US merchant bank Babcock & Brown has acquired the stalled Ireland Power project in west Dublin from BP for an undisclosed sum.
The bank's entry into the Irish electricity market raises the possibility that the proposed Ireland Power plant at Mulhuddart, west Dublin, will be built in time to prevent a projected shortage of power in 2005.
However, Babcock & Brown said its development of the proposed 400 megawatt (MW) plant, which has planning permission, was dependent on the conclusion of a competition for guaranteed contracts to sell the plant's output to the ESB.
The initiative requires an investment of at least €200 million, but Babcock & Brown seeks clarification about the competition process from the Commission for Energy Regulation.
BP owned 80 per cent and a US group, Ireland Power, owned 20 per cent of the initiative, which BP put on the market two years ago. Other groups linked previously to the project include Scottish Power and the defunct ePower, owned by the businessman, Mr Denis O'Brien.
A Babcock & Brown director Mr Ian Sharpe said the bank had acquired 100 per cent of the initiative last Thursday. Two Dublin-based Ireland Power directors, Mr Larry Thomas and Ms Laura Lovette, will be retained as consultants during the transition, but the bank will take a leading role in the project.
With annual financing exceeding €20 billion, Babcock & Brown specialises in the acquisition, management and financing of major assets. It owns a number of power plants in Australia and employs 20 people at its Dublin-based aircraft leasing operation.
The Ireland Power deal follows an agreement by the ESB in December to purchase electricity from independent suppliers. With the State company effectively precluded by EU rules from developing new large-scale plant in the liberalising market, the deal brokered by the energy regulator, Mr Tom Reeves, was designed to foster investment in the business.
Many potential investors, among them BP, have walked away from the market with some claiming difficulty with the structure and pace of deregulation was making projects difficult to bank.
In theory at least, the availability of guaranteed purchase contracts would support investment in generation because project owners could secure a return on their investment at a certain rate. Contracts for up to 400 MW will be offered in the competition.
Mr Sharpe said: "We've purchased Ireland Power in anticipation of the Commission for Energy Regulation coming up with a process in which it will be possible to finance the plan. We think we'd be in a leading position to meeting the requirement for additional power once we see the details of the process."
But he added: "We'd see little prospect of actually raising finance in the current market structure."
Other groups expected to compete with Babcock & Brown for the contracts include Viridian and Aughinish Alumina. Aughinish plans a generation station in the Shannon Estuary and Viridian has planning permission to build a second station next to its existing plant at Huntstown, north Dublin.
