Bord Gáis disposes of UK gas distribution business for €8.4m

Bord Gáis, the State-owned energy company, has disposed of its UK gas distribution business for £5.8 million (€8.4 million).

Bord Gáis entered the UK energy market in 2000, but it has proven difficult to expand its market share in one of the most competitive energy markets in Europe. The business is being sold to a subsidiary of Babock & Brown, the giant Australian leasing and finance company.

The business being sold, Utility Grid Installations (UIG), is involved in gas supply and distribution, mainly to new houses.

The business involves forming partnerships with building firms. UIG has built up strong business relationships with several UK building firms, but a spokesman said yesterday the business had reached a level where it may need fresh capital.

A statement from Bord Gáis said the consolidation in the UK gas transportation business also provided it with an opportunity to get a reasonable return on its investment. It said it would now focus on its electricity and gas interests in the Republic.

These are growing strongly at present and in recent weeks Bord Gáis has entered the wind energy sector by purchasing the output of a large wind farm in Co Donegal.

The company is also a leading player in the electricity sector's industrial segment, although so far it has stayed away from the residential sector.

The UK business of Bord Gáis is relatively small in terms of its overall operations.

Last year the company posted a turnover from its Republic of Ireland operations of €738 million, whereas the UK - including Northern Ireland - only chipped in €15.9 million, which was down on the previous year.

UIG has been competing against 12 other independent gas transportation licence holders in the UK.

It currently has 7,000 customers, with an order book containing another 14,000.

Bord Gáis was advised on the disposal by KPMG Corporate Finance and McCann Fitzgerald solicitors.

Chris Chapman, chief executive of Babock and Brown Infrastructure, said the transaction "meets our key investment criteria, including the expectation that the acquisition will be accretive, and is a natural complement to our existing business".