Sale of Bord Gáis Energy not the bounty that has been portrayed

The State, says Bord Gáis’s well-regarded chief executive Michael McNicholas, will eventually pocket about €1 billion from the sale proceeds of its energy business: a nice round number.

It appears the art of spin remains alive and well within the semi-State sector: the net financial gain to taxpayers from the sale of Bord Gáis Energy will not be €1 billion, or anything like it.

After debts attached to the disposed assets are paid off, €630 million will be left for taxpayers. Half will go towards alleviating the State’s bank- inspired debt burden under an agreement with the troika, leaving a measly €315 million bounty for job creation measures, the supposed raison d’etre for the sale of State assets.

McNicholas said a further €300 million will be freed up through a "restructuring" of the balance sheet, which he lumped in with the "sale proceeds". But all this really means is that the company will borrow another €300 million, and kick it upstairs to the Department of Finance.

That loan will show up as a liability on the taxpayer-owned company’s balance sheet and it will obviously have to be repaid. The cash to repay the loan will come from the pockets of its customers (who are also taxpayers) so it is a stretch to refer to the €300 million as “proceeds”. The maneouvre will also reduce the company’s borrowing capacity for gas and water infrastructural investment by €300 million.

There’s also the €54 million that the group must pay out to the worker members of its staff share scheme – their 3.27 per cent stake had to be bought out before the BGE sale could go ahead. So, strike that from the “proceeds” too.

And then there is Whitegate. When it opened just four years ago at a cost of €400 million, the gas-fired power plant was billed as a triumph. The reality has been quite different.

As part of the BGE buyout, Centrica paid just €129 million upfront for the plant and BGE's customer book of about 680,000 accounts, with a potential further €29 million payable over three years depending on performance.

The value of the plant was written down by about €224 million prior to the sale. Centrica in effect got the customer book for free.

Bord Gáis said that regardless of the sale, under accounting rules it was obliged to write down Whitegate anyway. This is true. But if it hadn’t been sold, the full force of the writedown could have been spread over a longer period.

Bord Gáis has for years been the best-run of the semi-State businesses. But our Government has rewarded the company by catching it by the ankles, turning it upside down, and shaking it for all it is worth.