EU to shield gas and electricity sector from buyouts

The Guardian. Private equity and hedge funds would be banned from taking over the gas and electricity networks of huge energy groups unless they met strict investment targets under crucial proposals for the entire EU to be adopted by MEPs later today, the Guardian has learned.

The European parliament will also insist that no third country such as Russia, working through state-owned Gazprom, will be allowed to buy up the assets when it votes in favour of full-scale "ownership unbundling" of groups such as Germany's Eon and RWE and France's EDF and GDF - unless it agrees to complete reciprocity. Gazprom has signalled its wish to buy up European assets, including in Britain.

The 785 MEPs are expected to endorse by a large majority European commission proposals, due to be put into a draft law in September, for breaking up the continent's energy groups and forcing them to sell off their network of grids and pipelines. This follows the opening up of the EU's retail gas and electricity markets for domestic consumers on July 1.

Enshrining fears shared by energy commissioner Andris Piebalgs and competition commissioner Neelie Kroes, the MEPs have inserted a series of caveats. "We are effectively saying that we don't want private equity and hedge funds taking them [the assets over]," Eluned Morgan, Labour MEP and rapporteur of the parliament's energy committee, said last night.

Drawing on the UK model, the MEPs will say that any purchaser of the assets would have to meet long-term investment targets in an effort to deter capital-rich funds from buying them, squeezing cash out of them and selling them on in the short to medium term. "We're saying they can't sweat the assets and then leave them as wrecks," Ms Morgan said. "Nor do we want them guzzled up by the likes of Gazprom or any other company that won't allow access to their markets."

The parliament, which will also endorse a consumers' energy charter set out by the commission late last week, will arouse opposition from governments in France, Germany and Italy against its plans for energy liberalisation. But German socialist MEPs have endorsed them after seeing the profits of big domestic groups such as Eon swollen by their grip on the market.

In recent weeks eight EU governments, including the UK, have called for full-scale ownership unbundling to be adopted against the wishes of others who would prefer to see ownership of the networks kept in the hands of the big groups but overseen by an independent systems operator for day-to-day management and strategic planning. The moves are seen as crucial for opening up energy markets, creating greater consumer choice and encouraging investment from newcomers to ensure security of energy supplies and end dependence on external countries such as Russia.