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Stock Strategist Industry Reports

GDF Suez: A European Giant Continues to Turn Outward

With International Power fully in the fold, we think this global energy company is set to leave its diversified peers behind.

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After completing its full acquisition of International Power in June,  GDF Suez (GSZ) now owns the largest independent power generation portfolio in the world with 117 gross gigawatts of capacity. With a mix of long-term contracted and open generation, GDF enjoys cash flow stability, significant upside to higher power prices, and growing power usage in its major markets. The IPR deal augments its expansion into fast-growing markets outside of Europe and supports our belief that GDF's combination of operational resilience, financial strength, asset quality, and growth opportunities makes it more attractive than peers  Enel (ENEL),  E.ON (EONGY), Iberdrola (IBE), and RWE (RWE), which have similar or greater levels of eurozone exposure.

Most diversified European utilities invested abroad during the last decade, but GDF's position outside of Europe and North America is, in our view, the most robust. The diversified space is a frothy one, as Europe's utility giants frequently trade assets, move in and out of countries, and create complex holding structures, earning themselves healthy conglomerate discounts. GDF has swapped its share of assets, but the merger with Suez in 2008 set a decisive course toward expanding power generation development outside of core European markets. The subsequent IPR acquisition has amplified this move, adding significant capacity in Asia and the Middle East and boosting the growth pipeline in Latin America.

Mark Barnett does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.