Eni takes on GDF Suez in French retail gas

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25 April 2013, Gas

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When the French gas market was opened to competition in 2007 Eni became a shareholder of Altergaz, but only took control in 2012 and now brands it under the Eni name.

Of the 10 million French households using gas, 91% remain with GDF Suez, and the rest are mainly with EDF, Eni, Poweo Direct Energie, E.ON, or Energem. In revenue terms EDF is now the second biggest player and Eni is third.

Since Eni took control of Altergaz in October 2012 it has pursued an aggressive strategy of capturing retail customers. It has a goal of 50% sales growth by 2016 (from EUR800m per year at present to EUR1.2bn per year). Altergaz originally focused on the retail business segment, but since 2009 has been trying to gain residential customers.

However, the market is difficult and Altergaz lost money in the last two years (EUR32m in 2010 and EUR50m in 2011), despite selling as much volume as EDF. The country's tariff structure is complicated, with a mixture of fixed, variable, and personalized tariffs. Of note is Eni's offer called Horizon, a fixed tariff for three years, whereas other offers in the market are for two years. Its Essentiel tariff aligns itself with GDF Suez's regulated tariffs, but promises a 6% reduction on the per kWh price.

In a similar vein, Poweo Direct Energie also offers a price indexed on regulated tariffs but with a 5% guaranteed reduction, and instead plays on the quality of its customer service and ease of use, for example by offering dual electricity and gas bills.

GDF Suez will be especially desirous to limit customer switching given the difficulty it will have covering its costs if the government follows through with its intention to limit gas price rises to 2% per year. The government refused the requested 7% increase by GDF Suez in 2012.

GDF Suez will remain the leader in the gas market, but it will have to maintain its customer service standards if it wishes to cease the slow erosion of its customer base, which is becoming increasingly price sensitive. Retail gas prices rose by 2% in September 2012, after increases of 4.4% in January 2012 and 2% in July 2012.

www.datamonitorenergy.com / asken@datamonitor.com / @DatamonitorEN

Source: MarketLine

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