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Brussels, 23 rd June 2009

Mergers: Commission approves proposed acquisition of Essent by RWE, subject to conditions

The European Commission has cleared under the EU Merger Regulation the proposed acquisition of Essent of the Netherlands by RWE of Germany. Both companies are active in the electricity and gas sectors. The Commission's decision is conditional upon RWE's commitment to divest Essent's controlling shareholding in Stadtwerke Bremen AG (swb). RWE agreed to this divestment to remedy competition concerns the Commission had in relation to the German wholesale electricity and gas markets. The Commission concluded that the transaction, as modified by this commitment, would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

Competition Commissioner Neelie Kroes said "After an extensive review of the proposed transaction and an in-depth market investigation, the Commission is confident that the takeover of Essent by RWE poses no competition problems in the Dutch electricity or gas markets. RWE will in particular not be able to use its position as owner of certain interconnectors on the Dutch German border to withhold electricity and thereby increase prices in the Dutch electricity markets. The Commission is also confident that the commitments offered by RWE to remedy concerns in the German generation and wholesale electricity and gas markets will guarantee that competition will continue to be effective in these markets."

RWE is active on both electricity and natural gas markets in most EU Member States and in particular in Germany, the UK, the Czech Republic and Hungary. Essent is active in the electricity and natural gas markets, mainly in The Netherlands and to a lesser extent in Germany and Belgium.

The activities of RWE and Essent overlap in both the electricity and gas markets in the Netherlands and Germany.

The Commission's investigation revealed that the proposed transaction would not raise competition concerns on the wholesale, retail or trading electricity markets in The Netherlands, nor on most of the electricity and gas markets in Germany, as RWE's and Essent's joint market shares are moderate and a sufficient number of competitors will remain in the market after the merger. The Commission reached the same conclusion in regard to retail sales of low calorific gas to large industrial customers in The Netherlands, where there is an important overlap.

The Commission conducted a thorough analysis as regards possible anti-competitive effects of the transaction resulting from the significant position on the markets for wholesale electricity that the merged entity would have in Germany and The Netherlands, while operating the majority of interconnectors (together with the Dutch transmission system operator) between the two Member States. The Commission concluded that this did not raise competition concerns, because the new entity would not have the effective ability to withhold electricity flowing from Germany to The Netherlands through the interconnectors in its ownership with a view to significantly raising prices in The Netherlands.

However, the Commission's investigation found that the proposed transaction, as initially notified, would have raised competition concerns in the German wholesale electricity and gas markets. Essent currently has a controlling shareholding in Stadtwerke Bremen AG (swb), which like RWE is active in these markets. On the wholesale electricity market, the Commission therefore found that the proposed transaction, as initially notified, would have in particular strengthened RWE's current collectively dominant position (together with at least E.ON) by removing swb as an actual competitor while at the same time increasing RWE's incentives to withdraw generation capacity to raise prices. On low calorific gas supply to large industrial customers the transaction would have led to the creation of a monopoly in the Bielefeld distribution zone which is located in RWE's market area.

On the gas wholesale market the Commission was concerned that the transaction would have given rise to a vertical relationship, resulting in closing off supplies to customers, between the upstream market for gas short-distance wholesale supply and the downstream markets for gas retail sales in RWE's market area.

To resolve these competition concerns, RWE proposed to divest Essent's controlling shareholding of 51% in swb.

The Commission's investigation found the remedy proposed sufficient to remove all identified competition concerns.

More information on the case will be available at:

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