GDF Suez Net Rises 14% on Higher Gas, Power Prices

By Tara Patel

Sept. 1 (Bloomberg) -- GDF Suez SA, the world's second- biggest utility, said first-half profit rose 14 percent on higher power and natural gas prices.

Net income advanced to 3.38 billion euros ($5 billion) from 2.96 billion euros a year earlier, the Paris-based company said today in an e-mailed statement. That beat the 3.16 billion-euro median forecast of 10 analysts in a Bloomberg News survey.

The results are the first since the merger of Gaz de France SA and Suez SA last month. The combined company, which is seeking to challenge Electricite de France SA, confirmed short and medium-term financial targets and announced an interim dividend payment of 0.8 euro a share. It plans to buy back 1 billion euros of shares before the end of the year.

GDF Suez said its average number of shares in the first half of 2008 was 2.17 billion, giving earnings per share of 1.56 euros, according to Bloomberg calculations. The company didn't provide its own figures.

Earnings before interest, taxes, depreciation and amortization, or Ebitda, climbed 20 percent to 8.1 billion euros. The median forecast in the survey was for profit of 7.76 billion euros on this basis.

Gaz de France's net profit rose 13 percent to 1.7 billion euros, while that of Suez increased 11 percent to 2.05 billion euros, the statement said.

GDF Suez fell 1.2 percent to 39.40 euros in Paris on Aug. 29. They have dropped 6.2 percent since their trading debut.

Power Rates

Describing GDF Suez as their ``favorite French pick,'' Credit Suisse Group AG analysts including Elisenne Verdoja wrote in a report Aug. 28 that the company is benefiting from rising commodity prices and a ``benign regulatory environment'' in France.

GDF Suez sales rose 17 percent to 43.1 billion euros due in part to ``growing energy sales in Europe and internationally against a background of high market prices and a well-balanced and developing power generation base,'' the statement said.

French utilities' earnings are capped by regulated household power rates that are among the lowest in Europe. The Finance Ministry last month allowed regulated power rates for households to rise by as much as 2 percent. Charges were allowed to climb by 2 percent for small companies, 6 percent for mid- sized businesses and 8 percent for large consumers. Natural-gas tariffs were allowed by climb by an average of 5 percent.

The French government has a 36 percent stake in GDF Suez, compared with a controlling stake in Gaz de France.

Growth Target

GDF Suez expects growth of more than 10 percent this year for Ebitda, which is expected to reach about 17 billion euros in 2010. The company said it expects to make 1 billion euros in cost savings annually by 2013 and invest 10 billion euros a year through 2010.

The company has said it's also seeking to double gas reserves to 1.5 billion barrels of oil equivalent from 2006 levels, mainly through external growth as well as boosting European gas-storage capacity by more than 35 percent by 2013. It also wants to gain as much as a fifth of the French power market by pushing dual gas and electricity supply to clients, according to an Oct. 15 statement.

Suez has long signaled its interest in investing in so- called third-generation nuclear reactors. Suez's Electrabel SA unit is Belgium's biggest power company and the owner of the seven atomic generators at the country's two nuclear plants.

Of the 20 analysts tracked by Bloomberg who cover GDF Suez, 14 have a ``buy'' rating on the shares, five recommend holding the shares and one says to sell.

To contact the reporter on this story: Tara Patel in Paris at Tpatel2@bloomberg.net