Private equity-backed Neptune agrees to buy Engie oil and gas unit

PARIS/LONDON (Reuters) - Neptune Oil & Gas has agreed to acquire a majority stake in French utility Engie's ENGIE.PA exploration and production business for $3.9 billion, the latest private equity-backed firm to enter the international energy sector.

For Engie, the sale marks a key step in its shift away from oil and gas to more regulated businesses such as power grids that allow more stable returns.

The deal, expected to close in the first quarter of 2018, includes several fields in the UK and Norwegian North Sea and assets in Germany, Algeria, Egypt and Asia, producing more than 150,000 barrels per day of oil and gas equivalent.

Neptune, set up in 2015 and headed by former Centrica boss Sam Laidlaw, is backed by private equity funds The Carlyle Group CG.O and CVC Capital Partners.

“Our ambition is to create a leading international independent E&P company within the next 5 years,” Laidlaw said in a statement.

Neptune joins other private equity-backed firms such as Chrysaor and Siccar Point which have acquired oil and gas assets from large firms such as Royal Dutch Shell RDSa.L and Austria's OMV OMVV.VI.

Engie said in a statement it had received a firm and binding offer from Neptune for its exploration and production unit based on a total valuation of 4.7 billion euros ($5.11 billion), which includes 1.1 billion euros of decommissioning liabilities.

The deal is expected to reduce Engie’s consolidated net financial debt by 2.4 billion euros when the deal is closed.

Engie Chief Financial Officer Judith Hartmann told reporters that, besides the decommissioning provisions, Neptune would also take over about 200 million euros of pension provisions.

The deal was reached after Neptune agreed to increase China Investment Corporation’s (CIC) stake in EPI to 49 percent from 30 percent, sources told Reuters last month. CIC had bought its 30 percent stake in 2011.

Neptune did not mention CIC in its statement.

Engie previously said it planned to sell 15 billion euros worth of assets between 2016 and 2018 to focus on contracted and regulated businesses such as energy services and grids. It has said it could realize 85 percent of the planned sales by the end of 2017.