Exxon Mobil look to offload Castle Peak Power assets

Exxon Mobil has launched an auction to sell up to US$2 billion (HK$15.5 billion) worth of shares in a Hong Kong power venture after a year-long effort to offload its holding to its partner yielded no result, sources familiar with the matter said.

The world’s biggest oil company by market value has hired Barclays as an advisor for the sale of nearly half of its 60 per cent stake in Castle Peak Power as part of its plan to divest non-core assets.

Talks to sell the entire stake to CLP Holdings and state-owned China Southern Power Grid had stalled due to disagreements over valuations, the sources said. CLP owns 40 per cent of Castle Peak.

The auction may attract interest from infrastructure funds, Japanese trading houses and sovereign wealth funds, they added without specifying names.

The process is in its early stages and potential suitors are assessing whether to bid for the stake. First-round bids are due in early April.

China’s cash-rich state power groups have also been scooping up assets worldwide, with dominant power distributor State Grid Corp establishing a presence in the Philippines, Spain, Brazil and Portugal.

CLP, controlled by Hong Kong’s wealthy Kadoorie family, remains attracted to the stake because Castle Peak offers guaranteed returns, one source familiar with CLP’s strategy said.

But “the ball is in Exxon’s court now,” the source added.

Castle Peak operates three coal-fired power stations and has a generation capacity of 6,908 megawatts.

CLP and Power Assets Holdings, Hong Kong’s other power supplier that is controlled by tycoon Li Ka-Shing, garner an annual return of 9.99 per cent on net fixed assets until 2018 under a programme known as Scheme of Control.

The sources, who declined to be identified as the sale process is confidential, said the 60 per cent stake was valued at around US$3 billion (HK$23.3 billion) last March. Around half of that plus a premium would bring the deal value closer to $2 billion, they said.

Exxon Mobil said in an emailed statement that it does not comment on rumours or speculation and that it routinely assesses its global portfolio of businesses.

A CLP spokeswoman and a Hong Kong-based spokesman for Barclays declined to comment.

CLP posted a 10.5 per cent drop in its earnings last year because of weak performances at its operations in Australia and India. Hong Kong accounts for the bulk of CLP’s earnings.