EDF Offers Remedies to Seal British Energy Takeover

By Paul Dobson

Dec. 2 (Bloomberg) -- Electricite de France’s SA, Europe’s biggest power producer, offered remedies to address European Union antitrust concerns about its planned takeover of British Energy Group Plc.

Paris-based EDF said in a statement today that remedies, which it didn’t reveal, will be sent to competitors and customers in the U.K. for market testing. Competitors and consumer groups have expressed concerns the takeover will reduce trading and power-market competition.

The European Commission today extended its review of the 12.5 billion-pound ($18.5 billion) deal by 10 working days to Dec. 22. EDF agreed in September to buy British Energy to become the U.K.’s biggest power producer and gain control of eight sites to build reactors. The purchase adds commercial clients to the 5 million households EDF’s U.K. unit supplies.

“The European Commission could ask for disposals of some British Energy generation plants, mostly likely coal-fired, or the sale of land adjacent to some of British Energy’s existing nuclear sites where new reactors could be built,” Miriam Hehir, an analyst at RBC Capital Markets Inc., said by telephone. Such “requests could go beyond what EDF may have already offered.”

The Brussels-based commission can extend the investigation by 90 working days on Dec. 22.

Buyers?

EDF fell 0.506 euros, or 1.2 percent, to 43.5 euros in Paris as of 1:39 p.m.

Drax Group Plc, the operator of the U.K.’s biggest power plant, said in October it planned to tell authorities that EDF’s takeover may reduce competition and trading in the U.K. electricity market. Consumer group Energywatch also said the transaction may reduce competition in the traded market.

Britain’s six biggest power suppliers, including EDF, also own generation units and sell the majority of their output to retail and business customers instead of in the market. The takeover of British Energy may concentrate more power in the hands of the “big six energy companies,” Energywatch said.

From the Outset

“Other market players have expressed competition concerns from the outset, particularly about liquidity in the wholesale market,” said Tina Cook, an analyst at Charles Stanley in London, by telephone today. “There might be some attempt to address these issues.”

Ian Marchant, Scottish & Southern Energy Plc’s chief executive officer, said on a conference call on Nov. 12 he had concerns about “whether there will be sufficient competition in nuclear new build” after the takeover.

As part of the deal agreed with the U.K. government, British Energy’s largest shareholder, EDF said it will sell land for nuclear development to competitors, subject to its ability to build plants at its preferred sites.

The so-called “market-testing” could involve EDF talking to potential buyers of surplus British Energy land considered suitable for new reactors, Hehir said today.

U.K. Prime Minister Gordon Brown is seeking an expansion of nuclear power with competition between consortia and reactor designs to cut imports and reduce carbon-dioxide emissions.

The London-based Times newspaper reported Oct. 13 that EDF may sell output from its coal-fired Eggborough power plant to get EU antitrust approval.

“The U.K. is short generation capacity in the medium to long term and EDF has offered both the expertise and funding capability to build new U.K. reactors,” Hehir said. “The European Commission needs to balance generation competition issues with the increasingly urgent need for new capacity.”

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net