Bloomberg News

GDF Suez Won’t Cut Dividend in Response to Freeze, Tax

November 18, 2011

(Updates with CEO comment from second paragraph.)

Nov. 18 (Bloomberg) -- GDF Suez SA, operator of Europe’s biggest natural-gas network, won’t cut its dividend for the next two years even as the company struggles to cope with a freeze on domestic gas tariffs and higher taxes in Belgium.

The annual payout to shareholders will be “at least equal” to last year’s dividend, while sales and earnings before interest, tax, depreciation and amortization will be higher, Chief Executive Officer Gerard Mestrallet told an investor conference today in Paris.

The utility, which is based in Paris, is dealing with a freeze in natural gas prices in France for consumers ahead of next year’s presidential elections and a more than doubling of a nuclear tax in Belgium. GDF Suez has mounted a legal challenge against the French government, its biggest shareholder, over the price freeze and has vowed to contest the Belgian tax using “all legal means.”

The company posted Ebitda of 15.1 billion euros ($20.53 billion) last year on sales of 84.5 billion euros. It paid a dividend of 1.50 euros a share.

GDF Suez’s growth will come in part from raising power production outside Europe, Mestrallet said, adding that regulatory decisions by the French and Belgium governments have depressed the company’s share price. The stock is down 28 percent this year.

‘Hurting Us’

“There are two state decisions that are hurting us,” Mestrallet said today. “This is the kind of thing that is happening now.”

Regulatory decisions have multiplied and “the utility industry isn’t doing very well,” he said. The French gas price freeze will result in a shortfall for the company of 400 million euros, GDF Suez has said.

The Belgian decision would raise an annual nuclear tax to 550 million euros from a previously-agreed annual level of 215 million to 245 million euros, GDF Suez has said. It would also cancel a 10-year lifetime extension for three reactors in that country.

Shutting the reactors in 2015 would lower GDF Suez’s Belgian nuclear capacity by about a third, or 1,800 megawatts, effectively reducing the utility’s worldwide electricity production capacity by 2 percent, Mestrallet said today.

“I am fighting this,” he said.

--Editors: Stephen Cunningham, Tony Barrett.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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