China to take part in GDF Suez project

City A.M. Reporter
CHINA’S sovereign wealth fund is to buy a stake in GDF Suez’s gas exploration and production unit and to finance the French utility’s expansion in power-thirsty Asia, sources said yesterday.

The multi-billion dollar memorandum of understanding with China Investment Corp (CIC) is the latest bid by the world’s biggest utility to boost its presence in faster-growth emerging markets.

“The deal is a very broad one. Its first manifestation will be the entry of CIC in the capital of GDF Suez’s exploration and production subsidiary with roughly 30 per cent,” said one source, confirming the deal was based on the €8bn-€9bn (£6.95bn-£7.8bn) value analysts have estimated for the unit.

“In the MOU, the CIC will commit to finance all the GDF Suez projects in the Asia-Pacific region that the fund is interested in or that fit its investment criteria,” the same source said, adding projects would range from gas-fired plants and liquefied natural gas developments to energy services.

The deal will be unveiled after GDF Suez’s supervisory board approves it in Paris today, one of the sources said. A second source, who has been involved in the talks, confirmed the existence of a deal but would not say when it would be announced.

GDF Suez has said it would spend an average €11bn in 2011-13 on gas and power production projects in emerging countries, where the group expects 80 per cent of the world’s new power production capacity to be built over the next 20 years.

Last year, GDF Suez purchased 70 per cent of Britain’s International Power following an asset-swap deal to gain access to more markets.

GDF Suez declined to comment yesterday. Its shares closed down 2.9 per cent at €19.82, in line with other European utilities.