UPDATE 2-GDF looks to energy services, not big takeovers, for growth

Tue Jan 21, 2014 10:26am EST

Related Topics

* GDF CEO says demand for energy services grows 2.5 pct/yr

* Growth comes despite weak economy, falling power demand

* Cofely European and global leader in fragmented sector

* GDF denies plans for a major acquisition, stock recovers

By Geert De Clercq

PARIS, Jan 21 (Reuters) - GDF Suez can achieve most of its planned growth without resorting to acquisitions, its chief executive said on Tuesday, after banking and industry sources said Talisman Energy had rebuffed a takeover approach by the French utility.

The sources said on Monday that GDF was still seeking acquisitions of up to $20 billion outside Europe and had looked into buying companies including U.S. utility AES Corp after being rejected by Canadian oil and gas producer Talisman.

CEO Gerard Mestrallet denied any such plans on Tuesday and insisted on the strong organic growth prospects of the gas and power utility's existing businesses, notably its energy services provider Cofely.

GDF is playing down the prospect of game-changing, multi-billion-dollar tie-ups for now. Cofely said last month it wanted to buy several smaller peers with combined revenue of 1 billion euros ($1.4 billion) to drive home its advantage as Europe's biggest provider of energy services for buildings.

"In an environment with economic growth around zero and with energy demand falling by 1 to 2 percent per year, we are seeing growth of around 2.5 percent per year in demand for energy efficiency services," Mestrallet told reporters in Paris.

Alongside its push in energy efficiency services, GDF wants to consolidate its position this year as the biggest independent power producer in emerging economies, in particular by expanding its energy services in those countries too.

"I believe efficiency needs will also grow in the emerging world," Mestrallet said, adding that this was why GDF last year bought a 51 percent stake in Emac, a Brazilian air-conditioning maintenance company with 850 staff.

In 2012, GDF also bought Chilean energy services firm Termika and invested in the urban cooling network of Cyberjaya city in Malaysia.

Mestrallet said GDF had no plans for major takeovers, and voiced confidence in the group's current balance of traditional, asset-heavy power generation and labour-intensive and capital-light energy services.

NO IPO SEEN FOR COFELY

With its 90,000 staff, Cofely represents 60 percent of GDF Suez's headcount but just 15 percent of its 2012 sales and 7 percent of core earnings. It earned 2012 core profit of 1 billion euros on sales of nearly 15 billion euros.

Following the 190-million-pound acquisition of the facilities management unit of Britain's Balfour Beatty last year, Cofely now has turnover of around 16 billion, Mestrallet said. GDF had 97 billion euros of revenue in 2012.

In France, Cofely competes with Dalkia, Vinci Energies , Sodexo and privately held Spie, which is considering an IPO later this year.

Mestrallet said energy services remained fragmented and unstructured worldwide, effectively making GDF Suez-Cofely the world's number one player in the business, even if the bulk of its activity is in Europe.

"This industry is fragmented, and we want to take advantage of that to further develop our energy services," he said.

Mestrallet said GDF's main competitor in France, state-controlled utility EDF, did not have an energy services activity and was now acquiring one by buying the French arm of Dalkia in a deal with Veolia.

"We are years ahead in this business. We do not want to lose this advantage," Mestrallet said.

He ruled out an IPO for Cofely.

"It is out of the question that we would part with this activity. It is an enormous asset," Mestrallet said.

GDF stock, which had fallen as much as 3 percent on the news of its interest in Talisman and AES, retraced half of that drop and stood 1.6 percent lower in early afternoon trade.

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