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Thu, Oct 05, 2006 - Page 10 News List

GDF privatization bill passed

FRENCH PARLIAMENT The measure will allow Paris to cut its stake in Gaz de France so the company can be bought by Suez, thereby creating Europe's biggest gas group

AFP , PARIS

French lawmakers approved on Tuesday an energy bill that paves the way for privatization of the state-owned gas group GDF and its merger with the private French company Suez.

The French state intends to cut its holding in Gaz de France (GDF) from 80.2 percent to 34 percent so that it can be acquired by Suez, a French energy and water company listed on the stock market.

The deal is set create the biggest gas group in Europe, and the continent's fifth-biggest producer of electricity.

The bill was passed in the French parliament by a majority of 327 votes in favor and 212 votes against.

To become law, it still requires the approval of the French Senate and President Jacques Chirac, neither of which are expected to be obstacles.

If investors in Suez then approve the merger, a new entity worth about 70 billion euros (US$90 billion) would result.

The plan has been fiercely opposed by the opposition to the center-right government, and by trades unions, seven months before a presidential election.

Opponents say that a privatized GDF would likely raise its prices, while unions are also fighting to preserve the gas group's public service status.

Opposition lawmakers attached a record of 130,000 amendments to the bill. The privatization clause alone was the target of 32,505 amendments.

The ruling center-right UMP party had faced revolt in its own ranks as well, but a campaign by Finance Minister Thierry Breton to quell opposition appeared to have succeeded.

The proposed GDF-Suez deal has been justified by the French government as a defense against increasing competition in the global energy market and by the prospect that in the next 10 to 15 years Europe will face increasing challenges in securing energy imports.

But the plan for Suez to absorb GDF emerged just as it became apparent that the Italian energy group Enel was likely to bid for Suez to acquire its interests in Belgium.

France, rejecting suggestions that it had cooked up the plan to make Suez too big to swallow, said a GDF-Suez merger had been in the making for some time to create a gas and electricity group big enough to negotiate supplies from a position of strength.

The European Commission is concerned that some EU countries are tending to organize large energy groups around national interests in breach of the spirit and letter of EU policies.

On Tuesday however, Breton said he had "good hope" regarding negotiations between the Commission, Suez and GDF over potential problems stemming from the merger.

GDF president Jean-Francois Cirelli acknowledged his group was "very attached" to some of Suez's electrical production assets in Belgium that could pose competition problems for the EU Commission.

The Suez subsidiary Electrabel operates seven nuclear reactors in Belgium, while GDF owns 25 percent of the second largest Belgian electricity group SPE.

Brussels therefore wants Suez to give up some of its production capacity in the country.

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