E.ON is an energy company headquartered in Germany with its main activities in the generation, transmission and supply of electricity and gas, which are carried out throughout Europe and in the United States. E.ON is, however, not active in Endesa’s home market, Spain. E.ON’s shares are listed on all German stock exchanges as well as on the New York Stock Exchange.
Endesa is a Spanish electricity operator that is also active in other European countries (though to a limited extent), in particular in Portugal, France, Italy, Germany and Poland. In addition, Endesa is active in South America and North Africa. In Spain, Endesa is also present in the gas sector. Endesa’s shares are listed on the Madrid and the New York Stock Exchange.
The Commission’s market investigation has confirmed that the markets are still predominantly national in scope, inter alia due to varying degrees of liberalisation, regulatory barriers and lack of interconnection capacity.
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. In Spain, where Endesa is one of the two major operators in the electricity market, E.ON is not active at all. The parties do not have any overlapping activities in the national markets for natural gas.
Given the minor incremental market share of Endesa in the relevant electricity markets, and in the absence of any overlapping activities of the parties in the natural gas markets, it is considered unlikely that the proposed operation would have a significant adverse impact on competition in the energy markets in France, Italy, Germany, Poland and Spain in particular, or in the EEA as a whole.
Moreover, based on the outcome of its investigation, the Commission found that, given the present state of market development, E.ON could not be regarded as a likely market entrant in the Spanish electricity markets or gas markets, and that therefore the proposed operation would not give rise to the elimination of potential competition.
The investigation has not found that the transaction could significantly reinforce Endesa’s position in the Spanish generation and wholesale electricity markets. There is, for example, no reason why E.ON would be able to provide Endesa’s CCGTs (combined cycle gas turbines) with natural gas at prices that could not be matched by alternative suppliers. Additionally, gas imports into Spain through pipelines is subject to significant capacity constraints and pipeline capacity is not available to new market entrants because of long term contracts with the incumbent operators. New imports are therefore more likely to take place via liquified natural gas (LNG) tankers, but E.ON is not active in the LNG sector, in Spain or elsewhere.
The Commission also examined the impact of the transaction on gas procurement, and concluded that the transaction will not make a significant difference, as the two companies essentially do not overlap in terms of suppliers (E.ON purchases its natural gas from Russia, Norway, the Netherlands, Germany, UK and Denmark, whereas Endesa procures gas from Spanish wholesale markets, Algeria, Nigeria and Qatar).
The market investigation also considered the possible impact of E.ON becoming a more “pan-European energy operator”, but found no adverse effects on competition as a result of the proposed operation.
In view of the above the Commission has decided to approve the proposed takeover under the EU Merger Regulation.
In the course of the market investigation, third parties voiced concerns about the malfunctioning of the German and Spanish gas and electricity markets. The Commission takes these allegations very seriously. It has launched infringement procedures, and is currently carrying out an energy sector competition inquiry to find out whether undertakings have violated antitrust rules.
The Commission has in the past launched infringement procedures against Spain and Germany with regard to the implementation of the electricity and gas Directives (see IP/06/430, IP/06/429, IP/06/152 and IP/05/853). It will continue to enforce vigorously the community legislation in this field.
In the context of the energy sector competition inquiry, it will continue to keep the development in the German and Spanish markets and the other markets concerned under strict scrutiny (see IP/06/174 and MEMO/06/78).
