May 11 (Bloomberg) -- Shares of RWE AG, Germany's second- largest utility, rose the most in four years on speculation Electricite de France SA plans to buy the company, which has a market value of 46.4 billion euros ($62.7 billion).

Electricite de France representatives have already met with the German government to discuss the proposed deal, German radio station SWR said. RWE has seen ``no signs'' of a bid from the French company, spokeswoman Julia Scharlemann said. A German government spokesman denied any contact with EDF.

RWE and other utilities have been the subject of takeover speculation as power providers seek acquisitions ahead of the full opening up of European markets to competition in July. RWE shares jumped in November on reports OAO Gazprom might consider buying part or all of the company.

``At the end of the day it could be possible,'' said Matthias Heck, an analyst at Sal Oppenheim in Frankfurt who raised his rating on RWE to ``buy'' from ``neutral'' today. ``Takeover speculation will certainly support RWE stock.''

Shares of RWE climbed as much as 7 percent, their biggest jump since April 2003, before paring part of their advance after European Union regulators said they're probing the company for allegedly blocking competitors' access to a natural gas network in Germany.

RWE stock closed up 4.73 euros, or 6.1 percent, at 82.70 euros in Frankfurt. EDF shares rose 0.6 percent to 65.03 euros in Paris after initially falling as much as 1.2 percent.

`Political Backing'

``I can't see anything happening without the political backing of both France and Germany,'' said Sven Scholze, a utility credit analyst at F&C Asset Management in London, which has 135 billion pounds ($267 billion) of assets under management.

EDF offered to sell its stake in Energie Baden-Wuerttemberg AG to avoid antitrust concerns, according to SWR, which is based in Stuttgart, the capital of Baden-Wuerttemberg. Dirk Ommeln, a spokesman for EnBW, declined to comment.

EDF may consider other purchases as a premise for selling its 45 percent holding in EnBW, Oliver Kopp, an analyst at BHF- Bank in Frankfurt, said today. A potential deal might also pressure EnBW shareholders to allow EDF to take a majority of the company, Kopp said.

EDF is France's largest utility and controls the majority of its power generation. E.ON AG, RWE, Vattenfall Europe AG and EnBW control more than 80 percent of Germany's power production.

`Substantial Disinvestments'

``The EU would press for substantial disinvestments and there is always the danger of culture clashes since EDF is effectively still a state run company,'' Scholze said.

European utility deals have risen 45 percent this year to $124 billion, compared with $85.7 billion in the same period of 2006, according to data compiled by Bloomberg.

Italy's Enel SpA and Spanish construction company Acciona SA announced a joint bid for Endesa SA last month, valuing Spain's largest power company at 43.7 billion euros.

``There have been no contacts whatsoever between EDF and the German government,'' Chancellor Angela Merkel's spokesman Ulrich Wilhelm said in a statement. ``That's nonsense.''

``EDF denies any contact between EDF representatives and German authorities on RWE,'' EDF spokesman Francois Molho said by telephone from Paris. A spokeswoman for the French finance ministry declined to comment. EDF is state-controlled.

`No Talks'

``The state government has had no talks about RWE,'' Holger Schlienkamp, deputy spokesman for the regional government of North Rhine-Westphalia where RWE is based, said today by telephone.

Babcock & Brown Ltd. might buy EDF's stake in EnBW to ease antitrust concerns, the radio station said. Phil Green, chief executive officer of Babcock & Brown Ltd., also declined to comment.

RWE sold its Thames Water unit last year for 4.8 billion pounds to a group led by Macquarie Bank Ltd., as part of Chief Executive Officer Harry Roels' plan to focus on power sales.

Some analysts said the handover of presidential power in France to Nicolas Sarkozy made the transaction unlikely since the state would likely have to lower its control in EDF for any bid to stand a chance of succeeding.

Sarkozy Uncertainty

``This would amount to a nationalization of a massive German company by the French state,'' said Tim Gittos, a mergers analyst at Aurel Leven Securities in Paris. ``You'd have to see some arrangement to lower the French government's stake in EDF. Sarkozy has an awful lot of major reforms to push through before taking that on.''

Credit-default swaps based on 10 million euros of EDF debt were unchanged at 6,500 euros, according to Deutsche Bank AG. Credit-default swaps are based on corporate bonds and are used to speculate on a company's ability to repay debt. An increase indicates an worsening in credit quality. Default swaps on RWE rose 500 euros to 9,000 euros, according to Deutsche Bank.

To contact the reporter on this story: Thom Rose in Frankfurt at trose5@bloomberg.net

Last Updated: May 11, 2007 12:08 EDT