By Chris Jones - 14th November 2006
EU competition officials have cleared the merger of energy giants Suez and Gaz de France after the two companies agreed to sell a variety of Belgian assets.
The deal, which was supported by the French government in a bid to fend off a takeover bid for Suez from Italy’s Enel, was initially blocked by the European commission amid fears that it would distort competition.
The commission was particularly concerned about the two companies’ combined strength in the gas and electricity wholesale and retail markets in Belgium and in the gas market in France.
The two companies were previously competitors in both countries.
Under pressure from Brussels, the two firms agreed to a number of conditions, including the sale of Distrigaz, Belgium’s biggest energy group which is owned by Suez, and the disposal of GdF’s stake in SPE, the country’s second largest energy group.
The Distrigaz business must be sold to a company with experience in EU energy markets in order to create a third viable player in the Belgian market, a key demand of the Belgian national authorities. Distrigaz is also a competitor of GdF in the French market.
The two firms have also pledged to step up investments in electricity and gas infrastructure in both Belgium and France.
Competition commissioner Neelie Kroes said that the concessions made by Suez and GdF would “ensure effective competition in the Belgian and French energy markets”.
Meanwhile energy commissioner Andris Piebalgs said that the deal was a prime example of how “the European energy market is starting to become a reality”.
But the merger still faces opposition at home, with French GdF workers complaining about the “back-door privatisation” of the state-controlled firm.
And EU approval for the deal has done little to support the commission’s claims that it will do all it can to promote a pan-European energy market.
Both Kroes and Piebalgs have pledged to take action against governments that fail to liberalise their national energy markets, but Paris made little secret of its intention to keep national energy supplies in French hands through promoting the merger.
In contrast, Spanish attempts to block the takeover of leading energy group Endesa by Germany’s Eon – for the same security of supply reasons – were quashed by the commission on the grounds that the conditions imposed on the deal were disproportionate.
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