In its concerted effort to reduce debt and maintain investment
grade credit rating, Iberdrola SA, the biggest utility firm in
Spain, has decided to divest its French wind parks to a
consortium of companies led by
General Electric Company
) for about €400 million ($529 million). The divested portfolio
includes 32 wind parks with total installed capacity of 321.4
megawatts that are directly or indirectly controlled by Iberdrola
Renovables France, the French subsidiary of the Spanish utility
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The strategic move is aimed at reducing its huge debt burden,
which has been consistently on the rise as the Spanish government
failed to pay the bills for selling power at regulated prices due
to the continued sovereign debt crisis. To add to its woes,
Iberdrola presently has a dismal credit rating by S&P at just
a notch above the 'junk' rating. With the asset sale likely to
bring in additional liquidity, the company hopes to remain afloat
at least for the time being, although some experts anticipate an
imminent dividend cut.
As part of its cost-cutting initiatives, Iberdrola intends to
retrench its workforce and divest some of its operations to
reduce debt by about €6 billion to €26 billion within the next
two years. With the latest transaction, the company has divested
about €850 million worth of assets in 2012.
Post-acquisition, General Electric will have a 40% ownership
stake of the divested unit, while MEAG, the asset manager of
German insurer Munich Re, will hold another 40%. The remaining
20% ownership stake would be grabbed by EDF Energies Nouvelles,
the renewable unit of the EDF Group, the leading electricity
producing company in France.
General Electric is one of the largest and the most diversified
technology and financial services corporations in the world. With
products and services ranging from aircraft engines, power
generation, water processing, and security technology to medical
imaging, business and consumer financing, media content and
industrial products, it serves customers in more than 100
countries and employs more than 287,000 people worldwide.
Its segments include Energy Infrastructure, Aviation, Healthcare,
Transportation, Home & Business Solutions and GE Capital. The
Energy Infrastructure segment produces gas, steam and aero
derivative turbines; generators; combined cycle systems; and
renewable energy solutions, as well as provides water treatment
services and equipment. This segment also sells surface and
sub-sea drilling and production systems, floating production
platform equipment, compressors, turbines, turbo expanders, and
high pressure reactors to oil and gas companies.
General Electric currently has a Zacks #3 Rank, which translates
into a short-term Hold rating. We have a long-term Neutral
recommendation on the stock. We also have a Neutral
recommendation and a Zacks #3 Rank for
), one of the peers of General Electric.