Doubts over key French float

THE French government's privatisation programme is running into trouble. While thousands of workers at Electricité de France (EDF) throng the streets of Paris, and their colleagues pull the plug on Bordeaux and Grenoble, international investors are limbering up to shun the initial public offering of State aero-engines maker Snecma.

The float was almost cancelled two weeks ago due to wobbly markets, but Finance Minister Nicolas Sarkozy went ahead - apparently against investment bank advice - after trimming the planned amount raised from between e5bn and e6bn to e4.2bn and e4.6bn.

Pricing of the shares, against their target range of e15.45 to e17.20 is due tomorrow, with trading to start on Friday.

But fund managers in London and Paris seem wary of putting cash into the aerospace engineer so early in the aviation upturn.

Paul Doyle, of Threadneedle Asset Management in London, said that, while his firm was happy with its investment in pan-European aerospace group Eads, it had 'some concerns' about Snecma, 'notably its currency exposure'. Snecma does a lot of manufacturing in France, but sells in dollars.

At Gartmore Investment Management senior investment manager Adrian Darley said 'a lot of investors will have to consider selling something else in order to buy Snecma'. At the bottom of the target price range, he said, Snecma was 'reasonable value'.

In Paris, Jacques Tissier of Stratege said: 'We may take another look at Snecma once its on the market, but not right now.'

Many investors appear to prefer British rival Rolls-Royce, the world's second-largest aero-engine maker after General Electric of the US, and are wary of buying a fourth-ranked player with revenue of only e6.4bn with the French government keeping a controlling 60%.

A poor trading start by Snecma could blight prospects for the next two part privatisations on Sarkozy's list in the autumn - France's second and third-largest toll-road operators.

But the floats of deeply-indebted Société des Autoroutes Paris-Rhin-Rhône (SAPRR) and Société des Autoroutes de Nord et de l'Est de la France (Sanef) are intended only to raise new capital because of reservations about the sell-off among centre-right MP supporters.

These IPOs are set to be followed next spring by EDF and its sister company Gaz de France, with 30% of each being sold to achieve a combined capitalisation of e50bn plus. But entrenched union opposition at EDF and GDF will deter investors.