Endesa, Iberdrola call off merger

Spain’s two largest electric utilities have called off their merger plans, stating that the conditions imposed by the government were unacceptable. The news was quickly followed by announcements from two German utilities that they had launched bids for Spain’s fourth largest utility, Hidroelectrica del Cantabrico (Hidrocantabrico).

The government approved the Endesa-Iberdrola merger in February but the companies quickly decided to cancel the deal, as they believed that the stipulated upper limits on market share were too low. Several major European energy groups, keen to get a foothold in the fast-growing Spanish electricity market, would have benefited from forced asset disposals if the deal had gone ahead.

Interest in the market continued apace with bids from RWE AG and EnBW for Hidroelectrica. RWE has offered €26 ($23.8) per share and EnBW €25.8 per share for the utility. These bids add to one made by Electricidade de Portugal (EDP) in late January for Hidroelectrica. EDP offered €24 per share and has the support of three of Hidroelectrica’s shareholders: two Spanish banks and US energy company TXU

The government wanted to limit the generation capacity of a merged Endesa-Iberdrola to 41 per cent of the domestic market, distribution to 48 per cent and supply to 40 per cent.

de Palacio plans for faster market opening

European Energy Commissioner Loyola de Palacio is to submit a report to the European Union (EU) in March as part of her plan to implement fast-track opening of the region’s energy markets. She is responding to calls from EU leaders to speed up liberalization of Europe’s electricity and gas markets, and wants full competition by 2005.

Ms de Palacio is currently preparing draft legislation to replace the current directives on electricity and gas market deregulation.

The new directive is expected to require EU states to have an independent energy regulator and that transmission networks be fully separated from generation and sales.

Energy ministers are to discuss the proposed legislation during 2001, and the regulation could be applied in 2002, with the directive coming into force 12 months later.

Electrabel “takes on challenge”

Belgian power group Electrabel is to cut 1700 staff from its workforce by 2003 as it plans to streamline its operations. The utility is aiming to focus on four core activities and will reorganize its operations in response to increased competitive pressure in its home market.

The company currently employs 15 300 people but has said that it will shed jobs not related to its four basic activities – electricity generation, trading, network management and sales. “The objectives of these measures is to give the company, by 2003, the necessary means to take on the challenge of an open European market,” the company said in a statement.

Belgium’s electricity market is 42 per cent open to competition, but the pace of liberalization is expected to increase. The market originally planned for full liberalization by 2006, but some regional governments want to see the market completely open by 2003.

NETA to meet its planned schedule

The UK energy regulator, Ofgem, has said that the new electricity trading arrangements (NETA) are on schedule to start on March 27, 2001. The new system is undergoing final testing which is due to be completed by March 16.

The new arrangements have been under development for two years and will replace the current ‘pool’ trading system used in England and Wales. The pool system has been widely criticized for its lack of transparency and high prices.

The regulator and the government hope that the new system will improve liquidity in the market and bring a reduction in wholesale power prices of around ten per cent.

NETA was due to be implemented in November 2000, but was postponed due to delays with systems and software.

Elettrogen attracts seven bidders

The sale of Elettrogen, the first of three Italian generating companies to be sold, had attracted bids from seven companies by the February 9 deadline. Spanish, German and US companies submitted bids for the holding company, which owns 5400 MW of capacity.

The sale is part of moves by the Italian government to liberalize its power sector. Two other generating companies will be sold in 2001.

Elettrogen is estimated to be worth between ITL2.7tr ($1.3bn) and ITL5.4tr. Most of the bids came from consortiums – reducing the risks of entering a liberalizing energy market.

The bidders are: Endesa of Spain; the Energia Italiana consortium, comprising Mirant and Verbund; the Merloni consortium, comprising Foster Wheeler, EnBW and a number of Italian municipal utilities; Edison and Sondel; Italpower – a group led by AEM and Atel; a consortium of Italian refiner ERG and Edison Mission Energy; and a joint venture of Electrabel and ENI.

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