Business Irish

Thursday 26 April 2018

'There's only one way to sell a business, and that's to do it quickly'

Uncertainty surrounded the long sales process for Bord Gáis Energy, leaving staff unsure about their future. But Dave Kirwan insists the firm is more than a small cog in a big wheel, writes John Mulligan

Dave Kirwan, coo of Bord Gais Energy
Dave Kirwan, coo of Bord Gais Energy
John Mulligan

John Mulligan

There's a great autumnal view from Dave Kirwan's corner office beside the Grand Canal in Dublin. Light floods through the expansive windows, where the Co Carlow native heads up Bord Gáis Energy as its chief operations officer. The company is now a part of UK energy giant Centrica following its €1.1bn sale by the Government in 2014.

Kirwan (44) admits that he had a bit of a clear-out the evening before, despatching boxes of books - he says he's a real bookworm - to declutter the place. They've even gone to the trouble of breaking out the Club Milks.

It's just under two years since the sale of the gas business was agreed, and Kirwan concedes that the whole drawn-out process created uncertainty and was a big distraction for management who were pressed into action for roadshows and investor meetings.

"I said to someone after: There's only way to sell a business and that's to do it quickly. Prolonged uncertainty is too tough on people. The mental stamina at times gets strained."

In March 2012 the then Minister for Energy, Pat Rabbitte, said Bord Gáis Energy would be sold. It would be more than two years before that happened, essentially leaving staff in a vacuum.

"People get spooked and start to believe anything and everything," says Kirwan, who was doing a doctorate in business economics at the time the sales process got going. "By God, it served me well. A lot of it was to do with people and their behaviour - the human condition and how we think. In times of uncertainty, people get really fixated with the downside. I used to say 'look, we could be bought by an organisation that wants to grow this business, that loves our passion'."

But a full year passed before the sale really got mobilised, according to Kirwan.

"In January 2013, my team and I were asked to put together an information memorandum describing the business end to end. We were doing that until August and doing management presentations for all the bidders, and that went through right to the end of the year."

And while selling any business has its challenges, throw in the fact that it was a semi-state, and the political baggage that comes with that, and the mix all starts to get pretty sticky.

Just look at how it took for the State to decide whether or not to sell its stake in Aer Lingus to IAG.

Then, at the end of 2013, Pat Rabbitte landed a bombshell. The Bord Gáis Energy sale, which for the Government was being handled by Royal Bank of Canada out of London, was being pulled. There was huge uncertainty as to what was going to happen. Centrica, says Kirwan, was "shell-shocked".

But within 10 days, Kirwan was out visiting staff all over the island because the Government did a sudden U-turn and said it would sell to Centrica (it's actually a consortium led by Centrica and which includes two private equity groups that bought the business). The distribution side of the business - Gas Networks Ireland - remains under Government control.

"The job I had at that time was to make sure the business didn't drop the ball, delivered the numbers, and mostly, that the people in it came out of it as unscathed as they could be and enthusiastic about the future," he explains. "That was tough. It was the most rewarding but the most tiring 18 months of my career."

Then the top brass at Centrica told Kirwan they'd like him to remain to continue leading its new Irish business. The Bord Gáis Eireann group had been headed by former ESB troubleshooter Michael McNicholas, with Kirwan in charge of the energy division. McNicholas (whom Kirwan says was a great support to him) now heads Ervia, the umbrella group for Irish Water and Gas Networks Ireland.

As a 23-year-old, fresh-faced university graduate (he studied electronic engineering at UCD having done his Leaving Cert at the tender age of 16), he was despatched by ESB International to Texas. Kirwan has come a long way since. He'd been sent to the US to work as a consultant to investors interested in building power stations in a deregulated market, but still found some time to join a band and bring Irish ballads to the South.

Afterwards, he worked in Vietnam with ESB International for 14 months before joining Bord Gáis in 1999.

"I learned a lot," he says of his time in the US in particular. "It completely changed my perception of what you can do in your career. You had to earn your money by pleasing the client. You grow up a lot. I came back completely different."

Now he has a whole new set of challenges. While Bord Gáis Energy has 600,000 residential energy customers in Ireland - including for gas and electricity - it's now in a constant battle for loyalties with a number of providers including the ESB's Electric Ireland, Airtricty (which is owned by UK firm Scottish and Southern Energy), Energia (currently owned by Bahrain's Arcapita), and smaller players such as Prepay Power and Pinergy.

Latest figures from Centrica show that Board Gáis Energy generated gross revenue of £400m (€556m) in the first six months of 2015, and an adjusted operating profit of £23m (€32m).

And the most up to date data from the Commission for Energy Regulation shows Bord Gáis Energy has been holding its ground, luring more customers than it's losing as consumers switch providers. It has passed on two price decreases this year.

"The pressure on us now is to grow and innovate, to use everything that Centrica has, deploy it in Ireland and to make a bigger success of this business," says Kirwan. "That's good pressure. In semi-states, boards are under a lot of pressure from a lot of constituents, and sometimes it's impossible to please everyone. That's a real challenge and I've great sympathy for them because there are good people in semi-states."

But surely the concern for Bord Gáis Energy is that it would become a very small cog in a very big machine?

That £400m of revenue it generated in the first six months of 2015 makes it the second smallest unit within the Centrica group, which last year posted turnover of £29.5bn (€41bn) and a £1.74bn (€2.4bn) adjusted operating profit. The group is involved in energy exploration, production, distribution, storage, trading and supply.

Kirwan admits it was initially a worry.

"I looked at turnover, I looked at the profit and loss and what we could contribute growth-wise," he says. "I was thinking to myself: how interested are they going to be? But actually they're incredibly interested. The chief executive of Centrica (Iain Conn) gets involved with us. He was here three weeks ago and met all our staff. They're looking at this wondering if they can replicate it. It also gives them an opportunity to test things. Centrica is a very ambitious company."

Regardless, consumers love to give out about utility companies, whether they energy or water firms, or telecoms providers. With oil and gas prices having fallen, consumers can quickly see the impact at a petrol pump but it takes much longer for cuts to filter through in their domestic energy bills.

"Fixed charges to pay back infrastructure to deliver product is a large core part of the energy price," Kirwan insists. "We do have to contract gas in the UK, ship it using UK networks, then using an interconnector and then using local networks."

When the Corrib gas field off the west coast will finally come on stream later this year or early in 2016, it will provide an estimated 56pc of Ireland's annual gas demand in the first full year, but the interconnector between Northern Ireland and Scotland will re-emerge as a dominant supply source in the medium term.

Meanwhile, Bord Gáis Energy has forged a three-year strategic partnership with Focus Ireland to help it continue its work for homeless people. The company will provide a total of €1.2m in financial support over the three-year period.

"We're going to fund two full-time staff and provide counselling and advice for families at risk before they get into the homeless situation," says Kirwan.

"We do mail drops to over 600,000 customers and through our partnerships we can get the word out that homelessness is affecting 600 families in Ireland. There are 1,500 children in emergency accommodation. We genuinely want to make a difference."

And as great as that view out the office window is, you wonder if Kirwan has his sights set on moving up the ladder at Centrica. Earlier this year, he uprooted his family including four young kids from Cork to Dublin.

"We all come to work to move up the food chain," he laughs. "But genuinely, anyone who gets to a senior level, I think if they got there the right way, the reason they come to work is to learn and extend themselves and work with great people. I don't think good leaders sit there navel gazing about what their next big job will be.

"They should be obsessing about whether they're doing enough as a group of people in their current role. Then the days pass quickly."

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