Battle for Bewag grinds to a halt
A series of deals between German and Swedish utilities that would have furthered the restructuring of Germany’s electricity sector were halted in mid-August when a German court blocked an attempt by E.ON Energie to sell its stake in Bewag to HEW.
E.ON Energie, the energy unit of the merged German utilities Viag and Veba, agreed a deal in early August to sell its 49 per cent stake in the Berlin electricity company Bewag to HEW, the Hamburg utility. In return, HEW agreed to sell its 15.7 per cent equity stake in Swedish utility Sydkraft AB to E.ON.
The deal was halted one week later after objections from the authorities in Berlin and Southern Co., the US company that holds a 26 per cent stake in Bewag. The future of Bewag is now being discussed by all the participants and the city’s financial authority.
E.ON Energie was directed by Europe’s competition authorities to divest its stake in Bewag to gain approval for the merger of Viag and Veba. Its acquisition of a stake in Sydkraft, of which it already owns 20.7 per cent, is a strategic move to expand its position in the Scandinavian market. It is also looking to sell its stake in HEW to Vattenfall of Sweden.
Sweden delays closureof Barseback-2
The Swedish government has announced that it will delay the closure of the Barsebàƒ¤ck-2 nuclear power unit to avoid the risk of power shortages. The news was welcomed by Foratom, the trade association for the European nuclear power industry, which said that the move highlighted the importance of nuclear power to Sweden’s energy security.
Unit 2 of the power plant was earmarked for closure by July 2001, provided that the annual generation loss of 4bn kWh could be compensated for by reducing energy consumption and increasing generating capacity from non-fossil fuel sources. The government believes that these conditions are unlikely to be met, leading to a risk of power shortages in southern Sweden.
Unit 1 at Barsebàƒ¤ck was closed in November 1999 resulting in Sweden increasing its imports of electricity from Denmark.
EEX begins trading
Frankfurt’s new electricity exchange, EEX, began trading on August 8. It had a positive start, according to traders and EEX board members, trading 12 223 MWh of electricity on its first day.
EEX attracted 21 market participants from five countries. High volumes were traded in the baseload and peakload blocks, but there was little turnover in the auctioning of individual hours. Traders felt that more liquidity is needed on the exchange, whose main rival, the Leipzig Power Exchange (LPX), opened in June 2000.
Overall in its first week, EEX said that it traded 77 743 MWh of electricity. More than 85 per cent of this was for blocks of power rather than individual hours, but this was to be expected as trading in the German market is still dominated by bilateral trades between utilities and because it generates its power mainly from coal and nuclear plants with little flexibility.
Compart to buy Falck
Compart, the Italian industrial conglomerate which owns Edison, intends to gain control of the Falck Group, a former steel company which converted into an electricity producer. The deal would create a power company of a size to rival Enel, the former state-owned power monopoly.
Falck’s board is said to have approved the deal. Compart bid a9 ($8.1) per share for Falck and a3.85 per share for Sondel, Falck’s separately traded electricity generator unit. The merged entity would be third in the Italian electricity market in terms of size, behind oil and gas group ENI and Enel.
The merger will create a company with an installed capacity of 5600 MW and a turnover of $1.67bn. Between them, the companies produced 27 500 GWh of electricity last year.
UK market sees consolidation
The UK’s electricity market witnessed another round of consolidation as two acquisition deals were sealed involving struggling Welsh utility Hyder and retail energy supplier Norweb Energi. In separate deals, TXU Europe purchased Norweb Energi from United Utilities for à‚£310m ($505m), and Western Power Distri-bution (WPD) ended a bitter four-month long battle by buying Hyder for à‚£565m.
TXU Europe, part of Dallas-based TXU, became the UK’s second largest electricity supplier by adding Norweb’s 2.2m electricity and gas customers to its own customer base of 3.4m. The deal included the contracting of TXU’s customer services business to United Utilities’ Vertex operation for seven years, and the integration of Norweb’s power purchase agreements into TXU’s energy trading portfolio.
Hyder’s fate was sealed after WPD and Nomura, the Japanese Bank, submitted sealed bids for the utility to the takeover panel.