|COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels , 12/11/2009

In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description. SG-Greffe(2009) D/8838 C(2009)9059

PUBLIC VERSION

MERGER PROCEDURE ARTICLE 6(2) DECISION

To the notifying party:

Dear Sir/Madam,

Subject: Case No COMP/M.5549 – EDF/ Segebel Notification of 23 September 2009 pursuant to Article 4 of Council Regulation No 139/2004 [1]

1. On 23 September 2009, the Commission received a notification of a proposed concentration within the meaning of Article 4 of the Council Regulation 139/2004 (the "EC Merger Regulation") whereby Electricité de France S.A. ("EDF", France) will acquire exclusive control of Segebel, a holding company of which its only asset is a 51% stake in SPE S.A. (the "proposed transaction"). SPE is the second biggest electricity operator in Belgium, after the incumbent operator GDF Suez (Electrabel). It is present in the market with its brand Luminus.

I. THE PARTIES

2. EDF and its subsidiaries are active in the generation and wholesale trading of electricity and in the transmission, distribution and retail supply of electricity, as well as in the provision of other electricity-related services, in France and other countries. EDF is also active, to a lesser extent, in the natural gas retail and wholesale markets.

3. Segebel is a holding company whose only asset is a 51% equity interest in SPE S.A. ("SPE"). SPE is a Belgian company active in the production of electricity and in the trading and supply of electricity and gas in Belgium. SPE produces electricity through a portfolio of power plants in Flanders and Wallonia, composed of thermal facilities and renewable energy facilities such as hydro and wind. SPE also holds drawing rights in nuclear power plants in Belgium. SPE is currently controlled exclusively by Centrica [2] .

II. THE OPERATION

4. The proposed transaction concerns the acquisition of Centrica's 100% shareholding in Segebel, following which EDF will enjoy the same rights and obligations, which Centrica currently has in Segebel. […].

5. The proposed transaction will thus result in EDF acquiring sole control over SPE. It therefore qualifies as a concentration within the meaning of Article 3(2) of the Merger Regulation.

III. COMMUNITY DIMENSION

6. The proposed transaction has a Community dimension pursuant to Article 1(2) of the EC Merger Regulation. The parties to the concentration had a combined aggregate worldwide turnover in excess of EUR 5 billion in 2008 and each of the undertakings concerned had a Community-wide turnover in excess of EUR 250 million in 2008. The parties to the concentration do not achieve more than two thirds of their respective Community-wide turnover in one and the same Member State.

IV. PROCEDURE

7. On 23 September 2009 the proposed transaction was notified by EDF to the European Commission under Article 4 of the Merger Regulation for a decision under Article 6 of the EC Merger Regulation.

8. On 14 October 2009, pursuant to Article 9(2)(a) of the EC Merger Regulation, the Belgian National Competition Authority ("Belgian NCA") submitted a request to partially refer the proposed transaction from the Commission in accordance with the provisions of Article 9(3)(b) of the EC Merger Regulation to the Belgian NCA with a view to assessing the proposed transaction under Belgian competition law as far as the Belgian electricity markets are concerned (the "Referral Request").

9. On the same day of adoption of the present decision, the Commission has decided not to partially refer the proposed transaction to the Belgian NCA, in application of Article 9(3)(a) of the EC Merger Regulation.

V. COMPETITIVE ASSESSMENT

A. Relevant markets

10. The proposed transaction creates overlaps between the parties' to the concentration activities in energy markets (electricity and gas) in France, Belgium and the Netherlands.

11. EDF, for the purposes of the proposed transaction is active on the following markets in France, Belgium and the Netherlands:

· Belgium : electricity and gas wholesale markets (generation/wholesale supply of electricity, electricity and gas trading), electricity and gas supply markets (except to household customers);

· France : electricity and gas wholesale markets (generation/wholesale supply of electricity, electricity and gas trading), transmission and distribution of electricity, electricity and gas supply markets and the market for ancillary services and balancing power;

· The Netherlands: electricity and gas trading markets.

12. SPE is active on the following markets in Belgium, France, and the Netherlands:

· Belgium : electricity and gas wholesale markets (generation and wholesale supply of electricity, electricity and gas trading), electricity balancing power and ancillary services, electricity and gas supply markets;

· France : electricity and gas wholesale markets (generation and wholesale supply of electricity and electricity and gas trading);

· The Netherlands: electricity trading.

13. In respect of electricity markets, only the relevant Belgian electricity markets are fully analyzed for the purposes of the competitive analysis of the proposed transaction. As regards the electricity markets in France, although EDF is the dominant player and SPE was present until recently on the French wholesale and generation market, these markets are only briefly analyzed given that at present SPE has no generation capacity in France. The same applies for electricity trading given that SPE's activities are very limited. In the Dutch electricity markets, there is only a very limited overlap of the parties to the proposed transaction on the physical electricity trading, considering the very limited addition of market share in view of SPE's activities (less than [0-5]%).

14. Regarding gas markets, both parties have overlapping activities in the Belgian gas markets. In that respect certain of these overlaps create horizontally affected markets in Belgium. However, in the gas markets in France, the combined market share of the parties to the proposed transaction is below [10-20]% (gas trading) or there are no overlaps (gas supply). In the Dutch gas markets the market share of EDF is around [0-5]% of all traded volumes and SPE is not active in that market.

B. Electricity generation and wholesale and trading market(s) in Belgium

1. Product market definition

15. In previous decisions concerning Belgian electricity markets [3] , the Commission distinguished a wholesale electricity market as comprising electricity generation and electricity imported to be sold on to retailers. It also distinguished an electricity trading market, where electricity is bought and sold, not necessarily with a view to being supplied to a final customer. It was left open whether within the trading market separate markets for the trading of physical and financial products existed.

16. EDF argues that it should be left open whether electricity trading, on the one hand, and wholesale (generation and imports), on the other hand, constitute separate markets or not [4] . The Commission, in a more recent case concerning the British electricity markets, considered the wholesale market as comprising electricity generation and imports as well as trading [5] .

17. Within the course of the Commission's market investigation of the proposed transaction, it has been investigated whether the activity of trading electricity contracts, either over the counter ("OTC") trading or trading on organised markets such as Belpex [6] , should be considered as taking place on a separate market. The prevailing opinion [7] was that also in Belgium the conditions of competition are homogeneous enough so that electricity trading does not have to be distinguished from other wholesale activities, like generation and imports.

18. The market test also inquired as to whether other potential distinctions within a wholesale market would be pertinent, namely: (i) a distinction on the basis of the different sources of electrical energy (such as nuclear power stations, gas-fired power stations, coal-fired power stations, hydroelectric or wind farms) and (ii) distinctions, within the activity of trading electricity, for example (a) based on trading channels (non-standard, non-brokered (or "structured contracts"), OTC brokered, and products traded on organised market, like Belpex); or (b) between products for physical delivery, on the one hand, and so-called financial contracts (that concern electricity but in which contract settlement takes place financially), on the other hand.

19. It appears from the market investigation that a significant interaction exists between OTC traded electricity products and electricity products traded on organised markets [8] . Similarly, sufficient interaction exits between financial and physical products as the former use the latter as underlying products.

20. For these reasons, and on the basis of the results of the market investigation more generally [9] , it is considered that the market investigation did not provide grounds that a further market segmentation would need to be considered.

21. On the basis of the above, the Commission concludes that, for the purposes of the present decision, the wholesale market is comprised of electricity generation, imports and trading on organised markets or OTC for both physically and financially settled products.

2. Geographic market definition

22. In accordance with previous Commission decisions, the parties to the concentration consider the wholesale market to be national in scope [10] . This line was also followed in the most recent case concerning Belgian electricity markets [11] . It is recalled that in the Gaz de France / Suez Decision [12] , it was held that there exists a national geographical scope of the market given the limited interconnection capacity and the risks assumed when taking longer term commitments based on imported electricity (a risk that affects entrants asymmetrically) in particular when liquidity of traded electricity products is low [13] .

23. Belgium is interconnected with France and the Netherlands [14] . Interconnections capacity available for commercial usage has not significantly increased since the Gaz de France / Suez Decision [15] . Projects that could significantly increase this capacity in the near future do not appear to be envisaged either [16] . The (annual and monthly) capacity that a single operator can acquire is capped both on the French-Belgian as well as the Belgian-Dutch borders [17]

24. In order to assess the geographical scope of the generation and wholesale market, the effects of market coupling and the pertinent facts as regards liquidity in traded electricity products will be described in turn.

a) Effects of market coupling

25. Over the course of the market investigation, several respondents argued for a geographical scope of the market being larger than Belgium and, at least, comprising France, Belgium, the Netherlands and Luxembourg (to the extent connected to the Belgian transmission grid) or even wider [18] . The arguments put forward by these market participants relate primarily to the introduction of so-called "market coupling" between these Member States. It is useful to add that the currently existing market coupling arrangement between France, Belgium, the Netherlands and Luxembourg is expected to be extended to Germany (and the Luxembourgish grid connected to Germany) during 2010 [19] .

26. The implementation of market coupling was envisaged at the time of the Gaz de France / Suez Decision [20] . The Commission concluded at that time that market coupling did not change the geographic scope of this market which remained national in scope. This was for two reasons: (i) in cases concerning electricity markets where systems similar to market coupling were already in existence at the time (Nordpool [21] ), the Commission had decided upon national markets, even in cases where interconnection capacity was significantly greater in Belgium than at the time of the GDF/Suez decision (and still now) existed in Belgium; and (ii) market coupling leaves unaffected the physical constraints on the transmission networks and, hence, the level of congestion. It appears however pertinent, now that market coupling is put in place, to reassess this situation.

27. Market coupling concerns essentially the day-ahead allocation of interconnection capacity. Interconnection capacity for longer periods (generally up to one year) is allocated by an (explicit) auction [22] . Subsequently, the successful bidder of interconnection capacity may (or may not [23] ) use the capacity to import or export electricity. In market coupling, market participants submit bids for the purchase and/or sale of electricity for injection or delivery the next day to the power exchange in the "coupled" markets which then, on the basis of aggregated demand and supply curves, clear the markets under the constraint of the available interconnection capacity.

28. If interconnection capacity is not constrained, the volumes of imports and exports can be set at levels that, in each coupled market, allow prices to equalise. If interconnection capacity is constrained, prices will be set at a level that the resulting adjustments in the volumes demanded and supplied on a given exchange (and hence volumes that need to be imported or exported to make demand and supply meet on that exchange) will equal the available interconnection capacity for imports or exports. Interconnection capacity is thus not made available to specific market participants but sold implicitly (hereinafter "implicit auction") together with the electricity supplied to or off-taken by the successful bidders on the power exchange.

29. Market coupling increases the efficiency of interconnection usage [24] as import and export decisions are no longer taken on the basis of decentralised (and therefore not necessarily consistent) predictions of price levels in the interconnected countries the next day but by a central agency that decides on the usage of interconnection capacity on the basis of known plans of all market participants and known price levels.

30. Whether ultimately related to the introduction of market coupling or not, the fact remains that since its introduction the three coupled areas (Belgium, France and the Netherlands) had identical prices about 69% of all hours during 2008 (i.e. there was no congestion between any of these three areas). Belgium had identical prices with France for 15.4% of all hours (but not the Netherlands, i.e. there was congestion on Belgium's North border) during 2008 and 14.7% of all hours during 2008 prices between Belgium and the Netherlands were identical (but not with France i.e. there was congestion on Belgian's South border). Only in less then 0.8% of all hours during 2008 did Belgium have different prices compared with both France and the Netherlands (congestion occurred on both of Belgium's borders) [25] .

31. Whereas this mechanism without doubt improves the efficiency with which interconnection capacity is used and the accuracy by which imports and exports react to price signals, it directly deals only with the trading of electricity for delivery the next day. Other electricity products, such as products with longer maturity, represent the more than two thirds of electricity exchanged in Belgium [26] and are not subject to such coupling mechanisms. Moreover market coupling does not change the available interconnection capacity.

b) Liquidity of traded electricity wholesale market products

32. In the Gaz de France / Suez Decision [27] , it has been established in detail that the Belgian traded market is illiquid, in particular with regard to products other than base-load (such as peak and off-peak products) and products with delivery further in the future [28] .

33. EDF confirmed in the Form CO that Belgian wholesale markets have remained illiquid and that the sole liquid product is the 5 MW base-load calendar product (i.e. the right to be supplied on the Belgium transmission network with the 5 MW of electricity power during all the hours of the next calendar year). Even if market liquidity for day-ahead products may have developed positively in recent years, the fact that liquidity remains low for virtually all other products was clearly confirmed in the market test.

34. When accumulating volumes traded on Global Vision (a trading application allowing the bringing together "futures" on ENDEX [29] and the offers of various broker services for "forwards" [30] ) and on Belpex, it appears that total traded volumes amounted to about 36.8 TWh in 2008. However, 72% of all trades are concentrated on either the year-ahead calendar year or Belpex (i.e. day-ahead). Even though Belpex allows the buying and selling an hourly profile, futures and forward contracts other than base-load ones are (virtually) not traded [31] .

35. In contrast, the liquidity of traded electricity products in electricity markets adjoining or nearing Belgium, in particular France, the Netherlands (with which it is directly interconnected) but also Germany, even if maybe not always optimal, is clearly better in particular also in trade of electricity products other than base-load year-ahead products [32] .

36. The fact that electricity wholesale markets in Belgium, on the one hand, and those of surrounding countries, on the other, show very different patterns of liquidity of wholesale market products, demonstrates that these electricity wholesale markets are insufficiently homogeneous and do not allow for the substitution of traded products available in adjoining electricity markets. The absence or limited availability of, for instance, peak-load products and products with longer time horizons within Belgium constitutes therefore a strong indication that the Belgian wholesale electricity market, despite the improved liquidity on the day-ahead market, is not integrated to a large extent with neighbouring electricity generation and wholesale markets. In other words, by merely focussing on market coupling and the benefits this may have brought to liquidity and market integration for day-ahead contracts, it cannot be concluded that the Belgian electricity wholesale market at large is fully integrated and constitutes merely a part of a larger geographical market.

37. Moreover, the relative illiquid state of trading in Belgian electricity products constitutes, as established in previous decisions of the Commission [33] , a significant barrier to entry in the market for generation and the wholesale market, further reinforcing the view that these markets are national in scope.

38. Consequently, the geographical scope of the Belgian electricity wholesale market, including electricity trading, is considered to be national in scope.

3. Competitive assessment

39. Before proceeding with the substance of the competitive assessment, it is necessary to put in perspective the existing and future generation capacities of the market players on the Belgian electricity market including the capacities of the parties to the proposed transaction and those of their competitors.

40. The below information on current and future generation capacity and construction projects derives from the Form CO (often figures from or estimates using public sources) and the responses to the market investigation undertaken by the Commission.

a) The parties to the proposed transaction

(1) EDF

(a) Current generation portfolio

41. EDF's sole generation assets located in Belgium concern co-ownership with GDF Suez (Electrabel), which also acts as operator, of the Tihange-1 nuclear power plant. EDF is entitled to 50% of the output of this reactor. EDF's share is […] 419 MW [34] and the maximal nominal capacity to which EDF is entitled equals to [450-550] MW [35] .

42. Prior to the proposed transaction, EDF sold 419 MW, its entire […] supply from its rights on the Tihange-1 nuclear power plant, to […] under a long term contract expiring in 2015 [36] . [Information on the Tihange agreement] [37] .

(b) Projects being developed

43. Prior to the proposed transaction, EDF initiated the development of two sites for the purpose of constructing Combined Cycle Gas Turbine generation units ("CCGTs"):

· One site located in Dilsen-Stokkem, developed by [CCGT1 Company] (100% EDF owned company, minus one share), foreseen with two CCGT units of each [400-500] MW capacity ("[CCGT 1] project"); and

· One site located at [Western Part of Flanders], developed by [CCGT2 Company] (100% EDF owned company, minus one share), also foreseen for two CCGT units of each [400-500] MW ("[CCGT 2] project").

44. The final investment decision on these projects has not yet been taken [38] . The total capacity being considered that could be built amounts to [1,800 – 1,900] MW. Current schedules foresee operation to start at the end of [2010-2020] or at the beginning of [2010-2020] should the projects be pursued.

45. EDF has in the past years tried to develop other projects within Belgium with the objective of obtaining access to generation capacity [39] . Notably, EDF has tried to:

· Acquire a stake in SPE in 2003. The stake was ultimately acquired by GDF, now GDF Suez (Electrabel);

· Develop a coal fired plant of 900 MW in the Ghent region. This project was abandoned, primarily for environmental reasons;

· Develop a CCGT project jointly with Arcelor Mittal (Sidmar), which is now being developed by GDF Suez (Electrabel);

· Develop a CCGT project jointly with Duferco (Marcinelle-Marchienne), which is now being developed by ENEL;

· Develop a CCGT project jointly with T-Power (Tessenderloo), which is now being developed by Essent.

46. Moreover, […].

47. Thus, whereas a number of these projects were or are currently being considered by EDF, this has not (so far) provided EDF with additional generation capacity located within Belgium. They do however bear witness to the fact that EDF has persistently tried to enter the Belgian generation market.

(2) SPE

(a) Current generation portfolio

48. SPE currently has access to a combined capacity (including the capacity available under its effective Pax Electrica II agreements with GDF Suez (Electrabel)) of [1,800 – 2,200] MW [40] . […].

(b) Projects being developed

49. SPE is currently developing three projects.

· The Angleur project concerns the building of a peak unit of 126 MW [41] . For this project, the final investment decision has already been taken [42] . It is expected to become operational before the end of 2011;

· A very similar project is currently built in Ham (126 MW) and expected to become operational during 2009. The investment decision has already been taken;

· The Navagne project is currently virtually [43] fully permitted and the preparations to start building the site have already started. The Navagne project concerns the building of an 850 MW CCGT unit. The final investment decision has however not yet been taken [44] .

50. SPE also has various wind generation projects under development. Even though these are projects whose realisation is difficult to predict with precision, the parties to the concentration estimate that, by 2011, [10-50] MW will be developed and an additional [50-100] MW by 2015 [45] .

b) Competitors of EDF and SPE

51. Currently, the main competitors of EDF and SPE in Belgium are: GDF Suez (Electrabel), RWE (Essent), Vattenfalll (Nuon). Other relevant companies are ENEL and E.ON.

(1) GDF Suez (Electrabel)

52. GDF Suez (Electrabel) is the historical operator in the Belgian electricity markets. It owns and operates the largest (13,500 MW) and most varied portfolio of generation assets.

(2) RWE (Essent)

53. Prior to the acquisition of Essent [46] , RWE was mainly present in Belgium through its participation in a gas fired power plant at Zandvliet (214 MW), as a joint venture with GDF Suez (Electrabel). This was intended mainly to supply a single industrial customer, BASF [47] . Prior to the merger, Essent built a 149 MW (Inesco) generation unit. Consequently, RWE (Essent) can dispose a total of 363 MW gas fired CCGT capacity within the Belgian balancing zone [48] .

54. Essent intends to increase its presence in Belgium by constructing a new CCGT unit in Genk-Zuid [49] . The status of this project is unknown but, in any event, it is not to become operational before 2012 [50] .

(3) E.ON

55. At present, E.ON has a marginal presence in the Belgian electricity markets. However, it will soon have at its disposal the capacity it recently acquired from GDF Suez (Electrabel) generation assets in a transaction approved by the Commission [51] .

56. The assets that are acquired by E.ON concern (in Belgium) the hard coal power plant Langerloo (556 MW capacity) and the gas power plant Vilvoorde (385 MW capacity) and drawing rights for a capacity on Doel-1, and Doel-2 and Tihange-1 of, in total, 500 MW for delivery in Belgium [52] . All these power plants are situated in Belgium. Consequently, E.ON has acquired in total 1,441 MW [53] of generation capacity in Belgium.

(4) Vattenfall (Nuon)

57. Vattenfall is present in the Belgian electricity markets via its recent acquisition of Nuon [54] . According to the notifying party [55] , Nuon is planning to invest in a new generation plant in Seneffe/Manage (450 MW). The status of this project is unknown but, in any event, it is not to come on line before 2012 [56] .

(5) ENEL

58. ENEL is not yet present in the Belgian electricity markets. However, it is currently developing a 420 MW CCGT at Marcinelle. This plant is expected to become operational in 2011 [57] . […] [58] ..

c) Current and future shares in generation capacity and electricity production/imports in Belgium

59. On the basis of the above information, and the Form CO, Table 1 shows current (2008) shares in generation capacity by the parties to the proposed transaction and their competitors. Table 1 does not take into account the fact that the capacity owned by EDF on the Tihange-1 reactor is contracted until 2015 to […].

Table 1. Belgium 2008 Electricity Generation Capacity (MW)

Company |MW |% share |

EDF Group |[0-825] |[0-5]% |

SPE |[1,650-3,300] |[10-20]% |

Combined |[1,650-3,300] |[10-20]% |

GDF Suez (Electrabel) |[13,200-14,850] |[80-90]% |

RWE/Essent |[0-825] |[0-5]% |

Others |[0-825] |[0-5]% |

TOTAL |16,501 |100 % |

Source: EDF estimates on the basis of information published by the CREG and Febeg (table 26 Form CO)

60. Table 2 shows parties' share in the generation and import of electricity in Belgium for 2008, taking account of the fact that generation capacity, depending on its place in the merit order may result in different volumes of produced electricity and parties' share in (net) imports of electricity into Belgium [59] .

Table 2. Belgium 2008 Net Electricity Generation/Import

|TWh |% |

Net Electricity Production in Belgium |77.5 |88.07% |

EDF Group |[0-4] |[0-5]% |

SPE |[4-9] |[5-10]% |

Combined |[9-17] |[10-20]% |

GDF Suez (Electrabel) |[62-70] |[70-80]% |

Others (RWE, decentralized production) |[0-4] |[0-5]% |

Net imports |10.5 |11.93% |

EDF Group |[0-4] |[0-5]% |

SPE |[-4-0] |[-5-0]% |

Combined |[-4-0] |[-5-0]% |

Total production and net imports |88 |100% |

EDF Group |[0-4] |[0-5]% |

SPE |[4-9] |[5-10]% |

Combined |[9-17] |[10-20]% |

Source: Form CO table 23 EDF estimates on the basis of information published by the CREG

61. On the basis of the above and the Form CO, Table 3 shows the future share of the parties to the transaction in terms of generation capacity [60] .

Table 3. Current and Projected generation capacity in Belgium (assuming all projects will be realised)

|2008 |2009 |2011 |2014 |

|MW |% |MW |% |MW |% |MW |% |

EDF |[0-825] |[0-5]% |[0-840] |[0-5]% |[0-925] |[0-5]% |[2125-4,255] |[10-20]% |

SPE |[1,650-3,300] |[10-20]% |[1,680-3,360] |[10-20],% |[1850-3,700] |[10-20]% |[2,125-4,255] |[10-20]% |

Combined |[1,650-3,300] |[10-20]% |[1,680-3,360] |[10-20]% |[1850-3,700] |[10-20]% |[4,255-6,380] |[20-30]% |

E.ON |0 |0,0% |0 |0,0% |[925-1,850] |[5-10]% |[1,060-2,125] |[5-10]% |

GDF Suez (Electrabel) |[13,200-14,850] |[80-90],% |[13,435-15,115] |[80-90]% |[11,105-12,955] |[60-70],% |[12,755-14,880] |[60-70]% |

Other |[825-1,650] |[5-10]% |[840-1680] |[5-10]% |[925-1,850] |[5-10]% |[1,060-2,125] |[5-10]% |

Total |16501 |100,0% |16793 |100,0% |18508 |100,0% |21258 |100,0% |

Source: Form CO figures 2, 20, 24, 25,26 as well as current capacity and future projects of third parties mentioned above.

d) Overlap between the parties to the proposed transaction

62. In view of the fact that the current generation capacity at the disposal of EDF within Belgium is contracted until 2015 (i.e. for the foreseeable future) to […], there is no real significant overlap of the parties to the proposed transaction in the Belgian generation and wholesale market when only current generation capacity is considered.

63. However, the parties have various projects for the future development of generation capacity. The main overlapping activities that must form part of a competitive analysis are the various projects for the development of new generation capacity. This is particularly true to the extent that these may constitute projects that are similar in nature i.e. the three projects of the parties to the proposed transaction to develop CCGT generation capacity relating to the [CCGT 1], [CCGT 2] and Navagne projects.

e) Assessment of EDF's position as an entrant in the absence of the proposed transaction

64. Based on the above, it can therefore be deduced that:

· Prior to the proposed transaction, EDF had a very modest foothold in the Belgian electricity wholesale market (see recitals 59 and 60) but it has persistently tried to increase its access to generation capacity in various projects (see recitals 45, 46 and 47);

· EDF is developing two projects (see recitals 43) which, if realised, would create an important extension of its position in the Belgian electricity wholesale market (see recital 61) with a generation capacity of [2450-2550] MW, that is [10-20]% of the capacity expected to be on line by [2010-2020];

· When projects of other market participants are considered (see recitals 51 to 58), the realisation of these projects would render EDF easily the most ambitious entrant in the market for electricity generation and wholesale. None of the other market participants have projects that foresee the construction of generation capacity as ambitiously as EDF.

65. The entrant in terms of capacity that comes closest in terms of generation capacity is E.ON that recently acquired 1,441 MW of capacity located in Belgium from GDF Suez (Electrabel). Whereas it cannot be ignored that E.ON is also a significant entrant, the effect on the market of this entrant must be assessed in different manner than EDF in the absence of the proposed transaction. While E.ON's entry does not bring new capacity to Belgium, EDF would bring new capacity even in the absence of the proposed transaction. EDF would therefore bring not just one more supplier on the market, but also more effective competitive pressure to the market as the additional capacity affects directly the supply demand balance within the Belgian electricity generation and wholesale market. Consequently, the mere entry of E.ON cannot offset the negative effects the proposed transaction may have on the ambitious expansion strategy of EDF absent the proposed transaction.

f) Horizontal unilateral effects on electricity generation and wholesale market and on electricity trading

(1) Counterfactual to the proposed transaction

66. The assessment of the potential horizontal unilateral effects of the proposed transaction requires a comparison with a counterfactual which describes the most likely market outcome(s) in the absence of the proposed transaction.

67. The structural changes which would be brought by the proposed transaction are threefold. First, before 2015, the proposed transaction brings together production assets of SPE in Belgium into EDF's production assets elsewhere, especially in France.

68. Second, in 2015, the Commission understands that the long term supply agreement by which EDF sells the production of its 50% share in the nuclear power plant Tihange-1 to […] will end. This nuclear power plant has been recently authorised to run for another 10 years after 2015, which was its initially expected expiration date. As a consequence, at some point in the near future EDF will have to decide how to best use this production asset after 2015.

69. Third, EDF currently develops two sites for possible investments in CCGT production assets. According to the time line of these two projects, EDF envisages taking an investment decision in [2010-2020] and, in case a positive decision is taken, to put the additional capacity on stream in [2010-2020].

70. The combination of these elements, […], is that EDF will have to decide on (1) its 50% share of Tihange-1 ([450-550] MW), (2) possible investment for the [CCGT 2] site ([900-950] MW) and (3) possible investment for the [CCGT 1] site ([900-950] MW).

71. As a consequence, different likely counterfactuals situations are to be envisaged at this stage: (i) EDF does not invest in CCGTs and sells its share of Tihange-1; (ii) EDF keeps Tihange-1 but does not invest in CCGTs; (iii) EDF keeps Tihange-1 and invests in one CCGT; (iv) EDF keeps Tihange-1 and invests in two CCGTs.

72. Irrespectively of which counterfactual situation is the most likely to occur, the competitive position of SPE is degraded absent the proposed transaction: [Information related to SPE’s sourcing].

(2) Investment in additional production capacity

73. The Belgian NCA notes [61] that "[g]iven the long-term contract with […] and the low utilisation rate of import capacities by EDF, the concentration does not result in significant horizontal overlaps on the generation and wholesale market […]. However, both SPE and EDF have their respective projects to increase their generation capacities in Belgium […] and this could have significant impact on competition".

74. When assessing the financial impact of bringing additional capacities on the market, an undertaking mainly takes into account two elements:

· The profits it expects from this production asset(s), which depends on the expected demand pattern and electricity prices, as well as other factors such as cost of inputs and cost of CO2; and

· The impact of this additional capacity on the revenues of its entire production portfolio, as adding capacity usually exerts a downward pressure on electricity prices.

75. The Commission's review of SPE's pending investment decision regarding the Navagne project, which would have to be taken by EDF post-transaction, allows us to conclude that such capacity has been necessitated to cover SPE's own customers' demand. Moreover, before [2010-2020], the proposed transaction would not bring any structural change in the production of electricity in Belgium, and thus the proposed transaction cannot change the benefits of such an investment for the next [0-10] years at least. Eventually, such capacity would come on-stream far earlier than EDF's (stand-alone) contemplated CCGTs. As a consequence, it is considered that the merged entity would have no incentive to delay or decline such an investment.

76. For the purpose of assessing the effect of the proposed transaction on EDF's incentives to develop further its two CCGT projects, the Commission has used a tool (hereinafter the "model" or "EDF's model") developed and used by EDF for long-term market forecasts. [Information on the functioning of EDF's internal model] [62] , […].

77. [Information on the functioning of EDF`s internal model] […].

78. More specifically, the Commission has requested EDF to provide results of the model for the following cases:

· Case (i): all EDF's CCGT projects in Belgium and all SPE's projects;

· Case (ii): one EDF's CCGT project in Belgium ([900-950] MW) and all SPE's projects;

· Case (iii): one unit of one EDF's CCGT project in Belgium [400-500] MW) and all SPE's projects;

· Case (iv): none of EDF's projects in Belgium and all SPE's projects.

79. The analysis of the results first shows that, should an investment decision be taken before the completion of the proposed transaction by EDF on a stand-alone basis, the viability of the two CCGTs would not be completely secured. In particular, under a range of plausible scenarios, the gross margins anticipated for these projects are very close to the amount necessary to recover the expected investment. Specifically, the results of the simulation exercise described above indicate that, for a commissioning date of [2010-2020], in the base demand scenario, case (i) would appear risky and other cases would appear borderline, while in a high demand scenario, case (i) would become borderline and other cases more favourable [63] .

80. EDF emphasised that, irrespectively of the impact of additional capacities on revenues of existing production portfolio, elements unrelated to the proposed transaction will have a major influence on the viability of EDF's CCGT projects and, ultimately, on the investment decisions that EDF has scheduled to take in [2010-2020]. EDF points to two key elements: the speed of the economic recovery from the current crisis as well as the evolution of the cost of equipment, in particular the investment cost of a CCGT Unit. [Information as to possible positive scenarios]. Thus, if for instance these positive developments would materialise, there are scenarios where EDF would, in the absence of the merger, decide to invest in the additional generation capacities.

81. Whereas, as with any projected investment decision to be made in the future, it cannot be guaranteed with full certainty that it will materialise in all scenarios in the future, it can however already be considered at this stage that the proposed transaction will affect the incentives to invest in any of those scenario's. When the merged entity considers investing in new generation capacity, it will take into account not only the stream of revenue generated on the project itself (as an entrant without any installed capacity would do) but also the impact of the added capacity on the profits earned by all the plants in its portfolio. In this respect, the analysis indicates that the impact of EDF's CCGT(s) projects on the revenues of SPE is not marginal. The additional capacities considered by EDF would have a significant impact on prices in Belgium so that margins earned by SPE's plants would be significantly reduced [64] . The loss of gross margins [65] by SPE can represent […]% to […]% of the project-specific gross margins, using EDF's model. As a consequence, the incentives of the combined entity to develop further the CCGT projects currently considered by EDF are significantly lowered by the proposed transaction.

82. Although the precise likelihood of market conditions leading to, on the one hand, EDF on a stand-alone basis developing one or both CCGT projects and, on the other hand, the merged entity not developing the same project(s), is difficult to assess, the results of the modelling exercise described above nevertheless indicate that there exists a number of plausible scenarios under which the incentive for EDF to develop one or two of its CCGT projects appears borderline pre-merger and is significantly reduced post-merger as a result of the combined entity taking into account the negative price impact of additional capacity on its entire generation portfolio. It is therefore considered that there are serious doubts with regard to the incentives of the merged entity to further develop EDF's CCGT projects. The notifying party has submitted Commitments to address this concern.

83. In view of the fact that EDF is currently the most ambitious entrant in the Belgian wholesale and generation market and the fact that the proposed concentration affects significantly merged entity's incentives to develop generation capacity, the proposed transaction would remove the most ambitious entrant in the Belgian wholesale and generation market

(3) Short-term unilateral effect

84. Until [2010-2020], before the earliest date at which current project developments in Belgium would become operational if EDF were to proceed with the investment decision as currently scheduled, the only unilateral effect is to combine SPE's portfolio with EDF's share of Tihange-1 of [450-550] MW. However, this capacity is not only a very small share of the Belgian total generation capacity (of approximately 16,500 MW), but it is also […] sold under long-term contract to […], so that any unilateral effect on the Belgian market considered in isolation can readily be excluded.

85. With respect to the potential unilateral effects of the proposed transaction, the Belgian NCA notes [66] that the size of the merged entity will lead to an increase of its interest in withdrawing capacities and submitting high purchase orders in Belpex in order to increase the spot exchange price.

86. This argument of the Belgian NCA relies on the position of the parties to the proposed transaction in both France and Belgium. In particular, the Belgian NCA indicates that although SPE currently has little incentive to withhold capacity, "[i]f SPE will merge with EDF, the merged company will have very high incentive for withholding capacity: low cost (SPE's CCGTs) and very high benefits due to the very large production park".

87. It has been assessed whether EDF's presence in France could lead to an increase of electricity prices in Belgium as a result of the proposed transaction. On the basis of an analysis of the French and Belgium cost curves, that a merger-specific withholding strategy using SPE's mid-curve portfolio would be unlikely to be profitable for the merged entity, in particular as it would have little impact on French prices, if it were conducted on the electricity generation taken as a whole. The impact of strategies consisting of withholding the highest cost infra-marginal SPE generation units was assessed, based on the very conservative assumption that this would result in an equivalent increase of demand on the electricity generation market in France [67] . A wide variety of demand scenarios were considered, and it was found that these strategies would not be profitable for the merged entity, as the profit loss resulting from such a withholding strategy in Belgium would be greater than the gain for EDF in France. [68]

88. In light of the above arguments, it is concluded that the proposed transaction would not lead to any anticompetitive unilateral effects in the short term.

g) Coordinated effects on the electricity generation and the wholesale market and on electricity trading

(1) Possible coordination risks due to shareholdings by the French State in both GDF Suez (Electrabel) and of EDF

89. The Belgian NCA submits that the creation of a "structural link" between the two incumbent Belgian electricity producers (GDF Suez (Electrabel) and SPE), due to the shareholding of the French State in both companies [69] , could amount to an even more important element which (i) increases the likelihood of coordination or (ii) strengthens coordination.

90. The French State shareholdings of both companies are managed by Government Shareholding Agency ("Agence des Participations de l’Etat" or "APE"). The APE takes care for the interest of France's assets and maximizes their value

91. The fact that GDF Suez (Electrabel) and EDF have a common shareholder, the French State, is the reason why the Belgian NCA considers that there is a risk of coordination between the two companies in their strategic business decisions. It is also argued that this risk of coordination would be facilitated by the management of the French State shareholdings through the same agency, APE.

92. In order to analyse these claims it is necessary to ascertain, whether an undertaking whose majority shareholdings (84.66%) [70] are held by a State (EDF), or where the State is the major shareholder (35%) (GDF Suez (Electrabel)) can still be considered to have an independent power of decision in relation to other undertakings where the same State is the main or a major shareholder. That will be the case if this undertaking sets by itself its business plan, budget, and strategy, in its own commercial interests, independently from other undertakings owned by the same State entity.

93. The requirement that the business plans, budget and strategy must be set independently implies that the acquiring State entity cannot (directly or indirectly) impose or facilitate coordination between any other undertakings which are owned by it. Relevant factors that may be taken into account when assessing the independent power of decision include, but are not necessarily limited to: (i) the existence of interlocking directorships between undertakings owned by the same acquiring entity; and (ii) the existence of adequate safeguards ensuring that commercially sensitive information is not shared between such undertakings. In any event, the exercise of supervisory powers by the State will not exclude the ability of such undertaking to set its strategy independently where such powers are limited to the protection of interests analogous to those of a minority shareholder [71] .

94. Therefore, when an undertaking fulfils the abovementioned requirements it could be concluded that it has an independent power of decision, regardless of the fact that the State owns it or is a majority shareholder. In the Gaz de France / Suez Decision [72] , the Commission considered EDF and GDF Suez (Electrabel) as competing undertakings. In that decision, in the market for supply of gas to industrial customers, the Commission regarded EDF as one of the main competitors of GDF Suez (Electrabel), together with Total, Distrigaz, E.ON or BP. In the market for the supply of gas to household customers, the Commission considered that EDF constituted together with Distrigaz one of the main competitors of GDF. [73] In the market of supply of gas to electricity customers, EDF expressed its concerns that "the GDF/Suez merger would strengthen the control each of the parties has over the gas system (supply, access, transmission and storage) in which they operate in France and the whole North-West of Europe, giving the new entity in essential segments of the corresponding value chain a virtual monopoly" [74] . In EDF's Document de Reference for 2008, it is noted that "EDF's main competitors on the French market are GDF Suez, Endesa/SNET, Atel, HEW Energies, Poweo, Direct Energie, and local distribution companies (LDCs). With the recent completion of the merger between Suez and Gaz de France, the energy landscape has changed due to the emergence of a first-rate competitor for EDF" [75] .

95. It can be added that, as it has been described above, EDF has ambitious plans to expand its business in Belgium by preparing the construction of [1,800-1,900] MW generation capacity. Additional capacity is most likely to affect the revenues of GDF Suez (Electrabel) more than any other market participant in the Belgian generation and wholesale market. Indeed, as is apparent from the Commission's simulations, the construction of new power plants affects the wholesale price and, by these means, the revenues of other participants. The larger the pre-existing portfolio of a market participant, the larger the expected revenue losses are likely to be. GDF Suez (Electrabel) has, by far, the largest generation portfolio within Belgium. The fact that EDF has an ambitious expansion policy within Belgium, which commenced after the Gaz de France / Suez merger [76] and has since continued, contradicts therefore the allegation of the Belgian NCA that the French State exerts influence with a view to increasing profits of both groups.

96. As regards, the existence of interlocking directorships, none of the representatives of the French State appointed to the Board of Directors of EDF is also a member of the Board of Directors of GDF Suez (Electrabel), and vice versa. Further, they are bound by governance principles relating to confidentiality and independence, in accordance with corporate governance principles applicable to listed companies [77] .

97. The information provided by EDF with regard to the proposed transaction indicates that EDF is able to independently set its business plans in relation to GDF Suez (Electrabel), and in accordance with its own commercial interests. The Commission did not receive any evidence as to the contrary during the market investigation.

98. The fact that a governmental agency (APE) is responsible for the managing of the French State's shareholdings in EDF and GDF Suez (Electrabel) cannot put such conclusion into question as far as its role is clearly limited and it does not appear to affect, as is the case here, the commercial and business autonomy of these companies.

99. Consequently, since EDF can be regarded as a company with an independent power of decision in relation to GDF Suez (Electrabel), and which is an actual competitor of GDF Suez (Electrabel), the alleged risk of coordination with GDF Suez (Electrabel) in the Belgian electricity markets due to the shareholding structure is not founded.

(2) Coordinated effects on electricity generation and wholesale market and on electricity trading

100. As detailed in the Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings ("Horizontal Merger Guidelines" [78] ), four cumulative conditions are necessary for coordination to emerge and be sustainable: the ability to reach an understanding on the terms of coordination, the ability to monitor deviations, the existence of deterrent mechanisms and the absence of any ability or incentive for outsiders to destabilize the coordination. These four conditions have to be considered within a plausible mechanism for coordination.

101. The Belgian NCA argues that the markets concerned have characteristics that are conducive to tacit collusion. In particular, it is argued that a mutual understanding on the terms of coordination is likely given the limited number of companies active on the market and the homogeneous nature of electricity and given that the market is sufficiently transparent to monitor deviations from the collusive agreement, that there are credible deterrent credible mechanisms and that the reaction of outsiders would not jeopardize the results expected from coordination. The Belgian NCA does not however provide a detailed description of how coordination would work in practice, in particular with respect to the mechanism and variables on which the colluding partners would tacitly agree the mechanism for detecting deviations and the means of retaliation [79] .

102. Contrary to the arguments set out by the Belgian NCA, EDF argues that the electricity market is not conducive to collusion. In particular, EDF emphasises that reaching the terms of coordination would be difficult in the absence of an obvious focal point (in particular given the demand and cost fluctuations, and the substantial degree of differentiation of the contracts offered on the market), that the market is not transparent because the majority of transactions in Belgium and France take place through OTC trade, that there are no effective deterrent mechanisms (in particular because deviation could take part through long-term forward contract), and that any attempt to raise prices by EDF and GDF Suez (Electrabel) would trigger reactions from outsiders (in particular, through an increase in imports and rival entry and expansions in the medium term).

103. As stated in the Horizontal Merger Guidelines [80] , when the Commission examines whether it would be possible to reach terms of coordination and whether the coordination is likely to be sustainable, it has to consider the changes that the merger brings about. For the purpose of reviewing the proposed transaction, the Commission's assessment of potential coordinated effects therefore focused on the merger specific effects of the proposed transaction.

104. Because of the very limited presence of EDF in Belgium electricity markets, any merger specific effect of the proposed transaction, as far as coordination is involved, is likely to be limited. In particular, in addition to the "structural link" addressed above, the main potential merger specific effect with respect to coordination derives from the increase in multi-market contacts between EDF and GDF Suez (Electrabel) in France and Belgium [81] .

105. The Belgian NCA argues that, as the proposed transaction will increase the number of multi-market contacts between EDF/SPE and GDF Suez (Electrabel), it is going to be easier for these companies to reach a common understanding, to monitor each others' behaviour and to retaliate in case of deviation [82] .

106. The Commission therefore assessed whether the increase of multi-market contacts (defined as interactions on different markets) between EDF and GDF Suez (Electrabel) as a result of the proposed transaction is likely to significantly impede effective competition by making coordination easier, more stable or more effective. As mentioned in the Horizontal Merger Guidelines [83] , multi-market contacts may reinforce the scope for retaliation in case of deviation from a collusive agreement (e.g. by linking the strategies on the different markets and triggering retaliation on all markets in response to a deviation on one market). However, economic theory shows that multimarket contacts also increase the gain for deviation from a collusive agreement (as not only retaliations but also deviations are possible on a higher number of markets), which implies that multi-market contacts could lead to coordinated effects only under specific circumstances.

107. An increase in symmetry between the parties to the concentration would not be sufficient in itself to consider that the proposed transaction is likely to lead to coordinated effects. Rather, to increase the scope for collusion, a coordination mechanism linking the two separate markets need to loosen the incentive constraint of the relevant players (e.g. if one participant would not have an incentive to collude on one market, but would have an incentive to engage in collusion if a collusion mechanism involved linking both markets). However, the market investigation did not provide any credible indication that factors which currently constrain the incentives of EDF or GDF Suez (Electrabel) to coordinate would be relaxed by the post-transaction increase in multi-market contacts in a way that would make coordination easier, more stable or more effective.

108. In light of these arguments, it is concluded that the proposed transaction is unlikely to lead to coordinated effects.

h) Non-horizontal unilateral effects on electricity trading activities in Belgium

109. EDF and SPE are active in both upstream (generation) and downstream (supply to final customers) markets in Belgium and/or France. the Commission, further to submissions by the Belgian NCA, has looked at whether the combination of the activities of the parties' to the concentration will lead to a non-horizontal input foreclosure strategy by the merged entity, which would consist in withholding electricity by SPE on the Belpex in order to increase the input price of its competitors active on the downstream supply market. According to the Belgian NCA, this input foreclosure strategy would significantly impede competition because the competitors that would be foreclosed play an important role on the electricity supply markets and because such manipulation of the spot exchange price would increase volatility and hence increase barriers to entry or expansion for potential and current competitors.

110. Moreover, some concerns have been raised that the proposed transaction could limit the liquidity available on the wholesale market [84] .

111. The proposed transaction would not impede competition as a result of the alleged input foreclosure strategy.

112. First, currently SPE buys more than it sells on the wholesale market, and as a consequence has decided to invest in new capacity located at Navagne, while EDF has no production facility at its disposal in Belgium and thus supplies its customers from imports and the wholesale market. Therefore, any negative effect of the proposed transaction on the liquidity of the Belgian wholesale exchange is unlikely before a new investment from either party come on-stream. At that time, each party will have the possibility to supply its customers partly through its own electricity, either on a stand-alone basis or as a merged entity. The main effect of an investment in generation is that less electricity will be bought from the wholesale market by the parties to the concentration, which in turn means that more electricity would be made available for the remaining buyers. The proposed transaction's only effect, for a given level of investment from both parties, relates to the coordination of production and consumption portfolios of each company, which increases the number of instances where the merged entity would use its own electricity to supply its customers. The main effect of the proposed transaction would be to increase the quantity of electricity available on the Belgian wholesale market for other distributors.

113. Moreover, the merged entity would not have the ability to foreclose its downstream competitors as it lacks market power given its relatively limited size on the electricity generation and wholesale market in Belgium. Furthermore, even if it had such an ability, the merged entity would not have an incentive to engage in such strategy given the limited impact of a withholding strategy in Belgium on electricity prices in France, in particular taking into account, on the one hand, the constraint imposed by the size of interconnectors between France and Belgium and, on the other, the constraint imposed by the optimization of imports from other neighbouring countries [85] . Finally, there is no evidence that a reduction of liquidity as a result of such a strategy would foreclose competitors or potential entrants.

114. E.ON recently acquired a significant quantity of generation capacity of significant size in Belgium. As E.ON does not have a significant downstream portfolio, this adds a market participant with a structurally long position in Belgium that is thus likely to contribute to the liquidity of traded electricity products in Belgium.

115. It is therefore concluded that the proposed transaction is unlikely to lead to non-horizontal unilateral effects on the Belgian electricity trading.

i) Conclusion on competition concerns of the Commission on the generation and wholesale electricity markets in Belgium

116. As a result of the detailed assessment of the proposed transaction with regard to the horizontal unilateral effect of the proposed transaction it is concluded that there are serious doubts concerning the incentives of the post-merger entity to further develop EDF's CCGT projects. The notifying party has submitted Commitments to address this concern.

117. However, the assessment of the proposed transaction did not identify serious doubts with respect to the coordinated effects and non-horizontal unilateral effects of the proposed transaction on the different relevant Belgian electricity markets.

C. Balancing and ancillary services in Belgium

1. Product market definition

118. In accordance with previous decisions of the Commission, the notifying party defines a market for ancillary services and balancing power [86] comprising, as defined in Belgian law [87] , of primary frequency control, secondary control, tertiary reserves, voltage control and reactive power and black start services. Elia, the Belgian Transmission System Operator ("TSO"), is the sole buyer of these services and it procures such services by tendering.

119. EDF [88] considers the supply of electricity for compensating network losses as also forming part of this market. Whereas it is true that the sole buyers of electricity for compensating network losses (like in the case of ancillary services and balancing power) are network operators (in the case of Belgium, only operators of distribution networks [89] ), the supply side of this market is substantially different from the one for providing ancillary services and balancing power.

120. With the exception of tertiary reserves (where interruptible customers can provide -limited amounts of - upward regulation [90] ), suppliers of ancillary services and balancing power can only be operators of power plants connected to the Belgian transmission network [91] . The technical ability and economic incentive to provide such services depends on the technical specification of a power plant (its flexibility and place in the merit order) and, also on the number of such suitable plants in a supplier's generation portfolio to guarantee the supply in case of maintenance and failure. Consequently, the number of potential suppliers of ancillary services and balancing power is very limited [92] .

121. However, the ability to supply network losses is not constrained in the same way as in the case of ancillary services and balancing power. Suppliers include, for instance, financial players active in electricity trading [93] that have no own generation capacity. Buyers of network losses essentially behave like final customers when purchasing electricity for compensating network losses [94] .

122. Consequently, the supply of network losses is not part of the market for ancillary services and balancing power. Ultimately, whether network operators are present on the demand side of the electricity wholesale market or in (one of the) retail supply markets can be left open as the volumes concerned (estimated to be 4.4 TWh [95] ) are limited and will not materially affect the assessment of the proposed transaction.

2. Geographic market definition

123. As explained above, suppliers that seek to offer ancillary services and balancing power can currently do so only from generation units/interruptible customer sites located within the Belgian balancing zone [96] . Consequently, the market for ancillary services and balancing power is national in scope.

3. Competitive assessment

a) Primary effect on the Belgian market for balancing and ancillary services

124. In view of the constraints that exist to supply ancillary services and balancing power, essentially [97] only GDF Suez (Electrabel) and SPE supply such services to their sole buyer, Elia. EDF is currently not present on this market. Consequently, the proposed transaction does not give rise to serious doubts for the market for balancing and ancillary services.

b) Secondary effects on the Belgian market for balancing and ancillary services

125. EDF's (and SPE's) planned generation units are technically and economically suited to supply all ancillary and balancing services (with the exception of black start) [98] . Indeed, the supply of such services is economically attractive as such revenues can represent ([5-25]€/kW/y) a significant share of a power plant's revenues [99] .

126. In order to guarantee the supply of balancing power in case of plant failure and maintenance, possessing several generation units capable of supplying balancing power is a prerequisite, or at least a competitive advantage, when supplying such services to the network operator Elia. EDF is projecting to construct four CCGT units.

127. In view of the limited suppliers of ancillary services and balancing power and the generation portfolio expected to come on line by other entrants in the near future, EDF appears to be the best placed entrant in the market for ancillary services and balancing power.

128. In view of the fact that the proposed transaction affects the incentives for EDF to invest in the planned generation units, the proposed transaction will significantly affect the competitive conditions on the market for ancillary services and balancing power.

129. The Belgian NCA also states that "SPE is known to be the 'price setter' in the 'intra-day' segment". It considers that it therefore has some market power and that its market position is significantly larger than it appears to be [100] . The Belgian NCA apparently refers here to SPE's role as a market maker in Belgian intra-day traded electricity products [101] . A market maker contributes to the liquidity of the traded products by quoting competitive sales or purchase orders (with prices) in order to guarantee the availability of a counterparty to other market participant. Such a role (a positive contribution to Belgium's illiquid electricity trading) should not lead to any different assessment with regard to the proposed transaction.

4. Conclusion on balancing and ancillary services markets in Belgium

130. Except for secondary effects, the proposed transaction does not raise serious doubts as to its compatibility with the common market for the Belgian market for balancing and ancillary services.

D. Electricity retail supply markets to small and large industrial customers in Belgium

1. Product market definition

131. The notifying party considers, in line with previous decisional practice of the Commission [102] , that the market for the supply of electricity in Belgium can be segmented along the following lines: (i) the market for the supply of electricity to large industrial and commercial customers connected to the transmission network (at above 70 kV), (ii) the market for the supply of electricity to small industrial and commercial customers connected to the distribution networks (below 70 kV) and (iii) the market for the supply of electricity to eligible household customers.

132. The results of the market investigation did not put into question this market definition. Therefore, the Commission does not consider it necessary to depart from this segmentation of the retail electricity markets in Belgium.

2. Geographic market definition

133. For retail supply of electricity, the Commission has generally defined these markets as national in scope, provided that these markets are fully liberalised [103] and if the conditions of competition are found to be uniform throughout the relevant territory.

134. Regarding the geographic scope of retail electricity supply to industrial and commercial customers (hereafter "I&C customers") in Belgium, the notifying party considers that the markets for supply of electricity to small, as well as to large, I&C customers are national in scope given that retail markets are now completely liberalised in all three regions and for all categories of customers in Belgium. In this respect, the notifying party referred to the Gaz de France / Suez Decision [104] in which, as it emphasized, the Commission in undertaking its competitive assessment has looked into the markets for the supply of electricity to I&C customers (large and small) only at national level in accordance with previous Commission decisions [105] .

135. Regarding the geographic scope of these markets, respondents to the Commission's market investigation have provided mixed comments. On the one hand, the overwhelming majority of respondents submitted that for large I&C customers the relevant market should be the whole of Belgium. On the other hand, regarding small I&C, it was noted that the relevant geographic market could be considered to be sub-national in scope and that it could be split into the three regions of Brussels, Flanders and Wallonia. In addition to the language differences between the relevant regions, market respondents who pleaded in favour of a sub-national market definition for the supply to small I&C customers based their view on the divergent regulatory conditions and the existence of separate licensing authorities in these three regions. It was further argued that there are differences in prices and costs from region to region and that not all suppliers have entered all three regions. Moreover, as it is demonstrated from the market shares, EDF has managed to acquire higher market shares in Wallonia.

136. In response to the Commission's requests for information following the market investigation, by analogy, EDF has referred to the fact that the Commission has examined the question as to whether household supply markets (which are in any case not affected in the proposed transaction) can be defined as regional in scope on the basis of differences in regulatory conditions which were not homogeneous across the three Belgian regions at the time of the Gaz de France / Suez Decision [106] . For example, at the time of the Gaz de France / Suez Decision there were differences in the level of liberalisation of the market for this customer group in these regions. Given that the market is now completely liberalised in all three regions of Belgium, EDF considers that the market for the supply of electricity could be defined as national for all customers. The notifying party further submits that with respect to large I&C customers, such a national definition is also supported by the existence of a national transmission network to which all these customers are connected.

137. The fact that in the Gaz de France / Suez Decision [107] the Commission based its assessment on a national market definition (for the supply to small I&C customers), does not prevent the Commission, in the case at hand, to look into a narrower geographic definition for that supply market. Against this background and based on the results of the market investigation on this point, for the purposes of the present decision it can be left open whether the market for the retail supply of electricity to small I&C customers in Belgium should be defined as sub-national in scope given that the proposed transaction does not raise serious doubts as to its compatibility with the common market under any alternative market definition.

138. Regarding the geographic scope of the retail market to large I&C customers in Belgium, in line with previous practice and the results of the market investigation, the Commission does not consider it necessary to look into a segmentation which is smaller than Belgium.

3. Competitive Assessment

139. SPE is active on all the electricity supply markets in Belgium. EDF is only active on (i) the market for the supply of electricity to large I&C customers (connected at above 70 kV) and (ii) the market for the supply of electricity to small I&C customers (connected at below 70 kV). The proposed transaction therefore leads to horizontal overlaps on the Belgian markets for the supply of electricity to large I&C customers and the market for the supply of electricity to small I&C customers.

a) Large industrial and commercial (I&C) customers market

140. Regarding supply of electricity to large I&C customers, the increment added by EDF's presence is a mere [0-5]%, while SPE's market share is found to be just below [5-10]%.

141. The proposed transaction will not lead to competition problems in this market, given the relatively low combined market shares and the minor increment resulting from it. The market investigation did not identify any serious doubts for this market.

b) Small industrial and commercial (I&C) customers market

142. As regards the retail market to small I&C customers (connected at below 70 kV)), if a national market definition is adopted, the increment added by EDF's presence would be a mere [0-5]%. SPE's market share on this market is [10-20]%, therefore no competition issues appear to arise in case a national definition is adopted.

143. At the smallest possible geographic definition, the parties to the concentration overlaps for the Brussels region are found to be even smaller (EDF [0-5]% and SPE [5-10]%), while for the Flanders region EDF would add a mere [0-5]% to SPE which has a presence of just [10-20]%. It is therefore clear that even if a definition which is smaller than national is applicable for small I&C then no competition issues arise with respect to the Flanders and the Brussels regions. However, by reference to the smallest possible geographic definition, as regards Wallonia the figures are higher than at national level since the combined presence would be [10-20]%. EDF has a presence of [5-10]%, while SPE's presence is around [10-20]%. A number of respondents have noted that the proposed transaction will lead to a decrease in the number of suppliers given that EDF is currently a credible alternative supplier to SPE.

144. Nevertheless, the combined market share of EDF and SPE in Wallonia (which is at [10-20]%) cannot by itself be considered to be high enough so as to create doubts.

145. First, GDF Suez (Electrabel), the incumbent supplier, has a total presence of [60-70]% in the Walloon region and [70-80]% nationally in the retail market to small I&C customers. This is a very high figure which cannot be considered comparable to that of the merged entity. Therefore, the concentration does not affect the competitive structure of the market which is already characterised by only one large player.

146. Second, as confirmed by numerous respondents to the Commission's market investigation, the merged entity (EDF and SPE) would, post merger, be able to exert more competitive pressure on the incumbent GDF Suez (Eletrabel) than in the current situation where EDF and SPE compete individually with GDF Suez (Electrabel). Moreover, the proposed transaction creates better opportunities from the current situation for EDF to expand further its retail supply business in the short to medium term given that it currently lacks the necessary and suitable generation capacity. Possessing own generation capacity is clearly a very important factor for materially expanding a downstream supply business.

147. Third, it is to be noted that EDF and SPE are not the only retail suppliers to small I&C customers currently competing with GDF Suez (Electrabel). At national level, E.ON has a presence in the range of [0-5]% while RWE (Essent) and Vattenfall (Nuon) have market shares of [0-5]% and [0-5]% respectively. Moreover, a number of other smaller suppliers are estimated to have a total presence of just [5-10]%. Specifically in relation to the Walloon region, where the merged entity would have a market share of [10-20]% in the sub-national geographic definition, E.ON has a presence of [0-5]%, RWE (Essent) [0-5]% and Vattenfall (Nuon) just above [0-5]%. These remaining competitors active in the market, are sufficient to ensure that competition will be maintained. The potential of these remaining competitors, to further develop their presence in retail supply markets for small I&C is also relevant given their planned entry and expansions in the generation and wholesale market. This argument is particularly relevant for E.ON which recently acquired sole control over two power plants and certain drawing rights [108] in Belgium.

148. For these reasons, the proposed transaction does not give rise to serious doubts for the market of supply to small I&C customers.

c) Secondary effects on retail markets

149. The proposed transaction has its primary effects on the Belgian generation and wholesale market.

150. However, EDF has a strategy of entering markets vertically integrated, hence both with a generation portfolio and a retail business. Indeed, in order to secure optimal revenues for its generation capacity, it deems it necessary to develop a consistent retail business which, thanks to the ability to secure prices through a large number of contracts with different maturities and limited churn rates, provide a natural financial hedge against wholesale volatility [109] . EDF's retail portfolio today is insufficient (to very large extent) to absorb the generation capacity it is planning to bring on line. Whereas its current portfolio amounts to a mere 1.55 TWh, it can be estimated that EDF may be able to produce between [5] and [15] TWh/y by [2010-2020] [110] when its planned CCGTs come online.

151. Consequently, the effects the proposed transaction may have on the parties to the concentration's incentives to expand generation capacity in the wholesale and generation market are likely to also have effects on EDF's entry and expansion on the various Belgian retail markets.

4. Conclusion on retail markets

152. Except for secondary effects, the proposed transaction does not raise serious doubts as to its compatibility with the common market in any of the retail markets in Belgium.

E. Electricity generation and wholesale and trading markets in France

1. Product and geographic markets definition

153. For the purposes of the present decision, the precise definition of these markets in France can be left open since SPE has no generation capacity and its position in electricity trading is very limited.

2. Competitive assessment

154. EDF is currently active in electricity generation and electricity trading in France. SPE has no longer production capacity in France as a result of an agreement [111] whereby SPE's share of 100 MW of the Chooz B nuclear plant in France has been swapped for an equivalent capacity made available by Electrabel in Belgium on February 2009. The Transaction will therefore have no impact on the production capacity held by EDF in France.

155. SPE's position in electricity trading is very limited (below [0-5]%) and, from 2010, SPE's activities in physical electricity trading should be reduced because of the Chooz B related swapped volumes.

156. It is thus considered that the concentration does not raise competition concerns for the electricity markets in France.

F. Electricity generation and wholesale and trading markets in the Netherlands

1. Product and geographic markets definition

157. For the purposes of the present decision, the precise definition of these markets in the Netherlands can be left open, since SPE has no generation capacity and its position in electricity trading is very limited.

2. Competitive assessment

158. In the Dutch electricity markets, the only very limited overlap of the parties to the proposed transaction is on the physical electricity trading, where the combined activities of the parties to the proposed transaction reach around [5-10]% of the traded volumes on the Dutch market, with a very limited addition of market share in consideration of SPE's activity ([0-5]).

159. It is thus considered that the concentration does not raise serious doubts for the electricity markets in the Netherlands.

G. Gas markets in Belgium

1. Natural gas sector in Belgium

a) Natural gas import to Belgium

160. There is no domestic production in Belgium. Belgium's main suppliers in 2008 were the Netherlands (33.8%), Norway (32.2%). Other bigger suppliers were Qatar (10.3%) and Algeria (5.7%) whereas in these cases the gas is delivered to Belgium via LNG tankers. The similar amount of gas, i.e. 6.6% of all imports, was delivered to Belgium from Russia and the United-Kingdom.

161. The biggest importer of the gas into Belgium in 2008 was Distrigaz with 72% of all imports even though this share has progressively decreased over the last five years (it amounted to 88.1% in 2004). Other bigger importers, enjoying a strong position in their country of origin were GDF Suez (Electrabel) of which its imports increased from 8.1% in 2004 to 13% in 2008 and Wingas with the increase from 2.3% in 2004 to 6.6% in 2008.

162. SPE started to import gas in 2008 for a volume of [10-20] TWh, which represents 6% of total imports. EDF started importing gas in 2007, for a volume of [0-5] TWh in 2007 and [0-5] TWh in 2008.

b) The gas infrastructure in Belgium

163. As of 1 June 2005 gas transport, LNG and gas storage infrastructures are subject to a legal monopoly through licenses held by Fluxys which is responsible for managing, maintaining and developing the transmission network. The Belgian energy authority, Commission de Régulation de l'Electricité et du Gaz ("CREG" [112] ) undertakes supervision both for technical and tariff matters. Fluxys operates such networks through (i) an LNG re-gasification terminal in Belgium (Zeebrugge) with the capacity of about 9 bcm/year (equal to around 104.67 TWh) in 2008, (ii) a large high pressure transmission network ensuring both transportation of natural gas for internal consumption and transit from border points to other border points and (iii) a capacity of underground storage in Loenhout accounting for 0.6 bcm (equal to around 6.978 TWh) working volume. The low pressure distribution network is operated by many local companies.

164. As far as storage is concerned, the Belgian storage capacities are currently limited to one site in Loenhout, although storage facilities are available for LNG at the Zeebrugge LNG facility operated by Fluxys. Its useful storage capacity is 0.62 bcm (equal to around 7.27 TWh). Such capacity is too small to meet Belgian modulation needs. Nevertheless, Fluxys is currently working on the extension of this capacity to 0.7 bcm (equal to around 8.14 TWh).

165. The regional distribution gas network grid is being operated, maintained and developed by Distribution System Operators ("DSOs") operating on behalf of the inter-municipal utility companies for gas.

166. Given EDF's and SPE's overlapping activities on the Belgian gas market, only the hub gas trading markets and the markets for supply of gas are relevant markets with regard to the proposed transaction.

2. Product market definition

a) General

167. In previous cases concerning the natural gas industry, the Commission has generally distinguished separate markets for gas exploration/production, gas transport (via high pressure systems), gas distribution (via low pressure systems), gas storage, trading and gas supply activities [113] .

168. With regard to the gas markets in Belgium, the market investigation has confirmed that such a distinction is still valid today.

b) Gas hub trading in Belgium

169. In the Gaz de France / Suez Decision [114] , the Commission concluded that competitive conditions on the Zeebrugge hub in Belgium and on the NBP hub in the United Kingdom had considerably converged and that the two hubs could therefore be regarded as belonging to the same market. Following the Commission's assessment there are no grounds for departing from this definition.

c) Supply markets

(i) Distinction between L-Gas and H-Gas in Belgium

170. In the Gaz de France / Suez Decision [115] , the Commission considered that it is necessary to distinguish between L-Gas and H-Gas in all supply markets for final customers, since they ‎(i) require the use of separate delivery infrastructures, both for transmission and storage, (ii) do not have the same characteristics or properties, and (iii) are not interchangeable for both customers and suppliers.

171. EDF submits that the distinction is still valid today for Belgium since access to L-Gas under competitive conditions is difficult to new entrants for several reasons: gas balances between H-Gas and L-Gas are clearly separated, there is no conversion service from H-Gas to L-Gas similar to the one existing in the Netherlands, very few firm exit capacity is available from the Netherlands and there are no modulation tools (storage, LNG) for L-Gas in Belgium.

172. The market investigation has confirmed the need to make a distinction between L-Gas and H-Gas.

173. Consequently, in respect of the analysis of the proposed transaction on the Belgian gas markets, a distinction is made between L-Gas and H-Gas.

(ii) Eligible customers

174. As regards gas supply activities, following the opening of competition of the European gas markets, the Commission has also drawn distinctions between eligible and non-eligible customers and between customers according to their annual gas consumption and their type of activity (e.g. power plants) [116] .

(ii) Gas supply markets in Belgium

175. The notifying party considers, based upon the relevant Commission decision making practice [117] , that the activities of (i) supply of H-Gas and L-Gas to dealers, (ii) supply of H-Gas and L-Gas to producers of electricity, (iii) supply of H-Gas and L-Gas to large industrial and commercial customers, (iv) supply of H-Gas and L-Gas to small industrial and commercial customers and (v) supply of H-Gas and L-Gas to eligible household customers constitute separate product markets. Consequently, as submitted by EDF, in Belgium supply of L-Gas to dealers and supply of H-Gas to dealers constitute separate product markets.

176. The market investigation has also confirmed the need to make this distinction.

177. The Gaz de France / Suez Decision [118] , clearly distinguished the activities of (i) supply of natural gas to dealers, (ii) supply of natural gas to producers of electricity, (iii) supply of natural gas to large industrial and commercial customers, (iv) supply of natural gas to small industrial and commercial customers and (v) supply of natural gas to eligible household customers. In addition, on the basis of the Gaz de France / Suez Decision [119] , distinction needs to be made between L-Gas and H-Gas in all supply markets for final customers. In particular with regard to the market for supply of gas to dealers, the Commission considered in the Gaz de France / Suez Decision that such market includes the supply of gas to local authority utilities (DSOs) and third-party retailers [120] . Third party retailers include national and international companies that obtain gas supplies in Belgium that are subsequently sold to their final customers in Belgium. With regard to the DSOs, according to EDF the liberalisation of the gas and electricity markets has transferred the responsibility of the supply from the DSOs to the different suppliers (historical players and new entrants). Prior to the liberalisation [121] , customers were supplied and had a contract directly with their DSOs and not with a supplier.

178. In view of the above, the Commission considers that the activities of (i) supply of H-Gas and L-Gas to dealers, (ii) supply of H-Gas and L-Gas to producers of electricity, (iii) supply of H-Gas and L-Gas to large industrial and commercial customers, (iv) supply of H-Gas and L-Gas to small industrial and commercial customers and (v) supply of H-Gas and L-Gas to eligible household customers constitute separate product markets in respect of the analysis of the proposed transaction.

3. Geographic market definition

a) Gas hub trading

179. In previous decisions the Commission took the view that with respect to the geographic scope of the trading market, the competitive conditions on the Zeebrugge hub in Belgium and on the NBP hub in the United Kingdom had considerably converged and that the two hubs could therefore be regarded as belonging to the same market [122] . The notifying party submitted the same conclusions.

b) Gas supply markets

180. The Commission took the view in its previous decisions related to the Belgian gas markets that the Belgian supply gas markets are national as for their geographic scope [123] . However, regarding the market for the supply of gas to household customers, the Commission considered in its recent GDF / Centrica / SPE [124] and Gaz de France / Suez [125] Decisions the possibility of a sub-national regional dimension (Flanders, Wallonia and Brussels Region) while ultimately leaving the question open. In both abovementioned Decisions, the Commission contemplated the differences in regulatory conditions, which were not homogeneous across the regions, in particular as regards the opening of household customer gas supply to competition.

181. EDF specifically emphasized with respect to large industrial and commercial customers that the existence of a national transmission network to which all such customers are connected militates in favour of a national geographic scope.

182. The notifying party furthermore submits that with regard to the supply of gas to household customers, the market could not be defined as regional as the market is fully liberalised as of 1 January 2007 in all three Regions in Belgium.

183. Most of the respondents to the market investigation carried out by the Commission held that the gas supply markets should be considered as national.

184. Some respondents to the market investigation deemed the household customer market to be regional for reasons such as local language, differences in terms of regulations and prices according to the regions and the overall legal context for the supply to household customers. By contrast, other respondents took the view that the household customer market should be considered as national since the large majority of suppliers are present on the entire Belgian gas market with equal conditions for the commodity. However, since EDF has no activities on the market for retail supply of natural gas to household customers, there is no need to conclude on this point with regard to the proposed transaction.

c) Conclusion

185. Consequently, the geographic scope of the gas trading market is limited to the Zeebrugge and NBP hubs while the wholesale and retail supply of H-Gas and L-Gas are considered to be national (with the exception of the supply of gas to household customers where the question is left open) for the assessment of the proposed transaction with regard to the Belgian gas markets.

4. Competitive assessment

a) Horizontal overlaps

186. The proposed transaction gives rise to overlaps on a few natural gas markets in Belgium, namely: (i) gas trading, (ii) retail supply of H-Gas to large industrial and commercial customers and (iii) retail supply of H-Gas and L-Gas to small customers.

187. According to the information provided by EDF, SPE and EDF would have combined market shares above [10-20]% only on the market for supply of H-Gas to small industrial and commercial customers. Consequently, the horizontal effects of the proposed transaction on the Belgian gas markets will be analysed only for that market.

188. As to supply of H-Gas to small industrial and commercial customers, the parties' combined market shares in Belgium in 2008 are [20-30]% with a relatively low increment of [0-5]% added by EDF's presence.

189. While EDF's market shares have been constantly growing since 2007 (in 2006 EDF did not have a presence on this segment of the Belgian gas market), GDF Suez (Electrabel) still maintains [50-60]% on market for supply of H-Gas to small industrial and commercial customers. Other competitors are also present on the market such Distrigaz or Wingas with respectively [10-20]% and [5-10]%. In consequence, as a result of the proposed transaction, SPE's market shares constantly superior to [10-20]% will be slightly reinforced without however significantly modifying the competitive conditions on the market.

190. Consequently, the horizontal overlap of the parties to the proposed transaction on the market for the supply of H-Gas to small industrial and commercial customers does not give rise to competition concerns with regard to the proposed transaction on the Belgian gas market.

b) Vertical relationships

191. In respect of vertical relationships, EDF takes the view that the proposed transaction gives rise to two potential vertical relationships: (i) EDF as a gas supplier of SPE and (ii) supply of gas to SPE as an electricity producer.

192. With regard to vertical relationships, it has to be underlined that the parties' combined market shares are rather limited on both upstream and downstream markets.

(1) Supply of natural gas to SPE by EDF as a trader

193. In 2008, the OTC deals on the Zeebrugge hub between EDFT and SPE amounted to a volume of [0-5] TWh of sales of EDFT to SPE and [0-5] TWh of purchases from EDFT to SPE on market of a size of [400-500] TWh.

(2) Supply of H-Gas to SPE as an electricity producer

194. EDF Belgium only supplies gas to end-users and H-Gas to electricity producers while SPE does not supply gas to electricity producers in Belgium.

195. EDF's market share on the supply of H-Gas to electricity producers in 2008 was [5-10]% in 2008. It has to be also noted that on this market EDF's most important client is […] (around [60-70] % of its supply to electricity producers was delivered to […] in 2008) [126] . In 2008, EDF supplied [30-40]% of all the delivered H-Gas to SPE as an electricity producer [127] while operators such as […] supplied SPE with H-Gas for its need. SPE's need of gas with regard to electricity production equalled to [5-10] TWh in 2008 which is estimated by EDF to amount to around [20-30]% [128] of supplied H-Gas volume to electricity producers in Belgium in 2008.

196. Consequently, on the assumption that SPE purchases H-Gas for its need to produce electricity only from EDF, following the proposed transaction and also in the light of the annual [30-40] GWh long-term purchase agreements of H-Gas entered into between EDF and market players other than SPE [129] , such behaviour would affect [20-30]% of the relevant product market which cannot lead to any sort of foreclosure.

197. Consequently, the proposed transaction does not give rise to vertical concerns on the Belgian gas market.

H. Gas markets in France

1. Product and geographic markets definition

198. For the purposes of the proposed transaction, the product and geographic market definitions of the gas markets in France can be left open since the overlaps between the parties are minimum (gas trading) or non existent (retail markets).

2. Competitive assessment

199. In the context of the proposed transaction, the only overlap between the parties to the proposed transaction is on the gas trading market since SPE and EDF are both active on this market in France. EDF is active on the French markets mainly through EDF Trading on the OTC markets and on Powernext Gaz, including the Balancing GRT Gaz segment of Powernext. SPE had a very residual activity on the French gas markets in 2008 through OTC deals ([0-5] GWh in 2008 representing around [0-5]%). SPE is member of Powernext Balancing GRT Gaz since 9 October 2008 [130] but not of Powernext Gas Spot or Powernext Gas Futures. In 2008, SPE sold [10-20] GWh on Powernext Balancing GRT Gaz [131] . The total sales of SPE OTC and on Powernext GRT Gaz in 2008 amount to [10-20] GWh. The combined position of the parties on OTC and on Powernext Gas represents [10-20]% for 2008 and [10-20]% on PEG NORD (the gas volumes traded on Powernext Gaz are only delivered on the North zone).

200. On the retail markets, the proposed transaction will have no horizontal impact on the gas markets in France since ‎(i) SPE is not active on the French gas supply markets and (ii) EDF has only very limited market shares.

201. It is thus considered that the proposed transaction does not raise serious doubts for the gas markets in France.

I. Gas markets in The Netherlands

1. Product and geographic markets definition

202. For the purposes of the proposed transaction, the product and geographic market definitions of the gas markets in the Netherlands can be left open since there are currently no overlaps between the parties to the proposed transaction.

2. Competitive assessment

203. [Information on the contemplated activities of SPE on the Dutch gas markets].

204. EDF is only active through its subsidiaries EDF Trading, Edison and EnBW on the gas trading market with a market share of around [0-5]% of all traded volumes.

205. It is thus considered that the concentration does not raise serious doubts for the gas markets in The Netherlands.

VI. REMEDIES

A. Procedure

206. Following its competitive assessment of the proposed transaction, the Commission concluded that there are concerns with regard to the incentives of the post-merger entity to further develop EDF's CCGT projects. The proposed transaction removes EDF as an ambitious entrant from various Belgian electricity markets because incentives for the merged entity to develop new generation capacity in Belgium will be significantly reduced in comparison to the incentives that EDF had pre-merger.

207. Consequently, preliminary competition concerns have been identified as the Proposed Transaction would lead to significant lessening of competition on the Belgian electricity markets. This raises serious doubts as to the compatibility of the proposed transaction with the common market, specifically on the Belgian wholesale and generation market which accordingly can lead to secondary effects on the Belgian electricity retail markets and the Belgian market for balancing and ancillary services.

208. In order to address the serious doubts identified by the Commission, as to the compatibility of the proposed transaction, as initially notified, with the common market, EDF submitted on 21 October 2009 a remedy package.

209. After market testing the proposed remedies, the Commission considered that a cleared definition of what constitutes a final investment decision was needed. Therefore, EDF submitted on 9 November 2009 a revised Commitments package so as to provide increased certainty that a final investment decision will result in the actual materialisation of the investment

B. Description of remedies

210. Currently, EDF is developing two sites in Belgium with a view to constructing up to [1,800 – 1,900] MW of CCGT based generation capacity. One site is located at Dilsen-Stokkem and the other site is located at […]. All current assets related to these development projects are located in two separate companies, [[CCGT1 Company]] and [[CCGT2 Company]] respectively, which are both owned at 100% (minus one share) by EDF Belgium. SPE is also developing one site, in Navagne, capable of receiving generation capacity up to 850 MW site. The final decision to construct generation capacity on these sites has not been taken for any of these projects, nor have they obtained all the necessary permits

211. In order to remove the competition concerns identified by the Commission in respect of the proposed transaction, EDF has provided Commitments. The Commitments consist of:

· The immediate divestiture of the assets of either [CCGT 1] or [CCGT 2], and;

· The divestiture of the assets of the remaining of these two companies if, by a certain date, EDF has not taken a final investment decision or has taken a negative final investment decision with regard to the remaining site.

212. The combined effect of the Commitments is that a potential maximum generation capacity of up to [1,800 – 1,900] MW will be made available to the market (constituting approximately [10-20]% of the existing Belgian generation capacity). As a result, EDF considers that this completely addresses the Commission's concern regarding the potential removal of EDF as an ambitious entrant in the generation and wholesale market in Belgium.

C. Outcome of the market test on the Commitments

213. Respondents to the market test of the Commitments included mostly competitors of EDF and SPE on the Belgian electricity generation and wholesale market and on the markets for the supply of electricity to end customers.

214. Responses from market players can be considered a