2002/164/EC: Commission Decision of 7 February 2001 declaring a concentration to be compatible with the common market and the EEA Agreement (Case COMP/M.1853 — EDF/EnBW) (notified under document number C(2001) 335) (Text with EEA relevance.)
Date: 2001-02-07
Institutions: European Commission
Subjects: European Commission, application of EU law, economic concentration, electrical industry, electricity supply, merger control

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 7 February 2001

declaring a concentration to be compatible with the common market and the EEA Agreement

(Case COMP/M.1853 — EDF/EnBW)

(notified under document number C(2001) 335)

(Only the English text is authentic)

(Text with EEA relevance)

(2002/164/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the opinion of the Advisory Committee on
Concentrations, (3)

Having regard to the Treaty establishing the European Com-
munity,

Whereas:

Having regard to the Agreement on the European Economic
Area, and in particular Article 57(2)(a) thereof,

Having regard to Council Regulation (EEC) No 4064/89 of
21 December 1989 on the control of concentrations between
undertakings (1),
amended by Regulation (EC)
No 1310/97 (2), and in particular Article 8(2) thereof,

last

as

Having regard to the Commission Decision of 2 October 2000
to initiate proceedings in this case,

Having given the undertakings concerned the opportunity to
make known their views on the objections raised by the
Commission,

(1) On 31 August 2000, the Commission received a notifi-
cation pursuant to Article 4 of the Council Regulation
(EEC) No 4064/89 (the Merger Regulation) of a proposed
concentration whereby the undertaking Electricité de
France (EDF), France, alongside Zweckverband Obersch-
wäbische Elektrizitätswerke (OEW) acquires within the
meaning of Article 3(1)(b) of the Merger Regulation joint
control of the undertaking Energie Baden-Württemberg
AG (EnBW).

(2) On 2 October 2000,

the Commission decided,

in
accordance with Article 6(1)(c) of the Merger Regulation
and Article 57 of
to initiate
proceedings in this case.

the EEA Agreement,

(1) OJ L 395, 30.12.1989, p. 1; corrected version in OJ L 257,

21.9.1990, p. 13.

(2) OJ L 180, 9.7.1997, p. 1.

(3) OJ C 53, 28.2.2002.

(3)

The hearing took place on 20 and 21 December 2000.

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(4)

The Advisory Committee discussed the draft of this
Decision on 31 January 2001.

(9)

In 1999,
the Land Baden-Württemberg organised a
tender for the purpose of the sale of its shares in EnBW.
EDFI won the tender and acquired 25,005 % of the
shares in EnBW. EDFI has since increased its share in
EnBW to 34,5 % and has thus reached parity with OEW
under the Shareholder Agreement.

I. THE PARTIES AND THE OPERATION

(5)

EDF is a wholly State-owned company which is active in
all fields of supply and transport of electricity in France.
It is the operator of the national transmission grid.
Through its subsidiary EDF International (EDFI), a hold-
ing company, EDF has shareholdings in electricity
companies in many European countries, including Aus-
tria, Belgium, Italy, Luxembourg, Netherlands, Portugal,
Spain, Sweden, Switzerland and the United Kingdom.
The most
in
recital 85. Outside France, EDF is also active in electricity
(EDFT), which is
trading through EDF Trading Ltd.
jointly controlled by EDF and SA Louis-Dreyfus & Cie,
France. Furthermore, EDF is active in the construction,
operation, and maintenance of electrical plants and
power networks and provides waste recycling and street
lightening services.

important shareholdings are set out

(6) OEW is an association of nine public districts in south-
west Germany. Its main purpose is to hold shares in
companies active in the energy sectors. Through its
wholly owned subsidiary OEW Beteiligungsgesellschaft
mbH, OEW holds 34,5 % of the shares in EnBW.

II. CONCENTRATION

(10) As a result of the proposed concentration, EnBW will
become a joint venture jointly controlled by EDFI and
OEW. EDFI and OEW together hold the majority of the
voting rights in EnBW. The Shareholder Agreement sets
out binding rules concerning the exercise of the voting
rights and the influence on EnBW with respect to its
market strategy and commercial policy, and provides for
a joint decision making procedure,
in form of vote
pooling. Vote pooling will ensure the uniform exercise
of EDFI’s and OEW’s voting rights in the Shareholder
Meeting. A Shareholder Committee will ensure the
proper functioning of the vote pooling. EDFI and OEW
each delegate up to four members of the Shareholder
Committee. Before a decision is taken either by the
Supervisory Board or by the Shareholders’ Meeting of
EnBW, the Shareholder Committee will deal with the
matter. If unanimity cannot be reached in the Share-
holder Committee, EDFI and OEW must vote against the
resolution proposed at Supervisory Board or Shareholder
Meeting level.

(11) The proposed operation, therefore, constitutes a concen-
tration within the meaning of Article 3(1)(b) of the
Merger Regulation.

(7)

(8)

EnBW is a vertically integrated electricity utility active in
all fields of supply and transport of electricity mainly in
south-west Germany. Furthermore, EnBW has activities
in electricity trading. Other business activities comprise
the supply of gas and district heating, telecommuni-
cation, waste recycling and financial services.

III. COMMUNITY DIMENSION

Prior to the proposed concentration, Landesstiftung
Baden Württemberg GmbH, a wholly owned subsidiary
of Land Baden Württemberg held 25,005 % in EnBW.
The remaining shareholders of EnBW were and still are
OEW with a stake of 34,5 %, Landeselektrizitätsverband
Württemberg (12,04 %), Gemeindeelektrizitätsverband
Schwarzwald Donau (8,82 %), Technische Werke der
Stadt Stuttgart GmbH (9,00 %) and Badischer Elektrizi-
tätsverband (5,40 %).

(12)

EDF, OEW and EnBW had a combined aggregate world-
wide turnover of more than EUR 5 000 million in 1999
(EUR 32 057 million for EDF, EUR 57 million for OEW
and about EUR 4 111 million for EnBW). EDF and
EnBW each had an aggregate Community-wide turnover
in excess of EUR 250 million in 1999 (EUR
30 484 million for EDF and EUR 4 040 million for
EnBW). Neither EDF nor EnBW achieve more than two-
thirds of its aggregate Community-wide within one and
the same Member State. The notified operation therefore
has a Community dimension within the meaning of
Article 1(2) of the Merger Regulation.

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IV. COMPETITIVE ASSESSMENT

A. RELEVANT PRODUCT MARKETS

(13) The proposed concentration has to be seen against the
background of the state of liberalisation of the electricity
markets in France. The French Electricity Law of 10 Feb-
ruary 2000 (4) (‘the Electricity Law’) has been adopted in
order to implement
the
European Parliament and of the Council of 19 December
1996 concerning common rules for the internal market
in electricity (5).

the Directive 96/92/EC of

(14)

to Article 22 of

the Electricity Law,

Pursuant
the
eligible customers defined by decree in accordance with
Article 19 of Directive 96/92/EC include all French
large industrial customers with a demand per site of
16 GWh/year or more, which represents approximately
30 % of consumption in France. Since 20 May 2000
customers with a demand per site of 16 GWh/year are
eligible. On 31 August 2000, a list of 1 206 companies
was published which by this means have made known
their eligibility.

(15) A further decree is currently in preparation that will
qualify more industrial consumers as eligible customers
by lowering the 16 GWh threshold to 9 GWh/year.
Following this increase in the number of eligible cus-
tomers, the market for these customers would represent
approximately 34 % of consumption in France, i.e. an
increase of 4 % compared with the present situation.

(16)

Furthermore, Article 22 II of the Electricity Law provides
that independent authorised electricity generators which
purchase electricity for resale to eligible customers are
also considered as eligible customers. The same rule
applies to Distributeurs non-nationalisés (DNN) if they
supply electricity to eligible customers in their local
distribution and supply area.

(17) Article 12 to 16 of the Electricity Law concern the
transport of electricity. EDF is the French high-voltage
transmission system operator (TSO) responsible for
operating, maintaining and developing this system in
France. A special division, RTE, has been created in EDF
for this purpose. Its director has been nominated by
Ministerial Order. EDF and some 150 DNN are the
responsible French distribution system operators (DSO).
The DNN include the municipal and regional distribution
entities.

(18) The Electricity Law provides for a right of access to the
transmission and distribution grid (regional distribution
of electricity). France has chosen a regulated access
system. The decree regarding the conditions of access to
and use of the transmission and distribution networks,
including in particular the network usage tariffs, is under
preparation. Tariffs for the use of the transmission and
distribution networks will be proposed by the Electricity
Regulation Committee (CRE) and approved by the
minister in charge.

(19) The definition of the relevant product market for the
purposes to the assessment of the proposed concen-
tration has to take into account the current state of
liberalisation in France. A distinction should be drawn
between the supply to eligible customers that are free to
choose their supplier and the supply to non-eligible
customers, which cannot yet choose their supplier (see
also the Commission’s Decision in Case IV/M.1557 —
EDF/Louis-Dreyfus (6)). The assessment below will focus
on the supply to eligible customers.

B. RELEVANT GEOGRAPHIC MARKET

(20)

In its Decision in EDF/Louis-Dreyfus the Commission
considered the French supply market
to be clearly
in scope due to regulatory restrictions and
national
technical constraints.

(21) The Commission’s investigations in the present case
have shown that the market for the supply to eligible
customers of electricity is not larger than national.
Before the recent liberalisation of the French market, no
significant imports of electricity could take place.

(22) Moreover, to a certain extent, imports are (and will be at
least for some time) constrained by the limited character
of interconnector capacity. According to publicly avail-
able information the interconnector capacity between
France and its neighbouring countries amounts to
approximately 20 to 25 GW. However, due to technical
limitations the usable interconnector capacity is approxi-
mately 10 GW. Compared with the installed generation
capacity in France of approximately 110 GW, the import
capacity is less than 10 %.

(4) Loi no 2000 — 108 relative à la modernisation et au développement

du service public de l’électricité
(5) OJ L 27, 30.1.1997, p. 20.

(6) OJ C 323, 11.11.1999, p. 11.

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(23)

In this context, the parties submit that the available
import capacity is in reality much higher. Given the
relatively high exports from France to neighbouring
countries, a similar amount of imports would outbalance
the flow of export electricity with the result that full
installed capacity would be again available for additional
import electricity. However, this superposition effect of
import and export flows can only occur to the extent
that electricity flows in both directions take place at
exactly the same time. The increase in available capacity
due to the superposition is therefore in reality uncertain.

(27)

(24)

In 1999, approximately 4 TWh of electricity were
imported into France (7). Compared with the total con-
sumption on the French market of 430 TWh (8), the
proportion of imports was thus just under 1 %. With
electricity consumption of eligible customers accounting
for 130 TWh, the proportion of imports would have
been 3 %.

delivered to customers other than EDF. For 2000, the
market share of EDF may be slightly less since some
foreign suppliers, in particular German electricity com-
panies, were able to conclude supply contracts with
some eligible customers.

EDF’s dominant position in the market for supply to
eligible customers has to be seen in the light of its
importance as a generator in France. EDF is the principal
generator of electricity in France. Its installed generating
capacity in France of 103,5 GW comprises nuclear
(63 GW),
(17,2 GW) and hydroelectric
(23,3 GW) power stations. In 1999, EDF’s output was
469 TWh out of 500 TWh of total electricity generation,
which corresponds to a share of 93,8 %. Of EDF’s
total output 80 % derived from nuclear, 15 % from
hydroelectric and 5 % from fossil fuel power gener-
ation (9).

fossil

fuel

(25) Consequently, the geographic market for the supply of

eligible customers is France.

(28) Total consumption in France in 1999 was 430 TWh.
EDF’s total electricity supply in France was 417,6 TWh ,
which corresponds to a share of 97 %.

C. COMPETITIVE ASSESSMENT

1. DOMINANT POSITION OF EDF

1.1. EDF has extremely high market shares in the
market for eligible customers and is the main
electricity generator and supplier in France

(26)

EDF enjoys a dominant position in France as far as the
supply to eligible customers is concerned. The parties
submit in their notification that EDF accounts for more
than 80 % of the market for the supply of eligible
customers, auto production included. According to
the parties auto-generators and independent producers
generated 31 TWh in 1999. Independent production
accounted for 24,8 TWh and auto-production, which in
fact does not form part of the market, accounted for
around 6,2 TWh in 1999. At present, the consumption
of
approximately
130 TWh. Assuming that the entire auto production of
6,2 TWh was generated by eligible customers,
the
quantity delivered by the market would have been
123,8 TWh. Of this quantity, at least 117 TWh, i.e.
about 95 %, must have been delivered by EDF. Indeed,
in 1999, only 6,8 TWh produced by the independent
generators (excluding EDF and auto producers) were

customers

represents

eligible

1.2. Other electricity generators have only have a
marginal share of generation and supply elec-
tricity mainly to EDF

(29) Beside EDF there are three other electricity generators
active in France (10). Compagnie Nationale du Rhône
(CNR) has an installed generation capacity of 2,785 GW
and produces electricity on the Rhône which it, however,
sells to EDF (18 TWh in 1999). EDF holds one sixth of
the CNR share capital and nominates one out of its
30 directors. EDF has managed CNR since 1946. At
present, it is negotiating the conditions of its exit from
CNR on the basis of Article 50 of the Electricity Law.
Société Nationale d’Electricité et de Thermique (SNET) in
which EDF holds a stake of 19 %, has an installed
capacity of 2,6 GW and generated 6,8 TWh in 1999,
of which a certain amount was supplied to eligible
customers. Harpen AG, which belongs to RWE group
generates electricity in seven small-scale hydro power
plants (installed capacity: 0,57 GW). However, the entire
output of the power plants, 0,2 TWh (159,4 GWh) in
1999, is supplied to EDF.

(30) Compared with the overwhelming position of EDF in
terms of generation, the role which the three potential
independent supplier could play for the supply of eligible
customers,
is not significant. Even if both CNR and
SNET were already able to supply their entire production
to eligible customers, their common output would only

(7) Source: Unipede; Eurostat; VDEW.
(8) EDF Annual Report 1999, p. 9.

EDF Annual Report 1999, p. 8.

(9)
(10) Société Nationale des Chemins de Fer (SNCF) produces 1,5 to 2

TWh which are, however, used for its captive use.

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cover 19 % of the total French market for the supply of
eligible customers which represents some 130 TWh.
This has been also recognised by CRE in its Annual
Report where it states that
few years
competition with EDF will result much more from the
action of foreign operators than from the presence of
important producers installed in the national
terri-
tory’ (11).

‘in the next

(31) Moreover, the Electricity Law contains significant restric-
tions which further limit the margin of manoeuvre of
the independent electricity generators for the supply of
eligible customers. Article 22 IV of the Electricity Law
together with Article 2 of the Decree No 2000-1069 of
30 October 2000 provides that authorised electricity
generators can only purchase electricity for resale to
eligible customers for an amount of 20 % of their
respective installed generation capacity. This signifi-
cantly restricts the ability of the independent electricity
generators to play a more active role in the market
for supply of eligible customers. The position of the
independent electricity generators in terms of overall
production is already marginal since they represent less
than 5 % of French total production. By limiting the
volumes which independent electricity generators can
purchase in order to supply to eligible customers to
20 % of the respective generation capacity, however, it is
excluded that these companies may become a significant
supply alternative for eligible customers in the future. In
assessing the consequences of the 20 % limitation, an
expert group of ‘inspecteurs des finances’ reached the
following conclusion in a report for CRE: ‘For all that,
the clause referred to above can appear, in itself, to
constitute barriers to the trade of electricity (in relation
to both financial markets and to bilateral trades)
...
Within this framework, it seems unfavourable to those
French producers who are independent
from EDF,
insofar as it has the effect of fixing the existing hierarchy
of market shares, while preventing EDF’s competitors
from competing with EDF by completing their offers
to purchase which would enable them, justifiably, to
compensate for their modest production capacity’ (12).

1.3. The situation with regard to possible entry into

the French market

1.3.1. General

(32) The Commission’s investigations have shown that it is
impossible for newcomers to enter the French

not

(11) CRE, Activity Report, 30 June 2000, p. 7.
(12) ‘Rapport sur le mécanisme d’ajustement des flux électriques par
le gestionnaire du réseau public de transport d’électricité (GRT)
et sur la création en France d’un marché de l’électricité’, September
2000, p. 38.

market. In particular, in some instances, foreign sup-
pliers have won bids organised by eligible customers for
delivery of electricity. It remains, however, that it is still
difficult for newcomers, in particular foreign suppliers,
to start supply activities in France.

(33)

In order to become active in a foreign market, an
electricity supplier can source the electricity by using
generation capacity situated in France, by purchasing it
from another producer in the framework of trading
activities or by importing electricity produced in its own
plants abroad.

1.3.2. Difficulties in entering the French market

1.3.2.1. Newcomers have only marginal chances to gain
access to generation capacity in France

(34) Access to generation capacity in France would only
realistically be possible if EDF granted such access since
EDF is the main generator in France. The potential
three independent generators currently supply electricity
mainly to EDF or generate it for captive use. There are a
number of large industrial customers which generate
electricity for auto-production, but which are bound by
long-term contracts (12 years) with EDF for excess
production as part of the cogeneration programme (13).

(35)

for

facilities

In this respect, the parties argue that the authorisation
procedure
above
new production
4,5 MW (14) per unit, as laid down in the Electricity Law
and the Decree No 2000-877 of 7 September 2000,
enables all Community operators to set up own pro-
duction facilities in France. However, the build-up of
generation capacity is a long-term process and involves
high investments, that is to say, high sunk costs, which
cannot be used other than for generation of electricity.
Moreover, it would require customers to be prepared to
sign long-term supply contracts of 10 to 15 years in
order to secure, to a certain extent, the up-front high
investment. In addition, a spot market does not exist in

(13) In this context, CNR criticises in its Activity Report (p. 6) that
‘EDF purchase obligations — and moreover at subsidised prices
— relative to cogeneration, decided well before the 10 February
2000 law, allow this system to continue to supply EDF exclus-
ively, whereas it is one of the rare national systems capable of
being competitive on the eligible market’.

(14) The installation of new generation capacity requires an authoris-
ation from the Minister of Energy if the capacity installed exceeds
4,5 MW. Below this threshold, a simple declaration is sufficient.

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France. Therefore, excess production would be either
lost or would have to be sold to EDF. Furthermore, the
operational costs vary significantly depending on the
primary energy used for the operation of such a plant.
Fossil fuels, such as coal, oil and gas create much higher
operational costs than hydro fuels or nuclear fuels. A
power plant using fossil fuels would not be able to
compete with the low prices EDF can offer on the basis
of its nuclear generation capacity.

the main generator in France and the three potential
independent generators only account for 5 % of the total
for supply to
production. Furthermore,
eligible customers is still dominated by EDF. As long as
there is no significant competition on this market, there
are no incentives for trading activities to develop.

the market

(36) Moreover, the existing generation capacity is far from
being fully used. On the basis of EDF’s installed gener-
ation capacity, the theoretical maximum output would
be 906,6 TWh (103,5 GW * 24 hours * 365 days) per
year. This would amount nearly to the double of EDF’s
total generation in 1999 which was 469 TWh. In the
past, the development of generation capacity was driven
by forecasts based on very optimistic assumptions on
future growth of demand, which did not materialise.
This is confirmed by CRE in its Annual Report where it
states that ‘in accordance with the trend observed in
Europe, but which is much more evident in France,
production seems able to meet the foreseeable change
in the demand without requiring additional investments
in capacity ... The competitivity of power stations now
largely paid for generally makes the installation of new
significant capacities not economically justifiable in the
coming few years. This situation, to which must be
added the consequences of the historic monopoly of
EDF which produces about 97 % of total consumption
explains why the development of competitivity in
France, with the eligibility thresholds now reached, will
probably not include the installation of new capacities
in competition with those of the historical operator’ (15).

(38)

In addition, the three potential independent generators
are limited in their purchasing activities as trader/suppli-
er. The volumes they can purchase are limited to 20 %
of the respective generation capacity, as set in recital 31.
This again contributes to the fact that trading activities
are likely to remain minimal. In this respect, CRE in its
Annual Report has stated with respect to the supply to
eligible customers that ‘the methods of creating and
operating this market must be analysed later with respect
to the legislative or regulatory provisions applicable,
especially those aiming at putting a ceiling on the
amount of electricity producers are authorised to buy
with a view to reselling to eligible clients. Depending on
the level at which it is set, this ceiling may lead to
limiting the trade of electricity, hence the capacity of
eligible clients to diversify their suppliers’ (16). Purchasing
electricity from another producer in the framework of
trading activities, therefore,
is currently not a viable
sourcing alternative in France.

(39)

ParisBourse wants to launch a spot market for the trading
of hourly and daily blocks of electricity. However,
ParisBourse’s attempt to create a trading market is not
yet in place and, therefore, has no practical impact.

1.3.2.2. Newcomers have only marginal chances to purchase

electricity in the framework of trading in France.

1.3.2.3. Newcomers face difficulties when entering the

French market via imports.

(37) Trading of electricity at wholesale level requires liquidity,
that is to say, an environment where producers are able
to sell sufficient quantities to traders. In France, the
competitive structure is not favourable for liquidity,
Indeed, EDF is
which is thus unlikely to develop.

(40)

In view of the current state of the French market, foreign
suppliers, who wanted to supply electricity to eligible
customers in France, have, to date, chosen the option of
importing electricity from abroad and using the French
grid for transmission of electricity to the customer’s site.
However, the current conditions for transmission still
make it difficult for foreign suppliers to supply eligible
customers with electricity imported across the intercon-
nectors.

(15) CRE, Activity Report, 30 June 2000, p. 9.

(16) CRE, Activity Report, 30 June 2000, p. 21.

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(41) Customers insist on having only one supplier responsible
for the entire electricity supply. A full service contract
comprises the provision of energy and balancing power.
For the latter, however, EDF is the only supplier in
France be it directly or indirectly via the network
operator, RTE. Since it is usually unattractive for eligible
customers to conclude a separate contract with the
supplier of balancing power because of additional costs
involved for the contract management, foreign supplier
also need to purchase balancing power. In this respect,
it should be noted that RTE has recently organised an
auction with regard to the supply of energy required to
compensate losses occurring on the transport network.
RTE has announced that it will carry out a similar
auction for balancing power in the near future. It is
however uncertain when such an auction will actually
take place.

(42)

In France, suppliers other than EDF were initially
forced to purchase balancing power for each individual
customer and could thus not avail themselves of the
advantages normally inherent in bundling of customers
in energy balancing groups, thus limiting the need to
buy balancing power. In view of the fact that the amount
of balancing power needed could only be roughly
estimated, the foreign supplier needed to purchase a
sufficient quantity to be safe. If the balancing power was
not needed, however,
the foreign supplier had no
possibility to re-use the balancing power elsewhere. In
consequence, the price for the balancing power had the
potential to increase the final price for electricity to non-
competitive high levels. Furthermore, no provision is
made for refunding in case of excess in input of
electricity into the grid in France.

(43)

Since 1 November 2000 RTE has established a system
that allows all suppliers to aggregate consumption by
different customers. Foreign supplier are now, in theory,
able to balance the fluctuation of
their customer’s
consumption. However, as long as foreign suppliers
have not overcome the other barriers to entry and
won a sufficient number of customers to effectively
outbalance existing fluctuations on consumption, the
possibility of forming energy balance groups will prob-
ably not deliver significant benefits.

1.3.2.4. The overwhelming position in electricity generation
in France allows EDF to outbid competitors trying
to enter the French market

(44) The Commission asked EDF to provide the number of
bids launched by eligible customers where EDF was
competing with foreign suppliers in the period from
May 2000, that is to say, since the liberalisation entered
into force in France. Table 1 shows the outcome of those

bids based on the figures submitted by EDF. In its reply
to the Statement of Objections EDF stated that these
figures may not be exhaustive because there might have
been further bids also involving foreign suppliers.

Table 1

Outcome of bids based on EDF figures

Ongoing/not decided

Won by EDF

Lost by EDF

Total

Number
of bids

42

65

33

Rate

30 %

47 %

23 %

140

100 %

(45) Table 2 shows figures obtained by the Commission
during its investigation based on the replies by foreign
electricity suppliers.

Table 2

Outcome of bids based on replies by foreign electricity
suppliers

Ongoing /not decided

Won by foreign companies

Lost by foreign companies

Total

Number
of bids

52

48

437

537

Rate

10 %

9 %

81 %

100 %

(46) Table 1 demonstrates that EDF is able to win a significant
amount of bids submitted to eligible customers. EDF
won in almost half of the bids, 47 %, and has lost in less
than 25 % of the bids. The picture is even clearer when
the figures obtained by the Commission in the course of
the investigation are taken into account. Foreign sup-
pliers, which bid in the French market
to eligible
customers were only successful in approximately 9 % of
total bids.

(47) According to EDF, only limited information was avail-
able on the number of bids made to eligible customers.
This information is set out in Table 1. All foreign

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suppliers, however, submitted all available information
on bids. This information is set out in Table 2 and was
not contested by EDF in its reply to the Statement of
Objections. It can, therefore, be considered a valid basis
for the Commission’s assessment. Moreover,
in the
absence of any French supplier of any importance other
than EDF, it can be assumed that these bids, which were
lost by foreign suppliers, or at least a vast majority of
them were won by EDF. This can largely be confirmed
by the bidding lists submitted by the foreign suppliers.

Table 3

Average prices to eligible customers

Period

Minimum
consumption
level of
eligible
customers
(GWh/year)

Average
price
to eligible
customers
(EUR/MWh)

Average
price
submitted
in bids to
eligible
customers
(EUR/MWh)

1.1–30.4.2000

1.5 – November 2000

100

16

[25–35] *

—

[30–40] *

[20–30] *

* Parts of this text have been edited to ensure that confidential
information is not disclosed; those parts are enclosed in square
brackets and marked with an asterisk.

(48) The ability of EDF to systematically outbid foreign
suppliers is further supported by the fact that there is no
transparent average market price in France. In fact, EDF
can significantly influence the price for electricity supply
to eligible customers. EDF as an integrated monopoly
company is able to respond to competition challenges
in the market for eligible customers by moving margins
from eligible customers to the sector of customers which
cannot freely choose their supplier. In this respect, EDF
argued at the Hearing that cross-subsidies are prohibited
by law and the regulatory framework. The tariffs are
approved by the Minister after opinion by the CRE and
the tariffs are subject to a price cap, covering full costs
of supply. However, a price cap in no way excludes
profitable margins for the supplier. Furthermore, the
existence of cross-subsidies cannot be easily proved. The
fact that cross-subsidies are a real danger has been also
recognised by CRE in its Annual Report where it is
stated that ‘it is difficult to regulate a dual market
since captive consumers must not subsidise the eligible
consumers and competition imbalance must be avoided
on the eligible consumer market’ (17).

(50) The data in Table 3 prove that EDF’s average price for
eligible customers is higher than the prices offered to
eligible customers in order to outbid a foreign supplier.
The replies of those competitors which participated in
bidding procedures also confirm that EDF matched the
prices offered by foreign suppliers in order to keep its
customers. CRE, in line with these conclusions, states in
its Annual Report: ‘As of 1 June 2000, the number of
eligible clients having changed supplier was low but a
certain number of
from EDF,
significantly lower prices after having checked with
various competitive suppliers’ (18).

them have obtained,

2.

STRENGTHENING OF EDF’S DOMINANT POSITION

(51) The proposed concentration will strengthen EDF’s domi-
nant position on the market for eligible customers in
France since it will eliminate EnBW as a potential
competitor on the French market, it will heighten EDF’s
increase
the retaliation potential
EDF’s foothold in Switzerland and eliminate Watt as
potential competitor and it will strengthen EDF’s pos-
ition as a Pan-European supplier.

in Germany,

it will

(49) During the in-depth investigation EDF supplied price
data concerning its average prices for eligible customers
as well as prices submitted to eligible customers in the
context of bids during 2000. Those figures are shown in
Table 3.

2.1. There are incentives of foreign suppliers to enter

the French market

(52) There is a strong incentive for foreign suppliers to be
active in France. This is illustrated by the participation

(17) CRE, Activity Report, 30 June 2000, p. 4.

(18) CRE, Activity Report, 30 June 2000, p. 9.

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of such suppliers in numerous bids for the supply to
eligible customers. As far as German suppliers are
concerned it is worth noting that, due to the liberalis-
ation in Germany, the electricity price for industrial
customers is generally not higher than in France. In fact,
for certain customers prices in France appear to be higher
than in Germany (19). Therefore, German electricity
generators can make competitive offers to eligible cus-
tomers in France and also have a strong incentive to
become active in France, in particular since France is the
second largest market in the Community.

four (22) Franco-German interconnectors are in the
EnBW supply area. EnBW has approximately 1,2 GW
interconnector capacity. With that amount of capacity
EnBW could export up to 10,5 TWh to France. Together
with the [<10]* TWh, which EnBW receives, inter alia
through its participations in EDF’s generation park,
EnBW could supply [10-20]* TWh to eligible customers
in France. According to these figures, approximately [5-
15]* % of consumption by the French eligible customers
could be supplied by EnBW.

(53) This incentive is further supported by a tendency
towards pan-European supply contracts, that is to say,
for the supply of large business customers in more than
one Member State. The Commission’s investigations
have confirmed that there is an increasing demand for
such contracts. There are, of course, still significant
limitations for a customer to have one and the same
supplier all over the Community due to the different
levels of liberalisation. However,
large business cus-
tomers are increasingly interested in being supplied by
one and the same supplier in more than one Member
State. This is in particular true for those customers
with sites which meet the varied national requirements
allowing them to choose their supplier. Such contracts,
of course, also include the supply to companies or sites
situated in France. In order to be able to make offers to
multi-site customers with subsidiaries in France, it is
essential to be active in that market.

2.2. EnBW is one of the potential competitors par-
ticularly well placed to enter the French market

(54)

(55)

EnBW is one of the six electricity suppliers at intercon-
nected level in Germany which generate and supply
energy and maintain the high voltage grids. It is the
fourth largest German electricity utility after E.ON (20),
RWE/VEW and VEAG for electricity supply at intercon-
nected level and the third largest for electricity supply as
a whole in Germany.

EnBW’s supply area is in south-west Germany and has a
long common border with France, EDF’s supply area.
EnBW is the owner of the high voltage 380/220 kV
transmission grid in its supply area with a length of
3 500 km (21). Beside RWE, EnBW is the only German
interconnected electricity company that has intercon-
the
nectors between France and Germany. Two of

(56) According to the parties, EnBW’s geographic proximity
to EDF does not confer a competitive advantage on
EnBW. The parties argue that cost and prices of elec-
tricity supplied to customers in France do not differ
materially depending on whether the electricity orig-
inates from EnBW or from an operator, such as E.ON,
even though the latter is bound to transit either the
EnBW or RWE/VEW area, on its way to France.

(57) That assertion is not correct. In Germany, transmission
fees are payable for transmission through grids that are
owned by other electricity companies at interconnected
level. Electricity generators, whose transmission grids
are not in the direct neighbourhood of the French
market, have a disadvantage compared to those with
grids along the French border, such as EnBW or
REW/VEW. As
explained the Decision in Case
COMP/M.1673 — VEBA/VIAG (23), the grid owners are
able to apply tariffs to their competitors which are not
fully transparent, and it is thus not possible in all cases
to detect actual discrimination against these competitors.

(58) As regards electricity exporters situated in countries with
no border with France, they would need to pay additional
costs, in particular when crossing the borders from third
countries to France via Germany or Belgium. Therefore,
EnBW’s geographic proximity to EDF confers a cost
advantage in comparison to the said categories of
suppliers.
In this respect, a strategic paper on the
acquisition of ENBW (24) prepared by EDF states, as the
first point of the commercial advantages which joint
control over EnBW would confer to EDF that ‘EnBW
will bring with it direct, border access’. If EDF considered
the geographic situation of EnBW’s supply area on the
German-French border
to be competitively advan-
tageous for its strategic expansion in the German market,
this situation should also confer analogous advantages
on EnBW when looking at the French market.

(19) Prix du gaz et de l’électricité en Europe, Edition October 2000,

p. 8.

(20) E.ON is the result of the VEBA/VIAG merger.
(21) EnBW own estimates.

(22) There is a fifth interconnector in the RWE supply area which is

normally out of operation.

(23) VEBA/VIAG, Decision of 13 June 2000.
(24) EnBW Energie Baden-Württemberg (Allemagne): Acquisition
d’une participation de 25,01 % dans le cadre d’une offre portant
sur 34,01 %, p. 11.

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Official Journal of the European Communities

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(59)

Furthermore, EnBW has access to generation capacity
situated in France under a number of contractual long-
term agreements with EDF including certain capacity
reservations of the French nuclear power plants Fessen-
heim ([...]*) and Cattenom ([...]*) as well an agreement
providing for supply of base load power and of ad hoc
peak load power from EDF to EnBW. In 1999, EnBW
received [...]* TWh from Fessenheim and [...]* TWh from
Cattenom and [...]* TWh base load from EDF.

(60) According to the parties, EnBW receives on average a
total of [<10]* TWh per year under all existing agree-
ments between EDF and EnBW. The quantities are as a
rule made available to EnBW at the Franco-German
interconnector of Sierentz/Kuhmoos. According to the
notification, EnBW uses the imports to supply its
German customers. However, there are no legal or
contractual impediments which would prevent EnBW
from supplying the quantities received from EDF to
eligible customers in France. This was explicitly con-
firmed by representatives of both EDF and EnBW in a
meeting with the Commission on 17 November 2000.

(61) The parties argue that RWE/VEW, E.ON, Electrabel and
other Community-situated electricity companies are
considerably larger than EnBW and accordingly are
more likely to have the financial strength, resources and
planning ability to sustain entry of the French market for
eligible customers. In their view, even after optimising its
production capacity, EnBW would have insufficient
capacity for its own market. EnBW generates some
40,5 TWh and sells some 55 TWh buying the difference
from various sources including EDF.

(62)

In view of the replies received from the Community-
situated electricity generators, however, existing pro-
duction capacity or surplus in production is not a
decisive element when considering entry to the French
market. In particular in Germany, the electricity gener-
ators can sell their over-capacity production to the
electricity exchanges or to other electricity generators at
interconnected level on a bilateral basis. If an electricity
company decides to deliver electricity to the French
market, it can therefore do so by purchasing the amount
of electricity required from either the trading market or
other producers. It, therefore, can be concluded that
own surplus generation is not necessarily a decisive
advantage of large utilities in comparison with EnBW.

difficulty in entering the French market lies in the
limited interconnector capacity of approximately 1 GW.
German suppliers other than RWE/VEW have no direct
access into France. Therefore,
it appears that only
RWE/VEW and Electrabel are as well placed as EnBW.
However, neither RWE/VEW nor Electrabel have com-
parable access to generation capacity in France to that
of EnBW. RWE/VEW has access to generation capacity
in France via Harpen AG. However, Harpen AG’s
production is marginal (0,2 TWh) and, in addition, the
entire output
is supplied to EDF. Electrabel has a
participation in the nuclear production units of CHOOZ
B and Tricastin in France, which date from 1984 and
1975 respectively. Since these contracts were based on
an equivalent participation of EDF in the Belgian nuclear
production unit of Tihange, the production of the French
units is not available for supply in France.

(64)

It can therefore be concluded that EnBW would be one
of the strategically best-placed companies to enter the
French market for supply to eligible customers. Since
one third of EnBW’s potential supply to eligible cus-
tomers (see recital 55) originates from French pro-
duction, EnBW does not have to pay cross-border
transmission fees for these quantities. In this respect,
EnBW’s position is unique compared with that of all
other competitors.

2.3. Without the present operation EnBW should
have a strong incentive to enter the French
market

(65)

(66)

For the purposes of entering the French market, EnBW
would profit not only from its competitive potential and
its geographic situation, which make it one of the best-
placed candidates, but also from the tendency towards
pan-European supply. Industrial customers in EnBW’s
supply area comprise important German companies
active in electric and metal-using industries as well as
companies in the mechanical engineering industry with
further production sites in the Community.

EnBW has created local subsidiaries in Austria, the
Italy, Poland and Spain (25).
Netherlands,
It already
supplies [...]* of its large industrial customers in the
framework of ‘Pan-European supply contracts’ in more
than one Member State. The most important of such
In EnBW’s view suitable
supply contracts are [...]*.
customers for Pan-European supply contracts are large
industrial customers with several production sites or
premises in at least two European countries. In EnBW’s
view, the minimum consumption per site to be con-
sidered for a Pan-European supply contract should be 5
to 10 GWh. [...]* of EnBW’s present customers would
already qualify under these criteria for Pan-European
supply contracts.

(63) Other candidates for potential entry into France are
situated in Germany, Belgium and Spain. As far as
foreign suppliers from Spain are concerned, the major

(25) EnBW, Annual Report 1999, p. 28.

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(67)

EDF and EnBW have traditionally close cooperation due
to their neighbouring locations in a number of electricity
fields, including joint operation of generation utilities
and transport of electricity generated by EDF through
EnBW’s network for export to Switzerland, Italy and
Austria.

and HEW from pursuing aggressive competition in the
market for supply to eligible customers in France. Since
those competitors do not have a similar potential for
retaliation in France, they would be further discouraged
from aggressively challenging EDF’s position in France.

(68) The parties argue that given the longstanding links
between the two companies, it would be unrealistic to
expect EnBW to actively try and challenge EDF’s market
position in France. However, these links are not sufficient
to rule out the possibility that EnBW would become
active in France and compete with EDF, if it were not
controlled by the latter. This view is further supported
by the fact that EnBW has already participated in bids
launched by French eligible customers.

2.4. By acquiring EnBW, EDF would become in

general less exposed to competition in France

(69) The proposed concentration will increase EDF’s potential
for retaliation in Germany. EDF enjoys a very strong
position in the market for supply to eligible customers
in France. The acquisition of EnBW, however, confers
on EDF the possibility to be active on the fully liberalised
German market via an existing highly aggressive com-
petitor, whilst EDF’s position in its ‘home’ market,
France,
is still well protected due to its very strong
position in the French market in terms of capacity and
secured (non-eligible) customers.

(70)

EnBW’ s importance in Germany is also illustrated by
the fact that,
in June 1999, EnBW became the first
German power utility to offer its standard-rate customers
a choice of different electricity prices. EnBW, through its
subsidiary Yello Strom GmbH (Yello Strom), has made a
substantial contribution to opening up the German
market for supply to small customers to competition.
Yello Strom will launch a similar competitive initiative
for large and small industrial customers.

(72)

In this context, the parties argue that no EDF policy
exists to launch retaliation campaigns in Germany nor
will such policy exist in the future. However, in the
course of the Commission’s investigation several com-
petitors stated that EDF’s increased potential for retali-
ation would be one of the major consequences of
the proposed concentration. Furthermore, EnBW itself
indicated in a meeting with the Commission and rep-
resentatives of EDF on 17 November 2000 that, even in
the current situation, EnBW would have to take into
consideration the possibility of retaliation by EDF in
Germany if EnBW entered the French market to any
significant extent. It is clear that such a strategy, which
is already anticipated by EnBW, would be much easier
and would have much stronger effects if EDF had a
strong foothold in Germany following the proposed
concentration.

(73) At the Hearing OEW stated, that following the concen-
tration, EnBW will not be under the sole control of EDF,
but will be jointly controlled by EDFI and OEW and that
OEW’s participation in EnBW would be a sufficient
safeguard against any possible retaliation by EDF in
Germany following the transaction.

(74)

It is true that following the concentration EnBW will be
jointly controlled by EDF and OEW. However, pursuant
to the Shareholder Agreement EDF is the sole industrial
partner whereas OEW will be the regional partner. [...]*.
As long as OEW’s regional interests and its profit interest
are sufficiently respected, it appears very unlikely that
OEW has, be it, an incentive to actively oppose the
[...]*.
business strategy EDF chooses within EnBW.
Moreover, strategies of retaliation do not necessarily
affect any of the said interests. Therefore, it remains that
the proposed concentration would also lead under the
aspect of an increased potential for retaliation to a
significant strengthening of EDF’s dominant position in
France.

2.5. Through EnBW’s controlling shareholding in
WATT, EDF would considerably strengthen its
foothold in Switzerland

(71) Before the transaction, EDF was less able to counter
market entry by German interconnecting companies in
France by launching retaliation campaigns in Germany,
since EDF was not present on the German market. After
the transaction, however, EDF will be in a position to
use its presence in Germany at least to a certain extent
in order to deter actual competitors such as RWE, E.ON

(75)

In Switzerland,
there are seven vertically integrated
‘U¨ berlandwerke’: Atel (Aare-Tessin AG für Elektrizität,
Olten), BKW (BKW FMB Energie AG, Bern), CKW
(Centralschweizerische Kraftwerke AG, Luzern), EGL
(Elektrizitätsgesellschaft Laufenburg AG, Laufenburg),

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EOS/Energie Ouest Suisse, Lausanne), EWZ (Elektrizitäts-
werk der Stadt Zürich, Zürich) and NOK (Nordost-
schweizerische Kraftwerke AG, Baden). These companies
are the transmission system operators which operate the
Swiss transmission grid, with a total circuit-length of
6 633 km. ETRANS AG is the system coordinator in the
Swiss transmission grid. The seven ‘U¨ berlandwerke’ have
the following shares in ETRANS AG based on their
respective share of the Swiss transmission grid: Atel
(18,8 %); BKW (11,5 %), CKW (5,0 %), EGL (13,2 %),
EOS (14,5 %), EWZ (12,9) and NOK (24,1 %).

(76) The parties declare that EDF has no controlling share-
holding in Atel (26). However, EDF has enjoyed a close
commercial relationship with Atel for a long time. This
relationship is in particular based on various long term
In
supply agreements between the two companies.
1999, Atel generated 7,6 TWh and sold 29 TWh, of
which 80 % were exported (55 % went to Southern
Europe, in particular Italy). Atel accounts for 40 % of
Swiss exports and 32 % of Swiss imports. In 1999,
22 TWh were imported into Switzerland from France.
The bulk of EDF’s electricity exports to Switzerland were
not sold to Swiss clients but were re-exported.

(77)

EnBW, Bayernwerk AG (E.ON) and NOK jointly control
Watt AG (27) (WATT). EnBW and E.ON each have a

stake of 24,5 % and NOK has a stake of 34,5 %, the
remaining 16,5 % are held by Crédit Suisse S.A. WATT
holds controlling stakes in two out of the seven ‘U¨ ber-
landwerke’ EGL and CKW as well as in two other
electricity companies KWL (Kraftwerk Laufenburg) and
KWR (Kraftübertragungswerke Rheinfelden).

(78)

In 1999, EGL and CKW sold around 21 TWh and
4 TWh respectively, which corresponds to more than
the Swiss U¨ berlandwerke.
1/3 of
NOK, which is not in competition with Watt and its
subsidiaries, sold around 21 TWh in 1999.

the total sales of

(79) As a result of the proposed concentration, EDF would
considerably strengthen its foothold in Switzerland by
obtaining a controlling stake in WATT (and, indirectly, in
WATT’s subsidiaries). Furthermore, this new acquisition
would enable EDF to control nearly half of the Swiss
interconnectors in terms of total numbers and more
than 50 % of total interconnector capacity.

(80) There are 36 interconnectors between Switzerland and
its neighbouring countries. Table 4 shows the ownership
of interconnectors in Switzerland and the respective
interconnector capacity.

(81)

Table 4

Interconnectors between Switzerland and its neighbouring countries

Company

Number
of interconnectors

Percentage

EGL

Atel

EOS

NOK

BKW

KWB

RHOW

AWAG

16

5

6

3

2

2

1

1

44 %

14 %

16 %

8 %

5 %

5 %

4 %

4 %

Transmission
capacity (MW)

13 765

4 854

3 854

2 001

1 435

396

240

53

Percentage

51,8 %

18,3 %

14,4 %

7,5 %

5,4 %

1,5 %

0,9 %

0,2 %

(82) Due to its geographical position, its high voltage connec-
tions to France, Germany, Italy and Austria and the

(26) EDF through EDFI and RWE each have a 20 % participation in
Motor Columbus, a holding company with a majority stake
(56,6 %) in Atel. In addition, EDF has a direct participation in Atel
of 1,2 %. The remaining shareholders in Motor Columbus are the
Swiss Bank UBS with a share of 37,2 % and other institutional
investors which have together 22,8 %. EDF and RWE are, therefore,
the only shareholders in Motor Columbus which have a strategic
commercial interest. They are both represented in the Conseil
d’Administration of Motor Columbus and of Atel.

(27) See Commission Decision of 4 December 1997 in Case IV/M.

958 WATT AG II, (OJ C 116, 16.4.1998, p. 2).

flexibility of Swiss hydraulic power, Switzerland is a
turntable for peak load for its own and other European
utilities’ seasonal and daily requirements. In this respect,
Switzerland is particularly important for French elec-
tricity supply of peak load. 80 % of EDF’s total output in
1999 was generated in nuclear power stations. Nuclear
power generation is steady and, therefore, suitable for
base load. However, nuclear power generation is also
rather inflexible and thus not suitable to satisfy peak
load demand. Electricity exports from Switzerland to
France account especially for peak load, exports from
France to Switzerland, however, mainly for base load.

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(83) Through the proposed concentration EDF would be in a
position to control a large part of the Swiss generation
and supply of peak load. Competitors which want to
supply eligible customers in France need to provide base
load as well as peak load. Where such competitors are
not able to satisfy peak demand themselves, they need
arrangements with other suppliers for peak load,
in
particular Swiss suppliers. The proposed concentration
will considerably restrict the choice of Swiss peak load
supply for such suppliers.

directly to French eligible customers as well as to other
suppliers of such customers. However, following the
concentration, such competition would be excluded on
a lasting basis. EDF’s dominant position in France would
therefore be strengthened.

2.6. The acquisition of joint control over EnBW
would significantly contribute to EDF’s out-
standing position as Pan-European supplier

(84)

Furthermore, the proposed concentration would also
lead to the elimination of EGL as a potential competitor
in the French market. EGL is currently approaching
eligible customers in France. In this respect, EGL would
be able to supply the full range of electricity products

(85) Throughout the last years, EDF, through EDFI, has
systematically acquired participations, either directly or
as part of investment consortiums,
in the fields of
power generation, transmission and distribution all over
Europe. Table 5 shows that EDF is already active in a
number of Member States.

Table 5

EDF’s presence in Member States

Country

Company

Participation of EDFI

Austria

Spain

Italy

Portugal

Sweden

Estag

Elcogas

Ise

Tejo Energia; Pegop; Carbopego

Granninge

25 % held via SIA a joint venture
between EDFI (80 %) and Gaz de France
(20 %) (IV/M. 1107)

29,13 %, main remaining shareholders
are Endesa (30,53 %), and Iberdrola
(11,1 %)

75 % held via Finel a joint venture
between EDFI (40 %) and Edison (60 %)
(IV/M. 568)

Tejo Energia; Pegop 10 % Carbopego 1/3
as part of a consortium with National
Power and Endesa

34,2 % together with its subsidiary
Skandrenkraft (IV/M. 1169)

United Kingdom

London Electricity-Sweb

100 % (IV/M. 1345, IV/M. 1606)

(86) Table 5 shows that EDF already has access to a number
of different markets in the Community. This is true at
least for the cases where EDF has either sole control or
joint control over national electricity suppliers. However,
EDF is not present in Germany which is the most
important market in Europe. Following the proposed
concentration, EDF would have a strong foothold in
Germany and would be in a unique position to offer
truly Pan-European services to industrial and commercial
customers.

(87)

EDF’s dominant position in France makes it very difficult
for any other European supplier to provide such service
at the same level as EDF would be able to do. Firstly,
foreign suppliers can only supply electricity to their
customers in France where those customers have a
demand per site of 16 GWh/year or more. If customers
have a demand per site below 16 GWh/year, they cannot
choose to be supplied by their foreign suppliers since

they are still supplied by EDF exclusively. Where, for
instance, such customers have different production sites
in France with demand which differs according to the
site, some sites below and some sites above 16 GWh/
year, only EDF would be able to offer a true multi-site
supply to such customers. This significantly restricts the
possibilities for foreign suppliers to offer multi-site
supply to their customers situated in France. Secondly,
foreign suppliers face
as described in section 1.3,
significant difficulties where they supply eligible cus-
tomers in France. Therefore, foreign suppliers are still at
a great disadvantage if they want to offer multi-site
supply to their customers in France.

(88)

France has a strategic position in Europe, due to its
the United Kingdom,
interconnections with Spain,

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Belgium, Germany, Switzerland and Italy. When, for
example, German suppliers are requested by their cus-
tomers to supply sites in the United Kingdom or Spain,
they would have to transit electricity through France. The
Commission’s investigations revealed that the difficulties
faced by such transits are such that competitors are not
in a position to supply such customers if they do not
manage to purchase electricity locally.

production, EDF undertakes
to purchase, between
1 April 2001 and 1 April 2006, upon request of CNR,
part of its production. The quantities to be so purchased
as well as the purchase price will be the subject of a
contract to be concluded between EDF and CNR prior
to 31 March 2001 in accordance with the joint declar-
ations of 15 January 2001.

(89)

EDF, by contrast, is already in a very different situation.
It is still the dominant operator in France. Through a
policy of systematic strategic acquisitions EDF has
managed to be active in nearly all Member States, in
particular in fully liberalised markets such as the United
Kingdom, at a time where foreign competitors could
not, in turn, enter the French market. However, before
the proposed concentration, EDF’s presence outside
France had a significant gap since it had no foothold in
Germany. The acquisition of joint control over EnBW
and its strong Yello Strom brand in Germany would
close this gap. It would further strengthen EDF’s position
as a Pan-European supplier and, thus,
its
dominant position in the French market for supply to
eligible customers.

indirectly,

(92)

EDF undertakes to renounce the exercise of its voting
rights in CNR and to withdraw its representative from
the CNR board of directors. A trustee will act as a
caretaker of EDF’s shares in CNR.

Access to generation capacities in France

(93)

EDF undertakes to make available to competitors access
to in total 6 000 MW generation capacities located in
France, 5 000 MW in the form of virtual power plants
(VPP) and 1 000 MW in the form of back to back
agreements to existing cogeneration power purchase
agreements.

V. COMMITMENTS SUBMITTED BY THE NOTIFYING PAR-
TIES AND MODIFICATIONS TO THE OPERATION

Virtual power plants

COMMITMENTS

(90) The notifying parties submitted commitments in order
to remove the competition concerns identified by the
Commission. In summary, the commitments comprise
the following elements:

Relations with CNR

(91) CNR will, as from 1 April 2001, be put in a position so
as to ensure on its own both the operation of its power
plants and the commercialisation of
the power so
generated. EDF and CNR have signed common declar-
ations setting out the contractual framework to render
CNR a fully independent electricity producer. EDF
undertakes to conclude with CNR by 31 March 2001 at
the latest binding agreements, which will implement
these declarations. For commercialisation of the elec-
tricity generated EDF undertakes not to make any claim
to the electricity generated by CNR or part thereof as
from 31 March 2001. However, in order to allow CNR
to develop progressively the marketing of its entire

(94) The VPP will comprise 4 000 MW of baseload and
1 000 MW of peakload capacity. Both baseload and
peakload VPP will be offered simultaneously, but separ-
ately. The VPP contracts will have the duration of three
months, six months, one year, two years and three years.

(95) VPP contracts will be awarded through an open, non-
discriminatory public auction. The auction will be open
to energy utilities and energy traders. Entrants will bid
for an integer number of MW of capacity, the smallest
bid being 1 MW. Bids will be grouped according to plant
type disregarding the duration of the contract. Within
each group, bids will be sorted in descending order
according to their spread in relation to reference value
fixed by EDF. The reference value will reflect EDF’s
estimates of the French wholesale power market. This
reference value is not a reserved price and spreads may
be negative. The values will be communicated to the
trustee before the invitations to bid are announced.

(96) Capacity will be awarded to bidders according to their
rank until the auctioned capacity volume is reached.
Bidders who bid for a mix of baseload and peakload
plants will have the option to withdraw their bids if they
are not awarded the plant portfolio of their choice.
When bids are withdrawn, the corresponding capacity
will be awarded to non-selected bidders according to
their rank.

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(97)

Successful bidders will buy x MW of generation capacity
from EDF for EUR y MW/year (capacity price). Over the
duration of the contract, the buyer has the right to call
upon EDF at any time in order to request delivery of up
to x MW. The required load curve has to be notified one
day ahead at 12 noon.

offered in back-to-back contracts grouping a number of
existing co-generation contracts. The first back-to-back
contracts will be for a duration of 12 months. Contracts
over two and three years will be considered if demand
for such contracts develops.

(98) The buyer will pay EDF EURz/MWh for the electricity
consumed (energy price). In the case of baseload virtual
plants, the energy price reflects nuclear variable costs of
a power plant operated by EDF in France. The energy
price of peakload virtual power plants reflects the
variable costs of a physical peakload unit operated by
EDF in France. For the time being, the energy price is
[...]* EUR/MWh in the case of a baseload plant and
[...]* EUR/MWh in the case of a peakload plant. Energy
prices are fixed by EDF after having given the trustee the
occasion to verify their level (28).

(99)

EDF will operate auctions every three months offering
baseload and peakload plants. The first auction involving
the sale of 1 000 MW will be conducted in four rounds
of 250 MW. The principles of the first virtual power
plant auction will be announced in May 2001. The first
round will take place in the beginning of September
2001. The other rounds will follow at ten-day intervals.

(100) If the trustee testifies that the prices of the auctions are
abnormally low in relation to market prices or that the
auctions result in bids significantly below EDF’s costs,
the Commission, upon reasoned request by EDF or the
trustee, will decide about the fixing of a reserved price
for auctions.
In agreement with the trustee, further
auctions may be suspended until the Commission has
taken a decision. A request aiming at the fixing of a floor
price should not be made prior to the completion of the
first round of four times 250 MW auction.

Duration

(102) EDF undertakes to grant access to generation capacities
for a period of five years from the date of this decision.
This time period is based on the expectation that within
the forthcoming five years the electricity market in
France might have developed so as to allow sufficient
alternative supply sources for the quantities provided by
EDF in auctions in order to increase market liquidity.

(103) After the five-year period the Commission, on the basis
of a reasoned request by EDF, will decide whether or not
these conditions are met and respectively terminate or
prolong EDF’s obligation to grant access to generation
capacities.

(104) EDF and/or the trustee may submit at any time, but not
before three years have elapsed since the adoption of this
decision, a reasoned request to bring this commitment to
an end.

EnBW shareholding in WATT

(105) The parties commit that EnBW will divest, and EnBW

agrees to divest, its shareholding in WATT.

Auction of cogeneration power

EVALUATION

(101) EDF has signed Power Purchase Agreements with French
cogenerators promising to buy all their electricity pro-
duction over a 12-year period. These contracts still have
an average of 10 years to run. EDF undertakes to auction
a total of 1 000 MW of the generation capacity available
to EDF under these contracts. The capacity would be

(28) Whilst the capacity price is determined by the individual bid, the
energy price that means the price for the electricity drawn from
the capacity acquired is fixed by EDF on the basis of its variable
costs. By contrast, the reference value is no fixed price, but only
a technical instrument for carrying out the auction.

(106) The commitments concerning the relations between
EDF and CNR will ensure that from 1 April 2001 CNR
will be in a position to become an active competitive
force in the electricity sector in France. Since EDF will
renounce the exercise of its voting rights in CNR and
withdraw its representative from the CNR board of
directors, EDF will no longer be involved in CNR’s
commercial policy and market conduct. On the basis of
the technical operation agreement and the commer-
cialisation agreement to be concluded between EDF and
CNR, CNR will progressively be in a position to develop
the marketing of its entire production on the market for
supply to eligible customers.

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(107) The access to 6 000 MW generation capacity via auc-
tions corresponds to approximately 39 to 41 TWh. This
amounts to 30 or 32 % of the market for eligible
customers which is currently 130 TWh. The access to
generation capacity will enable foreign suppliers to
become active on the market for supply to eligible
customers to a significant extent. After the envisaged
reduction of the threshold for eligible customers to 9
GWh/year, the market for eligible customers in France
will amount to around 150 TWh. On the other hand, it
can be expected that CNR and SNET will directly
contribute to the liquidity of this market with some
10 TWh in the forthcoming years. Thus, together with
the around 40 TWh made available by EDF through
auctions, around one third of the eligible market can be
marketed by competitors with electricity generated in
France.

(108) Furthermore, German suppliers will also be able to gain
a foothold in France and thus become sufficiently strong
in France in order to cope with EDF’s potential for
retaliation resulting from its presence in Germany.

(109) Finally, the access to generation capacity in France will
put foreign suppliers in a better position regarding Pan-
European supply contract since they will be able to
supply customers with eligible production sites in France
through a VPP contract with EDF.

(110) At present it is uncertain how the French market will
evolve and no provision is made for an automatic
termination of this commitment at a given date. A
period of five years was deemed the minimum time
necessary to allow sufficient alternative supply sources
to develop in order to reach sufficient liquidity in France.
After this period, the Commission will decide whether
or not these conditions are met. If the Commission
concludes that the conditions are in fact met, it will
terminate the commitment. After a period of three years
following the adoption of this decision, EDF and/or the
trustee may submit to the Commission a reasoned
request to bring this commitment to an end. In that
case, the Commission will decide whether the conditions
outlined above are already met.

(111) The divestiture of EnBW’s participation in WATT will

restore the status quo ante in Switzerland.

(112) Therefore, the commitments offered by EDF are appro-
priate to eliminate the strengthening of EDF’s dominant
position on the market for eligible customers in France
since they outbalance the loss of EnBW as a potential
competitor, the retaliation potential in Germany, the
increased foothold in Switzerland and elimination of
WATT as potential competitor and the strengthening of
EDF’s position as a Pan-European supplier.

VI. SUMMARY

(113) It can be concluded from the above that the proposed
concentration in its modified form would not lead to
the creation or strengthening of dominant positions, as
a result of which effective competition would be impe-
ded in a substantial part of the common market, on
condition that the commitments set out in the Annex
are fully complied with. The operation is therefore to be
declared compatible with the common market and with
the functioning of the EEA, pursuant to Article 8(2) of
the Merger Regulation.

HAS ADOPTED THIS DECISION:

Article 1

Subject to full compliance with the commitments, set out in
the Annexes, the notified operation whereby Electricité de
France and Zweckverband Oberschwäbische Elektrizitätswerke
acquire joint control of Energie Baden-Württemberg AG is
hereby declared compatible with the common market and the
functioning of the EEA Agreement.

Article 2

This Decision is addressed to:

The notifying Parties.

Done at Brussels, 7 February 2001.

For the Commission

Mario MONTI

Member of the Commission

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ANNEX

The full English text of the Commitments referred to in Article 1 may be consulted on the following
Commission website:

http://europa.eu.int/comm/competition/index–en.html