The German government stepped in to back E.On AG's (EOAN.XE) bid to secure a 21% stake in Lisbon's Energias de Portugal SA (EDP.LB), which Portugal is selling to help pay off sovereign debt, the Financial Times reports Monday.

The FT said that Angela Merkel, the German chancellor, pushed E.On's bid in a recent conversation with Pedro Passos Coelho, Portuguese prime minister, according to people familiar with the matter.

E.On, Germany's biggest utility, has made a EUR2 billion bid and offered to move renewable energy businesses to Portugal, which could support the Portuguese economy, according to the FT. In November, the Portuguese government shortlisted E.On, Brazil's Centrais Eletricas Brasileiras SA (ELET6.BR), Companhia Energetica de Minas Gerais (CIG) and China's Three Gorges Corp., operator of the world's largest hydro power dam by power generation capacity, for the sale of its stake in EDP.

The stake is being sold as part of a bailout agreement between Portugal and the European Union and the International Monetary Fund.

-By Jenny Gross, Dow Jones Newswires; 4420-7842-9239; jenny.gross@dowjones.com

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