GDF Suez Quits Europe, Shifts Investment to Emerging Economies

on Jun 20, 2012
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Early shutdown of nuclear reactors in Belgium, a lost tender for wind farms in France as well as government caps on prices in both countries are driving GDF Suez, Europe’s largest power and natural-gas utility, off the continent, Bloomberg reported on 19 June 2012.

The Paris-based electric utility company, which traces its origins to a Suez Canal construction company in the 1850s, has become frustrated with Europe. Bloomberg quotes Per Lekander, a UBS AG utilities analyst, who noted in a telephone interview that “GDF Suez has given up on Belgium and France”.
According to Bloomberg, Belgium, whose whole position on nuclear energy has “flop-flopped” over the past decade depending on the parties making up the government, is preparing to start shutting down GDF’s oldest reactors within three years. Belgium’s Energy Minister Melchior Wathelet is expected to unveil a new power production policy by 21 July, which could lead to the closure of three reactors in 2015, significantly reducing the revenue of GDF Suez in the country.

!m[](/uploads/story/91/thumbs/pic_1_inline.png)France has also managed to give GDF Suez reason for frustration, with the company losing a 1.8 billion-euro offshore wind-farm projectwhich it spent five years preparing. In addition, GDF Suez is waiting for a decision of the French government about state-set prices in the country, after successfully challenging a price freeze in 2011.

Bloomberg reports that shares of GDF have dropped with 20 percent this year, a slump which has wiped out more than €8 billion from the company’s market value and is more than four times the 4.8 percent slide in Europe’s benchmark power utilities index. Bloomberg also notes that this trend is not limited solely to GDF Suez, considering that shares of Spain’s largest utility, Iberdrola SA, fell 28 percent in 2012, while Italy’s Enel SpA has slumped with 27 percent. Both in Italy and Spain austerity measures are hitting the economy and forcing tax rises. In any case, it is no wonder that GDF Suez, which got 65 percent of its revenue from the EU in 2011, is looking into investment opportunities outside Europe.

GDF Suez has already started moving toward emerging markets, with the Financial Times recently reporting that the company paid a generous price for the last 30 percent of the British companyInternational Power Plc it did not already own. Since International Power Plc operates in South
America, the Middle East and Southeast Asia, the transaction, which is expected to be completed in July, will provide GDF Suez with access to International Power’s businesses in fast-growing emerging markets.

The chief executive officer of GDF Suez, Gerard Mestrallet, noted in an interview that the company may sell assets in Europe after the International Power transaction is complete, as reported by Bloomberg. In addition, according to the FT article, as much as half of GDF’s expected annual capital spending of €9-11 billion in the next five years will be spent in developing markets, with Mr Mestrallet highlighting the company’s commitment to invest heavily in Asia, the Middle East and South America.

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