Bord Gβis may take a stake in the Huntstown power plant being built outside Dublin by Viridian, the Northern Irish utilities group. When commissioned next year, the Huntstown plant will be the first independent competitor to the ESB for power generation.

Viridian is seeking a co-investor in the plant although it is thought likely that no deal will be made until next year.

A Bord Gβis spokeswoman said yesterday that the company was "having discussions with a number of independent power producers at the moment and one of them is Huntstown". She declined to comment further.

Becoming involved in the £200 million project, which is well-advanced, would have a number of advantages for the State gas company. Huntstown could purchase gas to generate power from Bord Gβis, which is already a player in the "virtual market" in electricity and sells on electricity generated by the ESB to industrial users.

Viridian, the former state electricity monopoly in Northern Ireland, bought out its original co-investor, CRH, last year after the building materials group decided to leave the market. No alternative investor emerged at that stage.

Bord Gais, which wants to float on the Stock Exchange, has long-standing plans to become a major player in the electricity market. It sees the adoption of a dual energy strategy as crucial to its future growth. The State company has deep pockets. It was short-listed to secure a gas distribution business in Britain this month and was understood to be prepared to spend in the region of £100 million.

The company already has agreements with a US group, ATCO, and with Aughinish Alumina to develop a large electricity generation plant in Co Limerick. It is unclear whether an investment at Huntstown would delay that project. An Aughinish spokesman yesterday said it remained committed to the project but accepted that commercial negotiations between the parties were "difficult". This he attributed to "regulatory uncertainty".

The electricity market was partially opened to competition last year and it will be fully liberalised in 2005. Although the process is designed to foster private-sector investment in a key industry, many entrants to the Irish market have left.

Deregulation was intended to foster competition and, ultimately, the State's withdrawal from key industries. Paradoxically an investment by Bord Gβis in the Viridian plant would mean that the first large-scale competition to the ESB would come from a plant part-owned by another State company.