French assembly to vet gas

As the European Commission continues its study of the proposed merger between Suez and Gaz de France, French politicians are gearing up for a heated debate in the opening session of their parliament next week (7 September).

The centre-right UMP administration hopes to see approval of the draft law on the further privatisation of Gaz de France, a pre-condition for the merger with Suez, voted through by the end of September. Much of that month has been set aside for an examination in parliament of the 30,000 amendments to the law requested by the opposition Socialist party.

The law would reduce the state’s stake in Gaz de France, a pre-condition for the merger to go ahead, to 34%, way below the current legal minimum of 70%. Socialist member of Parliament Alain Vidalies, in charge of economic affairs for the French Socialist party, said: "We will put up a very fierce fight at the National Assembly [France’s lower house]. We remain completely opposed to this project."

Thierry Breton, minister for the economy, finance and industry, is still holding last-minute meetings with UMP politicians to ensure no doubts remain over the logic of the deal ahead of the French parliament’s opening session, said a government source. Breton’s summer has been spent ensuring there are no potential detractors within his own ranks.

The source denied that the scale of Socialist demands would delay the legislation, which was originally supposed to be pushed through parliament before the summer, but was postponed at a time when the government was still enmeshed in the Clearstream financial scandal.

"It is now the time for politicians to decide if they want to privatise Gaz de France," said Antoine Lenoir, spokesperson for Suez. "Nobody doubts the industrial logic of the merger."

But the deal still hangs in the balance at EU level. This Friday (1 September), both Suez and Gaz de France are due to send written replies in response to a statement of objections issued by the European Commission two weeks ago (18 August). Objections raised included competition concerns relating to Belgium’s electricity and gas markets (Suez owns Electrabel and Distrigas, dominant players in the country’s electricity and gas sectors) and France’s gas market. The Commission will issue its final ruling on the merger by 25 October.

"I can tell you it was not a surprise," said Lenoir, referring to the Commission’s demands. "We are just following a normal process that is always the same in merger situations. That’s the way all mergers have to proceed. This has been part of the discussion since the launch of the merger project in February [2006]."

Earlier this week, both companies evoked the threat of the EU’s potentially excessive dependency on Russian gas giant Gazprom as an additional defence of their merger project. Lenoir denied that this was a new strategy designed to win over any remaining doubters within the UMP. "It’s been two years since Gérard Mestrallet talked about the problems of

European dependency on outside [companies]," he said, referring to Suez’s chief executive.

Vidalies rejected the new argument. "The problem is that Suez is not a producer of gas, it is a distributor," he said. The merger would only increase capacity [of the new entity] by 25% in total. This new company would not be strong enough to withstand a bid from ENEL or any other company, including Gazprom."

As the European Commission continues its study of the proposed merger between Suez and Gaz de France, French politicians are gearing up for a heated debate in the opening session of their parliament next week (7 September).

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