International Power (IP) has agreed on the sale of its 33.3% equity stake in the 420MW T-Power CCGT plant in Belgium to Itochu, a leading Japanese Consortium. The company will receive € 48m for its stake.
The Belgian/French utility had to sell its stake to satisfy demands of the European Commission, which saw this as part of the clearance requirements for the reverse take-over of IP by GDF Suez.
T-Power is a Belgian CCGT-project that will be fully operational during 2011 and is built via a consortium consisting of Tessenderlo Chemie (33%), (92,62 EUR, 0,18%) (33%) and International Power (33%). When operational the plant will be able to cover ~2.5% of Belgian electricity demand. T-Power -which was budgeted at € 448m- already signed a 15-year tolling agreement (with five-year extension option) with Essent Trading International (subsidiary of Essent NV, now RWE). International Power was selected as the operatorof the facility.
Our View:
We already pointed to this potential transaction on 26 January 2011 and saw a lot of logic in the deal since: i/ Electrabel would have taken control over the operation of T-Power while Tessenderlo Chemie tried to become independent from Electrabel; ii/ the Belgian Competition Council acknowledged the concerns made by other Belgian electricity generators/suppliers re Electrabel’s already dominant position (>70% of supply, ~85% of production) in the Belgian market. The acquisitionwould have strengthened their position in production, wholesale & trading, balancing and ancillary services; iii/ also Essent Belgium (RWE) feared that Electrabel would gain too much information about its strategy on the Belgian market.
Note that International Power (IP) bought Advanced Power’s 33% stake in the project for € 23m and is now booking a profit. We made a rough calculation and expected GDF Suez could receive ~€ 55m for its 33% stake. The number came in slightly lower, at € 48m or € 0.35m/MW.
Conclusion:
This deal was already pre-announced and won’t materially impact GDF Suez’ numbers. We continue to rate GDF Suez Accumulate. Our TP of € 30/sh is based on a mix between a DCF and SoTP valuation.