Davy stockbrokers believe that Bord Gáis should follow the example of the ESB and Eirgrid and create a separate body to manage the national gas network.
Following the failure of the State to sell Bord Gáis Energy after a nine-month sales process that resulted in the assets being abruptly pulled from the market, the Government is now facing an April deadline for separating gas networks and energy supply.
Davy analyst Joseph McGinley said that, due to the tight timeframe, the State will likely use an independent company to operate the gas network in a similar manner to how Eirgrid looks after the electricity network.
“The State has commented that ‘all options are on the table’, including a flotation or trade sale. We believe, however, that the most likely solution would be to continue the independent transmission operator model through Gaslink given the success of this to date and how unlikely it is that a higher valuation is realised by then,” Mr McGinley said.
By doing this, the Government can hold on to the assets indefinitely or break up the body and sell the various segments within the energy-generation wing of Bord Gáis Energy, which might allow the Government to achieve a higher return than selling them as a bundle.
Bord Gáis Energy is made up of a generation, electricity, and gas retail supply in Ireland and a fully integrated gas business in the North. Due to the varied nature and location of the businesses, they might actually be a deterrent to investors.
Mr McGinley said: “We believe the investment cost for these segments was in excess of c€1.4bn, which is clearly higher than the bids received, mooted to be c€1bn, which is unsurprising given the investment case for these assets is likely to be significantly different today.
“The variation in the businesses may also have been a deterrent for some parties, given the likelihood of having an expertise or a desire to invest in all of these was surely remote ”
Mr McGinley said the upside of the nine-month sales process is that the State now has an understanding of what purchasers are willing to pay for the various assets in the Bord Gáis Energy group.
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