EdF is setting itself for European domination, with assets throughout Eastern and Western Europe. Adding a generator to its Hungarian distribution businesses will put EdF in an even better position to compete against new entrants when the market is finally deregulated.
French state-owned electricity giant Electricite de France (EdF) has agreed to buy 89% of Hungarian generator Budapest Power, which has six power plants serving the city and surrounding area. The move is part of EdF's stated plan of becoming a fully integrated electricity utility in the country.
When distribution assets were privatized in Hungary, EdF was among the first attracted to this high-potential central European market. Since then, promises made by the government with regard to privatization have not been met to investors' satisfaction. Many potential investors have been put off, believing that the situation is too uncertain and that they will not be allowed to make sufficiently high returns.
However, this is not the case for EdF. As well as investing heavily in Western Europe where competition is developing rapidly, it is also positioning itself as a dominant force in central European markets. EdF already has stakes in two Hungarian distributors, EDASZ and DEMASZ and by adding the power generator, the company is shifting towards a vertical structure which will put it in a much stronger position for power market competition.
At present the market is expected to open only very slowly, with 15% of demand free to choose from 2001, covering the country's 15 largest consumers. Exact details of when full competition will be introduced are not available, but it is unlikely to be for some time. But EdF is in the game for the long run. As throughout Europe, the French utility is just steeling itself for the start of the real battle.