Suez SA Asset Netb Sales Rises 43% on 2006

Suez SA, the water and power company merging with Gaz de France SA, said profit rose 43 percent last year, aided by asset sales and higher energy prices.

Net income rose to 3.6 billion euros ($4.7 billion), or 2.84 euros a share, from 2.51 billion euros, or 2.39 euros, a year earlier, the Paris-based company said. That's higher than the median estimate of 3.5 billion euros from six analysts surveyed by Bloomberg.

``It's very strong growth,'' said Emmanuel Soupre, a fund manager with Neuflize Gestion in Paris, which manages about $15 billion in assets. ``The strategy put in place three years ago with energy and water and services is proving correct.''

Suez Chief Executive Gerard Mestrallet said the company will spend 15 billion euros to boost power capacity by 44 percent in five years, building nuclear and natural gas plants. Suez will seek to complete this year its 42.7-billion-euro merger with Gaz de France to form Europe's second-largest utility. The merger has hit legal and political roadblocks.

``The fusion is a major opportunity for Suez,'' Mestrallet told reporters. ``It will accelerate growth and profitability. We are determined to go through with the project.''

Suez increased its annual dividend by 20 percent to 1.20 euros a share. It said it would start a share-buyback program, paying no more than 55 euros a share. Analysts said the buyback was Suez's ``Plan B'' if the merger with Gaz de France failed.

``It implies they are looking at a future without GDF,'' said Marc Koebernick, an analyst at WestLB Equity Markets in Dusseldorf with a ``hold'' recommendation on the shares. ``It was purely meant for Suez if the merger derails.''

Market Consolidation

Suez shares rose 63 cents, or 1.71 percent, to 37.46 euros at 3:52 p.m. in Paris. The shares have fallen 1.8 percent this year, after hitting a high of 40.34 euros on Jan. 12 amid prospects for a bid from French billionaire Francois Pinault.

The French government-arranged plan to combine Suez, owner of Belgium's largest power company, with Gaz de France, operator of Europe's largest natural gas network, can't be completed until July, France's highest court ruled in November. That's pushed back completion of the deal to after the French presidential elections, raising doubts it will happen at all.

Suez's plan to merge with Gaz de France comes as other European utilities struggle to combine. E.ON AG, Europe's second-largest utility by market value, is trying to complete a purchase of Spain's largest utility Endesa SA. The German supplier's bid is under threat from Acciona SA and Enel SpA, which have bought shares to try to control the utility.

Asset Sales, Expansion

``There have been lots of actual attempts, but one single successful deal: Electrabel'' and its purchase by Suez, said Mestrallet, who said European utilities were in the middle of ``intense'' consolidation.

To confront changes from the opening of European markets to competition, Suez has been selling ancillary assets. The world's second-biggest water company said capital gains from disposals were 1.09 billion euros. Suez last year sold assets representing revenue of 2.5 billion euros, including the Belgian company Electrabel Netten Vlaanderen and units in South America.

It expanded in power and gas to benefit from record rates in Europe. Suez plans to expand power capacity to 75,000 megawatts by 2012 from 52,000 megawatts now.

While Suez didn't provide average prices for electricity in 2006, this year they will likely be 6 euros to 7 euros less per hour, Jean-Pierre Hansen, chief operating officer, said at an analyst conference in Paris. In Germany, Europe's biggest power market, average day-ahead prices last year rose 9 percent on the country's power exchange to 50 euros a megawatt hour. In France, the second biggest market, prices gained 4 percent.

Nuclear

The company wants to build a third-generation nuclear reactor by 2020, Mestrallet said. Suez's Electrabel SA unit operates two nuclear power plants in Belgium. The company has been trying to find a site for a new nuclear plant.

``We very much intend to increase our nuclear generation capacity,'' Mestrallet said at a conference with analysts in Paris. ``We intend to participate in the building of new nuclear power stations, and to be part of nuclear power's renewal globally.''

Suez became the sole owner last year of Belgium's largest power company when it bought the 50 percent it didn't already own of Electrabel.

Brussels-based Electrabel today said organic electric sales rose 15.4 percent on higher volumes and an increase in market prices ``which were strongly influenced by the trend in fossil fuel prices.'' Electrabel net incomes rose 12 percent to 2.14 billion euros, the company said in a statement.

Suez said on Feb. 1 that revenue in 2006 rose to 44.3 billion euros from 41.5 billion euros in the previous year.

``All branches of the group have contributed to these historic results,'' Mestrallet said. ``We have surpassed all of our targets.''

Energy, Water Waste

Suez lost sales in Belgium, where domestic competition increased, and gained in other European countries. Half of Suez's total revenue comes from Belgium, where Electrabel is the country's largest electricity company, and France.

Overall, the company's sales at its European energy business, Suez Energy Europe, advanced 12 percent because of the increase in natural gas prices, adding 1.14 billion euros in revenue. The company reported gains in the volumes of electricity sold in France, Germany, Italy and Spain, where it started a new power station in July.

Suez Environnement, the water and waste unit last December won a U.K. contract worth more than 1 billion euros to manage household waste in Northumberland, in northeastern England.

source:www.bloomberg.com