The world’s biggest power producer by output has announced a $20.4bn write down in asset values and goodwill.

GDF Suez (Euronext: GSZ), also owner of Europe’s biggest natural gas network, may be forced to cut dividends as the company suffers from Europe’s ongoing slump.

“We have decided to hit hard,” Chief Executive Officer Gerard Mestrallet told Bloomberg, adding that the situation is “serious and long-lasting”.

The utility took impairments of 9.1 billion euros, mostly on European power assets, and goodwill of 5.8 billion euros, according to a statement.

The company, which operates installations from atomic reactors in Belgium to offshore gas platforms, has been hurt by lower demand for gas-fired power during Europe’s economic decline, leading it to close or mothball more than 11,000 MW of capacity.

Mestrallet has sought to expand in Asia, Latin America and the Middle East to counter the slowdown and move away from a European focus.
European gas power plants are struggling with overcapacity because of subsidised renewable energy and cheap coal imports flooding in from the US.

But investors reacted positively to the move, with the share price rising 6 per cent. Analysts said that the writedown and dividend move gave them more clarity, and a corresponding rise in 2014 forecasts and capital expenditure was positive.

“By deciding to write down massively our [European power generation] activities it is a demonstration that we want to accelerate the transformation of the group,” said Gérard Mestrallet, chief executive.

Over the past five to six years about 50,000 MW of gas-fired capacity in Europe – equivalent to 50 nuclear plants – have been closed or mothballed by 10 of the continent’s biggest utilities amid weak demand and the rise of renewable energy.

Mr Mestrallet said that amid the turmoil in Europe’s traditional energy markets, the group was moving its business towards renewable energy as well as energy services, for example installing smart technology in houses to reduce fuel bills.

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