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Financial Times: AIG fund to sell $1.5bn stake in power producer

By Raphael Minder in Hong Kong
Published: February 14 2008 02:00 | Last updated: February 14 2008 02:00

A fund management company backed by American International Group is planning to sell a 50 per cent stake in InterGen, a power producer, in a transaction that is likely to fetch between $1bn and $1.5bn, according to people familiar with the situation.

The planned divestment comes almost three years after AIG Highstar Capital and the Ontario Teachers’ Pension Plan jointly acquired InterGen for $1.75bn from Royal Dutch Shell, the Anglo-Dutch oil company, and Bechtel of the US.

InterGen has assets across the world, including power plants in the UK, the Netherlands, Mexico and Australia.

At the time of the 2005 takeover, it had 10 operational power plants with a combined capacity of 5,500 MW. But it has since been expanding its operations, notably in Asia and Europe.

It is adding a €480m ($699m) power plant in the Netherlands and has recently started production at two natural-gas fired power plants in the UK. The $1bn construction of a power station in Singapore has been delayed because of a disputed gas supply contract.

When they acquired InterGen, AIG and the Canadian pension fund also assumed $3.6bn in debt.

However, they have since refinanced the company, selling about $1.9bn in bonds last July.

While InterGen is privately held, a banker familiar with the energy sector estimated that the refinancing, coupled with recent investments, had boosted InterGen’s value to close to $3bn.

The sale by AIG could attract several power companies, as well as Australian and other energy funds. It is also unclear whether Ontario Teachers’ will hold on to its stake.

Neither AIG nor Ontario Teachers would comment on their plans for InterGen.

The divestment comes amid strong interest for power assets, particularly in the Asia-Pacific region, where separate billion-dollar auctions are scheduled to take place this year.

Lehman Brothers is managing the sale.

Additional reporting by Bernard Simon in Toronto

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