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Shell Vends Stake in Borssele Wind Project to Partners Group


Royal Dutch Shell plc RDS.A recently divested partial stake in two Dutch offshore wind farm projects to Switzerland-based private equity firm Partners Group Holding AG. The buyer acquired 45% stake from Shell, Eneco Holding N.V. and Mistubishi. The fourth co-partner Van Oord NV will retain its 10% stake. Financial details of the deal however have been kept under wraps.

Prior to the deal, Shell, Mistubishi and Eneco held 40%, 30% and 20% stakes, respectively. Post the divestiture, Shell’s stake in the project has been reduced to 20%, while Mistubishi and Eneco own 15% and 10% stakes in the wind farms, respectively.

The two wind farms — Borssele III and IV — are located off the port city of Zeeland in the Netherlands and have a combined capacity of 700 megawatts. The total cost of development of the farms is estimated to be $1.4 billion and the construction is expected to be completed by 2020.

Notably, these are the first large-scale offshore wind projects undertaken by Shell. The company intends to reduce its ownership in the projects due to their capital extensive nature. With the divestment, the company will be able to recoup half of the investment it made in the projects. The move is also in sync with Shell’s strategy to concentrate on the development of the primary stages of such wind farms and avoid holding them for longer term as returns tend to decrease. Thus the proceeds will enable the company to deploy funds in more profitable projects.

With Shell already closing more than $23-billion divestment deals, it remains on track to meet its target by 2018. Further, the company announced asset disposals worth around $2-billion and additional $5-billion divestment deals are already in advanced stages of talks for prospective transactions.

The divestment was part of the company’s move to lower debt arising from the $50-billion mega acquisition of BG Group. It was part of its portfolio optimization strategy and the $30-billion global divestment program set for the 2016-2018 period. The move was also in line with the company's aim to upgrade and streamline its portfolio.

Reaffirming its priorities to curb costs and cut debts, Shell, which ended the third quarter of 2017 with a debt-to-capital ratio of 25.4%, now aims to reduce the leverage to 20% on the back of operational efficiency and divestment spree.

Headquartered in the Netherlands, Shell is one of the largest integrated energy companies engaged in production, refining, distribution and marketing of oil and natural gas. Shares of Shell have rallied 26.5% over a year compared with 12% growth of its industry.

The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

A few other top-ranked stocks in the same industry are Statoil ASA STO, Eni S.p.A E and PetroChina Company Limited PTR. While Statoil sports a Zacks Rank #1, Eni and PetroChina carry a Zacks Rank #2 (Buy).

Last quarter, Statoil delivered a positive earnings surprise of 13.64%.

Eni posted an average beat of 147.35% in the trailing four quarters.

PetroChina pulled off an average positive earnings surprise of 27.44% in the trailing four quarters.

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