General Electric (GE) is set to win the race to buy Gama's 40 per cent stake in the Tynagh energy plant.

One of the world's largest companies, GE has been named preferred bidder in recent days for the stake with an offer of approximately €40 million. Gama, which has worked with GE on a number of projects internationally, picked the US group over other international bidders - including Babcock & Brown - who are reported to have tabled higher bids.

The gas-fired 400 megawatt Tynagh plant in Co Galway is expected to come into commercial operation within weeks. Gama holds an 80 per cent stake, but has decided to only sell half of the equity. If the GE deal goes ahead the shareholders will be Gama (40 per cent), GE (40 per cent) and Mountside Properties (20 per cent).

Among the companies who lost out for the Gama stake were two rival Australian investment houses, Babcock & Brown and Macquarie. Other bidders included Japan's Sumitomo Mitsui Banking Corporation and International Power, an electricity producer.

Mountside, as an existing shareholder, has pre-emption rights on Gama's stake - it will have to decide over the next 10 days whether it wants to match the GE bid.

The interest in the plant from major international players like GE and Macquarie proved problematic for domestic firms like Bord Gais and Viridian. Both of them expressed an interest in taking a stake in Tynagh but did not make the final shortlist drawn up by New York corporate adviser Fieldstone Capital Group.

GE knows the Tynagh plant well as it was involved in its construction. One of the most appealing parts of the Tynagh deal is the guaranteed arrangement the plant has to sell power to ESB for 10 years. This deal was put in place by the Commission for Energy Regulation (CER) three years ago when it awarded contracts for new power stations to Tynagh and Aughinish Alumina in Co Limerick.

One of the original investors in the plant, South African bank Investec, sold out in 2004, selling its shares to Gama for an undisclosed sum.