The ratings on 100% state-owned Gaz de France S.A. (GDF) reflect the forecast large share of low-risk regulated gas transport activities, a benign regulatory environment in France, and a strong group financial profile. Risks related to GDF's sizable gas supply operations and long-term take-or-pay obligations are mitigated by its established position as the incumbent, ownership, and reserved access to liquefied natural gas (LNG) import terminals and pipelines and its own LNG fleet, and by a high share of residential clients. These strengths are offset by strategic challenges to expand in Europe and to diversify into upstream gas production and electricity generation activities, through a partly debt-financed investment plan. The ratings factor in the likely part privatization of GDF in 2005,
