One of Europe's largest energy companies, RWE, has significantly increased its Irish presence by concluding a €750 million deal with the Tynagh Energy power station in Galway.
The 10-year deal involves Germany's RWE operating and managing the station and supplying it with gas. RWE will also sell any excess electricity to the market on behalf of Tynagh, which has a 10-year deal to supply power to the ESB. However, there will be about 10 per cent excess available to other customers.
Dr Brian Senior, chief executive of RWE Trading Ireland, said it wanted to expand its business in Ireland, mainly by selling gas to large industrial customers and also power generators. He said that, until recently, the company was selling under the brand name Innogy.
The Tynagh group - made up of Turkish firm Gama Construction and Mountside Properties - has concluded all financial arrangements for the project.
A €300 million finance package has been secured to fund the building of the plant. The finance was arranged by IBI Corporate Finance. Ulster Bank, now part of Royal Bank of Scotland, is believed to be among the main lenders.
Mr Brian Keogh, director of Tynagh Energy Ltd, said the deal with RWE was a "significant milestone". He said RWE had huge international experience which could be tapped into by Tynagh.
It is understood Tynagh talked to several gas suppliers over the past few months about supplying the 400 megawatt station based on the site of the old Tynagh mine. Among those who held discussions with Tynagh, say industry sources, were Centrica, Bord Gáis Éireann and Statoil.
While Bord Gáis will be disappointed to lose such a large gas supply contract, it does not have the same expertise as RWE in the management and operation of power stations.
Nevertheless, it will benefit from the transportation of gas to the Tynagh site. Bord Gáis owns the network of high-pressure pipes that carry gas to power stations and it charges a transportation tariff for this service.
Bord Gáis was among a group of companies that lost the competition to build Ireland's latest power station. Viridian, which owns the Huntstown site, was also a losing applicant, although it is considering building a second Huntstown plant.
The increased presence in Ireland of RWE will be noted by leading players in the industry. With 8,000 megawatts of plant in Britain alone, RWE is significantly larger than any Irish power company, including ESB.
While RWE representatives were yesterday playing down its plans for the State, RWE would have the financial resources to acquire any Irish utility. In the first half of 2004, RWE had a turnover of €21.1 billion.
