The Scotsman: Shell set to raise $5bn from sales: "Shell is quite stretched [for cash]," said Peter Nicol, an analyst at ABN Amro. "They are coming out of a few peripheral areas to concentrate on the core." (ShellNews.net)
13 Oct 04
SHELL is on the brink of netting a multi-billion dollar windfall from the sale of two of its biggest non-core businesses as it seeks to raise cash for upstream investment.
In deals that could bring in up to $5 billion (£2.8bn) the Anglo-Dutch firm Shell and partner Bechtel yesterday confirmed plans to move ahead with the sale of their under-performing joint venture InterGen, a US-based power generating firm. The value of that deal alone is estimated at $3bn (£1.7bn).
Also up for sale is Shell’s liquefied petroleum gas (LPG) unit.
A spokesman for Shell, which holds a 68 per cent stake in the joint Bechtel venture, said: "Given improved power markets and demand for international power assets, Shell and Bechtel have decided to investigate the potential sale of InterGen. But it is not clear yet if the process will lead to a sale."
Speculation that InterGen would go on the block was reinforced at cash-strapped Shell’s September strategy meeting, where it outlined a $10bn-$12bn (£5.5bn-£6.7bn) divestment programme up to 2006 to fund a three-year £25bn capital spending plan. Shell is under pressure to book additional reserves after it revealed production would remain flat up to 2009.
Earlier this year, Shell shocked investors with the admission that it had overstated its proven reserves by nearly 25 per cent.
In an effort to draw a line under the events of the last 10 months, the major is drawing the focus back to its traditional business of exploration and production.
"Shell is quite stretched [for cash]," said Peter Nicol, an analyst at ABN Amro. "They are coming out of a few peripheral areas to concentrate on the core."
One analyst said Shell had been overweight in its downstream business, and it was following its sector peers in divesting non-core assets, if several years behind.
Intergen, which part-owns 16,200-Mw worth of power capacity across the world, has sold off a portion of its generating portfolio so far this year, with some of its most attractive plants in the US expected to be excluded from the upcoming sale.
Meanwhile, Goldman Sachs Capital Partners has joined forces with buy-out firm Kohlberg, Kravis Roberts to bid for Shell’s liquefied petroleum gas (LPG) unit, valued at more than £1bn.
Shell, which said last month it had received "an unsolicited approach" for its LPG business, reiterated yesterday that discussions with interested parties were at a preliminary stage.
Other groups are expected to show an interest when the sales process starts in January, among them France’s PAI Partners and Blackstone. Analysts say Japanese utilities, such as Tokyo Electric Power Co, could also bid for the asset.
Shell is also looking at options, including a possible sale, for Basell, its plastics venture with BASF.
• China’s enormous appetite for oil is starting to ease off, according to the International Energy Agency (IEA). The watchdog said China’s energy demand growth, a key contributor to sending oil prices to all-time highs, slowed to 6 per cent in August from 12 per cent in July.