Viridian Group Plc Business Information, Profile, and History

Company Perspectives:

Our Mission: Providing an affordable and reliable electricity supply to the people of Northern Ireland. Our Vision: To be recognised as an organisation that contributes to the prosperity of the community in which it operates.

History of Viridian Group Plc

Viridian Group plc is the holding company that controls Northern Ireland Electricity (NIE), which provides electricity procurement, transmission, distribution, and supply services to Northern Ireland. NIE remains Viridian's main operation, accounting for more than £557 million of the group's total turnover of £834 million in 2003-04. NIE represents the regulated side of the Viridian Group. In 1998, the company restructured its operations, splitting off the unregulated parts of NIE. One of these became NIE Powerteam, which became the largest power utility contractor in the Northern Ireland market. NIE Powerteam chiefly provides maintenance and management services for NIE's own transmission network but also provides turnkey services for private power networks. Furthermore, Viridian Group has begun an effort to establish itself as a major power player throughout the Northern Ireland region and has made a push south into the Republic of Ireland itself. As part of that effort, the company's subsidiary Viridian Power & Electricity is building the Huntsdown power generation facility outside of Dublin. The £200 million project uses gas-fired generators and will provide approximately 10 percent of the power generation demand for the entire country upon completion. Viridian P&E is already a major component of the Viridian group, adding more than £206 million to its revenues in 2003-04. After a brief effort to diversify in the 1990s, Viridian has refocused around its power generation and transmission core. In 2003, the company sold off the last of its non-core holdings, including Fleet Solutions, its share of the Moyle Interconnector, and Lyslyn Ltd. Nonetheless, the company continues to operate two other smaller subsidiaries, Energia, which oversees the group's energy retailing activities, and Sx3, a provider of information technology services. Viridian Group is listed on the London Stock Exchange and is led by CEO Patrick Haren.

Deregulating Energy in Northern Ireland

Northern Ireland turned started using electric power in 1892 when the first commercial power station began operating. Northern Ireland's electrical power market, as in the rest of the United Kingdom, was constructed largely by private and local or regional interests over the next three decades. This led to a patchwork of electrical grids and power generation facilities with little coordination among them. In addition, remote regions of the country were cut off from the electrical power grid--a situation that remained unchanged until the 1950s.

The importance of electrical power to the national infrastructure of the United Kingdom was initially recognized in the 1920s. In 1926, the government formed its first oversight authority, the Central Electricity Board (CEB). The CEB then began building the United Kingdom's national power grid, linking the many power stations then in operation and encouraging the construction of new power stations. By the 1940s, the United Kingdom boasted more than 600 power stations. Yet the country's electricity market remained characterized by widely differing prices and even different voltage standards.

The United Kingdom's control over Northern Ireland meant that it needed to be included in the national power grid. In 1931, legislation created a new regional electricity authority, the Electricity Board for Northern Ireland (EBNI), which worked alongside two other national government bodies, the Corporation Electricity Departments and the Joint Electricity Authority, to develop Northern Ireland's electrical grid.

Private power companies remained in operation through World War II. Following the war, however, the British government moved to nationalize a number of strategic infrastructure and industrial assets, including the country's electrical power and other utilities. This process began in 1947, when the government created an oversight body, as well as new regulations, in order to achieve full national coverage, as well as to standardize not only prices but also voltage rates throughout the United Kingdom. Northern Ireland, along with Scotland, became exceptions when electrical industry was restructured under a single, vertically integrated and nationalized body starting in 1947. Elsewhere in England, power generation and transmission remained separated functions. In 1957, the nationalization of the United Kingdom's electrical market was completed with the creation of a new authority, the Central Electricity Generating Board.

At the same time, the British government launched an ambitious nuclear power generation program, calling for the construction of as many as 19 nuclear power stations to be built by the 1960s. Northern Ireland, too, was slated for its own nuclear plant, with completion expected for 1962. The new atomic energy plants were expected to help reduce Britain's reliance on fossil fuel imports. Nonetheless, these remained an important part of the United Kingdom's power generation grid. In the 1960s, EBNI continued adding new power stations to its network, including a new station at Ballylumford started in 1966. That coal-firing plant was further extended with more than 350 megawatts (MW) of capacity in 1968. Meanwhile, the government's nuclear energy plans had moved ahead, if more slowly than originally planned, and by the end of the 1960s there were nine nuclear power stations in operation.

In 1973, the government created a new authority merging the operations of EBNI and the Northern Ireland activities of the Corporation Electricity Departments and the Joint Electricity Authority into a single body, now called the Northern Ireland Electricity Service (NIES). The government-controlled body then took over the full range of electricity supply, including operation of Northern Ireland's four power stations at Ballylumford, Kilroot, Belfast, and Coolkeeragh. NIES was also responsible for ensuring the transmission, generation, and supply of electricity to Northern Ireland, as well as selling excess capacity to the export market.

The rise of the Conservative Party government under Margaret Thatcher brought impetus to plans to privatize many of the country's nationalized industries. Against opposition, plans were put into place to privatize the United Kingdom's utilities as well.

The first phase of the deregulation process began in 1983, with the passage of a new Electricity Act that allowed the creation of independent power producers in the United Kingdom for the first time since the nationalization of the 1940s. Privatized power generation and transmission appeared to be an especially positive prospect for Northern Ireland, where years of hostilities had led to under-capacity in the province's power generation capacity.

The discovery of a vast lignite deposit in Ulster in the early 1980s promised to reverse some of the province's supply problems. The field, with an estimated 400 million tons of brown coal, including more than 130 million tons immediately available to lower-cost open-cast mining methods, also led to a first test of the government's resolve to privatize the utility market. In 1985, the government began accepting bids from the private sector to build and operate a power-generation plant on the lignite site.

Privatized in the New Century

The 1983 legislation had failed to ignite the private power generation sector, in part because the country's existing government-controlled power generators retained distinct pricing and return rate advantages. At the same time, the legislation did not fully address issues surrounding access to the national power grid by new privately held entrants.

These concerns were finally address in 1989 with the passage of a new Electricity Act. This legislation firmly set in place a process of deregulation and ultimate privatization. An important step toward this end was the restructuring of the electrical industry, separating the power generation component from transmission operations, and at the same time creating a new distribution market composed of twelve new regional electricity companies. The operations of the new companies were further separated into a regulated side--transmission--while marketing activities were slated for full deregulation.

The privatization of the new electrical companies in England and Wales took place in 1990. Northern Ireland's turn came two years later. In 1992, the government restructured NIES, splitting off its four power generation facilities into separate companies, which were then sold to private investors. The remaining operations were regrouped under a new name, Northern Ireland Electricity plc (NIE), created in 1993.

NIE took responsibility for the procurement of electrical power, the development and maintenance of the province's transmission and distribution network, and the delivery of electricity to end users. As in England and Wales, NIE operated along two lines, the regulated transmission component and its non-regulated marketing side, which also included its maintenance and engineering operations.

Faced with constraints on its regulated operations, NIE began an attempt to diversify its business somewhat into the mid- to late 1990s, adding businesses such as Fleet Solutions, which provided fleet management services, and Sx3, an information technology services supplier. NIE also became a partner in the Moyle Interconnector project, laying a sub-sea cable to connect the Northern Ireland and Scottish power grids. The company also entered into the telecommunications sector, acquiring a stake Internet provider nevada. Yet power transmission and marketing remained the group's primary focus.

In 1998, as the United Kingdom moved to full deregulation of the electricity industry, NIE restructured its operations. The company formally split itself into its regulated and non-regulated components, which were then placed under a new holding company, Viridian Group plc. Where NIE had been barred from the power generation market, Viridian Group faced no such constraints. The company promptly announced its interest in moving south into the Republic of Ireland market. In 1999, Viridian won a bid to construct the new Huntsdown power station outside of Dublin, which came online in 2002.

Into the 2000s, Viridian found itself hard-pressed to maintain profitability in many of its diversified holdings. The company revised its strategy, refocusing itself around its power generation, transmission and marketing core. In 2002, the company began selling off its non-core holdings, which by then included a financial services wing as well as its struggling Internet operation. Viridian's divestment program was completed by the end of 2003 with the sale of Fleet Solutions to AssetCo in November of that year.

The divestment helped refocus Viridian and restore its profitability. The company had also completed more than £650 million in infrastructure improvements between 1992 and 2002, and continued to invest strongly into the middle of the decade. At the same time, Viridian's successful Huntsdown project encouraged the company to eye further growth in the power generation market in the Republic of Ireland. After losing out on a bid to construct two new power stations in Dublin, Viridian announced that it was considering building its own 400 MW facility in North County Dublin.

In May 2004, the British government announced that it would redeem its special shares in a number of the country's energy groups, including Viridian, which effectively shielded these companies from takeover attempts. The removal of the block, in keeping with a ruling from the European Court of Justice, meant the government's consent was no longer a requirement for the purchase of a large stake in Viridian or one of the other companies. The move opened up new possibilities for takeover offers or for mergers among the companies. Meanwhile, Viridian Group continued to power its way into the future as Northern Ireland's dominant electricity company.

Principal Subsidiaries: SONI Ltd.; NIE Powerteam Ltd.; Powerteam Electrical Services Ltd.; Viridian Power and Energy Ltd.; Huntstown Power Company Ltd.; GenSys Power Ltd.; Viridian Power Ltd.; Viridian Energy Supply Ltd.; Viridian Energy Ltd.; Viridian Capital Ltd.; Service and Systems Solutions Ltd.; LearnServe Ltd.; Viridian Enterprises Ltd.; Viridian Properties Ltd.; Viridian Insurance Ltd.

Principal Competitors: National Grid Transco plc; Scottish Power plc; PowerGen plc; Scottish and Southern Energy plc; British Nuclear Fuels plc; EDF Energy plc; British Energy plc; International Power plc; Northern Electric plc.

Chronology

• Key Dates:
• 1892: Commercial electrical power distribution begins in Northern Ireland.
• 1931: The Electricity Board for Northern Ireland (EBNI) is created.
• 1947: The British government nationalizes the electricity industry, including EBNI.
• 1973: EBNI is merged with other components of the Northern Ireland electricity sector to create Northern Ireland Electricity (NIE).
• 1983: The Electricity Act is passed, deregulating the national electricity industry.
• 1989: The New Electricity Act sets in motion privatization and deregulation of the UK energy sector.
• 1992: NIE spins off its four power generation plants as separate companies as part of a restructuring leading to privatization.
• 1993: NIE is privatized, becoming responsible for procurement, transmission, and distribution of electricity to Northern Ireland.
• 1998: NIE is broken up into regulated (NIE) and deregulated (Viridian) operations under a new holding company, Viridian Group.
• 2003: The company completes its divestiture of non-core operations with the sale of Fleet Solutions.