department of his requirements and Government sources have indicated that there was a sizeable gap at that stage between what they would offer and what Dr O'Connor would be likely to accept.

It is understood that a fresh offer was made by the departmental negotiators yesterday, with an indication that this was as much as the State was prepared to offer.

An intense day of contacts followed between the two sides to try to hammer out a package which would avoid a lengthy legal battle and also head off a further investigation into Dr O'Connor's remuneration by the senior counsel, Mr Frank Clarke.

The Government had decided earlier this week to suspend Dr O'Connor and appoint Mr Clarke to review the existing reports on Dr O'Connor's pay and hear representations from senior counsel on both sides. However, a condition of the settlement is that this inquiry will not now go ahead.

Dr O'Connor had threatened to seek a judicial review of the Government's decision to suspend him as Bord na Mona managing director. It is understood that the Government had informed Dr O'Connor that it would strenuously defend any such proceedings, suggesting that a lengthy and costly legal battle was in prospect unless a settlement was reached.

Discussions on a settlement package are understood to have centred on pension arrangements, severance payments and the associated legal costs. The terms of the announcement of Dr O'Connor's departure were agreed and a confidentiality clause forms part of the package.

Sources believe that a settlement was the best option for both sides. Mr Lowry and other senior Government ministers are understood to have wanted to see the affair concluded as quickly as possible. Meanwhile, Dr O'Connor has, for some time, made it clear that he was prepared to accept a package if terms could be agreed.

The Bord na Mona affair started more than three months ago when the board of the company requested a review into Dr O'Connor's remuneration package. The board eventually concluded that the package breached Government guidelines.

Dr O'Connor's package included £66,000 in unvouched expenses, which he and the former chairman Mr Brendan Halligan said were part of a public affairs budget to promote the interests of Bord na Mona.

The Government considered the board's conclusions this week and decided to suspend Dr O'Connor on full pay.

Mr Paddy Hughes, the company's chief operations officer, was appointed as acting chief executive.

Last night's statement said that the company would now focus on the challenges facing it.