GdF and Suez merged with nuclear agenda

Wednesday, 23 July 2008

Gaz de France (GdF) and Suez shareholders agreed their merger yesterday, creating an oil and gas giant with substantial links to nuclear energy. In a related move, Britain's Centrica has consolidated a controlling stake in Belgium's second-largest power company.

 

The new company, GdF Suez, is known to have desires to engage directly in nuclear energy generation. Previous statements from Suez made clear a desire to own and operate nuclear power plants by 2015-20, while Suez was quick to react to the latest announcement on new nuclear build from French President Nicolas Sarkozy. Suez said it would decide on taking part in new nuclear projects - presumably in Europe - "by the start of 2009 at the latest." It has established specialist nuclear departments and has made an agreement with Areva and fellow oil company Total on a two-reactor nuclear desalination project in the United Arab Emirates.

 

GdF Suez links with Areva go further: The nuclear company owns 1.2% of GdF Suez and its CEO, Anne Lauvergeon, sits on the GdF Suez board subcommittee on strategy and investment as well as another on ethics, environment and sustainable development. GdF Suez also owns a 5% equity stake in Areva's forthcoming Georges Besse II uranium enrichment facility.

 

The French state remains the largest shareholder in the new company, with a stake of 35.7%, resulting from a previous shares of 80% in GdF and 2% in Suez. The French state also owns 88% of Areva.

 

Changing stakes

 

Rights to a portion of the output from Electrabel's Tihange nuclear power plant are to change

In November 2006 the European Commission (EC) approved the merger of GdF and Suez, subject to conditions including that GdF sells its 25.5% stake in Belgian power company SPE. Britain's Centrica used a pre-emption right today to take that stake and form a controlling share of 51%. The right was established in a 2005 joint venture agreement between GdF and Centrica to control SPE, but had Centrica not exercised its right, it is thought that Electricité de France (EdF, 85% owned by France) would have bought the share.

 

Centrica is primarily concerned with gas, but was for a time closely linked with the future of nuclear generator British Energy. That company's future remains undecided, with EdF said to be the only remaining bidder.

 

Although SPE does not own any nuclear power plants of its own, the Belgian government has imposed two 'Pax Electrica' deals upon Electrabel, the country's nuclear operator which is also a part of Suez. Under these agreements, Electrabel is to make 30% of its generation capacity available to other companies. SPE already had a right to offtake 250 MWe of Electrabel's nuclear capacity, while 'Pax Electrica 2' would likely take that to a total of 535 MWe. Centrica will pay €515 million ($809 million) for GdF's former share on completion in September, subject to EC approval, and a further sum of up to €105 million ($165 million) based on the final terms of 'Pax Electrica 2'.