There are a number of significant upcoming events in Ireland that will be of interest to international investors, suppliers and service providers that are active in the energy and water sectors. Most prominent among these opportunities are the proposed sale of certain of the assets of publicly owned Bord Gáis Éireann (BGE) and the restructuring of the Irish water industry.
Sale of BGE’s Energy Business
BGE is responsible for the supply, transmission and distribution of natural gas in Ireland and has approximately 1,000,000 customers. Under the terms of the EU-IMF bailout, Ireland has committed to sell off up to €3 billion of State assets. As a result, a significant opportunity now exists to invest in assets which would otherwise have remained in public ownership but for the global economic downturn. The Government plans to raise between €1-1.4 billion from the sale of BGE’s energy business which will be one of the largest ever sales of publicly owned assets on Irish shores. Due to the level of interconnectivity between Ireland and the UK, the sale of BGE’s energy business will be of particular interest to the larger utilities in the UK. Chinese and Middle Eastern investors are also being targeted as part of this sale.
What Energy Assets Are for Sale?
The sale, which is expected to go ahead towards the end of 2013, will comprise of BGE’s three main operating areas:
- BGE’s retail arm which has approximately 468,000 gas and 407,000 electricity customers;
- BGE’s trading unit which procures gas, electricity and carbon on wholesale markets; and
- BGE's assets which include the 445MW Whitegate power station as well as 234MW of operational wind assets and 460MW of wind-energy assets in development.
BGE’s gas transmission or distribution systems and its two gas interconnectors will not be included in the sale.
As part of the current overhaul of the Irish water sector, a new water utility, “Irish Water” is to be established as an independent, state-owned company within the BGE Group. It will take over the provision and supply of water services currently provided by local authorities. This promises to offer considerable investment and commercial opportunities to both Irish and foreign entities active and interested in the water sector, including those operating in the construction, technology, engineering, manufacturing and consultancy sectors.
Among other responsibilities, Irish Water will oversee the roll-out of a national domestic water metering programme. This project, which has a target date of 2014, is expected to create significant opportunities for the technology and contracting sides of the supply chain to supply and fit the meters required.
It is intended that ownership of assets will transfer from water services authorities to Irish Water once statutory responsibility for the provision of water services has been given to Irish Water. The asset management programme which will inevitably accompany the restructuring of the Irish water sector is also likely to give rise to further commercial opportunities in this sector.
Opportunities continue to arise for the construction and technology sectors in relation to the ongoing rehabilitation and upgrade of the infrastructure for Irish water and waste water services. Investment in Irish water infrastructure is required in order for Ireland to meet its water quality targets under the Water Framework Directive and the ongoing rehabilitation and upgrade is also expected to give rise to significant investment opportunities. The Exchequer’s capacity to fund the required capital investment in water services is constrained. This is clear from the Capital Investment Programme 2012-2016, published in November 2011, which states that the Government is committed to a transition to a non-Exchequer based funding model no later than the start of 2014. Once established, Irish Water will be tasked with the responsibility of sourcing private finance for investment in capital projects. While there have been no definite indications to date as to how private financing of such projects might be structured, it does appear that significant investment opportunities will arise in this sector when Irish Water takes on this new role.
Preparations are underway for many interested entities in the UK energy sector some of which have already begun to marshal their advisers in relation to the proposed bidding process for the BGE assets. Interest in this sale is also expected from further afield including China and the Middle East.
The plans for the Irish water sector are also expected to generate interest from parties operating in the water sector in other countries. One of the many challenges for BGE in the implementation of these plans and the procurement of the required products and services will be getting the balance right between capitalising on the existing wealth of local and regional knowledge whilst also tapping into and benefitting from the experience which operators in the water sector in the UK and elsewhere have to offer.