True cost of Bord Gáis sell-off emerges

The Government, and in particular the energy minister Pat Rabbitte, always appeared to be a reluctant seller of Bord Gáis Energy (BGE), for which a Centrica- led consortium has agreed to pay a gross €1.1 billion. Now we know why.

The breakdown of the consideration paid to taxpayers for the component parts of the business shows that late 2013 was a terrible time to be negotiating the sale of an energy business.

The consensus from industry analysts is that the State did well to get a net €500 million for the BGE's business. But the price it got for the retail business of Bord Gáis, which includes a shiny new gas-fired power plant at Whitegate in Cork, is hard to swallow.

Depending upon performance, taxpayers may net a sum as low as €129 million for a retail book of almost 700,000 customers, a power plant that cost €400 million to build in 2010, and a near 40-year old brand (the State is obliged to rebrand what remains of Bord Gáis). Together with Irish Water, the old Bord Gáis infrastructure business will remain in State hands as Ervia.

Ostensibly, half of that will have to go to pay off foreign-domiciled holders of Irish bank bonds. So the best-known part of a much loved brand has been offloaded for potentially just €65 million to spend on job creation.

The cost of the deal to taxpayers runs even deeper. Ervia will have to stump up about €54 million over the next five years to Bord Gáis staff to buy out their 3.27 per cent stake in the group, in order to get the BGE sale over the line.

BGE was a profitable business, so Eriva’s capacity to pay the cash-starved State dividends in future has also been diminished.

Centrica, which incorporates parts of the old UK state-owned British Gas, appears to have gotten itself a jolly good deal with its entry into the Irish market, albeit through a competitive process.

The Government, to be fair to it, had to sell something to keep the troika off its back. It was obliged to take the best deal it could get, and this was it.