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Faced with GDF merger delay, Suez board must find a way forward
By Fabien Zamora
AFP
PARIS
Petroleumworld.com 12 08 06
The board of private French energy group Suez, which meets on Friday, must decide soon whether to pursue troubled tie-up talks with the state-owned gas company GDF, or look elsewhere.
The plan to absorb GDF was designed to create a French national champion able to compete in a consolidating European energy market and protect the company's from foreign predators.
But the controversial deal ran into legal trouble that squeezed its calendar up against campaigning for French presidential elections next year, causing some key private investors to question whether it could happen after all.
Sources close to the matter nonetheless told AFP that Suez did not have a "plan B" after a French court put the merger project on hold for several months at least.
Suez "does not really have an alternative project", one source said.
"The ideal scenario for the board would be to find a good reason to buy some time, to put off its decision, such as if another actor stepped onto the stage."
The question is not officially on the agenda for Friday's meeting, but few doubt it will be one of the main topics of discussion.
Last week, the French Constitutional Council cleared the way in principle for Suez to absorb Gaz de France, but only after another court ruled that GDF had not provided adequate information to trades unions, as required by law, and prevented its board from approving the deal.
The council also ruled that French utility prices must be allowed to rise, giving a huge boost the the French electricity giant EDF, which has seen its share price soar by around 10.5 percent in the past week.
GDF unions meanwhile, which are represented in the gas company's works council, strongly oppose the plan with Suez which they say will eliminate jobs.
The court decision that postponed the deal also threw it into the midst of campaigning for French presidential elections next year.
The Suez-GDF plan was widely seen as a pre-emptive defence against a possible hostile bid by Italian energy group Enel. Many analysts believe predators are following efforts to rescue the merger closely with a view to biding for Suez if the deal with GDF falls through.
But Enel has made it clear that any offer for Suez would require a sign that French officials would not seek to block the deal.
Meanwhile, the cash-rich German energy group RWE is rumored to be a potential bidder for Suez as the European energy sector consolidates with the blessing of the European Commission in Brussels.
"The Germans are interested in the French market, E.ON will get a foot in the door when it gets its hands on Endesa ... but RWE is not present yet," said a source.
The source referred to a bid by the German group E.ON for Spanish electricity company Endesa, which owns Snet, the second biggest electricity producer in France after the giant EDF.
Another source said: "Suez is not looking for a 'plan B'.
"They want the operation (with GDF) to take place within a secure judicial framework" which could be provided if the government adopted a law opening up energy markets before a deadline of July 1.
While that would allow Suez and GDF to finalise their deal before the April presidential election, the finance ministry said it was not considering such a move "at present".
AFP 07 1231 GMT 12 06
Copyright© 2001 AFP. All Rights Reserved.
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