Spain Told To Remove Conditions On Takeover Of Endesa

Clearly angered by obstacles that Madrid has put in the path of the proposed takeover, the Commission insisted that Brussels alone can decide whether a merger with a European dimension can go ahead.

In her strongest words yet in the case, Neelie Kroes, the EU Competition Commissioner, said: “I regret that the Commission has once again been obliged to intervene to avoid that a member state places unjustified conditions on a major European takeover.

“No one should doubt the Commission’s commitment to ensuring Europe’s businesses can operate on a level playing field to the benefit of Europe’s consumers, businesses and the economy as a whole.”

The Commission has acted against the last remaining conditions attached to the deal even though E.ON has already accepted them. In the face of concerted opposition from the Commission, Spain has already backed down on the most onerous demands, which would have forced E.ON to sell a third of Endesa’s generating capacity The latest warning from the Commission represents the second time in three months that it has challenged Spain’s conditions. It now objects to the requirement that Endesa maintain its brand for five years and that companies owning electricity assets outside mainland Spain be kept within the Endesa group for the same length of time. It also criticised the Spanish Government’s attempts to ensure that the merged company continue to use Spanish coal.

Spain has been given until January 19 to remove the conditions or face legal proceedings.

The Spanish Government had no immediate comment yesterday on the Commission’s latest threat. However, Spain’s Industry Minister, Joan Clos, said recently that the Government would not accept “a different treatment from other countries”.

Spain had also included what it calls a “Ruhrgas clause”, under which E.ON would have to get regulatory approval to sell Endesa’s assets during the next ten years. The German Government imposed the same condition on E.ON when it bought Ruhrgas in 2002, and the Spanish Government has used the example to argue that the EU energy market is not a level playing field.

The EU recently agreed to re-examine the German Government’s “Ruhrgas clause” and is expected to overturn it — four years after the event.

A Spanish company has also recently been on the other end of similar protectionist tactics by the Italian Government. The planned merger between Abertis, the Spanish roadbuilder, and Italy’s Autostrade highways group was abandoned last week after concerted opposition from Rome. The European Commission also acted in the case, but too late to save the deal.

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