Belfast Telegraph

Power firm's independence will be 'boosted' by part sale

The sale of a stake in Northern Ireland Electricity's parent company ESB - planned for some time in 2012 - should boost the firm's independence from government, a top ratings agency has said.

The Irish government is expected to sell about 25% of the company at some point next year, but so far no consultants have been appointed to undertake the sales process.

Fitch, one of the 'big three' ratings agencies, said it did not expect the sales process to conclude in the short term.

The agency made its comments as it affirmed ESB's long-term issuer default rating at BBB+.

The affirmation reflected ESB's "improved liquidity position" after it attracted over €1.2bn (£1bn) of new debt during 2011.

"The Irish government decided in September 2011 to sell a minority stake in ESB," said the agency.

"The agency does not anticipate the privatisation to conclude shortly, but a reduced ownership by the government would possibly enhance ESB's independence,'' it added.

However, ESB is set to remain focused on Ireland as that represents over 80% of earnings, with the rest in Northern Ireland.

ESB has suffered because the Republic's own credit rating has fallen, but it should stay focused on the Republic, said Fitch.

"The sovereign rating of Ireland would have to be downgraded to speculative grade for sovereign constraint to cause a downgrade of ESB from the current rating level,'' said the influential agency.

Fitch said ESB's generation portfolio was diversified by fuel source and the firm commanded a strong market share and was well placed in the single electricity market.

Fitch said: "The rating is constrained by the limited geographical diversification of ESB's asset base and earnings, and the challenges facing ESB's electricity supply business, which is suffering from the market liberalisation."

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