Cluttered market means buyers can drive down price
The Government will find it hard to get a top price for ESB as the European energy market is already cluttered with similar assets which are up for sale.
Some estimates suggest there are €35bn of energy assets already for sale in Europe, meaning it is very much a buyer's market and prices are likely to remain depressed.
Officials at the Department of Communications warned about this problem of selling an ESB stake into a crowded market in October.
Their warning was contained in a submission to UCD economist Colm McCarthy, who was reviewing the semi-states.
Meanwhile, corporate finance experts have told the Irish Independent that any price paid for the stake will be reduced because the Government is only selling a minority stake.
"If it's not a controlling stake in the ESB the price has to come down,'' one of those competing to advise the Government said.
In their submission on the issue of selling the ESB, the Department of Communications officials warned that other major power companies might also be trying to offload assets.
"Utility companies in Europe are engaging in significant asset-disposal/capital-raising programmes -- some analysts estimate that there are over €35bn worth of utility assets up for sale at present," said the officials.
This meant the market across Europe was "likely to be very limited" with consequences for what price might be paid.
Meanwhile, two major international banks, HSBC and BNP Paribas, are interested in advising the Government on any transaction. Others likely to be interested are Goldman Sachs and, here, Goodbody Corporate Finance.
Any contract to sell the stake is likely to result in fees running into millions of euros.
While the Government may struggle to get a trade buyer for the stake, there are private funds around the world which invest in infrastructure and power companies.