EDF obtains antitrust approval of British Energy acquisition
22 Dec 2008
Electricite de France SA (EDF), Europe's biggest power producer, won conditional European Union (EU) antitrust approval to buy British Energy Group Plc (BE) for £12.5 billion ($18.7 billion). The European Commission, the 27-nation European Union's regulator in Brussels, announced its endorsement in a statement today. (See: EDF to acquire British Energy for $23.2 billion)
The EU clearance was conditional on EDF's commitment to:
- Divest the power generation plant at Sutton Bridge in Britain (owned by EDF) and at Eggborough (owned by BE)
- Sell certain minimum volumes of electricity in the British wholesale market
- Unconditionally divest a site potentially suitable for building a new nuclear power station located at either Dungeness or Heysham in Britain at the purchaser's choice
- End one of the merged entity's three grid connection agreements with the National Grid at Hinkley Point in Britain.
The commission's removal the threat of a prolonged investigation into the deal on competition grounds, clears the way for the government to accelerate the country's planned nuclear renaissance. Under the revised terms imposed by Brussels, EDF has agreed to sell its own generating plant at Sutton Bridge and BE's only coal-fired plant at Eggborough. It has also committed to selling minimum volumes of electricity in the UK wholesale market.
The French group, which has embarked on an aggressive expansion strategy in the US, Italy and South Africa as well, has also pledged to dispose of a site for building a new nuclear plant at either Dungeness, Kent, or Heysham in Lancashire. The choice of this site will be left to the purchaser, possibly Centrica, owners of British Gas, or one of the two big German utilities, E.ON or RWE. All operate in the UK energy market and are keen to join the nuclear expansion programme.
EDF has also agreed to end one of the merged group's three connection agreements to the grid at Hinkley Point as the commission found that the group's capacity expansion plans rendered this unnecessary - and could have unduly delayed rivals' own generation projects.
"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," the Commission said in a statement.
After the two companies submitted an improved package of remedies to address the Commission's concerns, the EU executive said it felt able to grant conditional approval for the merger. "The Commission concluded that the revised remedy package was sufficient to remove all identified competition concerns," the statement said.
Today's decision is also a substantial boost to EDF's expansion plans, including its takeover of US nuclear operator Constellation after outbidding Warren Buffett. Pierre Gadonneix, chief executive, has indicated that EDF now wants to increase its presence in Italy and South Africa. (See: EDF Group acquires controlling stake in US nuclear giant Constellation Energy)
