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GDF Suez Quits Europe as Belgium Plans to Shut Reactors: Energy

GDF Suez SA Chief Executive Officer Gerard Mestrallet. Photographer: Brent Lewin/Bloomberg
GDF Suez SA Chief Executive Officer Gerard Mestrallet. Photographer: Brent Lewin/Bloomberg

June 19 (Bloomberg) -- Europe is driving its largest power and natural-gas utility off the continent.

GDF Suez SA is dealing with government caps on prices in France and Belgium, losing a 1.8 billion-euro ($2.3 billion) wind-farm project in France it spent five years preparing, and an early shutdown of as many as three atomic reactors in Belgium. Chief Executive Officer Gerard Mestrallet says he only sees expansion coming in faster-growing Asia and Latin America.

The Paris-based company’s shares have dropped 20 percent this year, a decline that’s wiped more than 8 billion euros from GDF’s market value and is more than four times the 4.8 percent slide in Europe’s benchmark power utilities index. As Mestrallet shifts investment into emerging economies, Belgium, where France’s former natural-gas monopoly got about 13 percent of revenue last year, may present his biggest headache.

“Belgium is probably the country in Europe where regulation is the most hostile,” Per Lekander, a UBS AG utilities analyst, said by telephone. “GDF Suez has given up on Belgium and France.”

Belgium’s coalition government led by Prime Minister Elio Di Rupo is preparing to start shutting GDF’s oldest reactors within three years, lawmakers said. The government has already doubled a tax on nuclear power to 550 million euros a year.

The frustrations of GDF Suez, whose origins date to a Suez Canal construction company in the 1850s, are shared by other regional utilities, especially those in southern European countries where austerity measures are hitting the economy hardest and forcing tax rises. Shares in Iberdrola SA, Spain’s largest utility, are down 28 percent this year, while Italy’s top power producer, Enel SpA, has dropped 27 percent.

GDF rose 1 percent today in Paris, trailing a 1.7 percent gain in France’s benchmark CAC index.

International Power

Mestrallet has moved toward emerging markets by agreeing to buy the 30 percent of International Power Plc it didn’t already own for $11 billion in April. The full acquisition of International Power adds hydroelectric projects in Brazil, gas-fired stations in the Middle East and coal plants in Asia.

The company, which got 65 percent of its revenue from the European Union in 2011, may sell assets in Europe after the International Power deal is complete, Mestrallet said in April.

“We want to accelerate our growth in rapidly growing emerging countries,” Mestrallet said in an interview at the time of the deal. “Growth in Europe in energy and power generation will be limited.”

GDF is the dominant power producer in Belgium, which gets about half its electricity from seven reactors operated by GDF’s Electrabel unit, a business valued at 25 billion euros ($31.4 billion) when Suez SA acquired half of Electrabel shares in 2005.

New Policy

Belgium’s Energy Minister Melchior Wathelet will unveil a new policy on power production by July 21 that could see the closure of as many as three reactors in 2015, reducing GDF’s revenue in the country.

“There is a high probability that at least one of the reactors will be closed,” said Joseph George, a Belgian lawmaker and a member of the same party as the energy minister. Either the 962-megawatt Tihange 1 generator in his constituency on the Meuse River or the twin 433-megawatt reactors at the Doel plant near Antwerp will be shut, he said.

“We will abide by Belgium’s forthcoming decision,” Philippe Pradel, vice-president of nuclear at GDF Suez said at an energy conference in Paris. “We believe prolonging operations of the three reactors would be a good economic solution. Nuclear has a place within GDF Suez.”

GDF is reviewing its entire nuclear strategy because of uncertainty about Belgian policy and the impact of the Fukushima disaster in Japan last year. The outcome will determine whether the company pursues nuclear projects in countries including the U.K., U.S., Brazil, Saudi Arabia and Turkey, Mestrallet said in April.


Belgium’s stance on atomic energy has flip-flopped over the past decade depending on the parties making up the government. Di Rupo’s six-party coalition, which took office in December after an 18-month power struggle, pledged a phasing out of nuclear power while guaranteeing supply security.

The possibility of a permanent halt of GDF Suez’s reactors highlights wider difficulties for the utility in Europe, especially in France and Belgium. Decisions by regulators in the neighboring countries have cost 1 billion euros in earnings before interest, tax, depreciation and amortization, UBS’s Lekander said. Total Ebitda was 16.5 billion euros last year.

Price Freeze Challenged

The operator of Europe’s biggest natural-gas network is waiting for a government decision over state-set prices in France, after it successfully challenged a price freeze last year. The company lost out on a tender to build offshore wind farms off the French coast in April.

The Tihange-1 and Doel-1 and -2 reactors, which came into service in 1975, provide about 10 percent of Belgium’s overall forecast power-generating capacity in 2014.

Belgium passed a law in 2003, when the anti-nuclear Greens were part of the government, that set a timetable for Belgium’s atomic-energy exit, with the three oldest reactors scheduled to be halted in 2015 after 40 years of operation and the rest between 2022 and 2025.

The oldest were given a reprieve in 2009 when a different government agreed to extend their operating lives by a decade in exchange for Electrabel paying an annual tax of as much as 245 million euros. That accord never gained legal status because of political instability. Wathelet is expected to outline how long the utility can keep running the reactors and whether new gas-fired plants can be built.

Nuclear Pullout

“The principle of a pullout from nuclear energy as foreseen by the law is confirmed,” Aart Geens, energy adviser to Wathelet, said in a telephone interview. “What needs to be fine-tuned is the timing. We can’t jeopardize the security of supply of our country.”

Fueling debate in Belgium is a report by the energy directorate on the country’s production capacity through 2017 which warns there may be a shortfall in capacity for peak demand, with the deficit reaching as much as 4,533 megawatts three years later.

“The findings are alarming,” the lawmaker George said in the interview. “The 2003 law was naive. We believed someone would just come along and invest in new power plants. We now know that isn’t going to happen unless there are guarantees of profitability over decades.”

Electrabel has long come under criticism for controlling a majority of Belgium’s power market. This grew stronger after its owner Suez SA merged with Gaz de France SA in 2008, handing the French government a 36 percent stake and a golden share.

Gas Freeze

The before-tax annual earnings from the three oldest reactors were 150 million euros, Paris-based GDF Suez reported in February. The utility last month announced a freeze in gas and power prices and a plan to shut some of its thermal plants in the country.

“Belgians are preoccupied with the cost of electricity,” Karine Lalieux, a lawmaker from the prime minister’s French Socialist Party, said in an interview. “They have the impression that there is some sort of transfer of Electrabel profits to France.”

Like George, Lalieux says the government will likely make plans for shutting at least one reactor in 2015 in a bid to compromise between sticking to the phase-out plan and ensuring there aren’t blackouts in the next five years. Some junior parties in the coalition and pushing for life extensions.

“If the government decides to shut the reactors I don’t think there will be much celebrating in Paris,” Kristof Calvo, a Greens lawmaker in parliament, said by telephone. “Extending their lives would be a gift from Belgium to Electrabel, which has long been a cash cow for GDF Suez. It’s either Champagne for Belgian citizens or for Mestrallet.”

To contact the reporter on this story: Tara Patel in Paris at

To contact the editor responsible for this story: Will Kennedy at

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