The way for Bord Gais to diversify out of its core gas business is to be cleared. The Minister for Public Enterprise, Ms O'Rourke, has said she will "consider in a positive way" the question of broadening the company's powers to engage in other businesses in a new Bill.
Proposals for legislation are being prepared within the Department of Public Enterprise for a new Bord Gais Eireann Bill, the Minister said in a written reply to a question from a Labour TD, Mr Michael Ferris.
Bord Gais is examining a number of significant diversifications. These include a telecommunications joint venture with the Norwegian state telecoms company, Telenor. Using the group's pipes and its customer base of more than 300,000, the two sides are thought to believe that they could forge a viable communications business.
Meanwhile Bord Gais is also examining the establishment of a gas-fired electricity station in a joint venture with a Canadian company, Atco. The electricity sector is being deregulated gradually and Bord Gais is one of a number of players planning significant power station investments.
However, under current legislation Bord Gais is not allowed to diversify and will not be able to progress these plans further until the proposed new Act passes into law. Its latest results, published this week, show that its costs are rising as it is forced to import more gas and, according to Mrs O'Rourke, "like any competitive organisation, it needs to find new ways of replacing this profit loss through diversification of its activities".
She also pointed out that new competition as the gas sector is liberalised and competition is introduced for larger consumers "is expected to affect Bord Gais's profit earning capacity". The Minister pointed out that any specific proposals to diversify required her approval and that of the Minister for Finance. "I would have to be satisfied that . . . the project appeared to be commercially sound and would add to the value of the company."
At present, the relevant legislation applicable to the group is the Gas Act, 1976, as amended.
Earlier this week, Bord Gais reported profits before tax and exceptional items of £80 million for last year, compared to £81 million the previous year. Turnover rose by 8 per cent to £313 million (€397 million), but a 13 per cent rise in the price of buying gas held back profits. Last year 50 per cent of gas was imported, compared to 33 per cent in 1997.
The new legislation will also convert Bord Gais into a plc, although there are no indications that the Government is considering further measures such as privatisation, in the short term at least. The company is also in discussions with its trade unions on changes in work practices and on the possibility of employees taking a stake in the company, though no agreement has yet been reached.
