The giants limber up. In the generally constructive context surrounding the preparation of the next meetings on energy (see this section yesterday), manoeuvres by several of the major European actors to take control of their rivals and the idea of “national champions” has somewhat soured the atmosphere and led to some heated and often reductive exchanges. Infringements to European standards have been denounced, which on first impressions, don't exist and, as is always the case when the nationalist card is being played, have led to some unreasonable overexcitement.
In an effort to a priori oppose the announced takeover bid by Enel (Italy) for Suez (France), the French government decided to merge Suez with Gaz de France (which is 80% state controlled), thus making the first merger less likely. European rules allow for the freedom of choice between nationalisation and privatisation and consequently, the decision taken by the French government as a shareholder was legal. The European Commission will only have to examine the operation according to competition rules and free movement of capital. Repercussions, however, are already occurring. The main Belgian electricity producer (Electrabel) belongs to Suez, even if a Brussels newspaper's headline was “Paris nationalises Belgian electricity”. If the Enel takeover of Suez had succeeded, Electrabel would have been controlled by the largest electricity producer in Italy. In parallel, the main German producer (E.ON) is trying to take control of the Spanish company, Endesa, which the Madrid authorities are striving to prevent. The giants in the energy sector are therefore limbering up for the next and total round of liberalisation of the European electricity market by trying to consolidate their positions.
Pass round the “poison pills”. It is usually the takeover mechanism which is used for these operations. The 2004 European directive on the subject (adopted after an aborted attempt to make the draft even more liberal) only dealt with one of the essential aspects at the centre of long and bitter preparatory discussions: the right of a company subject to a hostile takeover to take defensive measures without seeking the explicit authorisation of the shareholders' assembly. Frits Bolkestein (him again!) had already suggested that this preliminary authorisation be essential; the Parliament and Council had already definitively reached a compromise leaving it up to the Member States to decide in their national laws on transposition. The deadline for this transposition is 20 May. Member States are moving increasingly towards strengthening the defence measures these companies have (the “poison pills”) to oppose hostile takeovers, sometimes by making last minute amendments to the draft laws being discussed (Luxembourg, France). I am grossly oversimplifying but the trend is clear: taking into account the scattering of shareholders and the weight assumed by the pensions funds (often American) in owning shares, the authorities in several Member States believe that it is increasingly necessary for national enterprises to be able to defend themselves from hostile takeovers (see this section in bulletins: 9127, 9128 and 9129). What is true in general is still true in a strategic sector like the production and distribution of electricity on which the industrial force of a country depends and which represents an essential part of “universal service” to citizens.
Heated exchanges. This explains some of the current verbal spats, a mixture of threats and demands but which do not mean that any of them are justified. Member States that reacted with the most enthusiasm to oppose current hostile takeovers or those that protested most against others' defensive measures, have in the past often been guilty of what they criticise today. And there's always a different side to things. The new company resulting from the Gaz de France-Suez will only be around 35% controlled by the State and could therefore be considered more as a partial privatisation of Gaz de France than a partial French nationalisation of the Belgian Electrabel company! According to Etienne Davignon, interviewed by “Le Soir”, Electrabel will leave the operation in better shape because the group it is part of will be active in both gas and electricity production. An effective strategy, although in his opinion the merger between Gaz de France and Suez was planned even when there was no planned Enel takeover! Mario Monti (in the editorial of “Corriere della Sera” on 28 February) says that what is essential in the “internal” aspect of the energy issue, is the efficient functioning of the European market, with genuine competition. This will be my subject for tomorrow.
(F.R.)