EDF takeover of British Energy cleared

David Gow in Brussels
guardian.co.uk, Monday 22 December 2008 11.05 GMT

The European commission today cleared the £12.5bn takeover of Britain's main nuclear power operator British Energy by French state-owned group EDF.
The commission said the deal could go ahead after EDF agreed to sell two power stations and make a site available to a competitor to build one of the UK's planned new third-generation atomic power stations.
Its decision, removing any threat of a prolonged investigation into the deal on competition grounds, clears the way for the government to accelerate the country's planned nuclear renaissance.
Under the revised terms imposed by Brussels, EDF has agreed to sell its own generating plant at Sutton Bridge and BE's only coal-fired plant at Eggborough. It has also committed to selling minimum volumes of electricity in the UK wholesale market.
The French group, which has embarked on an aggressive expansion strategy in the US, Italy and South Africa as well, has also pledged to dispose of a site for building a new nuclear plant at either Dungeness, Kent, or Heysham in Lancashire.
The choice of this site will be left to the purchaser, possibly Centrica, owners of British Gas, or one of the two big German utilities, E.ON or RWE. All operate in the UK energy market and are keen to join the nuclear expansion programme.
EDF has also agreed to end one of the merged group's three connection agreements to the grid at Hinkley Point as the commission found that the group's capacity expansion plans rendered this unnecessary – and could have unduly delayed rivals' own generation projects.
Overall, the commission said that the merger, as initially notified, would have raised serious competition concerns even though the merged group would not have had extremely high market shares in generation, distribution and supply.
It cautioned that the combination of the two companies' activities could have made it easier for the group to withdraw power supplies in order to increase prices. The merged group could have used power internally rather than have sold it to the overall market, thereby reducing liquidity.
With a limited number of sites available for new nuclear power plants, most of them owned by BE, the group would have enjoyed a "high concentration" of ownership of suitable sites.
Today's decision is also a substantial boost to EDF's expansion plans, including its takeover of US nuclear operator Constellation after outbidding Warren Buffett. Pierre Gadonneix, chief executive, has indicated that EDF now wants to increase its presence in Italy and South Africa.
The French company, of which the state owns almost 80%, is building the first new-generation nuclear plant, the EPR, at Flamanville on the Normandy coast and was chosen by the government as the preferred bidder for its 35% stake in BE because of this expertise. It owns 58 nuclear plants in France.