BRITISH and European energy giants will lead the multi-billion dollar takeover wave to sweep America after the passing of its controversial energy bill. UK companies Centrica and National Grid have confirmed their interest in taking part; Germany's Eon - which owns UK brand Powergen - has also been named as a likely acquirer.

The US is deregulating its energy market, one of the most restricted in the world, to help bring down prices to consumers in the wake of $60 a barrel oil and peaking gas prices.

Many UK and European firms, which face slowing growth at home, see the expanding US economy - growing at an annual rate of 3.4% according to figures released on Friday - as the last great energy frontier.

The energy bill, passed by the US Senate on Friday, is unpopular with environmentalists because it gives $14.5bn (Pounds 8.1bn, E11.9bn) in tax breaks and subsidies to US energy firms, opens up oil drilling in Alaska and subsidises new nuclear power plants. It also repeals the legislation that blocks consolidation in the industry, the depression-era Public Utilities Holding Company Act, an anti-trust measure that has long restricted the world's largest power market.

National Grid, which owns five utilities in north-east America, is tipped to be the most aggressive player. It sold four of its UK gas distribution businesses in June, leaving it the $3.8bn cash it has earmarked for acquiring US transmission and distribution businesses. A US spokeswoman for the company said: "It [the new bill] would allow National Grid to invest in new areas and new geographic regions. Right now, the way it's set up, we are only allowed to buy systems that touch each other." A US-based banker tipped National Grid to take over California utility Pacific Gas & Electric Corporation, a perfect fit since it was forced to sell most of its power generation assets after the California energy crisis.

The deal was impossible previously because of the distance from National Grid's existing US assets.

NiSource in the Midwest would be a good fit for Eon, which already owns Kentucky utility LG&E. The banker said Eon could have expanded into Chicago and Illinois if it wasn't for the previous act. Eon raised speculation it was back in expansion mode in March when it lifted a E5bn limit previously imposed on acquisitions. A spokesman at Centrica, which owns the Direct Energy brand, said: "We are always looking at ways to boost our presence in the US. But it's fair to say that, like National Grid, there are regulatory issues."

John Reynolds, head of power banking at Houlihan Lokey, said: "I don't think 'wave' is too strong a word for it. You look at the average size of a utility company in the US: it's considerably smaller than in Europe. There are big economies of scale in the power sector which offer benefits to the shareholders of companies and their consumers."

The previous act banned non-utility companies from buying utilities and would only allow acquisitions where a buyer's existing utility was capable of integration with the one it was taking over, limiting mergers to particular regions. Competing with the European firms will be the more acquisitive US utilities such as Atlanta- based Southern Company and MidAmerican Energy Holdings, controlled by investment guru Warren Buffett.

Regulators at the Securities and Exchange Commission (SEC) have only lightly enforced the previous utilities act recently, believing its demise was imminent. Duke Energy's acquisition of Cinergy and MidAmerican Holdings' acquisition of Scottish Power subsidiary Pacificorp should not strictly have been allowed. Buffett was thought to be betting, as it turns out rightly, that by the time the deal came before regulators the act would be long gone.

The repeal could also make the US a fertile hunting ground for banks and private equity firms looking for reliable regulated returns. With more than 70 local utilities that have been unable to consolidate, there's no shortage of bite-sized targets.

The US Senate on Friday night finally passed the energy bill in a vote of 74 to 26. Congress passed it on Thursday by 275 to 156. It will now go for signing by President Bush. The only risk is the paradoxical protectionist streak of legislators. Bankers fear some of the previous act's stringent requirements may be transferred to one of the battery of bodies regulating the US power firms.

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