The Danish companies, Kobenhavns Belysningsvesen (KB), SEAS Distribution (SEAS) and Nordvestsjellands Elforsyning (NVE) -- all based on the eastern island of Zealand -- have a total customer base of around one million, Sydkraft said in a statement.

The planned new company, scheduled to start up in the beginning of next year with headquarters in Copenhagen, would be owned with equal shares by the four companies.

Sydkraft, Sweden's largest private power producer, said the company's main target would be Denmark, but that it aimed to expand.

"The company is going to run its operations first and foremost in the Danish energy market, but later it will expand in nearby areas in the Nordic region and in the area around the Balitc Sea," Sydkraft said.

"The company will focus on the customers who are going tobe free in Denmark as the deregulation is taking effect," it said.

Denmark is behind its Nordic neighbours Norway, Sweden and Finland in the power deregulation process. So far, only power-intensive industry with an annual power consumption higher than 100 gigawatt hours -- including only six companies -- can participate in the open market and shop around for electricity.

"Even if there are still many questions related to the energy reform in Denmark, the new company will under all circumstances fit in and become a very strong player in the Baltic Sea area, the area with the strongest growth in all of the Nordic region," Sydkraft CEO Lars Frithiof said.

Sydkraft said the name of the new company had not yet been decided.