April 2009: John Mullins, Chief executive, Bord Gáis

Bord Gáis is a bright spark in gloomy times with positive financial results, a €335mn fund-raising and its electricity market shake-up.

Because

There are not too many Irish companies with good news these days. But semi-state energy supplier Bord Gáis is doing its bit to keep optimism alight with three positive news stories in recent weeks. It has just announced a very positive set of financial results, it has raised a serious amount of cash for future development and it has shaken up Ireland’s domestic electricity market.

Bright sparks

Bord Gáis launched what it calls The Big Switch campaign in February and over 100,000 customers have abandoned the ESB for the State gas company. New customers are promised a discount in the first year of between 10% and 14% on the regulated price charged by the ESB and, at least, a 5% discount in the second year.

Energy prices

Few single issues are quite as important to the economy as energy prices. Both domestic and business users have rightly felt ripped off in recent years and the spiralling cost of electricity has been one of the key contributors to the erosion of Ireland’s competitive position. That is what makes initiatives such as the one taken by Bord Gáis in the domestic market so welcome. On top of this decrease, the end of this month will see the ESB reduce its prices by 10% and Bord Gáis drop its gas prices by an average of 12% (with the possibility of a further decrease in October). As welcome as such reductions are, it will be crucial that this is only the beginning of a much more fundamental adjustment of the Irish energy market.

Private placement

Such a readjustment, of course, will take major investment and the announcement by Bord Gáis that it had successfully raised $450m (€335m) on the US private placement market is therefore very welcome. The fundraising was, according to the company, significantly oversubscribed and attracted considerable interest from US institutional investors. It will be used to part-fund the company’s planned capital-expenditure programme, including power-generation assets, and to refinance certain existing debt.

Under construction

Construction of the company’s €407mn 445mw gas-fired power station at Whitegate is well underway and the plant will be operational by June 2010. It also purchased its first wind-farm development in November 2008 in Galway and will soon have 120mw of wind power in its development portfolio.

The firm also has formed a joint venture to develop four Open Cycle gas-fired peaking power plants in Athlone, Kilkenny, Cahir and Claremorris. With up to 400mw of power in total when complete, Bord Gáis believes that these developments are strategically important to support the growth in windpowered electricity generation in Ireland.

Welcome dividends

Last week, Bord Gáis published annual results for 2008 that proved it is heading in the right direction. Group turnover increased by 14% to €1.379bn. Gas sales, accounting for almost two-thirds of turnover, increased by 15%, electricity sales rose by 18%. Profit before tax decreased by 10% to €151m and a dividend of €28m was paid to the exchequer.

“Bord Gáis is now well on its way to transforming itself into a leading Irish energy company, performing successfully in the country’s gas and electricity markets. We are a company of ambition, backed up by a management team and staff that will deliver on its stated corporate objectives,” said Mullins.

Clean bill of health

• 100,000: Number of new electricity customers since February
• 10% to 14%: Savings such customers will make
• 14%: Rise in turnover in 2008
• $450mn : Amount raised last month for future investment