BG Group to sell share of Phoenix Natural Gas to East Surrey Holdings

East Surrey Energy Investments Ltd., a subsidiary of East Surrey Holdings PLC, agreed to buy 24.5% of Phoenix Natural Gas Ltd., the Northern Ireland natural gas distribution company, from BG Energy Holdings Ltd., a subsidiary of BG Group PLC. The stock exchange deal is worth �50 million.


By the OGJ Online Staff


HOUSTON, Feb. 28
�East Surrey Energy Investments Ltd., a subsidiary of East Surrey Holdings PLC, agreed to buy 24.5% of Phoenix Natural Gas Ltd., the Northern Ireland natural gas distribution company, from BG Energy Holdings Ltd., a subsidiary of BG Group PLC. The stock exchange deal is worth �50 million.

BG Group will remain the majority shareholder with 51% of the company, while US-based KeySpan Corp. retains its 24.5%.

The sale is subject to approval by East Surrey Holdings' shareholders at a meeting Mar. 16.

�This sale demonstrates BG Group's ability to build material gas businesses and add value to its portfolio via equity sales. In just 4 years, Phoenix has become an attractive investment opportunity realizing a developer's premium for BG Group while presenting valuable growth opportunities for our partner,� said Frank Chapman, CEO of BG Group.

�This acquisition provides an opportunity to significantly increase the proportion of East Surrey Holdings business that derives from outside the regulated water business, which I firmly believe is in the interests of our shareholders," said Pat Barrett, chairman of that company.

BG Group has invested �104 million in Phoenix Natural Gas since the company was established and awarded a license for the Greater Belfast area in 1996.

That license provides for exclusive supply for 8 years to customers using less than 75,000 therms/year of gas and 3 years for users of more than 75,000 therms. In addition, Phoenix has 20 years exclusivity in the transportation of gas in its license area.

The licensed area contains 240,000 domestic households and 20,000 business premises, most of which burn fuel oil. To date, Phoenix has laid 1,750 km of pipe and connected 20,800 domestic and 2,200 business customers to the network.

BG Group introduced natural gas into Northern Ireland via a joint venture company, Premier Transmission Ltd., which owns and operates a 24-in. subsea pipeline bringing gas from Scotland.

The group's first venture in Northern Ireland was its 1992 purchase of Ballylumford Power Station, part of the UK government's program to privatize the Northern Ireland electricity supply industry. The station generates more than half of Northern Ireland's current electricity requirements.

Last March, the group announced plans to invest �200 million in a combined-cycle gas turbine power plant at Ballylumford. Construction began in June.

East Surrey Holdings supplies water to a population of 634,000 people over 833 sq km, covering parts of Surrey, Kent, Croydon, and other areas of southeast England.

More in Pipelines & Transportation