Distrigaz S.A.

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Distrigaz S.A.

Rue de l'Industrie 10
Brussels, B-1000 46120 61131
Belgium
Telephone: (32) 02 557 30 11
Fax: (32) 02 557 30 02
Web site: http://www.Distrigaz.be

Public Company
Incorporated: 1929
Employees: 120
Sales: EUR 3.8 billion ($4.87 billion) (2005)
Stock Exchanges: Euronext Brussels
Ticker Symbol: DIST
NAIC: 221210 Natural Gas Distribution; 486210 Pipeline Transportation of Natural Gas

Distrigaz S.A. is one of Europe's top ten natural gas sales and trading companies. The company provides transit, transport, and delivery services for natural gas via pipeline, as well as in liquefied form via tanker vehicles and ocean-going vessels. The company's customers include industrial companies, natural gas resellers and distribution companies, and power generation companies. Distrigaz's largest market remains Belgium, where it controls as much as 80 percent of the resident and corporate/industrial markets. The company has also taken advantage of the liberalization of the European energy market to launch sales in other countries, including France, Germany, the Netherlands, Luxembourg, Spain, and the United Kingdom. In addition to gas sales, the company is one of the Europe's leading provider of arbitrage services, enabling the transfer of excess natural gas capacity among the different national markets. In support of its operations, Distrigaz has put into place a highly diversified supply portfolio, with long-term contracts from the Netherlands, Algeria, and Norway, excess capacity from the United Kingdom, and, starting in 2007, from Qatar. Distrigaz also holds a 16.4 percent in the Interconnector pipeline project connecting the UK to the continent at Zeebrugge. Distrigaz is itself majority held by Suez Tractebel, which controls more than 57 percent of the company. Publigaz owns more than 31 percent of the company, while the Belgian government retains a "golden share" in the formerly state-owned business. Listed on the Euronext Brussels Stock Exchange, Distrigaz posted revenues of EUR 3.8 billion ($4.87 billion) in 2005.

COKE GAS BEGINNINGS IN 1929

Distrigaz was founded in 1929 by the United Kingdom's Imperial Continental Gas Association, which had long been an active player in the continental European gas market. Distrigaz's initial operations consisted of transporting gas generated by the country's coke ovens. In support of that, the company began constructing its own pipeline. By 1932, Distrigaz was operational, having completed some 143 kilometers of pipeline. Distrigaz was later taken over by the Belgian government.

The rising gas demand in the years following World War II required the company to find new sources for its gas needs. The development of the natural gas industry during this time offered the company the promise of the capacity it required. The period also saw the discovery of a number of large-scale natural gas fields in the 1950s, such as the Hassi R'Mel gas field in Algeria's Sahara Desert region, which came under the control of that country's government-owned Sonatrach.

Distrigaz's first shift toward natural gas came in the early 1960s, when a natural gas field was discovered close by, in Slochteren, in the Netherlands. Distrigaz negotiated its first large scale supply contract, and by 1966 the company had received its first shipment of gas from the Netherlands.

Into the 1970s, Distrigaz set itself an objective of further diversifying its gas supply agreements, in an effort to ensure a stable and steady supply of gas to the Belgian market. The company began negotiating with Sonatrach to receive gas from the Hassi R'Mel field. In 1975, the two sides reached a 20-year agreement for Sonatrach to supply 100 billion cubic meters to the Belgium gas group. Two years later, the company reached a new supply agreement with Ekofisk, which had begun exploiting the huge natural gas fields discovered in the North Sea near Norway. In support of both contracts, Distrigaz constructed a new transmission network in western and southern Belgium.

The Distrigaz focus on developing its transmission and transit capacity led the company to begin construction of an LNG terminal complex in Zeebrugge. With a capacity of 135,000 cubic meters, the new facility became the largest in Europe, and helped position Belgium as a hub of the future inter-European gas market. Started in 1978, the company's LNG terminal was fully completed by 1987, accepting its first tanker delivery that same year. Much of the technology behind the Zeebrugge complex came from Distrigaz's own long-term research and development efforts.

The European natural gas market remained confronted with heavy competition from the continent's coal, oil and nuclear power industries. In 1986, however, the gas producers at the Sleipner and Troll gas fields in Norway agreed to ship more than 10 billion cubic meters of natural gas per year to the European market. The promise of this abundant gas supply helped the natural gas market position itself as a low-cost energy provider. By the 1990s, natural gas had largely outpaced coal gas in Belgium and elsewhere.

GAS HUB FOR THE NINETIES

By the early 1980s, Distrigaz had not only developed a diversified gas supply portfolio, it had also developed its own cutting-edge gas technologies. The company's strengths lay particularly in gas storage, pipe protection technologies, transmission control systems, and the like. In 1983, the company adopted a new strategy of becoming a technology services provider, and accordingly created an international consulting division.

Yet the movement toward European trade unity, and the prospect of the liberalization of the European gas market offered a new prospect for Distrigaz. By 1989, the company had begun to downplay its consulting operations in favor of a new strategy of becoming the major gas transmission hub for the European market. The company's Zeebrugge complex was ideally suited for this role, offering the continent's largest and most modern transmission facility, while its location placed it at the center of the continental European gas transmission grid.

A major step toward Distrigaz's new ambition consisted of the launch of construction of the new Zeepipe pipeline linking the Sleipner and Troll gas fields in Norway to the Zeebrugge complex in 1989. That pipeline was completed in 1993. In the meantime, the company had launched construction on a new pipeline linking Belgium to Luxembourg. The company also added a new 145-kilometer pipeline to the French border. Completed by 1995, the new pipeline connected to the Zeepipe pipeline, offering the potential of transporting natural gas from the Norwegian gas fields as far as to Spain.

COMPANY PERSPECTIVES

A strategic partner, full of energy. Distrigaz is part of SUEZ, an international group active in the energy and environmental sectors. Our company has been selling natural gas for 75 years to industrial users, gas distribution companies, power generators and other traders. Our strategic position at the hub of Europe's gas networks allows us to operate right across Western Europe.

Also in 1995, Distrigaz joined in the Interconnector gas pipeline project linking the United Kingdom to the European continent. The new pipeline proposed a link between Bacton in England and Distrigaz's Zeebrugge complex. While the bulk of the project was meant to transmit over-capacity in the United Kingdom to the European continent, the new pipeline also offered reverse flow capacity, offering European producers access to the U.K. market, where gas prices remained higher. Distrigaz's ambitions to become the single largest gas transmission hub in Europe suffered a setback, however, when the company lost out on the bid for a new pipeline connecting the continent to the Norwegian gas fields. Instead, that pipeline went to Dunkirk, in France.

As part of its commitment to the Interconnector project, Distrigaz commissioned a new pipeline connecting the Zeebrugge site with Germany. That pipeline was completed in 1998. Not only did it connect the company to the German market, it also offered access to the Eastern European markets and to the Russian market. Meanwhile, the first phase of the Interconnector pipeline was completed in 1998 as well, with the first shipments of gas taking place in October 1998. In March of the following year, Distrigaz raised its stake in Interconnector to 10 percent.

NEW STRUCTURE FOR THE NEW CENTURY

With an increasing percentage of its revenues coming from its transmission services, Distrigaz also moved to widen its own gas delivery markets. Focused on the Belgian market through the 1990s, the company began targeting the international market in the early 2000s. Among the company's early international clients was France's Rhodia, with first deliveries slated for early 2002. By the middle of the decade, Distrigaz had added gas sales to Germany, Luxembourg, the Netherlands, the United Kingdom, and Spain as well.

In the meantime, Distrigaz joined the unbundling effort among the European natural gas market, as new European Union rules came into effect. As a result, Distrigaz split up its operations into two separate companies: the newly created Fluxys, which took over the company's transportation and Zeebrugge hub services, as well as its storage facilities; and Distrigaz, which became a purely commercial company focused on gas sales, purchasing, and transit agreements. Distrigaz went public in 2002, but remained controlled by majority shareholder Suez-Tractebel, itself a 100 percent subsidiary of French energy giant Suez. Another large shareholding belonged to Publigas, while the Belgian government retained "golden shares" in both companies.

Distrigaz stepped up its international sales portfolio in 2003 with an agreement with Energie de Rhoône, in France, giving the Belgian company access to the industrial market in that region. The following year, the company added Russia to its list of operations, signing a transit agreement with Gazprom subsidiary Gazexport. Also in 2004, Distrigaz became a shareholder in the second phase of the Interconnector project.

Distrigaz continued to seek a diversification of its gas suppliers. This led the company to reach an agreement with the RasGas II gas facility in Qatar to supply the company with some 2.75 billion cubic meters of gas per year, starting in 2007. The company began lining up new customers for the increase in capacity. In 2005, for example, Distrigaz deepened its penetration of the French market, signing its first industrial supply contract in the Gironde region near Bordeaux. Also in 2005, Distrigaz made its first gas delivery to the United Kingdom.

KEY DATES

1929:: The Imperial Continental Gas Association, of the United Kingdom, establishes Distrigaz in order to supply coke oven gas to the Belgian market.
1966:: Distrigaz receives its first shipment of natural gas from the Netherlands.
1975:: The company signs a supply agreement with Hassi R'Mel gas field in Algeria.
1977:: A supply agreement is reached with Norway's Ekofisk to receive gas from Norwegian natural gas fields.
1978:: Construction begins on the Zeebrugge LNG facility (completed in 1987).
1983:: Distrigaz initiates a strategy to develop international gas infrastructure consulting services.
1989:: Distrigaz seeks to become a hub for the European natural gas market.
1993:: The Zeepipe pipeline connecting Zeebrugge to Norwegian natural gas fields is completed.
1995:: A new pipeline connects Zeebrugge with the French border.
1998:: First natural gas transmission is made through the completed Interconnector.
2001:: Distrigaz splits into two separate businesses: Fluxys and Distrigaz.
2002:: Distrigaz goes public on the Belgian stock exchange.
2005:: The company signs a supply agreement with Qatar; completes first gas sale to the United Kingdom.

The planned merger of Suez and Gaz-de-France at mid-decade placed new pressure on Distrigaz and its dominant position in the Belgian gas market. The merger threatened to place as much as 90 percent and more of the Belgian market under the control of combined operations, and brought Distrigaz under scrutiny by European Commission antitrust authorities in 2006. With the liberalization of the European gas market under full swing, however, Distrigaz promised to remain a major player not just in Belgium but throughout the region.

PRINCIPAL SUBSIDIARIES

Distri RE S.A.; Distrigaz & Cie SCA; Etac BV; Finpipe GIE; Huberator S.A.; Interconnector (U.K.) Ltd.; Interconnector Zeebrugge Terminal SCRL; Sofipar S.A.; Transfin S.A.

PRINCIPAL COMPETITORS

Royal Dutch/Shell Group; RWE AG; ENI SpA; E.ON AG; Repsol YPF S.A.; SUEZ; Centrica plc; E.ON Ruhrgas AG; ENDESA S.A.; SHV Holdings N.V.; Electrabel N.V.