EU forces Spain to back down over energy merger

EU competition regulators have given Spain a deadline to remove the conditions imposed on the takeover of energy group Endesa, according to press reports.

Spain’s national energy regulator, the CNE, gave the go-ahead to the takeover by Germany’s Eon group at the end of July but imposed a number of conditions, including the sale of a large share of Endesa’s Spanish business.

Madrid argues that the security of Spain’s energy supply can only be guaranteed if it remains in Spanish hands.

But the European commission disagrees, and has sent a letter to the government of José Luis Zapatero giving it five working days to remove all obstacles to the sale, according to the UK’s Telegraph newspaper.

Zapatero’s centre-left government has opposed foreign takeovers in the Spanish energy sector, arguing  that its actions are justified under EU merger rules allowing national governments to block deals on “security grounds”.

But with energy supplies in several other EU countries – notably the UK – already controlled by foreign groups without any disruption to supply, Spain’s argument is viewed as a front for old-style protectionism by Brussels.

The Brussels regulators have already cleared Eon’s bid for Endesa and are keen to promote similar cross-border deals in a bid to create European ‘champions’ in the energy market.

Madrid has backed a rival bid for Endesa from Barcelona-based Gaz Natural.

The CNE was given new powers to rule on foreign takeovers earlier this year, but Brussels believes that these breach EU rules on the free movement of capital by treating foreign takeovers differently than national ones.

According to the Telegraph, EU competition commissioner Neelie Kroes has been empowered to “do whatever is necessary” to stop Madrid from further delaying the merger.

“The longer this drags on, the worse it is for Eon. This is a big deal and time is of the essence,” an EU official told the paper.

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