* France, EU wrangling over state assistance for EDF
* Paris rejects break up of EDF
* Time seen tight ahead of 2022 presidential election (Updates with French government sources, comments from energy minister)
PARIS, March 11 (Reuters) - Paris and Brussels have agreed on the broad principles of a deal to restructure power group EDF , two French government sources said on Thursday, adding that France hoped an agreement would be sealed in the coming weeks.
Talks about an overhaul of the indebted state-controlled company are expected to come to a head by the end of March, two union sources and another person familiar with the discussions told Reuters on Wednesday, with the government sources confirming France is now hopeful for a favourable outcome.
“We’ve passed some important milestones, we are in agreement on a number of broad principles and now discussions around the details are underway,” one of the sources told journalists ahead of government meetings with EDF unions on Thursday and Friday.
EDF shares were up 11.8% by 1536 GMT.
The restructuring, dubbed “Project Hercules”, is seen by EDF as key to boosting its revenues and investment plans and covering its costs.
But France and the European Commission have been wrangling for months over the extent to which the nuclear power unit and various divisions at EDF need to be kept separate, in order to avoid creating a structure in which all its business would benefit from a form of state aid.
The deal would involve resetting the price at which EDF sells on nuclear power to third party distributors. The parties had not yet fixed the price, but had agreed on the parameters that would be used to set it, the French government sources said.
EDF declined to comment. The Commission said in a statement that it had ongoing contacts with the French government on the nuclear energy reform, but could not “prejudge the timing or outcome of these contacts.”
MAKE-OR-BREAK BY MARCH
EDF and the French state are working on a scenario under which the group’s business units would be ring-fenced into three separate groups.
Activities such as renewable energy could be opened up to investors, while the nuclear arm could be fully nationalised. In its current form EDF is 83.7% owned by the government.
Brussels had pushed for a stricter separation, sources close to the talks said previously, prompting EDF boss Jean-Bernard Levy to warn that the European Commission wanted a full break-up of the company, which France rejects.
Negotiations are now centered on issues such as how support functions could be shared across the business units, the French government sources said.
One of the union sources briefed on the discussions told Reuters that a “conclusive” meeting was planned for the end of March.
Without an agreement soon, it may become harder to pass the reform, which is opposed by unions, through the French parliament before the 2022 presidential election.
“Politically, it will be difficult to deal with this in the middle of a campaign,” Marie-Noëlle Battistel, a member of parliament who specialises in energy policy, told Reuters.
Delays would penalise EDF and its ability to invest, the company has warned. (Reporting by Benjamin Mallet, Elizabeth Pineau, Gwenaelle Barzic and Sarah White. Additional reporting by Leigh Thomas. Editing by Toby Chopra and Mark Potter and Kirsten Donovan)