GDF-Suez Merger: Finding the Equilibrium

The proposed merger between Suez and Gaz de France (GDF) is moving into the final lap, as the political debate in France focuses on a proposed law to allow a reduction of the state's shareholding in GDF. As alternative proposals have appeared, it is not clear whether the French government's initial plan or some variant involving other large European utilities or asset divestment will be the eventual outcome. The future shape of the French and Belgian energy industries will be determined by three factors:

* The companies' management decisions. The industrial logic of the merger and the advantages it would bring to both companies have already been largely understood.
* The French political context. The political debate in France is all the more intense as trade unions are concerned about workers' rights in the state industries, consumers about the level of energy prices, and politicians about the impact of the privatization on the electorate.
* The European regulatory environment. The European Commission is currently focusing on issues of market concentration and might ask for some asset disposals to ensure competition. Against the background of the Commission's publicly expressed concern about degrees of unbundling, attention may be given to the future of the transmission and storage assets in both France and Belgium.

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