The Group confirms the strength of its business model, with sound Infrastructure business and sharp growth in Exploration – Production, Trading and Sales.

• Net income, Group share: 2.3 billion euros
• EBITDA: 5.15 billion euros
• Dynamic dividend policy: 1.1 euro per share (+62%)
• Investments at stepped-up pace: 4 billion euros (+38%)
• Contribution of Group's international activities doubled in two years (39% of sales)
• Many operational advances: strengthened operations, Exploration-Production, LNG Infrastructures and Electricity
• Major steps completed in merger project with Suez

Paris, 13 March 2007 – In fiscal year 2006, Gaz de France (code ISIN FR0010208488 – GAZ) had the best operational performance in its history.

As the annual results were published, Jean-François Cirelli, Chairman and Chief Executive Officer, stated: “All of the Group's business lines contribute to the 2006 results which reflect, to this day, the best operational performance ever achieved by Gaz de France These excellent results reflect the strength of its business model and the strategy implemented.

The exploration-production activities enjoyed the full benefits of a buoyant energy business environment, the Infrastructure activities confirmed the solidity and recurring-nature of their results and the Group successfully took advantage of its unique position in gas in Europe, for its trading and sales activities. 

Despite difficult weather and market conditions in early-2007, the Group is confident in the robustness of its fundamentals.

2007 will go down as the year when the energy markets were fully-deregulated. All of the teams at Gaz de France stand ready to provide our clients with new offers and services, including electricity, to meet their needs in the best possible way. 

The implemented Gaz de France development strategy will be boosted by our planned merger with Suez, a major undertaking intended to further speed up the pace of our growth”.

Main operational advances in 2006

Strengthened gas supply portfolio

>Agreements with Gazprom

Gaz de France signed major agreements with Gazprom in December 2006.  They will extend existing contracts until 2030 and cover 140 billion cubic metres (bcm).  In addition, Gazprom has committed to providing Gaz de France with over 50 billion in additional volume, starting in 2010.

>Agreement with Sonatrach

Gaz de France has signed an agreement with Sonatrach for the purchase of one bcm in natural gas per year, to be transmitted through Medgaz, the gas pipeline connecting Spain to Algeria.  Gaz de France now owns a 12%-stake in the pipeline, which is expected to be commissioned in 2009.  The 20-year agreement will enable Gaz de France to continue diversifying its supply and build up its position in Spain.

Development in Exploration - Production

>Gaz de France launches production on five natural gas fields in Dutch offshore

In January 2006, Gaz de France, with its subsidiary GDF Production Nederland BV, launched production at five natural gas fields in the Dutch North Sea.  The five fields will enable Gaz de France to double its medium-term production capacity in the Netherlands, thereby consolidating its position as  Number 2 European operator in the country.

>Developments in Upstream in Mauritania

Gaz de France and Dana Petroleum have finalised the agreement signed on 7 November 2005, under which Gaz de France entered three Mauritanian offshore exploration blocks. This operation will allow the Group to hold a significant position in this area.

LNG infrastructures strengthened

>LNG carrier delivery

Two LNG carriers, Provalys (154 500 bcm) and Gaz de France energY (74 000 bcm), were delivered in late 2006.  On 7 March 2007, Gaselys (154 500 bcm) joined Gaz de France's fleet, which has now been expanded to 12.  The new LNG carriers have enabled Gaz de France to consolidate its position as the leading European LNG operator. 

>New LNG terminal to be built in Fos-sur-Mer

Gaz de France is continuing construction on its third LNG terminal, Fos Cavaou, located in Fos-sur-Mer (South of France). The new terminal – with annual regasification capacity of 8.25 bcm – is expected to be commissioned in late-2007.

>Project to increase discharge and re-gasification capacity in Montoir-de-Bretagne

Gaz de France has launched a large-scale project to increase the capacity of its Montoir-de-Bretagne terminal (located near Saint-Nazaire).  The current capacity of 10 bcm will be increased in a two-step process, first to 12.5 bcm, then to 16.5 bcm.

Electricity development highlights

>Creation of Maïa Eolis

In December 2006, Gaz de France and Maïa Sonnier founded a joint subsidiary, Maïa Eolis.  The company, 49%-owned by Gaz de France and 51%-owned by Maïa Sonnier, will be responsible for developing and operating wind energy fields in France and Europe. Maïa Eolis' ambition is to produce 1 000 MWe in Europe, in the medium-term.

The Group's objective is that 10% of it electrical production capacity in Europe be covered by renewable energies by 2012.

>1,200 MWe combined-cycle plant in Cartagena, Spain, commissioned

In late-2006, the combined-cycle plant developed with American company AES was commissioned.  Gaz de France holds a long-term tolling contract, under which it provides gas and receives, in exchange, the plant's electricity production revenue.

>Combined-cycle plant to be built in Fos-sur-Mer

Gaz de France has embarked on work to build a natural gas combined-cycle plant, Cycofos (425 MWe), to be located in Fos-sur-Mer. Delivery is expected in 2009.

>Successful call for tenders on construction of a power plant in Brittany

Gaz de France won the call for tenders launched by RTE (Electricity Transmission Network) in December 2006, and will build a power plant in Brittany, offering production capacity of approximately 200 MWe, which will operate mainly on natural gas.  Delivery is expected in 2010.

Analysis of 2006 results: all the business lines contribute to the growth and improved operational performance

Analysis of 2006 EBITDA (before replacement costs)

Energy Supply & Services, growth drivers

>Exploration-Production: very sharp increase in results, driven by prices and volumes

>Purchase and Sale of Energy: strong improvement in profitability, in a conducive market environment

>Services: both activity and profitability continue to grow

On a comparable basis and excluding capital gains from divestments, the increase in EBITDA in Exploration-Production came out at +56%.  This evolution results mainly from the improvements in hydrocarbon sales prices and the increase in production.

Exploration expenses continued to grow (143 million euros in 2006, compared to 114 million euros in 2005).  Year 2006 was marked by eight successfully drilled wells out of 15.

Growth in 2006 EBITDA in the Purchase and Sale of Energy segment resulted from the combined effect of the Group's competitive supply portfolio in a highly-volatile market, improving margins and good performance of LNG and trading activities. 

In contrast, the 5.8% increase in public distribution rates implemented on 1 May 2006 prevented the Group from passing on the entirety of the rise in supply costs to its customers (511 million euros loss in revenues in 2006).  Lastly, the unfavourable climate conditions had a negative impact of 166 million euros on EBITDA between 2005 and 2006.

The increase in EBITDA 2006 in the Services segment was earned for the most part by Cofathec, which saw its profitability improve, particularly in Italy.  The services segment also enjoyed the full-year effect of operations at the combined-cycle plant in Dunkirk (DK6).

Continuing development in the Infrastructures business, a sound base of significant, recurring revenue for Gaz de France

>Transmission and Storage France: high level of recurring income

>Distribution France: increase in results, despite unfavourable climate conditions

>Transmission and Distribution International: strong improvement due to external growth and price trends

Excluding non-recurring items, 2006 EBITDA of the Transmission Storage France segment improved by over 4%: it benefited from the increase in capacity subscribed, rise in storage reservations and natural gas quantities discharged into LNG terminals.

EBITDA in the Distribution France segment was negatively impacted by climate conditions, for an amount of 60 million euros. 

Gaz de France continues to improve and extend its distribution network at a steady pace.  In 2006, over 5,000 kilometres were developed or upgraded.  Over 4,000 kilometres in new pipelines were laid in 2006 to connect new clients.  One thousand kilometres of grey cast iron pipes have been changed. In accordance with its commitment, the Group will have completely replaced any grey cast iron pipes in its network, by end-2007.

On a comparable basis and excluding non-recurring items, EBITDA in the Transmission Distribution International segment posted growth of nearly 15%, due mainly to rate increases and the successful integration of Distrigaz Sud.

Analysis of other main financial indicators

Group operating income reached 3,608 million euros in 2006, up by 28% compared to 2005.

The Group's financial income improved by 81 million euros with a net expense of 357 million euros as at 31 December 2006, compared to 438 million euros as at end-2005.  The net finance costs as at 31 December 2006 amounted to 123 million euros, decreasing by 79 million euros compared to 2005.  The average interest rate on long-term financial debt came out at 4.6%, compared to 4.9% in 2005.

Other income and financial expenses amounted to 234 million euros as at end-2006, compared to a 236 million euro expense as at end-2005.

Share in income of associates accounted for by the equity method dropped to 176 million euros at end 2006 from 189 million euros end 2005.

Tax expenses as at 31 December 2006 amounted to 1,104 million euros, as compared to 794 million euros as at 31 December 2005, due mainly to the increase in net income before tax.  The actual tax rate as at 31 December 2006 was stable, at nearly 34%.

In 2006, the Group's operating cash flow (before tax, change in working capital requirements and replacement costs) came out at 5,118 million euros compared to 4,254 million euros in 2005, up by 20%.

Working capital requirements increased by 410 million euros as at 31 December 2006, due primarily to an increase in gas inventory, resulting from the combined effect of the mild weather in late-2006 and the increase in supply costs.

The Group has maintained a dynamic investment policy.  Total investments amounted to 3,982 million euros in 2006 versus 2,938 million euros in 2005.  Investments excluding external* growth increased by 40% and represented 3,166 million euros at end 2006 compared to 2,264 million euros at end 2005. External** growth investments came to 816 million euros in 2006 against 674 million euros in 2005.

Equity rose by 1,881 million euros, reaching 16,663 million euros as at end-2006 (+13%). The average number of shares outstanding, as at end-2006, was 983,718,801 compared to 942,438,942 as at end-2005.

The Group's net debt came out at 3,465 million euros as at end-2006, compared to 2,962 million euros as at end-2005, up by nearly 17%.  The net debt/equity ratio came out at 21%, as at end-2006, compared to 20% as at end-2005.

*Including replacement costs and finance leases
**Including consolidation of  AES (Cartagena) once commissioned end 2006

Outlook

Operations

Winter 2006-2007 will have been the warmest winter in over 50 years, and this has impacted the business and market prices in the first few months of 2007.

As a result, 2007 will be a year of consolidation and the EBITDA should be in line with that of 2006.

At this stage, the Group is not considering reviewing its EBITDA growth objectives set for the period 2005-2008. Notwithstanding the market conditions, Group fundamentals are upheld and its strategy is confirmed. 

Improving shareholder returns

Gaz de France will pursue a dynamic dividend payout policy.

>Following its 12 March 2007 meeting, the board of directors will propose a dividend of 1.10 euros per share to the Annual General Meeting, an increase of 62%.  This decision is an acceleration of its policy of shareholder return growth, as announced at the time of the listing.

>In future years, the pay-out will not be below 50% of net income.

Merger plan with Suez: A Major Opportunity

This plan meets with the compelling and value-creating industrial vision of the Group, its employees, clients and shareholders.  Major milestones have already been reached:

>30 October 2006: New Group's management structure and governance principles announced

>14 November 2006: Approval from the European Commission

>7 December 2006: Ratification of law authorising privatisation of Gaz de France

The changes in European energy policy and the sector consolidation which accelerated in 2006 further strengthen the strategic logic of the merger of the two Groups.

Financial Timetable

Shareholders' Meeting:                23 May 2007
Dividend payment:                      30 May 2007

Group Profile:

Gaz de France Group is a major energy player in Europe.  As the leading natural gas distributor in Europe, Gaz de France employs close to 50,000 employees and earned 27.6 billion euros in sales in 2006. The Group holds a portfolio of 13.9 million clients, approximately 11.1 million of which are in France. Listed on the Paris Stock Exchange in July 2005, Gaz de France entered the CAC 40 and Dow Jones Stoxx 600 as early as September 2005.

Press Contact: 

Jérôme Chambin - Phone: (33-1) 47 54 24 35
E-mail: jerome.chambin@gazdefrance.com   

Investor Relations Contact:

Brigitte Roeser-Herlin– Phone: (33-1) 47 54 79 04
E-mail: GDF-IR-TEAM@gazdefrance.com

The objectives summarised herein are based on data, assumptions and estimates deemed reasonable by Gaz de France.  The said data, assumptions and estimates may evolve or be changed as a result of uncertainties due primarily to the economic, financial, competitive, regulatory or climatic environment.  In addition, the materialisation of certain risks set out in paragraph 4 of the Registration Document filed with the Autorité des marchés financiers (AMF) under number R.06-050 on 5 May 2006 (hereinafter referred to as the “Registration Document”) could have an impact on the Group's operations and its ability to achieve its objectives.  The attainment of those objectives is moreover dependent on the success of the strategy set out in paragraph 6.1.2. of the Registration Document.  Gaz de France thereby does not wish to make any commitments or guarantees on the achievement of the objectives and does not undertake to publish or issue possible corrections or updates of such factors except as required by applicable laws and regulations.

This communication does not constitute an offer to purchase or exchange or the solicitation of an offer to sell or exchange any securities of Suez or an offer to sell or exchange or the solicitation of an offer to buy or exchange any securities of Gaz de France, nor shall there be any sale or exchange of securities in any jurisdiction (including the United States, Germany, Italy and Japan) in which such offer, solicitation or sale or exchange would be unlawful prior to the registration or qualification under the laws of such jurisdiction. The distribution of this communication may, in some countries, be restricted by law or regulation. Accordingly, persons who come into possession of this document should inform themselves of and observe these restrictions. To the fullest extent permitted by applicable law, Gaz de France and Suez disclaim any responsibility or liability for the violation of such restrictions by any person.

The Gaz de France ordinary shares to be issued in connection with the proposed business combination to holders of Suez ordinary shares (including Suez ordinary shares represented by Suez American Depositary Shares) may not be offered or sold in the United States except pursuant to an effective registration statement under the United States Securities Act of 1933, as amended, or pursuant to a valid exemption from registration.

In connection with the proposed business combination, the required information document will be filed with the AMF and, to the extent Gaz de France is required or otherwise decides to register the Gaz de France ordinary shares to be issued in connection with the business combination in the United States, Gaz de France may file with the United States Securities and Exchange Commission (“SEC”), a registration statement on Form F-4, which will include a prospectus. Investors are strongly advised to read the information document filed with the AMF, the registration statement and the prospectus, if and when available, and any other relevant documents filed with the SEC and/or the AMF, as well as any amendments and supplements to those documents, because they will contain important information. If and when filed, investors may obtain free copies of the registration statement, the prospectus as well as other relevant documents filed with the SEC, at the SEC's website at www.sec.gov and will receive information at an appropriate time on how to obtain these transaction-related documents for free from Gaz de France or its duly designated agent. Investors and holders of Suez securities may obtain free copies of documents filed with the AMF at the AMF's website at www.amf-france.org or directly from Gaz de France on its website at: www.gazdefrance.com or directly from Suez on its website at: www.suez.com, as the case may be.

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