Bord Gaís Energy to be sold

Sleepy

Despite the announcement earlier this month about the Government rejecting all offers for BGE, they've received higher bids from a number of the parties involved and are granting Preferred Bidder status to the consortium bidder comprised of Centrica plc, Brookfield Renewables and iCON infrastructure.

The sale is expected to go through in Q1 next year.

Should see more about it on the news tonight / in the papers tomorrow. Of course the obvious big question is how much? And I'd follow that with: and what is it to be used for?

everdead.ie

I'm very Dissapointed with the sale especially given British Gas have been involved in massive price hikes for consumers recently I think in the end they'll definetly make their money back anyway.

Brussels Sprout

How will this affect the employees?

Sleepy

Hard to say until after the sale. Presumably the unions will stick their oar into the negotiations and attempt to steal a chunk of the company a la the Eircom privatisation but hopefully this government will have more sense than to pay them much heed.

Since the company is being sold as a going concern, however, one would have to assume that the standard transfer of undertaking will apply though redundancies can probably be expected down the line.

Victor

Note that only the supply end of the business is being sold, the state is keeping Bord Gáis Networks - a lesson from the sale of Eircom.

Bord Gáis has much fewer employees than say, the ESB, as a lot of the network work is contracted out.

I wonder how it will affect plans for Irish Water though - there would be certain synergies in the two businesses in things like billing and administration.

hotbabe1992

Theyve sold off a lot of natural resources why not this too..I dont have confidence in the government decisions..

Brussels Sprout

hotbabe1992 wrote: »

Theyve sold off a lot of natural resources why not this too..

What other natural resources have they sold off?



ignoring the fact that Bord Gais imports all of their gas

Nody

Brussels Sprout wrote: »

What other natural resources have they sold off?

They gave away those licenses for oil and gas in the sea for practically nothing (for two decades and still going) and all the oil compaines will make gazillions pumping up all this oil (that has not come up for over two decades and counting) and pay no tax doing it (90% tax to date on the profits would still yield 0 EUR to the exchange but lets not have such details stop an argument).

Victor

This case may have had some impact: http://www.irishtimes.com/business/sectors/energy-and-resources/us-energy-group-hess-evaluates-1bn-kerry-project-after-court-loss-1.1624804

Brussels Sprout wrote: »

ignoring the fact that Bord Gais imports all of their gas

Well, only 99%.

Nody wrote: »

They gave away those licenses for oil and gas in the sea for practically nothing (for two decades and still going) and all the oil compaines will make gazillions pumping up all this oil (that has not come up for over two decades and counting) and pay no tax doing it (90% tax to date on the profits would still yield 0 EUR to the exchange but lets not have such details stop an argument).

You do realise that businesses are primarily taxed on their profits? No profit, not tax.

Icepick

selling a retailer for 1.1 bn on a freeish market is a bargain for the gvmnt

hotbabe1992

Of course forbes will say we are the best place to do business isnt it any wonder

spank_inferno

Shame the power generating part including wind farms are being sold off also.

Considering the hundreds of millions BG put into power generation, I think its a bargain for Centrica

Scortho

spank_inferno wrote: »

Shame the power generating part including wind farms are being sold off also.

Considering the hundreds of millions BG put into power generation, I think its a bargain for Centrica

Was the wind energy not loss making?

fly_agaric

Sleepy wrote: »

And I'd follow that with: and what is it to be used for?

After having a root around in the memory-hole (...ugh), I recall FGs great masterplan (Newera) before the election said funds raised were to be for Irish Water??

Brussels Sprout

Nody wrote: »

They gave away those licenses for oil and gas in the sea for practically nothing (for two decades and still going) and all the oil compaines will make gazillions pumping up all this oil (that has not come up for over two decades and counting) and pay no tax doing it (90% tax to date on the profits would still yield 0 EUR to the exchange but lets not have such details stop an argument).

Ahh this old chestnut. About how we're sitting on billions and billions of barrels of oil and gas and have given it away for a can of magic beans.

If this is actually the case how come the coast of Ireland isn't dotted with oil platforms and exploration rigs like the Norwegian Sea and the Gulf of Mexico.

The truth of the matter is that even with incentivised contracts to explore the Irish sea bed to initiate an Irish off-shore extraction industry, the government can't attract companies to try their luck. The prospects just aren't good enough.

ART6

Assets owned by the people have to be sold off, at a knock-down price if necessary, because the EU masters have insisted upon it. What the people think about it is irrelevant, and it is called "democracy" as espoused by the EU and the European Commission -- one of the world's few remaining truly democratic institutions (!). It is done in the pursuit of "competition" and the "free enterprise" that will save the Euro and in so doing stabilise the worlds money markets, thereby preventing the Yen and the US Dollar and the pound Sterling from creating havoc. That the EU, the EC, and for that matter the Irish government have no idea what competition and free enterprise actually mean does not stop them from spreading the results of their ignorance throughout all of the member states.

What competition and free enterprise actually means when one is running a business with the sole (and legally obligated) purpose of making money for one's shareholders and investors, is to sell one's products for whatever the market will bear. That has nothing whatever to do with any public service, or any concern for those who can no longer afford to buy the product as long as there are more out there who can.

So another state company is to be sold off at a price that in spite of political press releases only days ago, will be sold at less than estimated value -- a fire sale perhaps? So now, let us say that I am a manager of a large international investment fund. I speak with the CEO of a couple of big multinationals with whom I have a close relationship, and I agree that I will lead an investment consortium to place a bid. We have billions available to us, and our partners have the experience and the technology to operate our purchase if we succeed. But before we confirm our bid, what does due diligence identify as the risks?
Financial collapse? Unlikely because the EU cannot permit that.
Government failing before an election? Immaterial -- the new government will be bound by our legal agreements.
Regulation? Will we be able to steadily increase our prices according to what the market will bear? Pretty sure bet because every time we increase our prices their government benefits from increased VAT and corporation taxes, so while they might posture a bit in the media they won't change anything. After all, it will allow them to win another general election by claiming to have reduced income tax as a result of increased government revenue.

So we conduct a SWOT analysis (Strengths, Weakness, Opportunities, Threats).

Strengths? Well we have a strong and experienced consortium with billions of funds.
Weaknesses? Few...we have already agreed with other international funds and consortiums that we will not trip over each other. In any case, we are negotiating with a pack of small-time politicians who, in spite of their posturing on the world stage, are not fully aware of what day of the week it is in the stage they profess to occupy.
Opportunities? Well, it's a small market and nothing to get too excited about, but there is still a potential rate of return of around thirty percent on investment. After all, this particular economy has to import almost all of it's energy and we should be able to corner a major part of that since we are a multinational consortium.
Threats? From where? The EU? They want us to take over. Changes of government? Immaterial since we own the business. Changes of tax rates to threaten us? Too late -- they have thrown themselves into the dog-eat-dog of the money world, and their only way back is to accept the EU demands for consolidated corporation tax throughout the union. That would be political suicide and can only happen in the event of the formation of a federal Europe, in which case we would have had some years to make our returns and would, finally, be no worse off than we would be anywhere else in Europe.

So now we see an opportunity to bid for a fairly minor asset in an obscure country on the edge of Europe, and the cost is peanuts while the risk is minimal. We are bidding to a group of politicians whose understanding of the tough world of high finance is limited to their understanding of how to avail of their salaries, pensions, and expenses. In any case, they are being instructed by creditors who have no more understanding than they have.

Worth a punt!

Victor

ART6 wrote: »

So another state company is to be sold off at a price that in spite of political press releases only days ago, will be sold at less than estimated value

Whose estimated value?

After all, this particular economy has to import almost all of it's energy and we should be able to corner a major part of that since we are a multinational consortium.

The problem being that there is competition in the form of Airtricity and Electric Ireland and a whole bunch of wholesale operators. The only way to corner the market is to reduce prices.

we are a multinational consortium.

A multinational consortium is a business that operates in several countries. It doesn't comprise several countries. It doesn't have unlimited resources or abilities.

Remember that 10 years ago you only had one choice for each of gas and electricity.

ART6

Victor wrote: »

Whose estimated value?
The problem being that there is competition in the form of Airtricity and Electric Ireland and a whole bunch of wholesale operators. The only way to corner the market is to reduce prices.

Unless in our analysis of the market we feel that our financial power will give us the opportunity to take them over gradually. In any case, if we are the major importers of energy, we can still control the market because we have the buying power.

A multinational consortium is a business that operates in several countries. It doesn't comprise several countries. It doesn't have unlimited resources or abilities.

With respect, I know only too well what an international consortium is, having been involved in one. What it might be is a grouping of international companies with funds to invest (companies that have no particular allegiance to any one country) and major fund managers and venture capitalists who, together, can make the Irish debt look like the petty cash. They don't have unlimited funds, true, but the funds that they do have would make the Irish debt look fairly trivial.

Remember that 10 years ago you only had one choice for each of gas and electricity.

I remember all too well, and I remember the political manipulation of that along with the intransigence of the trade unions, the notorious "bench marking", the so called "regulation" that dismally failed. I do not argue against privatisation per-Se, having spent my life in the private sector. I do, however, recognise that I and my kind are in a sense the wolf at the door, because our sole purpose in our lives is to make money, and someone has to pay that money.

This consortium that I have proposed here might be or become the dominant player in the Irish market, but it will not control the international market for oil and gas. In fact it will have little influence in that as a small player, but it will be able to use the same excuses that international prices have forced its position just as An Bord Gais has done. It will be able to argue that it is buying oil and gas years ahead and may be paying a higher price than it should in year ten, but the alternative would be buying on the spot market and never knowing what its investor's rate of return will ever be. Not a policy that gets one reappointed to the board at the AGM where the institutional shareholders are analysing their returns to the nearest few cents.

I don't have any easy answer to these issues. It would be nice to believe that some essential services should be under the control of the state and the people, but that would require that the state had the competence to do so. Since the state is a political operation it is never likely to have that competence because its ambitions have nothing to do with international commerce or finance and it is fundamentally incompetent. It is the admin department of the business, operating according to rigid rules without any real control over where the business is going.

Any state operation will always be subject to the ideas of elected politicians whose only experience of the real world is having been a bus conductor, a trade union leader, or a councillor or teacher in Galway or Mayo but with a certain gift of the gab and a practised ability to tell lies with a straight face. In any case, as a fully paid up (or indebted) member of the EU, the state is subject to the whims and the hastily cobbled-together resolutions of another and even more incompetent administration.

So yes, let's sell off everything the people owned and bought with their taxes, and let's throw ourselves on the mercy of the international financial community that has served us so well.

Victor

ART6 wrote: »

n any case, if we are the major importers of energy, we can still control the market because we have the buying power.

But the consortium won't be the only one importing energy.

With respect, I know only too well what an international consortium is, having been involved in one.

Your previous post didn't necessarily demonstrate that.

This consortium that I have proposed here

We have an actual consortium. no need for proposals.

[/QUOTE]In fact it will have little influence in that as a small player, but it will be able to use the same excuses that international prices have forced its position just as An Bord Gais has done. It will be able to argue that it is buying oil and gas years ahead and may be paying a higher price than it should in year ten, but the alternative would be buying on the spot market and never knowing what its investor's rate of return will ever be. [/QUOTE]And if there is a problem with paying higher prices, then other operators will take advantage of having lower prices.