CELEX: 31994M0402
Language: en
Date: 1994-06-27 00:00:00
Title: COMMISSION DECISION of 27.06.1994 declaring a concentration to be compatible with the common market (Case No IV/M.402 - POWERGEN / NRG ENERGY / MORRISON KNUDSEN / MIBRAG) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31994M0402

COMMISSION DECISION of 27.06.1994 declaring a concentration to be compatible with the common market (Case No IV/M.402 - POWERGEN / NRG ENERGY / MORRISON KNUDSEN / MIBRAG) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 189 , 12/07/1994 P. 0000

 COMMISSION DECISION of 27.06.1994 declaring a concentration to  be compatible with the common market (Case No IV/M.402 -  POWERGEN / NRG ENERGY / MORRISON KNUDSEN / MIBRAG) according to  Council Regulation (EEC) No 4064/89  (Only the English text is authentic)  The paper version of the decision is available through the  sales offices of the Office of Official Publications of the  European Communities. PUBLIC VERSION MERGER PROCEDURE ARTICLE 6(1)(b) DECISION Registered with advice of delivery To the notifying parties Dear Sirs, Subject: <ind>  <ind> Case IV/M.402 - PowerGen/NRG  Energy/Morrison Knudsen/Mibrag  <tab>  <ind> Your  notification of  24.5.1994 pursuant to  Article 4 of Council Regulation No. 4064/89.  1. <ind> The proposed operation concerns the sale by the  Treuhand of MIBRAG, a brown coal producer in the former East  Germany to a consortium of PowerGen, NRG Energy and Morrison  Knudsen.  The operation was notified to the Commission on  24  May 1994 pursuant to Article 4 of Council Regulation (EEC) No  4064/89.   <ind> The parties have also made a separate notification under  Article 65 and 66 of the ECSC Treaty.  PowerGen and NRG Energy  are also participating in the Schkopau power project with VEBA  Kraftwerke Ruhr AG (VKR) which will be the subject of a  notification under Regulation 17.  2. <ind> After examination of the notification the Commission  has concluded that the proposed operation falls within the  scope of Council Regulation No. 4064/89 and does not raise  serious doubts as to its compatibility with the common market.  THE PARTIES AND THE OPERATION  3. <ind> PowerGen plc is a UK company engaged in the generation  and sale of electricity.  NRG Energy Inc is a subsidiary of  Northern States Power Company and is a US corporation in non- utility energy related businesses.  Morrison Knudsen  Corporation is a US corporation active in the environmental,  industrial, power and transportation sectors.  4. <ind> PowerGen, NRG Energy and Morrison Knudsen  (collectively "the purchasers") intend to acquire 99% of the  shares of Mitteldeutsche Braunkohlengesellschaft mbH (MIBRAG  mbH) through a Netherlands holding company MIBRAG BV.  MIBRAG  mbH consists of brown coal mines and processing plants, power  plants and other activities which were part of the original  MIBRAG.  The remaining parts of the original MIBRAG have been  split off into two other separate companies which the  purchasers will not acquire.  Certain interface arrangements  will be necessary between MIBRAG mbH and the two other  companies.  CONCENTRATION  Joint control  5. <ind> The purchasers will act as one when exercising their  shareholders rights in MIBRAG mbH through MIBRAG BV.  Each of  the purchasers will indirectly hold one-third of the shares of  MIBRAG BV.   At the level of MIBRAG BV a number of decisions  require the unanimous consent of the purchasers including the  approval of the business plan and the budget. [Deleted as a  business secret]. The purchasers, therefore, will exercise  joint control of MIBRAG BV, and through it, MIBRAG mbH.  Full function JV not leading to the co-ordination of  competitive behaviour  6. <ind> MIBRAG mbH is a full function enterprise owning all  the assets, intellectual property rights and concessions  necessary to carry out its business.  It does not depend for  its business on facilities that are economically integrated  with the parent companies businesses.  7. <ind> The purchasers are not active in MIBRAG mbH's  neighbouring, upstream or downstream markets in Germany.  Even  though MIBRAG mbH and its shareholders are active in some of  the same product markets there can be no co-ordination of  competitive behaviour because they operate on different  geographic markets.  For example, there is no possibility of  PowerGen selling electricity generated in the UK to eastern  German customers or for MIBRAG mbH to sell its electricity to  customers in the UK.  Therefore, MIBRAG will be a full function  entity which will not lead to the co-ordination of competitive  behaviour.  8. <ind> Thus the notified operation constitutes a  concentration within the meaning of Article 3 of the Merger  Regulation.  COMMUNITY DIMENSION  9. <ind> The operation has a Community dimension.  The  worldwide turnover of all undertakings concerned amounts, in  their respective last financial year, to more than 5,000  million ECU.  The Community wide turnover of  PowerGen and  MIBRAG exceeds 250 million ECU.  The undertakings concerned do  not achieve more than two thirds of their aggregate Community  wide turnover within one and the same Member State.  COMPATIBILITY WITH THE COMMON MARKET  Product market  10. <ind> The main product of MIBRAG mbH is brown coal.  Brown  coal is primarily used for electricity generation.  Its low  calorific value and the need for higher capital outlay required  for environmentally friendly use let it compete only where  there are no significant transport costs.  The production of  brown coal is only economically viable if there is a specially  equipped brown coal power plant near to the brown coal mine.  The power generation equipment necessary to burn brown coal is  not widely available in other EU member states.  Conversion  from brown coal burning to hard coal burning power stations is  expensive and would make no commercial sense.  11. <ind> MIBRAG also produces brown coal briquettes (which are  an ECSC product) and pulverised brown coal.   It also has minor  activities in the electricity, district heating, waste  disposal, water treatment and decontamination, consulting and  engineering and insurance brokerage sectors.  Geographical market  12. <ind> The geographical scope of all MIBRAG's activities is  almost entirely limited to eastern Germany.  The high  proportion of transport costs to total costs of brown coal and  the concentration of brown coal burning power stations in  eastern Germany mean that its customers are limited to that  area.  MIBRAG's electricity generating activities are based in  eastern Germany and its electricity is prevented from being  sold more widely because the interconnectors with western  Germany are not yet fully operational.  MIBRAG's other  activities are either all or nearly all based in eastern  Germany.  However, given the current impossibility for MIBRAG  to sell its electricity in western Germany, it is not necessary  precisely to define the relevant geographical market.  Competitive assessment  13. <ind> The purchasers are not present on the brown coal or  brown coal product markets on which MIBRAG operates.  In  addition, none of the parents are engaged in the production of  fuels in the same geographical area as MIBRAG.  For the  technical and economic reasons outlined above, brown coal is  not a perfect substitute for hard coal, which PowerGen uses in  its electricity generating operations in the UK.  LAUBAG, a  large eastern German brown coal producer, currently provides  competition for MIBRAG and may be acquired by Rheinische  Braunkohlewerke AG, the only western German brown coal  producer, which would strengthen LAUBAG as a competitor for  MIBRAG.  14. <ind> The technical difficulties associated with the  interconnectors between eastern and western Germany make it  impossible for MIBRAG's electricity generation activities in  eastern Germany to compete with those of PowerGen in the UK.   MIBRAG's other activities do not overlap at all with any of the  purchasers on the same geographical market even for consulting  services.  If MIBRAG and Morrison Knudsen did operate on the  same (worldwide) market for consulting services, their market  shares would be completely insignificant.  State aid issues  15. <ind> The Commission considers the offer to acquire part of  MIBRAG, based on the tender of the purchasers as the best  offer. Accordingly, this sale does not appear to contain any  aid elements.  However, two clauses in a coal supply agreement  between the operator of the power plant Schkopau, Veba  Kraftwerke Ruhr AG (VKR) and MIBRAG, concluded in 1992 relating  to the supplier's liability for certain damage (paragraph 9)  and to the price of brown coal - tied to that of  imported hard  coal - payable under this agreement (paragraph 5), could  contain state aid elements. The Treuhandanstalt remains  ultimately responsible for these liabilities after the sale.  According to Article 93(1) EC Treaty, the Commission is  required, in cooperation with Member States, to keep under  constant review all systems of aid existing in those States. It  shall propose to the latter any appropriate measures required  by the progressive development or by the functioning of the  common market.  CONCLUSION  16. <ind> Based on the above findings, it appears that the  proposed concentration does not raise serious doubts as to its  compatibility with the common market.  For the above reasons, the Commission has decided not to oppose  the notified concentration and to declare it compatible with  the common market. This decision is adopted in application of  Article 6(1)b of Council Regulation 4064/89.  For the Commission