Centrica drops Bord Gáis Energy bid on price grounds

British utility Centrica is understood to be no longer formally bidding for Bord Gáis Energy, but may re-enter the race should the reserve price for the State-owned company be dropped below €1 billion.

It emerged yesterday that US-based private equity group, Blackstone, may rejoin final-round bidding for the electricity and gas supplier which was put up for sale in the spring.

However, it now looks like early favourite, Centrica, has pulled back from the race on the grounds that it was not prepared to meet or exceed the €1 billion reserve price sought for the business. It may re-enter the process if this figure is lowered. It has been known for some time that the company was not willing to meet the €1 billion figure. Its withdrawal from the process would be a blow as it would leave just one of Bord Gáis Energy's local rivals, Viridian and Canadian asset manager, Brookfield, in the running, from an original shortlist of four.


Falling number of bidders
Last month, Malayasian energy group, Tenaga, dropped its bid, saying that the Irish business was not the right fit as it had other priorities.

The falling number of bidders may serve to draw Blackstone back into the process, which observers say now appears to be faltering.

Blackstone operates a $16.7 billion buyout fund and considered bidding for Bord Gáis Energy, but withdrew from the sales process early on because of the number of others that looked likely to get involved.

However, the group has been asked to submit a final-round bid for the business and reportedly may decide to do so in the next couple of weeks, following due diligence.

Once the Government announced its intention to sell in early 2012, reports suggested that Bord Gáis Energy could fetch between €1 billion and €1.5 billion, along with some debt, but some industry sources were more sceptical, saying a figure below the €1 billion mark would be more realistic.

Business on the block
The business that is on the block consists of the group's 900,000-plus electricity and gas customers, which include both consumers and businesses and a gas-fired 450 mega watt (MW) power plant. It also owns developed wind farms with a total capacity to generate 250 MW of electricity and has a further 250MW under construction. Bord Gáis's network is not for sale as the Government regards that as a strategic asset.

It was one of the bigger of a number of State assets whose sale the Minister for Public Expenditure and Reform, Brendan Howlin, announced in February last year which the Government hoped would raise €3 billion.

None of the parties involved in the Bord Gáis Energy sale would comment yesterday. The group itself would only say that the sale is ongoing.