Page 11 - GLNG Week 25

GLNG EuRoPE GLNG
Iberdrola offloads portfolio
onto Pavilion
The two companies have both described the deal as demonstration of transition
invEstMEnt
WHat:
iberdrola is selling out of its lNG portfolio.
WHy:
the company is shifting to a new focus, based on renewable energy and long-term generation.
WHat nExt:
pavilion is expanding its global presence.
SPANISH utility Iberdrola has struck a deal to sell its LNG business to Singapore’s Pavilion Energy, for €115mn ($131mn). e move comes amid a broader shi for the Spanish company, which has touted a change of direction in light of industry trends and transition. e Singaporean company, meanwhile, also sees the deal as part of a transition, as it expands from its domestic focus into a more diversi ed entity.
sale tale
e Spanish company announced the sale on June 20. e package of contracts will be trans- ferred to Pavilion Energy Trading & Supply, a unit of Pavilion, by January 1, 2020. e nal price paid may be adjusted up or down, depend- ing on the value of the LNG inventory on closing.
Iberdrola said this sale was part of its plan to sell down non-strategic assets. is aims to raise €3.5bn ($3.98bn) between 2018 and 2022, with almost half of this achieved. e company has also sold o assets such as bre optics in Spain, power generation in the UK and gas storage in the US.
e deal with Pavilion “represents a change in the group’s current gas supply strategy, to ful l not only the customer needs, but also those of combined cycle plants”. Iberdrola will now focus, instead, on short-term supply in European gas markets.
Pavilion, in a statement, put the volume of sale and supply contracts at 4mn tonnes per year (tpy), with 2mn tpy of long-term regas at the UK’s Isle of Grain terminal. It also gains regas access in Spain and capacity on the Spain-France pipeline, with a time-charter on a newbuild MEGI vessel. In a related deal, Pavilion said it would supply gas to Iberdrola Generación Espana in Spain.
“This acquisition brings us a portfolio of prime assets primarily in Europe and the Atlantic Basin. e combined portfolio achieves global reach with the scale and exibility required to outperform,” said Pavilion’s group CEo, Frédéric Barnaud. “Today is a critical step towards our vision to be a leading global LNG player, leverag- ing our LNG portfolio with deep access to strate- gic gas markets in Singapore, Spain, and the UK, combined with sophisticated optimisation and risk management skills.”
outlook 2022
In February, Iberdrola set out a plan to make an “irreversible transition” to low carbon energy. of the 10,000 MW it planned to build, nearly 65% would be in renewables.
The company identified industry trends – such as a need to reduce carbon emissions, produce more energy and need for e ciencies –as“requiringanewandsustainablemodel”.As part of this energy transition, renewable energies were identi ed as of critical importance.
Iberdrola said it was ready “to continue seiz- ing” the opportunity of this transition, while also creating value for its shareholders. during the 2018-22 period, it said it would invest €34bn ($38.05bn), with €30bn ($33.6bn) already exe- cuted or under construction.
e shi will manifest in a move to regulated or long-term activities, it said, while maintaining currency diversi cation – with a slight shi from British pounds into euros. In particular, invest- ments are going into networks, renewable ener- gies and contracted generation capacity.
In addition to reducing its LNG exposure, Iberdrola is also cutting coal capacity, aiming to have reduced this to zero by 2030.
e company sold o €1.2bn ($1.34bn) of assets in 2018, with the largest share coming from the sale of its conventional UK generation.
Iberdrola has a number of supply and demand contracts in the LNG space. Iberdola has, for instance, signed a supply agreement with dong Energy – now known as orsted – in 2010 on the supply of 1 billion cubic meters (bcm) per year of LNG for 10 years, starting in late 2011. deliveries are to orsted’s Gate terminal, in the port of Rotterdam. It also has an agreement to supply volumes to BP, with both of these due to end in 2021.
e Spanish utility has a supply contract for 1 bcm per year of LNG with the US’ Cheniere Energy, running for 20 years. is involves sup- plies from the Corpus Christi liquefaction plant. e price of the contract was linked to Henry Hub and was provided to Iberdrola on a free on board (FoB) basis. It also has a deal with Nige- ria LNG (NLNG) and with Norway’s Equinor – expiring in the mid-2020s – while a contract with Eni was due to end in 2018.
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