Spain’s suspension of voting rights draws EU criticism

The decision by the Spanish government to suspend the voting rights of two foreign shareholders in domestic utility Hidroelectrica del Cantabrico has drawn criticism from EU competition commissioner, Mario Monti.

Spain has suspended the voting rights of Electricidade de Portugal (EDB) and German energy group, EnBW on the board of Hidroelectrica del Cantabrico (Hidrocantabrico) for up to three months, pending an investigation. The investigation will focus on the stakes each of the groups has in Hidrocantabrico, given the three per cent limit to foreign control which exists under Spanish law.

Yesterday Monti warned the Spanish government that it would need European Commission approval to restrict rights of foreign shareholders in the privatised utility. Mr. Monti said that national governments had extremely narrow grounds in which to interfere with cross-border mergers or acquisitions.

Hidrocantabrico is 60 per cent owned by EnBW. French state-owned power group Electricite de France has a 34.5 per cent interest in EnBW and, it is this holding, which has attracted the attention of the Spanish regulators.

EDB, the largest Portuguese utility, may also be in breach of the foreign ownership rules since the Lisbon government retains a 30 per cent interest in the group.

The investigation is a procedural matter, according to a Spanish economy ministry spokesman. It does not mean that the voting rights of the two foreign groups will automatically be restricted.

The EU commission’s single market directorate will be investigating the law, introduced by Spain only two years ago, which seeks to restrict foreign investors’ voting rights to three per cent, irrespective of their shareholding in Spanish utilities.

Spain has pressed ahead with the deregulation of its electricity market at a faster pace than a number of other European countries. This difference in approach has led to tension between Spain and France, with the Spanish government reluctant to relinquish control of domestic utilities without reciprocal opportunities being available. It is widely accepted that Spain introduced the new legislation as a measure to prevent the acquisition of privatised utilities by the French state-owned utility, Electricite de France.

Hidrocantabrico is the fourth-largest electric utility in Spain. It accounts for 7.3 per cent of Spain’s electricity generation and five per cent of the retail market. The group was courted by a number of European utilities earlier this year, with EnBW in consortium with private Spanish power group, Ferroatlantica, ultimately succeeding. The consortium offered $23.7 per share for Hidrocantabrico.

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