GDF Suez eyes asset sales before ‘difficult’ 2013

PARIS: French utility GDF Suez could carry out a major asset disposal by the end of the year to protect its credit rating going into what it said would be a difficult 2013.
The group’s net debt rose 8.3 billion euros in the first nine months of the year to 45.9 billion euros, swollen by the buyout of minority shareholders in British energy group International Power earlier this year.
In order to keep an “A” debt rating, which allows GDF to borrow at what it said are historically low rates of 4.32 percent, the group said asset sales were on the cards.
“Significant disposals could be done by the end of the year but without any significant impact on the 2012 EBITDA (earnings before interest, tax, depreciation and amortization),” Chief Financial Officer Isabelle Kocher said on a conference call.
Russian state-controlled gas giant Gazprom could be one of a number of potential buyers, having already flagged its interest in expanding into European gas production.
“If GDF wants to sell some European generation assets I can almost guarantee Gazprom gets a call,” said one analyst who asked not to be identified.
“(GDF) did buy back International Power earlier this year, and now they have full control over these assets it wouldn’t be surprising if they looked into it and say let’s offload some of them right now,” said the analyst who declined to be named because of company policy.
GDF earlier this year announced a 3 billion euro divestment plan on top of the 10 billion euros of assets it planned to sell between 2011 and 2013.
In April, GDF said it had yet to identify the assets it will sell but would focus on those located in mature markets. In May, it sold a stake in a power and water plant in Bahrain.
Analysts said selling some European gas generation assets could be the fastest way for the group to meet its target for a net debt-to-EBITDA ratio of 2.5 by the end of the year.
The group posted a 5.8 percent rise in nine-month core profits thanks to higher gas tariffs in France, and stuck to its full-year goals despite a tough economic environment in Europe.
EBITDA would have grown a more modest 1 percent without the impact of higher French gas tariffs.
“Market conditions in Europe remain difficult and we don’t see any improvement from this area coming from the markets in the near future,” Chief Executive Gerard Mestrallet told a conference call with analysts.
“We are therefore anticipating a difficult year in 2013,” the CEO added.
The economic slowdown in Europe is weighing on electricity margins, with cash-strapped consumers trying to save on their energy bills.
Shares in GDF were up 1 percent at 1300 GMT, outperforming a 0.68 percent rise in the European utilities sector.
“The beat was supported by the strong growth in E&P (exploration and production), while the European power businesses continued to be weak,” UBS analysts said in comments to investors.
Revenue at the group’s global gas and liquefied natural gas unit rose 47.6 percent compared with the same period a year ago to 3.582 billion euros, thanks to the rise in global commodity prices and strong production in Norway.
In the first nine months of the year, EBITDA reached 12.8 billion euros ($ 16.6 billion) as revenue grew 8.4 percent to 70.9 billion euros to end-September, mainly due to the one-off effect of higher French gas tariffs.
A French government freeze on its gas tariffs from Oct. 1 last year until Jan. 1 was overruled by a court this summer. GDF will recoup the loss gradually on French energy bills and estimated the net impact at 212 million euros.
The company said it still expects to achieve full-year recurring net income of 3.7-4.2 billion euros, up from 3.5 billion last year, as well as EBITDA of some 17 billion, despite the shutdown of two Belgian nuclear reactors until end-2012.