January 15, 2013 / 6:20 PM / 5 years ago

French utilities to cut costs, sell assets

PARIS (Reuters) - French utilities EDF (EDF.PA) and GDF Suez GSZ.PA have announced cost cuts and asset sales to further shore up balance sheets hit by high debt and slack demand.

EDF, which runs France’s 58 nuclear reactors and is 84.4 percent state-owned, said on Tuesday it will announce cuts when it releases full-year results on February 14.

French daily Le Figaro reported the cuts would total 1 billion euros $1.3 billion (809 million pounds) and focus on information technology and suppliers, but would not involve layoffs.

A spokeswoman told Reuters that EDF would maintain planned investment in its network and on nuclear maintenance, as well as the planned hiring of 6,000 new staff, or a net 2,000 new jobs.

The savings plan will come on top of a 2.5 billion euro plan launched in 2011 and due to be completed in 2015.

“EDF could go further if it wanted, but one cannot expect a state-controlled company to increase unemployment in France in order to benefit foreign shareholders,” a London-based utilities analyst told Reuters.

Several utilities have announced austerity drives and asset sales as Europe’s weak economy and the relentless drive to save energy hits demand for electricity.


GDF Suez, Europe’s biggest utility, said in December it would cut costs by 3.5 billion euros by 2015.

On Tuesday, GDF Suez and German peer E.ON (EONGn.DE) sold a 49 percent stake in Slovak gas utility SPP to Czech energy firm EPH for 2.6 billion euros.

GDF has now raised 5 billion euros from disposals and aims for another 11 billion under its new programme for 2013/14. It said the Slovak deal would help cut debt by about 1.3 billion euros from 46 billion at the end of last year.

The deal was a milestone for E.ON, which has now sold 17 billion euros of assets, topping its target of 15 billion by the end of 2013.

    EDF shares gained 2.1 percent, outperforming a 0.3 percent higher CAC 40 index .FCHI, boosted by a string of positive brokerage reports. GDF Suez fell 0.8 percent.

    Analysts said the two groups also benefited from recent agreements with France. EDF said on Monday the government had agreed to reimburse it for a 4.9 billion euro shortfall in renewables subsidies, lifting its shares 5 percent on the day.

    GDF Suez chief executive Gerard Mestrallet said on Friday a new system of automatic indexation of consumer gas prices would be more in line with its operating costs.

    GDF Suez and other suppliers have repeatedly challenged French caps on gas tariff increases in court.

    Both agreements seem to indicate President Francois Hollande’s government may not be as unfriendly to utilities as the market feared at the time of his election.

    “The least that can be said is that the French government is taking a pragmatic stance,” the London-based analyst said.

    ($1 = 0.7492 euro)

    Reporting by Geert De Clercq; Editing by Dan Lalor

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