Bord Gais Energy Sale – Was it a Bargain for Centrica ?

As part of the disposal of state assets to try and pay off Ireland’s bank bailout debts – the sale of Bord Gais Energy has been agreed this week.

The headlines say that Bord Gais Energy (BGE) is to be sold for €1.1 Billion to a consortium made up of  UK company Centrica and 2 others – but how much is Centrica actually paying for the gas and electricity supply part of the business  ?

Centrica are buying  the  Bord Gais gas and electricity supply business along with the well known brand name and all their 292,000 domestic electricity accounts and 357,000 gas customers . Also included in the deal is the 445 megawatt Whitegate  power station  …  all  for a grand total of just  €150 Million.

Centrica say the “enterprise value”  of  the purchase as at 1st Jan 2014 is €210 Million – but because the parent company  Bord Gáis Éireann will benefit from an estimated €60 million of income from BGE from 1 January 2014 until the transaction closes. – “the net consideration payable by Centrica will therefore be approximately €150 million (£125 million), including net working capital and a contingent payment of up to €21 million which is subject to certain performance conditions being achieved.”

Figures from Bord Gais Energy show that it’s EBITDA (Earnings before tax,interest depreciation and amortisation)  in  2012 was  €79.4 million.

The Whitegate power station was only opened in December 2010 and cost  Bord Gais €400m to develop . It provides power for 445,000 homes . To sell that off on it’s own for €150 million would seem cheap – but to throw in the whole energy supply part of the company  too  – seems like a very poor deal for the people of Ireland.

Just to give a comparison – we were told that €50m was spent by Bord Gais on consultants in 2013 to help set up Irish Water – yet the state are selling off a fully operational profit making business with a valuable power station for just 3 times that amount !

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Centrica shareholders will probably be fairly pleased with this purchase  – with Centrica telling investors that it is an  “Attractive opportunity to deliver value and growth”  .   Centrica say they expect the Bord Gais purchase to contribute around €40 million to their overall earnings in 2015.

Other details of the Bord Gais Energy sell off:

The biggest portion of the Bord Gais Energy sell off  in value terms is the Bord Gais Wind Energy projects that are to be sold to Canadian company Brookfield.  They are buying  all of Bord Gais’ 17 wind energy projects for €700 million  – this includes €495 million euros of assumed debt.

Firmus Energy is the Bord Gais owned energy transmission and supply business in Northern Ireland. As part of the state sell off  – it is to be purchased by an investment firm based in London called  Icon Infrastructure LLP . They are paying  €190 million euros for it.

In a  joint statement from  Pat  Rabbitte, minister for communications, energy and natural resources, and Brendan Howlin, minister for public expenditure and reform they said  …
The commitment made by these buyers to acquire the business is a strong vote of confidence in the Irish energy market, the Irish economy and in the Bord Gais Energy business and its employees,

Or …..Maybe they know a good bargain when they see one?