GDF profits up 29 percent; seeks price rise too

16th March 2006, Comments 0 comments

PARIS, March 16, 2006 (AFP) - French state-controlled gas utility GDF, involved in a controversial plan to absorb Suez, reported on Thursday that it had increased net profit last year by 29 percent.

PARIS, March 16, 2006 (AFP) - French state-controlled gas utility GDF, involved in a controversial plan to absorb Suez, reported on Thursday that it had increased net profit last year by 29 percent.

Gaz de France said it had made a record net profit of EUR 1.743 billion and that for 2006 it was targeting a net profit of more than EUR 2 billion with the help of "an increase in the price of gas to reflect costs".

GDF is to propose an increase of the dividend of 48 percent from the figure for 2004 to EUR 0.68, saying that the total dividend for 2005 would exceed the target announced at the time of part privatisation in July.

Group net debt had been cut from EUR 4.592 billion at the end of 2004 to EUR 2.993 billion at the end of 2005.

The group, which was partly privatised last year but has also been unable to increase its prices by as much as it would like, asked the government on Tuesday for permission to raise prices by less than 10 percent on April 1.

Gas has attracted the spotlight in Europe as a hot issue for several reasons.

Principal among these are the rise of energy prices in general, and concerns about energy supplies to Europe, and notably of supplies of gas, much of which comes from Russia.

Countries in western Europe became concerned about possible political factors this winter when Ukraine experienced problems over a dispute with Russia.

Gas de France is the leading provider of gas in France, has ambitions to extend its European activities, and is also branching into electricity distribution.

When it became apparent that Enel of Italy wanted to make a takeover bid for Suez, another big French general utility and energy distributor, the French government responded, five days later, by revealing a plan for Suez to be absorbed by GDF, even though Suez is a bigger company.

GDF and Suez said this scheme had been in preparation for months. Nevertheless it was widely seen as a protectionist move. Some analysts think that Enel might yet make a hostile bid for Suez in the next few days in any case.

In Milan on Thursday, a source close to manoeuvres by Enel told AFP that it wanted an assurance before launching any bid for Suez that France would not obstruct it.

Enel also wanted an assurance that EU Comptition Commissioner Nelly Kroes would act as a arbiter to obtain guarantees that France would not block a bid, the source said.

GDF chief executive Jean-Francois Cirelli said on Thursday of the requested price increase: "If we are asking for this, it is not because we are merging with Suez, it is because we cannot sell at less than cost."

Regarding a further possible increase on July 1, he said that he could not put a figure on this because of uncertainty about the trend of (wholesale) gas prices.

GDF is permitted to seek a revision of its prices every quarter, provided that it has the approval of the government and shareholders. This control by the government of its pricing policy was a factor of concern to investors when the part-privatisation shares were issued.

Cirelli also said that the tie-up between GDF and Suez would increase, not reduce competition in Europe.

Earlier, the head of Suez, Gérard Mestrallet, had told the newspaper La Tribune that the planned merger "crowned" the strategy pursued by Suez but that a takeover by Enel would result in the company being broken up with a loss of value.

In separate news, GDF is planning to invest EUR 1.5 billion euros in two gas pipeline projects linking Europe to Algeria by 2007 and to Iran by 2015, La Tribune said Thursday.

The French gas company will finance 12 percent of Medgaz — linking Spain and Algeria from 2007 — at a cost of EUR 640 million, the paper said, adding that the company wanted to make Algeria "its second supplier, equal with Russia" by 2010.

"We have obtained the agreement from Algerian authorities and we'll sign the contract in coming days," Cirelli told the French daily.

He said that GDF would also invest in Nabucco — bringing gas from Caspian Sea deposits and Iranian reserves to Austria — in a "more ambitious" project to finance 30 percent of the 3,300-km pipeline at a cost of EUR 4.6 billion.

The Nabucco gas pipeline should allow delivery of up to 30 billion cubic metres of gas per year to Europe.

Work on the 747-kilometre Medgaz Mediterranean pipeline, with a capacity to transport between eight and 10 billion cubic metres of gas, is due to start in July and finish in 2007.

Then, it is due to start supplying Spain with four billion cubic metres per year.

The Medgaz project is led by a consortium of companies including Algerian Sonatrach (20 percent of the capital), Spanish Cepsa (20 percent), Endesa (12 percent) and Iberdrola (12 percent), French GDF (12 percent) and British BP (12 percent).

Copyright AFP

Subject: French news

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