Bord Gais signals plan to become takeover target
Semi-state is valued at €250m but suitors would prefer valuation nearer €1bn
Thursday March 13 2008
Bord Gais is positioning itself for a possible privatisation in three-to-five years time.
While any decision on privatisation would be a matter for the Government, it is understood the semi-state company has told the Department of Energy that it is building itself up so as to have the scale and positioning to be an attractive takeover target.
The Bord Gais plan, which will be formally put to the Department next month, would see all regulated parts of the company's business, largely its gas distribution network, hived off into a separate division which would remain in state control.
This would leave the rest of the Bord Gais business, most notably its customer base, its position as a gas retailer and its electricity interests.
According to one source, the department has been told that Bord Gais is currently only valued at about €250m but needs to increase this to about €1bn in order to attract bids.
This is based on UK valuations for gas and electricity assets which are based on a value per customer of about £300. Bord Gais has 600,000 customers, giving it a valuation of about €250m.
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John Mullins, the new Board Gais chief executive, has already said that he plans to invest €750m, principally in electricity assets.
The company has invested €400m in a new power plant at the Whitegate refinery in Cork, which is due to come on stream in about two years.
Aside from this, the company's best chance of gearing up comes from its bid, with partner International Power, for three ESB power stations.
The Government required ESB to sell off Tarbert in Co Kerry, Marina Steam Turbine in Co Cork and Great Island in Co Wexford in an effort to create greater competition in electricity generation. Other bidders for the stations are thought to include Viridian, Scottish & Southern Energy, which recently bought Airtricity, and Northern European firm Eon.
It is likely Bord Gais will argue its existing customer base makes it is the only company properly positioned to bring electricity competition to the domestic market.
However, Bord Gais is not the only company looking to expand its non-regulated business.
Just as its is being forced to contract at home, ESB is keen to expand abroad.
This could mean that the company which acquires the three Irish stations on the market could be one willing to swap existing station in the UK or elsewhere, which would rule out Bord Gais at any price.
Bord Gais has also expressed an interest in buying Marathon Oil's Irish operations, including the Kinsale and Ballycotton gas fields and an 18pc interest in the Corrib field.
- Tom McEnaney
