Infrastructure 'multi-utility' Ervia to deliver Ireland's resources

Speaker: Seán Casey, managing director, Bord Gáis Networks. Author: Mary Anne Carrigan, editor, EngineersJournal.ie Irish Water needs to spend €6.2 billion on assets in order to provide clean, safe water to 1.8 million customers and deliver wastewater to environmental standards. Seán Casey, managing director of Bord Gáis Networks, told the Engineers Ireland Annual Conference why the company was chosen by the Government to establish Irish Water as a subsidiary. Casey briefed delegates at the conference, which took place in the Sligo Park Hotel last month, on the history of gas in Ireland. Bord Gáis Éireann became Ireland’s gas utility in 1976, when gas first came ashore from Kinsale. Local gas companies in Dublin, Cork and Limerick went on to join the BGÉ Group. In 2001, it launched its dual-fuel, all-island energy strategy. “Over the years, there has been large-scale investment in network assets in Dublin, Cork, Limerick and Waterford,” according to Casey. “We’ve initiated campaigns such as the ‘Big Switch’ and developed the Whitegate Power Plant in Cork and pipelines in Northern Ireland. We’ve also diversified into wind – in 2009, Bord Gáis Éireann bought the SWS Natural Resources wind energy company, which operates a number of wind farms in Munster and Ulster.” As an energy utility, Bord Gáis Éireann had at its heart the Group Centre. From there, it managed its three divisions – Bord Gáis Networks (incorporating Aurora Telecom), Bord Gáis Energy (incorporating SWS) and Gaslink, the gas system operator. However, since 2012, with the launch of Irish Water, it has been a company in transition. Next year will see further major change, when Bord Gáis will become Ervia, the country’s first multi-utility infrastructure company. Now that the sale of Bord Gáis Energy, including the ‘Bord Gáis’ brand, has been completed (in a €1.1 billion deal to Centrica consortium), the strategic gas networks business will be re-branded as ‘Gas Networks Ireland’. It will sit beside the Irish Water business in a group company under the new corporate name of Ervia. “There have been two drivers of transformation,” Casey said. “The first was the Government’s decision to sell state assets – i.e. Bord Gáis Energy – and the second was its decision to radically reform the provision of the country’s water and wastewater services nationally. The business elements were all run separately until the decision to sell. We’re moving away from being strictly an ‘energy company’ and losing the ‘Bord Gáis’ brand and name. “At the same time,” he continued, “we’re building on our experience and heritage and working with other key partners – such as the Department of Environment and local authorities around the country – in the establishment of Irish Water as a high-performance utility.” MULTI-UTILITY COMPANY Casey went on to explain what he meant by a high-performing multi-utility. “As Ervia, we’ll be delivering gas and water infrastructure and services to safety, quality, time and budget expectations. There’ll be a new Group Centre and work will be carried out on major projects and shared services within two engineering-based, customer-facing businesses – Bord Gáis Networks (which will re-brand to Gas Networks Ireland) and Irish Water. There are synergies already in both companies because areas such as operations and asset management are working together,” he said. “The country needs modern utility services to support economic development locally, regionally and nationally. We’ll do this by creating a multi-utility as a commercial semi-state, building on our experience to deliver water and gas infrastructure and services for Ireland – and beyond, when we’ve earned the right.” Casey said that Ervia had the potential to be “a positive force” for Ireland. “It’ll be a growing, profitable, 100% Irish company and, as Bord Gáis, we’ve already delivered investment to modernise gas infrastructure. The challenge now is to do the same for Irish Water. It’ll be difficult, as we have to meet the needs of shareholders, customers, employees, regulators and the Government, but I believe Ervia can be as dynamic as any Plc, because we’ve a commercial ethos balanced with a strong service ethos.” He pointed out that Ervia is set to be one of the top ten companies in Ireland, with a potential value of €600 million by 2017. Irish Water, he explained, will be a commercial, self-funded, modern utility as a subsidiary of Ervia. “There are a number of elements at play here,” Casey explained. “Irish Water will receive funding from international lenders and will work with the Environmental Protection Agency and Commission for Energy Regulation to ensure effective regulation. Agencies like IDA Ireland, the Department of Environment, Waterways Ireland, IBEC and the Houses of the Oireachtas Commission will support the economic development of Irish Water.” The new water utility will have an asset base of €11 billion and will be responsible for 100,000 kilometres of pipes. Its aim is to provide clean, safe water to 1.8 million customers and also deliver wastewater to environmental standards. “It’s going to be an integrated system and we have skilled and engaged staff in Irish Water and from local authorities to make this happen.” Casey responded to queries as to whether regulation was the appropriate model for Irish Water, stating that there were many benefits of economic regulation of networks. “Energy prices have risen, but not because of gas or electricity network costs,” he said. “Network prices have remained stable despite capital investment of €7 billion in the last decade – some €120 million year-on-year. Despite this investment, customer energy prices are at or below European averages. “The regulated model has allowed access to funding from international markets to fund this investment. This has resulted in improved quality and performance for electricity and gas customers,” he added. “We’ve had significant investment, yet stable changes – Bord Gáis Networks has invested over €1 billion on capital expenditure and its Regulated Asset Base has grown by over €450 million since 2003.” Indeed, the Bord Gáis Networks gas network now includes:

Transmission (cross-country) and distribution (towns) networks in Ireland;
Two sub-sea interconnectors linking Ireland with Scotland;
An on-shore system in Scotland;
A spur-line to the Isle of Man;
The North-West pipeline from Belfast to Derry;
The Mayo-Galway pipeline, to bring gas from the Corrib field into the national grid; and
The South-North pipeline from Gormanston, Co. Meath, to Belfast to secure long-term gas supplies for Northern Ireland.

IRISH WATER – WHY BORD GÁIS? Casey said that Bord Gáis Éireann was the right choice when it came to setting up Irish Water. “Irish Water was established within Bord Gáis as an existing semi-state company to leverage our skills, experience and track record as a successful utility provider. Firstly, it has extensive experience of operating a full-scale national utility service and it has a track record of delivery of large-scale capital projects. It also has years of experience in delivering services to customers in a regulated environment. “Also, BGÉ has a lot of expertise in raising finance on international markets, as well as implementing successful change and transformation programmes,” he added. Casey outlined the challenges in water services provision that Irish Water has to face. It currently costs €1.2 billion to run water services in Ireland and there is €11 billion worth of installed assets. Although there is a lack of data on the condition of these assets, it is known that 41% of water in Ireland is lost through leakage. “Some €6.2 billion needs to be spent on the assets,” said Casey. “We need to invest in our water infrastructure to end the current situation, where approximately 20,000 people are on ‘boil water’ notices and one thousand water schemes are at risk of bacterial and viral contamination.” He outlined Irish Water’s key priorities for 2014:

Bring a systematic approach to how we operate and manage services today;
Centralise and standardise activities to deliver major cost savings;
Deliver the largest metering programme for a water utility;
Adopt best engineering practice to reduce the capital investment required to complete quality projects; and
Implement a customer care and billing system for 1.8 million customers.

IRELAND’S GAS NETWORK Joining Irish Water under the auspices of Ervia is Bord Gáis Networks. This company has developed gas infrastructure across three jurisdictions, comprising of:

An interconnector system linking Ireland to the UK and continental gas markets;
2,467km transmission pipeline network; and
11,218km distribution pipeline network.

“There are nearly 670,000 gas users in Ireland in over 161 population centres within 19 counties throughout the country,” Casey continued. “Bord Gáis Networks’ agenda is to transport 53,000,000 MWh of gas through our networks to our 670,000 customers; safely complete our capital and maintenance work programmes; manage a record number of domestic customers changing supplier; and meet our regulatory contract. We also have to deliver the best customer service – there are a lot of challenges ahead.” Additional but once-off challenges lie ahead, such as the re-branding to Gas Networks Ireland. “We have to grow the gas industry to fully utilise the network – we need new connections, we need to introduce renewable gas into our network and we need to use compressed natural gas [CNG] as a transport fuel.” Casey told delegates that CNG as a transport fuel was cheaper, cleaner and viable. Some 16 million vehicles worldwide use CNG, he said, with 1.8 million of these in Europe. “The Clean Power for Transport Directive illustrates the central role that natural gas has to play in the future of transport. This is a focus area for us; we can provide refuelling infrastructure and gas expertise to support market development in Ireland. “The technology is proven – production-line models are available, affordable and they’re ideal for commercial fleets,” he added. “Biomethane provides a pathway to renewable transport.” All of these initiatives demonstrate that Ervia will truly be a multi-utility infrastructure company, according to Casey. “We’ll provide modern utility services in the area of gas and water not just for today, but for generations to come,” Casey concluded.