Kate Thomas
OGJ Online
In a strategic shift, InterGen, the electric power company alliance between Royal Dutch/Shell Group and US engineering company Bechtel is stepping up its investment in the US.
Up to now, InterGen has concentrated on building power plants outside the US. But InterGen Pres. and CEO Carlos Riva told OGJ Online the company now hopes to have about 40% of its portfolio or up to 10,000 Mw of electric generating capacity planned, under construction, or operating in the US in the next 4 years.
While InterGen has heretofore concentrated on building new plants, such an ambitious goal will require the company to look at acquisitions, he said.
The US efforts are the result of an agreement under which Shell will transfer most of the natural gas pipeline, storage, and power generation assets of its US Coral Energy energy marketing arm into the Shell-Bechtel InterGen alliance.
Under the agreement, Shell's ownership in InterGen will increase to 68% from 50%, and Bechtel will own the remaining 32%. InterGen, in turn, will own a 30% equity interest in Coral Energy, the region's third largest natural gas marketer and 20th largest power marketer. Bechtel will continue to be InterGen's preferred provider of power generation engineering, procurement, and construction services worldwide, the companies said.
Shell executives told OGJ Online in July such discussions were under way with Bechtel (OGJ Online, July 10, 2000). Specific assets that will be transferred to InterGen from Coral include 4,000 miles of major intrastate gas pipelines in Texas and the West Clear Lake storage facility, one of the largest gas storage reservoirs in Texas. Coral's interest, totaling more than 500 Mw, in four US power plants will be transferred, subject to equity and regulatory approval.
Riva said Coral will serve as the US marketing and trading arm of InterGen in addition to third-party clients. InterGen has developed some trading capability as a means of risk management to support its own operations, he said. Now, there will be a much greater "alignment" between the two companies, he said.
"Our ownership interest in Coral means we will outsource that effort," Riva explained. Outside the US, trading and marketing of InterGen electric generating capacity is handled by a variety of Shell entities on a case by case and country by country basis, Riva said.
Worldwide, Intergen is operating or building a total of 11 power stations representing 7,985 Mw and also has 7,040 Mw in advanced development. The partners are targeting a fivefold increase in its generating capacity by 2002. Riva said InterGen see prospects for growth in the US, Europe, Argentina, Brazil, South Africa, India, Japan, Malaysia, and China.
Globally, the alignment is expected to allow InterGen to leverage Shell's strengths in both fuel supply and power marketing and trading, the companies said. In the past, Shell has indicated to analysts that it plans to globalize its marketing and trading operations to benefit from its established worldwide brand name.
"Success in tomorrow's energy markets will be earned through globally aligned marketing, trading, and asset companies," said Linda Cook, CEO Shell Gas & Power. "That's critically true in the US and will be the case as competitive energy markets open worldwide."
In its second quarter results reported Thursday, Shell said there was a special charge of $660 million resulting from the restructuring of its power and gas business in the US.
