Bord Gáis seeks price rise of 30-40%

Bord Gáis is seeking a price rise of 30-40 per cent, but expects prices to moderate in the medium to long term as new pipelines are built and Europe embraces liquefied natural gas (LNG).

The company yesterday reported a 9 per cent fall in pretax profits, mainly due to the increase in wholesale gas prices. Turnover was, however, up by 13 per cent at €857 million and a €10 million dividend goes to the Government. The company is also planning to enter the domestic electricity market.

The company's pretax profit of €108 million fell from €119 million mainly because the cost of sales jumped by one-third. It has yet to submit a full price application to the energy regulator, but an application of 30-40 per cent is expected.

The regulator will shortly get a price application from ESB and the State-owned electricity company is also likely to push for a rise. However, fuel only makes up 25 per cent of the cost of electricity, so the rise may be curtailed.

Chief executive of Bord Gáis Gerry Walsh said yesterday that gas prices would face upward pressure because of "unprecedented" wholesale prices. While the short-term trends were not encouraging, he said, the long-term picture was better. "The distilled wisdom is that in the next year and half the perceived squeeze in the UK will be sorted and, as a result, from mid-2007 onward, prices will soften a bit."

Mr Walsh said new pipeline routes and the construction of LNG plants in Europe would increase the "volume and diversity" of gas supplies and this would have a "stabilising" impact on price in the medium to long term.

LNG is natural gas converted to liquid form by cooling to a very low temperature of about minus 162 degrees centigrade. At this temperature it can be transported by ship. Upon reaching its final destination, it can be turned back into a gas and injected into conventional pipelines. Several European countries are becoming heavily reliant on LNG and the growth of LNG allows supplies of gas to move more freely around the world.

The company is keen to do a deal to take the gas from the Corrib field off Co Mayo, but no deal has been signed, said Mr Walsh. He said while Bord Gáis wanted to add Corrib gas to its portfolio, it would also still need supply from gas fields in the North Sea. Mr Walsh described his talks with Shell and other Corrib shareholders as "advanced negotiations".

Meanwhile talks are continuing on an employee share ownership plan for the company.