French rule out power bid

ELECTRICITE de France (EdF), the state-owned French power giant, has ruled itself out of the bidding for National Power because of the intensifying row over the liberalisation of the French electricity market.

National Power announced plans last week to demerge its international business and concentrate on its 2.5 million retail customers and its 8 per cent share of the generation market in the UK. Speculation immediately grew that EdF, which already owns the London Electricity and Sweb supply and distribution companies, might be tempted to bid.

However, any such plans appear to have been stymied by the French parliament's block last week on plans to open up the country's domestic electricity market to international competition. The European commission has threatened to take legal action over its move.

Stephen Byers, the Secretary of State for Trade and Industry, described the French action as "clearly unacceptable".

Mr Byers is expected to use the deal under which France sells Britain huge quantities of electricity through the cross-Channel interconnector as a weapon in the intensifying trade war with France.

The current contract between EdF and the National Grid, the two operators of the interconnector, expires at the end of 2000 and is already being renegotiated. Industry leaders in the UK see the talks as an opportunity to wreak revenge on EdF for France's failure to open up its domestic market.

Hawks in the industry want the British Government to block use of the interconnector altogether - a feat unlikely to please National Grid, which is paid to import power through it, or EdF's customers in the UK.

Previous governments have tried to do so on at least three occasions - to stop the cheap electricity imports putting miners out of work - but failed because the link is subject to a legally binding bilateral treaty.

"Thus far no one has found a way to overturn the protocol," said Peter Atherton, an energy expert at Dresdner Kleinwort Benson. "But I'm sure people will go on trying now that France has breached the EU directive on liberalising its own electricity market."

The French giant's largest asset in the UK is London Electricity, which it bought last year for pounds 1.39bn. In an unprecedented move, Bruno Lescoeur, London Electricity's chairman and chief executive, joined the chorus of disapproval over the latest French government action.

"This is clearly the consequence of a misunderstanding by French politicians on the left and right about what is going on in the electricity industry throughout the world right now," he told The Independent on Sunday. "They don't realise that even if, up to now, EdF has been doing a reasonable job for the French consumer, it has to evolve."

He also said the row would kill any plans EdF had to buy National Power. "It's a little too soon, a little too big, and politically too sensitive."