State-owned Swedish energy group Vattenfall announced on Friday that it would sell its high-voltage power grid to Belgian firm Elia and Australia's Industry Funds Management.

The sale was priced at 810 million euros ($1.1 billion), with 60 percent going to Elia, a power network management company, and the rest going to infrastructure specialist IFM.

"The sale reinforces our position in the perspective of participating in the constitution of a true European energy market," Elia chief Daniel Dobbeni said.

Vattenfall's head of European activities, Tuomo Hatakka, said at a news conference that the grid was strategic because "it links vast offshore wind farms in the Baltic and North Seas with consumer industries in northern Germany."

He added that Vattenfall was "not obliged" to sell the grid, and that the decision has been part of a longer-term plan since mid 2008.

Shedding regulation

Vattenfall's German grid has a regulated value of 1.2 billion euros - nearly 50 percent more than the value of the sale. Heavy regulation in the energy market often translates to market values of grids being much lower than regulated values.

The grid serves about 18 million people in eastern and northern Germany and covers 9,700 kilometers of high-voltage lines. The sale increases Elia's holdings to 143,000 square kilometers serving 29 million customers.

Utilities across Europe have sold off lucrative but state-regulated power grids in favor of more profitable energy markets, where limited competition often leads to a market oligopoly. Last month, German's largest power company E.ON sold its grid to Dutch group TenneT for 1.1 billion euros.

The European Commission has put pressure on major power companies in Germany to break up production and distribution responsibilities to increase competition and lower prices.

acb/AFP/Reuters
Editor: Rob Turner