Analysts are predicting that the German utility RWE will lead a wave of cross-border mergers in Europe following the liberalisation of the European energy market.

An analyst at Bank Julius Baer in Frankfurt said he believed there would be a huge consolidation process in both Germany and Europe as international competition grew. There will only be a few big players, he suggested, and RWE will be one of those.

The speculation appeared as RWE’s chairman said that the company, which holds a 15 per cent share of the German energy market, wants to raise its European share, currently around 2.4 per cent, to a similar level as its German holding. This, he admitted, could only be achieved through acquisitions. The company has also said that it intends to concentrate on its core business of energy.

RWE may consider hostile bids for large rivals, the chairman admitted, as it sought to increase its share of the European market. However the company has denied recent claims that it plans to join in partnership with Electricité de France (EDF) and the rival German utility Energie Baden Württemberg (EnBW). It is known that EDF is buying a 25 per cent stake in EnBW which is being sold by the government of the state of Baden Württemberg.