Gaz de France takes stake in German utility

Gaz de France, in association with the Berlin electricity utility Bewag, is to take the majority 51.2% stake in Gasag, Berlin's gas distribution company. The Berlin government, previous owner of Gasag, approved the deal, which, at presstime, was pending only approval of the Berlin parliament. The total amount of the transaction is 1.41 billion deutschemarks. The cost for GdF, which will have a 38.16% stake, will be 3.5 billion francs, making it the French utility's largest project

March 2, 1998

3 min read

The total amount of the transaction is 1.41 billion deutschemarks. The cost for GdF, which will have a 38.16% stake, will be 3.5 billion francs, making it the French utility's largest project abroad.

Deutsche Bank will finance 60% of the outlay.

The GdF/Bewag association competed with a combine of Belgian gas and electric utility Tractebel and Berlin water utility Berliner Wasserbelriebe, and with a group of Houston Industries, Ruhrgas AG, and RWE-DEA AG.

Other German partners in Gasag besides Bewag, whose stake now jumps to 25.2% from 11.95%, are Veba Oel GmbH 12.95%, and Ruhrgas and RWE Energie 11.95% each.

Gasag development

GdF and Bewag are committed to developing Gasag, mainly in the areas of cogeneration, underground storage, and energy efficiency.

Currently, Gasag distributes 1.5 billion cu m/year through a 6,600-km network, generating annual sales of 950 million deutschemarks, which GdF Pres. Pierre Gadonneix says will increase two-fold in the next 10 years.

This major investment in Germany is part of GdF's strategy to participate in international markets-especially in Europe-to adapt to a changing and deregulated gas market (OGJ, Sept. 22, 1997, p. 23).

"Gas operators are increasingly going global," noted Pierre Gadonneix, "and GdF must remain among the world's leading gas companies."

Although the utility is expanding its sales in France through new clients and by developing new services and products such as air conditioning, cogeneration, and natural gas-fueled vehicles, its domestic development is restricted by the fact electricity generation in Europe will continue to be nuclear-based for years to come.

GdF expansion

GdF is relying on France's location at a European crossroads-between fast-growing markets in the south and producers in the north-to make France a "pan-European gas hub." The firm already provides a transit route for Spain's gas supplies, and last year it signed contracts for the transit to Italy of Norwegian and Nigerian gas.

GdF will spend about 4 billion francs to complete its gas network for these purposes, but the gas transit contracts should generate 1 billion francs/ year for 25 years.

GdF also sells to foreign countries the gas it buys from its large suppliers. Last year, these sales doubled to 750 million cu m, most of which was sold to Hungary's MOL Rt.

GdF will spend 5 billion francs in the next 3 years on its international expansion projects, for which it continues to seek partners. If its 3-year expansion goals are met, GdF's non-French investments, which accounted for 10% of the firm's overall 55.2 billion francs in sales last year, would account for 20% of annual sales at the end of the period.

GdF's expansion strategy also involves going upstream to secure its own resources. The stakes it has taken in Elf Aquitaine's Elgin and Franklin fields in the U.K. North Sea, and in one of Total's Norwegian fields, amount to 15 billion cu m in gas reserves.