GDF Suez (EPA:GSZ)

TOP CONTRIBUTORS

Ser.Blentzas grmike.blogspot.com

GDF Suez (EPA:GSZ, NASDAQ:GDFZY) is a major multinational energy company involved in the production and marketing of nonrenewable (natural gas (Europe's largest gas supplier), coal, fossil fuels) and renewable energy (wind, hydro, biomass, nuclear, solar (after the acquisition of International power is completed). As the world's second largest utility company behind its French counterpart EDF, its operations are global being the leading public energy generation comany in at least 4 other countries; Belgium, Netherlands, Brazil and Thailand (although about 80% of its revenue is from Europe). In numerous countries such as Germany and Egypt the company also has oil & gas production and exploration projects (reserves of 763 million boe).^[1] Its venture into the oil business generally began in 2008 with an oil and pipeline investment in the North Sea. Even though a major part of the company GDF (before the merger of it and Suez) has a history of being state controlled today the government of France only has a 35% interest. With over 180,000 employees and almost 80 billion in revenue in 2009 (25th highest) it is one of the largest companies in the world (ranked 24 overall by forbes in 2010 and 17 in 2009).^[2]

Company Overview

The company's business is divided up into 8 parts, Energy France, Energy International, Infrastructures, Energy Services, Suez Environment, Energy Europe and Energy Benelux & Germany. GDF Suez is also active in natural gas liquification, partnered with Santos in Boneparte, Australia. Its Liquefied Natural Gas (LNG) plant there processes gas from 3 fields (petrol, tern and frigate) which it also has joint ownership of. The part of the company that originated with Suez offers waste management (through Sita, the largest such company in the UK and Australia) and water purification/treatment services (United Water in the UK, USA, and Australia, Grupo Agbar concentrated in Spain). In China through partnerships (one is with Chongqing Energy Investment Group (CQEIG)) subsidiaries Suez Environment and Suez Energy run water treatment operations in Chongquing and urban area heating, cooling schemes for the largest municipality in the world.^[3]

Energy France's business is strictly that of a French utility company; electricity generation and natural gas marketing in France. The Benelux & Germany division oversees only those associate companies in the area of Benelux & Germany that generate and distribute electricity.

At the end of 2009 (before the acquisition of International Power) GDF Suez had 200,650 employees.

Divisions^[4]

• Infrastructures - oversees critical distribution networks and liquid natural gas terminals and storage facilities in Europe. in 2008 employees were numbered at 17,400.

100% owned subsidiary GRTgZ operates a 32,000 km long transmission network. There are also regional subsidiaries in Belgium (45% owned Fluxys which operates the Zeebrugge terminal), Germany (44% owned Megal) and Austria (34% owned BOG).

The division also has 12 underground storage centers managed mostly by 100% owned subsidiary Storengy. Also has an interest in Quebec through Intragaz.

• Energy Europe and International - does business in over 30 countries where its 25,000 employees handle electricity and gas projects. It is a leader in energy distribution in Italy, Romania and Hungary as well Turkey (Kocaeli) through Izgas. In addition to markets it has traditionally dominated (Benelux and other Western European countries) it is a top 3 energy producer(private, electricity) in Peru, Panama and The trading and portfolio management department deals with asset optimization.

• Global Gas & LNG (energy trading subsidiary Gaselys) - secures the group's gas supplies through production assets, and contracts (most are long term which is great because there are few short term problems with regards to supplies, many of the contracts are with large fully capable producers such as Gazprom and Sonatrach). Gas producing assets can be found in Norway, Germany, the Netherlands and the UK. There are also 17 LNG tankers and major terminals which gives the company more control over the supply chain. Liquifaction plants process the gas.

• Energy Services - (Largest subsidiary is COFELY (35,000 employees, already in 15 countries) started in 2009 as a means to better unify business in Western Europe, replaced Cofathec and Elyo, will eventually replace regional companies in Italy, Belgium and Netherlands)

Almost 80,000 employees serving 120,000 customers in the areas of consultation design (as well as helping to implemenrt those changes) regarding energy producing industrial factories and plants (including urban heating and cooling networks (runs 110 of them)). Recent acquisitions include Czech Republic company Spectrum.

Environment - deals with water and waste management (for 59 million people, over 1100 waste treatment and recovery locations, Suez Environment is 35% owned). The division employed 65,400 people in 2009. Concerned with sustainable development and the balance between urbanization and the environmment (including pressures on natural resources). It also deal with recycling, sorting materials and design and maintenance.

Business & Financials

First six months of 2011 revenue up to €45.678 billion up 7.9% versus the 2010 half (€42.346b) attributable to the consolidation of International Power into GDF Suez, as well as the consolidation of Agbar by subsidiariary Suez Environment (Agbar was previously part owned by Acea of Italy). The company did lose €625 million in revenue due to the divestment of Adeslas by Suez Environment. Ebitda was 8.2% higher however most of the increase was due to acquisitions and exchange rate effects (without considering that ebita was 1.1% smaller; In contrast, International Power recorded 25.7% organic growth in ebitda) - Newly added International Power accounted for €305m or 45.5% of the €671m growth in ebitda. International Power was boosted by new business in Latin America and North America. GDF's largest source of Revenue, France showed big drops in revenue (down 8.5% to 7.4b), ebitda (down 18.3% to 598m) due to a warmer winter causing significant drops in gas demand (gas sales down 24% to 131 TWh) and electricity demand (down 3% to 18.3 TWh).^[7]

First nine months of 2010 electricity sales in the wholesale market were up substantially in nearly ever major region (Germany up to 13.8 TWh) however energy services business in Belgium and the Netherlands was down as a result of stagnation in the country (private customers led the decline, the slow in business was softened by government infrastructure projects) and up in France where installation and maintenance activity was up 4.1% (countered by lower energy prices). The company's largest growth came from the Middle East, Asia, Africa and Latin America (combined for 29.9% sales growth, a lot of that growth can be traced to business in Singapore (Senoko), Thailand and the Marafiq project in Saudi Arabia). Steady but showing signs of weekness were the North American, European and Energy Services divisions (all were within about 2% of 2009 first nine months results). Suez Environment had organic growth of 9.7% a result of international expansion in the sorting and recycling business (won commercial contracts in the UK and France related to PFI's. Global Gas and LNG suffered from low short term sales (13.96% decline in electricity sales (down 10.9 TWh), 7.82% decline in natural gas sales to its largest European clients (down 10.1 TWh)) but was buoyed by external LNH sales (up 149.5% to 23.2 TWh almost a third of that growth coming from Asia).^[5]

• Source for data 2007^[8] 2008, 2009^[9] 1HFY09, 1HFY10^[10] 1HFY11 ^[7]

Capital Expenditure was 227% higher for suez environment compared to the previous years period however small decreases in 8 of the other 10 divisions (middle east, asia, africa, latin and north america are the only places that had higher capex) resulted in an overall decrease of 2.49% compared to the period in 2009. Between 2008 and 2009 current assets fell 5.6% from €52 billion to €49.1 billion while total equity grew 2.7% from €62.8 billion to €65.5 billion. Also in 2009 the company's financial debt grew 9% to €42.3 billion.

Production and Generation Capacity

In terms of oil and gas production in 2009 GDF Suez produced about 144,932 boe/day (73% gas, 27% oil). Reserves are 762.9 million boe (76% gas 24% oil).

Competition

Purchase of International Power

In the summer of 2010 GDF Suez completed a takeover (conditional of shareholder approval) of former British rival International Power for £1.4 billion in cash, €4.4 billion in debt, and a transfer of some of its assets outside Europe and the UK and Turkey to International Power operations. With 66.1 GW of generating capacity it will be the largest independent power producer. The merger creates €165 million in pretax savings and expands market access in places like France for International Power and the UK, and Turkey for GDF Suez.^[19]

International Power financial data

• Source for data 2007, 2008, 2009^[20] 1HFY09, 1HFY10^[21]

Trends and Forces

For the last couple years European countries Germany and Belgium have threatened to levy new taxes on nuclear energy production/nuclear production fuel. GDF Suez already faces increased taxes up to half a billion euro in Belgium that it is fighting and has refused to pay (despite losing a court battle on the issue in April 2010), $3 billion in higher taxes in Germany would be bittersweet since such a move would have a much larger impact on one of its biggest competitors RWE AG which is the second largest electricity producer in Germany (14-15% was from nuclear power in 2007) where 72.1% of its global production from nuclear energy happens and about 60% of its total energy generation.^[22] Belgium operations are handled by subsidiary Electrabel.^[23][24][25] Possibly as a result of more attractive tax laws and better cooperation with government in Italy, GDF Suez has partnered with EOn and Enel to jointly explore nuclear production possibilities in the country (nuclear power was phased out in 1987 but new legislation in 2009 had stated goals for power generation to be as high as 25% by 2030.^[26]

GDF Suez Invests $900M in two Latin America Thermal Power Plants

On November 30, 2011 GDF Suez inaugurated two new 300 megawatt (150 MW each) thermal power plants in Northern Chile (Andina and Hornitos). The plants will serve primarily Chile's Esperanza and Gaby copper mines. Power demand in Chile is growing with annual growth at 6%.^[27]

References

1. ↑ DF Suez and UK's International Power renew merger talks news (2010-07-19).
2. ↑ GDF Suez (2010-04-21).
3. ↑ [1]
4. ↑ GDF Suez Operational Organization. Retrieved on 2010-10-29.
5. ↑ ^{5.0 5.1 5.2} GDF Suez 2010 Third Quarter Results (2010-03-11).
6. ↑ GDF 3q11 press release (2011-10-27).
7. ↑ ^{7.0 7.1} 2011 June 30 1H Report
8. ↑ [2]
9. ↑ ^{9.0 9.1 9.2} 2009 Annual Report
10. ↑ 2010 First Half Annual Report
11. ↑ [3]
12. ↑ EDF Financials Hoovers
13. ↑ [4]
14. ↑ [5]
15. ↑ E.ON 2009 Annual Report p. 11
16. ↑ GDF Suez Financials Hoovers
17. ↑ [6]
18. ↑ [7]
19. ↑ GDF Suez to Control International Power
20. ↑ International Power Finance 2010
21. ↑ International Power plc Interim Report six months ended 30 June 2010
22. ↑ RWE 2009 Annual Report
23. ↑ Belgium court rules on nuclear tax (2010-04-06).
24. ↑ Belgium wants GDF Suez nuclear tax commitment (2009-10-21).
25. ↑ Merkel's Nuclear Tax Plans Spark Share `Overreaction,' DIW's Kemfert Says (2010-08-12).
26. ↑ GdF Suez, EOn partner on Italy 8 June 2010
27. ↑ GDF Suez powers Chilean copper mines (November 30, 2011).