GDF Suez: Closure of Belgium Nuclear Plants to Hit Profit

By Inti Landauro

PARIS--GDF Suez SA (GSZ.FR) warned Thursday that the closure of two nuclear power plants it operates in Belgium will hit its profit in the second half of the year by 40 million euros ($54 million) for each month the plants are closed.

The French power utility adjusted its full-year financial target saying its recurring net profit will be lower than the target of between EUR3.3 billion and EUR3.7 billion it announced two quarters ago to take into account the months of effective outage of the two nuclear reactors during the second half of the year.

Last month, GDF Suez had said the halting of the Doel 3 and Tihange 2 reactors would last longer than initially expected for additional tests to be carried out. The company expected to restart the reactors in July.

The additional delay is another blow to GDF Suez's European thermal power production business. The company faces stiff competition from substantially subsidized renewable sources, while the lasting economic crisis has lowered energy consumption in Europe.

The two nuclear reactors were shut down in late March by the Belgian authorities following tests on the reactors' pressure vessels that showed "unexpected results" regarding their resistance. Both reactors had already been shut in 2012 after micro-cracks were found on their pressure vessels, which enclose the reactors' cores.

Additionally, adverse foreign exchange rates and warmer weather than usual dented GDF Suez's earnings before interest, taxes, depreciation and amortization, or Ebitda, in the first half of the year to EUR6.6 billion, which was down 14% from a year earlier. Net recurring income for the period fell 13% to EUR2.1 billion. Lower power prices in Europe and a drought in Brazil, which hit hydro output, added to the utility's woes in the first half, the group said. Overall revenue contracted 6.3% to EUR39.4 billion.

Net profit, however, grew 51% to EUR2.6 billion for the period, supported by lower debt and lower depreciation and amortization following a EUR14.9 billion write-off last year.

The deterioration in the company's outlook and its first-half performance highlight the still challenging situation faced by GDF, one of Europe's largest utilities, as it is confronted with lower demand and stiff competition from heavily subsidized renewable energy on the continent.

Write to Inti Landauro and Geraldine Amiel at [e-mail]

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