The regulator CNE hedged its approval for the controversial incursion by E.ON into Spain with 19 conditions which media reports said meant the disposal of a third of Endesa's production capacity in Spain.

This involved about 40 percent of its assets in Spain, the media estimates said.

E.ON is offering 29.1 billion euros (36.6 billion dollars) in cash against a bid from Spanish Gas Natural, favoured by the Spanish government, which has offered 22.5 billion euros for Endesa, the leading provider of electricity in Spain.

The regulators' conditions state that E.ON must guarantee supplies of natural gas to the Spanish market, but they do not include a proposal that E.ON be obliged to sell its German subsidiary Ruhrgas within eight months.

Commentators had said that a requirement to dispose of Ruhrgas would have amounted to a veto of the bid.

The regulator, referring to "major risks for public safety represented by the nuclear activities", said that E.ON would have to sell a nuclear power station 100-percent owned by Endesa, called Asco 1, and would have to give up Endesa's part management responsibility for other nuclear power plants.

The conditions also require E.ON to dispose of power stations using coal produced in Spain and to commit to Endesa's investment plan in Spain from 2002-2011 regarding infrastructure and gas transportation in particular.

The ruling also requires the German group to sell assets owned by Endesa in the Balearic Islands, the Canary Islands and the Spanish enclaves of Ceuta and Melilla in North Africa.

E.ON had to "guarantee supplies of natural gas to the Spanish market, at least to the level of the annual quantity of gas forseen in the supply plans for natural gas presented by Endesa to the CNE".

Madrid has been at loggerheads for months with the European Commission, which wants to discipline the Socialist government for passing a law aimed at helping to protect Endesa, which is in a strategic sector, from a foreign takeover.

Spain adopted a law in February bolstering the power of its national energy regulator, the CNE, to review mergers affecting national strategic interests. It was passed days after E.ON announced its hostile bid.

Madrid would prefer an all-Spanish tie-up for Endesa and has actively backed the rival 22.5-billion-euro cash and shares bid launched in September 2005 by Catalan gas group Gas Natural.

The EU commission launched infringement proceedings against Spain on May 3 on the grounds that the mergers review law violated the EU's single market rules.

EU competition regulators have already given the green light to E.ON's bid.

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