Power Engineering - E.ON gets green light for Spanish acquisitions

7 August 2007 - The European Commission has approved E.ON's acquisition of Spanish company Viesgo, which is currently controlled by Enel, and certain activities currently belonging to Endesa.

E.ON is seeking to acquire control of Viesgo and Endesa Europa, and of certain minor activities of Endesa in Spain. Viesgo is the Spanish subsidiary of Italy's Enel, which is active in the generation, distribution and supply of electricity in Spain. Endesa Europa, meanwhile, is a subsidiary of Spanish energy firm Endesa that comprises Endesa's European activities outside Spain, particularly in France, Italy, Turkey and Poland.

Through the proposed transaction, E.ON also intends to acquire a certain number of Endesa's electricity assets in Spain, including drawing rights over 450 MW of nuclear-generated electricity under a 10-year supply agreement, three power plants with a combined installed capacity of approximately 1475 MW and a combined cycle gas turbine plant currently under development with a planned capacity of 800 MW

After examining the operation, the commission concluded that the proposed transaction would not significantly impede effective competition in the European Economic Area or any substantial part of it.

The commission's examination of the proposed takeover confirmed that the parties have limited overlapping activities in the electricity markets in France, Italy, Germany and Poland. The proposed transaction is not likely to create competitive concerns in any of these countries as the combined entity would have very limited market shares and would face competition from other significant players.

E.ON does not carry out activities in Spain, where Viesgo is active and where the Endesa businesses are located. Therefore, the only overlap would occur between the Endesa businesses and Viesgo on the market for electricity generation and wholesale.

However, in light of the parties' limited market share on this market, the presence of other significant players such as Endesa (which, despite the sale of the Endesa businesses remains a strong player) and Iberdrola, and the fact that the sale of the Endesa businesses would reduce the current level of concentration (mainly between Endesa and Iberdrola) in generation capacity in Spain, the proposed transaction would raise no competition concerns in this market.

The proposed transaction would also lead to the creation of some vertical relationships in France, Italy and Poland, where Endesa Europa has generation assets and E.ON has gas retail supply activities. However, in light of E.ON's negligible market shares in these three member states, the proposed transaction is not likely to have anti-competitive effects at a vertical level, the commission concluded.

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