Europe

NETA software problems

System testing for the new electricity trading arrangement (NETA) in the UK is encountering software problems, raising concerns over the launch date. Earlier this month Ofgem abandoned plans for the launch date which was scheduled for November 21.

The new arrangement is a radical overhaul of wholesale electricity trading in the UK. NETA’s implementation manager commented: “We’re going through a difficult period…we have been experiencing problems which need to be solved before we can move to end-to-end testing.”

End-to-end testing had been scheduled for September 18. These tests, which are an important part of the Market Integration Testing (MIT) for NETA, involve 11 participants and the central systems. They are designed to check that all systems work together satisfactorily.

The start of these tests depended on successfully completing a number of activities. One necessary activity which had not yet been completed was the Business Process Interface Tests (BPITs). These are the communication and file transfer tests between participants and central systems.

Logica, one of the central service providers, has written to the NETA programme stating that a delay of about two weeks is likely to be needed to complete the BPITs.

  • London’s International Petroleum Exchange is testing software for its new electricity market scheduled to start on October 2. The exchange which also offers Brent crude and gas contracts, plans to trade electricity futures as far out as 36 months, to mirror the gas market.

RWE buys Thames Water in a à‚£6.1bn deal

German multi-utility, RWE has completed the purchase of Thames Water, Britain’s biggest water company for à‚£4.3bn ($6.3bn). RWE will also pay an additional à‚£1.8bn to cover Thames’s debt.

Dr Dietmar Kuhnt, RWE’s chairman said Thames would benefit from the strength of RWE’s balance sheet while giving RWE a strong foothold in the European market.

RWE wants to increase its water interests in a bid to become one of Europe’s biggest multi-utilities.

Meanwhile, the managements of the German energy major Eon and the French energy and water services group Suez Lyonnaise des Eaux have confirmed that their potential merger is dead. They issued a statement indicating it was “never their intention” to merge or to link the business activities of the two groups.

Battle for Bewag continues

US energy company Southern Group, which is locked in a battle for the control Bewag, the Berlin electricity supplier, is expected to seek an accord with its Swedish rival, Vattenfall, in an attempt to break the deadlock.

Southern has proposed that the two companies jointly acquire a controlling interest in Bewag. The control of Bewag is the key to gaining control of the east German power company, Veag, and the east German electricity market. Bewag currently has a stake in Veag.

Southern, which already owns a 26 per cent stake in Bewag, won a temporary injunction preventing Germany’s largest utility, Eon (formed by the merger of Viag and Veba) from selling its 49 per cent stake in Bewag to HEW, which is part-owned by Vattenfall. Southern claims to have pre-emption rights over the stake and therefore first refusal on the sale of Eon’s stake.

Under the Eon proposal, Vattenfall would lift its stake in HEW from 25 per cent to 62.3 per cent by acquiring stakes from Eon and Sydkraft, another Swedish utility. In return, Eon would increase its stake in Sydkraft from 20.7 per cent to 36.8 per cent.

  • Eon and RWE plan to shut down some of their power plants in an attempt to reduce their exposure to an increasingly unprofitable power generation business in Germany.

Spanish utilities in merger talks

Spain’s two largest power companies, Endesa and Iberdrola, confirmed they are discussing a a12.5bn ($11.4bn) merger. The merger would create the fifth-largest utility in Europe, with a combined market capitalization of more than a30bn.

If regulators approve the deal, the merged company could introduce more competition to the Spanish electricity market. Further, a merger with Endesa would save Iberdrola from the grasp of a foreign competitor, something neither the Spanish electricity industry nor government wants.

Details of the merger are still being worked out. Power-sharing would be an issue in terms of generating capacity and management control. “A deal of this size is very complicated, particularly the decisions on share values,” said Benito Vera, a senior analyst at BSCH Bolsa SVB SA in Madrid. “But the key issue is divestment.”

Both companies acknowledged their willingness to sell generating assets in Spain in order to win government approval for a merger.

Endesa and Iberdrola account for 80 per cent of the Spanish market in both distribution and generation.

The proposed merger has already increased the price of stock for the companies. Endesa was trading up 1.5 percent, and Iberdola was up 0.6 percent.

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