Business Irish

Monday 11 December 2017

UK’s ‘Big Six’ power firms likely to bid for Bord Gais assets in 2013

Donal O'Donovan

Donal O'Donovan

THE UK's "Big Six" power companies are the most likely bidders when Bord Gais assets come up for sale next year but China and the Middle East will also be targeted for bidders, according to chief executive John Mullins.

UK-based Scottish Power's Spanish parent Iberdrola, as well as rivals Centrica and Scottish and Southern, who have previously been linked to a bid, are likely to bid once the sale of Bord Gais retail and power generation businesses kicks off next year.

In an interview with the specialist power trade publication 'ICIS Heren' Mr Mullins said he is "confident" that UK utilities are looking at the Bord Gais assets because of the increasingly interconnected energy markets in Britain and Ireland.

"All the Big Six will be looking. Scottish and Southern Energy are already here and they have the commercial knowledge of Ireland," he said.

Germany's RWE and E.ON both own UK power companies but are less likely bidders for Bord Gais assets, he added.

Bord Gais will also look beyond the UK to target potential bidders in the Middle East and Far East, Mr Mullins said.

The National Treasury Management Agency's (NTMA) New Era unit has overall responsibility for selling Bord Gais Energy (BGE). NTMA staff have already sounded out overseas bidders about bidding for New Era assets during tours primarily aimed at promoting investment in Irish government bonds.

New Era is understood to be primarily looking to sell BGE's power and retail arms as a single business, but Mr Mullins said in his interview that the units could be split up during the auction process.

He named Qatar and China as two countries that could provide buyers for BGE's electricity power station in Cork and its wind power unit.

New Era has hired Barclay's Capital to advise on the sale of BGE. Bord Gais itself will hire its own adviser before the sale process kicks off.

The process to sell off BGE is due to kick off in the first three months of next year.

The sale of BGE will be the first privatisation under the Government's New Era programme, which aims to raise €3bn in all through the disposal of state assets, including shares in Aer Lingus; Coillte's assets, excluding its land banks; and some ESB assets. Half the cash raised will go to pay off some of the national debt, with the rest available to fund job schemes.

Selling BGE could fetch between €1bn and €1.4bn of the overall target. It is made up of the retail units of Bord Gais that market gas and electricity to consumers, and its electricity production assets.

The infrastructure that is used to move gas throughout the country will not be sold. During the sale, a key issue will be the treatment of the company's employee share ownership trust (ESOT).

Employees of Bord Gais hold a 3.27pc stake in the entire company and will hire their own corporate advisers to assess the sale process

How they fare when the business is split and whether their shares are sold has all still to be decided.

Meanwhile, Bord Gais itself is continuing to search for a new chief executive to replace Mr Mullins when he leaves at the end of a five-year contract later this year.

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