EU looks to speed up power market liberalization

EU Energy Commissioner Loyola de Palacio has pledged to make a series of proposals that will speed up the liberalization of the region’s electricity market. The Commissioner wants to see greater market opening, fairer pricing for cross-border trade, improved access to the grid, better management of congestion and investment in interconnector infrastructure.

While Palacio acknowledged that most of the EU’s member states have opened their electricity markets to a greater extent than is required, she said that there still remained 15 separate markets instead of one single market. The Commissioner pledged legislative proposals by the end of the year for a reliable system for cross-border trade, and is aiming to bring forward proposals to open up the market to more consumers.

The EU is currently undertaking a study to investigate ways of creating a system for cross-border trade where the tariffs would depend on the volume of current exported and on the distances involved. The Commission wants to see a provisional cross-border regime based on this system running by October 2000.

The plans build on a summit in March 2000 where EU members made a commitment to speeding up liberalization.

Union Fenosa gets green light for Hidro

Shareholders of Spanish utility Hidroelectrica del Cantabrico (Hidrocantabrico) have given approval to a a2.7bn ($2.4bn) cash and equity takeover by Union Fenosa, bringing the Spanish power market one step closer to consolidation. The takeover has already been approved of the Spanish securities exchange, the CNMV.

TXU Europe, which has a 13.9 per cent stake in Hidrocantabrico and made a a2.4bn bid to buy 100 per cent of the utility in early March, dropped its opposition to the takeover. TXU chief executive Phil Turberville said that to oppose the takeover by Union Fenosa “would create a stalemate within the Hidroelectrica del Cantabrico Board which would not serve the interests of the company, its employees or the shareholders of TXU”.

The takeover was due to be completed as PEi went to press, but must first be approved by the Spanish government. Union Fenosa may have to sell certain assets to satisfy government competition rules. The deal will lift Union Fenosa’s share of the Spanish power market from 13 per cent to over 20 per cent.

TXU dropped its bid after Union Fenosa made a higher counter-offer. Under Spanish bylaws, takeover offers must receive the full backing of the takeover subject’s board to receive approval.

Southern may snap up Veag and Bewag stakes

US energy giant Southern Company has said that it wants to increase its presence in the German energy market by buying a stake in Veag, the supplier for eastern Germany, and increasing its stake in Bewag, the Berlin-based utility.

Its aim could be helped by Veba and Viag’s plans to sell their stakes in Veag to satisfy competition authorities.

Southern already holds a 26 per cent stake in Bewag. The other two main shareholders are Bayernwerk, a unit of Veba, and PreussenElektra, a unit of Viag. These two utilities are also main shareholders in Veag.

Veba and Viag are likely to be forced to sell their ownership in these utilities in order to gain approval from European competition authorities for their planned merger. Europe’s competition authorities said in April that the two companies would have to make a number of concessions before the merger could be approved.

Auctions give online choice

Two online energy auctions for the European market have been launched. The launch of Buyenergyonline.com in May was swiftly followed by BuyEnergyHere.com, which claimed to be the first pan-European energy auction to go live.

BuyEnergyHere.com has been set up by Norsk Hydro, the Norwegian group, and aims to operate in Scandinavian countries as well as Germany and other liberalized markets. It says it could save over 300 000 businesses up to $1.47m/year in energy costs.

Buyenergyonline.com aims to capture ten per cent of the £11bn ($6.87m) British industrial energy supply market by the end of 2001.

Magnox closures

Troubled British nuclear fuels specialist BNFL has sought to boost its image by announcing a timetable for the closure of its Magnox power stations in the UK. The group took over the plants in January 1998 and there has been speculation that it may try to extend the licenses for the plants.

Five of the plants will close when their licenses expire, one will close early and the company will apply for license extension for the remaining two. Environmentalists have expressed concern over license extensions for the plants.

News digest

Europe: The EBRD has called for the EU to focus on quality instead of speed in dealing with candidate countries negotiating for accession to the EU. The bank emphasised the importance of effectively tackling challenges such as creating a healthy investment climate, overcoming corruption and ensuring transparency in the banking sector before accession was granted. Twelve countries in central and eastern Europe are currently looking to join the EU, with Poland and Hungary aiming to achieve this by 2003.

Germany: The supervisory boards of German energy groups RWE and VEW have separately approved the plan to merge the two companies. Shareholders will vote on the proposals towards the end of June. The plans still require the approval of the Federal Cartel Office, and would create a company with a turnover of $37bn and a workforce of 170 000.

Germany: The first German electricity trading exchange, the Leipzig Power Exchange (LPX), will go into operation on June 14, 2000, one month later than planned. The exchange will initially operate a spot market, later adding on a futures market as it develops. It hopes to eventually handle one fifth of trading in electricity generated in Germany.

Portugal: Alstom Power has won a second contract for the turnkey supply of a combined heat and power (CHP) plant to Solvay in Portugal. It will supply a 43 MW GTX100 gas turbine, a heat recovery boiler and other equipment to the plant, which will be built at a chemical mill owned by Solvay Portugal. Last year the company won a contract for a CHP plant at a paper mill in the country.

UK: The IPE has announced that it is to launch its electricity futures contract on 2 October 2000. It will be traded on the IPE’s electronic trading system on the same screen and trading platform as its natural gas contracts. The electricity futures contract will offer both base and peak load and will comprise dailies, balance of the month, monthlies, quarterlies and seasons. IPE believes that with this new contract running alongside its natural gas contract, it is responding to the needs of the converging gas and electricity markets in the UK.

UK: The proposed timetable for the introduction of the new electricity trading arrangements (NETA) in England and Wales has once again slipped, with the arrangements now due to start on November 21 2000 instead of October. Further delays could result in the new system being implemented in 2001, as officials do not want first trading to start during the peak winter months of demand.