ENDESA Press Release Concerning European Commission Decision
November 15 2005 - 2:12PM
Business Wire
The following is a note from ENDESA: ENDESA (NYSE: ELE) requested
that the European Commission comment on its own authority in the
event of the concentration that would arise from the hostile bid by
Gas Natural in the conviction that, under European law governing
concentrations, the requirements of necessary assumptions and right
to determine the community dimension of the operation had been met.
The authorities have acknowledged on a number of occasions the
complex nature of the decision. ENDESA also took this initiative
with the aim, in defence of the interests of its shareholders, of
removing any uncertainty about the regulatory authority that must
review the operation and the conditions under which it could, or
could not, go ahead. This measure was becoming particularly
necessary in this case given that Gas Natural had apparently not
consulted the European Commission about this point previously, as
recommended in the best practice guidelines published by the
European Competition Directorate-General. ENDESA wishes to state
that it has constantly shown a high degree of transparency
throughout this process, as can be witnessed by its willingness to
make available to the participating parties all of the
documentation submitted to the European Commission. This is in
stark contrast to the other procedures in which, claiming
confidentiality, ENDESA has not had access to a large amount of
information submitted by Gas Natural. ENDESA will scrutinise the
decision taken today by the European Commission and consider making
full use of the legal instruments provided by European law. In any
case, after a preliminary analysis of the decision it is surprising
that the Spanish anti-trust authority has made various allegations
throughout the procedure which are in line with Gas Natural's
declarations, of which ENDESA, as an interested party in both the
EU and the Spanish procedure, had not been notified. Likewise, from
a material standpoint, ENDESA's legal counsel is studying the
compatibility of this decision with EU Law. In any event, ENDESA is
firmly convinced that, regardless of the authority that ultimately
has jurisdiction over the matter, the criteria, principles and
rules to be applied in the examination of the operation are clearly
established both in European and national legislation and in the
precedents established by the numerous decisions already adopted
previously in similar cases by the various European and Spanish
anti-trust bodies. In any event, ENDESA considers that the hostile
takeover bid launched by Gas Natural results in a concentration
that seriously threatens competition and that it faces major
obstacles that make it difficult for the anti-trust bodies to
authorise under the proposed conditions. The concentration
operation in itself and the agreement signed with Iberdrola raise
the following questions in terms of competition law: 1.- It removes
ENDESA from the natural gas supply and trading markets, which,
combined with ENDESA's CCGTs give it an 11-12% market share,
similar to (for instance) that of Spain's third largest utility. It
also strengthens the position of the main operator, which boasts
shares above 40% in all the natural gas markets (supply and
trading). 2.- It removes a major competitor in the power generation
and supply markets, with market shares of nearly 5% and major
growth projects and prospects. 3.- In all the electricity and
natural gas markets involved, it removes the most commercially
aggressive competitors (ENDESA in gas and Gas Natural in
electricity) and those with the highest penetration and growth. 4.-
In the wholesale electricity generation market, it creates a major
duopoly between Iberdrola and Gas Natural, spawning a strong mutual
incentive for tacit collusion and abuse of market power. 5.- In the
electricity and gas supply markets, the operation leads to
increased concentration in all segments. Specifically, its would
create regional gas and electricity distribution monopolies
protected by the control of the two networks and advantages in
supply in Spanish regions such as Catalonia, Madrid, Valencia,
Murcia and Andalusia. These account for 60% of Spanish gas demand
and 55% of electricity demand and are larger in size than Belgium,
the Netherlands and Austria combined. For all these reasons, the
operation would represent a serious backward step of more than
three years in the deregulation process of the Spanish energy
market, with negative implications for other European Union
countries and especially in the MIBEL. It will also have major
implications for consumers, with foreseeable rises in energy prices
that could not be offset by the scant synergies generated from the
operation or the commitments made by Gas Natural. Moreover, the
design of operation would dismantle the significant position
already attained by ENDESA in Europe, as well as destroy value, to
the extent that Gas Natural has plans to sell core assets in this
area without being subject to concurrent prices, which would
considerably hurt competition in Italy, Portugal and France and
result in the disappearance of one of the few major operators in
the process to create a single energy market in Europe. * This
document may contain certain forward-looking statements regarding
anticipated financial and operating results and statistics that are
subject to risks and uncertainties as well as to material risks,
changes and other factors which may be difficult to predict,
including, without limitation, those factors described in the
Documento de Registro de Acciones of Endesa filed within the
Comision Nacional del Mercado de Valores and in the Form 20-F of
Endesa filed within the Securities and Exchange Commission, both
for the fiscal year ended December 31, 2004. For all of these
forward-looking statements, we claim the protection of the safe
harbour for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
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