British energy generator SSE has agreed to buy a 20% stake in a deepwater project in the North Sea from French energy group Total. The £565m (€798m, $883m) acquisition concerns a stake in Total's Laggan-Tormore project, located 125km west from the Shetland Area, and is subject to regulatory approval.
Alistair Phillips-Davies, SSE's chief executive, said that the deal is part of the company's strategic plan of maintaining a balanced range of energy businesses and he hopes the deal will increase SSE's presence in the upstream gas sector. He stated: "The acquisition, including the Shetland Gas Plant, represents further investment in the UK energy infrastructure that gives access to gas from north-west Europe to help secure energy for customers and to help meet the needs of our gas-fired power stations, which will have an important part to play in supporting security of electricity supply."
According to reports by Reuters, Total had hoped the acquisition would be a $1.5bn deal. The sale of the stake would mean the French energy giant still owns 60% of the Laggan-Tormore project.
The announcement of the acquisition comes a week after SSE filed a trading update, in which it told shareholders the company's energy supply division is likely to suffer a dip in profits after it lost 90,000 customers. The sale is also an answer to the high costs of plants in the North Sea region. Companies especially feel the burn of the high costs with the falling oil price, making it hard to maintain margins.
For Total's part, selling the stake is part of a major cost-cutting scheme introduced by CEO Patrick Pouyanne, which includes the disposal of $5bn worth of North Sea assets. The company hopes to cut more than its $1.2bn operating savings target.