Storia di GDF SUEZ by ENGIE Italia

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150 YEARS IN WORLD MARKETS - SHARED ENERGY

In 1860, GDF SUEZ took its first steps in international business by obtaining concessions for gas street lighting and urban transport electrification – a marriage of gas and electricity which typifies the Group to this day. It was the beginning of an extraordinary story, full of interesting developments. Looking back through one and a half centuries of history, we have to admit that there are very few parts of this world left unexplored by the Group’s teams. Today, GDF SUEZ is the most international company in its market sector, a unique position resulting from its managers’ vision, its employees’ pugnacity and, most of all, its customers’ trust. This is the long story of GDF SUEZ, outside its home base of France and Belgium, that we would like to share with you.

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YEARS

150 IN WORLD MARKETS

SHARED ENERGY

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GÉRARD MESTRALLET CEO & CHAIRMAN

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GDF SUE SUEZ is the result of a 150-year process of expansions and mergers in a variety of businesses expansion

and resolutely focused on the wider world. This openness to the world is part of our company’s genetic he-

and geogra geographical areas. Our current identity builds national and international industrial traon those na ditions, whet whether it be building the Suez Canal, discovering gas ffields in Norway, lighting up our towns and cities or bbringing natural gas to half the homes less than a generation. GDF SUEZ is a in France in les

ritage and sets us apart from others in our industry.

company at once firmly rooted in its national history

Drawing on this vast heritage, we have become Europe’s leading gas player in terms of size, geographical diversity and supply portfolio flexibility, and a leading electricity company in the private sector in terms of installed electric capacity both within

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Turkey: power plant

The age of concessions (1860-1895) A world without borders (1895-1914) Nationalism and monetary instability (1914-1940) Towards other forms of international presence (1940-1985) Neoliberalism: users become customers once more (1985-1990) Take-off (1990-1995) The boom years (1995-2000) From one crisis to the next (2001-2008) A global group (2008-2011)

A GROWING GROUP

PART 3

2011 IIIIIIIIIIIIIIIIIIIII

PART 2

PART 1

1860 IIIIIIIIIIIIIIIIIIIII

Thailand: cogeneration plant

Nuclear The rise of natural gas and LNG Natural gas exploration and production Renewable energies Energy trading

IN A CHANGING WORLD

10 The age of concessions (1860-1895)

DEPLOYED GLOBALLY

19 Nationalism and monetary instability (1914-1940)

46 Northern Ireland – the first step; Reuniting Eastern and Western Europe; The West European ‘copper plate’; The ‘electricity islands’ of the Mediterranean

24 Towards other forms of international presence (1940-1985)

61 Return to Argentina; Chile – the land of copper; Peru follows the Chilean model; The Brazilian challenge

16 A world without borders (1895-1914)

28 Neoliberalism: users become customers once more (1985-1990) 31 Take-off (1990-1995) 33 The boom years (1995-2001) 36 From one crisis to the next (2001-2008)

GROUP EXPERTISE

76 The North American giant; Central America : Mexico, Panama 79 From Siam to Thailand; Tigers, dragons and other emerging powers; Success in the Gulf States

94 Nuclear 98 The rise of natural gas and LNG 104 Natural gas exploration and production 106 Renewable energies 113 Energy trading

INTERNATIONAL PRESENCE DOUBLED 114 INTERNATIONAL POWER – HOW GDF SUEZ DOUBLES ITS INTERNATIONAL PRESENCE

38 A global group (2008-2011)

REAP THE PAST’S REWARDS TO PREPARE A CHANGING WORLD FOR THE FUTURE and outside Europe, from Latin America to Southeast

For these reasons, GDF SUEZ today is ideally placed

It is an opportunity, too, because being open to ever-

Asia and the Middle East. These two arms of our business – our domestic markets and our international development – enhance and strengthen one another

to benefit from the growth of the emerging economies: Brazil (where we are the leading private producer), the Middle East and Southeast Asia.

evolving and complex markets forces us to innovate continually. Last but not least, it is an opportunity because it gives our people the human diversity they

through acquired experience and expertise. The combination between GDF SUEZ and International Power marks a further step in the company’s international development.

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Openness to the world is not only an absolute necessity for European companies in our sectors: it is also an opportunity for France and Belgium, the two countries in which GDF SUEZ originated.

need to adapt and seize the opportunities offered by a world which, though now globalised, retains the rich local diversity of its companies and territories.

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JEAN-FRANÇOIS CIRELLI VICE-CHAIRMAN, PRESIDENT

The GDF SUEZ Group’s history is marked by the convergence of 3 business activities: natural gas,

had produced gas on its territory directly from coal

of supply sources included the United Kingdom,

right up to the Second World War, the arrival of

Egypt, Qatar, Trinidad & Tobago and Azerbaijan.

electricity and energy services. Gas and electricity businesses have always been intricately related. At the dawn of the 20 th century, large companies started up for supplying these types of energy and some

natural gas, one of the least carbon-rich energy sources, definitively changed the energy landscape of the 20 th century. The 500-odd French coal gas works identified in 1946 gradually closed down, while large

distributed water as well. The use of electricity and natural gas was developed to bring more and more

gas and oil fields were discovered in the Sahara desert as from 1956.

M-E (Egypt, Algeria, Qatar, …), Europe (the Netherlands, Norway, the UK, …) and Asia (Indonesia, Australia, …). In this way, the Group is developing even more internatio-

The invention of gas liquefaction in the 20 th century marks a key step in the international history of energy.

nally by consolidating its presence throughout the natural gas value chain.

comfort and modernity to homes, businesses and local authorities. As with electricity, traditionally gas was closely linked with the concept of public service. While France

Industrialisation of this new technology has in fact made it possible to transport gas by sea. The Group pioneered the development of LNG (liquefied natural gas) chains. As a result, in the 1960s the very first LNG transport shipping line was set up between Algeria and France. In 2000, GDF SUEZ took over the running of the oldest operational LNG terminal in the USA (in Boston) and in 2007 helped strengthen security of supply in the north of Chile, building a natural

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at the end of the 1990s, ﬁrst of all in Germany and the British North Sea, then via new sites in Africa/

From the beginning of the 1990s, GDF SUEZ had been interested in the privatisation of numerous public services worldwide. GDF SUEZ became interested in refurbishing gas networks in Russia, and staked its claim in reunited Germany and in Portugal. In 1998, GDF SUEZ was supplying gas in both Berlin and Mexico City. Later, it took holdings particularly in European companies, especially alongside the main pipelines.

gas terminal. The Group has also held a stake in two Indian terminals since 2006.

The Group also chose the European continent for storage, transport and distribution activities, making

In order to ensure the security of its natural gas portfolio, in the second half of the 20 th century GDF

Canada the exception as a non-European country. Thus, in 2011, GDF SUEZ, took a stake in the major Russian transport network project, “Nord Stream”.

SUEZ set out to diversify its supply sources. This determination gradually bore fruit: Algeria in 1965, the Netherlands in 1967, Russia in 1975 and Norway from 1977 became the Group’s major suppliers. Other 4

GDF SUEZ got involved in exploration-production

countries taking part in this geographic diversification

GDF SUEZ’ energy story shows the Group’s ability to fulfil multiple missions: ensure security of supply to its customers, guarantee a high quality of service and offer competitive prices.

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DIRK BEEUWSAERT

EXECUTIVE VICE PRESIDENT IN CHARGE OF THE BRANCH ENERGY EUROPE & INTERNATIONAL EXECUTI The suc success of GDF SUEZâ&#x20AC;&#x2122; global expansion called on nume numerous skills in multidisciplinary development and the m management of large projects. These strengths are ensu ensured by the quality of the women and men who wor work day to day to serve the economic, sustainable growth gr of the regions where the Group is active. In doing this, they display their know-how throughout all the activities a deployed by GDF SUEZ to carry out the deve development and operational management of its business. business We rely on 150 years of experience in power plant operations, installation and maintenance, and elecoperatio trical sy systems management, including trading and sales ope operations, on the expertise of a world-renowned

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energy design and engineering company and on a wide network of sound references in nearly 35 countries. Our know-how also comes from being an acknowledged player in natural gas exploration and production, with teams who manage the largest European gas pipeline and storage network, and those who operate a fleet of 18 LNG carriers on all the worldâ&#x20AC;&#x2122;s seas. Lastly, our know-how is our capability to work closely with financial, industrial and institutional partners such as international financiers, public authorities and all types of development agencies who make such projects possible. Every day, 210,000 Group employees help make GDF SUEZ a recognised leader in the world of energy.

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The age of concessions (1860-1895) A world without borders (1895-1914) Nationalism and monetary instability (1914-1940) Towards other forms of international presence (1940-1985) Neoliberalism: users become customers once more (1985-1990) Take-off (1990-1995) The boom years (1995-2001) From one crisis to the next (2001-2008) A global group (2008-2011)

A GROWING 10/11/11 11:57

1860 IIIIIIIIIIIIIIIIIIIII 2011 IIIIIIIIIIIIIIIIIIIII

GROUP

IN A CHANGING WORLD

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Turkey: power plant

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[1860...

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ship whereby public authorities

1895

at national, regional or local level contract out the development, financing and/or operation of services of public interest (utilities), with or without associated infrastructure, to the private sector for a fixed period of time. Concessions exist for a range of services including public lighting, water and energy supply, public transport by railway, tram or boat, toll roads, and waste disposal and processing. The concession-holder provides the service in return for a fee

Having begun as a public-lighting and tram operator, GDF SUEZ simultaneously developed its electricity and gas activities.

charged to users or customers. [...] [...] C ontracting out the development of infrastructure and amenities to the private sector may be done for technical or financial reasons. O ften, the authorities are simply reluctant to expose the public to the financial risks associated with developing an innovation.

In 1812 , London became the first city to light its streets with gas, followed by Brussels in 1818, P aris in 182 0, Berlin in 182 6 and V ienna in 184 2 . In that age of pioneers, few major towns or cities had publicly-run systems of gas lighting.

This was the case in the 19 th century with public lighting, which had long been the responsibility of town and city councils. A t the end of the 18 th century, a new lighting fuel called coal gas was ‘ discovered’. Industrial investors seized on the invention and offered to award gas-lighting concessions to the municipal authorities. The idea was to harness a safe market – public lighting – in order to gradually develop another market: domestic, or home, lighting.

A fter a time, groups specialising in gas technology began to emerge. Their aim was to operate multiple concessions si mul taneously and so become multi na tionals in the sector. GDF SUEZ is the heir to several of these groups, one of the oldest of which, founded in 1862 , had plants at Leuven, Tournai and C harleroi in Belgium, as well as in P rague, C hemnitz , Siena, R imini and C atania. Later, it also operated in France and P ortugal.

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THE AGE OF CONCESSIONS

1860

Concessions are a form of partner-

Paris (France). The City of Lights at the time of gas street lighting

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Urban development in the 19th century played a key role in the rise of GDF SUEZ.

A nd so, it was in the gas sector that the concept of the public utility group was born. H owever, other companies soon emerged with the aim of building and operating multiple concessions, including railways, water supply networks and urban transport networks. A t that time, GDF SUEZ was particularly active on the Italian P eninsula, via a company established in Brussels in 1880 which specialised in the construction of narrow-gauge railways. This company built and operated narrow-gauge rail networks around Bergamo and Turin, and in 1882 acquired the tram networks in N aples, Florence, Turin, Trieste and elsewhere. A round 189 0-9 5 a new set of groups emerged, specialising in electricity generation and distribution. Financially, the appearance of these specialist groups was prompted by the increasingly capital-intensive

THE AGE OF CONCESSIONS

Belgium: laying of gas pipelines (around 1900)

nature of public utilities. The era of schemes pioneered by general or limited partnerships was over: that of public limited liability companies had begun. Because the groups specialised in particular fi elds (gas, electricity, trams, railways, etc.), they began to establish their own technical offi ces, the forerunners of todayâ&#x20AC;&#x2122;s design and engineering departments.

Irrespective of their core business, these specialist groups shared some common characteristics. First and foremost, there were always networks to be built, which necessitated some encroachment on the land, whether in the form of ballast to support rails, poles to support cables or underground pipes. Secondly, with the exception of the railway sector, the authorities granting the concessions were municipalities, which were keen to develop the facilities available to their residents. Urban development in the 19 th century therefore played a key role in the rise of GDF SUEZ â&#x20AC;&#x201C; and vice versa.

Lisbon (Portugal): cleaning the ovens at a gas works in Belem (around 1925)

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OF CONCESSIONS

1860 1895

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1895

...1895] Such were the similarities between public utility activities that some groups aspired to operate several simultaneously. Because gas was a potential rival to electricity for some applications, many companies combined the two. It was also common for one GDF SUEZ subsidiary or two separate subsidiaries to operate the local tram network and the electricity concession in the same town or city: the tram system ran on electricity, so its users guaranteed the electricity company a certain baseload consumption. In O dessa, the Group operated no fewer than four concessions: gas, electricity, trams

Milan (Italy): tram shelter used as a stand by a group that GDF SUEZ stems from, for the 1906 International Exhibition

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and telephone. In other places, such as Tunis, one subsidiary was responsible for supplying both water and gas. Even in the 19 th century, concession-holding companies in all areas of business faced issues that still exist today, such as the setting and revision of fares and tariffs, the need for conditions favourable to competition, the obligation to supply and the tendency for public authorities to terminate contracts prematurely, either to transfer the running to another operator or to bring it back under public control.

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THE AGE OF CONCESSIONS

1860

15 Kazan (Russia): a Compagnie Gaz et Ă&#x2030;lectricitĂŠ de Kazan (Kazan gas & electricity company) share certiďŹ cate, 1909

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A WORLD

WITHOUT BORDERS [1895... The stock market played an important part in the rapid development of companies GDF SUEZ originated from

During the global economic boom from 1895 to 1914, the world saw increased competition between economic powers: Britain’s unrivalled supremacy was over, its dominance challenged by the industrial might

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of Germany and the emergence of the United States. [...]

[...] In terms of international presence, this was a golden age for public utility groups like GDF SUEZ. They conquered new markets, including R ussia, Spain, South A merica and a number of countries in A sia. Their investments were facilitated by the free movement of capital and goods, while the convertibility of most world currencies meant that the fi nancial risk of overseas investment was limited.

Specialising among other things in the electrification of tram networks, GDF SUEZ was particularly active in the R ussian Empire, with subsidiaries in this sector operating in K ursk, K iev, K azan, O dessa, O rel, Saratov and Simferopol. Between 189 8 and 19 13 , GDF SUEZ secured simultaneous electric-lighting concessions in K az an, K ursk, O dessa, O rel, St. P etersburg,

The Group’s unprecedented international expansion was hampered by public authorities’ interventionism, despite the fact that its businesses were deeply rooted locally.

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1895 1914

Saint-Petersburg (Russia): a share certiﬁcate of the Compagnie d’Éclairage Électrique public lighting company, founded in 1897

Cairo (Egypt): the tram service to the Pyramids, around 1920

O perating ever further from their home markets, tram, gas and electricity groups felt the need to limit the resulting ‘ country risk’ by working together more closely. GDF SUEZ, for example, joined forces with the Empain Group in 189 5 -9 6 to establish two joint ventures in Egypt, one to operate trams in C airo, the other to run a narrow-gauge rail network in the N ile Delta. P leased

with the outcome of this collaboration, the two groups expanded into the Spanish market in 189 9 and the Syrian market in 19 05 . O ther consortia were formed by GDF SUEZ and rival groups to split the risks associated with operating urban transport networks and power stations in Bilbao, C onstantinople, Buenos A ires, Bucharest and Sz eged (H ungary).

The Group’s foreign subsidiaries were generally highly efficient. H owever, by the end of the 19 th century, the international expansion of public utility groups was regarded in some quarters as a form of economic colonisation, despite the efforts made by these groups to cultivate their image. In R ussia, relations between the companies holding lighting and tram concessions and the

Tram, gas and electricity groups were extremely active outside their home markets.

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Saratov, Simferopol and V ladikavkaz . In other Eastern European countries, the Group developed or electrified urban transport networks in Zagreb (C roatia), Galati (R omania) and Belgrade (Serbia). Further east, GDF SUEZ was very active in the O ttoman Empire, winning tram and electricity concessions at Salonica in 189 6 and Smyrna (Iz mir) in 19 09 .

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...1914]

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Istanbul (Turkey): electric trams on the Galati bridge in 1930

authorities awarding them (i.e., municipalities) quickly became very strained. A s soon as a concern proved profitable, municipalities would try to wrest it back in order to operate it themselves. In Bilbao, from 19 06, and M adrid, from 19 2 0, GDF SUEZ subsidiaries placated local opinion by promoting the investment of local capital in the tram enterprises they controlled. In both cities, companies incorporated under Spanish law were founded to manage the businesses, part of whose capital was held by Spanish investors. In Bangkok, the royal

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family and government officials held stakes in the local company that operated the electricity and tram networks. Despite these efforts to root their businesses locally, some networks were taken over by the public authorities from the turn of the 2 0 th century onwards. In W arsaw, the tram network operated by a Group subsidiary was taken over by the city authorities in 189 9 , while in 19 03 the Italian parliament passed a law allowing municipalities to buy back tram networks before the relevant concessions had come to an end.

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NATIONALISM AND MONETARY INSTABILITY

1914 1940

[1914... Vladimir Ilitch Oulianov, alias Lenin (1870-1924), leader of the 1917 Bolshevik Revolution

The First World War brought the Group’s development

Despite the nationalism in some countries, GDF SUEZ emerged from the First World War with a presence

to a sudden halt. Communications between GDF SUEZ

on four continents.

and many of its centres of operation were cut off, it was possible to maintain communications with foreign subsidiaries via London or Paris. As for the Group’s operations, their profitability was increasingly undermined by a relentless rise in the price of raw materials, especially fuel. Some also suffered physical damage: in Belgrade, for example, installations were sabotaged by the occupant troops. [...]

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[...] A fter the First W orld W ar, the nationalist fervour seen in some places in the late 19 th century became widespread. In the wake of the Second R ussian R evolution, the C ommunist government ordered businesses to be nationalised and one after another the tram and lighting companies in R ussia lost control of their operations; staff were forced to hand over to the Soviets companies which had been expanding rapidly in 19 14 .

Elsewhere, some municipalities and provinces decided to run their public utilities themselves. In Galati, R omania, a GDF SUEZ subsidiary was dispossessed of its networks in a particularly arbitrary way. Galati’s tram system had to cease operating in late 19 16, initially due to the hostilities and later because it was impossible to procure the spare parts and equipment needed to maintain the infrastructure. In 19 19 , the municipality seiz ed control of the bu-

siness, arguing that the company had forfeited its rights since operations had been suspended for over 3 0 consecutive days! In Belgrade too, the municipality took forcible possession of the tram and lighting companies, without any legal justification, forcing GDF SUEZ to take diplomatic steps in order to obtain compensation. The Group’s activities abroad were also hampered by a new phenomenon, infla-

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causing technical and financial difficulties. In some cases,

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NATIONALISM AND MONETARY INSTABILITY

1914 1940

Cluj (Romania): the power stationâ&#x20AC;&#x2122;s boilers, 1929

Electrification spread to ever vaster areas.

created tensions with the public authorities, varying in intensity depending on the country. In Italy, the authorities gradually drove tram companies to financial ruin by refusing their requests for fare rises. A lthough the positions of its subsidiaries were threatened around the globe, resulting in a growing focus on the domestic market, GDF SUEZ remained present in many countries, most notably in South A merica, A sia (Thailand and C hina), the M editerranean (Spain, Greece, Turkey, Syria and Egypt) and Eastern Europe (P oland and R omania). In R omania and C ongo, it built power stations for major industrial groups.

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tion, which threatened the financial stability of tram, electricity, gas and water concessions. C oncession-holding companies faced new and unexpected costs as wages and raw material prices rocketed. The advent of the eight-hour day was an added problem for public utility operators. In these exceptional circumstances, which nobody could have foreseen when the contract specifications were being drawn up, concession-holders had no alternative but to ask the authorities that had awarded the concessions to allow tariffs and fares to be adjusted to bring them into line with the new economic conditions, in order to offset the extraordinary costs that were crippling their businesses. H owever, these demands

Cairo (Egypt): Choubra power station under construction, around 1932

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NATIONALISM AND MONETARY INSTABILITY

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Wall Street (New York), during the 1929 stock market crash

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For technical reasons, growth in the gas industry was relatively slow: gas was a by-product of coal distillation, which meant that supply was inelastic. Electricity, on the other hand, was powering ahead. Group subsidiaries were electrifying ever vaster areas: networks were expanding outside urban and industrial areas and becoming regional. GDF SUEZ consulted with other public utility groups to determine their respective areas of expansion, establishing joint ventures where necessary and interconnecting networks in order to enhance security of supply and help pay for major fixed assets in the shape of increasingly powerful and efficient power stations.

The Great Depression of the 19 3 0s dealt a heavy blow to the profitability of foreign investments and the mobility of capital. H owever, the impact of the crisis varied considerably from country to country. In some parts of the world, it had a significant impact from as early as 19 3 0. This was the case in Damascus, where the devaluation of the Syrian currency impaired the profitability of local businesses. In Lods, P oland, the deep crisis in the textile industry affected the electricity company’s results from 19 3 0 onwards. In Lithuania, on the other hand, the profits of the local subsidiary continued to grow until 19 3 7 . Similarly, the Tientsin tram and electricity company

in C hina saw revenues start to dip only in 19 3 7 , as a result of the SinoJ apanese conflict. The C hinese currency of account was then devalued several times and the company’s dividend plummeted. The Great Depression also made it harder to repatriate profits generated by GDF SUEZ subsidiaries abroad. The protectionist legislation introduced in almost every country in the world significantly hampered the progress of Group businesses. In overall terms, the relative importance of foreign assets in the market valuation of GDF SUEZ portfolios declined substantially in the 19 3 0s in favour of the Group’s

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1914 1940

...1940]

Lastly, the economic crisis further heigh tened the nationalism already in evidence around the world. In Syria, the Damascus electricity company was boycotted on the grounds that it was foreign-owned. GDF SUEZ subsidiaries had to deal with the nationalist government of V eniz elos in Greece, the K emalists in Turkey and the Francoists in Spain.

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domestic markets, namely France, Belgium and their colonies.

23 Mwadingusha (Congo): installing turbines in the power plant, around 1929

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TOWARDS OTHER FORMS OF INTERNATIONAL

PRESENCE

[1940...

The concession model gave way to public ownership. The industrialisation of developing countries leads to a new form of Group expansion driven by its engineering business.

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Charles de Gaulle (1890-1970) presiding over the nationalisation of the French energy market

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W ith the outbreak of the Second W orld W ar, GDF SUEZ was once again completely cut off from most of its foreign subsidiaries. The occupation forced these companies to become self-reliant, and many of them experienced great diffi culties in sourcing fuel and procuring the spare parts needed to operate power stations effectively. In addition, some facilities were badly damaged in the hostilities. This was the case at Tientsin following the J apanese occupation. The J apanese also dismantled a large part of the Shanghai power station, in which the Group had a fi nancial interest. Despite these diffi culties, GDF SUEZ subsidiaries strove to ensure continuity of service in often hazardous conditions.

In C ongo, the electricity industry supported the A llied war effort, and output at the countryâ&#x20AC;&#x2122;s hydropower plants was only limited by an unusual succession of dry years.

agreement, concluded in 19 5 5 , committed the sector to a process of progressive integration, with the smallest, least profi table companies being gradually absorbed by the more successful ones.

By 19 4 5 , the system of public service concessions had become completely discredited, and was regarded abroad as a correlate of colonialism. There seemed to be one obvious solution: collectivisation. This was adopted by many countries, including France and Great Britain. In Belgium, some on the left also called for electricity companies to be nationalised. In the end, the power companies pledged to adopt a single tariff and to limit their profi ts. This

Elsewhere in the world, the tram, electricity and gas operations run by GDF SUEZ subsidiaries were nationalised or bought back for a pittance. The process had started during the war: in 19 4 1 and 19 4 3 respectively, the Greek and Turkish government authorities had bought back the installations and concession-holdersâ&#x20AC;&#x2122; rights from the tram and electricity companies in Salonica and Izmir before the concessions ended. In the aftermath of the hostilities, C hina and the countries

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1940 1985

In the 15 years that followed the end of the Second World War, consulting engineering work allowed the Group to remain active in over 30 countries.

Belgium: poster calling for socialism in the energy sector, 1961

A nother factor hampering international expansion was “the impossibility of carrying out certain ﬁnancial transactions due to the inconvertibility of currencies, the existence of exchange controls making it impossible to protect oneself from the instability of certain currencies … and the threats of a new general war resulting from the division of the world into

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two camps separated by different outlooks and ideologies. Ten years after the cessation of hostilities, we have not yet succeeded in rebuilding an economic system in which private capital can be exercised freely and smoothly.” Despite the nationalisation of its assets, GDF SUEZ continued to operate internationally as a consulting engineer or general contractor. In the 15 years that followed the end of the war, the Group carried out consulting engineering work in the M editerranean (Italy, Greece, Turkey, etc.), A frica (C ongo, Senegal, etc.), the M iddle East (Saudi A rabia, Syria, etc.) and A sia (Thailand). In C olombia, it designed the A nchicaya hydropower

plant and the Y umbo coal-fi red power station. In Iraq, it was commissioned to design the Dibis and Baghdad South power stations as well as high-voltage interconnection networks. It also opened local offi ces in Baghdad, Damascus, Bogotá and R iyadh. This form of expansion developed further in the 19 60s. By 19 7 0, GDF SUEZ design and engineering departments were active in over 3 0 countries in A merica, Europe, A sia and A frica. M ost of these were developing countries that GDF SUEZ was already assisting with their industrialisation. Its arrangements with these countries were based on the transfer of expertise and included

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of Eastern Europe adopted communist regimes and immediately nationalised their transport, gas and electricity companies. The compensation awarded was sometimes derisory and took a long time to be paid. In the 19 5 0s, the phenomenon spread to Third W orld countries such as Syria and Egypt.

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TOWARDS OTHER FORMS OF INTERNATIONAL

PRESENCE

Sasolburg (South Africa): power plant in 1957 Setubal (Portugal): power plant built in 1980

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training skilled senior personnel on-site. Funding was often provided by international fi nancial institutions such as the W orld Bank.

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O f the many projects completed in the 19 7 0s, two prominent examples were the A nnaba and Skikda power plants in A lgeria. A lgeria was a focus of much GDF SUEZ activity. The Group helped draw up the countryâ&#x20AC;&#x2122;s energy infrastructure plan, was involved in designing the A rz ew gas liquefaction plant and oversaw the construction of power

plants at natural gas and oil sites. H owever, in a bid to spread its risks more evenly, the Group also looked to other countries such as Libya, N iger, Indonesia and P eru. A t around the same time it took over C oyne et Bellier, a fi rm specialising in engineering works, especially hydroelectric dam and nuclear power station construction. C oyne et Bellier was already largely geared towards international markets at this time. By 19 7 9 , GDF SUEZ had representatives in fi ve Latin A merican countries

(A rgentina, Brazil, Guatemala, M exico and V enezuela) as well as in the Ivory C oast, N igeria, Zaire, H ong K ong and Singapore. In the energy sector alone, Group companies developed power stations and networks in Iraq, P ortugal, V enezuela, C hina, Zaire, the Ivory C oast, Libya, Turkey, Saudi A rabia, M orocco and A lgeria. They were co-responsible for carrying out studies commissioned by the Zaire and Guatemala governments and by the companies H ydro-Q uĂŠ bec (C anada) and Florida P ower C orporation (USA ).

10/11/11 11:58

1940 1985

15 0 years in world markets

...1985]

01_PARTIE 1.indd 27

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NEOLIBERALISM:

USERS BECOME CUSTOMERS ONCE MORE

Within 10 to 12 years, ‘competition’ had become the watchword – most notably within the European Community. In the mid-1980s, the global energy sector was still

In Eastern Europe, privatisations followed the fall of communism (1990 cartoon)

developing along largely national and self-reliant lines. Electricity and gas production and distribution were

ding in sectors traditionally considered as ‘ natural’ or ‘ logical’ monopolies. P ension funds backed the change, seeing in it the potential for lucrative investments.

national monopolies held either by state enterprises or by nationally-owned private enterprises under the close control of the authorities. In the latter case, tariffs were set so as to provide a ‘reasonable’ return

W ithin the European C ommunity, a consensus emerged around 19 88-9 0 to abolish the legal obstacles to the transmission and import of electricity and to freedom of establishment for electricity producers. The C ommission issued two directives during this period, one on the free transit of kW h and the other on price transparency.

on invested capital. As soon as the return exceeded what was necessary to tap the capital market, the monitoring bodies (government, trade unions, etc.) put pressure on the companies to redistribute the surplus profit to consumers rather than

15 0 years in world markets

to shareholders. [...]

01_PARTIE 1.indd 28

[1985...

[...] During the 19 80s, however, this set-up began to be questioned around the world, amid a general revival of interest in liberal theories. In Europe, M argaret Thatcher was the first to privatise state-owned enterprises and

dismantle state monopolies. This move was accompanied by market deregulation and an opening-up of the markets to foreign capital. W ithin some 10 to 12 years, ‘ competition’ had become the watchword around the globe, inclu-

A s a result, an electricity distribution company wishing to import electricity from a non-neighbouring country could arrange to use the transmission system of a third country that it had to cross, subject to payment of a fee. ‘ C abotage’, the practice of supplying consumers in the countries crossed, was provisionally prohibited.

10/11/11 11:58

1985 1990

The Group closely monitored the privatisations of state-owned enterprises. US President, Ronald Reagan and British PM, Margaret Thatcher, champions of neoliberalism

From 19 9 0 onwards, the trend in all parts of the world was towards priva-

01_PARTIE 1.indd 29

tising public utilities and splitting integrated energy companies into gas and electricity generation, transmission and distribution companies. This split was intended to promote competition bet ween producers by allowing their customers to freely negotiate the best possible prices. A new concept emerged, that of the ‘ independent power producer’ (IP P ). The IP P builds or buys power stations and then sells the power they generate to public utilities or highconsumption end-customers. Looking back at the history of GDF SUEZ, it is striking how quickly Group companies identified the change that was under way and tailored their strategies to it. A s early as J une 19 88, GDF SUEZ launched an investment fund to allow private investors to participate in the impending privatisation of the electricity sector. Buying and selling securities generated a

certain amount of profit. A s well as bene fits for the Group’s engineering business, there was potentially a 6-7 % return on investment, which was higher than the return under the regulated system. Two projects that the Group monitored particularly closely at that

time were the privatisation of R oosecote power station in the UK – the first to be put up for sale by M argaret Thatcher’s government in 19 89 – and the planned sell-off of a thermal power plant in P ortugal (P ego). It also studied a natural gas terminal project to be

15 0 years in world markets

H owever, this sudden renewed interest in competition and private enterprise was not confined to W estern Europe. In many emerging economies, the shift towards privatisation was hastened by the fact that foreign private capital now seemed the only available means of developing their infrastructure. Furthermore, international fi nancial institutions encouraged the privatisation of public services and the dismantling of monopolies. In Eastern Europe, the collapse of the communist regimes in 19 89 and the break-up of the Soviet Union in 19 9 0-9 1 offered W estern groups new opportunities for expansion. In December 19 9 1, 5 1 states adopted the European Energy C harter, aimed at improving the security of their energy supplies, optimising existing facilities and facilitating technology transfer.

10/11/11 11:58

NEOLIBERALISM:

USERS BECOME CUSTOMERS ONCE MORE ...1990]

UK: government proposals to privatise the energy supply industry, 1988

By the end of the 1980s, GDF SUEZ was already the number one wholly private player in Europe

15 0 years in world markets

built in P ortugal in partnership with Total.

01_PARTIE 1.indd 30

In M ay 19 89 , GDF SUEZ unveiled a strategy of ‘ Europeanisation’ aimed at making the Group “one of the sector’s leading private industrial players in the European framework – whether liberal or interventionist – which is set to gradually replace the national frameworks that characterise the sector today”. In the process, the Group would leverage the technical, fi nancial and management experience it

had acquired in Belgium, which had made it “the number one wholly private player in Europe”. In 19 9 0, a holding company was set up for all the investments the Group would acquire abroad as an independent power producer, and a business unit, called Electricity and Gas International, was established. The fact that it had been active abroad before the war only reinforced the Group’s conviction that it could become a strong international player.

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TAKE-OFF 01_PARTIE 1.indd 31

1995 Ryegate (USA): wood-ﬁred power plant in 1999

[1990... Rosario (Argentina): aerial view, around 1992

1992 saw GDF SUEZ enter the US and South American markets

national alliances were negotiated with other private electricity companies. A n agreement concluded with the Dutch firm SEP provided for optimum use of the two groups’ power plants, in order to reduce investment costs. In December 19 9 1, GDF SUEZ acquired a 3 .3 % stake in the Spanish private electricity company Iberdrola in a deal that included the possibility of developing partnerships elsewhere in the world. Talks had also begun with a number of other European electricity companies such as

the V eba and Scottish P ower groups. In each case, the idea was to swap minor investments and develop joint oneoff projects. In 19 9 2 -9 3 , a GDF SUEZ subsidiary was instrumental in setting up a European ‘ club’ for private electricity companies at which they could discuss such issues as the construction of shared power stations, difficulties encountered with nuclear energy, as well as terms and conditions for transiting electricity across the continent for cross-border sale.

O utside Europe, GDF SUEZ began systematically monitoring energy-sector developments in a number of countries in three geographical regions: N orth A merica, South A merica (A rgentina, C hile and C olombia) and Southeast A sia (Thailand, M alaysia, Indonesia and V ietnam). Its first successes came in 19 9 2 with the acquisition of several power stations in the United States. In the same year, GDF SUEZ established a foothold in South A merica, participating in the privatisation of

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In Europe, where the French and German markets were apparently closed for the time being, GDF SUEZ focused initially on two distinct geographical areas: ‘ peripheral’ W estern Europe (Scandinavia, the Iberian P eninsula, Italy, Greece, the United K ingdom and Ireland) and Eastern Europe (P oland, the C z ech R epublic and H ungary). Its first major project was the acquisition, in M arch 19 9 2 , of generation facilities in N orthern Ireland, in partnership with a US company. In addition, trans-

1990

10/11/11 11:59

TAKE-OFF

...1995]

By the early 1990s, the Group was a world leader in the field of combinedcycle gas turbine technology. Chilca (Peru): transporting the third turbine of the ChilcaUno power plant, commissioned in 2009

15 0 years in world markets

the A rgentine gas industry with its Spanish partner Iberdrola.

01_PARTIE 1.indd 32

A s the number of companies put up for sale increased, the Group became more selective. Its choices were dictated primarily by a risk map, which ranked countries according to their economic, financial and political prospects. It also focused on acquiring modest concessions at reasonable prices, knowing that paying over the odds for prestigious acquisitions would undermine their profitability for years to come. Instead, it looked for deals that would contribute quickly to the Group’s results. It also realised that targeting overly large acquisitions

would have forced GDF SUEZ to ally itself with a greater number of players, thereby preventing it from assuming the role of lead operator. The Group had a number of strengths that helped it break into the global marketplace. First and foremost, it had always maintained an international presence via its design and engineering activities. Secondly, it had considerable expertise in the design and operation of power stations, whether fired by coal, oil, gas or enriched uranium. By the early 19 9 0s, the Group was a world leader in the rapidly developing field of combined-cycle gas turbine technology. Its international ambitions

also benefited from its long-stand ing status as a multi-utility group, active in both gas transmission and distribution and electricity generation and distribution. In addition to this, its development as an independent producer was boosted by its service activi ties for industrial customers (the management of heating networks, for example), as provided by its many energy-service subsidiaries. Last but not least, as a private group free from political influence, GDF SUEZ was seen by many countries as an ideal partner. These strengths proved extremely useful in the financial planning that

preceded each acquisition process. In the consortia it was involved in – in which it always strove to be the industrial operator – GDF SUEZ never contributed its entire foreign currency component in the form of equity, because the cost of equity was much higher than the cost of bank loans. The challenge was therefore to “convince banks that the balance could be financed, at no risk to them, through a bank loan at a relatively low rate”. Under this method of bank financing (known as ‘ limited recourse’ or ‘ project financing’), the collateral consists not of marketable assets but of a belief in the project’s profitability.

10/11/11 11:59

THE BOOM YEARS

1995 2001

[1995...

The GDF SUEZ Group’s international growth gathered pace in the years 1995-98. The following new markets

Taweelah (Abu Dhabi): Prince Philippe of Belgium heads an economic mission in 2004

were developed: Hungary, Germany and India in 1995; Chile, China, Vietnam, Kazakhstan, Singapore and Thailand in 1996; Peru in 1997; Brazil, Mexico and Oman in 1998; South Korea in 1999; and Abu Dhabi and Poland in 2000. Between January 1996 and May 1997, no fewer than 13 acquisition and development projects were completed. The Group’s self-impo-

Hanjin (South Korea): map of households supplied by gas by a Group subsidiary in 1999

sed target of controlling more generation capacity abroad than met ahead of schedule. In July 1997,

Far-flung countries served as a test bed for the impending liberalisation in Europe.

GDF SUEZ ranked as the world’s sixth largest IPP, behind three American and two British companies. A number of opportunities also arose in the distribution sector, both gas (in Argentina, Germany and Thailand) and electricity (Bremen). [...]

01_PARTIE 1.indd 33

[...] To foster growth abroad, and ensure a sustainable presence, the Group’s management opted for a highly decentralised organisational structure with activities managed locally by staff from the relevant countries. This policy allowed the Group to be responsive to the market and maintain its entrepreneu-

rial dynamism. For example, the team established in C hile in 19 9 5 -9 6 during the acquisition of the Tocopilla and C olbun power stations played a crucial role in the Group’s expansion into P eru. In some cases, far-flung countries like C hile were furthest down the path of

liberalisation. These countries were to provide the Group with a test bed for the impending changes in Europe: A completely open market demands fresh responses such as an aggressive day-today business approach, extremely tight cost control, quick decision-making and non-stop flexibility. It was therefore

15 0 years in world markets

in Belgium by the year 2000 was

10/11/11 11:59

THE BOOM YEARS In 2000, GDF SUEZ became the leading producer in the Netherlands

15 0 years in world markets

Jacques Delors, President of the European Commission from 1985 to 1994

01_PARTIE 1.indd 34

outside Europe that the Group acquired its first experience as a merchant producer. Under the liberalised system, manufacturers purchased energy on the basis of calls for tender and already the trend was towards shorter-term supply agreements. “The ‘merchant plant’ concept is gradually being implemented: it will result in a system where producers will no longer be able to rely on contracts to finance their investments but will have to risk building units and selling their kWh on the best possible terms to direct customers, who will be able to renegotiate their contracts regularly”. In Europe, a European P arliament and C ouncil Directive of December 19 ,

19 9 6 marked the start of electricity market liberalisation: by 19 9 9 , at least 2 3 % of the market would be opened up, this being the proportion represented by industrial customers consuming more than 4 0 GW h per year. H owever, nationalist tendencies died hard in some countries and it remained difficult to gain a foothold in jealously guarded markets such as France and Germany. In N orth A merica, the Group did not establish a significant position immediately, the market there being increasingly competitive and extremely fragmented. This contrasted with the Southern C one of A merica (A rgentina,

C hile, P eru and Braz il), where the investment climate in the 19 9 0s was highly favourable: neo-liberalism was taking hold across the region, and governments were engaging in large-scale privatisation. A fter landing a number of contracts in A rgentina and C hile, in 19 9 8 GDF SUEZ embarked on a transnational project to build a transA ndean gas pipeline linking A rgentina to the Group’s power stations in northern C hile. O ver time, therefore, the ‘ opportunistic’ approach of the early days began to alter, with some projects snowballing into multi-country, multi-business ventures. For example, the project unAlmaty (Kazakhstan): power plant in 1996

10/11/11 11:59

1995 2001

...2001] Ilo (Peru): inauguration of the Ilo 2 power plant

N evertheless, this regrettable outcome should not overshadow the Group’s excellent track record in international projects. W ith a few exceptions (electricity in Bremen, India and Ireland, natural gas distribution in C anada and Uruguay) , its involvement in such projects was long-lasting, in spite of various crises.

It was during the same period, 19 9 5 2 000, that GDF SUEZ began to take an interest in energy trading. It took part in the first power exchanges in the United States and Scandinavia, and had the advantage of being one of the few operators active in both gas and electricity. A lthough present in many regions of the world, the Group had yet to make a significant mark in the key markets of Europe and the United States. It did, however, acquire strong positions in the N etherlands, taking over the country’s leading power producer, Epon, in 2 000, following two years of negotiations.

Eems power plant in the Netherlands, combining traditional thermal power generation with a gas-steam turbine and wind turbines

01_PARTIE 1.indd 35

15 0 years in world markets

dertaken in K az akhstan between 19 9 5 and 2 000 had a ‘ systemic’ dimension. K az akhstan’s geostrategic situation was clearly vital to the energy future of Europe and C entral A sia. Unfortunately, however, the K az akh project was not destined to go ahead.

10/11/11 11:59

FROM ONE CRISIS The global economy deteriorated sharply in 2001-02. A number of emerging economies â&#x20AC;&#x201C; Argentina, Indonesia and Brazil â&#x20AC;&#x201C; were plunged into a major crisis and were unable to honour their commitments to the public utilities with which they had concluded contracts. Many of these companies were hit hard. [...]

[2001... 15 0 years in world markets

Rosario (Argentina): Litoral Gas company operations in 2006

01_PARTIE 1.indd 36

[...] By 2 001, Europeâ&#x20AC;&#x2122;s national markets had opened up sufficiently for GDF SUEZ to consider the whole of the continent as its domestic market. In J uly 2 001, the Group was managing facilities of over 2 5 ,000 M W and was trading on all markets. 2 003 saw a further shake-up of the European regulatory environment with the publication of two new directives on the electricity and gas markets.

These required all non-residential customers to be liberalised by J uly 2 004 and residential customers by J uly 2 007 . In the event, many countries acted in advance of these deadlines. In addition, transmission and distribution activities had to be separated from production and supply activities and a national market regulator established in each M ember State. It was in this new regulatory framework that GDF SUEZ acquired major

positions in Italy, Spain and Germany, often with the support of local players (public authorities or industrial groups). From this time on, GDF SUEZ would adopt a holistic approach to the European market, in which it aspired to become the second biggest company. In 2 005 , it sold 14 5 .4 TW h of power in Europe: 68.9 % in the Benelux countries, 17 .7 % in the region spanning France, Italy and the Iberian P eninsula and 13 .4 % in P oland, Germany and H ungary.

10/11/11 11:59

TO THE NEXT

2001 2008

...2008] By 2 009 , the Group aimed to achieve sales of around 2 00 TW h and a generation capacity of 3 5 ,000 M W . Elsewhere in the world, 2 003 saw an upturn in Latin A merica and A sia. By 2 004 , GDF SUEZ was resuming its expansion in the region. A mong other projects, it took over a new hydropower plant in P eru (Y uncan) and began work on two power stations in the Gulf States (Sohar in O man and A l Ez z el

01_PARTIE 1.indd 37

in Bahrain). To free up capital for new projects and strengthen its local foothold of key ventures, a number of investments were scaled back, most notably in Thailand, P eru and Braz il. GDF SUEZ also sought to achieve a better balance between its hydro and thermal resources in order to be less vulnerable to rises in fossil fuel prices. Between 2 001 and 2 005 , total installed capacity at Group-operated power stations outside Europe rose from

11,5 00 M W to around 2 5 ,000 M W , a figure similar to the capacity of its European power stations. Latin A merica accounted for roughly half of the Groupâ&#x20AC;&#x2122;s installed capacity and sales abroad. The operation of public utilities by private bodies and, in particular, foreignowned groups, sometimes met with local opposition. In 2 002 , for example, the P eruvian president, A lejandro Toledo,

had to abandon plans to sell the stateowned electricity companies Egasa and Egesur to the local GDF SUEZ subsidiary. Lastly, there was a real risk that certain countries with fossil fuel resources, such as A rgentina, would adopt a self-reliant policy, thereby jeopardising the Groupâ&#x20AC;&#x2122;s systemic projects. GDF SUEZ worked to improve the energy security of the countries in which it operated by diversifying their primary energy resources.

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Al Ezzel (Bahrain): power plant unveiling, May 2007

10/11/11 11:59

01_PARTIE 1.indd 38

10/11/11 11:59

A GLOBAL GROUP

2008 2011

[2008... On 16th July 2008, the Gaz de France and Suez general shareholders’ meetings approved the merger of the two groups. The creation of the international energy company GDF SUEZ was accompanied by a new organisational structure that pooled and redistributed both groups’ activities. [...]

01_PARTIE 1.indd 39

[...] This major industrial operation relied on a consistent and shared industrial and social master plan. It fell within the framework of a profound and rapid change in the European energy market. The merger of the two groups aimed at reducing the risk exposure associated with this change and ensuring long-term competitiveness. O n a more specifi c level, the industrial logic behind this operation was set out in four major parts. Firstly, reach a worldwide dimension so as to maximise supply. Secondly, enjoy a high level of geographic and industrial complementarity to be able to strengthen and widen the scope of a competitive offer on energy markets. Thirdly, have a well-balanced positioning in terms of businesses and regions, respecting different cycles. A nd finally, set up a strengthened investment strategy that

gives a favourable position up against market challenges. Established in 7 0 countries worldwide in 2 010, GDF SUEZ now has considerable investments, so much so, in fact, that the countries in which the Group enjoys positions of strength account for four-fifths of its internatio nal investments. O n these markets that are sometimes as large as continents, it has had to pump in more capital to strengthen, or at least maintain, its positions. In Braz il, for example, where the market is growing at a rate of 7 % or 4 ,5 00 M W a year, keeping pace with the growth is a challenge in itself, given that the Group already operates 8% of the country’s installed capacity – making it Braz il’s largest private producer.

O ne of the Group’s strengths remains the diversity of technologies at its command. Today’s combined-cycle gas turbine (C C GT) units are 5 8% efficient, making them the most environmentally friendly of all fossil fuel-fired power plants. It is no surprise, therefore, that 5 4 % of the Group’s global installed capacity uses natural gas as its primary energy. Y et it would make no sense at all to roll out gas across the board, indiscriminately. H ydropower has a big future in Braz il, where 7 0% of hydro potential remains untapped. M oreover, many countries rely on a mix of energies to make them less dependent on other countries and less vulnerable to fluctuations in the weather. In Europe, R ussian gas plays a crucial role but a deliberate choice has been made to retain a variety of supply sources in

15 0 years in world markets

Everett (USA): liquid natural gas terminal in 2008

10/11/11 11:59

A GLOBAL GROUP Map ta Phut (Thailand): power plant of the Glow company, GDF SUEZ subsidiary, in 2005

15 0 years in world markets

order to ensure a certain level of supply and price stability.

01_PARTIE 1.indd 40

Similarly, GDF SUEZ has no preconceived notions about which business areas to prioritise. C ircumstances vary greatly from country to country, depending in particular on local legislation. In Thailand, most of the Group’s customers are manufacturers supplied directly under long-term contracts; they tend to consume both electricity and steam and have a stable offtake profile.

In Braz il, 60% of the output is sold to distribution companies on the basis of auctions covering periods of up to 3 0 years. C ontracts are indexed, which means that financial flows are predictable. The rest of the electricity generated is supplied on shorter contracts to selected industrial customers, with priority going to those for whom electricity is not a major component of their production costs. In the United States, by contrast, the Group markets electricity in 11 states and contracts

concluded with commercial companies and manufacturers are very short – between one and three years – but their renewal rate is 7 5 -85 % . In this kaleidoscope of different situations, Europe is not yet the uniform market one might imagine. The single energy market remains a work in progress. There are still restrictions, particularly technical ones, on electricity trading. The European high-voltage grid was originally designed to ensure security of supply, not for the commer-

cial transmission of power. W ith the development of trading in the wake of liberalisation, many cross-border interconnection lines are on the verge of saturation. There is therefore a distortion between a largely ‘ Europeanised’ demand (from transnational industrial groups) and a still fragmented supply. O n the regulatory front, we still have 2 7 liberalised markets rather than one single market: there are as many regulators as there are countries, doing little to facilitate smooth trading.

10/11/11 11:59

...2011]

01_PARTIE 1.indd 41

10/11/11 11:59

Northern Ireland – the first step; Reuniting Eastern and Western Europe; The West European ‘copper plate’; The ‘electricity islands’ of the Mediterranean Return to Argentina; Chile – the land of copper; Peru follows the Chilean model; The Brazilian challenge The North American giant; Central America: Mexico, Panama From Siam to Thailand; Tigers, dragons and other emerging 42 powers; Success in the Gulf States

02_PARTIE 2.indd 42

KEY GROUP P 10/11/11 12:00

PROJECTS

ON ALL CONTINENTS

02_PARTIE 2.indd 43

Estreito (Brazil), hydroelectric dam under construction in 2009

10/11/11 12:01

02_PARTIE 2.indd 44

10/11/11 12:01

02_PARTIE 2.indd 45

10/11/11 12:01

NORTHERN

NORTHERN IRELAND

IRELAND THE FIRST STEP In 1983, the free-market government led by Margaret Thatcher attempted to liberalise the UK’s electricity market by opening up the sector to new players. The experiment proved a fiasco, prompting the government to take the more radical step of breaking the de facto monopoly of the Central Electricity Generating Board (CEGB). [...]

15 0 years in world markets

Belfast (Northern Ireland): Nigen power plant, around 1992

02_PARTIE 2.indd 46

[...] P rivatisation of the UK electricity industry began in 19 9 0 – four years after gas industry privatisation and eight years after privatisation of the telecommunications sector. O n the generation side, the UK authorities decided to divide up the C EGB’s assets among three new companies: N ational P ower and P owergen were assigned 5 2 % and 3 3 % of installed capacity respectively,

while N uclear Electric took over the nuclear power stations. Later that year (19 9 0), the British government floated on the stock exchange 12 regional distribution companies with a monopoly over consumers using less than one megawatt of electricity. There was no shortage of interest: several of the companies were acquired by US groups, others by EDF. In De-

cember 19 9 0, GDF SUEZ had considered taking over one of the 12 privatised companies, Y orkshire Electricity, but these plans came to nothing. That left two other routes for breaking into this market: becoming an independent producer or investing in N orthern Ireland. In N orthern Ireland, electricity generation and distribution were in the hands

10/11/11 12:01

02_PARTIE 2.indd 47

15 0 years in world markets

of a state-owned company, N orthern Ireland Electricity (N IE), which operated four coal- and oil-fired thermal power stations with a total capacity of 2 ,100 M W . The N orthern Ireland grid was unusual in being completely unconnected to any other network. W hen the British government announced its intention to privatise N IEâ&#x20AC;&#x2122;s assets in various lots in A ugust 19 9 1, GDF SUEZ

10/11/11 12:01

15 0 years in world markets

NORTHERN

IRELAND THE FIRST STEP

Kilroot (Northern Ireland): power plant in 1992

02_PARTIE 2.indd 48

and the independent US producer A pplied Energy Services (A ES) set up a 5 0-5 0 joint venture called N orth Ireland Generation (N igen). In N ovember 19 9 1, N igen made an offer for two of the four power stations up for sale, namely K ilroot (660 M W ) and Belfast W est (2 4 0 M W ). The reason for the partnership with A ES was the latter’s

greater experience of acquisitions. The collaboration also had a technical component: “We complemented one another perfectly: the Genk-L angerlo power station operated by GDF SUEZ is a sister plant to Kilroot, while AES had bought an old facility, B eaver V alley, in the U S , which is very similar to B elfast West”. GDF SUEZ and A ES managed to limit

their investment to 10% of the purchase price. The remainder was financed by local partner banks. Through N igen, GDF SUEZ had made its first significant break into the foreign market. The venture was to last for eight years, until M ay 2 000. GDF SUEZ went on to acquire a number of power stations in the UK . In 2 003 ,

the Group bought the 2 10-M W Shotton combined-cycle natural gas plant in W ales. Five years later, GDF SUEZ acquired the most powerful C ombined C ycle Gas Turbine plant in Europe, Teesside in northeast England. Built by Enron in 19 9 3 , it had a capacity of 1,87 5 M W .

10/11/11 12:01

REUNITING

EASTERN AND WESTERN EUROPE The year after their triumphant R evolution in 1917, the Bolsheviks decreed that R ussia’s industrial base was to be nationalised. The decision was greeted favourably by many

EASTERN EUROPE

R ussians because the vast majority of capital invested in the Empire had Kiev (Ukraine): tram network in 1908

been foreign. [...]

[...] GDF SUEZ had substantial interests in R ussia at that time. It was heavily present in the energy industry, controlling electricity generation and distribution in St P etersburg, O dessa, Saratov, O rel, K ursk, K azan and Simferopol, among others.

02_PARTIE 2.indd 49

In the 19 2 0s, GDF SUEZ invested heavily in Eastern European countries, including C z echoslovakia, R omania and Lithuania. O ne of the Group’s main focuses was the electrification of P oland, where it had been active prior to 19 17 (when P oland was part of the R ussian

Empire). O f the total capital invested in the P olish electricity sector during the 19 2 0s, GDF SUEZ accounted for 15 -2 0% . This enthusiasm for P oland was partly owing to the country’s potential as a base for redeployment in R ussia.

A fter the Second W orld W ar, the countries east of the R iver O der fell within the Soviet orbit. A new wave of nationalisations took place and, although there was compensation this time, it was difficult to obtain and far from made up for the losses incurred.

15 0 years in world markets

Lodz (Poland): power plant in 1929

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REUNITING

Lech Walesa, President of the Polish Republic from 1990 to 2000

EASTERN AND

15 0 years in world markets

intention to privatise their national electricity generation systems to a greater or lesser extent, and to invite W estern investors to acquire stakes in the new companies. A longside this, the European institutions supported a number of initiatives designed to integrate the countries of the East with W estern Europe by interconnecting their power grids. In 19 89 , GDF SUEZ sent a delegation to Lech W alesa.

02_PARTIE 2.indd 50

For the next 4 0 years and more, an iron curtain was to divide Europe in two. The iron curtain fell in 19 89 , and soon afterwards several countries from the former Eastern bloc announced their

In H ungary, GDF SUEZ carried out a comprehensive assessment of the national electricity system in 19 9 0. A s in P oland, the authorities there wanted to halt nuclear investment, reduce the pollution levels of thermal power stations (most of which were powered by oil and lignite), and free the country from its dependence on other countries: a third of the power consumed in H ungary was imported from R ussia and the situation with

natural gas was even worse. By M arch 19 9 1, GDF SUEZ was working with several H ungarian partners to study

the opportunities presented by the bill privatising the national energy industry.

The trade unionist, the engineer and the lessons of history “ Lech W alesa received us in his office in Gdansk. H e came across as very approachable. H e spoke without notes in a well-rehearsed way, using colourful examples… H e began by stressing that he was a practical man, not a theorist… ‘I plan to take over 8 0 % of the companies currently in the hands of the communists… Y ou have to realise that there is no longer – in fact there never was – any communism in P oland. This country is like a radish – a thin outer layer of red, but white inside. H owever, there is no money to buy 8 0 % of these companies … we need to set up joint ventures governed by new laws.’ “ W e informed M r W alesa that GDF SUEZ had been a precursor to this move, because in pre-war P oland, which he was taking as his model, it had accounted for 4 1% of foreign investment in the electricity sector. H e replied immediately that that was very good and that we could have 5 5 % of it now... A s for the guarantees that any foreign operator would demand in return for its financial commitment in P oland, Lech W alesa replied that the guarantee was W alesa, Solidarnosc, the prime minister and the government.”

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In the end, the Group had to wait until December 19 9 5 to see its expansion projects in Eastern Europe come to fruition. In that month, GDF SUEZ pulled off a master stroke by buying 4 8.7 6% of the electricity generation company Dunamenti from the H ungarian government. Dunamenti was a power station com plex outside Budapest with an installed capacity (at that time) of over 2 ,000 M W , a third of H ungary’s total installed generation capacity. The Group’s ambition was to make Dunamenti a verylow-cost generation centre capable of playing a role not only in the H ungarian market but also in neighbouring countries such as Germany.

02_PARTIE 2.indd 51

GDF SUEZ finally broke into the P olish market in A pril 2 000 when it bought a 2 5 % stake in the P olaniec power station. P olaniec was a coalfired power station built in the 19 7 0s, 100 km from K rakó w. It had a total capacity of 1,800 M W and generated 6% of the power consumed in P oland. A s with Dunamenti, the Group’s aim with this acquisition was not only to become a major player in the P olish electricity market but also to exploit trading opportunities with the German market. In the years that followed, GDF SUEZ increased its stake in P olaniec, and ended up holding 9 9 % of the capital.

Dunamenti (Hungary): control room in the power plant acquired by the Group in 1995

V ery early on, GDF SUEZ also laid foundations for long-term cooperation with Eastern Europe on modernising and developing its gas infrastructure. In J une 19 9 0, GDF SUEZ negotiated a contract with R ussia for upgrading the M oscow distribution network. In December 19 9 5 , the Group bought the distribution networks of Gyô r and Szeged in H ungary. These two concerns together accounted for 2 2 % of the H ungarian gas market. In R omania, the Group acquired Distrigaz Sud in 2 004 , the country’s second largest distributor of natural gas with a million customers, mainly in the capital Bucharest. The fi rm has expanded steadily since then, mainly through takeovers of small distributors.

15 0 years in world markets

WESTERN EUROPE

Polaniec (Poland): electric power plant’s coal stock in 2003

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THE EUROPEAN ‘COPPER PLATE’

The privatisation of the East

THE WEST

German electricity system in 1989 attracted the attention of GDF SUEZ. In early 1990, the Group announced its desire to participate in the modernisation of the power infrastructure. [...]

15 0 years in world markets

[...] N egotiations ground to a halt, but contacts were maintained with V eba and working groups were set up in 19 9 3 to look into possible collaborations. These resulted in 19 9 5 in a joint action involving subsidiaries of the two groups in connection with the privatisation of the electricity, gas and water utilities of the city of Bremen in Lower Saxony. GDF SUEZ acquired a 12 .5 % stake in the venture. Stadtwerke Bremen served a population of around 600,000 inhabitants, had an installed capacity of 1,100 M W and distributed electricity, gas and water. For GDF SUEZ, this was a landmark investment.

02_PARTIE 2.indd 52

In 19 9 8, in partnership with the Berlin-based electricity company Bewag, GDF SUEZ acquired a 3 1.6% interest in GA SA G, the natural gas distributor for Berlin, under a 15 -year exclusive concession contract. Saarbrü cken (Germany): Rö merbrü cke power plant, in the Group since 2005

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EUROPEAN ‘COPPER PLATE’ Energie SaarLorLux, a GDF SUEZ and Stadtwerke Saarbrü cken joint subsidiary for energy sales (2002)

N earer to its home patch in Belgium, GDF SUEZ succeeded in establishing a solid footing in the N etherlands. In 2 000, after two years of talks, it bought the country’s leading power producer

02_PARTIE 2.indd 53

Epon, which had a generation capacity of 5 GW (a quarter of total Dutch generating capacity), including a state-ofthe-art 1.8-GW C C GT plant. GDF SUEZ notched up another success the following year, this time in East Germany. It signed a partnership agreement with Stadtwerke Gera under which it acquired 4 9 .9 % of two companies set up to generate and/ or distribute electricity, heating and natural gas. Gera was one of the 10 largest cities in East Germany and was located in an area where reunification had spurred major economic growth. Drawing on the assets managed as part of its collaboration with the Saarbrü cken and Gera Stadtwerke, GDF SUEZ gradually developed its sales outside these two regions. In 2 005 , the Group also took over the operation of R ö merbrü cke thermal

power station, increasing the plant’s capacity by 4 1 M W . H owever, the main boost to its development as a producer in Germany came with the construction of one modern coal-fired power station in W ilhelmshaven (800 M W ), which began in 2 007 . In the N etherlands, GDF SUEZ entered the residential market in 2 006 through its acquisition of R endo Energie and C ogas Energie, with their 3 80,000 electricity and natural gas customers. In the natural gas sector, 2 007 saw GDF SUEZ expand into markets outside its historical area of operation, in K iel, Lü beck and N orth R hine-W estphalia. It also took over two companies in the federal state of Brandenburg. By 3 1st December 2 008, GDF SUEZ was providing natural gas to nearly

15 0 years in world markets

GDF SUEZ, realising that its minority stake in Stadtwerke Bremen did not really allow it to play a leading role, decided to sell the investment in 2 000. H owever, in the same year, an agreement was concluded with Stadtwerke Saarbrü cken (SW S) which saw GDF SUEZ take over the latter’s gas- and coal-fired power stations, with a total capacity of 2 3 0 M W e and 4 3 5 M W th. GDF SUEZ and SW S also founded a joint venture, Energie SaarLorLux, which would take over the SW S customer base and be responsible for the sale of electricity, natural gas and heating to industrial and residential customers.

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THE WEST EUROPEAN ‘COPPER PLATE’

15 0 years in world markets

7 00,000 customers, thanks to 11,4 00 km of distribution networks and an underground storage capacity of over 1 bcm. In 2 008, GDF SUEZ continued its policy of acquiring strategic interests in local companies in both Germany and the N etherlands. For example, it concluded a collaboration agreement with W uppertaler Stadtwerke and acquired a 3 3 .1% stake in a joint venture. A lso in 2 008, GDF SUEZ signed a memorandum of understanding with the German group E.O N relating to the swap of generation capacity and nuclear drawing rights. The Group acquired E. O N ’s interests in 9 9 1 M W of conventional power plants in Germany, as well as 7 00 M W of nuclear drawing rights on three German nuclear power stations. The deal strengthened the GDF SUEZ’ position in Germany and showed its wil-

02_PARTIE 2.indd 54

lingness to observe the commitments it made in Belgium in the context of P ax Electrica II. A t the end of 2 010, the Group inaugurated the M axima power station in the N etherlands. It comprises two ultramodern gas and steam turbine generator units, each of 4 4 0 M W . A t the same time, GDF SUEZ is constructing a 800-M W power station in R otterdam. W ith an installed capacity of more than 5 ,000 M W , GDF SUEZ is the country’s leading power generator. A t the beginning of 2 011, following the purchase of five natural gas underground storage facilities, GDF SUEZ is now one of the leaders in the German storage market and number 1 in Europe in terms of natural gas storage capacities sales.

Maxima power station in Lelystad (Netherlands). Traditional thermal power together with gas and steam turbine generation.

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THE â&#x20AC;&#x2DC;ELECTRICITY ISLANDSâ&#x20AC;&#x2122;

OF THE MEDITERRANEAN PORTUGAL, SPAIN, ITALY, GREECE

From Egypt to Spain, Italy, Croatia, Greece, Turkey and Syria, the Mediterranean has been a favoured area of expansion for the GDF SUEZ Group since the 19th century. [...] Florence (Italy): tram network, around 1900

02_PARTIE 2.indd 55

rural areas on the Italian P eninsula, most notably the regions of Bergamo, Turin and Biella. A generation later, in 19 07 , GDF SUEZ sponsored the creation of an electricity company in the A lpine region of A damello. Its aim was to harness hydroelectric energy from the V al C amonica valley to provide power for the M ilan region, then in the throes of industrialisation. GDF SUEZ went on to acquire interests in several other

Italian ventures in Tuscany, the regions of Bari and Bologna and eastern Sicily. H owever, during the interwar years, public utilities owned by foreign groups faced the growing problem of Italian nationalism, which culminated in the rise of fascism. The authorities refused to allow gas, tram and electricity operators to index their tariffs and fares, prompting GDF SUEZ to withdraw from Italy.

15 0 years in world markets

[...] Italy is one of the oldest markets for our public utilities. In 1862 , before Italy had even become a unifi ed country, GDF SUEZ began building gasworks in Siena and R imini, and later in C atania. A decade or so later, the Group secured concessions for horse-drawn tram networks in Trieste, N aples and Turin, and later in Florence. A GDF SUEZ company founded in 1880 built and operated narrow-gauge rail networks in various

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02_PARTIE 2.indd 56

MEDITERRANEAN

THE ‘ELECTRICITY ISLANDS’ OF THE

15 0 years in world markets

Barcelone (Spain): Barcelona Traction Light & Power share certiﬁcate from the 1920s

In 19 62 , the whole Italian electricity industry was nationalised and transferred to the state-owned monopoly Enel (Ente N azionale per l’Energia Elettrica). Like Italy, the Iberian P eninsula was an important operating region for GDF SUEZ. In 1887 , GDF SUEZ set up a subsidiary to operate a gas concession in Lisbon. In 189 1, this company also secured a 4 5 -year electricity distribution concession for the P ortuguese capital. In 189 9 , 19 06 and 19 11 respectively, GDF SUEZ established other subsidiaries in Spain in order to unify and electrify public transport networks in M adrid, Bilbao and Barcelona. These companies had their own power stations. Later, in the 19 2 0s, GDF SUEZ

became the largest shareholder and industrial operator of Barcelona Traction Light & P ower. In the late 19 2 0s, GDF SUEZ also tried to strengthen its presence in Spain by buying a generation and distribution company, called R eva (R egadios y Energia de V alencia), in the region of V alencia. A s in Italy, albeit slightly later than there, the activities of foreign utility groups in Spain came up against an increasingly virulent brand of nationalism. In Bilbao and M adrid, despite the fact that substantial stakes in the tram companies had been reserved for Spanish groups, the municipal authorities of the two cities forced through the creation of

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semi-public companies, and then took the tram networks back into public ownership immediately after the Second W orld W ar. A t around the same time, in 19 4 7 , the assets of Barcelona Light & P ower, then responsible for providing power to a large part of C atalonia, were confi scated by the Spanish courts. By the 19 80s, therefore, all foreign infl uence had been effectively banished from Spain and Italy. H owever, as soon as liberalisation of the European electricity market was on the cards, GDF SUEZ began considering a return to these former markets. W hile waiting for the situation to develop, GDF SUEZ entered the Italian market as an independent producer. In 19 9 5 ,

02_PARTIE 2.indd 57

15 0 years in world markets

The Camaraja dam on the Noquera Pallaresa (Spain), in 1920

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02_PARTIE 2.indd 58

In 19 9 9 , taking advantage of the opening of the market, GDF SUEZ signed an agreement with the Swiss company EO S (É nergie O uest Suisse), which had substantial hydro resources and

was therefore well placed to provide peak load to the Italian market. In 2 000, GDF SUEZ founded a R omebased subsidiary, Electrabel Italia, which focused on building combinedcycle power plants. In 2 002 , the restructuring of the Italian energy sector gathered pace: the market was opened to more players, following a lowering of the eligibility requirements for industrial customers, and Enel began selling off power stations. To ease its transition into the Italian market, GDF SUEZ sought an alliance with a local partner. In 2 002 , it joined forces with A cea, an electricity and water distribution company operating in the R ome area and controlled by the city authorities. The joint venture, named A ceaElectrabel, encompassed three areas: generation (A cea having

MEDITERRANEAN

it began work on a C C GT plant at R osignano, in Tuscany, on the site of the Solvay chemical plant. The chemical plant used a lot of steam, mainly in the production of soda ash. The C C GT plant, which was to have an electric capacity of 3 5 2 M W and a thermal capacity of 82 M W , was the biggest independent power production scheme that Italy had ever seen. The project was also the first power station in con tinental Europe to be the subject of a project financing transaction. The steam was sold to Solvay, while all of the electricity was injected into the grid. R osignano was commissioned in J uly 19 9 7 .

THE ‘ELECTRICITY ISLANDS’ OF THE

15 0 years in world markets

Leini (Italy), 385-MW CCGT plant commissioned in 2007

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Rosignano (Italy): cogeneration plant commissioned in 1997

In N ovember 2 002 , A cea and GDF SUEZ formed a second joint venture, EblaA cea, which linked up with Energia Italiana to acquire Enelâ&#x20AC;&#x2122;s power unit Interpower. Immediately renamed Tirreno P ower, this company had a net installed capacity of 2 ,611 M W , with hydro, coal-, gas- and oil-fi red power stations. A cea-Electrabel then embarked on a fast-track expansion of its generation facilities by building greenfield power plants. Three 3 85 -M W C C GT plants were commissioned, one at V oghera, near M ilan, in 2 005 , and another two at R oselectra and Leini in 2 007 . In addition, Tirreno P ower commissioned new C C GT units totalling 5 69 M W at the Torrevaldaliga power

02_PARTIE 2.indd 59

station. A t the beginning of 2 011, a new agreement was signed between A C EA and GDF SUEZ. The Group has refocused on power generation, gas and electricity sales and trading and gas distribution. GDF SUEZ did actually invest in Italy, in several links in the natural gas chain: sales, distribution and energy services, through two companies, A rcalgas et Italcogim (where GDF SUEZ has been present since 2 003 ). In mid2 011, GDF SUEZ sold its distribution assets and aims to double its customers to reach 2 million by 2 015 . GDF SUEZ is the third-largest natural gas operator, the leader in energy services and the countryâ&#x20AC;&#x2122;s fourth-largest electricity operator. In Spain, too, the GDF SUEZ Group lost no time in re-establishing itself. In

15 0 years in world markets

contributed 2 3 0 M W thermal and 14 0 M W hydroelectric), sales to eligible customers and energy trading. A t that time, A cea had around 1.5 million customers.

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THE ‘ELECTRICITY ISLANDS’ OF THE

MEDITERRANEAN 19 89 , it made plans to acquire a 10% stake in Spanish company Iberduero, a one-time shareholder in Tramways et É lectricité de Bilbao (the Bilbao Tram and Electricity C ompany) alongside GDF SUEZ.

15 0 years in world markets

In 19 9 1, Iberduero merged with H idroelé ctrica Españ ola to form the Iberdrola Group and GDF SUEZ acquired a 3 .3 % stake in the new entity. The agreement provided for the possibility of the two groups embarking on joint initiatives elsewhere in the world – which they in fact did, in several Latin A merican countries and in the United K ingdom (nuclear industry, in 2 009 ).

02_PARTIE 2.indd 60

A t the time of the deal with Iber drola, the Spanish electricity market was still relatively cut off from the rest of the continent. GDF SUEZ sought to acquire H idrocantabrico, the smallest of the four Spanish utilities, in which it bought a 10% stake in J uly 2 000. Its ambitions were thwarted by vigorous competition from many

other groups and it ended up selling its share to the Spanish group Ferroatlá ntica. GDF SUEZ then fell back on the development of greenfield projects. In 2 002 , it sold the bulk of its interest in Iberdrola. Shortly afterwards, the Group bought land from the US company Energy, on which it built a 800-M W power plant at C astelnou, 2 00 km west of Barcelona. Still within the Iberian P eninsula, but this time in P ortugal, GDF SUEZ established itself by taking a share in P ortgas alongside Elyo and N Q F Gas. A s the second largest P ortuguese natural gas distributor, P ortgas supplies about 14 0,000 customers over a network of more than 2 ,2 00 kilometres. In the Thiva region of Greece, GDF SUEZ holds a 5 0-5 0 stake with its Greek partner GEK TER N A in the country’s most modern and powerful power station, a 4 3 5 -M W C C GT plant.

Castelnou (Spain): power plant commissioned in 2006

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ARGENTINA

GDF SUEZ began operating in Argentina in 1904, when it arrived in the country’s second city R osario to build a network of electric trams. [...]

Rosario (Argentina): power station inauguration (around 1914)

[...] Three years later, the Group was involved in setting up the C ompagnie Gé né rale des Tramways de Buenos A ires (the Buenos A ires General Tramway C ompany). In 19 10, it helped to establish the Socié té d’É lectricité de R osario (the R osario Electricity C ompany). A fter the First W orld W ar, GDF SUEZ designed and built the P uerto N uevo super power station in Buenos A ires, complete with two 5 2 .5 -M W turbines, for the C ompania H ispano-A mericana

15 0 years in world markets

THE SOUTH AMERICAN SUB-CONTINENT 02_PARTIE 2.indd 61

RETURN TO

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RETURN TO

ARGENTINA

Buenos Aires (Argentina): power plant known as the “South Dock”, in 1929

15 0 years in world markets

de Electricidad (or C hade), the electricity concession-holder in Buenos A ires. A symbol of A rgentina’s industrial prowess at the time, this plant was expanded regularly between 19 3 1 and 19 5 7 , but around that time the A rgentine government took over the control of power generation and distribution in Buenos A ires and its province.

02_PARTIE 2.indd 62

N evertheless, GDF SUEZ returned to A rgentina in 19 9 2 . This arrival of a foreign public utilities group coincided with the installation of C arlos M enem as president (19 89 -19 9 9 ). M enem pursued free-market policies, including pegging the peso to the dollar, privatisations, and economic and social reforms. The effect of this was an exponential economic growth. A s regards the energy

Rosario (Argentina): natural gas distribution network in 1997

sector in particular, the government privatised the gas industry in 19 9 2 -9 3 . GDF SUEZ participated in this privatisation process in conjunction with its Spanish partner Iberdrola. Tibsa, a consortium comprising GDF SUEZ (5 3 .3 3 % ), Iberdrola (2 6.67 % ) and the local group Bemberg (2 0% ), won the right to acquire a 9 0% stake in the firm Litoral Gas in December 19 9 2 . The presence of a local partner within the shareholding undoubtedly facilitated dealings with the A rgentine authorities. Litoral Gas served a largely industrial customer base in the provinces of Santa Fe and Buenos A ires. A ccompanied by a massive capital flight, the 2 001-2 002 crisis was partially curtailed by a drastic control of cash flows. In

Argentina, laying the NorAndino trans-Andean gas pipeline in 1999

spite of this, riots broke out in December 2 001. In J anuary 2 002 , the government ordered a total freeze of bank deposits and scrapped the automatic adjustment of public utility tariffs on the basis of peso-dollar parity and inflation, as provided for in the contracts of regulated companies. The peso was devalued by 2 8% in relation to the dollar. In 2 005 , Duhalde’s successor, N estor K irchner, froze gas and electricity tariffs. Economic activity began to pick up again, bolstered by public spending. By 2 005 -06, it was gathering pace. Litoral Gas sales resumed their upward trend. The company currently serves over 5 60,000 residential customers and nearly 3 0,000 businesses and SM Es, as well as large industrial customers.

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In 1982, Chile became one of the first countries in the world to privatise its electricity sector – and it did so with the help of a GDF SUEZ engineer. This move was driven not by economic circumstances, as in Brazil and Mexico (which would later open their markets out of financial necessity), but by political principles: the government in Santiago believed that the state should not interfere in any industrial sector. The Chilean electricity industry was divided into two independent grids. [...] Machicura (Chile): one of the hydropower plant’s turbines, 1997

[...] The biggest of these was the C entral Interconnected System (Sistema Interconectado C entral, SIC ), which stretched over some 2 ,000 km and served 9 3 % of the population. The other, known as the Great N orth Interconnected System (Sistema Interconectado del N orte Grande, SIN G), served a large and relatively sparsely populated mining region. GDF SUEZ took a great interest in the C hilean market from the early 19 9 0s onwards, not only because it was growing at an average rate of some 7 -8% a year but also because “it has a stable political system, favourable economic conditions and a comprehensive and coherent legal environment.

M oreover, in terms of electricity market organisation, it is an extremely interesting test bed which can be put to use eventually in Europe and right away in neighbouring countries”. Last but not least, C hile was a potential market for A rgentine natural gas. A transA ndean gas pipeline was scheduled for completion in 19 9 7 ; this would significantly alter C hile’s energy mix, which until then had consisted largely (7 8% ) of hydropower. GDF SUEZ could exploit this developing energy situation by drawing on its C C GT expertise. In 19 9 5 , C odelco, a C hilean state-owned company and the world’s leading copper producer, began looking for a

strategic partner to take over some of its energy assets. In December, a consortium comprising GDF SUEZ, the Spanish company Iberdrola and Enagas from C hile acquired the 600-M W Tocopilla coal-fired power station in northern C hile. This gave GDF SUEZ 4 0% of the installed capacity in the SIN G. It assigned operation of the power station to a specially created company, ElectroA ndina. Less than a year later, the state holding company C orfo decided to privatise C olbun, one of the few power companies that had not been privatised in the early 19 80s. It controlled 12 % of C hile’s installed capacity, making it the country’s third largest pro ducer.

15 0 years in world markets

THE LAND OF COPPER

CHILE 02_PARTIE 2.indd 63

CHILE

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15 0 years in world markets

It operated three hydropower plants (5 85 M W ), all situated on the same hydraulic network around 2 5 0 km south of Santiago. GDF SUEZ bought C olbun with the backing of M atte, one of the most powerful and influential industrial groups in C hile.

02_PARTIE 2.indd 64

In 19 9 7 , with power consumption growing at an ever faster rate, especially in the north of the country, GDF SUEZ decided to strengthen its competitive commercial position by replacing the outdated ElectroA ndina thermal units by C C GT ones. H owever, to operate such units, the Group needed its own gas resources and therefore it decided to build another trans-A ndean gas pipeline.

THE LAND OF COPPER

CHILE

San Andres (Argentina): built through an aid programme for the upper RĂo Bermejo river region

In N ovember 19 9 7 , GDF SUEZ allied itself with a subsidiary of the US group Southern Energy to form a joint venture called Gasoducto N orA ndino. This company began work straight away on the construction of a 1,000-km pipeline connecting the gas fields of northern A rgentina to the P acific coast of C hile. GDF SUEZ negotiated a longterm natural gas purchase contract with the A rgentine pipeline builder Techint. In A ugust 2 000, GDF SUEZ increased its interest in ElectroA ndina from 2 1.6% to 3 3 .3 % . The Group also raised its stake in C olbun from 18.6% to 2 6% . A year later, in J uly 2 001, GDF SUEZ

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Mejillones (Chile): President of the Republic, Michelle Bachelet (3rd from the left), lays the foundation stone of the LNG terminal, 24th March 2008

In M arch 2 002 , GDF SUEZ further strengthened its presence in C hile by acquiring, in partnership with the copper company C odelco, an 82 % stake in Edelnor, one of its main competitors in the north of the country and its partner in Gasoducto N orA ndino. Subsequently, the Groupâ&#x20AC;&#x2122;s policy in C hile was to diversify both the types of primary energy used in its power stations and its natural gas supply

02_PARTIE 2.indd 65

sources. This was owing to the crisis in A rgentina in 2 002 , when the price of imported fuels, oil and coal, had rocketed while that of local gas had been froz en. A s a result, local demand for gas had soared, forcing the government in Buenos A ires to drastically cut its exports. This meant that C hile was suddenly deprived of A rgentine gas. To prevent such a supply crisis from reoccurring, in 2 007 -08 GDF SUEZ began building two 15 0-M W thermal power stations on behalf of various copper producers. M eanwhile, in M arch 2 008, the C hilean president M ichelle Bachelet lay the foundation stone of a gas terminal at M ejillones, where today GDF SUEZ has a 63 % shareholding,

the other partner being the copper company C odelco. W ith a send-out capacity of 5 .5 million cubic metres (mcm) of gas per day, the terminal was capable of supplying cogeneration plants up to 1,100 M W . In late 2 009 , GDF SUEZ merged the companies Edelnor, ElectroA ndina and Gasoducto N orA ndino as part of a financial and industrial streamlining effort. The Groupâ&#x20AC;&#x2122;s single subsidiary in northern C hile now operates generation facilities totalling 1,7 9 5 M W . It secured a market with supply contracts, in particular with distribution company Emel for the sale of 2 ,000 GW h a year between 2 012 and 2 02 6.

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became C hileâ&#x20AC;&#x2122;s largest supplier for nonregulated industrial customers when it landed an eight-year contract to supply electricity to other copper mines operated by C odelco.

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PERU FOLLOWS THE CHILEAN MODEL PERU

For Peru, the 1980s were 15 0 years in world markets

a period of acute economic and political crisis [...]

Peru, pipeline under construction between Camisea and Lima, 2003

02_PARTIE 2.indd 66

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Lima (Peru): President Alejandro Toledo, 2nd from the left, opens the Greater Lima natural gas network in August 2004

In M ay 19 9 7 , GDF SUEZ began to expand in southern P eru, taking as its model the strategy pursued in northern C hile. It bought a 12 5 -M W diesel-fired power station, located at Ilo on the P acific coast, from the local copper producer Southern P eru C opper C ompany (SP C C ), with the aim of expanding it and connecting it to the rest of the national grid. A t the time, this was one of the biggest foreign investments ever seen in P eru. In N ovember 19 9 7 , work began on another 14 2 -M W power station known as Ilo 2 . [...] In the early 19 9 0s, P resident A lberto Fujimori (19 9 0-2 000) got the country back on its feet by imposing a policy of austerity and deregulation based largely on the C hilean model. In 19 9 2 , the Electricity A ct laid down plans for the reorganisation of the electricity sector, which would henceforth

02_PARTIE 2.indd 67

be owned and operated on the basis of concessions awarded to the private sector. A t this time, 9 0% of P eru’s electricity was generated by hydropower and demand for electricity was growing at a rate of 10-12 % a year. The authorities aimed to satisfy this demand by ‘ rebalancing’ their genera-

In 2 002 , GDF SUEZ secured a 3 0-year gas distribution concession for the Lima area. W ith over 7 million inhabitants, the P eruvian capital accounted for 5 5 % of the country’s electricity consumption. A t the same time, GDF SUEZ became an 8% partner in the consortium Transportadora de Gas del P eru,

which held the general gas transmission and distribution concession for the C amisea field. This consortium was building a 7 00-km gas pipeline between the C amisea field and the coast. The first deliveries of gas from C amisea arrived in Lima in 2 004 . K een to further diversify its energy resources, in 2 004 EnerSur bought a 13 7 -M W hydroelectric plant at Y uncan, 3 4 0 km north of Lima. The following year, the company began work on the C hilcaUno thermal power station, 64 km south of Lima, the first power plant in P eru to run on natural gas alone. A t the end of 2 010, GDF SUEZ announced the construction and operation of a new 4 00-M W thermo-electric open cycle power plant (planned to come on stream in 2 013 ). Today, GDF SUEZ is P eru’s second largest private electricity producer, operating power stations with a combined capacity of over 1,000 M W .

15 0 years in world markets

tion facilities, i.e., by encouraging the construction of thermal power stations.

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BRAZIL

THE BRAZILIAN CHALLENGE

GDF SUEZ attempted its first venture in Brazil in 1929-30, when it vied to secure the electricity concession for vast areas of territory near R io. Its acquisitions were confined to the concessions of Itaperuna and Carangola, on the border between the states of R io de Janeiro and Minas Gerais. In 1931, the business operated 108 km of high-voltage lines and supplied around 2,000 customers, including some 100 industrial consumers. It was nationalised in 1938 under the government of Getulio Vargas. [...] 15 0 years in world markets

Machadinho (Brazil): dam commissioned in 2002

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[...] O ver half a century later, in M ay 19 9 2 , it was announced that some of Braz ilâ&#x20AC;&#x2122;s public utilities were to be privatised. The country was in the midst of radical change. The first elected president, Fernando C ollor de M ello (19 9 0-9 2 ), faced major obstacles in his attempt to revive the economy,

including excessive public debt, hyperinflation and a bloated public sector on the verge of bankruptcy. H is administration sought to push through a series of liberal reforms, freez ing prices and wages, introducing temporary fiscal measures to reduce the budget deficit, scrapping various pu-

blic bodies and reducing the number of civil servants. For GDF SUEZ, Braz il was an attractive potential market. Its infrastructure requirements were considerable, with an additional 1,000-1,5 00 M W needed to be installed each year.

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Estreito (Brazil), hydroelectric dam to be inaugurated in 2011

Some 2 0 power stations were under construction, but the public authorities lacked resources and little headway was being made on these projects. In A ugust 19 9 2 , GDF SUEZ began liaising with the local authorities, stating its interest in a possible privatisation. H owever, with Braz il’s economic situation still uncertain and the promised measures slow in materialising, the time was not quite ripe to make a move. The process gathered speed in 19 9 4 with the implementation of the R eal P lan, introduced by the M inister of Finance and future president Fernando C ardoso. This imposed strict measures designed to balance the budget and stabilise the currency by pegging it to the dollar. Inflation plummeted from 2 ,2 9 4 % in 19 9 4 to 2 2 % in 19 9 5 , sending out a highly positive signal to foreign investors. C onsequently, the privatisation programme launched in a bid to reduce the public debt attracted a great deal of interest. In 19 9 5 , GDF SUEZ set about breaking down into the Braz ilian market in part-

02_PARTIE 2.indd 69

nership with the Spanish group Iberdrola and a company named N acional Energetica, an offshoot of a large private local bank called Banco N acional. In 19 9 6-9 7 , these groups tried unsuccessfully to buy the Serra de M esa hydropower plant in northern Braz il, followed by two distribution companies in the state of R io Grande do Sul. C ompetition in Braz il was extremely fierce, with groups such as Endesa (C hile), EDF (France), and H ouston Industries and A ES (USA ) all vying for a share of the cake. Furthermore, these groups considered not only the projects’ profitability but also strategic factors specific to themselves, such as the desire to acquire hydropower expertise. In the end, the prices paid were disproportionately high (sometimes up to 7 0% above the minimum price), in what the financial press dubbed the “ Braz ilian madness” . Undeterred, the local GDF SUEZ team put the experience to good use and continued to search for opportunities. W ith a little patience, prices were bound to come down to more reasonable levels.

In J une 19 9 8, the Braz ilian government offered for sale a 4 2 % stake in the generation company Gerasul, comprising three hydropower plants (P asso Fundo, Salto Santiago and Salto O sorio) and three fossil-fuel plants with a total installed capacity of 3 .7 GW – 7 % of the country’s overall capacity. Gerasul also had a number of power stations under construction (most notably the Ita and M achadinho hydropower plants), which would bring its installed capacity to 6.7 GW . Its market covered the four states of southern Braz il, near to A rgentina and Uruguay – an area the siz e of France. Gerasul had guaranteed sales for five years, after which it would be gradually exposed to market risks. To make its bid, GDF SUEZ allied itself with the US company Southern Energy Inc., with which it was already collaborating on the construction of the transA ndean gas pipeline in C hile. The acquisition was considered attractive due to its siz e, generation mix and geographical location. “The region is valuable on account of its dynamism and the industrial mentality that exists

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THE BRAZILIAN CHALLENGE

Sao Salvador (Brazil): dam, opened in February 2009

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there. F urthermore, it is situated at the crossroads between several M ercosur countries and should therefore continue to grow at a faster rate than the national average.” The region would also be the crossing point for two planned gas pipelines transporting gas from A rgentina and Bolivia. N atural gas only accounted for 2 % of the country’s primary energy sources, but this was set to rise to 10% within five years in an effort to close the energy gap in regions without sufficient hydroelectric resources.

H owever, the emerging economies were shaken by the 19 9 7 A sian financial crisis and the R ussian default of A ugust 19 9 8. The GDF SUEZ bid was submitted at a time when there was talk of an imminent devaluation of the Braz ilian real, leading to large outflows of capital from the country. Even the political situation was uncertain, with presidential elections due to take place in early O ctober 19 9 8… In spite of all this, GDF SUEZ decided to accept the risks on the grounds that this would be a long-term investment. In the end, the Group was the

02_PARTIE 2.indd 70

only party to submit a bid on September 15 , for the minimum price of 9 4 0 million reals ($ 801 million). A ll the other candidates withdrew. C onvinced of Gerasul’s strategic value, GDF SUEZ increased its stake in the company to 5 1% in December 19 9 8 and then to 68% one month later. This new sign of confidence in Braz il’s future came at a time of uncertainty, with the Braz ilian C entral Bank announcing in J anuary 19 9 9 that the Braz ilian currency would no longer be indexed to the US dollar. Fortunately, this devaluation had the effect of boosting economic growth. By the end of 19 9 9 , Braz il’s debt had fallen to 4 8% of its gross domestic product (GDP ): the government was doing better than the IM F required of it. Shortly before concluding the Gerasul contract, the Group had landed the concession for the C ana Brava hydropower plant, a 4 5 0-M W complex to be built on the R io Tocantins, some 2 5 0 km north of Brasilia. The concession, awarded for a term of 3 5 years, was an ‘ independent producer’ contract,

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Jirau (Brazil), artist’s impression of the future hydroelectric power station

In the years that followed the start of work on C ana Brava and the acquisition of Gerasul, GDF SUEZ strengthened its presence in Braz il. In J uly 2 000, it purchased the Braz ilian engineering company Leme Engenharia, employing several hundred staff in the energy, water and environmental tech-

nologies fields. In the same year, the Group increased its interest in Ita, a 1,4 5 0-M W hydroelectric dam scheme, from 3 9 to 69 % by buying half the shares of the company Itasa, which held 61% . In 2 001, Braz il was hit by a serious energy crisis following extremely low rainfall. Underinvestment in the electricity sector was also blamed: since 19 9 0, power consumption had risen by 68% while generation capacity had gone up by only 3 2 % . M illions of people

The Gerasul poker game A few days before the Gerasul tender deadline, the consortium comprising EDF and Total, one of several shortlisted candidates – abandoned its plans to submit a bid after the French government opposed EDF’s involvement in the deal. H owever, GDF SUEZ representatives in Brazil feared a last-minute U-turn. They prepared two envelopes containing two different bids: one for the minimum price specified by the awarding authority and another higher one designed to trump the offer of a possible rival. O n 15 th September 19 9 8, the GDF SUEZ delegation arrived at the bidding venue to find, surprise, surprise, that EDF had indeed sent a representative. W as this a bluff or a genuine change of mind on the part of the French energy giant? The GDF SUEZ representatives plumped for the former. They waited until the last moment and handed over the envelope containing the minimum price. A n EDF representative then pretended to take out an envelope from his jacket “probably just to give us a heart attack”. H owever, it soon became clear that the gamble had paid off for the GDF SUEZ team.

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endured repeated power cuts. To avoid a reoccurrence of these problems, the government took steps to save energy and to rapidly expand generation infrastructure. GDF SUEZ was involved in this drive. In 2 001 and 2 002 , it won concessions for two hydropower plants on the Tocantins R iver, in the north of the country: Sao Salvador (2 4 1 M W installed, g3 07 million invested, completed in 2 008) and Estreito (1,086 M W installed, g1,2 00 million invested, completed in 2 011). The Estreito project was undertaken in collaboration with a group of large, energy-intensive industrial consumers including the mining firm V ale do R io Doce and the aluminium producer A lcoa. Both the Sao Salvador and Estreito plants benefited from favourable financing conditions under the Growth A cceleration P rogramme (P rograma de

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meaning that the concession-holder was free to sell its output to any type of customers, whether businesses, distribution companies, traders or even the spot market.

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THE BRAZILIAN CHALLENGE

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Sao Salvador (Republic of Brazil): President of the Republic, Luiz Iná cio Lula da Silva, in the centre of the photo, and G”rard Mestrallet open the power plant in February 2009

A celeraç ã o do C rescimento or P A C ). This was launched in 2 007 by P resident Lula with the aim of improving infrastructure quality, which had been pinpointed as the main obstacle to economic expansion. During the building of the two power stations, 1012 % of the construction budgets were allocated to social and environmental programmes designed to protect wildlife and build new homes and infrastructure for the displaced populations. In 2 004 , the Braz ilian government introduced a new system of regulation based on a distinction between ‘ old’ and ‘ new’ power, i.e., power generated

at existing plants and power generated at recently built plants or plants under construction. Long-term contracts (eight years for old power and 15 3 0 years for new power) were awarded to the winning bidder, i.e., the producer that offered to sell its output at the lowest price. The system also distinguished between thermal power stations, where the auctioned product was generated power, and hydroelectric power stations, where the product sold was generation capacity. A t the first auctions in 2 004 -05 , GDF SUEZ had no trouble offloading the bulk of its old and new generation capacity by entering into long-term supply agree-

ments with various distribution companies. H owever, at the same time, it also made sure to diversify its customer base by reserving part of its availability for freely negotiated agreements with large groups such as V olkswagen, A rcelor and M ichelin, these being eligible customers. W hereas none of its sales was to direct industrial customers in 2 000, by 2 005 they accounted for 2 1% . The Group’s involvement in Braz il increased year on year, keeping pace with the country’s growth and contributing to the security of its energy supply. In 2 008, GDF SUEZ won the

concession for a new 3 ,4 5 0-M W hydropower plant to be built at J irau, on the R io M adeira in northern Braz il. This was to be the country’s largest infrastructure project. A consortium comprising three local companies and GDF SUEZ signed a long-term contract with local electricity distributors, guaranteeing income of g9 .6 billion over 3 0 years, starting in 2 013 . 7 0% of the power generated by the dam was therefore pre-sold. The investment would exceed g3 .3 billion, with the Braz ilian Development Bank pledging 85 % of the funding for the project. The J irau power station is due to come online in J anuary 2 013 .

Jirau (Republic of Brazil): power plant building site in September 2010

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THE NORTH AMERICAN GIANT CANADA

The United States have always been the worldâ&#x20AC;&#x2122;s USA

biggest electricity market, which has developed along original lines. In 1935, while Franklin D. R oosevelt was president, Congress passed the Public Utility Holding Company Act (PUHCA), which, in order to protect consumers, introduced numerous obstacles to merger/acquisition operations and in effect prohibited the takeover of utilities by institutional investors. Alongside the introduction of the PUHCA, the individual states set up public utilities to offset the shortage of private enterprise. The federal government also got involved, financing the construction of new generation facilities

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and establishing federal enterprises [...]

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New England (USA): power plant operated by First Light, a company taken over by the Group in 2008

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This law extended the competitive market environment for power generation by enabling third parties to access grids and creating a new category of producers, known as Exempt W holesale Generators, which were not subject to the P UH C A . This boosted the creation of independent power producers (IP P s), whose market share increased from 9 % in 19 9 2 to around 3 4 % in 2 002 . From 19 88 onwards, GDF SUEZ started to consider ways of exploiting this development in US legislation. H owever, A merica was a difficult market. The Group therefore decided to start small and gradually scale up its projects in the country, in order to feel its way into the market without staking too much in the way of investment. In the first few years, between 19 9 1 and 19 9 3 , GDF SUEZ limited its involvement to the acquisition of five small power stations in the Boston area, four of which were wood- or woodwaste-fired.

In 19 9 4 -9 6, it made its first real mark in N orth A merica with the development of a 103 -M W cogeneration plant in W indsor, O ntario (C anada), which would sell its electricity to O ntario H ydro and its steam to two neighbouring industrial customers. In M ay 19 9 5 , GDF SUEZ launched a friendly takeover bid for the Texan company C R SS Inc., a specialist in industrial cogeneration operating a total of over 1,000 M W e. W ith the backing of its parent company, C R SS acquired a number of cogeneration units in P ennsylvania and C alifornia over the ensuing years, selling the electricity to utilities and the steam to industrial customers. A lthough it had become one of the largest IP P s in the US with an operating capacity of over 2 ,000 M W , GDF SUEZ remained a marginal player in a country whose installed capacity exceeded 800,000 M W . In the final years of the 2 0 th century, the US market went into overdrive.

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[...] In 19 7 8, against the backdrop of the oil crisis, the US government passed the P ublic Utility R egulatory P olicies A ct, which is seen as the starting point for global deregulation of the electricity industry. It was believed that the legislation in force since 19 3 5 had ossifi ed the US electricity landscape by hampering enterprise. The aim of the new A ct was to develop an economical method of generating power – cogeneration – and to promote the building of power stations of up to 3 0 M W (known as Q ualifying Facilities) that operated on renewable energies or exploited generation sources that had not previously had any commercial value (biomass, hydro, associated gas, waste, etc.). The A ct required electricity companies to buy the power generated by these small independent producers at a price equivalent to the cost that the companies would have paid to generate the same amount of energy (the ‘ avoided cost’). This led to a proliferation of small power plants. A further development occurred in 19 9 2 with the Energy P olicy A ct (EP A C T).

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THE NORTH AMERICAN GIANT

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New York (USA): Astoria Energy CCGT

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A huge number of projects were launched which would boost installed capacity by a staggering 2 00 GW , or 2 5 % , between 19 9 9 and 2 004 . GDF SUEZ was keen not to be left behind: without waiting to find the ideal partner, it decided in 19 9 8 to develop greenfield power plants. Its first major project was the construction of a 4 4 0-M W lignite-fired power station in M ississippi, which began in 19 9 8. Its output would be sold in bulk to the Tennessee V alley A uthority, a corporation owned by the US government. In February 2 000, GDF SUEZ was also given the go-ahead to build a 3 4 0-M W gas-fired, combined-cycle power generating station in Ennis, Texas. This would be a “merchant plant”, meaning that it could sell the power it generated on the open market. The site was chosen based on the region’s rapid pace of growth and because it occupied a strategic position, close to natural gas deposits and to the high-voltage grid. A s a result of this and other acquisitions made around the same time, by J uly 2 001 the Group owned and/ or operated 4 7 power stations in N orth A merica with a combined capaci-

ty of 2 .1 GW . A further nine projects, totalling 4 .2 GW , were under construction or at an advanced stage of development, including C hehalis (5 05 M W , W ashington State, commissioned in 2 003 ), W ise C ounty (7 5 4 M W , Texas, 2 004 ), H ot Spring (7 5 4 M W , A rkansas, 2 005 ) and C hoctaw (7 5 4 M W , M ississippi, 2 006).

gulated markets, namely M assachusetts, N ew Y ork, Texas and N ew J ersey, followed by P ennsylvania, O hio and C onnecticut. By the end of 2 003 , the Group was supplying around 3 ,000 customers with 1,4 88 M W of power and by 2 009 ranked as the second largest electricity provider for industrial and commercial customers.

It was at this point, in 2 000-01, that the C alifornia power crisis struck, triggering price rises on the wholesale market, power cuts and massive government intervention. It also proved a major setback for market liberalisation. W hereas in 19 9 9 some 3 0 states had embarked on the process of opening up their markets to competition, by 2 003 that number had fallen to under 2 0, the others having suspended their planned reforms.

Upstream, the Group was continually expanding its generation capacity, favouring locations in the eastern United States and taking care to nurture a balanced energy mix. In 2 008, the acquisition of FirstLight boosted the Group’s generating capacity on the East C oast (M assachusetts and C onnecticut) by over 1,5 00 M W . Its facilities included 15 generation sites, primarily pumped-storage and hydroelectric plants. In N ew Y ork, the Group acquired a 5 9 % stake in the A storia 1 gas-fired power station in two stages and at the end of 2 009 doubled the initial capacity to reach 1,15 0 M W (A storia 2 ). This capacity was already largely accounted for, with major customers including the N ew Y ork M etropolitan Transportation A uthority and P ort A uthority.

Even so, approximately 4 3 % of the US population (12 3 million out of 2 88 million citizens) were now living in states where end customers were free to change their electricity supplier. In 2 003 , therefore, a Group subsidiary began electricity retail sales operations in various US states with dere-

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CENTRAL AMERICA: MEXICO, PANAMA GDF SUEZ played an indirect but vital

role in the Mexican utilities sector MEXICO, COSTA RICA, PANAMA

between 1923 and 1960. A Group subsidiary, Mexican Light &

Power,

held major concessions including the lighting concession for Mexico City and its suburbs, and for the city of Pachuca, 80 km north of the capital. GDF SUEZ carried out large-scale infrastructure work during the interwar period. This included developing the Tepexic hydroelectric power plant and building the N ononalco thermal power station and the Tepuxtepec hydropower plant. After 1940, against a backdrop of rapid economic and infl ation, new thermal power stations were built (Tacubaya and Lecheria) to make the country less vulnerable to fl uctuations in the weather. Around 1960, however, the Group pulled out of Mexico, selling its share in Mexican Light &

Power to the Mexican government. From then on, the state monopolised Mexico’s power generation. [...]

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Queretaro (Mexico): natural gas distribution concession, obtained in 1999

[...] It was not until the 19 9 0s that the situation began to change. In 19 9 4 , M exico had a population of approximately 9 5 million – making it Latin A merica’s second most populous country after Braz il. In that year, M exico signed the N orth A merican Free Trade A greement (N A FTA ), thereby tying its economy to that of the United States. In 19 9 5 , the gas sector was opened up to competition, with the private sector

granted permission to build, operate and own natural gas transmission, storage and distribution facilities – all activities previously monopolised by the state via P emex, the publicly-owned oil company. A lready active in the United States and C anada, GDF SUEZ felt that it was in its strategic interests to enter N A FTA ’s third market. It set itself

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population growth but also of accelerated

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MEXICO, PANAMA

CENTRAL AMERICA:

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Monterrey (Mexico): CCGT power plant inaugurated in February 2003

the medium-term goal of becoming one of M exico’s top five electricity generation and gas distribution companies and, in the longer term, of becoming a major electricity distribution player in the country. A t that time, M exico was undergoing a partial energy transition as it developed a new generation of gasfired power stations to complement its old, more polluting oil-fired ones. The Group made its fi rst breakthrough in the rapidly expanding gas distribution sector. V ia various entities GDF SUEZ secured a series of concessions: in 19 9 8 at M atamoros and at M exico C ity; in 19 9 9 at Q ueretaro and Tampico; and in 2 000 at P uebla Tlaxcala and Guadalajara, M exico’s second largest city. The M exican electricity market was also attractive because demand there

was growing three times faster than in the United States. H owever, private sector involvement in M exico was still confined to autoproduction, cogeneration and small-scale generation activities. The installed capacity of most independent producers was simply what they needed to meet their own needs. It was therefore in the cogeneration market that GDF SUEZ made its entry into M exico. In 2 001, the Group bought a cogeneration plant under construction at M onterrey, a major industrial centre in the northeast of the country. A s this 2 4 5 -M W unit was to run on natural gas, it represented a valuable outlet for the Group’s gas distribution activities. Its output was not dependent on public distribution channels because its customer base consisted solely of large consumers in the cement, glass and steel sectors.

Today, the Group is a major player in the M exican energy sector, especially the gas industry where it operates six distribution concessions and supplies a total of 3 85 ,000 customers. GDF SUEZ has been present in P anama since 2 007 , when it acquired a 5 1% holding in Bahia Las M inas, the largest

thermal power plant in the country (2 80 M W ). W ith the C ativa power plant, the Group has a 5 00 M W installed capa city and holds the second place in the market. GDF SUEZ also took part in various engineering and design missions in the context of the P anama C anal extension project.

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FROM SIAM TO

THAILAND

Several small European nations played an important role in Thailand’s history around the turn of the 20th century. When King R ama V, who ruled Siam from 1868 to 1910, resolved to modernise his country’s administrative and economic structures, he preferred not to seek assistance from any of the world’s major powers, fearing that this THAILAND

might compromise Siam’s independence and result in colonisation. Belgian lawyers were therefore consulted to help draw up Thailand’s constitution, while Danish engineers laid the first tram lines in Bangkok in 1888 and founded the first electricity company a decade later. In 1912, these two businesses were bought and incorporated into GDF SUEZ. At that time, the tram network covered 32 km and the power plant had an installed capacity of just 5 MW. Its boilers were fuelled by rice husks – proof that using biomass to generate power is far from a novel concept! However, the tram and electricity concessions terminated in 1949. GDF SUEZ proposed various solutions that would allow it to remain involved in the company’s development, but in keeping with the nationalist tendencies of the time the Thai authorities decided to take over the operations themselves. [...]

[...] Forty years later, the Group returned to the scene of these past achievements. The Thai market held considerable appeal, with a population of over 60 million. In addition, the country was undergoing rapid industrialisation, with an annual economic growth of 9 % . A gainst this backdrop, energy consumption was increasing steadily and the sector required major investment. In fact, GDF SUEZ had been doing business in Thailand even prior to the libe-

02_PARTIE 2.indd 79

ralisation of its energy sector. In 19 87 , the P etroleum A uthority of Thailand had appointed the Group’s engineering department to study the medium-term development of the Thai natural gas network. Following on from this, the Group signed a contract for baseline studies of gas distribution networks in the Greater Bangkok area in 19 9 0. The following year, a pilot gas distribution network was commissioned in C honburi. M eanwhile, the engineering

department was appointed by V inythai, a joint venture between the Solvay chemicals group and the Thai company C haroen P okphand, to build a P V C plant on the M ap Ta P hut industrial estate on the Gulf of Thailand. H owever, on all of these jobs the Group was merely acting as a consulting engineer or systems integrator. In 19 9 6, the Group’s first investment in Thailand came when the P etroleum

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Bangkok (Thailand): tram network in front of the Wat Chana Songkram temple, around 1930

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FROM SIAM TO

THAILAND

Bangkok (Thailand): Bangkok Tramway & Electricity Company (Soci”t” des Tramways et Électricit” de Bangkok) share certiﬁcate, around 1920

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A uthority of Thailand (P TT) received government approval for a joint venture to operate a gas network supplying industrial customers in Samut P rakan P rovince, on the outskirts of Bangkok. The aim was to encourage around 2 ,000 companies to switch from heavy fuel oil to gas in order to reduce air pollution. The P TT held a 4 9 % stake in the business, which was called P TT N atural Gas Distribution. GDF SUEZ acquired 2 7 % and British Gas 2 2 % . Gas supplies started in 19 9 7 . The network expanded in the years that followed and continues to do so.

In the electricity sector, too, the Thai authorities realised that foreign capital would be needed in order to finance facilities capable of delivering smooth growth in generation. W ithout actually privatising the electricity industry, the authorities took measures to encourage the creation of IP P s that would deliver the bulk of their output to industrial complexes. In some cases, they authorised the creation of small, independent power plants (known as ‘ small power producers’ or SP P s), which

could supply industrial customers or sell their output to the Electricity Generating A uthority of Thailand (EGA T), a public body responsible for the generation and distribution of electricity in Thailand. In 19 9 7 , the Group acquired a 4 5 % stake in a local company that had been given permission to build a 4 4 M W cogeneration plant in Surathani to be fuelled by plant waste generated from palm-oil production. In the same year (19 9 7 ), GDF SUEZ concluded a strategic agreement with the Thai group H emaraj Land and Development under which the two parties pledged to invest together in the Thai electricity sector and also, if the opportunity arose, in other countries in Southeast A sia, more specifically Laos and C ambodia. They would pool their collective investments in the joint venture H -P ower C o., which owned a 19 5 -M W , 13 0 tonnes of steam combined-cycle cogeneration plant under construction at an industrial site belonging to the H emaraj Group in M ap Ta P hut, as well as half of a 7 4 0-M W combined-cycle power plant

construction project at the Bowin industrial estate on the east coast of the Gulf of Thailand. P art of the energy generated would be sold to EGA T; the rest would be sold directly to industrial customers, along with the steam or distilled water. A s it transpired, these Group ventures could not have been undertaken at a worse time. In late 19 9 7 , a major financial crisis shook the A sian economy and Thailand suffered the backlash. Its GDP slumped by 10% in 19 9 8 and many investors pulled out of the country. GDF SUEZ, however, held firm, considering itself to be “a local, long-term player”. In fact, it even came to the rescue when its partners got cold feet. In 19 9 8, for example, H -P ower bought the 4 9 % stake in Bowin P ower held by the US firm Intergen. In February 2 000, GDF SUEZ increased its interest in H -P ower to 7 5 % . A nd in A ugust of the same year, the Group acquired the 2 2 % stake held by British Gas in P TT N atural Gas Distribution, bringing its investment in the company to 4 9 % .

Map Ta Phut (Thailand), Glow power plant, stages 3 and 4, showing hybrid cogeneration units installed between 1999 and 2005

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Samut Prakan (Thailand): PTT Natural Gas Distribution network, 2003

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The Group’s steadfastness was greatly appreciated by the Thai authorities. In M arch 19 9 9 , P rime M inister C haun Leekpai attended in person the inauguration of Industrial P ower’s first two cogeneration units (capacity: 12 0 M W ). Two months later, the P etroleum A uthority of Thailand awarded GDF SUEZ a turnkey contract to build a gas conditioning complex at the R ayong gas terminal south of Bangkok.

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Thailand : Coco, production unit acquired in 2000 (Cogeneration Co.)

In N ovember 2 000, the Group’s presence in Thailand changed dimension once again when it acquired a 69 % stake in the Thai company C O C O (C ogeneration P ublic C o. Ltd). A s with the acquisition of C abot and M onterrey, this deal involved taking over a business of importance to the country’s economic future from a struggling group. C O C O controlled three generation units in M ap Ta P hut and two 12 6-M W units on the outskirts of Bangkok. In all, GDF SUEZ acquired an installed and immediately operational capacity of 1,02 2 M W e, making it responsible for almost 10% of Thailand’s power generation. This masterstroke secured a permanent and solid foundation for the Group in A sia. In 2 001, GDF SUEZ increased its interest in C O C O and, as required under Thai law, launched a takeover bid for the

remainder of the capital. O nce completed, this transaction gave it a 9 7 % stake in C O C O , which was subsequently renamed Glow Energy.

way, GDF SUEZ positioned itself at the heart of a nascent regional electricity system spanning Thailand, Laos, V ietnam and C ambodia.

A t this point, the Group appeared to have achieved its objectives in Thailand. It was the leading private investor in the country’s energy sector, with a customer base of 2 9 large companies, including a significant number of petrochemical companies and plastics manufacturers. The Group’s next goal was to break into other Southeast A sian markets, in conjunction with Thai partners if necessary. In September 2 001, GDF SUEZ and its Thai partner M LC announced that they had acquired 80% of the shares in the H ouay H o hydropower plant in Laos, which had been operating a 163 -M W unit for the past two years. The other 2 0% would remain in the hands of the state-owned electricity company É lectricité du Laos. This ac quisition allowed the Group to diversify the type of power stations it operated in Southeast A sia, which had previously all been gas- or coalfired. A ll of the output of the H ouay H o plant would go to EGA T. It would transit to Thailand via a high-voltage line crossing two-thirds of the distance between V ietnam and Thailand. In this

Between 2 002 and 2 004 , the Group reorganised its assets in Thailand by incorporating them into Glow Energy. W ith this process complete, it was decided to anchor the company nationally by launching an initial public offering for 3 0% of its capital. Glow Energy was floated on the Thai Stock Exchange in A pril 2 005 . In the same year, anticipating a planned increase in IP P s in Thailand, Glow entered into an agreement with H emaraj, a company specialising in industrial infrastructure. Together, the two groups were awarded the contract for Gheco O ne, a 600-M W coal-fired power station in the industrial region of M ap Ta P hut, whose entire output will be sold to EGA T under a 2 5 -year power purchase agreement (P P A ). The plant will comply with the toughest C O 2 emissions standards. Today, the Group has a generating capacity of over 1,800 M W e and 9 67 tonnes of steam per hour, making it Thailand’s third largest IP P . The Group also has 1,087 M W of electrical capacity under construction.

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CHINA

The Boxer R ebellion (1900) was one of the darkest episodes in Chinaâ&#x20AC;&#x2122;s relations with the Western powers and resulted in a surge of European capital into China. It was in this context that the Tientsin tram and electric lighting concession was awarded

[...] The lighting network was inaugurated in J une 19 06 and proved immediately popular with local people: hardly surprising since, before its introduction, the fire insurance premiums for oil-lit houses were up to 12 % of the value of the property! The tram network was opened in 19 04 , with 4 0 motor coaches and 2 0 trailers. The system length was just 15 km in 19 15 but service frequency was high, with 2 6 million passengers transported that year.

The company was placed under J apanese military control in 19 4 1. The European staff were forced to keep the service operating until 19 4 3 and were then expelled or imprisoned. A fter the war, the C hinese authorities took possession of the infrastructure at Tientsin and began operating it themselves. Efforts to obtain compensation were made between 19 4 6 and 19 4 9 but these failed and in 19 5 6 the Groupâ&#x20AC;&#x2122;s company went into liquidation.

From 19 3 7 , the political and economic situation in C hina deteriorated. The Sino-J apanese conflict and the devaluation of the dollar led to falls in revenues.

It was in the late 19 80s that the Group began looking for ways to re-establish itself in the Far East. In M arch 19 88, GDF SUEZ began talks with C hina

to a number of Europeans in 1901, before being transferred to a GDF SUEZ company three years later. [...]

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TIGERSANDDRAGONS OTHER EMERGING POWERS

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TIGERS DRAGONS AND OTHER EMERGING POWERS

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Shanghai (China): cooperation agreement between GDF SUEZ and the company in charge of the city’s electricity supply, October 2007

Light & P ower C o. in H ong K ong and took a small stake in the company. A s for the P eople’s R epublic of C hina – which had a woeful lack of energy facilities – GDF SUEZ began studying investment opportunities there in 19 9 3 . In M ay 19 9 6, a small coal-fired cogenera-

tion plant producing electricity and steam, with a capacity of around 3 0 M W , was developed in partnership with C hina C hang J iang Energy C orp. The scheme was put on hold for a long time following changes to C hinese legislation on cogeneration. A number of subsequent projects were envisaged,

Singapore, power plant operated by Senoko, in which the Group acquired a holding in 2008

but these came to nothing due to a lack of firm guarantees on electricity prices. In Singapore, the Group’s investments were much more substantial. In A ugust 19 9 5 , GDF SUEZ became a 2 0% partner in a joint venture with SembC orp Utilities P te Ltd which built a complex supplying steam, demineralised water, cooling water and other services (liquid chemical storage, pipeline transportation and wastewater treatment) to a raft of chemical companies that were moving into a new industrial development z one on the man-made island of P ulau Sakra. This facility was commissioned in J une 19 9 7 . In a second phase (19 9 7 -2 001) and again in collaboration with SembC orp, GDF SUEZ acquired a 3 0% stake in the project to build a 815 -M W cogeneration plant called Semb corp C ogen. This was Singapore’s first independent power plant: it generated both electricity, which was sold to the Singapore Electricity P ool, and steam for sale to industrial customers on the island of J urong. Following on from these projects, in 19 9 8 GDF SUEZ teamed up with SembGas

Tientsin (China): power plant in the 1930s

P te Ltd to form a third joint venture intended to import natural gas from the W est N atuna gas fields in Indonesia via a 64 0-km sub-sea pipeline. In so doing, the Group helped to diversify Singapore’s gas resources, since until then the country had sourced all of its gas from M alaysia. SembGas also supplied the C ogen cogeneration unit and local petrochemical companies. SembGas designed and built its own receiving terminal as well as a network of high-pressure gas pipelines. The first delivery of gas took place on 15 th J anuary 2 001. H owever, the Group felt that it could not fulfil its traditional role of industrial operator on the basis of the minority share it held in each of these joint ventures; it therefore withdrew from these partnerships at the end of 2 003 . GDF SUEZ did not return to the Singapore market until 2 008, when it led the consortium – including J apanese group M arubeni – that acquired the largest local electricity producer Senoko. Senoko had generating facilities totalling 3 ,3 00 M W and produced 3 0% of Singapore’s electricity.

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SUCCESS IN THE SUN

THE GULF STATES THE GULF STATES

GDF SUEZ has been present in the Persian Gulf region since 1975, when it landed a contract to build the Group’s first seawater

[...] In the early 19 9 0s, the Gulf market was a highly attractive prospect for GDF SUEZ. Its population and economy were growing rapidly and demand for water and electricity was increasing proportionately. The political risk was low, the energy and water markets were opening up to private enterprise and the region had huge potential in terms of oil and gas reserves. In addition, the Group had a number of strengths that were particularly suited to the region, such as its position at the forefront of seawater desalination and cogeneration technology. GDF SUEZ made its first move in the region in 19 9 4 , when the O mani

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authorities awarded it the contract to build the A l M anah power station and 2 00 km of high-voltage lines. Designed to replace a number of dieselfired units, this gas-fired plant came online in O ctober 19 9 6 with a capacity of 9 0 M W , equivalent to 7 % of O man’s total power generation. This was increased to 2 89 M W in 2 000. W ith most of its output destined for air-conditioning units, the plant was expected to be 100% available during the five hottest months of the year and 4 0% available the rest of the time. The A l M anah power station was the first in the Gulf to be built, owned and operated by an independent power producer. This set-up came to be seen

as a model and was widely copied by the other Gulf States. The project was a ‘ build, own, operate and transfer’ (BO O T) contract, under which the facilities would be handed over to the O mani government after 2 0 years of operation for the symbolic price of one franc. It was executed to the customer’s complete satisfaction, with the result that the GDF SUEZ Group landed several other deals in O man in the 2 000s, namely the construction of the Sohar (5 85 M W , 15 0,000 m 3 of drinking water per day) and A l R usail (665 M W ) power stations and the expansion of the Barka power plant (67 8 M W , 12 0,000 m 3 of water per day).

15 0 years in world markets

desalination plant there. [...]

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SUCCESS IN THE SUN

THE GULF STATES Barka 2 (Oman). Overall view of the 680-MW power plant (2009)

the Taweelah A 2 contract was won in the end by a consortium comprising the manufacturer Siemens and the US electricity company C M S. H owever, the Group got even in 2 000 by securing a contract to rehabilitate the existing plant at Taweelah and expand its generating capacity from 2 2 5 to 1,4 3 0 M W and from 13 0,000 to 3 85 ,000 m 3 of water per day. The A bu Dhabi authorities retained a 60% share in the scheme, which was named Taweelah A 1. The complex was finished on time, in 2 003 : it was the region’s biggest independent power and water project to date and one of the largest cogeneration facilities in the world,

accounting for around 2 5 % of the emirate’s power and water production. In A bu Dhabi as in O man, customer satisfaction led to positive spin-offs: five years later GDF SUEZ was chosen to build Shuweihat 2 , a 1,5 10-M W plant capable of desalinating 19 ,000 m 3 of seawater per hour. The Group turned its attention to Q atar in 2 000, both because it wished to diversify its facilities in the Gulf States and also because, since the discovery of the N orth Field (the world’s largest gas field), the emirate ranked third in the world in terms of the volume of its proven gas reserves,

15 0 years in world markets

In A bu Dhabi, it was the GDF SUEZ engineering department that led the way, acting as industrial architect on the Taweelah B power plant project. The plant was to have a generating capacity of 7 3 2 M W and incorporate a seawater desalination facility producing some 60,000 m 3 of water an hour. In 19 9 8, the Group turned its attention to the emirate’s electricity privatisation process. It formed a consortium with the oil group Total and submitted a bid for an extension to the Taweelah plant to be built under an IP P (Inde pendant P ower P roducer) contract. A lthough GDF SUEZ-Total had long been considered the preferred bidder,

Barka (Oman): seawater desalination plant in 2009

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SUCCESS IN THE SUN

THE GULF STATES Construction site of the Barka 3 power station in Oman

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just behind R ussia and Iran. H owever, it was not until 2 008 that the Group realised its ambitions by winning a contract to build a 2 ,7 3 0-M W power station, R as Laffan C , and a seawater desalination plant with a daily capacity of 2 86,000 m 3 . Q atar has since become one of the main sources of gas for the GDF SUEZ Group.

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The Group entered the Bahraini market in 2 004 , when it landed a BO O contract for a 9 5 4 -M W power station on the A l Ez z el site. A s in O man, this made GDF SUEZ the first independent producer in Bahrain. Even before this plant was fully operational, the Group purchased the A l H idd power station in

partnership with International P ower and Sumitomo C orp. Under the deal, it acquired a number of units totalling 9 3 8 M W and pledged to increase the seawater desalination capacity from 13 6,000 to 4 10,000 m 3 per day. Lastly, in 2 008 GDF SUEZ won a BO O contract for a 1,2 3 3 -M W greenfield power plant to be built on the A l Dur site, combined with a daily water output of 2 18,000 m 3 . The fi fth Gulf State in which GDF SUEZ established itself was Saudi A rabia. In late 2 006, the Group secured the concession for the M arafiq power station, the largest combined power production and seawater desalination

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Sohar 1 (Oman): came into commercial operation on 27th May 2007

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SUCCESS IN THE SUN

THE GULF STATES MaraďŹ q (Saudi Arabia), cogeneration plant commissioned in 2009-2010

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project in the world. C ommissioned in 2 009 -10, the plant has a generation capacity of 2 ,7 5 0 M W and a seawater desalination capacity of 800,000 m 3 per day.

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In this way, the M iddle East has been an area of strategic and priority expansion for GDF SUEZ for the past decade. W ith 11 sites in five countries, the Group can exploit growing synergies for both the development and the operational management of its facilities. R ecently, in M ay and J une 2 010, the Group won contracts to build two further power stations in O man (Barka 3 and Sohar 2 ), with a combined capacity of 1,5 00 M W , and a second power station in Saudi A rabia, at R iyadh (1,7 3 0 M W ). GDF SUEZ is already the biggest private energy player in the Gulf, having a direct interest in almost 19 ,7 GW and a daily desali-

nation capacity of over 4 ,1 million m 3 of water. C ompared with the rest of the world, M iddle Eastern markets retain some distinctive features. Every single megawatt is installed on the initiative of governments. It is they who organise calls for tender, allocate land for the siting of power stations and decide what type of fuel will be burnt and who will supply it. It is they, too, who will sell the energy and water produced under long-term contracts, all of the provisions of which are agreed in advance between the parties making up the consortium. W ithin these consortia, which are formed with local state partners, GDF SUEZ does not have a majority controlling interest. C onstruction work only begins once financing has been secured with backing from a large number of international banks present in the region.

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From Constantinople to Istanbul The Group’s presence in Turkey dates back to the early 2 0th century. It was active in Iz mir from 19 09 , in both the electricity and tram businesses. In 19 11, it was part of a consortium set up to merge the existing gas, tram and electricity companies in C onstantinople (now Istanbul), electrify the tram network and build a power station in the city. By 19 14 , the network had 2 ,000 regular customers. A fter many ups and downs, the Turkish government finally took these enterprises into public ownership at the end of the 19 3 0s.

In 2 008, the Group won the tender for the privatisation of Iz gaz , Turkey’s third largest natural gas distributor. Iz gaz supplied 2 00,000 residential, tertiary and industrial customers in the K ocaeli region, 80 km east of Istanbul. It was a distribution network

Silightar (Turkey): power station, around 1925

Malikö y (Turkey) : Baymina power plant, opened in May 2004

that GDF SUEZ knew well, having built it itself in the mid-19 9 0s. W ith a population of 7 1 million and a sustained economic growth, Turkey today offers the Group major potential for development.

15 0 years in world markets

H owever, like many other emerging economies, Turkey passed an Electricity A ct in 2 001 introducing gradual deregulation of the gas and electricity markets. In the same year, GDF SUEZ purchased a 7 7 0-M W C C GT plant being built 4 0 km outside A nkara, having acquired a 4 5 % stake in Baymina, the company in charge of the project, from the British company International P ower, and a further 5 0% from a Turkish consortium. This was one of five BO O projects for which the Turkish authorities had issued public calls for tender.

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Nuclear The rise of natural gas and LNG Natural gas exploration and production Renewable energies Energy trading

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GROUP 10/11/11 12:13

EXPERTISE DEPLOYED GLOBALLY

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Thailand: cogeneration plant

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15 0 years in world markets

Mol (Belgium): The BR1 experimental natural uranium and graphite reactor, operational in May 1956

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The first industrial revolution was driven by coal and steam. After the Second World War, the rapid growth in energy needs and the depletion of Europe’s coal resources forced GDF SUEZ to explore

[...] Under a secret intergovernmental contract signed in 19 4 4 , in which Belgium agreed to supply all C ongolese uranium to the United States, the USA undertook to share their knowledge of the peaceful applications of nuclear energy with the Belgian industry. A s a result of this, continental Europe’s first pressurised water reactor (P W R ) nuclear power station was built at M ol, in the C ampine region of Belgium, with the assistance of the A merican group W estinghouse. It was connected to the Belgian electricity grid in O ctober 19 62 . France’s first P W R nuclear power station was commissioned at C hooz in 19 66; it too benefited from the assistance of W estinghouse, as well as the expertise acquired at M ol by GDF SUEZ engineers. This plant was built in partnership with EDF under Euratom, and General De Gaulle had to give EDF

express permission to operate outside what was then the nationalised French electricity industry. In 19 68-69 , GDF SUEZ decided to build two large nuclear power stations in order to make Belgium energy self-suffi cient. O nce again in partnership with EDF, an 87 0-M W unit was built at Tihange on the R iver M euse. A nother – 100% Belgian-owned – unit was built at Doel near A ntwerp. By the end of 19 7 5 , nuclear electricity already accounted for 2 1.2 % of all power generated in Belgium. In 19 7 1, the Group was chosen as architect-engineer for two 9 3 0-M W units in R inghals, Sweden. From 19 7 2 onwards, Group engineering departments were involved in building the fast breeder reactor at K alkar, Germany, in collaboration with German and Dutch power companies. They were also chosen to design

Chooz (France): loading the reactor at the PWR nuclear power plant, around 1967

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NUCLEAR

other primary energy sources, namely nuclear and natural gas. [...]

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Doel (Belgium): revision of the nuclear plant’s unit 3 in 2002

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the extension of the Eurochemic spent nuclear fuel reprocessing plant in Dessel, Belgium, which operated between 19 66 and 19 7 4 .

The first oil crisis boosted the development of nuclear energy. In 19 7 4 , GDF SUEZ decided to embark on a massive upgrade programme at the Doel and Tihange power stations, entailing the construction of four additional 1,000M W units. This move gave the Group a significant lead in the field of nuclear engineering. It also handled the preliminary study and comparison of tenders for a 1,3 00-M W nuclear power station to be built in Luxemburg. O n 18 th O ctober 19 7 8, the Group and BelgoN ucleaire established Belgatom with

03_PARTIE 3.indd 96

the aim of exporting their nuclear engineering expertise. In 19 7 9 , this consortium landed its first contracts for the European Economic C ommunity (EEC ), mostly in South K orea. It went on to carry out nuclear studies in Taiwan, Spain and in the USA .

seemed in doubt. A nd yet, as the head of the engineering department noted in 19 9 3 , “our loss of the N 8 design was other people’s gain, since it inspired the team behind the F ranco-German European P ressurised R eactor (EP R ) project”.

For the past 4 0 years, the nuclear power stations operated by GDF SUEZ in Belgium have been among the bestperforming in the world, with load factors regularly exceeding 9 0% .

To preserve the expertise it had built up, the Group turned its attention abroad, in particular to Eastern Europe. The C hernobyl disaster had highlighted the major flaws in the safety system of Soviet R BM K nuclear power stations. In J uly 19 9 2 , the G7 mobilised the international community on the issue of nuclear safety in Eastern Europe. The European C ommission took the decision to finance cooperation

H owever, in 19 88, when the Belgian authorities decided to postpone indefinitely the construction of an eighth nuclear unit at Doel – code-named N 8 – the future of nuclear engineering

NUCLEAR

Tihange (Belgium): the three reactors were commissioned in 1975, 1983 and 1985 respectively

programmes and know-how transfers on plant safety assessment and operator training. H owever, the C ommission lacked its own body of expertise. To fill this gap, GDF SUEZ joined forces with EDF to create the Twinning P rogramme Engineering Group (TP EG), an economic interest grouping, which quickly expanded to include seven European electricity producers. A mong other things, TP EG helped the European C ommission by preparing calls for tender for the rehabilitation of R ussian-style reactors and by selecting suppliers. Independently of this expertise, the Group participated in a series of commercial projects via Belgatom. In

10/11/11 12:13

J anuary 19 9 0, it was chosen to carry out an evaluation study on two proposed R ussianstyle pressurised (V V ER ) nuclear power stations at Zarnowiec, P oland (4 60 M W each). The study, which was fi nanced by the P H A R E programme, led the P olish government to put the construction plans on hold. GDF SUEZ worked with the Finnish power company Ivo in Bulgaria and with Spanish and British engineering companies in R ussia. In collaboration with Iberdrola, the Group improved safety at two nuclear power stations, one in R ussia (K alinin, 15 0 km from M oscow), the other in Ukraine. Finally, the Groupâ&#x20AC;&#x2122;s engineering department, in its capacity as consulting engineer to the C zech and Slovak R epublics, was appointed to compare the effi ciency of different nuclear designs.

O utside Eastern Europe, the GDF SUEZ design and engineering department was chosen as architect-engineer for a nuclear power station in Lungmen, Taiwan, in partnership with the US company Ebasco. It was involved in drawing up specifi cations for the nuclear island tendering process. In the mid-2 000s, nuclear power slowly began to emerge from its long period in the wilderness in the wake of C hernobyl. In Europe, however, there is ongoing debate between countries that have decided to halt their nuclear programmes, such as Germany and Sweden, and those that are building new nuclear facilities. That said, the boundaries are shifting, with Belgium and the N etherlands no longer ruling out the nuclear option, despite retreating from it in the past.

In this debate, the GDF SUEZ Group believes that nuclear offers indisputable benefi ts, not only political (energy independence) but also economic and environmental (no C O 2 emissions, limited quantities of waste). It is therefore keen to put the experience it has acquired in this field to good use. Since 2 004 , the Group has shown a commitment to furthering a revival of nuclear energy worldwide. It has declared an interest in the deployment of third-generation nuclear plants, particularly in France. In the United K ingdom, GDF SUEZ joined forces with Iberdrola in 2 009 to buy a plot of land facing the Isle of M an, not far from the Sellafield nuclear power station. A few months later, in September 2 010, GDF SUEZ concluded

a strategic partnership agreement with the Brazilian, government-owned electricity company Eletrobras. Geographically, the agreement covers all countries in Latin A merica and A frica. It relates to project development in the fi elds of electricity generation and transmission, particularly renewable. H owever, it also encompasses nuclear-generated electricity. A longside all this, GDF SUEZ has focused on nurturing top-quality staff to ensure that it has the expertise needed to realise its ambitions. In O ctober 2 006, the Group launched the N uclear Trainee P rogrammes, allowing young engineers to develop their knowledge of nuclear power through classroom and on-the-job training.

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Doel (Belgium): the ďŹ rst two reactors of the power plant came online in 1975

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THE RISE OF NATURAL GAS AND LNG ging natural gas to France and Belgium. In France, the discovery of the Lacq gas field led to the first natural gas conversions in 1956, while the first cubic metres of Algerian gas

Advertisement for town gas heating in the 1930s

were unloaded at the Le Havre liquefied natural gas (LN G) terminal in 1965. [...]

W hile GDF SUEZ built the LN G terminals of Fos-Tonkin (19 7 2 ) and M ontoir-deBretagne (19 80), its engineering department designed the one at Zeebrugge, which included a docking facility for LN G tankers and a regasifi cation line. GDF SUEZ built up considerable expertise on these projects. In the 19 80s, it exported that expertise, helping to build the Inchon and A san Bay LN G terminals in K orea, for example, and providing technical assistance for the construction of storage facilities in A bu Dhabi. Its design and engineering department also drew up master plans for the natural gas transmission and distribution networks in Tunisia, Indonesia and Thailand, and in

so doing paved the way for the Group’s redeployment as an industrial operator in Thailand.

W hen nuclear development programmes were put on hold in the wake of the 19 86 C hernobyl disaster, electricity companies around the world turned to a new and economical form of energy generation, namely cogeneration (also known as ‘ combined heat and power’ (C H P ) generation) and combined-cycle gas turbines (C C GT). This technology had enormous benefi ts: it was over 5 0% energy-effi cient, had a lower environmental impact and was very fl exible to install. The Group’s cogeneration expertise would help spearhead its international expansion in the 19 9 0s.

A s the market for natural gas as a powerstation fuel expanded (today, natural gas-fi red power stations account for over half of the Group’s installed capacity and almost two-thirds of its plants under construction), demand for natural gas rocketed. M oreover, progress in gas liquefaction and LN G terminal construction techniques boosted the rise in consumption by substantially reducing the costs of transporting gas by sea. The role of the Zeebrugge terminal as a European gas transit hub was strengthened in 19 9 8 by the commissioning of

15 0 years in world markets

GDF SUEZ was instrumental in brin-

[...] In Belgium, the gas revolution began with the discovery of substantial gas deposits at Slochteren, in the N etherlands. The fi rst cubic metres of natural gas crossed the Dutch-Belgian border on 10th O ctober 19 66. W ithin fi ve years, the Belgian and French distribution networks had been almost completely converted to natural gas. In the 19 7 0s, GDF SUEZ worked hard to diversify its supply sources. In 19 7 5 , it signed a long-term natural gas supply agreement with the Soviet M inistry of Gas Industry (which became Gazprom in 19 89 ). The Group also concluded supply contracts for gas from the Ekofi sk fi eld in the N orth Sea.

Gjø a (Norway), semi-submersible natural gas platform with a production capacity of 17 million cubic metres, inaugurated in 2011

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THE RISE OF NATURAL GAS AND LNG

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100

Gloucester (USA) : Neptune Deepwater Port, situated offshore

the Interconnector linking Bacton, in the UK , with Zeebrugge. By this time, Groupoperated gas transmission networks were transporting 110 bcm of gas per year. It was against this promising backdrop that in September 2 000 GDF SUEZ acquired C abot LN G, a company active in the liquefaction, purchase and cross-A tlantic transport of LN G. C abot operated the Everett LN G terminal in Boston, which was built in the 19 7 0s when the A tlantic LN G market fi rst took off. H owever, the economic crisis of the 19 80s confounded the optimistic forecasts of the terminal’s developers. Furthermore, deregulation of the US gas market in 19 86 prompted a wave of geological studies leading to the discovery of previously unknown gas reserves in the USA and its territorial waters. The terminal had

a storage capacity of 15 4 ,000 m3 of LN G and its supply sources were A lgeria and Trinidad. The transported gas was sold on in liquid or gas form in P uerto R ico and the markets of M assachusetts. The company owned its own LN G tanker, the M atthew, as well as a 10% interest in the company that operated the liquefaction facilities on the island of Trinidad, which had become the USA ’s biggest LN G supplier. H aving thus established itself in the United States, GDF SUEZ now accounted for over 2 0% of the total volume of LN G transported across the A tlantic. In 2 001, the Group founded a new company, GDF SUEZ Global LN G, to coordinate its increasingly substantial interests on the global LN G markets. To secure the best purchase terms from oil industry

heavyweights, GDF SUEZ capitalised on its controlling stakes in all businesses upstream of production, including liquefaction, regasifi cation and storage facilities, LN G tankers, distribution concessions and natural gas-fi red power stations.

it made sure to safeguard its position at the terminals where it operated by means of long-term contracts. J ust as importantly, it sought to develop its own facilities, with planned terminals in M exico, in the Bahamas and in C hile. It entered into service in 2 010.

Thanks to its presence in the various geographical areas of the A tlantic market, the Group benefi ted from the steady rise in gas consumption during the fi rst decade of the 2 1st century. It further diversifi ed its supply sources, striking deals with Y emen LN G in 2 005 for the supply of Y emeni gas.

Today, the Group has interests in three liquefaction plants: Trinidad (since 19 9 9 ), Ikdu in Egypt (since 2 005 ) and M elkø ya in N orway (since 2 007 ). In A ugust 2 009 , GDF SUEZ signed a partnership agreement with the A ustralian group Santos to build a floating liquefaction plant in A ustralia, with a capacity of 2 million tonnes of LN G per year. Downstream in the LN G value chain, GDF SUEZ aims to have a total regasification capacity of 4 4 bcm by 2 013 . The Group is currently

GDF SUEZ also expanded its fleet of LN G tankers, entering into long-term charter contracts, each adding two or three carriers to its fleet. In addition,

Melkoya (Norway), liquefaction plant operated by Statoil for six companies including GDF SUEZ, inaugurated in 2007

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101

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THE RISE OF NATURAL GAS AND LNG

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102

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Fos-sur-Mer (France): Fos Tonkin LNG tanker in 2007

Europe’s second largest operator of LN G terminals, owning M ontoir-deBretagne and Fos-Tonkin in France and Everett in the United States, with regasification capacities of 7 , 10 and 6.9 bcm per year respectively. It has interests in other terminals in France (Fos C avaou, 7 0.2 % ) and India (10% stake in P etronet LN G Ltd, which owns

the Dahej terminal and is building another in K ochi). In addition, the Group operates a fleet of no fewer than 18 vessels, two of which have on-board regasification systems allowing them to inject natural gas directly into the network at high pressure. In February 2 010, a

new regasification terminal was commissioned in the United States. N amed N eptune Deepwater P ort, it is unusual in being located offshore – 10 miles from the coast of Gloucester, M assachusetts. It consists of two submerged buoys, which allow LN G tankers with LN G vaporisation capability to connect and discharge regasified LN G via an

underwater gas pipeline linked to the onshore transmission network. The security of supply of its customers is one of the Group’s key concerns. O ne of the ways it safeguards this is by diversifying its supply sources as much as possible. This policy was prompted in particular by the risk that declining European gas fields would ulti-

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Alexeï Miller (Gazprom) and G”rard Mestrallet (GDF SUEZ), in the presence of presidents Medvedev and Sarkozy, sign an agreement involving the French group in the future Nord Stream gas pipeline, March 2010

The latest developments in this area mainly concern relations with the R ussian producer Gaz prom. These became closer recently with the signing of a memorandum relating to the supply

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of an additional 1.5 bcm per year and to N ord Stream, a sub-sea gas pipeline connecting R ussia to Germany on which construction work has just begun. M eanwhile, GDF SUEZ is keeping a close eye on other projects linking Europe to major gas fields, such as the EU-backed N abucco gas pipeline, which will connect the continent to gas fields in the C aspian region and the M iddle East.

Storage facilities and transmission networks To keep pace with the growth in natural gas markets, GDF SUEZ has invested over a long period in storage facilities that enhance its fl exibility of supply. This refl ects the fact that gas demand varies signifi cantly depending on weather conditions and problems with individual suppliers. The Group’s storage facilities in Europe are operated by a wholly-owned subsidiary, Storengy, which owns 13 sites in France (9 .7 bcm), 10 in Germany (1.5 bcm) and one in the UK (under development). GDF SUEZ also holds shares in underground storage companies in Slovakia (2 .1 bcm), the C zech R epublic (7 5 0 mcm) and R omania (3 5 0 mcm). O utside Europe, GDF SUEZ has holdings in C anada in two storage plants in Q uebec, with a total storage capacity of 12 0 million m3 . GDF SUEZ has shareholdings in various major European transmission networks, including in Germany (1,088 km, operated since 19 7 6) and A ustria (2 85 km). In the N etherlands, it has been operator of the main Dutch sub-sea gas pipeline, N oordGasTransport, since 2 000 and of the N ogat pipeline since 2 008. In Slovakia, GDF SUEZ controls the company SP P in a joint venture with E.O N ; SP P ’s transit network has a total annual transmission capacity of around 9 5 bcm. Thanks to its 12 .5 % interest in the M edgaz consortium, the Group is also a stakeholder in the project to develop an 8-bcm gas pipeline between A lgeria and Spain. Lastly, in M exico in 2 001, GDF SUEZ bought the natural gas pipelines M ayacan (1,000 km across the Y ucatan) and Baijo (2 5 0 km north of M exico C ity).

15 0 years in world markets

mately make W estern Europe overly dependent on two major producers, namely R ussia and A lgeria. Today, the distribution of long-term supply by country is as follows: N orway is the biggest supplier, with 2 3 % , followed by R ussia (2 1% ), A lgeria (13 % ) and the N etherlands (11% ). Supplies from Trinidad and Tobago, Egypt and the M iddle East account for 7 -8% each, while those from Libya make up 3 % . The long-term contracts signed with these various suppliers are for periods of around 2 0 years. A t the end of 2 009 , the average remaining term was 15 .6 years. LN G accounts for 18% of this portfolio.

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NATURAL GAS EXPLORATION AND PRODUCTION Jean-Fran“ois Cirelli on a visit to Norway in 2006

One of the most original aspects of GDF SUEZ’ gas policy is its shift towards the upstream segment of the gas industry, namely production. Following the closure of its gasworks in the 1960s, the Group ceased to be a gas producer. However, from 1995 onwards, it began looking to invest in the upstream segment of the oil and gas industry in the interests of security of supply; it also sought 15 0 years in world markets

to gain more control over prices by

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becoming the co-owner of a number of high-potential fields. [...]

[...] The bulk of the Group’s own resources are located in Europe. GDF SUEZ began its exploration and production activities in Germany in 19 9 4 , followed by the N orth Sea in 19 9 8 (Elgin-Franklin field), the N etherlands in 2 000 and N orway in 2 001 (Snø hvit and N jord fields, followed by Fram, Gudrun and Gjø a). M ilestones in the Group’s exploration and production activities include the 2 003 takeover of the German onshore assets of P reussag Energie GmbH and the acquisition in 2 008 of a series of oil and gas exploration, production and transport assets in the Dutch N orth Sea, which made it the biggest producer in that region. In recent years, GDF SUEZ has considerably diversified the areas in which it carries on its gas exploration and production activities. It has acquired interests in 18 fields in A lgeria, M auritania, Ivory C oast, Egypt, Libya, Indonesia, the Gulf of M exico and France. Four of these fields are in production. GDF

SUEZ is also present in the United States, Greenland, A zerbaijan, Q atar, A ustralia and K azakhstan. In Egypt, the Group has interests in three fields, of which one is in production. In 2 005 , it signed a concession contract with the state-owned company EGA S for offshore exploration of the W est El Burullus block in the N ile Delta. A 5 0% stake was subsequently sold to Dana P etroleum. In 2 007 , the Group strengthened its presence in Egypt by acquiring 4 5 % of the licence for A lam El Shawish W est, with 2 0% then being sold back to Shell Egypt. In the same year, a deal was reached with Shell to acquire a 10% stake in its new exploration licence for N orth W est Damietta. In A ustralia, GDF SUEZ acquired a 60% interest in three gas fields (P etrel, Tem and Frigate) located in the Bonaparte Basin. The acquisition was accompanied by a project to develop a floating gas liquefaction unit, which

will allow GDF SUEZ to enter the A siaP acific Basin market as an integrated LN G player.

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In K azakhstan, GDF SUEZ in partnership with Total, signed a heads of agreement to acquire 2 5 % of the offshore K hvalinskoye exploration licence, located in the C aspian Sea near the border between R ussia and K azakhstan. In total, GDF SUEZ held 3 62 exploration and/ or production licences in 14 countries, of which it operated 5 7 % itself. O f the 17 exploration wells drilled in 2 010, 9 were successful. A s at 3 1st December 2 010, the Group had proven and probable reserves of 815 M boe, of which 7 6% were natural gas and 2 4 % liquid hydrocarbons. In 2 010, the Groupâ&#x20AC;&#x2122;s hydrocarbon production totalled 5 1.2 M boe, of which three-quarters was natural gas. A lmost half of this gas output was delivered to Group subsidiaries; the rest was sold to third parties, including GasTerra in the N etherlands and E.O N and EGM in Germany. In the exploration and production segment, GDF SUEZ is one of the leading offshore producers in the N etherlands and is Germanyâ&#x20AC;&#x2122;s fourth-biggest producer, while in N orway the Group ranks among the top 8 production fi eld operators.

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15 0 years in world markets

Netherlands : offshore drilling rig in the North Sea, 2008

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RENEWABLE ENERGIES R ational use of energy (R UE) has long been a concern of the GDF SUEZ Group. As early as the interwar period, the Group’s predecessor companies were seeking to democratise electricity use by making it cheaper. They did this by centralising generation (power plants at this time tended to be dispersed, leading to energy losses) and by using so-called ‘unavoidable’ (i.e., inherent to a process or product) or ‘recovered’ energy, e.g., blast-furnace and coke-oven gas, hydropower, coal-washer waste and the heat given off by industrial furnaces. These economic and social considerations (the desire to generate power more cheaply and the desire to make electricity universally accessible) were complemented later on by a commitment to preserve the environment. [...]

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[...] A n awareness of the need to protect the environment began in the 19 60s and reached its first peak in 19 7 1-7 2 , with among other things the publication of the M eadows report – The L imits to Growth – commissioned by the C lub of R ome. This publication discussed such issues as the foreseeable shortage of fossil fuels. 19 7 2 also saw the launch of the United N ations Environment P rogramme (UN EP ) following the United N ations C onference on the H uman Environment held in Stockholm in J une of that year. In 19 88, UN EP sponsored the formation of the Intergovernmental P anel on C limate C hange (IP C C ). Ten years later, in 19 9 7 , the K yoto P rotocol was signed by the UN member countries as part of the Framework C onvention on C limate C hange. The P rotocol entered into force on 16th February 2 005 . GDF SUEZ became conscious of these developments very early on. In the early 19 9 0s, it launched its principle of respect for the “ 3 Es” , meaning energy,

4 MWp photovoltaic farm in Saulce-sur-Rhô ne (France), inaugurated on May 28, 2010

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Idanha (Portugal): map showing the dam and irrigated land in 1948

The Group’s R UE policy was put into practice in the years 19 9 5 -2 005 when many outdated power stations were decommissioned or retrofitted in the various countries where the Group operated. This choice substantially underpinned the safety of these installations and as a result, emissions of carbon dioxide (C O 2 ), sulphur dioxide (SO 2 ) and

nitrogen oxide (N O x) were reduced to levels lower than or equal to those prescribed by the relevant legislation. In another noteworthy development, the Group’s international expansion led it to considerably enlarge its hydroelectric portfolio by acquiring and building hydropower plants in Brazil, C hile, P eru, Laos and the United States. The Group is aware that the construction of dams can affect the lives of communities living in areas earmarked for flooding; it therefore seeks to minimise this negative impact by choosing suitable sites and, in some cases, by using ‘ softer’ technologies such as runof-the-river dams. M indful of its social responsibilities, it works with local authorities and communities to resettle displaced populations near to their former villages and pays them compensation for the damage incurred. This can amount to as much as 15 % of its total investment in the project. A side from hydropower, the Group has shown an interest in virtually all forms of renewable energy. In 19 9 2 , it bought a

15 0 years in world markets

economic and ecological considerations. To its two existing objectives, supplying energy to its customers safely and reliably (principally through diversification of fuels and supply sources) and limiting and stabilising the price per kW h in the interests of consumers, the Group therefore added a third: reducing the consumption of primary energy in order to conserve energy reserves and protect the environment. It worked hard to improve the efficiency of its existing conventional facilities and invested in new, R UE-compliant generating units such as C C GT and cogeneration plants. P roducing steam and power simultaneously, the most sophisticated cogeneration units were around 85 % energy-efficient.

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Monte Redondo (Chile): wind farm, inaugurated in 2009

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Sao Salvador (Brazil): forum for negotiations with a local community before starting work on a hydroelectric dam, 2007

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number of biomass-fired power stations in the United States. Since then, the amount of power generated from biomass has risen considerably, thanks to co-fired power plants or biomass waste compression stations. The Group has become the European leader here, with major plants in Belgium, P oland and the N etherlands. In Brazil, the Group recently began studying the possibility of exploiting wave energy by building a wave power plant on the breakwaters of P orto de P ecé m, in the state of C eará . In Germany, GDF SUEZ has just started supplying Berlin with biogas produced by methanising plant matter from local agriculture. M oreover, the Group has shown itself to be highly innovative, focusing on a range of areas including natural gas for vehicles and micro-thermal installation combined with gas supply. H owever, it is in the field of wind energy that the Group’s track record

is most impressive. In 2 002 , GDF SUEZ and the Spanish group Gamesa, the world’s third largest manufacturer of wind turbines and an operator in Spain, signed an agreement to develop four wind farms in P ortugal, with a total capacity of 2 14 M W . These farms, now owned by the Group, have been in operation since 2 008. W ith its windy climate, the Iberian P eninsula is one of Europe’s most favourable regions for wind power development. In 2 003 , the V ergã o 13 -M W farm in P ortugal was the first wind farm commissioned by Generg, a Group subsidiary with 11 farms in operation (4 3 6 M W installed capacity). In France at the end of 2 010, the Group, as the leading producer of wind energy, was already generating an output of 9 2 2 M W , with facilities capable of generating another 15 0 M W under construction.

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In C anada, GDF SUEZ acquired two wind farms under construction on the east coast from the V entus Group in 2 007 : W est C ape (9 9 M W ) and N orway (9 M W ). These were connected to the grid in 2 009 . In the same year, a third wind farm (9 9 M W ) was commissioned in N ew Brunswick. In C hile, GDF SUEZ inaugurated the countryâ&#x20AC;&#x2122;s largest wind farm (3 8 M W ) in O ctober 2 009 . The environmental benefits were substantial, with 5 4 ,000 tonnes of C O 2 eliminated. This allowed C hile to save on carbon credits. C learly, therefore, GDF SUEZ has striven to develop an energy mix which is as environmentally friendly as possible. It was in keeping with this ethos that it acquired Econergy International in 2 008. The company, founded in 19 9 4 ,

specialised in renewable energies and operated a total installed capacity of 2 66 M W in Latin A merica (Brazil, Bolivia, C osta R ica, C hile and M exico). Its generation facilities comprised small hydro units, wind farms and coalbed methane plants. In Brazil, Econergy opened a first 2 6-M W wind farm in September 2 008 in the state of C earĂĄ , in the northeast of the country. P ollutant emission standards are becoming increasingly stringent. In Europe, the C O 2 emissions trading scheme began operating at the start of 2 005 . W ith almost 5 0 power stations in eight countries, the Group had quotas totalling 4 0 million tonnes of C O 2 . A lthough some transfers between production facilities have been made via P owernext C arbon, the Group mainly engages in internal operations based on the quotas it holds. Fafe (Portugal): wind farm bought by GDF SUEZ in 2005

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RENEWABLE ENERGIES

Prince Edward Island (Canada): convoy of rotor blades on its way to the Ventus-Norway wind farm

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ENERGY TRADING For a long time, European energy

Houston (USA) : trading room in 1997

producers traded energy via a cooperative body called the UCPTE (Union for the Coordination of Production and Transmission of Electricity). However, under the monopolistic system in force in the 1980s, these transactions were only for small volumes since individual countries tried to ensure that they 15 0 years in world markets

had enough resources of their

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own. The high-voltage connections between Western European countries were important mainly as a backup mechanism to safeguard continuity of service. [...]

[...] In 19 9 4 -9 5 , GDF SUEZ discovered a whole new dimension to energy trading, as practised in the United States. It gained its first insights during contacts with the US group En ron. It was when it acquired the US electricity producer C R SS in M ay 19 9 5 that GDF SUEZ truly discovered the emerging energytrading sector. C R SS, together with some 2 5 other US firms, had entered the energy-trading business in 19 9 3 in the wake of market deregulation and the scheduled end of long-term monopolies. Deregulation of the sector meant increased risks for operators and the best way of countering that was to be present at the heart of the market. C ombining trading with generation and distribution activities was a response to the erosion of profit mar-

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In December 19 9 6, GDF SUEZ spun off its US trading business into a H oustonbased subsidiary. From the outset, that company had offices in Boston and M ontreal and operated in two regional US systems. Its 3 0 or so staff worked day-in day-out to establish positions

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on a highly flexible market, with the aim of becoming a multi-fuel supplier to large industrial consumers and other public utilities. GDF SUEZ therefore became the first European group to take this step in the US market, where some 10% of total electricity consumption was being traded at this time. This allowed the Group to acquire experience in a new area of business before the rest of Europe discovered it. A year after it was set up, the Group’s trading subsidiary had become the 15 th largest energy trader in the United States. H owever, the Group’s interest in trading was not confined to N orth A merica. It started trading on the A rgentine

market in 19 9 6 and the Thai market a year later. In the same year (19 9 7 ), looking ahead to the opening-up of the European energy market, GDF SUEZ turned its attention to the Scandinavian power exchange, N ord P ool, established in 19 9 3 , which at that time comprised N orway and Sweden but which would soon expand to include Finland and Denmark. If GDF SUEZ wanted to be a driver of this change in its home market, it would be wise to acquire grounding in the business in all markets where power exchanges were opening. In A pril 19 9 8, therefore, it reached a deal with the shareholders of a small Scandinavian trading company called O slo K raft. GDF SUEZ took over the company and reorganised it under the name Scandic Energy. In J une,

the Group established two teams, one in O slo specialising in short-term positions, the other in M almö dealing with medium- and long-term positions. In December 19 9 8, GDF SUEZ also became the first foreign operator to be admitted to the Spanish power exchange. A t around the same time, the Group established a trading department in Brussels and developed energy trading activities in Germany. In M ay 19 9 9 , it was also one of the three main founders of the A msterdam-based A P X exchange, whose market covered the N etherlands and western Germany. In J uly 2 001, a power exchange called P owernext was established in France with a capital of g10 million. The Group owned about 10% of the venture.

15 0 years in world markets

gins in an open market. By entering this business, electricity producers were seeking to maximise the margins between cost price and sale price of the primary fuels and energies supplied. From now on, the megawatt-hour would be considered as a raw material just like crude oil and foodstuffs. Its prices were published daily in the financial press, and varied according to the supply area, weather conditions and availabilities at each type of power station.

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In 2 001, GDF SUEZ set up Gaselys to provide its customers with a risk management service for the energy sector, through intervention in the natural gas, oil, electricity and carbon dioxide markets. Deregulation of the European market continued apace in the first years of the 2 1 st century. In various countries, virtual electricity generation capacity was

auctioned by the historic operators in order to enhance competition. Such auctions were also a means for GDF SUEZ to expand its presence abroad. In late 2 008, for example, the Group bought 1,100 M W of virtual generation capacity from the Italian company EN I. In 2 005 , a spot market for electricity, Belpex, was established in Belgium

with the involvement of the French and Dutch power exchanges P owernext and A P X . A round the same time, crossborder energy movements benefited from an upgrade of the lines connecting France and Belgium. In late 2 006, the three exchanges - Belpex, A P X and P owernext – were coupled, resulting in increasing price convergence on the so-called ‘ European copper plate’

spanning the markets of France, Benelux and western Germany. During 2 007 , prices on the three exchanges were identical two-thirds of the time. Since then, there has been a trend towards integration of European exchanges, as evidenced by the merger between the German EEX and the French P owernext in 2 008, that between the Dutch A P X and the Belgian

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Paris (France): trading room

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ENERGY TRADING In 2 007 , the Group implemented a new development plan for trading activities in Europe with the aim of gaining (or strengthening) footholds in markets where it had no generation facilities, such as the United K ingdom, Scandinavia and some Eastern European countries. It also aimed to significantly increase the volume of Group transactions in a market whose value was set to grow by 5 0% in five years as well as to reinforce the Group’s presence in the coal, oil and C O 2 emission certificate markets, among others.

with experienced meteorologists. H eatwaves, like the one in summer 2 006, have been known to trigger Europewide power shortages due to heavy use of air conditioning. W hen hurricanes K atrina and R ita devastated coastal areas of the Gulf of M exico in 2 005 , gas and electricity prices rose considerably and the Group’s US trading arm saw its revenues increase. A s for wind and hydro power, they are naturally dependent on fluctuations in wind and rainfall. M any dam reservoirs fill up when the snow melts, and the resulting abundance of cheap energy has an impact on the spring market.

O ver time, the GDF SUEZ Group has built up considerable expertise in trading. Because weather conditions have a major day-to-day impact on the energy market, GDF SUEZ works closely

W ith the full takeover of Gaselys assets in late 2 010, GDF SUEZ’ goal is to lead the European trading market with a presence throughout the entire energy chain.

Endex in 2 009 , and the tie-up between A P X -Endex and Belpex in 2 010.

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15 0 years in world markets

Brussels (Belgium): trading room in 2009

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INTERNATIONAL POWER

HOW GDF SUEZ DOUBLED ITS INTERNATIONAL PRESENCE

In the late 1980s, the Central Electricity Generating Board (CEGB) had sole responsibility for electricity generation and distribution in the United Kingdom. However, that was about to change following a decision by the government of Prime Minister Margaret Thatcher to privatise the energy sector. In 1990, the CEGB was split into three large generation companies (N ational Power,

Massachusetts (USA): CCGT at Milford

Powergen and N uclear Electric) and one high-voltage electricity transmission company

15 0 years in world markets

(N ational Grid). [...]

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[...] N ational P ower, the forerunner of today’s International P ower, inherited 4 6% of the C EGB’s generation capacity, i.e., 2 9 GW generated by around 4 0 power stations, most of them running on fossil fuels (gas, oil and coal). A ll of these plants had been built in the 19 60s and 19 7 0s. In 19 9 2 , N ational P ower began to invest in privatisation programmes overseas, capitalising on the skills, knowledge and financial strength acquired at the time of its own privatisation in the UK .

International investment quickly became a priority. In the space of a decade, the company built up a flourishing business spanning N orth A merica, Europe, the M iddle East, A ustralia and A sia. The N ational P ower and GDF SUEZ groups then developed along similar lines. Both adapted very quickly to the new competitive environment and in 19 9 3 -9 4 launched themselves on the international markets to take advantage of privatisation programmes mushrooming worldwide. Like GDF SUEZ,

N ational P ower relied heavily on thermal technology to drive its expansion. Inevitably, the two companies found themselves competing in some markets, most notably in P ortugal but also in P akistan and A ustralia, where they sometimes bid against one another at auctions. In 19 9 9 , the success of N ational P ower’s teams in world markets prompted its management to propose splitting up the British company. In O ctober 2 000, the company’s UK electricity busi-

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Thailand: cogeneration plant

Victoria (Australia): thermal power plant at Hazelwood

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A ustralia (1,9 9 6 M W ), and A sia and the eastern M editerranean (1,7 9 0 M W ). In A sia, the Group had a strong footing in P akistan. O ver the past decade, International P ower has continued to make progress in world markets. 2 004 was a particularly important year in this respect, with the acquisition of the electricity assets of Edison M ission Energy (EM E) in partnership with M itsui. EM Eâ&#x20AC;&#x2122;s portfolio totalled 3 ,2 02 M W , with assets on four continents: N orth A merica, Europe,

A sia and A ustralia. The company has also established its credentials on the independent electricity generation and water desalination market in the M iddle East. Today, the common experience of GDF SUEZ and International P ower will facilitate the integration of their teams worldwide. Both groups are also well-versed in devising original solutions to meet the requirements of a wide range of customers, whether it be in emerging economies, where

energy demand is burgeoning, or in mature markets. By joining forces with International P ower, GDF SUEZ is breaking new ground in the international arena. International P owerâ&#x20AC;&#x2122;s electricity generation capacity, set to become the focus of the GDF SUEZ Groupâ&#x20AC;&#x2122;s generation business, will increase from 3 4 to 66 GW after the merger (not including 2 2 GW under construction). This will make the Group the largest private operator in the world.

15 0 years in world markets

ness was spun off into a new company, which was sold to R W E in 2 001. N ational P ower was renamed International P ower and floated on the London Stock Exchange. Following the spin-off, International P ower had power stations, operational and under construction, totalling 10,85 0 M W , as well as strong positions on the trading market. The company was particularly well established in the high-growth markets of the United States (4 ,4 15 M W ), the western M editerranean and Europe (2 ,64 9 M W ),

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Unless otherwise mentioned, the photographs published in this document are the property of the GDF SUEZ Group and their respective authors. No copies, even partial, are authorised without the written permission of the GDF SUEZ Group. The publisher has made all possible efforts to apply

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statutory provisions on copyright, although was not able to trace the definite source of all documents. Anyone wishing to assert their legal rights is invited to contact the publisher.

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R ené Brion and J L M oreau: p. 12 , 15 , 16, 17 / 2 , 19 , 2 5 , 4 9 / 2 , 5 6, 7 9 , 84 / 3 , 9 9 GDF SUEZ / O livier Douliery / A BA C A P R ESS: p. 2 International P ower : pp. 3 , 9 2 , 9 3 , 114 , 115 GDF SUEZ / M EY SSO N N IER A N TO IN E: p. 4 GDF SUEZ / David P las photography: p. 5 GDF SUEZ / K ofl er C airo: p. 2 0 Ullstein Bild / R oger-V iollet: p. 2 2 R oger V iollet: pp. 2 4 ; 5 5 P eter J ordan / Time Life P ictures / Getty Images: p. 2 9 C orbis (J acques Delors): p. 3 4 K eystone / Getty Images (Lech W alesa): p. 5 0 Electrabel / DA UW E Sophie: p. 5 1/ 1, p. 5 3 Electrabel / M O SSIA T Didier: p. 5 1/ 2 Electrabel / BEC K ER & BR EDEL: p. 5 2 Electrabel / V A N DE BIEZEN Bram: p. 5 4 GDF SUEZ / Studio Fotografi co Filippi: p. 5 9 GDF SUEZ / O P DE BEEC K Gerrit: p. 62 / 3 , 68 GDF SUEZ / P IN O O C C A M P O C laudio: p. 63 GDF SUEZ / A BA C A P R ESS / BIZZA R I GIUSEP P E: p. 7 0 GDF SUEZ: p. 7 3 GDF SUEZ / A BA C A P R ESS / FR IEDM A N R ick: p. 7 6 GDF SUEZ / M A R TIN EZ FLO R ES J orge: p. 7 7, p. 7 8 GDF SUEZ / A BA C A P R ESS / FER N A N DES H ER BER T: p. 88 GDF SUEZ / A BA C A P R ESS / A LSA GA FF H ELM Y : p. 9 0 Electrabel / P hoto Locus P romocité : p. 9 4 Electrabel / BEC K ER S R af: pp. 9 6 / 1; 9 7 GDF SUEZ / IN TER LIN K S IM A GE / M O N LA U Laurent: pp. 101; 102 GDF SUEZ / A BA C A P R ESS / GO R A SSIN I Giancarlo: p. 103 GDF SUEZ / H ELSLY C EDR IC : p. 104 GDF SUEZ / IN TER LIN K S IM A GE / M A ITR E P ascal: p. 105 GDF SUEZ / R O BER T J UA N : p. 106 GDF SUEZ / P IER O T A lain: p. 109 GDF SUEZ / IN TER LIN K S IM A GE / M O N LA U LA UR EN T: p. 112 GDF SUEZ / DE BA R SE R udy: p. 9 6/ 2 , p. 113 GDF SUEZ: C over Gasunie FotoServices: Back cover GDF SUEZ / M ehdi Benyezzar (Illustrations): pp. 8; 9 ; 4 4 ; 4 5

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PEFC/10-31-1381

In this publication, the term “GD F S U EZ ” is used to refer not only to the current Group but also to all of its predecessor companies, in particular: C ompagnie pour l’É clairage et le C hauffage par le Gaz, C ompagnie Financiè re de Suez, C ompagnie M utuelle de Tramways, C ompagnie Universelle du C anal M aritime de Suez, É lectricité et Traction, Electrobel, GDF (Gaz de France), P owerfi n, Socié té des C hemins de Fer É conomiques, Socié té Gé né rale Belge d’Entreprises É lectriques, Socié té Lyonnaise des Eaux et de l’É clairage (later Lyonnaise des Eaux), Sofi na (recovery of design and engineering business goodwill), Suez-Lyonnaise des Eaux, Traction et É lectricité , Tractebel, Tractionel, and Electrabel as well as any subsidiaries of these companies and other companies that they may have acquired over the years.

ECO-RESPONSIBLE PRINTING This book has been printed by Imprimerie Nouvelle, 93, avenue Denis Papin, 45800 Saint-Jean-de-Braye which holds usage rights number registered under PEFC/10-31-1381. With the exception of the recycled paper of the cover, the papers used are PEFC certified (BV-CoC-1778657). PEFC CERTIFICATION From forest to printed matter – a chain of checks for certificated commitment. The international PEFC certification attests that the fibres used in the manufacturing of the papers come from timber thinning in sustainably-managed forests (economically viable, respectful of the environment and beneficial to local populations). To this day, only about 100 printers out of a total of 6,000 in France have obtained this certification. INKS The offset inks used for this book are formulated using renewable raw materials of vegetable origin. The process-printing range does not contain in its mixes any components that represent a health hazard. The use of inks in cartridges means less weight of waste to be treated using specially adapted procedures to limit their impact on the environment.

Director of the Publication : Valérie Bernis Coordination of the Publication : Guy Dellicour, Kristof Scheldeman GDF SUEZ (G06B02) Simon Bolivar Avenue 34 - 1000 Bruxelles - Belgium Tel : 0032 2 510 79 26 www.gdfsuez.com

PHILIPPE CHAUVEAU

35, quai André Citroën – 75015 Paris – France Phone: +33 (0)1 42 73 60 60 – Fax: +33 (0)1 42 73 60 70 Graphic design and page layout: Daphnée Mendez Editorial coordinator: Philippe Morineau editionspc-livres@wanadoo.fr – www.editionspc.com

Documentary research made by R”n” Brion and Jean-Louis Moreau, of AVAE (Association pour la Valorisation des Archives d’Entreprises).

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Printed at Saint-Jean de Braye, France at the print works of the Imprimerie Nouvelle, Groupe Jouve This book was written based on information from before June 1, 2010.

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