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Merge of GDF and Suez will raise prices for the power companies
10 September 2007The third on size player has come to the EU power market: French Gaz de France (GDF) and Suez have finally agreed on merge. In experts’ opinion, merge of these companies will lead to the fact that in the future the similar sort of the transaction will manage to the companies much more expensively because of all of an amplifying competition in power sector.
According to the research published KPMG (May 2007), in 2006 the total sum of transactions on merges and absorption in power sector has reached a record mark in 420 billion dollars. Growth has occurred on the background of the European power markets, opened for a competition and super profits of the companies of the sector in connection with a fast rise in prices on energy. All this is inevitably reflected in the cost of M&A - transactions on absorption of the power companies became already much more expensive.
It is expected, that investors will start to put pressure on incorporated GDF-Suez that the last one used the means more effectively and invested more money in the power markets, which have grown in some times on a background of rise in prices the for raw materials. The rough sum of promissory notes of the company (according to on the end of December 2006) makes nearby 13,9 billion euro and it is, by estimation of an analysts of the London representation of UBS bank, enables the company to spend nearby 25 billion euro for purchases.
Merge of GDF-Suez is estimated in 78 billion euro and it is supposed, that this concern will make a competition to such giants as Electricite de France and German E.ON. GDF and Suez are planning to finish merge approximately in first half of the next year and then the company can give more attention to questions of expansion. Such companies as British Centrica and Scottish Southern Energy are among possible applicants for merge.
Other analysts assume that GDF-Suez will temporarily suspend process of merge of other companies if the management of concern will decide to start modernization of the power stations and power networks.
In opinion of experts, it will be easier for GDF-Suez to buy up other companies as financial opportunities became noticeably more widely after the merge.
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