Italenergia to restructure and focus on electricity

Fiat SpA-led consortium Italenergia has revealed plans to restructure its business and focus on the Italian electricity and gas markets. The company plans to halve its €13.2bn ($11.9bn) debt and create a new company to be known as Edison.

Italenergia will sell €7bn of non-core assets of Montedison, the Italian conglomerate which it acquired earlier this year. It will also merge Montedison’s energy subsidiaries into Montedison, and then itself merge with Montedison to create the new company.

Montedison’s chairman, Umberto Quadrino, said that the group is aiming to capture 20 per cent of the Italian electricity market and 15 per cent of the gas market by 2007. This would rank the group third in the market behind Enel and Eni.

Italenergia is 38.6 per cent owned by Fiat, 18 per cent by Electricité de France (EDF), 20 per cent by Carol Tassara SpA and 23.4 per cent by three Italian banks.

EDF is to act as Edison’s main technical adviser and will help the new company participate in foreign ventures.

CMS to sell international assets

US-based CMS Energy Corporation has announced that it is to alter its business strategy to focus growth primarily in North America. The company is to sell its non-strategic international power assets in an effort to strengthen its balance sheet and provide transparent and predictable future earnings.

CMS is to sell some of its international power generation assets, its two South American electric distribution businesses and its entire interest in its Equatorial Guinea oil and gas fields. The sales are expected to raise $2.4bn in cash.

The company has said that it is negotiating a definitive agreement for the sale of its stake in the 2000 MW Loy Yang power plant in Australia. Unconfirmed reports suggest that the acquirer of this asset will be Duke Energy.

“With the actions … to address the company’s underperforming investments and our new, more focused strategy and improved balance sheet, we believe the company is well positioned for future success,” said CMS chairman and CEO William T. McCormick.

R&D to drive growth for ABB

Global technology company ABB has announced plans to streamline its research and development programme to focus on industrial information technology for the utility and automation markets.

The announcement came just three weeks after the company revealed in its third quarter results that it would be accelerating its plans to cut 12 000 jobs, and that its full-year profits for 2001 are expected to be below those of 2000.

ABB’s new R&D strategy is, said CEO Jörgen Centerman, focused on helping its utility and industrial customers enhance their productivity and sustainability.

“We are developing a common architecture allowing customers to link our generic and branch-specific offerings into a more efficient manufacturing and business operation,” said Centerman. “This is an ambitious effort.”

ABB spends around three per cent of revenues on R&D. As part of the new strategy, it will create four ‘global virtual laboratories’.

Energy M&A outlook down

In spite of pressure to consolidate in order to lower costs, current political and economic uncertainty could jeopardize future mergers and acquisitions in the global energy industry, according to a report from PricewaterhouseCoopers.

According to PwC’s Transaction Services team in the Global Energy and Utilities group, the factors that have driven the energy industry for the past ten years will continue to be important in the future, but the M&A trend will only pick up when stability returns.

“The industry faces enormous pressure to lower costs, increase efficiencies and shareholder returns,” says Rick Roberge, a Transaction Services partner.

New solar venture

Oil group Royal Dutch/Shell and Dutch chemical company Azko Nobel have signed a joint venture agreement to develop a new low-cost process to mass produce flexible solar cell panels.

The move is part of Shell’s strategy to grow its participation in the renewable energy technology sector. The venture with Azko Nobel will, hopes Shell, kick-start the market for solar power, currently the most expensive form of renewable energy. Fast, cheap production methods should help bring down the cost of the technology and allow cost-effective integration into existing solar products.

Together with Azko, Shell will explore a production method that applies a special thin solar cell coating to flexible foil materials. Conventional methods use materials like silicon, glass and metals and are relatively labour intensive.

The company has also announced plans to develop a geothermal energy project in El Salvador.

News digest

Alstom difficulties: Alstom is expecting to experience difficulties in meeting profit margin targets for next year and has promised to improve cash flow and cut debt. The company announced an 11 per cent fall in net profits for the first half of this year compared to last year while net debt rose by €421m ($371m) to €2.05bn between March and September 2001.

Babtie and Fichtner join forces: Babtie Group Ltd. and Fichtner Consulting Engineers Ltd. have launched a new joint venture company called Babtie-Fichner Ltd. which will offer technical consultancy to the power, waste and process industries.

Endesa increases profits: Spanish electricity group Endesa has increased profits by 6.8 per cent in the first nine months of 2001. This increase is the equivalent of $918m and sales are up 1.4 per cent at $9.7bn.

FirstEnergy merger: FirstEnergy Corp. has closed its merger with GPU Inc. and hopes to operate as a “larger and stronger company, better positioned to provide significant benefits to our customers, shareholders and employees,” said FirstEnergy’s CEO H. Peter Burg. The company also announced that its new board of directors would consist of ten members from FirstEnergy and six from GPU.

Fortum results: Finnish energy group Fortum has reported better-than-expected nine-month profits but predicts its full-year results to be flat due to the fall in world oil prices and lower than anticipated gas production.

Mirant reports record growth: Mirant has reported record earnings from operations which totalled $234m or 67¢/diluted share for the last quarter compared to $119m or 35¢/diluted share for the third quarter in 2000.

Reduced earnings for Reliant: Reliant Energy Inc. has reported reduced third quarter earnings blaming mild weather conditions, higher plant maintenance and operation costs, with higher legal, regulatory and administration costs for the decrease in profits. The company’s net income decreased to $290m or 99&cent/share in the third quarter, down from a net income of of $389m or $1.34/share.

SPL revenue increase: SPL WorldGroup B.V has reported a global company revenue increase of 30 per cent over the previous financial year. In the last year the company has introduced new products and services, organization realignment to maintain a market leading focus. It has also signed a number of new customers in the USA, Europe and Asia pacific to increase profits.