GDF Suez will merge with International Power to form a new entity called New International Power.
The new firm will be a global leader in independent power generation and is expected to have over 66GW gross operation capacity, according to GDF Suez.
Under a memorandum of undestanding (MoU), GDF Suez will hold a 70% stake in New International Power, while International Power will hold the remaining 30%.
The proposed combination will include both firms' international business areas and certain assets in the UK and Turkey.
UK assets will include GDF Suez Energy UK, which owns the 20MW Craigengelt wind farm in Scotland and the Teesside power station, a combined-cycle gas-turbine plant with combined heat and power.
GDF Suez chairman and CEO Gérard Mestrallet said that the combined business will have both the operational expertise and financial flexibility to capture significant growth opportunities in international energy infrastructure markets over the next decade.
"International Power will be particularly well positioned to capture the growth opportunities in emerging markets, where energy needs will be strong in the coming years, " Mestrallet said.
"As a result of this transaction, GDF Suez will achieve its strategic objective of 100GW in operation and strengthen its worldwide leadership in power generation."