It appears that the final installment in the long running E.ON/Endesa saga has taken place. I am of course referring to last month’s judgement by Europe’s leading court, the European Court of Justice, that the Spanish National Energy Commission, (CNE), breached European law by imposing conditions on the acquisition of Spanish electricity company Endesa by Germany’s E.ON.
It all began in April 2006, when Neelies Kroes, Europe’s competition commissioner approved E.ON’s bid for Endesa under the terms of the EU Merger Regulation. Subsequently, however, CNE, and the Spanish Minister of Industry imposed a number of conditions on the bid, saying they were necessary to safeguard Spain’s energy needs. The Commission disagreed, and said the conditions were incompatible with EU law. After Spain ignored two orders to withdraw the conditions, and despite it claiming it had taken steps to address the Commission’s concerns, the Commission referred the case to the ECJ in March 2007.
Although the E.ON bid ultimately failed à‚— the German energy giant eventually withdrew its bid citing concerns over shareholder losses and “unpredictable lawsuits” à‚— the ECJ ruled that the expiry of the bid did not relieve the CNE from obligations to remove regulatory obstacles to merger bids by other non-Spanish companies, and that Spain failed to “fulfil its obligations under community law”.
Commenting on the ruling, a spokesman for the Commission said that it “confirms that member states cannot deprive businesses and consumers of the benefits of a single market” and that “we would expect Spain and other member states to take note of the ruling and respect community law.” The ECJ ruling is a clear win for the Commission in its efforts to create a single liberalized European electricity market, but will member states, and in particular Spain, take note?
We may not have long to wait to find out because there is growing speculation that a further restructuring of Spain’s electricity sector is looming. This is not surprising as Spain is undoubtedly a lucrative market, and what is equally unsurprising is that Wolf Bernostat, CEO of E.ON has played down any suggestion that his company will be involved in this à‚— a case of once bitten twice shy, perhaps?
There are, however, rumours of a link-up between France’s EDF and the Spanish construction company, ACS à‚— somewhat reminiscent of the Enel/Acciona partnership that successfully acquired Endesa à‚— circulating, suggesting that this duo is on the verge of bidding for Iberdrola and Union Fenosa. Spain’s other two major power companies. Yet a report in influential Spanish newspapers, ABC has said that Enel may only look to take up to an 18 per cent stake in Iberdrola, as it does not want to spark anti-French feelings by taking over its rival. I suppose once again we will have to wait and see how it pans out, but I cannot help Sir Walter Scott’s famous quotation “Oh what a tangled web we weave, when we practice to deceive” popping into my head.
I’d like to finish off by drawing your attention to our cover story this month ‘Making smarter investment decisions for a low-carbon future’. It is written by the highly respected consultants, Arthur D. Little, and explores the options open to utilities to cut their carbon emissions. It also analyzes how they can best prepare for a low-carbon future through the investment decisions they make today à‚— a topic that without doubt is being discussed in boardrooms across the world. If you only have time to read one article make sure it is this one.