Eni launches French power retail sales, targets 1 mln clients by year-end

* Italy's Eni targets 2 mln customers by end 2020

* Eni bets that state will allow more competition

* EDF still has 86 pct electricity market share (Adds Eni comment on competition, detail on other players)

By Benjamin Mallet

PARIS, March 28 (Reuters) - Italy's Eni, already France's second-biggest gas retailer, said on Tuesday it will launch an electricity retail offer and is targeting 1 million French gas and power customers by year-end.

The entrance of a major new competitor on the French residential power market will be another blow to former monopoly power vendor EDF, which is seeing its margins slide as new players win customers with sharply priced offers.

Eni said in a statement that the French retail power market "offers incredible growth potential" as energy bills are a heavy burden for consumers.

Eni in 2012 entered the French gas market - dominated by former monopoly player Engie - with its own brand and by the end of February had won 700,000 customers. It had 2016 sales of 1.2 billion euros ($1.30 billion) in France.

In November 2016, Eni also started selling power to companies and now has some 1,500 client sites. By end 2017, it wants to add about 300,000 more customers and by 2020 Eni aims for 2 million clients, half in power, half in gas.

Four years ago, as its gas sales in France started taking off, Eni said it had no plans to enter the French electricity market because it was too tightly controlled by EDF.

Eni France Gas & Power head Daniel Fava said the power market in France, unlike most other big European countries, was highly political and that the state was putting a brake on free competition.

"We are betting that the market will become less politicised," he said.

Eni expects that the scrapping of regulated tariffs for residential gas and power customers in France - on which the State Council must rule in the coming months - will facilitate the appearance of new power vendors. Regulated tariffs for business customers were scrapped at the start of 2016.

EDF's competitors say the government is artificially keeping regulated tariffs low, making it hard for them to compete with EDF.

Eni will offer several formulas to its customers, competing on price with EDF, which at the end of 2016 had a market share of 85.8 percent of all client sites.

Gas utility Engie has an 8 percent market share, followed by independent retailer Direct Energie, which has a 5 percent share. Direct Energie told Reuters in January that by 2020 it aims to nearly double its client base to 4 million and targets a market share of 10 percent.

Last year, oil major Total bought Belgian power retailer Lampiris, which is also building up a retail client base in France. ($1 = 0.9206 euros) (Writing by Geert De Clercq; Editing by Sudip Kar-Gupta and Ed Osmond)