FRENCH PREPARE TO FACE RUSSIAN ENERGY

Western European governments are especially dubious of Russian intentions about oil and gas supplies after the manipulations of winter 2006 in Ukraine. The Sarkozy government is clearly preparing to challenge the Bear.

Companies to form global energy giant
Emma VanDore, September 3, 2007 (AP via Yahoo News)

WHO
French utility Suez SA (CEO Gerard Mestrallet), state-owned Gaz de France (CEO Jean-Francois Cirelli)

France has a big appetite for electricity and now it has a big company to deliver supply. (click to enlarge)

WHAT
The 2 French energy companies will combine to form GDF Suez, which will have the size to compete with Russia’s energy giant Gazprom in European and world markets.

WHEN
The deal, brokered by French President Nicolas Sarkozy and approved September 2, is expected to be finalized in 2008.

WHERE
GDF Suez will be one of the top 3 utilities in the world, the biggest gas importer in Europe and its 2nd biggest power generator after Electricite de France.

WHY
- Terms of the merger: 21 GDF shares = 22 Suez shares.
- GDF Suez will have a market value of $123.3 billion and revenue of $98.7 billion. The French government will be the largest shareholder. The size will give it the ability to reduce European dependence on Russian gas and foreign energy such as the increasingly powerful BRIC countries (Brazil, Russia, India and China).
- The company intends to grow business outside Europe.
- French unions oppose the deal because the new company will be private, diminishing their protections.
- Some European governments oppose the deal, calling it protectionist. It has been approved by EU central authorities.

Should Russian supplies of fossil fuels from the east tighten, France might be able to send electrons from the west to ease the pinch and counterbalance Russia's heavy hand. (click to enlarge)

QUOTES
- Suez CEO Gerard Mestrallet: “[GDF Suez] will play an essential role in the consolidation of the energy market in Europe…"
- The French Finance Ministry: “[GDF Suez] will boost the energy supply security, notably in gas, of France and furthermore of Europe."