Energy company Eneco is preparing to sell its district heating business, saying new government rules requiring public control of heat networks make it unattractive for private companies to stay involved.

The company told the Financieele Dagblad it is holding exploratory talks with potential buyers and hopes to sell the business in its entirety to a public sector owner.

“All options are on the table, but splitting up the company would mean losing the expertise and efficiency that are crucial for such risky projects,” Ron Wit, director of Eneco’s heating division, told the paper.

Eneco operates major heat networks in the Utrecht, Rotterdam and The Hague regions, supplying around 370,000 households, and its assets are estimated to be worth more than €1 billion. Vattenfall, which is also looking into selling its heating company, and Ennatuurlijk together account for most of the remaining market, covering roughly 85% of all connections.

Under new legislation passed by the lower house of parliament in July more than half of every district heating company must be owned by a public body such as a local council or province.

The government is keen to nationalise the networks as a sweetener to encourage people to stop using gas-fired central heating. Officials believe they would be more willing to make the switch if they were not being forced into the hands of a private company, with no choice of supplier.

Households connected to district heating systems, which typically use surplus heat from industry or waste incineration, have no choice but to use them, regardless of the fees being charged.

However, large energy firms have strongly opposed the law, arguing that they cannot justify major investments if they lose decision-making power. Construction of new networks has already slowed sharply as a result.

Wit said Eneco will not keep a minority stake in any of its heat networks or in the business as a whole. “It’s not that we don’t want to,” he said, “but the law prevents minority shareholders from having a say in key decisions. That’s unacceptable and irresponsible for projects of this size and complexity.”

Energy analyst Frans Rooijers told the FD the government should move quickly to nationalise the three largest city heating firms, ideally through the state-owned energy company EBN.

The government, he said, wanted to take charge but has not accepted the financial consequences of the move, he said adding that the €224 million set aside by climate minister Sophie Hermans for district heating projects is “a token amount”.

Senators are due to discuss the legislation with various experts including energy firm representatives, on Tuesday.