European utilities are emerging as a dominant force in world electricity markets.

Companies such as Electricite de France (EdF) as well as Eon and RWE of Germany are leading the way according to the latest cross border mergers and acquisitions figures compiled for the Financial Times.

Mark Hughes, a partner at PricewaterhouseCoopers (PwC) which produced the study says: "There is no doubt that Europe is really the battleground at the moment. About 80 per cent of M&A activity around the world within the sector centres on Europe. And it is mainly the Europeans that are acquiring the assets."

US companies, by comparison, are pulling back from earlier European investments.

"The Californian power crisis and Enron's collapse has left many US business worried about their own backyard, wary of playing away, and happier to sell-up and go home," says Mr Hughes.

According to PwC, international deals worth $37.8bn were announced last year, more than $1bn lower than the previous year's $38.9bn and well down on 1998's record $49.7bn. PwC's figures include acquisition of debt and reflect deals that have been announced but may have yet to reach a financial close.

The scale of cross-border activity, despite the slowdown, remains immense as European companies continue to consolidate their position "on the proven high value model of constructing a dual fuel, electricity and gas position, with customers backed by generation and production assets", says Mr Hughes.

The high value of deals since the mid-1990s reflects moves by international companies to take advantage of European Union legislation requiring member-states to start opening their electricity markets to competition.

Some earlier purchases, particularly by US groups, however, are beginning to look expensive and asset values, particularly for generation, have fallen recently, according to PwC.

Top 10 takeovers
Transaction value ($bn)	Target		Acquirer
13.815	Powergen	UK	E.ON	Germany
3.207	Elettrogen	Italy	Endesa	Spain
3.054	Birka Energi	Sweden	Fortum Oyj	Finland
2.100	Midlands Electricity	UK	UtiliCorp United	US
1.963	Nueva Viesgo	Spain	Enel	Italy
1.648	Bewag	Germany	Vattenfall	Sweden
1.300	Sydkraft	Sweden	E.ON	Germany
0.960	Edison Mission Energy (Fiddler's Ferry Ferrybridge)	UK	AEP	US
0.800	Saltend Energy Centre	UK	Calpine
0.746	HidroCantábrico	Spain	EdP	Portugal
Source: PriceWaterhouseCoopers

The biggest deal to be announced last year was Eon's $13.8bn bid for Powergen of the UK. This was more than four times the previous year's biggest deal, Powergen's $3.2bn purchase of LG&E in the US.

Seven of the 10 largest deals last year were wholly European affairs. RWE's $5.4bn bid for Innogy, another large UK energy utility, is also the biggest deal to be announced so far this year.

Mr Hughes says: "The European market has begun to form a super league of powerful players.

"However, within this group a mega trio of EdF, Eon and RWE seems to be emerging. This so-called mega trio seems to be pulling clear on the European stage by getting in the right shape to compete on the global stage."

"These players are making smart moves to build the right platform to launch onto the international stage."

Many commentators expect European utilities to start turning their attention to the US market having established a firm base in their home continent. Eon has made no secret that it intends to use Powergen to spearhead further US acquisitions.

Despite all this, the value of cross border deals in North America slumped last year to just 4 per cent of the global total, from 22 per cent in 2000. The share of purchases by North American companies in other international markets also fell from 36 per cent to 21 per cent.

Similar trends emerged in the Asia Pacific region and bids for South and central America companies were also down, following a period of intense bidding for South American assets in 2000, says PwC.