GDF ditches monopoly past, invests in growth markets

By Geert De Clercq and Benjamin Mallet PARIS (Reuters) - GDF Suez , with its traditional European business under pressure, plans to focus investment on power production in fast-growing emerging economies and on Europe's shift to renewables and energy efficiency. The French former gas and power monopoly plans to invest 9 to 10 billion euros per year in the next three years, of which only 2.5 billion to maintain existing assets, with a focus on small to medium-size acquisitions. In 2013, GDF invested 7.5 billion euros. "It is clear that the utilities business model is changing. We want to grab all new opportunities," Chief Executive Gerard Mestrallet told a news conference about 2013 earnings. GDF announced a 15 billion euro writedown on European gas-fired power plants and gas storage facilities that knocked the firm to a 9.74 billion euro loss. Mestrallet said that once two planned power plants in Germany and the Netherlands are finished, GDF will build no new power plants in Europe for the foreseeable future and will focus generation investment on growth markets. At the end of 2013, GDF had 15 gigawatts of projects under construction or under advanced development, of which close to 90 percent in fast-growing markets. One gigawatt is roughly equivalent to the output of one nuclear plant. The group is also targeting strong international growth for energy services. It wants to increase revenues from energy efficiency by 40 percent between 2013 and 2018 and to double sales outside Europe by 2019. GDF unit Cofely is the European market leader in energy services - heating, cooling and ventilation systems and services - with sales of around 15 billion euros. GDF also aims for more growth in its liquid natural gas (LNG) business, which is booming due to high demand in Japan and other Asian countries. It is targeting production of 59 to 63 million barrels of oil equivalent (mboe) by 2016 vs 52 mboe in 2013 and aims to develop its LNG supply portfolio from 16 million metric tons per annum (mtpa) to 20 mtpa by 2020. MONOPOLY HERITAGE The former French monopoly gas supplier's unions are not happy with the shift out of GDF's traditional French market and have denounced the 2008 merger between GDF and Suez that created the company. In an interview with Le Monde newspaper, Mestrallet said GDF cannot cling on to its old monopoly supplier heritage. "This old world, I am writing it off in our accounts. I want to change GDF's culture and invest in the new world," he said. Mestrallet told a results briefing on Thursday that GDF's investments in Europe would focus on the socalled energy transformation - a shift to less polluting sources of energy and greater energy efficiency. The group wants to be a leader in renewable energy, he said, adding that GDF is investing strongly in biogas. He has also created a new division that will focus on new activities like smart grids, digital metering, demand management and LNG retail. The new unit reports directly to Mestrallet. Mestrallet said that, with GDF's debt now under 30 billion euros, a year ahead of schedule, it has halted a divestment program that targeted 11 billion euros of asset sales and which realized 5 billion euros worth of sales in 2013. The firm plans to return to its normal rhythm of two to three billion euros worth of "rotational investment", focused entirely on growth. (Editing by Tom Pfeiffer)