EdF eyes eastern power base as war on monopolies hots up

Date: 21/06/01

By Laurence Frost

FRENCH state-owned power utility Electricité de France (EdF) is turning its hungry eyes to central and eastern European countries in response to the outcry over its acquisitions in EU markets.

The rethink comes as the European Commission threatens action against government-protected monopoly operators if member states continue to block proposals for full energy liberalisation.

Yesterday's (20 June) move by the EU executive was an attempt to end bitter infighting between governments over EdF's purchase of stakes in two foreign utilities, Spain's Hidroelectrica Del Cantabrico and Italy's Montedison. Both acquisitions are under EU investigation.

Now the French power giant is turning its attention to countries to the east which are still queuing to join the Union, where it hopes expansion will prove less controversial. "They're all in a privatisation process," EdF number-two executive Gérard Wolf told European Voice. "If the return on capital is good and the network options are good, then why not?" Wolf singled out Poland, the Czech Republic and Slovakia as possible targets for acquisitions. "People are asking us to bid [for contracts] in these countries," added the group coordination director.

The revelations come as EdF begins an unprecedented charm offensive designed to convince sceptical sector peers that its plans for Montedison were always benign. "Since the beginning we had no intention to take control," said Wolf. "EdF is portrayed as the bad boy of the class - but we're a good company with ethical values The idea is to make it possible for the second operator in Italy, [Montedison subsidiary] Edison, to be a real European operator. "

He insists cooperating with EdF would help Edison overcome its limitations, both in technical capacity and on the financial markets. "It's a win-win solution, not a Frenchie solution. "

Sources close to the French utility say plans for further EU acquisitions have been put on hold by the severity of the backlash against its Montedison and Hidroelectrica misadventures. In a bid to fend off EdF, Italy and Spain both passed laws limiting the voting rights of state-owned shareholders in the newly-privatised utilities. Wolf will not confirm a moratorium on Union purchases, but concedes that misjudgements have been made. "We certainly underestimated the reaction against us," he said. "If you take 20 of 9 [Edison's Italian market share], who's imagining you're going to start a revolution?"

EdF maintains that France, with 30 of its power markets already opened up, is far from the bottom of the EU liberalisation charts. The rate of consumer switching between competing providers is no higher in Germany than in France, where an open auction of 6,000 megawatts of capacity recently took liberalisation a step further.

The French utility could nonetheless face increased scrutiny after Competition Commissioner Mario Monti signalled yesterday that the EU executive would extend its interpretation of state aid rules to cover nuclear power - an area which previously enjoyed special status under the Euratom Treaty. "We need to monitor every type of state aid given to energy producers, including the nuclear sector," said Monti. "Competition rules should also apply there. "

EdF is already facing a possible state aid probe after Monti's department received complaints over subsidies from its competitors. But there will be relief in Paris that the Commission stopped short of carrying out earlier threats by energy supremo Loyola de Palacio to propose new "temporary instruments" to limit the purchasing power of state-owned utilities which enjoy protected monopolies on their closed home markets.

French state-owned power utility Electricité de France (EdF) is turning its eyes to central and eastern European countries in response to the outcry over its acquisitions in EU markets.