By Chris Jones - 14th July 2006
The European commission was right to refer the proposed merger of Spanish energy firms Endesa and Gas Natural to the Madrid authorities, judges have ruled.
Endesa, which is opposed to Gas Natural’s offer, had asked the commission to investigate whether the deal would breach EU competition rules.
But competition commissioner Neelie Kroes said last November that she could not intervene because the merger had no “community dimension”.
Brussels regulators only have jurisdiction over merger cases where more than one-third of a company’s turnover comes from outside their home country.
The commission said that this was not the case with either Endesa or Gas Natural, and that it was therefore up to the Spanish authorities to investigate the deal.
The Spanish group argued that the commission had incorrectly calculated its turnover by using Spanish rather than international accounting standards, but the court said that international standards only came into force in Spain in 2005 – a year after the relevant accounting period.
Madrid supports the Gas Natural offer for Endesa, arguing that Spanish energy supplies should remain under the control of Spanish companies.
Endesa, however, prefers a higher offer from Germany’s Eon group.
But the impact of the court’s ruling on the future of Endesa is unclear.
Endesa shareholders have already accepted Eon’s bid, but the merger is currently stalled pending an investigation by the Spanish national energy regulator.
A final decision is expected next week, with press reports suggesting that the Spanish regulators will approve the deal, provided certain assets are sold, possibly to Gas Natural.
But the commission is also investigating whether the Spanish government has exerted pressure on the nominally independent regulator to block the Eon deal.
Brussels has already given the go-ahead to the Eon takeover, and is concerned that Madrid’s insistence on creating a national energy champion has breached EU internal market rules.
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