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Shell to sell power arm for USD6 bn?

Business World: Shell to sell power arm for USD6 bn?

“World number three oil firm Shell is expected to put its worldwide power venture InterGen up for sale with a multi-billion dollar price tag as part of a drive to put its house in order.”

Friday, September 03

World number three oil firm Shell is expected to put its worldwide power venture InterGen up for sale with a multi-billion dollar price tag as part of a drive to put its house in order.

The sale of the electricity generating business could lift the embattled firm’s group-wide profitability, by dumping an operation that underperforms the core oil and gas portfolio.

InterGen, 68pc held by Shell in a joint venture with US building firm Bechtel, runs capacity that bankers say is worth around USD6bn including debt.

Details of its assets are sketchy, because Shell lumps its accounts in with a broader natural gas portfolio, while Bechtel is privately owned. However, InterGen’s affiliated 20 plants have a total capacity of 16,200 megawatts – about a fifth of the UK’s total.

Shell has hired Citigroup to review InterGen’s global portfolio and look at options that include a total sell-off, four senior utility bankers not involved in the global plan told Reuters.

Shell had tentative plans to float InterGen in 2000 when it wrapped some other power station assets into the joint venture in exchange for a bigger stake.

The California power crisis, the Enron accounting scandal and a slump in electricity prices in several countries derailed these, but power prices have since improved.

A sale could help finance the urgent search for new oil and gas reserves – Shell’s biggest challenge since the shock January revelation that it had overestimated them by 20pc.

Investors said selling non-core assets was a good way to restore its credibility with shareholders.

InterGen, set up in 1995, has power plants in the United States, Britain, the Philippines, Colombia, Mexico, China, Egypt, Turkey, Australia, the Netherlands, Spain and Singapore.

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