Suez Lyonnaise des Eaux, the French multi-utility, is thought to be close to a merger with the German power groups Veba and Viag, which are themselves merging to form E.on.
Most details are understood to have been agreed, and success or failure of the talks is now said to depend on the will of the parties to clinch a deal. However, the discussions are thought to have come close to collapse last week and people familiar with the talks are still cautious about the prospects of a successful outcome.
In particular, the French group is understood to be looking at an alternative alliance with a Spanish counterpart, which is believed to be Endesa. This project is said to be at an earlier stage, however, and would probably only cover one activity rather than a global merger. Endesa was last night not available for comment, while Suez repeated an earlier remark that in the energy sector everyone was talking to everyone else.
A merger between Suez and the German companies would create one of Europe's biggest power companies, with annual sales of about 260 terrawatt hours (TWh). However, this would still be far behind state-owned Electricité de France, with annual sales of about 470 TWh. Speculation that the companies were considering a merger first surfaced in March, helping to push Suez shares to E195.3, still a 52-week high.
Observers suggested at the time that the advantages of a tie-up would be greater for Veba and Viag than for Suez, since the German groups would inherit Suez's international expertise, while only contributing their expertise in the German domestic market.
The talks follow a series of large national and cross-border takeovers involving European electricity groups. Consolidation moves have been triggered by increased competition and falling electricity prices following a European Union directive last year requiring members to open at least a quarter of the power markets to competition. Reuters
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