Giant joints £1.6bn fight for Intergen

ELECTRICITY giant International Power is to enter the bidding for Intergen, the £1.6 billion power stations business put up for sale by owners Shell and Bechtel.

The move by International Power, under chief executive Phil Cox, comes just months after it agreed to buy £1.21 billion-worth of generating assets from American power company Edison Mission. Some industry observers fear that a further acquisition could overstretch the company.

First-round bids for Intergen, which is selling all its power stations outside America, are due tomorrow. International Power and Japanese conglomerate Mitsui are expected to make a joint bid. The two successfully worked together to buy the Edison Mission assets in July. International Power partly funded the purchase through a £291 million rights issue and the deal is expected to be completed shortly.

But last week, ratings agency Standard & Poor's said that International Power's BB-rated long-term credit and senior unsecured debt remained under review because the company had yet to complete the purchase.

Agencies measure a company's ability to repay its debt with a rating ranging from AAA - the top - to the lowest known as junk. The agency said the issue was expected to be resolved by the end of the year.

International Power said: 'Our first priority is to integrate our new assets, but if there are opportunities we would obviously look at them.'

The acquisition of Intergen would be attractive for the business because it has suffered from being too dependent on the American market. Trading there has remained tough while power prices have risen significantly in Europe.

Intergen, which is 68% owned by Shell, has 14 power stations outside North America, stretching from Colombia to the Philippines, and the additional stations would help International-Power widen its asset base away from the tough conditions of the US.

Other potential bidders could include Japan's Mitsubishi and American power business AES.

British power companies such as Scottish & Southern Energy and Eon have been more lukewarm because of the three power stations Intergen owns in Britain - Rocksavage on Merseyside, Spalding in Lincolnshire and Coryton in Essex. Only Coryton does not have a long-term contract to sell its power to a designated supplier.

Shell and Bechtel appointed Citigroup, the investment bank, to sell Intergen's power stations outside America after a strategic review.