By an OGJ Online Correspondent
Paris, Mar. 23�Following strong growth last year in Gaz de France SA's five business areas, the French utility is planning investments to "at least" double to 20% its European natural gas market share, Chairman Pierre Gadonneix said at a press conference.
Since August, GdF has opened up its market in line with the gas liberalization process in the European Union, Gadonneix pointed out, even though the French Parliament has not yet approved the relevant directive. In addition, despite higher natural gas supply costs due to high oil prices and the dollar's appreciation, GdF managed to remain competitive, he said, by adapting tariff increases for each category of client and emphasizing flexibility.
GdF also limited the pretax price increases to an average of 14% in France, compared to an average of 30% in the other nonproducer European countries.
For its industrial clients�the large consumers which benefited from market liberalization�the price hikes were carried out on a quarterly basis. In 2000 GdF kept the pretax selling price of its gas at 3.65 centime/kw-hr compared to 4 centime/kw-hr for fuel oil, causing operating profits to fall.
Despite these setbacks, which Gadonneix hopes to correct this year, he reported GdF posted strong growth in each of its five businesses.
In trading and marketing , the group pursued diversification of its natural gas supplies by adding as long-term suppliers�Russia, Algeria, The Netherlands, Norway, and, more recently, Nigeria, and an LNG consignment from Qatar. It also made spot purchases in Europe.
With 12 million clients in 20 countries, including 2 million outside France, GdF plans to double its international client portfolio in 5 years.
Bolstered by its 2000 performance, GdF has outlined ambitious growth targets to be carried out in 2001-2003. Technical development expenditures in France will rise to 2.9 billion euros from 305 million euros, while external industrial investments will triple to 2.6 billion euros. This will increase the debt rate to 80% from the current 66%, which Pierre Gadonneix said is reasonable for a company the size of GdF.
Presently, the biggest challenge facing Gdf is the question of opening up the company to other investors. Gadonneix pointed out the question is not of privatizing GdF, but of turning it into a "soci� anonyme" to bring in shareholders such as Electricit�e France (EDF), TotalFinaElf SA, Statoil AS, and, possibly, another European company.
The state would still retain a majority stake. A member of GdF told Oil & Gas Journal Online there would be no point in just bringing in EDF, an option advocated by the left wing. He said that would be interpreted by the EU as an indication both are monopolies, and GdF would "lose a third of its clients."
The Socialist government had seemed to favor opening up GdF's capital structure as a way to boost its growth outside France.
However, since the regional elections, the Socialists have discovered they are being abandoned by the left wing. With legislative and presidential elections in a year, Prime Minister Lionel Jospin isn't ready to abandon this segment of his electoral base.
Opening up GdF's capital is unpopular with the left wing as well as with the Communist trade union CGT, which is very powerful within EDF and GdF. Reflecting this sentiment, Jospin told the EU Commission his government opposes full liberalization of the gas and electricity markets by 2005, a proposition championed by Loyola de Palacios vice-president of the European Commission. France has been criticized for lagging behind other EU members in privatizing and deregulating industries.
