Vattenfall AB is in intense, binding talks with more than one buyer for its German power transmission grid, the Swedish utility's chief executive said in an interview as the group aims to improve its cash flow by selling non-core assets.

Vattenfall Europe's power grid sale has faced delays due to the financial crisis and regulatory concerns over its revenue parameters since announcing the divestment in July 2008. But talks are now moving and Chief Executive Lars Josefsson told Dow Jones Newswires that Vattenfall should find a successful bid in the third quarter and close the deal in the fourth.

"We're talking real things now, we're talking binding things," he said.

According to people familiar with the situation, only one of three potential buyers actually bid in the final round May 4. One person said the bidding consortium, comprising Allianz SE (AZ), Deutsche Bank AG's (DB) RREEF Alternative Investments and Goldman Sachs Group Inc. (GS), likely submitted an "expression of interest" only, rather than a binding bid, due to a lack of information on the business' capital expenditure plan.

Belgium's Elia System Operator SA (ELI.BT) and an unnamed infrastructure fund have been singled out as the two other potential buyers. Josefsson declined to name the parties.

The grid isn't the only asset Vattenfall is looking to sell to prop up its cash base as it expects weaker earnings in coming quarters due to falling demand.

"We are looking at what is core and what is not so much core. We have minority positions in a number of companies that aren't strategic," Josefsson said.

For example, two municipalities in northern Sweden, Lulea and Pitea, have agreed to buy Vattenfall's stakes in the cities' local energy companies for a combined value of 550 million Swedish kronor ($71.8 million).

"We have a number of other investments that we also see as non-core. These are low-yielding... and don't add to our strategic future," Josefsson said.

Its recent decision to pull out of the U.K.'s nuclear new-build program "should be seen as a precautionary measure" as price pressures have made major investments a tough sell, Josefsson said.

"In essence this is normal. The economic recession with falling demand and falling prices mean that cash flow is being curbed and as a responsible manager you need to act," he added.

Dwindling demand hasn't, however, derailed Vattenfall's plan, announced in February, to take over Dutch energy company Nuon NV in an all cash offer of EUR8.5 billion enterprise value for 100% of shares. The sale, Josefsson said, is proceeding as planned even though the European Union's antitrust authority recently extended its probe into the merger until June 22, citing concerns that the takeover would harm competition for retail energy supply in Berlin and Hamburg.

A Nuon Deutschland spokeswoman has said Vattenfall had offered to sell Nuon's German operation to please the antitrust authority.

"We don't see this as a major problem," Josefsson said. "We will see that the deal will close as planned."

Whether that means a sale or not, he said, remains to be seen.

"This German operation is a minute part of the Nuon company, which means that the concerns in relationship to the deal are minute. To some extent you can be surprised that it is a discussion at all, because it is so small. If you look at Berlin for instance, there's 120 different companies in competition for the household customers, so it doesn't seem like there's a lack of competition," Josefsson said.

Company Web site: www.vattenfall.com

-By Anna Molin, Dow Jones Newswires; +46 8 545 130 91; anna.molin@dowjones.com