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Around the Globe-Europe

Commission clears way for Veba-Viag to form E.ON

The European Commission has given its final approval to the merger of German energy groups Veba and Viag to form E.ON, Europe’s fourth largest electricity company. The German companies were forced to make a number of concessions to the Commission’s competition authority in order to clear the final hurdle.

Veba and Viag have agreed to a number of divestments that will prevent E.ON from gaining a dominant position in the market alongside RWE and VEW, German utilities which are also planning to join forces. A decision on the RWE-VEW merger is expected in mid-July from the German Cartel Office.

The key concession made by Veba and Viag involves selling several east German assets, in particular electric utility Veag and Laubag, the lignite producer. E.ON will also divest its interests in VEW, HEW and Bewag. RWE and VEW are likely to have to make similar concessions under their deal.

“We’re now ready for launch, and all systems are go,” said Viag CEO Wilhelm Simson. “The liberalized energy markets offer us exciting opportunities that we intend to seize aggressively.”

The approval of the Veba-Viag merger and the expected approval of the RWE-VEW deal could create a new wave of consolidation in the fragmented German power sector. Further consolidation across Europe is also likely.

Powerformer order

Alstom Power has received an order from Swedish utility Fortum Kraft AB for a high voltage Powerformer generator to be installed at the Hàƒ¶ljebro hydropower plant near Sàƒ¶derhamn, Sweden. This is the fourth order for a Powerformer worldwide.

The Powerformer unit will replace two older units at the power plant dating back to the 1930s and will be directly connected to the 80 kV network. The upgraded plant will be commissioned in June 2001.

Powerformer combines generator and transformer technology, allowing power to be generated at high voltage and to be fed directly into the transmission network.

“Powerformer represents a significant step forwards in technology development. After a century of conventional technology, we have been eagerly awaiting a high voltage generator like this,” said Sven Andersson of Fortum Kraft.

EPower, BP Amoco team up

Irish energy consortium EPower is to team up with BP Amoco to form a major power and natural gas marketing joint venture in Ireland. The joint venture will take an equity stake in a new power plant under development and will supply energy to eligible customers in a bid to become the leading independent energy supplier in the Irish market.

EPower will take an equity stake in Ireland Power Energy Ltd., a company formed to develop the 400 MW Powerstown power plant and in which BP Amoco is the major shareholder.

The marketing joint venture will retain the EPower brand and will offer gas and power to consumers as the markets deregulate.

Endesa expands

Spanish energy group Endesa has cemented its strategy of increasing its presence in Europe’s energy markets with the acquisition of two Dutch energy companies. Endesa will pay around Ptas66 500m (euro dollars400m) to acquire both NV Nutsbedrijf Regio Eindhoven (NRE) and NV Gasbedrijf Regio Eindhoven (GRE).

As a result of the deal, Endesa will become the largest foreign electricity and gas distributor in the Netherlands. NRE is a municipally-owned electricity distributor and GRE a municipally-owned gas distributor. The acquisition is subject to the approval of the Dutch Ministry of Economic Affairs.

This is the Spanish group’s largest investment in another European country. Endesa says that it will complement the activities of its trading joint venture with Morgan Stanley Dean Witter as well as its own activities on the Amsterdam Power Exchange.

NRE and GRE between them serve around 275 000 customers in the industrialized Eindhoven area. Endesa believes that the two utilities are well-placed for growth, both nationally and on a pan-European basis. Endesa has said that it will invest (euro dollars)3.6bbn between 2000 and 2004 in expanding its European presence.

UKPX and LPX go live

Two European electricity exchanges began operating in June: the London-based UK Power Exchange (UKPX) and Germany’s Leipziger Power Exchange (LPX).

UKPX is the first online trading exchange in the UK electricity market. It went on-line on 5 June, trading 18 000 MW of futures at an average price of à‚£25.50/MWh on its first day. LPX went live on 15 June, initially offering spot trading, with futures trading following in December 2000.

Owned by OM, the operator of the Swedish stock exchange, UKPX is to initially trade forward contracts up to 18 months ahead, and will later launch a spot market.

News digest

Belgium: Leading organizations in the renewable energy sector have joined forces to set up a joint headquarters in the rue du Trone in Brussels. They are the European Wind Energy Association, the European Association of Renewable Energy Research Centres, the European Small Hydro Association, the European Solar Energy Federation and the European Renewable Energy Export Council. In a joint statement, the organizations said that by sharing the same headquarters, they will be able to develop their Europe-wide networks more efficiently.

Finland: Finnish power company Kymin Voima Oy is to construct a biomass-fuelled power plant in Kuusankoski to supply 76 MW of power, 15 MW of district heat and 125 MW of process steam to a paper mill owned by UPM-Kymmene and Kouvolan Seudun Sahko. It will also supply 40 MW of district heat to two nearby towns. The plant will be fuelled by bark, sludge and sawdust from the paper mill and from other forestry industries in the region. Construction will begin in August 2000 and the plant will go on-line in late 2002.

Italy: The Italian government has said that it will sell a second tranche of shares in electric utility Enel in 2000. Although the size of the stake has not yet been decided, the government has not ruled out taking its holding in the company to below 50 per cent. In October 1999, the Treasury sold a 34.5 per cent stake in Enel, raising $17bn (euro dollars 18bn) in one of the world’s largest initial public offerings.

Republic of Ireland: Ireland’s Electricity Supply Board (ESB) is to cut up to one quarter of its 8000 workforce and has also said that it is considering a stock market flotation. The utility is aiming to make up to 2000 voluntary redundancies in the next three years in order to make it more streamlined and competitive. Ireland has already opened up 30 per cent of its electricity market to competition in line with EU legislation.

UK: The energy regulator, Ofgem, is to investigate whether the decision by Edison Mission Energy (EME) to withdraw of generating capacity from the market constitutes market abuse. Ofgem is concerned that EME may have put itself in a position of increased market power by the withdrawal of 500 MW at Fiddlers Ferry power station. EME says that it has withdrawn the capacity because of cost concerns.

UK: Western Power Distribution has made a $694m (euro dollars 741m) bid for Welsh utility Hyder plc. The bid of $4.49 per share represents a 15 per cent premium to the offer for the utility made in April by Japan’s Nomura Securities. Western Power is owned by US utilities Southern Energy and PPL.