Oct. 26 (Bloomberg) -- Electricite de France SA sued Veolia Environnement SA, the world’s biggest water company, over the right to own 50 percent of their Dalkia energy-services business, heightening tensions between the utilities’ chiefs.
Veolia plans to “strongly oppose” EDF’s suit, saying it’s without merit, according to a statement today from the water utility. “EDF lost its right to increase its ownership in the capital of Dalkia in 2005.”
EDF said 50-50 ownership of Dalkia by the two utilities was part of a December 2000 agreement, while “several” attempts to put it in place failed, according to its own statement.
EDF and Veolia said last year they were in discussions about the future shareholding of Dalkia, which has contracts for heating and cooling office buildings and hospitals. Veolia owns 66 percent of Dalkia in France, and EDF holds the rest. Veolia Chief Executive Officer Antoine Frerot said in March the company was building an industrial partnership with EDF and changes within the shareholding of Dalkia may follow. EDF CEO Henri Proglio said Nov. 8 that ownership may become 50-50, which Frerot confirmed a month later. Veolia would have operational control of the venture, Frerot said.
The lawsuit, filed Oct. 22, is the latest sign of friction between Frerot and Proglio, who resigned from Veolia’s board earlier this month. Proglio, who spent most of his career at Veolia, working his way up to chairman and CEO, now heads state-controlled EDF, Europe’s biggest power generator and the owner of a 3.9 percent stake in Veolia.
In recent months, Veolia held talks on a possible tie up with Suez Environnement, which is 34 percent owned by EDF’s competitor GDF Suez SA, the former French gas monopoly, according to three people with knowledge of the discussions. The two utilities said Oct. 21 that a merger isn’t planned. GDF Suez also has energy services businesses that compete with Dalkia.
Two weeks before EDF filed the lawsuit, Veolia said Proglio had resigned from the board.
EDF and Veolia don’t break out results for Dalkia, which reported 8.3 billion euros ($10.7 billion) in revenue last year, according to its website. EDF bought 34 percent of Dalkia in June 2000.
For antitrust reasons in France, where EDF was the power monopoly, EDF wasn’t granted management control of Dalkia operations in France although it shares 50-50 control outside the domestic market.
Veolia has pledged to sell billions of euros of assets and pull out of dozens of countries in a bid to lower debt and reverse losses.
Frerot earlier this year reshuffled the Veolia board, which in February backed the slimming down of the utility and Frerot’s position at the helm. This came after reports in the French press that Proglio had tried to garner support for Frerot’s ouster.
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