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EU regulators give their blessing to Suez-GDF merger
By Leigh Thomas
AFP
BRUSSELS
Petroleumworld.com 15 11 06
EU regulators gave their blessing Tuesday to the merger of Suez and Gaz de France, clearing the way for a marriage that has been threatened by union anger, political opposition and jealous foreign suitors.
However the two French energy groups will pay a high price for the European Commission's backing, with promises to sell prime assets in Belgium and France to avoid crushing competitors with dominant market power.
EU Competition Commissioner Neelie Kroes said: "The Commission has insisted on far-reaching remedies in this case so as to ensure effective competition in the Belgian and French energy markets.
"Our intervention in this case is part of our action to ensure that there is effective competition in the newly-liberalised energy markets to the benefit of consumers and business," she added.
The EU antitrust watchdog initially found in an in-depth probe that the deal would harm competition in Belgium and France and called on the two companies to offer "remedies" to fix the situation.
In response, Suez promised to sell its Belgian gas business Distrigaz, including its French activities, and give up control of its Belgian gas network operator Fluxys.
Meanwhile, GDF is to sell its interest in SPE, the second-biggest Belgian electricity and gas group.
Other lesser commitments were also made to clinch the commission's backing for the deal.
From the start the takeover was fraught with problems, especially because it was widely seen as being orchestrated by the French government to keep Italian energy group Enel from buying Suez.
The French government announced plans to merge state-controlled GDF with Suez in February, sparking a hail of criticism from Italy because Enel had recently expressed interest in Suez.
While Rome was in revolt at the perceived French protectionism, the deal also raised eyebrows in Brussels, which has complained in the past that the EU energy market is too concentrated in the hands of a few national giants and had previously called for more cross-border mergers.
But even in France, the government has struggled to sell the merger because it requires reducing the state's stake in GDF, a deeply unpopular move with unions and the opposition.
However, last week the French parliament gave its definitive backing to energy sector reform that included provisions for the privatization of Gaz de France.
The European Commission has for years led a campaign to end national energy monopolies in Europe that it says hold back tougher cross-border competition needed to fuel stronger economic growth.
In theory, companies have been free to choose their energy suppliers since July 1, 2004 and the market for the business of private households is to be open from July 1 2007.
The looming deadline for the full liberalisation of EU gas and power markets has sparked a merger boom in the industry, led by Suez and GDF, as companies try to grab market share through takeovers before competition grows fiercer.
EU Energy Commissioner Andris Piebalgs said: "This merger proves that the European energy market is starting to become a reality.
"Nevertheless to make it work in an open and effective way, we still need to take concrete action, in both the competition and regulatory areas," he added.
"The Commission will announce early next year a package of concrete measures to address the existing shortcomings, for the benefit of industry and consumers."
AFP 14 1528 GMT 11 06
Copyright© 2006 AFP. All Rights Reserved.
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