Tuesday 24 October 2017

Minister's hands tied as date for sale of ESB draws near


Emmet Oliver, Deputy Business Editor


McCarthy's valuation of the state-owned firm

Communications Minister Pat Rabbitte and his leading officials have been forced to sign an agreement that they won't deal directly with interested buyers of the ESB as the sales process of the state-owned company draws nearer.

The protocol signed by Mr Rabbitte and his officials means only the NTMA at this stage can deal with interested parties.

"There are people popping out of the bushes all the time," said one source familiar with the sales process.

The NTMA unit New Era is handling the sale of the company, with a trade sale, a limited IPO and a strategic investment among the options being studied.

By November 30, Mr Rabbitte is due to bring proposals before the Cabinet, with one of these options being favoured.

It is understood a number of potential buyers tried to approach ministers and officials directly with a view to discussing purchasing the firm. ESB is valuing the company in excess of €4bn and has advised the Government of this.

But so far the Government has not hired an investment bank to handle the sale. The price of the ESB stake, believed to be about 25pc, will have ramifications for other state assets.

The NTMA unit is not only handing the sale of the ESB stake, but is also assessing the sale of other assets, most notably Bord Gais. The EU/ECB and IMF wanted the State to sell up to €5bn of assets, but in recent agreements with the so-called 'troika', the Government managed to put in a promise to simply embark on an "ambitious" sales programme.

The Government is holding to its position that sales of €2bn are sufficient and it wants a portion of this money devoted to job creation efforts.

The troika wants the proceeds of any sale to be used to reduce the national debt, which is heading toward 115pc of GDP according to some calculations.

One source said the price achieved on the sale of ESB, most likely in the first half of next year, will be crucial to how many other state companies have to be sold.

The government is believed to have a preference for a pension fund to invest in the ESB. "It is all about compatibility," was how one buyer summed up the position.

The Government may write into any sale agreement conditions on how the ESB will operate in future.

For example, the government is looking at using some part of the ESB's national network to improve broadband access in areas where coverage is poor.

A report by economist Colm McCarthy of UCD valued the ESB at €4bn, but this was based on its net asset value and other valuations are likely to vary widely.

The company, for example, has a large debt load and is currently trying to address a substantial pension scheme, although it has got an agreement for measures to radically reduce this deficit.

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