Gaz de France Faces EU Probe Over Pipeline Access

Friday, May 23, 2008

Gaz de France SA, operator of Europe's largest natural-gas network, faces a probe by European Union regulators into whether it harmed competition by restricting access to its pipelines.

The European Commission, the EU's antitrust regulator, said today that it will study whether Gaz de France limited capacity on its network and failed to invest in pipelines. Gaz de France, which is planning to merge with Suez SA to create the world's third-largest utility, said it would cooperate with the probe.

The EU has increased its scrutiny of companies in the bloc's 340 billion-euro ($535 billion) power and gas market. The EU is considering legislation that would require gas producers to sell their transmission networks, spin off that business or hand over operation of the grid to an independent company.

"This is part of the pressure being put on utilities by the European Commission to separate their distribution networks," Tannegui Bujard, a Paris-based analyst at Raymond James, said by phone. "The probe in itself won't affect operations", he said.

The French government is leading opposition along with Germany to the proposal, which the commission made in September to ease network access for companies such as the U.K.'s Centrica Plc without their own grids.

No Complaint

Gaz de France said in an e-mailed statement that it has accelerated investment in French infrastructure in recent years to 1.5 billion euros last year and would cooperate with the European Commission.

As many as 44 competitors have access to its infrastructure "under transparent and non-discriminatory conditions," the Paris-based company said. "No complaint for anticompetitive conduct has been lodged" with the French and other energy regulators, it said.

Gaz de France fell 35 cents percent to 42.34 euros in Paris trading. Suez fell 17 cents to 45.79 euros.

In 2006, the EU carried out raids at natural-gas firms in several countries in search of evidence that companies shut out competitors by restricting pipelines access.

"We found information during the course of those investigations which illustrated that there was deliberate underinvestment so there would be no increase in gas imports into the French market," commission spokesman Jonathan Todd said at a press conference in Brussels. "Where there is a deliberate policy of not investing, there could be an issue of the abuse of the dominant position on the market."

Transport Capacity

The commission said it's studying whether Gaz de France's actions may prevent or reduce competition in the natural gas market through "long-term reservation of transport capacity and a network of import agreements, as well as through underinvestment in import infrastructure capacity."

Under EU rules, companies can be fined as much as 10 percent of annual sales for antitrust violations. Companies can appeal decisions at European courts in Luxembourg.

The EU approved Gaz de France's merger with Suez in 2006, after the companies agreed to give up control of Belgian natural gas companies and a heating network in France.

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