The ESB will have to raise more than €2 billion in bonds or loans to part-fund a major network renewal, its chairman has said.

Mr Tadhg O'Donoghue said the company would not be in a position to fund the initiative from its own resources and said the Government was unlikely to release State capital for the programme.

With the Progressive Democrats likely to push for an ESB flotation in any negotiation with Fianna Fáil on a programme for government, Mr O'Donoghue believed the company could be prepared for a sale within three years. He said: "Whatever decision the Government makes, the company will be ready for it. The shareholder must be given choices."

The immediate priority, he said, was to renew the company's ageing networks throughout the State, which are under pressure due to the increasing demand for electricity that followed the boom.

On funding, Mr O'Donoghue said: "In the absence of new share capital, we would need, between bonds and borrowing, over €2 billion. We would want €3.5 billion but we're going to generate quite a lot internally."

The ESB would seek a credit rating this year for the first time and it expected to receive either an A+ or AA rate.

While the plan was in its early stages only, Mr O'Donoghue favoured a bond issue over raising loan capital.

He said: "We'll probably have to go to the bond market some time in the next 12 months. I'm much keener on the bond because it's a much longer-term market."

The balance between money raised through loans and bonds had not been worked out yet, he added.

"Either way, if we are to complete the programme, we will have to raise borrowings because I can't believe the State will put in capital."

The company has initiated a review of its strategic plan, which will be put to a board meeting on June 26th.

This was the subject of a special meeting last weekend between the ESB's senior executive team and its board.

The definitive plan will be developed by chief executive designate, Mr Padraig McManus, who takes over from Mr Ken O'Hara in July.

The meeting last weekend was addressed by the energy regulator, Mr Tom Reeves, the Department of Public Enterprise, and by a senior executive at AIB Capital Markets, Mr John O'Donnell.

AIB's involvement suggests the review will incorporate a broader ownership review, including the possibility of issuing the firm's stock on the public markets.

Certain management figures have already championed flotation although the potential valuation of the firm is unclear.

Since the ESB is a statutory company, such an initiative would require plc legislation in the first instance. That could take up to 18 months to develop, it is believed.

Mr O'Donoghue said the strategic review would incorporate the ESB's legal obligation to reduce its market share as the company faced full competition in 2005.

Asked whether there would be any radical deviation from the current plan, he said: "I think there will be changes."

These were likely to include the separation of the company's power generation and networks operations, which currently operate under the Irish Electricity division.

"Each division will have more autonomy than heretofore."

Despite a Government move to prevent a €1.8 billion investment in the Polish market last year, Mr O'Donoghue said there would be renewal of interest in the international division "simply because we need to grow".

The company was likely to seek involvement as an operational partner to larger groups which would provide financial backing for initiatives.

He said: "We'll be looking at projects less on a 100 per cent basis and looking for financial partners as opposed to wholly-owned developments."