UPDATE 1-Switzerland plans partial privatisation of energy supplier Axpo

Switzerland is preparing to part-privatise Axpo, the country's largest electricity producer, by allowing private investors to buy up to 49% of the company, documents published by local government authorities show. Axpo has struggled with losses in recent years as electricity from its dams and nuclear plants cost more to generate than the Swiss utility can command on European power markets, which are experiencing low wholesale prices.

That has led to write-downs worth billions of Swiss francs at Axpo, as well as the cancellation of dividends. The proposed changes, part of wider Swiss market liberalisation plans and posted in documents this month by the canton of Thurgau, would take effect in 2021 should they win support from Axpo's government owners, including the cantons of Zurich, Aargau, Glarus and Zug in the coming months.

Thurgau's local utility has a roughly 12 percent Axpo stake. With 2007 revisions to laws governing electricity supply, Switzerland began opening its power market in stages, first allowing larger commercial customers to choose their suppliers.

Although liberalisation for residential customers remains a work in progress, Axpo's owners said revamping "outdated", 105-year-old rules governing its ownership structure and defining a new strategy are necessary to conform to requirements of a modern electricity market. Under the new proposal, which was first reported on Friday by the Neue Zuercher Zeitung newspaper, Axpo's existing owners would be required to maintain a 51 percent share and would be forbidden from selling for at least five years.

Should an owner eventually decide to sell, the others would get a right of first refusal before any newcomers. The challenging power market is also driving changes at Swiss utilities, with publicly-listed Alpiq on Friday saying it was selling Czech fossil fuel power plants.

Swiss investors said last month they were buying a big Alpiq stake from France's EDF and taking the power supplier private. ($1 = 1.0089 Swiss francs)

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