EC orders asset sale as price for EDF British Energy deal

£12.5bn sale of nuclear giant cleared as EDF offers concessions on competition

The European Commission will force a sell-off of assets in return for approving Electricité de France's £12.5bn acquisition of British Energy.

EDF must sell its non-nuclear power plant at Sutton Bridge and another owned by British Energy at Eggborough to overcome competition objections, the commission ruled yesterday.

The state-controlled French utility must also agree to sell minimum amounts of electricity in the UK wholesale market, dispose of land at either Dungeness or Heysham that could be used to build a new nuclear power station, and end one of its three connection agreements with National Grid.

In return, EDF will avoid a drawn-out inquiry into its acquisition of Britain's biggest electricity provider in a deal that will put it at the forefront of UK nuclear power development.

Analysts warned that the forced sale of the assets would result in EDF getting less than it might have expected from voluntary sales. However, the Government will welcome the conditional clearance for the deal, which is a key part of Britain's new energy strategy. The Government has turned to nuclear power to replace ageing generators, to make Britain less exposed to imported energy and to reduce emissions.

EDF offered the concessions to the European Commission to overcome initial objections to the deal. The EU was concerned that the combined company could more easily withdraw electricity from the market to increase prices, reducing liquidity in the wholesale and retail markets.

Britain's nuclear power plants provide 19 per cent of its electricity. However, all but one are due to close within 15 years. British Energy owns eight nuclear stations and one coal plant, as well as extensive land that could be used for new building.

"Although the combined entity would not have extremely high market shares, the commission found that the transaction, as initially notified, would have been likely to raise serious competition concerns in four main areas," the commission said.

The French company was told to sell the grid connection at Hinkley Point because the capacity would not be taken up by the combined group's expansion plans and could instead be used in rivals' power generation projects.

The combined group would also have owned a "high concentration" of the limited number of sites available for new nuclear power plants.

The Government decided this year that expanding nuclear power was the best option to deal with the twin concerns of global warming and the increased concentration of energy supplies in unstable regions. Its desire to develop several new nuclear projects as quickly as possible required investment by British Energy at a time when many facilities were lined up for decommissioning, leaving the company unable to meet the Government's demands.

EDF was chosen by the Government because of its expertise in nuclear power, built up over decades. EDF is building the first new-generation nuclear plant, the EPR, at Flamanville on the Normandy coast.

EDF is the world's biggest operator of nuclear power stations, generates more than three-quarters of France's power, and is expanding aggressively. The British Energy deal will boost its reputation as the dominant force in the world's nuclear power industry.

In the US, the utility agreed last week to buy 50 per cent of Constellation Energy's five reactors for $4.5bn (£3bn). EDF also has expansion plans in Italy and South Africa.

The takeover is expected to be completed early next month.