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    MNM Service What is it? Latest Edition Search Archive
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World Energy News From the Communications Centre Contributed by Aristide Mbiock IJmuiden, NL, 16th July 2001 - Ref.:0107art14
Electrabel buys Tractebel's European electricity assets Belgian utility Electrabel SA said Thursday it plans to buy the European electricity assets of Belgium's Tractebel SA for about dlrs 507 million. Electrabel said it will acquire 100 percent control of Tractebel units in Scandinavia, Germany and Poland. The utility also will buy shareholdings in the following power stations, acquiring a total of 4,317 megawatts of capacity: A 25 percent stake in Polianec, Poland (1,800 MW capacity); a 99.5 percent stake in Rosen, Italy (356 MW capacity); a 32.5 percent stake in Generg, Portugal (35 MW capacity), and a 74.8 percent stake in Dunamenti, Hungary (2,126 MW capacity). Last November, Tractebel, the energy arm of France's Suez, said it planned to transfer the assets to the utility. Tractebel, which controls 40.24 percent of Electrabel, said at the time, "Tractebel's European assets in the electricity sector will be offered to Electrabel to bolster its development on that particular market." Electrabel said that the boards of Electrabel and Tractebel approved the transaction Wednesday. Tractebel is organized into five divisions: Electricity and Gas Europe; Electricity and Gas International; Engineering; Groupe Fabricom; and Groupe Elyo. Tractebel spokesman Jacques van Hee said the share transfer was made to allow Electricity and Gas Europe to be the "vehicle of European expansion" through Electrabel.
Eon values BP deal at E6.5bn BP, the UK integrated oil company, and Eon, the German utility giant, said on Monday they had agreed to a E6.5bn ($5.54bn) joint venture deal that will give BP the largest share of the German motor fuels market and Eon a strategic stake in Ruhrgas, Germany's largest gas importer and distributor. The complex cash and assets transaction will give BP 51 per cent of Veba Oil, which operates 2,560 Aral service stations accounting for 18 per cent of fuel sales in Germany. BP currently has a 7 per cent share of the German market. Its buyout of Mobil's European petrol retailing assets at the time of the Exxon-Mobil merger in 1999 failed to give it any significant new German assets. In return, Eon, created last year by the merger of energy groups Veba and Viag, will acquire a 51 per cent stake in Gelsenberg, a BP subsidiary that owns 25.5 per cent of Ruhrgas. It will also receive a balancing cash payment of $1.63bn and transfer $950m of debt to BP. Put options, exercisable from the second half of next year, are in place allowing the minority partners in each joint venture to be bought out by the majority partner. BP will hope to recoup much of the cost of the deal through the sale of Veba Oil's upstream assets. BP has been looking for a buyer of its stake in Ruhrgas for a decade while Eon has long-described Veba Oil as being non-core. The UK energy group said the deal would be immediately accretive to its earnings and allow it to transform its downstream presence in Europe's largest fuel market. If BP acquires all of Veba Oil, the group would realise savings and synergies of at least $200m a year and would leapfrog ahead of rival Royal Dutch/Shell, which has a 24 per cent share of the German market. Eon said the transaction enabled it to continue its aim of becoming a focused energy business by giving it a substantial stake in one of Europe's top three gas companies. Ruhrgas' long distance gas supply activities would complement Eon's gas retailing business, while the international activities in Scandanavia, the Baltic states and Eastern Europe were also a good strategic fit. BP declined to put a value on the deal. However, Eon said it had achieved an enterprise value of about E6.5bn for Veba Oil on the basis of its valuation of E2.4bn for the whole of BP's stake in Ruhrgas and including the repayment of shareholder loans and the assumption of debt and pension liabilities by BP. Analysts said the deal made strategic sense to both companies but that the figures were more difficult to unravel. JJ Traynor of Deutsche Bank, BP's house broker, said BP believed the transaction to be worth $5.3bn (E6.2bn) because it placed a lower valuation on Ruhrgas. "Industrially, both sides are getting the assets they want but it looks to us as though Veba has been sold at a 20 per cent discount to its net asset value," he added. The deal will strengthen BP's refining and petrochemical capacity, improving its logistical base and ability to supply clean fuels to Central Europe while meeting its regional ethylene feedstock needs. Lord Browne, chief executive of BP, said it was the result of a "happy coincidence of circumstances". "Eon's wish to deepen its gas interests and exit downstream oil has presented BP with a unique opportunity to realise two strategic aims - achieve market leadership at the heart of Europe and realise excellent value for our stake in Ruhrgas," he said. Veba's refining capacity amounts to 300,000 b/d. It also has upstream production of 160,000 barrels of oil equivalent a day in 13 countries including Venezuela, Trinidad, Kazakhstan, Syria and Libya. Lord Browne made it clear the group would attempt to sell off all of the upstream assets, which were not considered a good fit with the rest of BP's portfolio. Analysts valued these assets at $2bn-$2.4bn. BP would be allowed to keep up to $1.5bn of the proceeds from a sale before a profit-sharing mechanism with Eon came into play, according to sources close to BP. Eon is understood to have received other approaches for Veba Oil from OMV, the Austrian oil and gas group, and Middle Eastern interests based in Abu Dhabi. But sources close to the deal said those offers were considered too low and did not have the benefit of a stake in Ruhrgas. Eon took the decision to switch its strategy from that of a multi-utility to becoming a focused energy utility aiming for growth in Europe and the US. Earlier this year it bought Powergen, the UK electricity generator with interests in North America, for £10bn ($14bn). One of the conditions required by US regulators is that groups buying energy utilities must generate at least 80 per cent of their sales from electricity and gas supply. Ulrich Hartmann, Eon chief executive officer, described the sale of Veba Oil to BP as the "optimal solution" to this, putting the group in a position to exploit growth in the European gas sector. "Eon is putting the pedal to the metal with this deal and is well on course to achieve its goal of becoming one of the world's leading energy providers," he added. Banking sources said BP and Eon would almost certainly exercise their rights to full ownership of Veba Oil and Gelsenberg. The two-stage structure of the deal echoes Shell's joint venture earlier this year to take control of the downstream oil activities of German multi-utility RWE and is a way of avoiding punitive German capital gains tax rules, which are due to change at the start of next year. BP began a push into retailing in Germany in the mid-1990s when opportunities for growth in the eastern länder arose. Its daily sales in the country will rise to 230,000 barrels a day if it takes full control of Aral, Veba's retail arm, gaining 2,560 filling stations in Germany and 450 others in neighbouring countries. BP believes it can cut costs by 15 per cent by integrating its own and Aral's retail operations, with the loss of some jobs. Ruhrgas is not quoted and is owned, principally, by Bergemann, a vehicle that includes Gelsenberg and Eon and others (59.8 per cent), Schubert - another vehicle in which Gelsenberg has a stake - and BEB Erdgas. It sells 50bn cubic metres a year of gas to supply companies, industrial users and power generators and sources gas from the Netherlands, Russia, Norway, Denmark and the UK. BP was advised on the deal by Deutsche Bank, while CSFB advised Eon. In early afternoon trading in London, BP's share price was scarecely changed at 571p while in Frankfurt Eon stood 0.7 per cent higher at just over E64.1 a share.
Oil demand forecast to fall again on slowdown The International Energy Agency on Friday made its seventh downward revision this year to oil demand growth forecasts, blaming reduced economic activity, high oil prices and currencies losing ground to the dollar for the slowdown. The Paris-based agency, which is linked to the Organisation for Economic Co-operation and Development, said it had trimmed its oil demand growth projections for 2001 by 510,000 barrels a day to 460,000 b/d. This compares with the its original forecast of 1.9m b/d last summer when US and global economic growth had been expected to be more robust. The IEA warned that action by the Organisation of Petroleum Exporting Countries to keep the market price of crude oil high was starting to hurt sales while stimulating investment in new production from non-Opec producers. It said non-Opec production was forecast to increase by 600,000 b/d this year and 700,000 b/d in 2002. In contrast the "call on Opec crude plus stock change" was revised downwards by 500,000 b/d to 26.6m b/d for this year and was expected to be marginally lower at 26.5m b/d in 2002. Klaus Rehag, editor of the IEA's monthly oil report, said the forecast assumed a fourth-quarter recovery in US economic activity followed by more modest recovery in Europe and Asia later on. "There is considerable risk to this forecast, both upside and downside. Obviously demand will be even slower to grow if the US takes longer to recover," he said. Crude oil prices on Thursday fell to their lowest levels for three months at $25.14 a barrel for benchmark August Brent after the US government's Energy Information Administration said US demand for crude and refined products had fallen by 800,000 b/d from the record levels a year ago. Nymex, the US benchmark, was up 6 cents at $26.86. The fall was also attributed by traders to the first hard evidence of a resumption of 2m b/d of Iraqi exports following a dispute over the terms of United Nations sanctions on the country. Opec decided last week to keep its production targets unchanged, despite pressure from some consumer countries for an increase. The IEA said "market fundamentals" would eventually assert themselves to bring the price of oil down to more sustainable levels, though there was unlikely to be a price collapse, as happened in response to the Asian financial crisis in 1997-98. "The global economy today is in a much stronger position to weather the storm, but high crude oil and product prices are dampening growth and contributing to inflation," it added. OECD oil stocks had recovered by 1.4m b/d in May due to the economic slowdown, while prices above $20 a barrel were providing an incentive for non-Opec producers to develop marginal fields and invest in maturing assets. Product prices were already falling rapidly, with wholesale gasoline prices down 18 to 24 per cent in key markets around the world in June, while the marker grades of crude fell by around $3 a barrel between the start and end of the month. World oil production last month fell by 1.9m b/d as a result of the Iraqi export suspension. Opec production excluding Iraq was up marginally from 24.5m b/d to 24.7m b/d and non-Opec production decreased by 70,000 b/d to 46m b/d, largely as a result of maintenance in the North Sea.
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