Sovereign wealth fund will pay $3.2b for 30% of production unit

PARIS - GDF Suez SA and China Investment Corp (CIC) are in exclusive talks to seal a $4 billion alliance that will help the French utility fund its expansion in booming Asia and offer China access to new energy resources.

GDF Suez outlined the details of the partnership, its second large deal in less than a year after its purchase of 70 percent of British group International Power PLC through an asset swap, when it unveiled first-half earnings boosted by acquisitions.

Under the partnership, China's sovereign wealth fund CIC will pay 2.3 billion euros ($3.2 billion) for a 30 percent stake in the utility's exploration and production unit.

The $400 billion fund will also purchase the French group's 10 percent stake in a natural gas liquefaction plant in Trinidad and Tobago for 600 million euros.

CIC will also co-finance GDF Suez's projects in Asia and the Pacific and help the utility win deals in the high-growth region, including in China.

"The Asia-Pacific is clearly a very promising region for gas operations. It is crucial that a key gas operator such as GDF Suez has the means to play an important role in the region," GDF Suez chief executive Gerard Mestrallet told a conference call.

Mestrallet, who has said the Fukushima nuclear disaster in March had opened the way for a "golden age" of gas, estimated that Asia accounted for two-thirds of the world's liquefied natural gas (LNG) market.

While the companies did not say when they expected to seal their alliance, a GDF Suez board member told Reuters on Tuesday a signing could take place in coming days.

GDF Suez, the world's biggest utility with a market value of $64 billion and annual sales of 85 billion euros, plans to spend an average of 11 billion euros annually between 2011 and 2013 on gas and power production projects in emerging economics.

Getting the backing of CIC means GDF Suez will be able to share the funding effort on capital-intensive exploration and production projects. In Australia for instance, GDF Suez is due to make an investment decision for the Bonaparte LNG project, which analysts estimate will be around $8 billion.

The agreement would mark China's latest bid to boost its influence over Western-owned energy assets and help GDF Suez accelerate growth in its exploration and production business.

GDF Suez confirmed the deal as it posted an 8.2 percent rise in first-half earnings before interest, tax, depreciation and amortization (EBITDA) to 8.9 billion euros, an increase largely fueled by its acquisition of International Power.

Sales rose 7.9 percent to 45.7 billion euros, but net profit fell to 2.7 billion euros from 3.6 billion in the same period a year earlier when the bottom line was lifted by asset sales.

The results beat the average forecast of a Thomson Reuters I/B/E/S poll of analysts for EBITDA of 8.8 billion euros, sales of 45.1 billion and net income of 2.41 billion.

Reuters