Oct. 1 (Bloomberg) -- Electricite de France SA, Europe’s biggest generator, and E.ON AG, Germany’s largest utility, agreed to swap assets to cut debt and meet antitrust regulations.

E.ON will get the 35 percent it doesn’t own in French energy supplier SNET and rights to 800 megawatts of nuclear output, in return for giving up 1,215 megawatts of atomic and coal-fired generation in Germany. Each side of the deal may be worth as much as 1.5 billion euros ($2.2 billion), according to Christian Kleindienst, a credit analyst at UniCredit SpA.

The two utilities are seeking to sell more than 15 billion euros of assets to pay down debt accrued by snapping up rivals. E.ON wants to settle a probe by the European Commission into whether it thwarted competition at home while the French state is forcing former electricity monopoly EDF to sell more nuclear energy to rivals.

“It’s great for E.ON,” said Munich-based Kleindienst. “E.ON can strengthen their position in France, EDF is pulling out of a minority stake that isn’t helping much and the company has to reduce its presence in France.” He has “overweight” recommendations on the bonds of both companies.

E.ON will get 800 megawatts of French nuclear capacity from EnBW Energie Baden-Wuerttemberg AG, a German utility partially controlled by EDF, which has rights to the Fessenheim and Cattenom nuclear plants in France.

Coal Assets

Karlsruhe, Germany-based EnBW will take a stake in E.ON’s Rostock coal-fired power plant and rights to electricity from its Buschhaus generator, which runs on the same fuel, according to company statements today.

E.ON spokesman Christian Drepper declined to comment on the value of the transaction when reached at company headquarters in Dusseldorf. EnBW spokesman Dirk Ommeln said the financial terms of the deal are confidential.

Both sides were in talks over the asset swap in May, three people familiar with the matter said at the time. The deal may have slowed because of uncertainty over whether Germany would elect a government keen on promoting nuclear power, said Kleindienst at UniCredit.

Chancellor Angela Merkel and the Free Democrats, her preferred allies, who won enough votes to form a government in last month’s elections, may scrap a law that required Germany’s 17 nuclear plants to shut by about 2021 after the Social Democrats thwarted earlier attempts to repeal the legislation.

Avoid Penalty

E.ON has now divested more than 4,400 megawatts of the 5,000 megawatts it pledged to end a Commission probe and avoid a potential penalty of as much as 10 percent of annual sales for violating EU antitrust rules.

The combined stake in SNET, known as E.ON France since last year, comes from EDF and Charbonnage de France. The French unit has about 2,500 megawatts of power plants, mostly coal-fired units, E.ON said.

The stake in SNET is equivalent to 824 megawatts of power output, almost twice the installed capacity of the German coal- fed assets, E.ON said.

The transaction is still subject to approval by regulators and the supervisory boards of the companies. It should take effect from Jan. 1, EnBW said.

EnBW and EDF were advised by UBS AG and Calyon Global Investment Banking, EDF said. E.ON didn’t identify the bank it mandated for the deal. Freshfields Bruckhaus Deringer said it provided legal advice to E.ON.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net. Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net

Last Updated: October 1, 2009 12:07 EDT