SINGAPORE/LONDON (Reuters) – Royal Dutch/Shell has kicked off auctions for two units worth several billion dollars, to move forward with its plans to sell non-core assets to help fund more upstream oil exploration.

The company on Tuesday confirmed it and its partner, U.S. building firm Bechtel, were investigating the possible sale of their InterGen power joint venture.

Sources familiar with the situation said Shell’s advisor Citigroup had already sent offer documents to potential buyers for InterGen, while other sources said Citigroup was also preparing a sales memorandum for Shell’s global liquefied petroleum gas (LPG) distribution and marketing unit.

One source valued InterGen at $3 billion (1.7 billion pounds) including debt, while analysts have valued the LPG unit at around $2 billion.

Last month, Shell, the world’s third-largest oil company, unveiled plans for major disposals and new production in its bid to put behind it a reserves scandal that rocked the group.

Shell said it planned $10 billion to $12 billion of asset sales for 2004 to 2006. It said it had received an approach in relation to its LPG business but gave no guidance on InterGen.

Analysts welcomed the news on the sales as a sign that Shell is making progress with its strategic plans.

“It’s a positive thing. Intergen was identified some time ago as one of the underperforming parts of the portfolio that was to be sorted out in due course,” said Brendan Wilders, oil analyst at Oriel Securities in London.


Shell and Bechtel on Friday issued possible bidders a 6-page “teaser”, a document that describes the InterGen assets put on the auction block, the sources told Reuters.

“It (the teaser) is a description of the assets. And it says Shell and Bechtel are going to sell InterGen as a whole,” one source familiar with the document said.

InterGen, set up in 1995 and 68-percent owned by Shell, runs power plants around the world, with total capacity of 16,200 megawatts — equivalent to a fifth of the UK’s total.

But because many of the plants are only partly owned by InterGen, its own — or net — generating capacity is just 6,000 megawatts, sources familiar with the situation said.

A Shell spokesman said the auction process was at an early stage, and there could be no certainty of a sale.

InterGen’s power plants, including those under construction, are in the United States, Britain, the Philippines, Colombia, Mexico, China, Egypt, Turkey, Australia, the Netherlands, Spain and Singapore.

The first source said Shell and Bechtel might exclude several power plants, possibly some U.S. ones, to accelerate the sale.


One source familiar with the LPG sale process said a wide range of private equity firms had expressed an interest in the unit and that bidding would likely start early next year.

Sources familiar with the matter added that the private equity arm of Goldman Sachs and buyout firm Kohlberg, Kravis Roberts (KKR) had teamed up to make a possible bid.

Goldman and KKR declined to comment.

The sale of a string of power assets in the Asia-Pacific region and Europe by U.S. energy firms has demonstrated investors’ appetite for large electricity portfolios.

This year has already seen 62 transactions of electric power assets worth $15 billion in enterprise value in the Asia Pacific region, research firm Dealogic said. That overshadowed 94 deals worth $10.5 billion in the whole of 2003 and 89 deals worth $6.9 billion in 2002.

Edison International’s Edison Mission Energy unit agreed in July to sell its remaining 5,381-megawatt international portfolio to Britain’s International Power Plc and Japan’s Mitsui & Co. for $2.3 billion.

“Basically it is encouraged by the Edison Mission transaction. That was successful. That was the motivation for them to try to do the same thing,” said another source.

Potential buyers include Japanese utilities or trading houses such as J-Power and Tokyo Electric Power Co, which have been trying to boost their overseas businesses because of competition and stagnant growth at home, said the source.

“The Japanese would be interested in anything that is going at the moment. They are fairly active,” he said.