Lights flicker for grand French Suez-GDF energy plan

22nd November 2006, Comments 0 comments

PARIS, Nov 22, 2006 (AFP) - A plan to create a French Suez-GDF energy giant was in deep trouble on Wednesday and seemed likely to exacerbate factional strains within the government only months before a presidential election.

PARIS, Nov 22, 2006 (AFP) - A plan to create a French Suez-GDF energy giant was in deep trouble on Wednesday and seemed likely to exacerbate factional strains within the government only months before a presidential election.

A court ruled late on Tuesday in favour of objections by trade unions in Gaz de France and prevented the GDF board from approving the merger on Wednesday. This has disrupted the timetable and makes a merger this year unlikely.

But the board of state-owned GDF had decided to meet late on Wednesday with a view to reaffirming support for the plan, a source close to the company said.

Sources close to Prime Minister Dominique de Villepin said he would meet Economy and Finance Minister Thierry Breton late in the day to discuss the merger situation.

Government spokesman Jean-François Copé said after a weekly meeting of ministers that the government expected GDF "to submit without delay" a timetable and method for finalising the merger.

They had to pay close attention to the interests of GDF customers, clients, employees and shareholders, he said.

The Suez board also said it was awaiting proposals from GDF after the court found that GDF had not provided unions with adequate information about the effects of the merger on staff, as required by statute.

Breton also said tersely on television: "It is up to the companies — and no-one else — to carry out their projects."

The deal, which would create a group capitalised at about EUR 83 billion, is now at risk of being caught up in the March corporate results period and Suez shareholders are also threatening to turn against the financial arrangements.

The delay means that the project, which has involved marathon legislation to permit privatisation of GDF, could become a hot issue in the presidential election in April particularly if the plan collapses and Suez becomes a target for takeover, as some analysts suggest.

A few months ago, even supporters of the government, reticent about the merits of the plan and worried about their popularity, were threatening not to approve enabling legislation.

Eventually the leader of the governing UMP party and its likely candidate for the presidency, Nicolas Sarkozy, put aside his own reticence to pull party unity behind the plan.

In doing so he compromised with Villepin and with President Jacques Chirac with whom he has difficult relations.

The heat of electioneering has increased sharply with the selection last week of Segolene Royal as the Socialist candidate.

A prominent Socialist Jean-Marc Ayrault said: "The future of GDF is not yet determined."

A member of the pro-Sarkozy faction among government supporters, Dominique Paille, said: "It is a thorn in the foot of the UMP candidate (Sarkozy) and this could turn out to be a big bonus for the left." And he forecast: "There will not be a merger."

Cope said that the delay would amount to only weeks or months, insisting that the merger was vital for the nation's "energy independence".

The proposal for Suez to absorb GDF emerged after Italian energy group Enel had shown signs of preparing a hostile bid for privately-owned Suez. The French plan was received coolly by European Union authorities that want market forces rather than national ambitions to shape the European energy sector.

Suez shareholders have warned they might reject the merger plan unless a special dividend is increased to reflect recent superior performance by the company.

Opponents of the plan argue that it involves the privatisation of GDF, could accelerate increases in gas prices and will undermine employment conditions.

Copyright AFP

Subject: French news

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