MorganEnergy

EurActive reports on a major European Union initiative to invest in the African energy sector. The €600 million will go to a variety of projects including renewable generation, power pools and infrastructure projects. A further major announcement is expected soon on the subject of the proposed Trans-Saharan Gas Pipeline. This is intended to bring up to 30 billion cubic metres of Nigerian natural gas across more than 4,300km of desert to EU markets via Algeria. It would also, of course, significantly reduce Europe’s dependence on Russia for gas supplies.

The primary source of all these handouts is something called the European Development Fund, which is of course abbreviated to EDF. Any resemblance to a French energy company is entirely coincidental, if somewhat amusing.

Last month we reported on a possible compromise deal in EU market liberalization whereby transmission owners (in particular large “national champions”) would not be required to sell off capacity to promote competition, but instead would simply cede operational control of their networks to independent Transmission System Operator. That plan now appears to have foundered on the rock of the European Parliament which has voted, by a majority of 449 to 204, to insist on actual ownership unbundling of the networks. EurActive has more details.

The French financial regulator, AMF, has approved a merger between Gaz de France and Suez. The merger is now free to go ahead provided that it receives shareholder approval at a meeting on July 22nd. According to a Platts report, the new company, to be called GdF Suez, will be the world’s fourth largest energy utility by market capitalization, behind only Gazprom (Russia), EdF (France) and E.ON (Germany). The company will control 25% of Europe’s LNG market. It is not clear what effect the merger will have on the European Commission’s ongoing anti trust investigation into GdF.

The European Commission has begun formal proceedings against E.ON and Gaz de France, alleging that the two companies colluded to restrict competition in each other’s national gas markets. An anti-trust investigation has been ongoing for some time, but this new development means that actual charges of wrongdoing have been filed against the two companies who must now defend themselves or risk being subject to substantial fines. Further details from Platts and the BBC.

Further to our discussion of EU market liberalization, RWE has announced that it will follow E.ON’s example and look to sell off its gas transportation network in order to settle the anti-trust case being brought against it.

Energy market liberalization in the EU has been a difficult process and is likely to remain so. While some countries, notably the UK, have gone full steam ahead into creating fully competitive markets within their own borders, other countries, in particular France and Germany, have concentrated on developing “national champions” that will be able to compete in the expected Europe-wide energy marketplace. It is no accident that most of the UK’s energy companies are now owned by large European firms.

But before that European marketplace can properly develop, the stranglehold of the national champions on their home territories has to be broken. Naturally, those companies see no reason to give up their privileged position, and have been happily cooperating with each other to divide up Europe between them. This has led the European Commission to open anti-trust proceedings – see for example this Forbes report on investigations into the behavior of E.ON, Gaz de France (GdF) and RWE in Europe’s gas markets.
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