Tue, Oct 11, 2016 - Page 10 News List

Noble Group surges after trader pulls off US energy unit sale for US$800m

Bloomberg

Noble Group Ltd (來寶集團), the embattled commodity trader backed by China’s sovereign wealth fund, has agreed to sell its US energy unit to Calpine Corp for US$800 million plus working capital, saying the deal largely completes a drive to raise US$2 billion. The shares jumped in Singapore.

The sale of Noble Americas Energy Solutions (NAES) includes the repayment of working capital, estimated at an additional US$248 million, Noble Group said in a filing in Singapore yesterday, citing the figure in its audited year-end accounts. Calpine costed the working-capital payment at a net US$100 million, according to a separate statement. The transaction is expected to close in December.

The sale might aid Noble Group’s turnaround, after the Hong Kong-based company was mauled by the rout in commodity prices, mounting losses and a liquidity squeeze.

Noble founder and chairman Richard Elman last month said the company is on track to raise US$2 billion by cutting costs and selling assets, including NAES, which was once considered core under former chief executive officer Yusuf Alireza.

While the sale might help the trader become leaner, it is also losing key assets, according to KGI Securities (Singapore) Pte.

“The market will be receptive,” said Nicholas Teo, a strategist at KGI.

“This is essentially a continuation of the rationalization of the company, which includes sale of assets to shore up their financials,” he said. “Whether this marginalizes their business going ahead or not remains to be seen.”

STOCK SURGE

Noble Group’s shares advanced as much as 9.4 percent to S$0.21 (US$0.15), the highest since June, and traded at S$0.205 at 2:08pm. While that extends last week’s 26 percent surge, the stock remains 32 percent lower this year.

“The sale of NAES substantially completes the US$2 billion capital raising initiative that we announced in June,” chief executive officers Jeff Frase and Will Randall said in their company’s statement. “With the divestiture, Noble will continue to reduce debt, while also funding growth opportunities.”

The company’s 6.75 percent notes due January 2020 rose US$0.049 last week to US$0.0854 on the dollar, the most in four months, according to Bloomberg-compiled prices.

The securities traded at US$0.0853 to yield 12.3 percent yesterday, and handed investors 45 percent return so far this year.

POWER PRODUCER

The San Diego-based NAES business offers supply and risk management services to commercial and industrial customers, buying energy wholesale for sale as retail products, according to the annual report. The unit — part of the Gas and Power business — has an aggregate book value of US$662 million, according to Noble Group’s statement yesterday. Houston-based Calpine is an independent power producer.

“This transaction is highly cash flow and credit accretive,” said Thad Hill, president and chief executive officer at Calpine. “In addition to expanding our retail customer sales channels and product offerings, we will more than double the volume of retail load we are capable of serving across the country.”

The plan to sell NAES was announced in May on the same day that former chief executive officer Alireza said he was resigning. Alireza had previously described the unit as among those that he wished to retain as he sought to mend the company’s finances. He was replaced by Randall and Frase.

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