French power operator GDF Suez SA (GSZ.FR) Thursday raised its earnings forecast for 2011 following the merger of most of its international operations with U.K.-based International Power PLC (IPR.LN) and a 3.1% jump in 2010 net profits.

In 2011, the group now expects its earnings before interest, taxes, depreciation and amortization, or Ebitda, at between EUR17 billion and EUR17.5 billion, up more than 21% from the 2009 level, while it had earlier expected it to grow 15% from 2009. The improved forecast shows the French power giant expects increased sales volumes and higher tariffs in its home market to more than offset the effects of a natural gas glut that has depressed prices in Europe .

The new forecasts takes into account the performance from International Power, GDF Suez's Chairman and Chief Executive Gerard Mestrallet said during a conference call.

The group also said it expects equal or superior net earnings per share and dividend this year and in the medium term. The policy is to keep on increasing the dividend, Mestrallet said.

In 2010, GDF Suez' net profit grew to EUR4.6 billion, from EUR4.48 billion a year earlier, boosted by higher sales and higher gas tariffs in France. A poll of 23 analysts by FactSet had forecast net profit of EUR4.48 billion.

GDF Suez's co-CEO Jean-Francois Cirelli said that the spread between gas and oil prices isn't likely to be restored to its historic correlation until 2013, and that in 2012, the group's exposure to the gas market environment concerned 100 TWh of the group's total output.

In early February, GDF Suez finalized the combination of its international operations outside of Europe and some assets in the U.K. and Turkey with International Power, creating the world's largest private power generation group.

The group plans to invest around EUR11 billion per year over the medium term, CEO Mestrallet said. Some of the investments will take place in France , notably as the group seeks to increase its production capacities by 500 MW through bids for hydropower plants, he also said.

France 's regulated gas tariffs are to increase 5% by April 1, energy minister Eric Besson said Tuesday.

GDF Suez said it will launch a new Efficio plan, targeting EUR900 million in 2011 in cost savings and efficiency gains, CEO Mestrallet said. In 2010, the group's initial Efficio plan saved EUR1.5 billion.

As for the reform of the French power market, Mestrallet reiterated that the price under which Electricite de France SA (EDF.FR) should sell a quarter of its nuclear power to competitors for a transitory period, as requested by law, should be EUR35/MWh and not EUR42/MWh as requested by EDF. EDF won't lose money if the price is set at EUR35/MWh, Mestrallet said.

The French state would find it difficult to meet EDF's request that a government-set price to sell electricity to competitors be placed at EUR42 per megawatt hour, a government official told Dow Jones Newswires Wednesday.

"Some analysts say this is disappointing, but I find all that rather positive," a Paris-based trader said.

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