September 14, 2011 / 2:26 PM / 6 years ago

UPDATE 2-Ireland to launch sell-off with power firm stake

* Ireland to sell minority stake in former power monopoly ESB

* First major privatisation under EU/IMF bailout programme

* CEO in Feb. said full sale could make 8 bln eur

* Govt rules out sale of majority stake

* Committee will decide on more details by November (Adds analyst comment, background)

By Conor Humphries

DUBLIN, Sept 14 (Reuters) - Ireland is to launch a privatisation drive by selling a minority stake in state electricity supplier ESB, the first major sale under an EU/IMF bailout programme, the energy minister said on Wednesday.

A minority stake could in theory cover the government’s 2 billion euro ($2.7 billion) privatisation target, analysts said.

The government has not, however, agreed a specific target with its EU/IMF lenders and the IMF has urged Dublin to consider a much larger 5 billion euro sell off.

“The sale of a minority stake in ESB as an integrated unit has been agreed by government,” energy minister Pat Rabbitte told parliament. “A minority stake is not control, and there is no question of this government handing over control.”

The group’s chief executive, Padraig McManus, said in February a sale of the entire company, which in 2010 had revenue of 2.7 billion euros, could raise between 6 and 8 billion euros.

“It’s one of the jewels of the crown,” said Alan McQuaid, chief economist at Bloxham stockbrokers. “They could write the 2 billion euros off in one go if the conditions are right, but they won’t rush into it with global markets as they are.”

The government has not decided the timing or size of the sale, but will not allow a majority stake to fall into private hands, Rabbitte said.

“The ESB is of strategic significance in the Irish economy and we recognise that,” he said.

The government has agreed to present a list of privatisation targets to its bailout lenders -- the International Monetary Fund, the European Central Bank and the European Commission -- by the end of the year.

A government-chaired committee will report back with recommendations on the sale by the end of November, Rabbitte said.

A state-commissioned report in April recommended ESB’s energy supply business, electricity distribution arm, generation assets and overseas interests should be sold as a single entity, but its transmission assets remain in state hands.

Rabbitte said, however, ESB would remain an integrated unit.

Privatisation is extremely controversial in Ireland, which has experienced a series of botched sales.

Shares in telecoms monopoly eircom collapsed after an IPO marketed as a one-way bet to the Irish public. A series of changes of ownership left it with 3.8 billion euros ($5.4 billion) of debt at the end of last year.

“I don’t think there will be a huge backlash as they have promised to keep the majority in state hands,” said Bloxham’s McQuaid.

ESB posted a loss of 84 million euros in 2010 compared with a profit of 580 million a year before as Ireland suffered one of the sharpest recessions in a developed economy.

ESB, which controls some 60 percent of the residential electricity market, has cut staff numbers to 6,911 from 7,783 two years ago.

$1 = 0.731 Euros Reporting by Conor Humphries; Editing by David Holmes and Elaine Hardcastle

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