With plans to grow its power generation portfolio in the UnitedStates, InterGen, the power generation joint venture of RoyalDutch/Shell Group and Bechtel Enterprise Holdings Inc., closed adeal yesterday giving the international developer a 30% equityinterest in Houston-based Coral Energy, one of the largest naturalgas and power marketers in the country.

Coral Energy officials had predicted in July that Shell andconstruction giant Bechtel would fold InterGen, InterGen North Americaand certain assets of Coral Energy into one business (see Daily GPI,July 10). Under the agreement announcedyesterday, InterGen will receive the majority of the natural gaspipeline, storage and power generation assets of Shell’s Coral Energyaffiliate in the United States. It remains a joint venture of Shelland Bechtel.

The move gives Shell a 68% ownership in InterGen, with Bechtelowning the remaining 32%. InterGen had been formed as a 50/50 jointventure, and Bechtel made an undisclosed payment to Shell in thedeal. About 230 Coral employees, mostly related to the Texas-basedassets in Houston, will become InterGen employees under theagreement.

InterGen is considered a world leader in power generationdevelopment, with projects around the world. Carlos Riva,InterGen’s CEO, said that the transaction “represents a significantboost to our plans in the United States. These assets andstrengthened alignment with a premier U.S. gas and electricitytrading enterprise will provide InterGen a strong platform forgrowth in the U.S. market.”

Globally, the alignment is expected to help leverage Shell’sstrengths in both fuel supply and power marketing and trading.Bechtel will continue to be InterGen’s preferred provider forworldwide power generation engineering, procurement andconstruction services. Coral is the region’s third largest naturalgas marketer and the twentieth largest power marketer in thecountry.

Linda Cook, Shell Gas and Power’s CEO, said the “whole idea” wasto help InterGen grow in the United States, and that the best waywas to add Shell assets to it. “Success in tomorrow’s energymarkets will be earned through globally aligned marketing, tradingand asset companies,” said Cook. “That’s critically true in theU.S. and will be the case as competitive energy markets openworldwide. InterGen plans to build a sizable power generationportfolio in the U.S., working closely with Coral to pursueinvestment decisions that make the most commercial sense. We expectthis relationship to make a significant contribution to bothInterGen’s and Coral’s long-term success.”

Shell and Bechtel formed InterGen in March 1999 (see Daily GPI, March 18, 1999) specifically to pursuepower generation opportunities in North America. The Boston-basedcompany was set up to develop, finance, own and operate large-scaleindependent power projects and co-generation facilities in the UnitedStates and Canada.

“Shell, Bechtel and InterGen have among them the complete skillset for success in the new global energy market,” said Paul Unruh,COO of Bechtel. “InterGen is a world-class developer with a proventrack record of successfully developing, financing and operatingprojects around the world. Shell is one of the most successfulmarketers and traders of energy in the U.S. and is expanding intoderegulating natural gas and power markets globally; Bechtel is aglobal leader in the development, engineering and construction ofpower facilities. These strengths together create a large powergeneration platform now directly linked with global energymarketing and trading.”

InterGen’s portfolio will give Coral Energy access for itstrading business, and Coral will participate as part of Shell’sglobal trading network, with InterGen a business partner in itsexpanding North American asset platform. As the exclusive marketerof Shell’s gas production, Coral has a gas supply of 2.5 Bcf/d, anda trading platform dealing in extensive volumes of energy in allkey supply basins. For Bechtel, the agreement will help it lock inconstruction contracts for its combined cycle gas turbine powerstations.

Specifically, the assets to be transferred to InterGen fromCoral include the following:

In total, Coral had 6,100 miles of gas pipeline that ran alongthe Gulf Coast in Texas and Louisiana. It also is building a100-mile long pipeline in northern Mexico with that country’snational oil company, PEMEX.

Currently, InterGen is either operating or building 11 powerstations with a total of 7,985 MW. It also has 7,040 MW in advanceddevelopment. Projects are being operated, under construction or arein advanced development in the United Kingdom, the Philippines,Colombia, Mexico, China, Egypt, Brazil, Australia, Turkey and theUnited States.

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