GDF Suez Rises on Forecast for 2013 Earnings Near Top of Range

GDF Suez SA, a French power and gas utility, advanced the most in 1 1/2 years in Paris trading after saying 2013 profit will be near the top of its targeted range.

GDF Suez jumped as much as 6 percent, the biggest intraday gain since November 2011, and was up 5.3 percent at 16.61 euros as of 12:41 p.m. local time. Trading volumes already exceeded the three-month daily average.

“We are very confident in our ability to reach our targets,” Chief Financial Officer Isabelle Kocher said today on a conference call. “There is a high probability for us to be closer to the upper range than the bottom.”

GDF Suez, hurt by lower demand for gas-fired power, is cutting capacity to contain costs. The utility has closed or mothballed about 8,600 megawatts of plants in Europe since 2009 and sought expansion in Asia, Latin America and the Middle East to counter the decline at home. Chief Executive Officer Gerard Mestrallet said today he may pursue further shutdowns or sales.

“We hope to announce some movement in the coming weeks in the reduction of our exposure to thermal power generation in Europe,” Mestrallet said in a presentation, describing the potental sales and halts as a “strategic reorientation.”

GDF Suez today reported a 26 percent decline in first-half net income to 1.73 billion euros ($2.3 billion), and kept a target of net recurring earnings of 3.1 billion euros to 3.5 billion euros for 2013. The utility announced a stable interim dividend of 83 cents a share.

Adverse Market

“We are suffering from adverse conditions in the European markets,” Kocher said. Longer-than-expected shutdowns of Belgian nuclear reactors for safety checks will cost 318 million euros in earnings before interest, taxes, depreciation and amortization this year.

Net debt fell to 32.2 billion euros as of June 30, down 4.4 billion euros from the end of last year, the company said. It’s seeking an 11 billion-euro effect on net debt from asset sales this year and next to reduce borrowings to about 30 billion euros by the end of 2014.

At the end of last year GDF Suez reduced earnings targets, citing a “demand crisis” in Europe’s energy markets. In February the utility wrote down the value of its power plants in Europe by 2 billion euros, saying weaker demand, falling emission-permit prices and the cost of gas relative to coal combined to make generation unprofitable.

Impairment Charges

GDF Suez recorded a further 200 million euros of impairments in the first half after mothballing gas-fired plants, Kocher said today.

“The group is evolving in a still uncertain and challenging economic environment, particularly in power generation in Europe where depressed market conditions do not yet offer any sign of improvement,” GDF Suez said.

As European utilities shut more than 30,000 megawatts of capacity across the region, countries will have to take “urgent measures” to protect security of supply this winter, Mestrallet said. GDF Suez plans to review an additional 2,000 megawatts of capacity in southern and eastern Europe in the coming months after mothballing 1,400 megawatts in the first half.

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