Wednesday 20 September 2017

Endesa takes €300m hit on sale of Irish business

Tom Lyons

Weak price bad for sale of state assets

Spanish utility Endesa took a hit of more than €300m -- half of its total investment in this country -- in order to exit the Irish energy market.

The decision by Endesa to sell its four power plants in Ireland to SSE, the owner of Airtricity, at such a heavy discount reflects the lack of international interest in acquiring Irish utilities.

It also points to the Spanish giant's need to raise cash as obtaining fresh finance in EU economies such as Spain and Ireland becomes ever-more expensive, even for relatively blue-chip businesses such as large energy firms.

Despite the colossal write-off, Taoiseach Enda Kenny nonetheless described the deal as a "vote of confidence" that "reflects the degree of certainty and confidence in Ireland that we know is valued by many international investors and companies".

In reality, SSE drove an extremely hard bargain as the assets failed to attract much overseas interest -- a negative signal for Ireland which hopes to repay part of the cost of the EU/IMF bailout with sales of State utility assets.

SSE paid just €320m in total for Endesa's Irish assets -- €130m less than the Spaniards paid for the assets only three years ago. Combined with an investment of more than €120m in upgrading facilities, Endesa poured in excess of €570m into Ireland before pulling the plug.

There is good news in domestic employment terms as SSE said it would invest a further €168m in Ireland, creating 700 new jobs. SSE already employs 800 people here. Since the transaction, SSE is now the third largest energy company across the island of Ireland with 750,000 customers.

In total, SSE will have invested €1.7bn in Irish energy over the past five years. SSE's deal includes a 460mw combined-cycle gas turbine being built at Great Island, Co Wexford, to replace an existing smaller oil-fuelled unit at the same site.

SSE also has plants at Tawnaghmore, Co Mayo, and Rhode, Co Offaly, plus a number of further development sites. The most promising of these is planning a gas turbine plant at the existing 620mw Tarbert operation in Co Kerry.

SSE declined to comment on its purchase of Endesa and the Spanish utility did not return calls for comment.

Sunday Indo Business

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