Nicolas Sarkozy to decide on GdF-Suez merger plan by end of September

French president Nicolas Sarkozy will decide by the end of September whether to back the merger of utility Suez and state-run Gaz de France, a Cabinet spokesman said Wednesday.

Tension has been mounting over the deal as the companies face a European Commission deadline this week to meet conditions allowing a merger to move forward.

"The president will make his position known when he has all the elements _ and notably the position of Suez on some issues," government spokesman Laurent Wauquiez said after a Cabinet meeting.

"The date required so that we can be clear is the end of the month of September," he said, adding that the merger was "one of the options on the table."

Sarkozy's new government has been exploring options about the planned tie-up, announced in February last year to fend off a hostile takeover bid for Belgian-French utility Suez by Italian utility Enel SpA.

The previous conservative government headed by Prime Minister Dominique de Villepin had arranged the deal to create a French champion in the energy business. Critics said it flew in the face of free-market principles.

For a merger to take place, the government would have to privatize GdF - something Sarkozy promised not to do when he was finance minister in 2004.

GdF Chief Executive Jean-Francois Cirelli, speaking at an earnings presentation, said he still hopes the merger will go ahead, but added that the company has other options if it falls through.

Cirelli, like Suez did Tuesday, said all parties had been in regular talks over the summer to try to salvage the deal. He said the companies could ask for an extension from the European Commission.

He urged Suez to "make the necessary efforts" to allow the deal to go forward, but declined to estimate when the impasse could be resolved.

The news came as GdF said net profit dropped 11 percent to EUR 1.51 billion (US$2.06 billion) in the first half of 2007 from EUR 1.70 billion a year earlier as demand slumped because of unusually warm weather.

The results topped expectations of a 14 percent drop in net profit and a 13 percent drop in EBITDA, based on the average of five analysts' estimates polled by Dow Jones Newswires.

Looking beyond the results, CM-CIC analyst Patrice Lambert de Diesbach said the "major question is the outcome of the merger" which is facing "less and less engaging comments."

In a statement, GdF cited a "very difficult environment" in the first half amid "exceptionally warm weather that affected nearly all of our businesses," and slumping gas prices.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, fell to Ђ3.11 billion (US$4.25 billion) from EUR 3.27 billion over the same period a year earlier.

GdF confirmed its financial objective for the full year of 2007 of an EBITDA in line with the 2006 level.

GdF shares rose 2 percent to EUR 34.59 (US$47.18) in Paris.

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Author`s name Angela Antonova