The EU has approved an ESB joint venture with Statoil, which owns a 400 megawatt power station at Ringsend, Dublin. The agreement brokered by the energy regulator, Mr Tom Reeves, secures the ESB's control of the €250 million generation plant known as Synergen. It is considered the "jewel in the crown" of the ESB generation portfolio.

That had been in question after the Government queried its purchase of the turbine for the station in 1999.

In addition, one EU official said Synergen's agreement to connect its supply to the national grid was a "violation" of EU competition law. This was deemed questionable from a competition perspective because only a limited number of such connections were available due to constraints on the system.

Thus the EU approval comes at a price. While the expenditure for the turbine was sanctioned on the basis that the ESB would divest its interest in the plant if competition concerns made that appropriate, the deal finalised yesterday means the State company will have to sell half the plant's output to independent suppliers.

Details of the agreement were revealed in March by The Irish Times. The condition imposed by the EU reduces the ESB's potential revenues from the plant because it will derive only wholesale rates from the electricity sold to independent suppliers. This requirement is designed to stimulate competition in a market that has seen many potential investors leave or shut down operations.

With demand for electricity rising and just one other new plant opening in Dublin, the agreement will remain in place until a third new 400 MW plant is commissioned.

The ESB is also obliged to continue auctioning a separate supply of 400 MW of power to independent rivals. With 200 MW from Synergen to be sold to the independents, this means some 600 MW will be sold by non-ESB companies. That is the equivalent of one-and-a-half power stations.

The agreement also frees Statoil, which owns 30 per cent of Synergen, to participate in separate joint ventures in the Irish market.

While the agreement closes the EU file on the joint venture, turbine problems at the station mean it will underperform for up to three years.