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Friday, November 20, 1998 Published at 15:41 GMT

Business: The Company File

France ups the ante for London Electricity

British Energy and National Power are still in talks with Entergy

An end to the cross-Channel battle for control of London Electricity could well be in sight.

The French state-owned power monopoly Electricité de France (EdF) has raised its bid for London Electricity to over £2bn, trumping its UK rivals British Energy and National Power.

EdF is Europe's largest electricity generator and supplier, exporting about 17% of domestic production to neighbouring countries including Britain.

Entergy, the ailing US energy group which owns London Electricity, put it up for sale in order to raise cash to reduce borrowings.

It put London Electricity up for sale in August, only 17 months after paying £1.3bn for the company. It was eighth US power firm to take over a regional electricity company.

Regulatory hurdles

Entergy however has been concerned that a sale to UK power companies could run into regulatory or competition problems.

[ image: OFFER's regulations worry US Entergy]
OFFER's regulations worry US Entergy
So it should have drawn hope from Trade and Industry Secretary Peter Mandelson's recent approval of a takeover by electricity generator PowerGen of East Midlands Electricity, the UK's third largest supplier, provided PowerGen sells part of its generating capacity.

The possibility of a Gallic victory has fired UK power companies to lobby ministers, arguing that they should be allowed into French markets and export electricity there through the cross-Channel interconnector.

EdF has already cornered 7% of the UK's electricity-generating market by supplying heavily subsidised nuclear power via the interconnector.

Changes to the UK's wholesale electricity market will force companies such as British Energy and National Power to change their habits.

They will have to conclude medium-term contracts with regional electricity companies at pre-determined prices.

Currently, they use the Pool system which allows them to secure the highest price paid for power on the day - a method criticised by consumer groups for generating both excessive corporate profits and prices for consumers.

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