In an effort to put its reserves revaluation scandal behind it, Royal Dutch/Shell kicked off a major asset sale program, putting its InterGen global power joint venture with Bechtel on the auction block last week along with the previously announced potential sale of its liquefied petroleum gas (LPG) business.
“Given the improved power markets and the demand for international power assets and following a review by InterGen’s financial advisor Citigroup, both Shell and Bechtel have decided to investigate a potential sale of InterGen,” Shell said in a statement. “We’ve said that the process will involve contacting a number of potential buyers but the exact details remain commercially confidential. It’s also not clear at this stage that the process will eventually lead to a sale.”
The company’s optimism may stem in part from Edison International’s success earlier this year lining up a sale of its Asian power business. International merchant power subsidiary Edison Mission Energy in July agreed to sell its 5,381 MW international portfolio to Britain’s International Power Plc and Japan’s Mitsui & Co. for $2.3 billion.
Analysts have valued the InterGen operation at about $3 billion. It includes about 10,700 MW of net power generation worldwide, including equity stakes in the following U.S. power plants: Wildflower in California (232 MW), Redbud in Oklahoma (1,220 MW), Magnolia in Mississippi (900 MW) and Cottonwood in Texas (1,235 MW).
The company also holds stakes in numerous power plants in Asia, Europe and Latin America, including the following: Meizhou Wan in China (gross 724 MW); Quezon in the Philippines (460 MW); Island Power in Singapore (750 MW, under construction); Callide C (920 MW) and Millmerran (880 MW) in Australia; Rocksavage Power Station (748 MW), Spalding Energy (860 MW) and Coryton (732 MW) in the United Kingdom; Rijnmond (820 MW) in the Netherlands; Knapsack (790 MW) in Germany; Catadau (1,200 MW) in Spain; Gebze and Adapazari (1,554 MW and 777 MW) and Izmir (1,523 MW) in Turkey; Sidi Krir (685 MW) in Egypt; La Rosita, Mexicali (1,100 MW) and Bajio, San Luis de la Paz (600 MW) in Mexico; and TermoEmcali, Cali (235 MW) in Colombia.
Last month, Shell unveiled plans to sell off up to $12 billion in assets between now and 2006. To succeed in reestablishing its leading position, the number three oil major said it plans to spend $45 billion through 2006, nearly all of it on upstream activities. Jeroen van der Veer, chairman of Shell’s committee of managing directors, said the company’s priorities include more upstream activities, improving the downstream unit’s bottom line, improving performance across the board and fostering an “enterprise first” culture.
The company started examining its strategic options regarding its LPG distribution and marketing business last month when it was approached by an interested buyer, London-based spokesman Andy Corrigan said. “Discussions are at a very preliminary stage and progress will depend on the conclusions of the review,” he said. “Meanwhile, work that was already under way to structure LPG into a stand-alone global operation will be accelerated.” Analysts have valued that operation at about $2 billion.
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