Bord Gáis takes first step in selling its energy division

State company Bord Gáis has taken the first formal step in inviting formal bids for its energy division, which is due to be sold by the end of this year.

The group issued a statement to the stock market yesterday inviting potential buyers to contact Royal Bank of Canada Capital Markets, which it has hired to provide financial advice on the sale.

The move is a first formal signal to buyers that the business is for sale. It opens the door to potential bidders to talk directly to the advisers and get a broad understanding of the business.

They will be able to access previously published financial information and basic details about the number of customers and assets that the company controls.

The next step will involve Bord Gáis publishing a formal memorandum. This is generally expected to come out in April, and a more formal bidding process should follow.

British utility Centrica, which has a similar profile to Bord Gáis, is already known to be interested in buying the State-owned business.

It has hired its own advisers, including commercial law firm Arthur Cox and Goodbody Corporate Finance, to work on its bid.

Scottish Southern Energy, owner of one of Bord Gáis’s rivals in the Irish market, Airtricity, has not been ruled out.

There has also been some suggestions that private equity players would look at bidding for it, although this is thought to be less likely.

Bord Gáis Energy consists of a gas-fired 450 megawatt (MW) power plant and wind farms with the capacity to generate 235MW of electricity. It is developing further power-generating capacity.

It has over 900,000 gas and electricity customers. It has a trading division, and owns Firmus, Northern Ireland’s gas supply business.

A note with yesterday’s statement says that it is targeting €150 million in earnings over the next five years.

Industry sources

When he announced that the Government intended selling the business a year ago, Minister for Public Expenditure and Reform Brendan Howlin suggested the company could be worth between €1 billion and €1.4 billion. Industry sources believe €1 billion or under may be more realistic.

Bord Gáis is not selling its networks business which operates the pipelines that transport gas around the country.