Northern Ireland Energy Holdings (NIEH) is lining up to buy one of the main gas supply lines to Belfast in a deal likely to be valued at €150 million.

NIEH revealed yesterday that it has entered talks with Phoenix Energy to buy the Islandmagee-Belfast gas pipeline, which connects the city with the line linking Northern Ireland and Scotland.

NIEH's statement said that it had entered talks about a possible purchase of the pipeline.

The parties have signed a confidentiality agreement and neither would reveal a likely price yesterday. However, industry sources say that the pipeline should have a value in the region of €150 million.

It is understood that Phoenix Energy would be willing to sell the pipeline as the local energy regulator has told the group that it cannot use it to generate a high return.

Regulators are allowed to do this to prevent excessive increases in energy costs.

The energy holding company is the only bidder for the Phoenix pipeline at this stage.

NIEH is a company limited by guarantee and has no shareholders. It operates as a mutual. The theory behind this approach is that as it does not have to return profits or dividends to shareholders, it can pass on all savings and benefits to its customers.

Its strategy is to buy energy infrastructures, refinance them by issuing bonds to the capital markets, then operate them as cost effectively as possible. Welsh water utility Glas Cymru uses a similar model.

The other assets it owns include the Moyle interconnector, an electricity link running between the Antrim and Scottish coasts, and Premier Transmission, a gas pipeline also linking the Antrim and Scottish coasts.

Its board of directors includes David Montgomery, the former chief executive of UK newspaper publisher, Trinity Mirror, whose titles include the Daily Mirror.

Phoenix Energy Holdings is ultimately controlled by venture capitalist firm Terra.