FINANCIAL TIMES: Shell makes the first move in disposal plan: “It is looking to spend its way back to health after it was forced to cut its proved reserves by a third last year and replaced only one in five of the barrels of oil and gas it extracted.” (ShellNews.net) 20 April 05

By James Boxell

Royal Dutch/Shell has completed the first significant part of the expected $12bn-$15bn (£7.8bn) disposal of non-core assets with the sale of its $1.75bn InterGen power generation business.

 The Anglo-Dutch oil group has embarked on the disposal programme to help fund a $45bn spending plan over the next three years. It is looking to spend its way back to health after it was forced to cut its proved reserves by a third last year and replaced only one in five of the barrels of oil and gas it extracted.

InterGen is being sold to AIG and the Ontario Teachers' Pension Plan. Low-growth assets such as InterGen with steady and predictable cashflows have become increasingly attractive to pensions funds in recent years, especially those from Canada and Australia.

Shell, which owns 68 per cent of InterGen and its partner Bechtel, the US engineering services and construction company, sold 10 of InterGen's power stations in the UK, the Netherlands, Mexico, Australia, the Philippines and in China as part of the deal.

However, it was unable to sell seven less attractive plants in the US, Colombia and Turkey, which will be restructured "pending further review" by Shell and Bechtel.

Shell is also selling Basell, its polymers joint venture with BASF, for a price of about €4.5bn (£3bn). Bidders include Iran's National Petrochemical Company and an investment group led by Chatterjee of India that includes Haldia Petrochemicals and Merrill Lynch.

Shell is also looking to sell its $4bn liquid petroleum gas business, with financial buyers looking the most likely bidders.

InterGen is being sold with debts of about $3.1bn. Analysts said the implied value of the deal was roughly in line with expectations, although there was slight disappointment that not all of the power stations had been sold.

While much of the attention on Shell's disposal plan has focused on its downstream assets, the company said it also planned to make disposals of non-core oil and gas fields.

Citigroup is advising Shell, Bechtel and InterGen. Deutsche Bank is representing AIG and Ontario Teachers. Shell shares rose 4p to 472p.

Click here for ShellNews.net HOME PAGE