Europe’s Utilities Stay Close To Home

A Wave Of Consolidation Has Swept The Sector, But To The Chagrin Of EU Officials, Players Are Mostly Hunting Targets Within Their National Borders

Score two for economic nationalism, zero for European integration. That’s the clear message from the latest round of activity in Europe’s fast-consolidating energy sector.

On Feb. 27, France announced a $39 billion deal in which Gaz de France, the government-controlled gas company, will acquire Paris-based electricity-and-water utility Suez. The agreement creates a French national champion that will be one of the world’s biggest energy groups — while freezing out Italian utility group Enel, which had been angling to buy Suez or some of its holdings.

In a similar move, the Spanish government is maneuvering to block German energy giant E.on from acquiring Endesa of Spain. In late February, the government pushed through a series of regulatory changes to make Endesa less attractive to E.on, while backing a plan for Spanish group Gas Natural to take over the Spanish power company [see BW Online, 2/21/06, “E.on Bids Big for Endesa”].

BORDER CROSSINGS.

European Union regulators are clearly unhappy with these government-arranged marriages, which undermine efforts by Brussels to knock down national barriers in the energy business. On Feb. 16, EU Competition Commissioner Neelie Kroes issued a scathing report, saying that Europe’s gas and electricity markets were still hobbled by inefficient, anti-competitive practices dating from the days when most of the region’s utilities were public monopolies. For example, some utilities were effectively controlling wholesale electricity prices, while some gas companies were hoarding capacity on natural-gas pipelines, the report found.

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