A division of Bord Gais has been sold for 1.12bn euro about two weeks after the Government gave up the hunt for a buyer.
A deal has been struck with a consortium for Bord Gais Energy just days before Ireland's exit from the bailout.
The Government had been pushing for 1.4 billion euro, but dropped the value for the consortium involving UK energy giant Centrica, Brookfield Renewable Power and iCON Infrastructure.
Discussions will now begin on the final terms of the sale, which is expected to be signed in early 2014, while talks with employees and trade union representatives get under way.
Energy Minister Pat Rabbitte and Brendan Howlin, Minister for Public Expenditure and Reform, welcomed the deal.
"Each consortium member brings with it deep industry experience and significant financial strength to support the continued investment in the business," they said in a joint statement.
"The entry into the all-island energy market of international strategic investors is a strong vote of confidence in the market, the Irish economy and in the Bord Gais Energy business and its employees.
"The successful conclusion of the sale will help provide additional funding to enable investment in infrastructure and jobs."
Bord Gais Energy - t he retail, trading and assets division of the state-owned company - had been earmarked for sale alongside harvesting rights for Coillte forests, which has also been dropped, and a 25% stake in Aer Lingus.
The sale, offered to international energy companies and investment groups as part of the sale of state assets under the bailout programme, was being overseen by the New Era unit of the National Treasury Management Agency.
Elsewhere, the sale of about one million acres of state-owned forest was abandoned back in June with a decision taken to merge Coillte with Bord na Mona to develop commercial bio-energy and forestry interests.
The Government has repeatedly said its Aer Lingus shares will only be sold when the demand is there.
The sale of state assets was suggested on the back of the 2010 EU-IMF Troika bailout to raise an estimated three billion euro.
Some 150 million euro from sales was earmarked for road repairs, new school buildings and home insulation projects.
The Bord Gais Energy sale was designed to ensure the transmission system and networks owned by the company remained in state hands.
It included the 445 megawatt Whitegate gas power station, opened in November 2010, and its renewable wind energy sites which are big enough to power nearly 180,000 homes.
Bord Gais said three bids were received several days before the sale was pulled last month because the offers were too low.
Opposition politicians criticised the move, describing it as rushed, cynical and a betrayal.
Fianna Fail also questioned why it was being sold at less than the market value.
"Bord Gais is an efficient and well run state asset that is delivering a good service for citizens and a profit for the state," said Michael Moynihan, party spokesperson on communications, energy and natural resources.
"Despite the spin from Government, there was never any agreement to sell the company and now that the state is meeting its financial targets without having to sell the company, there is no reason to proceed."
Sinn Fein claimed the sale was a betrayal of the massive amount of public money invested to date, and of the potential for the company in the future to become a leading player in the renewable energy market.
Michael Colreavy, energy spokesman, said the latest offer still under values Bord Gais Energy compared to the 1.5bn euro first mooted.
"But even had that price been realised the sale would still represent a shortsighted decision given the massive potential facing the Irish energy sector over the next decade," he added.
"Bord Gais Energy is already a significant stakeholder in wind energy and is poised to further expand its interests. That will be worth far more than the sale price agreed as the proportion of electricity generated by wind increases."
Elsewhere Joe Higgins TD said the privatisation of Bord Gais Energy was a treacherous betrayal of the Irish people and of energy workers.
"The track record of privatised companies has been a disaster with dire consequences for the jobs and conditions of the workers involved," he added.
"Workers and the trade unions should now mobilise and actively resist the privatisation of Bord Gais Energy."