Energia Group, the electricity and gas utility controlled by New York private equity firm I Squared Capital, handed a further €110 million of dividends to its owners in September, even as earnings dipped in its most recent financial quarter amid lower energy prices.
The payment comes as I Squared Capital advances plans to sell the business which was formerly known as Viridian Group. It brings total dividend distributions to more than €490 million since the US firm acquired Energia in 2016 for €1 billion.
Energia’s earnings before interest, tax, depreciation and amortisation (Ebitda) declined by 6.3 per cent to €79.5 million in the three months to the end of September, the company’s financial second quarter. However, for the first six months of the year, earnings were up.
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I Squared Capital hired investment bankers earlier this year from Morgan Stanley and Barclays to prepare the company for sale, sources previously told The Irish Times. While industry sources had expected a process to officially launch before now, I Squared is unlikely at this stage to commence it until next year.
Reuters, which first reported in February on I Squared’s third planned effort to sell Energia since 2018, put an enterprise value of about €2.75 billion, including net debt, on the group at the time. Its net debt declined to €430 million in September from €449.6 million in March — and has fallen by 45 per cent over the past eight years.
Dividend payments will affect the price I Squared and its minority partner — an unnamed investor that bought a stake in 2017 — will achieve in a sale.
The three parts of Energia’s business — renewable energy, a flexible electricity generation business, and a unit supplying customers — have proven to be complementary in recent years despite upheaval across energy markets.
When earnings soared across the group’s renewables and flexible generation businesses in the two years to March 2023 — amid soaring electricity prices globally following Russia’s invasion of Ukraine — its business supplying customers suffered large losses with margins squeezed by heightened wholesale prices. However, last year saw the consumer solutions business deliver a large profit as earnings across the other two units declined.
In the most recent quarter, Ebitda in the renewables business, which owns 358 megawatts (MW) of wind assets and purchases electricity from 1.19 gigawatts (GW) of third-party green energy producers, declined to €19.8 million from €24.4 million for the same period last year. This was driven by lower wholesale energy prices and wind volumes. Peak electricity demand in the Republic is about 5.6GW.
The flexible generation division, mainly made up of two combined cycle gas turbine plants in Huntstown in north county Dublin with a total capacity of 747MW, posted a 72 per cent surge in Ebitda to €35.9 million. This was fuelled by greater use of the plants — used to plug gaps in electricity supplies in the Greater Dublin Area — during the period as well as the opening earlier this year of an emergency 50MW gas-fired electricity plant on the Huntstown site.
Earnings in the customer solutions business — which supplies electricity and gas to more than 860,000 households and businesses on the island — declined by a quarter to €33.9 million with margins squeezed as energy prices declined.
“Our integrated business model has delivered a strong set of financial results for the quarter,” said chief executive Ian Thom. “Our core businesses of renewables, flexible generation and customer solutions continue to perform well, as we look towards a normalisation in financial performance during the course of this financial year.”
Mr Thom said in the interview with The Irish Times in September that Energia has a 3.4GW “pipeline of opportunities” across onshore wind, solar, and offshore projects. These will require significant equity and project debt to deliver.
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