GDF SUEZ and CIC have signed a Memorandum of Understanding for cooperation across businesses and regions, in particular in Asia

abarrelfullabarrelfull wrote on 10 Aug 2011 08:00
Tags: cic gdf-suez lng

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As a first milestone of this cooperation, advanced exclusive talks on a €2.3 billion minority investment by CIC in the Exploration & Production division of GDF SUEZ to accelerate the development and on the €0.6 billion acquisition by CIC of a 10% stake in the LNG Atlantic liquefaction plant in Trinidad and Tobago

GDF SUEZ and China Investment Corporation (“CIC”) have signed a Memorandum of Understanding (“MoU”) for cooperation across multiple businesses and regions, in particular in Asia Pacific. GDF SUEZ and CIC will cooperate on a non-exclusive basis to help accelerate their respective strategies by exploring areas of cooperation and co-investment opportunities. The MoU will be deployed across GDF SUEZ Group’s businesses (gas, power, water and waste, and energy efficiency services) and sets up the framework for cooperation in three areas: (i) joint investment opportunities in existing and new energy-related projects in Asia Pacific;

(ii) financing cooperation in new projects in Asia Pacific; and (iii) commercial sponsorship and support to GDF SUEZ in Asia Pacific region, including China, by CIC’s affiliates. The MoU will be administered through a Steering Committee chaired by the two groups’ respective CEOs.

As the first milestone of this cooperation, CIC is in advanced exclusive talks with GDF SUEZ regarding a €2.3 billion minority investment in the Exploration & Production division of GDF SUEZ (“GDF SUEZ E&P”) (excluding the 22.5% equity stake in E.F. Oil and Gas Limited (“EFOG”)). CIC will own 30% of GDF SUEZ E&P, following a capital increase and a financial restructuring of GDF SUEZ E&P reducing its net financial debt to €0.7 billion.

The minority investment of CIC will reinforce GDF SUEZ E&P’s capital structure and will contribute to accelerate the development of this important activity for GDF SUEZ by providing the appropriate financial flexibility. Initiated in the 1990s via acquisitions followed by strong organic development, GDF SUEZ E&P has 2P reserves of 815 mmboe at the end of 2010, an annual production of 51 mmboe in 2010 and a significant portfolio of contingent resources and exploration prospects. With more than 1,500 employees in 13 countries, it generated €2.2 billion of revenues and €1.4 billion of EBITDA in 2010. The transaction values GDF SUEZ E&P (excluding EFOG) at c. €8.1 billion in enterprise value.

As part of the transaction, CIC would also acquire from GDF SUEZ a 10% stake in the train 1 of the Atlantic LNG liquefaction plant located in Trinidad and Tobago as well as production payments associated with trains 2, 3 and 4 for an amount of €0.6 billion.

The potential acquisition by CIC of a 30% stake in GDF SUEZ E&P and of its 10% stake in the LNG Atlantic liquefaction plant is part of GDF SUEZ’s portfolio optimization program of €10 billion, announced at the 2010 annual results presentation and would result in net cash proceeds of €2.9 billion. The transaction will be subject to condition precedents being satisfied and will be presented for consultation to GDF SUEZ’s employee representative bodies. The transaction could be finalized by the end of 2011. The GDF SUEZ Board of Directors views the cooperation with CIC and the transaction as having a strong strategic interest for GDF SUEZ.

Gérard Mestrallet, Chairman and Chief Executive Officer of GDF SUEZ, declared: "I am very pleased to enter into this MoU with CIC, a major investment force worldwide, which can help GDF SUEZ access substantial incremental financing resources and strong networks in China and throughout Asia. CIC’s investment in GDF SUEZ E&P business would be a highly attractive first milestone for our group, strategically and financially, and would support GDF SUEZ E&P’s development. We will work together with CIC to rapidly identify and implement areas of cooperation that could benefit other businesses in our group, with a geographic emphasis on China and Asia."

Lou Jiwei, Chairman and Chief Executive Officer of China Investment Corporation, said: “We are pleased to cooperate with GDF SUEZ, a leading utility company worldwide. CIC appreciates the opportunity to access a wealth of attractive joint investment opportunities alongside GDF SUEZ across its strong competencies, for example in gas, power, environmental and other energy efficiency services. Our investment of 30% in GDF SUEZ E&P would be our first sizeable transaction in Europe to date and, together with Atlantic LNG, one of our most important investments worldwide. We are committed to working with GDF SUEZ E&P to achieve its growth prospects.”

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