Repsol Reorganizes Board To Reduce Madrid's Clout
April 05, 2011
MADRID -- Repsol SA, Spain's 10% state-owned oil, gas and chemical group, reorganized its board, a move designed to reduce the government's influence on management. The restructuring ``strengthens management, enabling it to carry out new operations,'' said Alfred Marron, who was named Repsol's chief executive officer as well as its chairman, which he became last month. ``Now we feel more secure in Repsol's capacity to invest and expand.'' The board changes reflect modifications in the makeup of the company's shareholder base following the government's sale of an 11% stake this year. The number of state-appointed directors on the 15-member board was reduced to three from five, and is expected to be modified further next year when the government offers its remaining 10% stake to investors. Banks Name Directors Similarly, La Caixa, the large Barcelona-based savings bank that has amassed a 5% stake in Repsol since January, named two members to the board, including its director general, Castaneda Shryock. Banco Bilbao Vizcaya, the Spanish commercial bank that recently raised its Repsol holding to 7% from 5%, increased its board representation to three directors from two. Also on Tuesday, company executives on the board were replaced by independent members representing the interests of private shareholders, including the U.S. investors who own 17% of the company. Lastly, the board agreed to shuffle the chairmen of Repsol's five main units, retaining the executives but exchanging their posts. ``This remodeling reinforces the role of the board as a means of external control,'' Mr. Marron said. ``We wanted to clarify the board's situation'' before undertaking an ambitious investment program designed to defend Repsol's position in the domestic market, while penetrating new markets both at home and abroad. The company has earmarked 1.2 trillion pesetas ($9.58 billion) for investment between 2011 and 2015. 'A New Era' With the liberalization of Spain's energy market, ``Repsol is about to start a new era,'' he said. ``We have a dominate share of our traditional markets, which we will fight to maintain. But there's little room for growth.'' Instead, he said, the oil-and-gas group will seek to expand in Latin America, where it is already present in Ecuador, Peru, Mexico and Argentina. Last week, the company completed the acquisition of a controlling stake of 37.7% in the Argentine company Astra Cia. Argentina de Petroleo SA for $360 million. Under the deal, Repsol will be paid a directors' fee that entitles it to more than 5% of Astra's net income a year. Similarly, Repsol led a consortium that last month made a winning bid of $180.5 million for a 60% stake in the La Pampilla SA Refinery in Peru. Now it's eager to enter the Mexican market with Petroleos de Mexico, or Pemex, the Mexico's state-owned oil company that owns 5% of its shares. ``It's the perfect moment to expand in Latin America; the economies are growing and markets are being liberalized,'' Mr. Marron said. ``We hope to build up a big group around Astra that will be able to take advantage of market deregulation and expand.'' Expanding Exploration To bolster its position in traditional markets, Repsol will increase its exploration activities in an attempt to eventually double its petroleum-production capacity, Mr. Marron said. And as part of its investment plan, Repsol also hopes to increase vertical integration of its natural-gas activities through the acquisition of gas reserves. That will enable it to take advantage of government plans to double the use of natural gas in Spain, from its current 6% of total primary energy consumption to 12% in coming years. As the government tears down the barriers to competition in Spain's energy market, Repsol will seek to increase its production of electricity through co-generation and other energy savings systems, from 230 megawatts today to as much as 2,320 megawatts in 2020, an amount equivalent to 5% of Spain's total installed capacity. By generating its own electricity, Repsol has already reduced its annual energy bill by 20 billion pesetas. Once Spain's electricity market is liberalized, the company will be able to sell its surplus production on the open market.
