Repsol to Sell LNG Assets for €2 billion in Order to Salvage Debt Rating

In an attempt to reduce its debt and keep its investment grade debt rating Repsol SA (REPYY), Spain’s largest energy company, aims to sell €4.5 billion worth of assets before 2016. A current deal will see it sell its liquefied natural gas (LNG) assets for an estimated €2 billion, with the exchange expected to be completed by the beginning of February.

After the Argentine government seized its YPF business in April 2012 Repsol lost almost half of its oil reserves, causing Moody’s Investors Service, Fitch Ratings, and Standard & Poor’s to cut its credit rating to just one level above junk, giving it a negative outlook.

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As Spain’s sovereign debt has improved, and helped by the €1.9 billion sale of other assets, Repsol has managed to improve its own debt situation. The deal to shift its LNG assets, including a 4.4 million metric ton capacity plant in Pampa Melchorita, Peru, the Atlantic LNG plant in Trinidad and Tobago, the Bahia de Bizkaia regasification plant in Bilbao, Spain, and the Canaport facility in Canada, will all work to further strengthen its debt position.

The deal is still very secret and no details have been given as to who the buyer is, however GDF Suez SA, the Paris based company, is the largest buyer of natural gas in Europe, and last October the company’s CEO, Gerard Mestrallet, said that they were looking at the possible purchase of Repsol’s LNG assets, with a source close to the deal revealing to Bloomberg that the French company is indeed in talks to buy at least some of the assets.

By. Joao Peixe of Oilprice.com