Mergers: Commission clears proposed acquisition of British Energy by EdF, subject to conditions
European Commission - IP/08/2048 22/12/2008
Brussels, 22nd December 2008
The European Commission has approved under the EU Merger Regulation the proposed acquisition of British Energy (BE) by Electricité de France (EdF). The Commission's decision is conditional upon EdF´s commitment to divest the power generation plant at Sutton Bridge in the UK (owned by EdF) and at Eggborough (owned by BE), to sell certain minimum volumes of electricity in the British wholesale market, to unconditionally divest a site potentially suitable for building a new nuclear power station located at either Dungeness or Heysham in the UK at the purchaser's choice and to end one of the merged entity's three grid connection agreements with the National Grid at Hinkley Point in the UK. The Commission concluded that the transaction, as modified by these commitments, would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.
Electricité de France S.A. (EdF) is a company incorporated under the laws of France active in the generation and wholesale trading of electricity and in the transmission, distribution and retail supply of electricity to all groups of customers. In the UK, it is active mainly in coal and gas power generation, wholesale, supply and distribution of electricity.
British Energy (BE) is a UK-based company active in the markets for the generation and wholesale of electricity and supply to industrial and commercial customers. BE has a predominantly nuclear power generation portfolio.
The activities of EdF and BE overlap at the levels of generation and wholesale as well as the supply of electricity to industrial and commercial customers.
Although the combined entity would not have extremely high market shares, the Commission found during its investigation that the transaction, as initially notified, would have been likely to raise serious competition concerns in four main areas.
Firstly, due to the combination of the flexible generation portfolio of EdF and the base-load generation portfolio of BE's nuclear power plants, the Commission was concerned that the proposed transaction could have made it easier for the merged entity to withdraw electricity supplies from the market in order to increase price.
Secondly, the Commission was concerned that the combination of the short generation position of EdF and the long generation position of BE was likely to lead to an increased internal use of electricity that would otherwise have been sold to the market. This would have led to a reduction of liquidity which could have had negative effects in both the wholesale and the retail supply markets.
Thirdly, the Commission was concerned that there are a limited number of sites likely to be suitable for the construction of a first wave of new nuclear reactors in the framework of the UK policy on building new nuclear power stations. BE owns many of the sites most likely to be suitable for new nuclear build, while EdF owns key land at two such locations. The transaction, as originally notified would therefore lead to a high concentration in the ownership of sites most likely to be suitable for new nuclear build.
Finally, the combination of EdF and BE's current rights to connections to the electricity transport network would have enabled the merged entity to hold connection rights beyond its combined capacity expansion plans, with the risk of unduly delaying power generation projects of its competitors.
To address the above concerns, the parties submitted remedies. Further to the results of the market test of these remedies and in its own assessment, the Commission found that the remedies proposed were not sufficient to remove the competition concerns with respect to the two first areas of concern. However, subsequently, the parties submitted an improved remedy package comprising the commitments to divest EdF's power generation plant at Sutton Bridge and BE's generation plant at Eggborough, to sell certain minimum volumes of electricity in the wholesale market for a certain period of time when the combined entity would have had the ability to internalise the use of electricity that it produces, to divest a site potentially suitable for building a new nuclear power station located at either Dungeness or Heysham and to end one grid connection agreement with National Grid at Hinkley Point.
The Commission concluded that the revised remedy package was sufficient to remove all identified competition concerns.
Further information on the case will be available at: