British Gasoline Sells Canadian Arm For 638m Pounds
Author: TOM STEVENSON
Cedric Brown, chief govt, mentioned the proceeds of Cdollars 1.2bn ( pounds 638m) would be invested in a range of growing nations the place the potential returns have been higher than within the mature Canadian market.
World Gasoline, British Gas’s overseas division, already owns shareholdings in gasoline firms in Argentina, Germany and the US, and has plans to set up joint ventures in India, Vietnam, Indonesia and Malaysia.
Mr Brown stated that whereas Customers Gasoline had been a good investment for British Gasoline it no longer fitted with the company’s technique of concentrating its overseas operations in markets with excessive development potential.
The offer from Interprovincial Pipe Line System, operator of the world’s longest gas pipeline through Canada and the US, values Customers at eleven.6 times last year’s earnings. In the year to September, pre-tax income were Cdollars 192m. Net assets have been Cdollars 863m.
British Gasoline purchased Consumers Gasoline in January 1990 for Cdollars 1.14bn. Since then, on the insistence of the Canadian authorities, it has floated 15 per cent of the corporate, raising Cdollars 162m.
Mr Brown said that British Gas’s complete investment amounted to Cdollars 1bn, implying an annualised price of return of 11 per cent. Including the influence of sterling’s devaluation in opposition to the Canadian dollar, he estimated the true return to have been sixteen per cent a year.
He added: ‘International gasoline markets have modified significantly since we acquired Consumers Gasoline. Major opportunities are now opening up oil inventory numbers worldwide as a result of accelerating liberalisation of energy markets and growth in demand for gasoline.’
Demand for gasoline is estimated to rise by 40 per cent by 2005, with creating nations rising twice as quick as Horizontal Rotation Cracking Furnace the common. Investment in the gasoline trade is forecast to complete dollars 1,100bn over the following 10 years.
The disposal of Customers Gasoline will cut back British Gas’s borrowings by pounds 1.5bn, cutting gearing by about 8 per cent to 39 per cent.
Mr Brown denied that the efficient shift of belongings from a secure utility in North America to tasks in more volatile elements of the world represented a significant increase within the company’s danger profile.
Analysts agreed that the company was still dominated by the UK distribution enterprise which, though waiting for government reaction to a sequence of proposals from the Monopolies and Mergers Fee, is considered to be comparatively safe.
The MMC report on British Gasoline, revealed in August, really useful the disposal of the company’s gasoline- provide arm and retention of the gas storage and transportation system, which accounts for the bulk of its belongings.
British Gasoline shares closed 4p decrease at 322p.