Suez Abandons Planned Sale of Assets Worth €3bn-€4bn to Electrabel

The French utilities group, Suez, has abandoned a planned sale of assets worth about €3bn-€4bn ( $3.7bn-$5bn) to its majority-owned Belgian energy producer, Electrabel, due to disagreement over price and uncertainty over market liberalisation. The sale would have included several key assets, including Elyo, the French energy services group, Distrigas and Fluxys, which own the monopolies for selling and transporting gas in Belgium, and Fabricom, an electrical contractor. The decision comes after Suez had already agreed in December 2002 to regroup all its European energy activities under one roof by selling those held by its wholly-owned Tractebel subsidiary to Electrabel.

Key Takeaways:

• The planned sale of assets worth €3bn-€4bn was abandoned due to disagreement over price and uncertainty over market liberalisation.
• The assets in question included Elyo, Distrigas and Fluxys, which own the monopolies for selling and transporting gas in Belgium, and Fabricom, an electrical contractor.
• Suez had already agreed in December 2002 to sell the European energy activities held by its wholly-owned Tractebel subsidiary to Electrabel.
• The sale was part of Suez's plan to reduce its debt by about a third in two years through non-core disposals and capital expenditure reductions.
• Suez has already cut its debt to about €16bn by shedding more than €10bn of assets, including stakes in Fortis, Northumbrian Water, and Ondeo Nalco.
• Assets still awaiting sale include Suez's 50.1% stake in Noos, the cable operator, and 16.7% of LDCom, the telecoms business of the Louis Dreyfus group.

Statistics:

• Suez debt reduction target: €9bn (about a third of its current debt) in two years
• Suez debt reduction achieved so far: €10bn (cutting its debt from €27bn to €16bn in one year)
• Stake in Electrabel: Suez now holds above 50% stake in Electrabel after lifting its stake in December
• Sale of Tractebel Installations & Maintenance: failed last summer due to disagreement on price
• Last year's performance of the businesses for sale: enjoyed a sharp rebound, increasing their overall value

Sources:

• "Suez abandons €3bn asset sale" in The Financial Times
• "Suez reports higher quarterly profit on lower charges" in Reuters
• Karl Neitvelt, analyst at Standard & Poor's, as quoted in The Financial Times