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French State to Keep Control of Hydro Concessions, Royal Says

April 29 (Bloomberg) -- France will create state-controlled companies to operate hydroelectric dams, Energy Minister Segolene Royal said today, scrapping a plan to hold competitive bids for the contracts.

Tenders would “create risks for water management, the ecological balance of valleys and power distribution,” Royal said in a statement today. “State control must be retained.”

Successive ministers have delayed making a decision about how to run the country’s biggest sources of renewable power, now mostly in the hands of state-run Electricite de France SA and GDF Suez SA through its Cie Nationale du Rhone, or CNR, and Societe Hydro-Electrique du Midi units.

“A decision, long-delayed, has to be made,” Royal said, adding that concessions for 150 dams will come up for renewal before 2023, a quarter of total capacity.

Majority state-owned companies modeled after CNR would run the concessions, according to the statement. Energy producers would need to compete to take a share in the partnerships.

President Francois Hollande held off a plan by his predecessor Nicolas Sarkozy to open bids for 5,300 megawatts of hydroelectric capacity. That prospect attracted interest from European utilities including Vattenfall AB and EON SE. The state auditor has said delaying tenders may cost hundreds of millions of euros in royalties.

The European Union announced in September a probe into how hydropower contracts are awarded in countries such as France and Portugal, where projects are operated by state-run companies.

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

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Alex Devine, Tony Barrett

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