Airtricity for sale at potential price of €1bn

Wind energy group Airtricity is up for sale with a potential price tag of €1 billion, just weeks after the company sold its North American division for a similar sum, writes Barry O'Halloran.

The group's ultimate owner, Airtricity Holdings, announced yesterday that following a strategic review of the business, it has decided to sell.

The company said yesterday that the review was prompted by last month's agreement to sell its American division to German energy giant Eon for $1.4 billion (€1 billion).

At the time that deal was announced, industry sources calculated that Airtricity's remaining businesses and wind-power sites were also valued at around €1 billion.

It has hired Irish brokers NCB and its long-time banker, Credit Suisse, as advisers on the sale. Its statement said that the group expects a deal to be done midway through next year.

Utility group NTR owns 51 per cent of Airtricity Holdings and will receive the biggest slice of any sale proceeds.

Chief executive and founder Eddie O'Connor holds 4 per cent of the group's 50 million shares. A €1 billion sale price would value this holding at €20 million.

Other executives hold another 12 per cent, while Ecofin, a specialist investment fund focused on alternative energy and environmental management, owns 16 per cent. Private shareholders hold the balance of the group's stock.

Airtricity has €500 million debt on its books, net of the €250 million or so liabilities that it amassed in developing its American operations. Eon has taken over that debt.

It is due to receive around €800 million in cash from the Eon sale when it goes through at the end of the year.

Mark Ennis, director of strategy and public policy, said yesterday that the group's development costs were running at around €1 billion a year.

It has wind farms with the capacity to produce 11,000 megawatts (MW), roughly equal to three average power plants, in its development pipeline in Europe and China, with a further 200MW under construction.

The cost of building these facilities comes to between €1.8 million and €3 million for every megawatt.

Mr Ennis said it was for this reason that shareholders decided to sell. "We felt the best way to fund this would be with an owner who has a significant balance sheet behind them," he said.

He added that a flotation would not be the best option, as after a stock market launch, it would still be left with the ongoing necessity of raising funds through rights issues or other methods. "That did not seem to be the optimum way forward," he said.

Potential trade buyers at this level could include Eon, with which it has already done the US deal, or similarly-sized European power and utility players such as Italy's ENI, or German-based EDF and RWE.

Earlier this week, RWE, which is Europe's biggest power company, with over 30 million electricity and gas customers, said that it intended investing €1 billion in renewable energy sources, such as wind power.

The move is designed to offset the fact that it is also one of the continent's biggest polluters, as its operations produce large amounts of greenhouse gas.

The EU is increasing the cost of the credits needed to pay for the right to pollute by making them less available. The credits themselves are traded on financial markets, and hit a five-month high of over €23 per tonne of greenhouse gas earlier this week.