CELEX: 32020M9929
Language: en
Date: 2020-10-28 00:00:00
Title: Commission Decision of 28/10/2020 declaring a concentration to be compatible with the common market (Case No COMP/M.9929 - EDP / VIESGO) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 28.10.2020
                                                                C(2020) 7581 final
                                                                                 PUBLIC VERSION
                                                                 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                                                                 information omitted has been replaced by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.
                                                                To the notifying party
Subject:            Case M.9929 — EDP/Viesgo
                    Commission decision pursuant to Article 6(1)(b) of Council Regulation
                    No 139/20041 and Article 57 of the Agreement on the European Economic
                    Area2
Dear Sir or Madam,
(1)       On 23 September 2020, the European Commission received notification of a
          proposed concentration pursuant to Article 4 of the Merger Regulation by which
          Energias de Portugal S.A. (“EDP”, Portugal), acquires within the meaning of Article
          3(1)(b) of the Merger Regulation indirect sole control of the whole of Viesgo
          Infraestructuras Energéticas, S.L. (“Viesgo”, Spain) (the “Transaction”). The
          concentration is accomplished by way of purchase of shares.3 EDP and Viesgo are
          designated hereinafter as the “Parties”.
1    OJ L 24, 29.1.2004, p. 1 (the “Merger Regulation”). With effect from 1 December 2009, the Treaty on the
     Functioning of the European Union (“TFEU”) has introduced certain changes, such as the replacement of
     “Community” by “Union” and “common market” by “internal market”. The terminology of the TFEU will
     be used throughout this decision.
2    OJ L 1, 3.1.1994, p. 3 (the “EEA Agreement”).
3    Publication in the Official Journal of the European Union No C 321, 29.09.2020, p. 45.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak--- 1.      THE PARTIES
(2)     EDP is a vertically integrated utility company and the largest generator, distributor
        and supplier of electricity in Portugal, with significant operations in the electricity
        sector in Spain. In total EDP is present in 19 countries in 4 continents and is present
        throughout the electricity value chain and in the gas markets.
(3)     Viesgo’s main activities are the production and supply of electricity from renewable
        sources in Spain and Portugal and the distribution of electricity in Spain. Viesgo is
        currently ultimately controlled by Macquarie Infrastructure and Real Assets Europe
        Ltd. (“MIRAEL”, United Kingdom).
2.      THE CONCENTRATION
2.1.    Multiple steps
(4)     The Transaction is accomplished by way of purchase of shares of Viesgo
        accompanied by the transfer of various assets of EDP’s distribution businesses
        owned by E-Redes (ultimately controlled by EDP) into Viesgo. On 15 July 2020,
        EDP, Viesgo and MIRAEL signed the Amended and Restated Framework
        Agreement (“Framework Agreement”), governing the steps necessary for the
        execution of a number of operations, as well as the conclusion of the concerned Sale
        and Purchase Agreements (“SPAs”), by which EDP acquires control of Viesgo
        leading to the acquisition of both its distribution and generation businesses (“Viesgo
        Distribution Business” and “Viesgo Generation Business”).
2.2.    Sole control
(5)     The Transaction will change the situation of sole control of Viesgo by MIRAEL to
        sole control by EDP, with MIRAEL retaining an indirect non-controlling minority
        shareholding in Viesgo’s distribution business.
(6)     EDP will exert sole control over Viesgo’s distribution business. Resolutions of the
        general meeting of shareholders shall require the favourable vote of the simple
        majority of the share capital of Viesgo. Furthermore, for Board decisions, MIRAEL
        will have a maximum of 1/3 of the Board members,4 while decisions of the Board of
        directors will have to be taken with the favourable vote of more than 50% of the
        directors. Its minority shareholding confers on MIRAEL minority protection rights
        for specific decisions requiring its approval. However, these decisions do not relate
        to strategic decisions determining the commercial policy of Viesgo such as the
        business plan, the budget, any major investment or the appointment of senior
        management.
2.3.    Single concentration
(7)     The Framework Agreement regulates the conditions, procedure and steps necessary
        for the execution of all the different parts of the Transaction, which constitute one
4   The Board of directors will be composed of a number of members [Details of the Shareholders’
    Agreement]directors. [Details of the Shareholders’ Agreement] directors will be appointed by EDP and
    [Details of the Shareholders’ Agreement] directors will be appointed by MIRAEL. [Details of the
    Shareholders’ Agreement].
                                                        2
 ---pagebreak---          single concentration for merger control purposes for the following reasons. First, the
         Framework Agreement and the SPAs were signed simultaneously on 15 July 2020.
         Second, the SPAs of the respective parts of the Transaction are closely connected in
         that they formed part of the Framework Agreement entered into between EDP and
         Viesgo (amongst other parties). Third, the undertakings participating in EDP’s
         acquisition of control over the Viesgo Distribution Business and the Viesgo
         Generation Business are the same (EDP and Viesgo). The fact that MIRAEL retains
         a minority non-controlling stake in the distribution business does not impact this
         conclusion, in line with paragraphs 41 to 44 of the Commission Consolidated
         Jurisdictional Notice (“CJN”)5. Fourth, the fact that there is only a single
         concentration comprising different agreements is also reflected in EDP’s press
         release,6 which states that the acquisition is unitary in nature.7
3.       EU DIMENSION
(8)      The undertakings concerned have a combined aggregate worldwide turnover of more
         than EUR 5 billion (EDP: [10,000-15,000] EUR million; Viesgo: EUR [200-400]
         million). The aggregate Community-wide turnover of each of them exceeds EUR
         250 million (EDP: [10,000-15,000] EUR million; Viesgo: [200-400] EUR million),
         and the undertakings concerned do not achieve more than two-thirds of their
         Community-wide turnover in one and the same Member State. The notified
         operation therefore has an EU dimension within Article 1(2) of the Merger
         Regulation.
5   Official Journal C 95, 16.04.2008, p. 1.
6   According to the press release: “Under the terms of the agreement, EDP‘s Spanish electricity distribution
    subsidiary, ERedes, and Viesgo‘s electricity distribution units, Viesgo Distribución and Begasa, with a
    total RAB of €1.8 billion (post-Lesividad) and EBITDA of €320 million as of 31 December 2019, will be
    owned 75.1% by EDP and 24.9% by MIRA. Also, as part of the transaction, EDP will, through its 82.6%-
    owned subsidiary EDP Renováveis, S.A. (“EDPR”), acquire 100% of the renewables business of Viesgo,
    which comprises 24 wind farms and two mini hydro power plants located throughout Spain and Portugal
    representing a total of over 500 MW of installed net capacity, for an Enterprise value of €565 million.
    EDP will also acquire Viesgo’s two thermal generation plants in the south of Spain, which carry potential
    interconnection rights under the European Union’s “Green Deal Investment Plan and Just Transition
    Mechanism” following completion of their decommissioning.”
7   According to the press release: “The Viesgo transaction coupled with the right issue represents a unique
    investment opportunity for EDP and is fully aligned with EDP’s equity story focused on growth in
    renewables and networks, in particular:
              -   Enhances EDP’s exposure to electricity networks and renewables, critical enablers of the
                  energy transition with strong long-term growth prospects.
              -   More than doubles EDP’s presence in electricity distribution in Spain with perpetual
                  licenses and regulatory visibility until 2025.
              -   Further reinforces EDP’s position as leading global renewables player with a portfolio of
                  high-quality assets with strong resource and extension/repowering potential, reinforcing
                  EDP’s commitment with investments in Portugal and the remaining portfolio.
              -   Strengthens EDP’s business risk profile by increasing EDP's exposure to regulated
                  networks.
              -   Maintains EDP’s solid balance sheet and credit metrics.
              -   Creates long-term value for shareholders by being accretive from both an earnings per
                  share and cash flow perspective.”
                                                             3
 ---pagebreak--- 4.       ANALYSIS
(9)      The Parties are both active in the following markets (i) the markets for generation
         and wholesale supply of electricity in Spain and Portugal, and (ii) the grid-wide
         markets for the distribution of electricity in Spain.
(10)     Against this background, the Transaction results in one horizontally affected market,
         namely the Portuguese market for generation and wholesale supply of electricity.8
(11)     The activities of the Parties result in the following vertically affected markets: (i)
         the markets for the grid-wide distribution of electricity in Portugal (upstream)9 and
         the market for generation and wholesale supply of electricity in Portugal
         (downstream) and (ii) the markets for the grid-wide distribution of electricity in
         Spain (upstream) and the market for generation and wholesale supply of electricity
         in Spain (downstream).
4.1.     Product and geographic market definition
4.1.1. Generation and wholesale supply of electricity
(12)     The Commission has consistently defined the market for the generation and
         wholesale supply of electricity as encompassing the domestic generation of
         electricity in power stations within a certain geographic market, traded on the
         wholesale market, as well as electricity physically imported into that geographic
         market via interconnectors, and irrespective of the different sources of electric
         energy10 within the wholesale electricity market.11
(13)     In previous decisions, the Commission has taken the view 12 that generation
         and wholesale supply of electricity are a single relevant product market
         because the generation of electricity is not an autonomous market activity from
         its wholesale supply.13
8   In the Spanish market for generation and wholesale supply of electricity, the Parties’ combined market
    share in 2019 was [5-10]% in terms of capacity and [5-10]% in terms of production. The distribution
    markets are grid-wide in scope and one distribution grid is separate and not substitutable with distribution
    through another (see Section 4.1.2), therefore there can be no overlap between the distribution activities of
    the Parties in Spain.
9   Distribution networks are a necessary input for generators to be able to supply electricity, and generators
    pay network charges to the grid operator to which they are connected. Therefore, distribution grids are
    upstream to the generation and wholesale supply market.
10  Gas fired, coal fired, nuclear, hydroelectric power stations, wind farms or others.
11  COMP/M.8687 – Prisko/OKD Nastupnicka, paras. 55 seq; COMP/M.7850 – EDF/CGN/NNB Group of
    Companies, para. 54; COMP/M.8660 – Fortum/Uniper, paras 18 and 26.
12  COMP/M.6984 – EPH/Stredoslovenska Energetika; COMP/M.6540 – Dong Energy Borkumriffgrund I
    Holdco/Boston Holding/Borkum Riffgrund I Offshore Windpark; COMP/M.6225 – Molaris/Commerz
    Real/RWE/Amprion; COMP/M.5979 – KGHM/Tauron Wytwarzanie/JV.
13  The Commission has also considered a distinction between wholesale supply on the one hand and
    balancing and ancillary services on the other hand, and has taken the view that the market for the
    provision of balancing and ancillary services is national in scope (COMP/M.7927 – EPH/ENEL/SE).
    However, the Transaction does not give rise to any affected market in the provision of ancillary and
    balancing services in Spain or Portugal.
                                                            4
 ---pagebreak--- (14)     The Commission has generally defined the geographic market for the generation and
         wholesale supply of electricity as national in scope.14The Parties do not contest the
         Commission’s practice.
(15)     In view of the Commission’s practice, and in the absence of evidence to the contrary,
         for the purposes of this decision, the Commission retains the market definition
         identified above, that is the market for the generation and wholesale supply of
         electricity, which is national in scope.
4.1.2. Distribution of electricity
(16)     In previous decisions,15 the Commission has identified two separate markets for the
         transportation of electricity: transmission and distribution.16 For the competitive
         assessment of the Transaction the distribution market is the only relevant, because
         the transmission is not an affected market.
(17)     In relation to distribution of electricity, in previous decisions, the Commission has
         identified a separate market for the distribution of electricity, namely the operation
         and management of the lower voltage grids.17
(18)     For the distribution of electricity, the Commission has previously considered that the
         relevant geographic market is the territory covered by a relevant distribution network
         forming a connected grid. Similarly to other customer distribution channels one
         distribution grid is separate and not substitutable with distribution through another
         grid.18
(19)     The Parties agree with the Commission’s practice.
(20)     In view of the Commission’s practice, and in the absence of evidence to the contrary,
         for the purposes of this decision, the Commission will retain the market definition
         identified above for the distribution of electricity, namely the operation and
         management of the lower voltage grids, which is grid-wide in scope.
14  COMP/M.5979 – KGHM/TAURON Wytwarzanie/JV, para. 24; COMP/M.5711 – RWE/Ensys, para. 21;
    COMP/M.4180 – GDF/Suez, para. 726.
15  COMP/M.7927 – EPH/ENEL/SE, para. 21; COMP/M.5467 – RWE/EssentEssent, para. 179;
    COMP/M.4238 – E.ON/Prazskà plynárenská, para. 18.
16 According to Articles 2(3) and 2(5) of Directive 2009/72/EC of 13 July 2009 concerning common rules
    for the internal market in electricity and repealing Directive 2003/54/EC (OJ L 211, 14.8.2009, p. 55–93),
    “transmission” means the transport of electricity on the extra high-voltage and high-voltage
    interconnected system with a view to its delivery to final customers or to distributors, but does not include
    supply, while “distribution” means the transport of electricity on high-voltage, medium-voltage and low-
    voltage distribution systems with a view to its delivery to customers, but does not include supply.
17  COMP/M.5827 – Elia/IFM/50Hertz, para. 18; COMP/M.5467 – RWE/Essent, para. 179, 440.
18  COMP/M.5827 – Elia/IFM/50Hertz, para. 23; COMP/M. 5467 -RWE / ESSENT para 21; COMP/M.4238
    – E.ON/Prazskà plynárenská, para. 19; COMP/M.3440 – ENID/EDP/GDP, para. 75.
                                                            5
 ---pagebreak---  ---pagebreak---  ---pagebreak--- (28) Viesgo is not active in the Portuguese market for the distribution of electricity.
(29) Due to EDP’s (both in Spain and Portugal) and Viesgo’s (only in Spain)
     monopolistic position in those distribution grids that they own, the Transaction gives
     rise to the following vertically affected markets:
     (a)      In Portugal: the market for distribution of electricity on which EDP is active
              (upstream) and the market for generation and wholesale supply of electricity
              on which both Parties are active (downstream);
     (b)      In Spain: the market for distribution of electricity on which both Parties are
              active (upstream) and the market for generation and wholesale supply of
              electricity on which both Parties are active (downstream).
(30) Because of EDP’s and Viesgo’s monopolistic position with regard to those
     distribution networks they operate, the relevant theory of harm would be foreclosure
     of third-party suppliers’ access to their grids. For the reasons below, such a
     foreclosure would seem not to be a serious concern.
(31) First, the Parties claim that no vertical choice of distribution of electricity would
     technically be possible for generators in Portugal and Spain given that, under the
     current national regulatory frameworks, an electricity generator is never given the
     opportunity to choose to which grid to connect. This is because an electricity
     generator will be connected to the operating grid where the power plant is located.
     The grid operator, provided there is available capacity and that it is technically
     possible (both conditions strictly applied under the supervision of the Portuguese and
     Spanish energy regulators), is under the obligation to grant access to its distribution
     network under the conditions approved by the respective regulator. In view of the
     existing regulatory framework in Portugal and Spain and the responses to the
     Commission’s market investigation, the Commission considers that post-Transaction
     EDP would have limited if any ability to foreclose third-party access to its
     distribution network, in spite of its monopolistic position in the distribution networks
     it operates.
(32) Second, the actual vertical relationships between EDP and Viesgo are limited in
     number in Spain, where [Details of Viesgo’s distribution network] of EDP’s
     electricity generating assets [Details of Viesgo’s distribution network] connected to
     Viesgo’s distribution network, and [Details of EDP’s distribution network] of
     Viesgo’s electricity generating assets [Details of EDP’s distribution network]
     connected to EDP’s distribution network.
                                                 8
 ---pagebreak--- (33)   Third, Viesgo’s market share in the Portuguese and the Spanish market for the
       generation and wholesale of electricity is very limited, [0-5]% in Portugal and [0-
       5]% in Spain, both in terms of capacity and production.
(34)   In view of the existing regulatory framework, the limited number of actual vertical
       relationships between Viesgo and EDP, and Viesgo’s limited presence in the market
       for the generation and wholesale supply of electricity in Spain and in Portugal, it is
       unlikely that EDP will have an incentive to undermine third-party access to its
       distribution network post-Transaction.
(35)   In conclusion, the Transaction is unlikely to result in the foreclosure of third-party
       electricity generators and wholesalers in Spain and Portugal. The results of the
       Commission’s market investigation confirmed that other market players believe that
       EDP will not have the ability or incentive to foreclose access to its distribution
       network to third-party suppliers in Spain or Portugal.21
(36)   In view of the above, the Commission considers that the Transaction does not raise
       serious doubts as to its compatibility with the internal market as a result of non-
       horizontal effects either in the markets for generation and wholesale supply of
       electricity or in the markets for distribution of electricity, both in Spain or Portugal.
5.     CONCLUSION
(37)   For the above reasons, the European Commission has decided not to oppose the
       notified operation and to declare it compatible with the internal market and with the
       EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the
       Merger Regulation and Article 57 of the EEA Agreement.
                                                        For the Commission
                                                        (Signed)
                                                        Margrethe VESTAGER
                                                        Executive Vice-President
21 Replies to Commission’s email of 24 September 2020.
                                                     9