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News : International Last Updated: Nov 27, 2013 - 2:34 PM


Market: Irish Government cancels €1.5bn sale of Bord Gáis Energy
By Finfacts Team
Nov 27, 2013 - 2:31 PM

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Pat Rabbitte TD, minister for communications, energy and natural resources, confirmed today that the Government has cancelled the sale of Bord Gáis Energy as none of the final bids received were at an acceptable value.

The minister noted that the sale process attracted significant interest from a broad range of potential international acquirers, "reflecting the positive international sentiment towards Ireland, while noting also that current conditions in the power and commodity markets were not favourable."

Reports earlier this week suggested that Blackstone Group and Viridian Group, Northern Ireland's largest energy company, had submitted final-round bids for Bord Gáis Energy and the minister hinted today in a radio interview that the offer was about  €1bn.

The Government under pressure from the bailout troika announced planned sales of state assets that would raise €2 to €3bn after reaching an agreement with the bailout lenders to use some of the proceeds to invest in the economy as well as pay down debt.

Apart from today's withdrawal, it cancelled plans to sell the public stake in Aer Lingus and state forestry firm Coillte.

It did raise €400m though the sale of a lottery licence last month.

“The minister for public Expenditure and reform and I have been clear from the outset of the offer process that Bord Gáis Energy would only be sold if a sale price was achieved which fully recognises the inherent value of the business,” Rabbitte said.

“The Department and NewERA will work with Bord Gáis to complete the separation of Bord Gáis Networks and Bord Gáis Energy in accordance with EU energy law, to continue investing in and developing the Bord Gáis Energy business and to review options for the future of Bord Gáis Energy.”

The Wall Street Journal reported on Tuesday that the Nasdaq Composite Index closed above 4,000 for the first time in 13 years, the latest symbol of easy money from the Fed and robust investor demand for a broader swath of fast-expanding companies.

A rise of 23.18 points Tuesday to 4017.75 put the index up 33% for the year. It remains more than 1000 points below its record close of 5048.62 on March 10, 2000.

Economic View: Strengthening labour market provides comfort; Dermot O'Leary of Goodbody comments - - "Among the various strands of evidence of a recovery in domestic demand in Ireland, yesterday’s employment data is the most important to date. Not only did employment growth pick up to 3.2% yoy in the third quarter of the year (from 1.9% in Q2), an acceleration in full-time employment was the reason for the improvement. This trend is reflective of the increased confidence on the part of employers in the sustainability of the economic recovery.

Despite a continued drag from public sector employment, eight of the fourteen sectors of the labour market saw annual employment gains over the past twelve months. Agriculture (+29% yoy) has seen the strongest growth, but there are sampling issues here that are likely to be affecting the numbers. Outside of this sector, employment growth is strong in accommodation and food (+12% yoy) and professional, scientific and technical activities (+11% yoy). Mainly as a result of the more positive employment trends, the unemployment rate fell to 12.8% in Q3, its lowest level since 2009.

What are the implications of the latest data? Given the strength of employment, the relative weakness of Irish output provides a conundrum. Sector-specific issues in the pharma sector may be at play here once again. In relation to consumer spending, weakness in earnings (data also released yesterday) goes some way to explaining a lacklustre performance in the year to date. Nevertheless, we would expect consumer spending to pick up as the labour market tightens. Finally, the continued fall in the unemployment rate provides some comfort for bank stress tests in 2014."

Bank of Ireland: Potential equity raise now mooted at €500-600m; Eamonn Hughes of Goodbody comments - - "Following a Bloomberg article last Friday that BOI was looking at a €400m equity raise (5% of its €8bn market capitalisation), reports yesterday, initially on Reuters, pitched the possible equity raise in a €500-600m range. Reuters indicated the equity will be raised through a placement rather than a rights issue and will retire one-third of the €1.8bn of preference shares, with the State set to sell the balance at a premium to investors.

The Reuters article indicated that the equity raise would be as early as next week to avoid a clash with the Thanksgiving break (US investors key!) and post the bank receiving the results this weekend from the Asset Quality Review. We know that the bank can place up to 5% of shares without requiring prior approval. A figure at the mid-point of the €500-600m range would equate to a c.7.5% new issue. However, we understand prior approval is required should it look to place an amount larger than 5%, say up to 10%. BOI released an RNS indicating it noted recent media reports.

A placing (either 5% or 10%) given the current P/TNAV multiple would have minimal TNAV dilution. Our transition rules core tier 1 ratio of c.15% is unchanged if the new equity retires some of the preference shares. However, our trough “fully loaded” CT1 ratio bounces from 6.5% to c.9% (if c. €600m was raised). Our initial thoughts are that our 30c fair value would be broadly unchanged. If we assume the bank utilises retained earnings out to 2017 to repay all the prefs, then the higher ROE from the reduced coupon payments are balanced by a lower TNAV as the prefs are repaid. However, the market may be more comfortable with the capital structure and provide a little more clarity on ultimate timelines to a dividend."

US Markets

In New York Tuesday the Dow rose 0.26 points or 0.0% to 16,073.

The S&P 500 added 0.1% and the Nasdaq added 0.50%.

US benchmark updates

Asia Markets

The MSCI Asia Pacific Index added 0.01% Wednesday.

Japan's Nikkei 225 fell 0.42%; China's Shanghai Composite rose 0.82%; South Korea's KOSPI added 0.31%; Australia's S&P/ASX 200 fell 0.45% and in Mumbai, the Bombay Stock Exchange the S&P BSE India Sensex Index dipped 0.02%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is up 0.38% in mid-morning trade Wednesday.

In Dublin, the ISEQ  has risen is 0.75%

CRH has added 1.49%.

European Benchmarks

Irish Share Prices

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.3599 and at £0.8340.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

On Thursday, July 15, 2010, the index fell for the 35th straight session, by 9 points, or 3.11%, to 1,619 points, Bloomberg report.

On Tuesday, the BDI rose 20 points or 1.34% to 1,512.

Global rebalancing — the tanker scrapyard index?

Crude oil for January 2014 delivery is trading on the Chicago York Mercantile Exchange (CME/Nymex) at $24.71 up 97 cents from Tuesday's close. In London, Brent for January 2014 delivery is trading on the International Commodities Exchange at $111.29. The North Sea benchmark accounts for two-thirds of the global market.

Finfacts, July, 15, 2013: US West Texas Intermediate oil benchmark jumps in July - - margin between WTI and Brent falls.

Gold spot price

The spot price of an oz of gold is trading on the CME in Chicago at $1,250.70 up $9.3 from Tuesday's closing.

Gold had hit a record high of $1,921.15 a troy ounce on Sept 06, 2011.

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