Decision on gas network expansion should be prelude to `significant price reductions'

4In spite of the best efforts of the regulator, electricity in Northern Ireland is still the most expensive in the UK

4In spite of the best efforts of the regulator, electricity in Northern Ireland is still the most expensive in the UK. But the expansion of the gas network, and the opening next year of the Moyle interconnector, may help to change all that.

More than a year after proposals were submitted, the various consortia bidding to construct a multi-million-pound extended natural gas network throughout Northern Ireland (via a pipeline to Derry, and possibly Craigavon) are still waiting to hear which of them has been selected as the project's preferred bidder.

The question was shelved following the suspension of the Stormont Assembly, but electricity regulator Mr Douglas McIldoon has said that all four proposals are capable of delivering natural gas to an increasing number of consumers. He has submitted a report to the government with his recommendations on the preferred bidder, and is now seeking consent from the Department of Trade and Industry to award the licence in order to begin putting the new infrastructure in place.

This should see construction work on the pipeline extension begin within a year, with the first deliveries of piped gas arriving in the north-west by 2004. Among the bidders are Viridian Power Resources (VPR), whose partner is the French group, Elf, which is listed in the FTSE Eurotop 300 companies and is capitalised at £21 billion sterling (€33.09 billion).

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This consortium favours a solution which focuses on the north-east, north-west and south as the first stage in an all-island network. Managing director Mr Keith Eddington said the pipeline - with an initial investment of £100 million out of an overall figure of £250 million - would go through Antrim, Ballymena, Ballymoney, Coleraine, Limavady and Derry.

There would also be the option to upgrade the system to facilitate a north-south interconnector. The VPR submission details plans for a new power-generation plant at Coolkeeragh, employing no more than 30 people (currently nearly 300 work there).

They believe that this would provide an anchor demand for gas, and would support the financing of the expansion of the gas network. Such a network would have a catchment zone of 87,000 households and 8,000 businesses. Mr Eddington said it would bring "significant price reductions" to gas and electricity users through cost-efficiency in distributing gas directly to customers and power-generation plants.

"We are talking about building an infrastructure that is going to promote business opportunities," Mr Eddington said. "It would give existing businesses choice of fuel and keep prices down. Ours is not a single pipeline to a single power station solution, but a total macro-solution for the whole of Northern Ireland."

Mr Eddington said he was also anxious that the government's Climate Change Levy - postponed in Northern Ireland for five years - did not begin ticking until the process was well-advanced.

Also in the bidding to construct the 125 km gas pipeline to Derry, and a state-of-theart combined-cycle gas turbine (CCGT) power station at Coolkeeragh, on the shores of Lough Foyle, is a consortium of ESB, Coolkeeragh Group and Premier Transco (the transportation division of BG plc, formerly British Gas).

A board member of Coolkeeragh, Mr Michael Aherne, said he believed the group had the resources to make the pipeline and power station projects a reality.

"What we are proposing is a CCGT plant which would be able to compete with any electricity station in Ireland, and which would help drive down the price of electricity in Northern Ireland," Mr Aherne said. "In the longterm, this would mean competing with the Republic of Ireland. Our target is to have a new power station in operation sometime in 2004."

According to the proposal made to the regulator, ESB/Coolkeeragh would build the new CCGT station and Premier Transco would construct the gas pipeline. GTC, which is part of a Guernsey-based company, would use its expertise in the development of the gas distribution business.

Meanwhile, strong growth in unregulated businesses helped Viridian, the parent company of Northern Ireland Electricity and Viridian Power Resources, to achieve profits of almost £100 million (€1.27 million) for the 12 months to the end of March. Group turnover rose by 11 per cent to £566.3 million, from £512 million the previous year. Operating profits also rose, by 11 per cent to £96.1 million, up from £86.6 million the previous year.

Viridian, which employs around 2,400 people, is Northern Ireland's largest listed company and has diversified into sectors ranging from telecoms and the Internet to financial services and business outsourcing. It said that the results reflected another year of "robust progress".

This progress was particularly marked in two of Viridian's unregulated businesses, Sx3 and Open+Direct, which had a combined turnover of £130 million, or 18.3 per cent of the group's operating profit. Sx3, which provides ITbased solutions to companies in the UK and the Republic, has made a number of strategic acquisitions in recent months. Open+Direct, which emerged from NIE's ShopElectric network, is a financial services company offering retail services, fleet solutions and personal finance. It won more than £20 million of new credit business from clients in the UK in the first two months of this year.

Another subsidiary, Viridian Power Resources, recently signed a £25-million contract to build a small power station for a paper mill in Yorkshire. It has also signed memoranda of understanding with three other companies for a total of 28 megawatts of electricity combined heat and power projects in Britain.

Viridian is also building a 300-megawatt power station at Huntstown, near Dublin, where consents are in place and the company is awaiting gas allocation from the Government.

Viridian chief executive Dr Patrick Haren said that other group subsidiaries - including Energia, Powerteam and Viridian Power Resources - were becoming well-positioned to contribute to company profits next year. Dr Haren said the same would be true of telecommunications and Internet company Nevada Telecom, a joint venture with Energis plc. It was acquired by Viridian in April, and its performance was therefore not included in the overall results.