By Marie Maitre and Marcel Michelson
PARIS (Reuters) - The French President will appoint Veolia <VIE.PA> Chief Executive Henri Proglio as the new head of state-controlled power group EDF <EDF.PA>, the world's biggest nuclear operator, the Prime Minister's office said on Sunday.
"The state supports and recommends in this matter the candidacy of Mr Henri Proglio... to succeed to Mr Pierre Gadonneix as chairman and chief executive of EDF," said a statement from Prime Minister Francois Fillon.
"Pending the decision of the company's decision-making bodies, Mr Proglio will be appointed executive chairman by decree of the President (of France)."
The statement was issued shortly after an EDF supervisory board meeting adopted a list of six board representatives to be put for vote at a shareholders meeting on November 5 -- among which Proglio, Lafarge <LAFP.PA> Chairman Bruno Lafont, and four new representatives.
The French state is EDF's main shareholder by far, with a stake of some 84 percent in EDF.
The mandate of Gadonneix, who had angered the government during the summer by calling for sharp power tariff increases at a time of surging unemployment, was not renewed as expected.
Sources close to the situation had told Reuters ahead of the meeting that Proglio would be appointed but that some details on the conditions of his appointment remained to be set.
VEOLIA BOARD MEETING ON MONDAY?
The role that Proglio will retain at Veolia after becoming executive chairman of EDF has yet to be defined, as are the terms of EDF's future stakeholding in Veolia -- two conditions set by Proglio for accepting EDF's top job -- one source said.
The Prime Minister's statement did not address these issues.
Proglio had been seen as a leading contender amid potential successors for Gadonneix, after several sources with direct knowledge of the situation said French President Nicolas Sarkozy had offered him the job.
But Proglio, who had already turned down the same offer in 2004, was said to be reluctant to leave Veolia, a company where he spent his entire career and which he was instrumental in shaping into the world's biggest water company.
A source told Reuters Proglio could opt to keep a firm foot in Veolia by staying chairman of the supervisory board or becoming chairman of the strategy committee.
A second source who confirmed that Proglio was expected to be appointed tonight did however not confirm the role he would keep in Veolia or reports that Antoine Frerot, head of Veolia's water division, would succeed him.
"Everything is in Proglio's head really. He's a man excessively attached to governance issues, so we don't know who will succeed him at the CEO-ship and whether he will remain chairman. All we know is that he's accepted to go to EDF."
"We'll know more about this when Veolia holds its own board meeting," the second source added.
French weekly newspaper Le Journal du Dimanche and the Wansquare news site reported on Sunday that Veolia would hold a board meeting on Monday, but a spokeswoman at Veolia declined to comment on that.
Also at stake is EDF's financial holding in Veolia.
This is a key point for Proglio as sources said he feared his departure could whet the appetites of predators for Veolia, which is in the process of restructuring after a spending spree on acquisitions that pushed its debt sharply higher.
The Les Echos newspaper reported EDF could raise its stake in Veolia to 13-14 percent, from about 4 percent on December 31.
"EDF does not have a lot of cash to spend on this so the idea would be that Veolia buys EDF out of their Dalkia joint venture and EDF uses the receipts to raise its stake, but I think we are talking about 10 percent rather than 15 percent," the first source said, insisting that nothing was decided yet on this point.
(Additional reporting by Julien Ponthus, editing by Marcel Michelson)