Sunday, August 21, 2005

Shell to sell InterGen's U.S., Turkish power plants

AMSTERDAM (Reuters) - Oil group Royal Dutch Shell Plc has agreed to sell more power plants belonging to its InterGen joint venture for an undisclosed sum and aims to have exited the venture by the year-end.

Shell said on Friday it planned to sell three InterGen power plants in the United States to Kelson Holding LLC, a unit of Harbert Management Corporation. It will also sell three InterGen assets in Turkey to its local partner, construction firm Enka Insaat, and is restructuring its plant in Colombia.

Shell, the world's third-largest listed oil group by market capitalization, and U.S. construction firm Bechtel agreed in April to sell 10 power plants at their InterGen venture to a partnership between AIG Highstar Capital II L.P. and Ontario Teachers' Pension Plan for $1.75 billion.

The sale of these 10 plants -- located in Britain, the Netherlands, Mexico, the Philippines, China and Australia -- was completed, Shell said in a statement on Friday.

It said of the U.S. and Turkish sales, "These transactions, all of which are subject to obtaining necessary consents, should result in Shell's exit from InterGen activities by year end 2005, and mark a significant step in Shell's portfolio restructuring activities."


Shell and Bechtel put the Boston-headquartered InterGen on the block last year, and the sale forms part of Shell's plan to raise $12 billion to $15 billion between 2004 and 2006 by selling non-performing and non-core assets.

Shell owned 68 percent of InterGen and the rest was held by privately owned Bechtel.

For Shell, the divestment is part of a refocusing on its core operations as it seeks to rebuild investor confidence after a damaging oil reserves over-booking scandal last year.

Shell announced in May it was selling its plastics joint venture with BASF for about 4.4 billion euros. The group is also hoping to sell its liquefied petroleum gas distribution unit.

The company, which gave up its dual Anglo-Dutch company ownership status on July 20 to simplify its management and operational structure, needs to streamline its activities.

Shell's earnings growth lags that of its rivals and the group warned last month that it was forced to delay starting production at a key Nigerian oil field.

Rampant inflation in the oil-service sector and the difficulty of having to search for oil in ever more remote and harsh locations have led analysts to warn of a structural erosion in oil firms' profits.

InterGen was sold with debts of around $3.1 billion, implying an enterprise value of around $4.85 billion. This was broadly in line with the level the market had expected.

AIG mounted a failed bid for power generation assets sold by Edison International last year, while Ontario Teachers has in the past bid for power assets in the UK.

Shell and Bechtel were advised by Citigroup while Deutsche Bank acted for AIG Highstar and Ontario Teachers'.

Shell shares were down 0.2 percent in London by 1033 GMT, in line with the DJ Stoxx Oil & Gas Index.


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