Italy strikes first in EU power battle
Witness the success of the Italian government in obliging Electricite de France (EdF), the state near-monopoly, to offer French generating assets to Enel, Italy's biggest generator.
After two years of talks, Enel boss Paolo Scaroni is poised to acquire a 35% stake in French coal generator SNET, 12.5% of the first six French new-generation nuclear reactors of the EPR type, and build two combined-cycle gas plants in France.
The stake in SNET, which operates eight French coal-fired stations with capacity of 2,474MW, will be sold by EdF and state- owned sister Charbonnages de France, the rump coal company. Enel's investment partner, which has bought the other 65%, will be Spanish utility Endesa.
Endesa was allowed to buy into SNET after its government blocked EdF's acquisition strategy in Spain, protesting the French market was closed to competition. Enel's entry is thanks to an Italian law that has blocked EdF exercising control over its Italian associate. Enel will get a 3% foothold in France's electricity market.
The success of Endesa and Enel in breaking EdF's monopoly contrasts with Britain's long-privatised utilities, which have yet to win a toehold in France. Whitehall's laissez-faire has let EdF Energy become one of the biggest players in UK electricity, with 25% of the distribution market, with nothing in exchange.
The deals cement the need for a flotation of EdF this autumn. Not only has the Italian government made the Edison deal conditional upon the float, but EdF, which has shareholder funds of only E8.4bn ($10.8bn, Pounds 5.7bn) for debts of E19.7bn, will need E10bn from the offering to rebuild its balance sheet.
One glitch is the European Commission, which could look askance at Enel's favourable entry terms into France.
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