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BUSINESS

Repsol sells LNG operations to Shell for 5.1 billion euros

Anglo-Dutch firm to pay 3.375 billion euros in cash and assume associated debt

After several months of negotiations, Repsol has announced that it has reached an agreement to sell liquefied natural gas assets to Anglo-Dutch oil company Shell for $6.7 billion (5.1 billion euros)

The proceeds from the deal, which was agreed Wednesday, will allow Repsol to reinforce its balance sheet and financial situation, reducing its debt, excluding that of unit Gas Natural Fenosa, by over half to 2.2 billion euros.

Shell will pay $4.4 billion (3.375 billion euros) in cash for the assets and assume financial leases and debt.

Repsol said the operation will generate a pretax capital gain of $3.5 billion (2.670 billion euros). After taxes and a provision for its LNG operations in North America, that figure is reduced to $1.4 billion (1.075 billion euros).

The assets sold include minority stakes in Atlantic LNG in Trinidad & Tobago, Peru LNG and Bahia de Bizkaia Electricidad (BBE) as well as the LNG sale contracts and time charters with their associated loans and debt.

Repsol said the sale process attracted significant interest and led to more than a dozen bids from the world’s most significant liquefied natural gas operators.

With the latest deal, Repsol has now divested five billion euros in assets, surpassing the target it outlined in its 2012-2016 business plan of between four and 4.5 billion euros in the period.

As part of the agreement, Repsol and Shell also signed a parallel deal under which the Anglo-Dutch company will supply Repsol with about one million tons of LNG for its Canaport regasification terminal in Canada over a 10-year period.

Repsol said the North American facility is not included in the sale as the current low gas prices the US market undervalued the asset’s medium- and long-term potential. Repsol will analyze all available operational, financial and strategic options for the facility. Repsol will adjust the book value of Canaport with a net provision of $1.3 billion.

The funds obtained from the sale of the LNG assets will allow Repsol to boost its upstream organic growth strategy. Repsol said it would maintain significant exploration and production activity in the countries where it has sold LNG assets.

Repsol and Shell intend to complete the agreement before the end of 2013 after obtaining the necessary approvals and fulfilling the agreed conditions. Until the close, Repsol will continue to operate the assets.

Repsol has retained the services of Goldman Sachs and Linklaters as sole financial and legal advisors respectively in this transaction.

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