Belgian resistance

9 March 2006 By Simon Nixon

The French utility s impressive full year results will reinforce the sense that the terms of the planned GdF merger are inadequate. With rising political opposition in Belgium and the market discounting a possible counterbid from Enel, Suez is right to be worried.

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Suez has raised its dividend by 25% for the full year to the end of December 2005, an improvement on the 15% rise announced just three weeks ago. The French utility group said the hike was justified by a strong financial performance during the year, in which organic sales grew 6.3% and ebitda was up 9.7%, beating market forecasts. Suez ended the year with net debt lower than expected at E13.8bn.

Separately, the Belgian government publicly expressed opposition to Suez's planned merger with Gaz de France. A combined Suez/GdF utility would control 89% of the country's electricity market and 90% of its gas market. Belgian prime minister Guy Verhofstadt said that this was not acceptable, according to French newspaper Le Soir.

Enel is reported to have discussed a bid for Suez at a board meeting on Wednesday. In a statement, the board said it was waiting for "further clarity" from the EU before deciding whether to bid.

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