Publications / McDermott Newsletters / Brussels Energy Brief - March 2008

Brussels Energy Brief - March 2008

March 2008

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KEY DEVELOPMENTS

Commission Welcomes E.ON’s Divestment Proposals

Benoît Keane

Germany's largest energy group, E.ON, has agreed to sell off its transmission grid in a compromise deal that is designed to bring an end to its long-running competition case with the European Commission.  E.ON’s proposals to sell its electricity transmission network and 4,800 MW of generation capacity have been welcomed by the Commission.  E.ON’s offer is the first settlement proposal in the Commission’s investigation into the energy sector in the European Union.  The Commission will now carry out a market test to determine whether E.ON’s proposals will address its concerns.  Meanwhile, the Commission’s investigations into other EU national energy markets continue.

 

Infringement Proceedings Against Italy Regarding Service Stations

Patricia Armesto

The European Commission considers that the Italian provisions on the establishment of service stations are contrary to Article 43 of the EC Treaty, which provides for freedom of establishment within the European Union.  The Italian provisions, which are laid down at both national and regional level with regard to the retail distribution of fuel, impose a number of restrictions that make it extremely difficult for new competitors from other EU Member States to enter the Italian market.  Following its reasoned opinion of June 2007, the Commission has decided to move on to the next stage in the infringement proceedings, granting Italy a period of four months before bringing the matter before the European Court of Justice.

 

Four Member States Implicated in Ecodesign Directive Infringement

Jonathan Aitken

The Ecodesign Directive establishes a framework for the setting of ecodesign requirements for products that use energy.  It is one of the pillars of EU strategy on energy efficiency and Member States were required to transpose it into their national law by August 2007.  In September 2007 the Commission sent formal letters to Finland, Greece, Portugal and Luxembourg for failure to inform the Commission of full transposition of the Directive.  In February 2008, as the Member States in question had still failed to transpose the Directive into their national law, the Commission initiated the second stage of the infringement procedure by addressing reasoned opinions to each of them.  The first ecodesign requirements are expected to enter into force next year, making it essential for the necessary provisions to be transposed into national law before then.

 

OMV’s Planned Takeover of MOL Enters Second Phase

Juan Gutiérrez

The European Commission has opened an in-depth investigation into the proposed acquisition of the Hungarian oil and gas company MOL by the Austrian oil and gas group OMV.  The proposed acquisition would bring together two strong, integrated oil and gas companies active in several Central and Eastern European countries.  The Commission will assess the potential effects of the proposed transaction on the markets for refined oil products and natural gas.  In particular, the assessment will review the effects in the refined oil product markets on wholesale and retail competition that will result from placing the refineries of the two companies under the control of one business. 

 

SpainInfringed EU Law by Not Withdrawing Conditions on E.ON-Endesa Deal

Elena Kostadinova

The European Court of Justice (ECJ) has ruled that Spain failed to fulfil its obligations under EU law by not respecting the European Commission’s decision to withdraw a number of conditions on E.ON’s acquisition of Endesa.  In 2006 the Commission approved the acquisition of Spanish energy company Endesa by German company E.ON.  The Spanish Energy Regulator and Ministry for Industry, Tourism and Trade, however, imposed a number of conditions on the deal.  The Commission subsequently issued two decisions requiring that Spain withdraw these conditions and, in 2007, brought an action before the ECJ.  Spain argued that:  (i) the action was devoid of purpose because E.ON abandoned the merger in April 2007; and (ii) these measures were adopted in order to ensure the security of energy supplies.  The ECJ rejected both arguments because:  (i) the Commission’s Reasoned Opinion was published prior to April 2007; and (ii) Spain’s allegations that the Commission’s decisions were unlawful could not be used as a defence in an infringement procedure.

 

GreeceCondemned for Restricting Access to Lignite

Bróna Heenan

The European Commission has adopted a Decision finding that Greece has infringed Article 86 of the EC Treaty in conjunction with Article 82 by maintaining rights that give the State-owned electricity incumbent, Public Power Corporation (PPC), quasi-exclusive access to lignite.  Lignite is abundant in Greece and is the cheapest available fuel for electricity generation.  In Greece, PPC has obtained 91 per cent of current lignite exploitation rights (in terms of volume of deposits).  As a result, its competitors currently cannot compete efficiently with PPC in the Greek market because they are denied access to sufficient quantities of lignite.  The Commission has given Greece eight months to propose and adopt remedies to ensure sufficient access to lignite for PPC’s competitors.  It indicates that, to create a level playing field, at least 40 per cent of exploitable lignite resources should be made available.

 

New EUR 80 Million Fund for Energy Efficiency and Renewables in Developing Countries

Elena Kostadinova

The European Commission has established a Global Energy Efficiency and Renewable Energy Fund as part of its initiative to fight climate change in developing countries and economies in transition.  GEEREF is expected to invest in regional sub-funds in the African, Caribbean and Pacific (ACP) region, North Africa, non-EU Eastern Europe, Latin America and Asia.  It is aimed at supporting investments below EUR 10 million, which are mostly ignored by commercial investors and international finance institutions.  The Commission intends to participate in GEEREF with EUR 80 million for the period 2007 to 2010.  It is expected that the total initial funding from other public and commercial sources would amount to between EUR 150 and 200 million.  According to the Commission, several EU and EEA Member States have shown interest in contributing to GEEREF.

 

MERGER NOTIFICATIONS

End February 2007 – March 2008

STATOIL / CONOCOPHILLIPS (14 March 2008)

GDF / SUEZ / TEESSIDE POWER (17 March 2008)

ELECTRABEL / CNR (26 March 2008)

TOTAL FRANCE / S-OIL / TOTAL ISU OIL (27 March 2008)

 

MEETINGS

April 2008

International Energy Forum (21 – 22 April 2008)

 

McDermott Will & Emery

McDermott Will and Emery