Major German utility E.On says that two new deals to dispose of generating capacity in its home market will improve the competitive landscape in Germany while making it a key player in the Belgian electricity market.

The utility is intending to sell over 2200 MW of generating capacity from German power stations to Belgium’s Electrabel and EnBW of Germany as part of a deal with the European Commission to reduce its market power in the country. It has pledged to sell a total of 5000 MW of capacity in the next few months, as well as dispose of its high voltage transmission network in Germany.

The deal with Electrabel takes the form of an asset swap and marks the entry of E.On to the Belgian electricity market. E.On has signed a Memorandum of Understanding (MoU) with EnBW to sell its stakes in Lippendorf lignite fired power station (446 MW) and the Bexbach hard coal fired power plant (79 MW).

“When completed, these transactions will enrich the competitive landscape in Germany and Belgium, thereby further stimulating competition throughout Europe,” said E.On CEO Wulf Bernotat. “By entering the Belgian market, we’re continuing to rapidly expand our presence in Europe.”

Under the MoU with Electrabel, which is owned by GDF Suez, E.ON will sell around 1700 MW of generating capacity and power procurement rights in Germany to Electrabel in return for the same amount of capacity and power procurement rights in Belgium. GDF Suez has called the agreement a “milestone” in its strategy in Germany.

E.On plans to acquire from Electrabel the 556 MW Langerlo coal fired power plant and the Vilvoorde gas fired plant (385 MW), plus 770 MW of power procurement rights from the Doel 1, Doel 2 and Tihange 1 nuclear power plants.

In return, Electrabel will acquire from E.On stakes in the 350 MW Farge and 449 MW Zolling coal fired plants, as well as 50 MW of combined cycle capacity and a 50 per cent stake in a 20 MW biomass generating unit. The agreement also includes the 130 MW Jansen hydropower plant group.

Electrabel will also acquire around 700 MW of procurement rights from the Krümmel, Grundremmingen and Unterweser nuclear power stations.

“For E.On, the asset swap with Electrabel would also mark our successful entry into Belgium’s power generation market,” said Bernotat. “This one transaction would give us more than 12 per cent of the Belgian market, making us the country’s third biggest power producer.

“This position would be considerably enhanced by the coal-fired power plant we plan to build in Antwerp, which is scheduled to become operational in 2014.”

GDF says that the transaction will substantially strengthen its position in Germany, where it has been active for ten years and where it recently began construction of a 800 MW coal fired power plant.

The companies expect to close the transactions in the first half of 2009.