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24 February 2006 - The bid for Endesa by E.ON has prompted speculation that other mergers in the power sector may follow and that UK firms are in the firing line.
Industry sources regard Centrica, ScottishPower, and Scottish and Southern Energy as likely bid targets now that E.ON has dropped its interest in Scottish Power in favour of building up its business in Southern Europe. This leaves the way open for players such as Germany's RWE and Russia's Gazprom to seek acquisitions in Britain, they said.
The larger groupings emerging in the European gas and power sector will put pressure on smaller players to for deals to increase market presence and with German and French markets still hard to break into, the fully liberalized UK market looks favourite for foreign companies with deep pockets.
The Spanish government has said it is unlikely to use its 'golden share' to block the offer by E.ON for Endesa but is not attracted by the prospect of Spain losing control of its largest electricity supplier. Endesa had been close succumbing to a bid from Gas Natural until the E.ON move trumped the Gas Natural offer.
But E.ON may yet have a battle on its hands. Italian utility Enel said yesterday it might back Gas Natural if it returns with a bigger bid for Endesa.
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