Gaz de France and Suez have submitted proposals designed to remedy the objections identified by the European Commission regarding their proposed merger. These proposals include creating a new competitor in Belgium and France, and various asset transfers.

The European Commission identified four markets where the merger between the two companies could raise competition issues, namely the natural gas markets in Belgium, the electricity markets in Belgium, the natural gas markets in France and the heating network market in France.

One of the remedies submitted by the two companies is to create a new competitor in Belgium and France. Under this proposal, a new company will be set up, and subsequently sold to a third party. Various assets would then be transferred to this third party, including the portfolio of sales contracts with Distrigaz’ industrial customers in Belgium and France, as well as contracts for the sale of gas concluded by Distrigaz and Gaz de France with SPE.

Other assets to be transferred would include a gradual transfer of supply contracts for a total of 50 billion kWh/year (approximately 4.5 billion cubic meters), additional medium-term supply contracts between the merged group and the new company, and the technical resources required for the company’s business activities (such as transmission and storage capacity).

Suez and Gaz de France would sell this new company at the end of a competitive process, preferably based on an asset swap agreement.

Other proposals made by the two companies include a ‘gas release’ program in France and Belgium, the sale of Gaz de France’s 25.5% stake in SPE, and the sale of the Cofathec heating networks.

In addition to the large number of capital spending operations decided or committed in France and Belgium in 2006, the companies also propose making changes to the corporate governance rules of the companies responsible for infrastructure in France and Belgium designed to reinforce the guarantees of independence of the companies in question.

This would also involve the transfer to Fluxys of Distrigaz & Co and the 25% equity interest held by Gaz de France in Segeo.

The Commission is expected to announce its decision concerning the transaction by the middle of November, after studying these proposals and consulting other stakeholders in the relevant markets.