UPDATE: BG Philippines Sale Latest Power Plant Divestment

United Kingdom-based oil and gas company BG Group PLC (BG.LN) said Wednesday it has sold its 40% stake in two gas-fire power plants in the Philippines to Korea Electric Power Corp. (KEP) for $400 million.

The deal is the latest in a string of divestments of power generation assets as BG focuses more on development of large oil discoveries in Brazil. BG sold its interests in power plants in the U.K. and the U.S. this year, taking a half-billion dollar loss on the latter transaction.

BG is likely to continue to sell off its power plants until it has fully exited the electricity sector, said Panmure Gordon analyst Peter Hitchens.

"They've realized power generation is not quite as good as they thought," he said. "Pumping that money into exploration, production and liquefied natural gas, where there is faster growth," makes more sense, he said. Hitchens expects BG to sell its remaining power plants in Italy and possibly its electricity transmission and distribution business in India.

The deal covers the 1000-megawatt Santa Rita plant and the 500MW San Lorenzo facility, both located on the island of Luzon, 80 kilometers south of the capital Manila. The plants were commissioned in 2000 and 2002 respectively with a combined construction cost of around $1.4 billion.

BG holds its stake in the plants through a joint venture with First Philippine Holdings Group (FPH.PH). Completion of the deal, expected in the first quarter of 2011, is subject to approval by BG's partner, the company said.

At 1018 GMT BG's shares were down 1.09%, or 12 pence, at 1140p.

 
   -By James Herron, Dow Jones Newswires; [phone]; [e-mail]