• Home
• /
• Business

GDF says awaits Suez steps on planned merger

‘It is up to Suez to make the necessary steps to ensure the 18-month-old project goes ahead,’ GDF Chief Executive Jean-Francois Cirelli told reporters after the French group posted lower interim profits, hit by the mild winter.

‘To reach an agreement we are now waiting for Suez to make the final steps,’ Cirelli said, declining to say what these steps were.

The Suez-GDF deal was originally drawn up as a merger of equals, but the valuation gap between the two has widened.

With Suez shares now around 5 euros above GDF’s share price, analysts have suggested Suez will have to slim down by shedding its water and waste businesses and using the cash to pay an extraordinary dividend to its shareholders.

But Suez has repeatedly opposed the move and was reported on Tuesday to have written to French President Nicolas Sarkozy to propose an alternative way to resolve the financial impasse which threatens the 90 billion euro ($122.3 billion) project.

Cirelli said on Wednesday GDF remained committed to the deal, but said projects in liquefied natural gas, exploration and production, and gas storage made him confident in GDF’s medium- and long-term growth prospects as a standalone entity.

‘This is a project in which we invested a lot. If the project does not take place, I will regret it, but we will move ahead and without second thoughts,’ he said. ‘We are confident in the future whatever the hypotheses.’

Great company

Cirelli declined to comment on possible alternative deals for GDF, only saying: ‘We are confident in the strength of GDF. I don’t subscribe to the idea that GDF is small and fragile. We are a great European energy group with a lot of projects ahead.’

GDF had earlier reported first-half profits marked by what Cirelli said was an ‘exceptionally’ warm winter that capped gas sales, but it nonetheless stuck to a full-year target for core earnings in line with those of 2006.

Net profit for the first six months fell to 1.51 billion euros ($2.1 billion) from 1.70 billion in the same period last year, marginally below the average forecast of 1.52 billion in a Reuters poll of 10 analysts.

GDF shares were up 1.2 percent at 34.29 euros by 1000 GMT, while Suez rallied 2.9 percent at 39.45 euros amid renewed speculation that it could become a takeover target again if the planned alliance with GDF falls through.

‘These results seem better than expected,’ brokerage CM-CIC Securities said. ‘However, the key issue at stake is the outcome of the merger and there are an increasing number of downbeat comments on this.’

Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 4.9 percent to 3.11 billion euros, and operating profit slipped to 2.33 billion euros from 2.55 billion.

Analysts had on average forecast EBITDA of 3.09 billion euros and operating income of 2.29 billion.

Gaz de France has already posted half-year sales of 13.78 billion euros, down from 15.42 billion a year ago.

GDF’s core gas distribution activities in France bore the brunt of the mild weather, with EBITDA down 24 percent to 686 million euros, overshadowing a 12 percent increase in earnings from transmission and storage activities.