CELEX: 32021M10212
Language: en
Date: 2021-10-29 00:00:00
Title: Commission Decision of 29/10/2021 declaring a concentration to be compatible with the common market (Case No COMP/M.10212 - ANDEL / ENERGI DANMARK) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                 Brussels, 29.10.2021
                                                                 C(2021) 7934 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                                                                  information omitted has been replaced by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.
                                                                 Andel a.m.b.a
                                                                 Hovedgaden 36
                                                                 4520 Svinninge
                                                                 Danmark
Subject:             Case M.10212 – ANDEL / ENERGI DANMARK
                     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 24 September 2021, the European Commission received notification of a
          proposed concentration pursuant to Article 4 of the Merger Regulation by which
          Andel a.m.b.a (“Andel”, Denmark) acquires within the meaning of Article 3(1)(b) of
          the Merger Regulation sole control of Energi Danmark A/S (“Energi Danmark”,
          Denmark) by way of purchase of shares (the “Transaction”) 3 . Andel is designated as
          the “Notifying Party” and together with Energi Danmark 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 402, 5.10.2021, p. 11.
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)      Andel is a Danish cooperatively owned energy and fibre group, which is active
         within energy production, energy distribution, fibre infrastructure, and energy sales
         and solutions. Andel is primarily active in Denmark, but also trades on e.g. the gas
         exchanges in Germany and the Netherlands and sells natural gas and biogas in
         Southwest Sweden.
(3)      Energi Danmark is a Danish energy trading group with activities within physical and
         financial trading of electricity, certificates trading, trading of natural gas, oil, carbon,
         and wind energy, and portfolio management based on the Nordic and German energy
         markets. Energi Danmark has trading activities in 26 countries.
2.       THE OPERATION AND THE CONCENTRATION
(4)      The concentration consists of the acquisition of sole control by Andel over Energi
         Danmark through the acquisition of shares. Andel currently owns a 40.9% minority
         shareholding in Energi Danmark, but does not have sole or joint control, either de
         iure or de facto.4 Through the Transaction, Andel will increase this shareholding to
         approximately 63.65%. Andel is to acquire this increased shareholding both directly
         and also indirectly, through its 100% owned subsidiary SEAS-NVE Strømmen. The
         remaining 36.35% shareholding in Energi Danmark will be held by NRGi a.m.b.a.
         (“NRGi”, Denmark), which will as a result of the Transaction increase its
         shareholding from 23.12% to 36.35%.5
(5)      Andel will exercise sole control over Energi Danmark because it will hold a majority
         of seats of the Board of Directors.6 […].7 Andel will also have a majority of votes at
         the shareholders’ meeting and NRGi will not have any veto rights over strategic
         decisions.
(6)      In light of the above, the Transaction constitutes a concentration within the meaning
         of Article 3(1)(b) of the Merger Regulation.
3.       UNION DIMENSION
(7)      The undertakings concerned have a combined aggregate world-wide turnover of
         more than EUR 5 000 million8 [Andel: EUR […], Energi Danmark: EUR […]].
         Each of them has a Union-wide turnover in excess of EUR 250 million, but they do
4   The remaining shareholdings are currently held by NRGi a m.b.a. (“NRGi” ) (23.12%), Energi Nord
    Holding A/S (18.37%), EWII Energi A/S (16.5%), SEF Energi A/S (1.12%), Fonden Langelands
    Elforsyning (0.4%).
5   As a result of the Transaction, Energi Nord Holding A/S, EWII Energi A/S, SEF Energi A/S, Fonden
    Langelands Elforsyning, will sell their shareholdings to Andel and NRGi, thereby exiting as shareholders
    of Energi Danmark.
6   The Board of Directors of Energi Danmark is responsible for the adoption of key strategic decisions such
    as the adoption of the budget and business plan. The shareholders’ meeting does not give any shareho ld er
    veto rights, but rather is responsible for the election of the board of directors, adopts amendments to the
    articles of association, decides on dividend payments.
7   Form CO, paragraph 30
8   Turnover calculated in accordance with Article 5 of the Merger Regulation.
                                                            2
 ---pagebreak---          not achieve more than two-thirds of their aggregate Union-wide turnover within one
         and the same Member State. The notified operation therefore has a Union dimension.
4.       M ARKET DEFINITION RELEVANT FOR HORIZONTAL ANALYSIS
(8)      The Parties are both active on the market for the retail sale of electricity in Denmark.
         However, Energi Danmark does not provide electricity to households/private
         consumers or smaller industrial consumers with annual consumption less than 0.1
         GWh. The main horizontal overlap between the Parties is therefore in the retail sale
         of electricity to large industrial customers with annual consumption above 0.1 GWh
         in Denmark and this is the focus of our market investigation. There is also a minimal
         horizontal overlap in the retail sale of natural gas to large industrial consumers.
(9)      Moreover, there are several upstream markets that are vertically affected in view of
         the fact that the Parties’ combined market share in the downstream electricity retail
         market is above 30%, in particular, generation and wholesale supply (where both
         Parties are present), and balancing and ancillary services, distribution of electricity,
         certificates trading and financial trading (where Energi Danmark is active).
         Moreover, Andel is active with a market share higher than 30% in the e-mobility
         services market, which is downstream from generation and wholesale supply.
(10)     Finally, there are horizontal overlaps in the supply of natural gas and gas storage, but
         these are not affected markets and will therefore not be discussed further in this
         decision.
4.1.     Retail supply of electricity to large industrial customers
4.1.1. Product market
(11)     In its previous decisions, the Commission has considered that there exists a distinct
         product market for retail supply of electricity to large industrial and commercial
         customers on the one hand and households and smaller industrial and commercial
         customers on the other hand.9
4.1.1.1. The Notifying Party’s view
(12)     The Notifying Party argues that the relevant consumption threshold to identify “large
         industrial customers” is the consumption level above 0.1 GWh, based on relevant
         precedents of the Danish competition authority. 10 This 0.1 GWh had previously been
         identified as the relevant threshold because it distinguished between the metered, and
         non-metered customers. Now that all Danish consumers typically have metered
         billing, this distinction is less relevant. However, the Parties note that 0.1 GWh is
         nonetheless       a     useful    dividing    line     between   (i)    smaller  industrial
         customers/households and (ii) larger industrial customers. The Parties note that
         larger industrial customers tend to be more professional buyers, have a higher degree
         of price sensitivity, have a higher degree of buyer power, shorter contract lengths,
         often choose their supplier by broker or tender, tend to have specialised needs such
9    Case M.8660, FORTUM/UNIPER, para 102, M.9587, Engie/EDP Renovaveis/EDPR Offshore Espana
     paras 23-24, M.8855 Otary/Eneco/Electrabel/JV paras 27-28.
10 Form CO, paragraph 171.
                                                        3
 ---pagebreak---         as security of supply, demand for advisory services and hedging agreements, and
        some require delivery in more than one country. 11
(13)    The Notifying Party does not consider that there are distinct markets for retail supply
        of electricity according to the type of generation e.g. “green” or renewable energy.
        They argue that electricity is a homogenous product; once it has been generated, it is
        fed into the grid and it is impossible to distinguish. From a demand side perspective,
        the two are entirely substitutable. While some customers may value “green”
        electricity, the Parties submit that only a few customers are willing to pay a premium
        for green energy.12
4.1.1.2. The Commission’s assessment
(14)    In the market investigation, the majority of customers and competitors agreed that
        there should be distinct markets for at least: (i) large industrial customers above 0.1
        GWh; (ii) small industrial customers below 0.1 GWh; and (iii) household customers.
        However, certain market respondents highlighted that the 0.1 GWh threshold for
        indicating the division between “small” and “large” industrial customers, was too
        low. For example, one customer noted that: “0,1 GWh is very low number for
        industries, if I take an average on over 100 of our sites the value will be
        3,5GWh/year. Then looking into how Energy Efficiency Directive is interpreted in
        some member states for large enterprises (large industries) I would say the above 5
        or 10GWh is a large industry.”13 Similarly, a competitor added that from its
        perspective, the relevant dividing line between small and large industrial customers
        was a yearly consumption of electricity below/above 2 GWh.14 The same competitor
        considered that “very large” customers were those with a consumption above 20
        GWh.
(15)    The market investigation therefore indicated that there could be additional separate
        product markets regarding large industrial customers, according to the size of yearly
        electricity consumption. The vast majority of competitors noted that the retail supply
        of electricity to large industrial should be further segmented according to: (i)
        customers with annual consumption between 0.1 and 2 GWh; (ii) customers with
        annual consumption between 2 and 10 GWh; and (iii) customers with annual
        consumption above 10 GWh in view of their different consumption patterns. One
        competitor explained that while customers with consumption of between 0.1 and 2
        GWh still tended to “act as a small business”, customers in the 2 – 10 GWh bracket
        were “more aware of the dynamics in the market”, while those with a consumption
        above 10 GWh were “highly professional customers, often with specialized
        employees or advisers involves in the purchasing process. Customers often involve
        several suppliers for tender process.”15 Another competitor noted that customers
        sourcing above 10 GWh electricity per year had “more advanced sourcing strategies
        and a higher level of contractual and consumption awareness”.16
11  Form CO, paragraph 175.
12  Form CO, paragraph 185.
13  See reply to question 3 of questionnaire to customers.
14  See reply to question 3 of questionnaire to competitors.
15  See reply to question 4 of questionnaire to competitors.
16  See reply to question 4 of questionnaire to competitors.
                                                           4
 ---pagebreak--- (16)    The market investigation also provided indications that there could also be a separate
        market for electricity produced from renewable sources (“green” electricity), with a
        majority of both customers and competitors expressing this view. 17 However, certain
        market participants considered that this should only be the case for “green”
        electricity that is supplied through corporate power purchase agreements (“PPAs”). 18
        Indeed, a majority of customers and competitors who replied to the market
        investigation noted that it was appropriate to distinguish a separate market for the
        supply of “green” electricity through PPAs with the owner of renewable generation
        assets.19 For example, one competitor noted: “We do not find it appropriate to
        separate a market for green electricity as a "whole", but we find it appropriate to
        consider PPA's as a separate market. We experience that we have industrial
        customers who contact us directly in order to buy PPA products (not green energy,
        but PPA).”20
(17)    A majority of competitors noted that the costs to start supplying “green” electricity
        were low, although the costs for supplying “green” electricity through PPAs were
        deemed to be higher.21 For example, one competitor noted that: “Offering "green"
        electricity from GoO's [Guarantees of Origins, “GoOs”] is an affordable setup - both
        in the start up, risks and in the normal operation. The importance of long-term deals
        with the customer is limited. Offering "green" electricity through PPA's is a much
        larger setup involving several partners, investors and customers and presume long-
        term relations. The supplier need "big muscles to enter into a PPA setup for the
        supply of “green” electricity to large industrial customers through PPAs.”22
(18)    Finally, a majority of both customers and competitors considered that large industrial
        customers would be ready to pay a higher price for “green” electricity. 23 For
        example, one large industrial customer noted that: “We would be ready to pay a
        premium, as sustainability is high agenda and brings a lot of value to the company.
        The premium would from our point of view depend on multiple factors: PPA or
        GoO's, type of GoO's etc.”24
(19)    The Commission notes in fact that any supplier of electricity can supply as well
        “green” electricity by just buying the equivalent amount of GoOs, which would
        point to the existence of full supply-side substitutability. This would not be the case
        for the supply of green electricity via PPAs, as the supplier would need either to own
        a production asset or to have an agreement with the owner. 25
(20)    However, for the purposes of this decision, the exact product market definition can
        be left open as the proposed Transaction does not raise serious doubts as to its
17  See replies to question 5 of questionnaire to customers, s ee replies to question 5 of questionnaire to
    competitors.
18  See replies to question 5 of questionnaire to competitors.
19  See replies to question 6 of questionnaire to customers, see replies to question 7 of questionnaire to
    competitors.
20  See reply to question 5 of questionnaire to competitors.
21  See replies to questions 6 and 8 of questionnaire to competitors.
22  See reply to question 6 of questionnaire to competitors.
23  See replies to question 7 of questionnaire to customers, s ee replies to question 9 of questionnaire to
    competitors.
24  See reply to question 7 of questionnaire to customers.
25  See replies to questions 6-8 of questionnaire to competitors.
                                                           5
 ---pagebreak---         compatibility with the internal market or the functioning of the EEA Agreement
        under any plausible market definition. The Commission will therefore analyse the
        effects of the proposed Transaction on the basis of separate product markets for: (i)
        the retail supply of electricity to all large industrial customers (ie. those with an
        annual consumption above 0.1 GWh); (ii) the retail supply of electricity to large
        industrial customers with annual consumption levels between 0.1 GWh and 2 GWh;
        (iii) the retail supply of electricity to large industrial customers with annual
        consumption levels between 2 GWh and 10 GWh; (iv) the retail supply of electricity
        to large industrial customers with annual consumption levels above 10 GWh and; (v)
        the retail supply of “green” electricity to large industrial customers through PPAs.
4.1.2. Geographic market
(21)    In its previous decisions, the Commission has defined retail electricity markets as
        national in scope26 but has also considered whether the market may be narrower than
        national.27 However, as regards the Nordics, it has also considered that there may be
        a wider, regional market for the retail supply of electricity.28
4.1.2.1. The Notifying Party’s view
(22)    The Parties argue that the market is broader than national29 and should encompass at
        least the Nord Pool area, an electricity exchange operating across the Nordics,
        Baltics and other central and Northern European countries. They note that Energi
        Danmark is active across the Nordics i.e. Sweden, Norway and Finland, which are
        all part of Nord Pool. A number of foreign suppliers are also active in Denmark,
        such as Norsk Elkraft (Norway) and Vattenfall (Sweden). The Parties note that the
        costs of access to Nord Pool are the same for all and that Danish wholesale
        electricity prices were the same as the other Nord Pool countries for around 50% of
        the year.
4.1.2.2. The Commission’s assessment
(23)    All of the competitors replying to the Commission’s market investigation confirmed
        that they were active in supplying electricity to large industrial customers in
        Denmark only, as opposed to two or more Nordic countries. 30 A majority of
        competitors also indicated that the majority of Danish suppliers retailing electricity
        to large industrial customers were not active in other Nord Pool countries. 31 A
        majority of customers replying to the Commission’s market investigation also
        indicated that their suppliers were also active throughout Denmark, as opposed to
        two or more Nordic countries.32 A minority of customers indicated that their
        suppliers were active across two or more Nordic countries. One such customer
26  Case M.8660, FORTUM/UNIPER, paras 105-106, M.9587 Engie/EDP Renovaveis/EDPR Offshore
    Espana paras 27-28, M.8855 Otary/Eneco/Electrabel/JV paras 30-31.
27  M.9587 Engie/EDP Renovaveis/EDPR Offshore Espana para 27.
28  Case M.8660, FORTUM/UNIPER, paras 105-106.
29  Form CO, paragraph 190 and 195.
30  See replies to question 10 of questionnaire to competitors.
31  See replies to question 12 of questionnaire to competitors .
32  See replies to question 8 of questionnaire to customers.
                                                           6
 ---pagebreak---          provided the examples of Vattenfall and Energi Danmark who were active in
         supplying their Danish and Swedish sites. 33
(24)     Overall, a significant majority of both customers and competitors considered that in
         light of the similarities in the suppliers of the market and in pricing, that the market
         for the retail supply of electricity to large industrial customers was national in scope.
(25)     The Commission considers that the geographic scope of the market is most likely
         national. However, for the purposes of this decision, the exact geographic market
         definition can be left open as to whether it is national or wider than national e.g.
         extending to other Nordic countries, as the proposed Transaction does not raise
         serious doubts as to its compatibility with the internal market or the functioning of
         the EEA Agreement under any plausible market definition.
4.2.     Retail sale of natural gas to large industrial customers
(26)     The Commission has consistently found a separate relevant product market for the
         retail sale of gas. In the most recent decisions, the Commission considered a further
         segmentation into (i) the supply of gas to gas-fired power plants, (ii) the supply of
         gas to large industrial customers, (iii) the supply of gas to small industrial and
         commercial customers, and (iv) the supply of gas to household customers with
         reference to various past cases, where various delineations between the segments
         were considered.34
(27)     Regarding the geographical scope of the market, the Commission has generally held
         that the geographic markets for gas supply were national in scope, whilst also
         considering a regional scope in a few older cases.35
(28)     The Notifying Party argues that for the purposes of the Transaction, the market
         definition can be left open. The Commission agrees that for the purposes of this
         decision, the exact market definition can be left open as the proposed Transaction
         does not raise serious doubts as to its compatibility with the internal market or the
         functioning of the EEA Agreement under any plausible market definition.
5.       M ARKET DEFINITION RELEVANT FOR VERTICAL ANALYSIS
5.1.     Generation and wholesale supply of electricity
(29)     The Commission has consistently found a relevant market for the generation and
         wholesale supply of electricity, which comprises electricity generated in power
         stations, traded on the wholesale market (through bilateral agreements, regulated
         market places, and power exchanges) as well as electricity physically imported via
         interconnectors.36
33   See replies to question 8 of questionnaire to customers.
34   Case M.6984, EPH/Stredoslovenska Energetika, para 27.
35 Case M.6984, EPH/Stredoslovenska Energetika, para 27.
36 Case M.7927, EPH/ENEL/SE, paras 9-12. Case M.8660, FORTUM/UNIPER, para 21.
                                                           7
 ---pagebreak--- (30)     The Commission has found that the geographic market is not narrower than national
         and considered, with regard to the Nordic countries, whether the relevant geographic
         market is wider than national. The exact delineation was left open.37
(31)     The Commission considers that for the purposes of this decision, the exact market
         definition can be left open as the proposed Transaction does not raise serious doubts
         as to its compatibility with the internal market or the functioning of the EEA
         Agreement under any plausible market definition.
5.2.     Financial trading of electricity
(32)     The Commission has found that the financial trading of electricity constitutes a
         relevant product market, separate from the generation and wholesale supply of
         electricity.38
(33)     The Commission has considered the market for financial trading of electricity to be
         global or at least EEA-wide, and in relation to the Nord Pool area, comprising at
         least the Nord Pool region.39
(34)     The Commission considers that for the purposes of this decision, the exact market
         definition can be left open as the proposed Transaction does not raise serious doubts
         as to its compatibility with the internal market or the functioning of the EEA
         Agreement under any plausible market definition.
5.3.     Distribution of electricity
(35)     In previous cases, the Commission has identified two separate markets for the
         transportation of electricity: transmission and distribution. In relation to distribution
         networks, the Commission has found the operation and management of lower
         voltage (distribution) networks to be a relevant product market. The Commission has
         previously considered the relevant geographic market for the operation of electricity
         distribution networks to be limited to the geographic area of the network in question
         (grid wide scope), with each grid constituting a relevant geographic market.40
(36)     The Commission considers that for the purposes of this decision, the exact market
         definition can be left open as the proposed Transaction does not raise serious doubts
         as to its compatibility with the internal market or the functioning of the EEA
         Agreement under any plausible market definition.
5.4.     Certificates trading
(37)     The Commission has previously found that a separate relevant market exists for the
         trading of CO2 allowances, which possibly also includes Certified Emission
         Reductions (CER credits). In addition, the Commission has found that trading of
         GoOs form a distinct market.41
37   Case M.7927, EPH/ENEL/SE, para 34.
38   Case M.8660, FORTUM/UNIPER, paras 37-48.
39 Case M.8660, FORTUM/UNIPER, paras 49-52.
40 Case M.8870 E.ON/Innogy, paras 41-43, 46
41 Case M.8660, FORTUM/UNIPER, paras 107-115.
                                                     8
 ---pagebreak--- (38)     Regarding the geographical scope of the markets, the Commission has considered
         that it comprises the geographical area covered by the relevant regulation. 42
(39)     The Commission considers that for the purposes of this decision, the exact market
         definition can be left open as the proposed Transaction does not raise serious doubts
         as to its compatibility with the internal market or the functioning of the EEA
         Agreement under any plausible market definition.
5.5.     Balancing power/ancillary services
(40)     The Commission has previously taken the view that a separate product market exists
         for balancing power and ancillary services. Also, the Commission has considered a
         further segmentation based on the type of regulation of the balancing service,
         however the segmentation has been left open. 43
(41)     The Commission has previously considered the market to be at most national but
         potentially limited to the relevant Transmission System Operator’s (“TSO”) control
         area (which is national in Denmark) or regional. 44
(42)     The Commission considers that for the purposes of this decision, the exact market
         definition can be left open as the proposed Transaction does not raise serious doubts
         as to its compatibility with the internal market or the functioning of the EEA
         Agreement under any plausible market definition.
5.6.     E-mobility services
(43)     In its early decisions considering e-mobility services, the Commission had
         considered (i) a broad market for the provision of e-mobility solutions and (ii) a
         market for the manufacturing, supply and installation of charging infrastructure for
         e-mobility solutions.45 In a more recent decision, the Commission considered
         whether the market for installation and operation of public electric vehicle (“EV”)
         charging stations may be further segmented. In that case, the Commission
         considered that the installation and operation of public EV charging stations on-
         motorways and off-motorways should be considered as separate product markets. 46
         As regards the geographic market definition, the Commission left open whether the
         relevant geographic market definition was local or national with local elements of
         competition.47
(44)     The Commission considers that for the purposes of this decision, the exact market
         definition can be left open as the proposed Transaction does not raise serious doubts
         as to its compatibility with the internal market or the functioning of the EEA
         Agreement under any plausible market definition.
42   Case M.8660, FORTUM/UNIPER, paras 116-121.
43   Case M.8660, FORTUM/UNIPER, paras 69-78, Case M.7927, EPH/ENEL/SE, paras 24-27.
44   Case M.7927, EPH/ENEL/SE, para 37.
45   See M.6441,Verbund/Siemens/E-mobility Provider Austria.
46   Case M.8870 E.ON/Innogy, para 190.
47   Case M.8870 E.ON/Innogy, para 200.
                                                     9
 ---pagebreak--- 6.         COMPETITIVE ASSESSMENT
6.1.       Introduction
(45)       The Transaction gives rise to horizontally affected markets in the (i) retail supply of
           electricity to large industrial customers in Denmark, and in the (ii) retail supply of
           gas to large industrial customers in Denmark.
(46)       Moreover, the given the vertical links between the Parties, the Transaction gives rise
           to the following vertically affected markets:
        i.           electricity generation and wholesale supply market, where both Andel and
                     Energi Danmark are active (upstream), and retail supply of electricity to large
                     industrial customers, where both Parties are also present (downstream);
       ii.           electricity generation and wholesale supply market (upstream), and the e-
                     mobility services market, where Andel is present (downstream);
      iii.           balancing power and ancillary services market, where Energi Danmark is
                     active (upstream), and retail supply of electricity to large industrial customers
                     (downstream);
      iv.            distribution of electricity, where Andel is active (upstream), and retail supply
                     of electricity to large industrial customers (downstream);
       v.            certificates trading, where Energi Danmark is present (upstream), and retail
                     supply of electricity to large industrial customers (downstream); and
      vi.            financial trading of electricity, where Energi Danmark is present (upstream),
                     and retail supply of electricity to large industrial customers (downstream).
6.2.       Horizontal non-coordinated effects
(47)       The Transaction gives rise to affected markets in the retail supply of (i) electricity
           and (ii) gas to large industrial customers in Denmark.
6.2.1. Retail supply of electricity to large industrial customers in Denmark
6.2.1.1. The Notifying Party’s views
(48)       The Notifying Party submits that the Transaction raises no competition concerns in
           relation to the market for the retail supply of electricity to large industrial customers
           in Denmark because (a) competitors exert significant competitive pressure, (b) entry
           barriers are low and suppliers have and will enter the market, (c) customers’
           switching costs are low, (d) customer mobility is increasing, (e) there are no capacity
           constraints concerning electricity purchases, and (f) there is buyer power among
           large industrial customers.48
48   Form CO, paragraphs 260 onwards.
                                                          10
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---         share of [20-30]%) and PoDs ([5-10]%), whereas their shares among the medium
        customers would be roughly in line with those for the overall market ([30-40]% in
        terms of volume, [10-20]% in PoDs). However for the larger customers, i.e. those
        with annual consumption levels of more than 10GWH, which represent [50-60]% of
        the overall market, although the combined share would be higher ([40-50]% in terms
        of volume, [20-30]% in PoDs), Andel’s presence is minor ([5-10]% in sales, [0-5]%
        in PoDs), Energi Danmark appears to have lost a significant amount of sales in the
        last three years, and the Parties’ competitors seem to have captured all the growth of
        the market in the same period.
        (B)         The Parties are not close competitors
(63)    The information provided by the Parties and obtained by the Commission during the
        market investigation suggests that the Parties are not close competitors.
(64)    First, the Parties focus their businesses on different categories of customers. Whereas
        the core of Energi Danmark’s business seems to be mostly on large and in particular
        on those with consumption levels above 10 GW/h, Andel’s activity with regards to
        those customers appears to be very limited. As can be seen in Table 1 and Table 2,
        the difference between market shares by volume and by PoD is considerably larger
        for Energi Danmark than for Andel. This suggests that customers supplied by Energi
        Danmark are, on average, significantly larger than those supplied by Andel. Second,
        Energi Danmark’s share in the segment of customers with annual consumption
        levels above 10 GWh is significantly higher than in the other segments ([30-40]%
        versus [20-30]% and [10-20]%) and its sales to these customers represent almost
        […]% of its total sales to large industrial customers; by contrast, Andel’s presence in
        that same segment is minor ([5-10]% share) and the sales to these customers
        represent only […]% of its total sales to large industrial customers.
(65)    The replies to the market investigation support that Parties target mostly different
        types of customers. One broker said that “both Parties barely meet in tenders.
        Energi Danmark and Andel in general still supply different kind of customers,
        Energi Danmark mainly targets large and more international players while Andel,
        while now also supplying large customers, mainly focuses in smaller customers”53
        and that “the prices offered [by Energi Denmark] became too high in relation to
        those of other suppliers”. Another broker indicated that “already before the
        transaction there was limited competition between both.”54 Moreover, a customer
        indicated that “Energi Danmark and Andel are not in the same business. While
        Andel operates the grid and supplies small customers and consumers, Energi
        Danmark focuses on larger customers.” This customer “doesn’t see Andel as one of
        its potential suppliers as they couldn’t supply for Nordics.”55 Moreover, a large
        competitor indicated that “Energi Danmark focuses on customers with a
        consumption above 5 Gw/h and is specifically performant for very large customers
        with a consumption above 10 GWh. Conversely, most of Andel’s sales are to small
        and middle segment customers.”56 Another large competitor said that “Energi
        Danmark is focused on large business customers. […] Conversely, Andel is very
53  See minutes of a conference call with a broker, 25 August 2021.
54  See minutes of a conference call with a broker, 26 August 2021.
55 See  minutes of a conference call with a customer, 9 June 2021.
56 See  replies to question 23.1 of questionnaire to competitors.
                                                         18
 ---pagebreak---          active in the segment for small and medium customers and only has a few large
         customers”.57
(66)     Second, another element pointing to the Parties not being close competitors is the
         tender data provided by the Parties. Andel and Energi Danmark seem to have
         competed in very few tenders in the last 2-3 years due to Energi Danmark’s
         decreasing participation in tenders over the last years.58 Moreover, among all the
         customers who replied to the market investigation, four indicated that they
         considered both Parties as electricity suppliers in the last contract. Seven considered
         only one of the Parties.59
(67)     Third, the replies to the market test suggest that, in general, market players do not
         perceive the Parties as being close competitors. Only one customer indicated that the
         Parties are particularly close competitors. 60 The vast majority of customers and
         competitors indicated that Norlys and Ørsted are closer competitors of the Parties
         than the Parties are to each other. For instance, one large competitor said that “Andel
         and Energi Danmark does not differ more from each other than other suppliers on
         the market”.61
(68)     Fourth, the switching estimates provided by the Parties indicate that out of all the
         contracts lost by Andel in 2020 only […] was lost to Energi Danmark, yielding an
         approximate diversion ratio of [0-5]%, which is considerably lower than the ratio
         towards other competitors (EWII [50-60]%, Jysk Energi, [10-20]%, Orsted [10-
         20]%, Scanenergi [5-10]%). In 2018 and 2019, […]. In 2020, Energi Danmark lost
         [20-30]% of its contracts to Andel. Although this percentage is not low, it is still
         considerably less than the proportion of contracts lost to Norlys ([30-40]%), and in
         any case Energi Danmark underlines that it is not aware of the beneficiary of most of
         its lost contracts. In any case, Energi Danmark submits that it is not aware that
         […].62
         (C)        Existence of alternative suppliers
(69)     There are a number of credible alternative suppliers that will remain in the market,
         such as Norlys, Ørsted, Vattenfall, Jysk Energi, Danske Commodities, NRGi and
         EnergiFyn.63 The majority of customers who replied to the market investigation
         indicated that there would be sufficient alternative suppliers to turn to once their
         current contracts expire. Only two customers indicated that there would be no
         sufficient alternatives, one of them submitting that for the last contract it only
         received “offers from 5 suppliers”.64 For instance, a large customer indicated that
         “there are still a number of alternative suppliers and so there will continue to be
57  See minutes of a conference call with a customer, 11 June 2021.
58  The reason is that, in Energi Danmark’s view, tenders are overly focused on price with little room for
    other parameters. […]. With tenders, Energi Danmark cannot just price the customers afterward, as they
    are not in contact with the customer. This is handled by the consultants, who have agreed with the
    customer that all communication goes through the consultant. Energi Danmark submits that it is not
    interested in that. See reply to RFI 4.
59  See replies to question 16 of questionnaire to customers.
60  See replies to question 20 of questionnaire to customers.
61  See replies to question 20 of questionnaire to customers and question 23.1 of questionnaire to competitors.
62  See reply to RFI 2 and RFI 4.
63  See replies to question 28.1 of questionnaire to customers.
64  See replies to question 28 of questionnaire to customers.
                                                          19
 ---pagebreak---         competition”.65 During the market investigation, a broker indicated that it currently
        receives three to five offers in each tender, and that it received eight to ten offers
        some years ago.66 Moreover, all the competitors who replied to the market
        investigation confirmed that there would be sufficient alternative suppliers for
        customers to turn to in case the combined entity increased prices or provided their
        service at significantly worse conditions. A number of alternative suppliers were
        mentioned by competitors, and one of them indicated that “[f]or most customers
        their products are relatively standardized, therefore customers should not have any
        difficulties finding an alternative supplier.”67
(70)    The tender data provided by the Parties shows that in 2020 Andel and Energi
        Danmark won […]% and […]% of the tenders in which they participated,
        respectively. This, coupled with the fact that the Parties barely met in tenders in
        2020, indicates that a significant proportion of tenders in which the Parties
        participated were available for other suppliers.
(71)    Electricity being a very homogeneous product, suppliers cannot differentiate
        themselves easily. In this regard, during the market investigation a broker indicated
        that there are no “particular advantages by Andel or Energi Danmark. Simply, being
        larger companies, they can in general offer more flexibility as regards payment
        terms. […] all major suppliers offer more or less the same service.”68 A customer
        also submitted that “the margins of electricity suppliers are rather thin and the
        mark-ups and services offered are therefore very close”69 and another one mentioned
        that this “partly explains why there is a strong competitive pressure in the electricity
        retail market”.70 In fact, the market investigation revealed that the most important
        factors for large industrial customers to choose electricity supplier are price,
        payment terms and quality/reliability.71 This is consistent with competitors’
        perception that margins are low. Competitors said that “[t]he margins from the
        supplier has decreased. The competition is strong” and that “[t]he market is highly
        liberalized and characterized by a high level of competition. Generally, margins
        within the segment of larger industrial customers are low.”72 Moreover, during the
        market investigation a broker indicated that in recent years suppliers have been
        “leaving the tenders, arguing that with the tenders it is not possible to sustain any
        reasonable margin” and gave a concrete example of an electricity supplier who
        “changed strategy and stopped participating in tenders, arguing that the margins
        are too low”.73 Another broker mentioned that “Energi Danmark has been
        withdrawing from tenders since there is too much competition and, when brokers are
        involved, margins are too small”.74
65  See minutes of a conference call with a customer, 6 July 2021.
66  See minutes of a conference call with a broker, 26 August 2021.
67  See replies to question 33 of questionnaire to competitors.
68  See minutes of a conference call with a broker, 26 August 2021.
69  See minutes of a conference call with a customer, 9 June 2021.
70  See minutes of a conference call with a customer, 27 May 2021.
71  See replies to question 13 of questionnaire to customers and question 17 of questionnaire to competitors.
72  See replies to question 31.1 of questionnaire to competitors.
73  See minutes of a conference call with a broker, 25 August 2021.
74  See minutes of a conference call with a broker, 26 August 2021.
                                                          20
 ---pagebreak--- (72)    The tender data provided by the Parties shows that contracts are normally concluded
        for a duration of one to three years.75 The vast majority of respondents to the market
        investigation confirmed this.76 Although the majority of customers have not
        switched electricity supplier in the last five years, 77 the vast majority of customers
        and all the competitors who replied to the market investigation indicated that it is not
        particularly costly to switch electricity supplier in Denmark and that there are no
        other barriers that would discourage customers from switching supplier. 78 For
        instance, a customer submitted that “there are no barriers to switch from one
        electricity supplier to another, once the contract has ended”.79
(73)    Moreover, the Parties’ market shares are not indicative of their market power and
        may differ significantly depending on the contracts won. For instance, Energi
        Danmark does not have a large number of customers, […]. […].80 Moreover, during
        the market investigation a broker mentioned that Energi Danmark has lost many
        contracts due to its high prices.
        (D)          Absence of barriers to expand
(74)    Moreover, all the competitors who replied to the market investigation confirmed that
        they would be able to react in the short term by increasing their purchases of
        electricity and start selling the customers that want to switch away from the Parties. 81
        For instance, a competitor indicated that “there are no capacity constrains to supply
        more and larger customers. This only requires to invest in qualified workers and
        systems. In a nutshell, going from small or large customer is not so much technically
        difficult but requires a change of strategy.”82
(75)    Furthermore, there is regulation in place to ensure that distribution of electricity to
        end-customers is conducted under non-discriminatory terms in the electricity
        network.83 In these circumstances, it seems that smaller competitors of the Parties do
        not face significant obstacles to grow.
        (E)          Retail supply of “green” electricity to large industrial customers via PPAs
(76)    The Commission has also analysed the impact of the Transaction in a hypothetical
        narrower market including only the supply of “green” electricity to large industrial
        customers through PPAs. Also in this narrower market, the Transaction would not
        raise serious doubts as to its compatibility with the internal market.
(77)    The Notifying Party submits that there seems to be in the market an increasing
        interest on the side of certain large industrial customers to sign long-term (up to five
75  See reply to question 10 (iv) of RFI 2.
76  Half of the customers indicated that the duration of the contracts range from one to two years, whereas
    38% said that this was between three to four years. Five competitors replied one to two years and only two
    competitors indicated three to four years. See replies to question 26 of questionnaire to customers and
    question 30 of questionnaire to competitors.
77  See replies to question 29 of questionnaire to customers.
78  See replies to question 30 of questionnaire to customers and question 35 of questionnaire to competitors.
79  See minutes of a conference call with a customer, 27 May 2021.
80  See reply to RFI 4.
81  See replies to question 34 of questionnaire to competitors.
82  See minutes of a conference call with a customer, 11 June 2021.
83  See, inter alia, Sections 20 and 73 of the Danish Act on Electricty Supply.
                                                           21
 ---pagebreak---          or even 10 years) PPAs with producers of “green” electricity. Whereas GoOs can be
         exchanged in the market and can be attached to any electricity supply contract, the
         PPA is specific in that it is linked to the actual production of a specific generation
         asset.84 By entering into a PPA, customers are ready to assume a general price risk
         instead of paying the price of the GoOs. 85 The Parties submit that these contracts are
         relatively new in the market.86 They expect a general decline in the prices of GoOs
         and that the interest of consumers will gradually shift towards mechanisms such as
         PPAs which incorporate the “green” element into the price of electricity. 87
(78)     Suppliers can either sign a PPA asset owner (the producer of “green” electricity) to
         then resell that electricity to the industrial customer, or as mere intermediary of a
         direct contractual relationship between the asset owner and the industrial customer. 88
(79)     The Notifying Party excludes any competition concerns in this segment of the
         market, since neither Energi Danmark nor Andel are customers or producers (except
         for Andel’s participation in Rødsand 2, with a very limited production). Moreover,
         according to the Notifying Party, there are several producers in the market capable of
         supplying PPA agreements. All existing and new production capacity of renewable
         energy assets is in theory available for PPAs89 and all producers like Ørsted,
         Vattenfall, Better Energy, or European Energy can offer a PPA to industrial
         customers.90
(80)     Energi Danmark currently only delivers electricity under a PPA agreement with
         [customer].91 This constitutes a negligible share of the total production in Denmark
         in 2020 (29 165 GWh). Energi Danmark does not have information as to the total
         capacity currently under PPAs and therefore, of what its share of this capacity would
         be.92 In any case, irrespective of the exact market share of Energi Danmark in a
         hypothetical market segment of PPAs, the Transaction would not give rise to any
         horizontal overlap, as Andel has not entered into any of these agreements. 93
84  Form CO, paragraph 185.
85  Form CO, paragraph 186. Since at the moment of the signing of the PPA – usually for long periods of 5-
    10 years– it is uncertain how the electricity price will evolve in the long and very long term.
86  Ørsted (former DONG) was, according to the Notifying Party, the first market participant offering PPAs,
    then labeled ‘climate partnerships’ and for a long time, it was the only market participant offering such
    products (Form CO, paragraph 523). The novelty of these agreements has been confirmed by a broker
    [Nordisk Energipartner/Kinect], who has explained that the PPAs have started to emerge in the last years
    because they is seen as more “green” and local product, conferring direct access to the producer (see
    minutes of the call of 26 August 2021).
87  Form CO, paragraph 187.
88  Form CO, paragraph 413.
89  Some customers seem to value the “additionality”, i.e. contributing to adding a new green electricity
    production asset into the market (Form CO, paragraph 520).
90  Form CO, paragraphs 340-341.
91  [In terms of future deliveries, Energi Denmark” […]. Energi Denmark has also signed a (direct) contract
    […]. At the time of the notification Energi Danmark was expecting to sign other agreements with asset
    owners of approximately […]. In total, Energi Danmark has currently contracted […] under PPAs and is
    about to contract an additional […] – all for future deliveries (Form CO, paragraphs 527 and 528)]..
92  However, it has provided examples of three other PPAs entered into by competitors amounting to a total
    of 227.7 MW, constituting approximately 3.8% of the available wind capacity.
93  Form CO, paragraph 337.
                                                             22
 ---pagebreak--- (81)     All producers of renewable electricity consulted in the market investigation
         confirmed to have entered into PPAs with retail suppliers or end customers94 , and all
         except one indicated that there are no major economic or regulatory obstacles or
         barriers for the owner of a generation asset to enter into PPAs with retail suppliers or
         with end-customers for the supply of “green” or renewable energy. 95 And while a
         slight majority were of the view that there is currently no sufficient installed capacity
         in Denmark to satisfy the demand of PPAs for the supply of “green” or renewable
         energy, one producer indicated that demand is increasing but that “at the moment it
         looks like there is enough supply” and other indicated that new generation would
         need to be developed to meet this demand rising demand. 96
(82)     Finally, all competitors and customers that expressed a view confirmed that there
         are, besides Energi Danmark, other suppliers that can supply “green” electricity
         backed by PPAs with owners of renewable assets and were capable of identifying
         several suppliers. One competitor indicated that the following suppliers could
         provide PPAs: Danske Commodites, Centrica, Energy Trading, Norlys, Midtjysk
         Elhandel, Ørsted, NRGi Better Energy and European Energy (the last two, possibly
         through partners).97
         (F)         Conclusion on non-coordinated horizontal effects in the markets of retail
                     supply of electricity for large industrial customers
(83)     In conclusion, the Transaction is unlikely to raise any competition concerns in the
         retail supply of electricity to large industrial customers, regardless of whether the
         product market is defined as including all industrial customers with annual
         consumption above 0.1 GWh or different markets are defined according to the size
         (consumption) of the customers (customers with annual consumption between 0.1
         and 2 GWh/between 2 and 10 GW/above 10 GWh). This is due to the following
         reasons: (i) the Parties’ combined shares do not exceed 40% neither in the overall
         market nor for the different customer size categories (except in the category of
         customers with annual consumption above 10GWh, but in that category the share
         increment is limited and Energi Danmark’s share has decreased significantly in the
         last years); (ii) the Parties appear not to be close competitors; (iii) there are a number
         of credible alternative suppliers that will remain in the market; (iv) there are no
         major obstacles for customer to switch supplier; and (v) there are no barriers for
         competitors to expand production in case the Parties were to increase prices post-
         Transaction. As regards the retail supply of “green” electricity to large industrial
         customers via PPAs, the Parties’ activities do not overlap and there are other
         alternative suppliers in the market.
94   See replies to question 4 of questionnaire to generators.
95   See replies to question 5 of questionnaire to generators.
96 See replies to question 6 of questionnaire to generators.
97 See replies to question 23 of questionnaire to customers, s ee replies to question 27 of questionnaire to
     competitors.
                                                           23
 ---pagebreak---  ---pagebreak--- (88)      Energi Danmark submits that it no longer offers natural gas to consumers and is thus
          no longer active on the market. […].99 While Energi Danmark maintains that there
          are no internal documents where the decision to withdraw from this market is
          reflected,100 it seems consistent, both with the evolution of its sales and market
          presence in the last three years, with the figures provided of active customers,101 and
          also with the perception of other market participants. In particular, the majority of
          the customers that expressed a view in the market investigation indicated that they
          do not perceive Energi Danmark as a current or potential supplier of gas. 102
(89)      In any case, the majority of market participants have expressed their view that (i) the
          Parties are not particularly close competitors in this market, 103 (ii) that they do not
          have any competitive advantage in the supply of gas, 104 (iii) that there are alternative
          suppliers to the Parties,105 and (iv) that the Transaction is unlikely to lead to an
          increase in gas prices in the retail supply to large industrial customers. 106
(90)      In view of the above, the Commission considers unlikely that the Transaction may
          give rise to any horizontal effects in the retail supply of gas to large industrial
          customers.
6.3.      VERTICAL EFFECTS
(91)      There are other potential vertical links identified by the Parties which give rise to the
          following vertically affected markets, which are analysed in this Section.
6.3.1. Generation and wholesale supply of electricity (upstream) and retail supply of
          electricity to large industrial customers (downstream)
(92)      Andel has a very limited presence in generation and wholesale supply through a
          windfarm it jointly controls and a self-standing single wind turbine, with an overall
          share of approximately [0-5]% of the market in Denmark in terms of production in
          2020.107 Energi Danmark does not own production facilities, but it buys electricity at
          the exchanges (Nord Pool, EPEX) and sells to other electricity retailers
          (“downstream wholesale”) or to their own large industrial customers (retail sale). 108
          These downstream sales represent a share in terms of production in 2020 of
          approximately [10-20]% of the total production of the generation and wholesale
          supply market in Denmark and [10-20]% of the total consumption. Therefore, the
99 […].
100 […].
101 See footnote 100.
102 See replies to question 35 of questionnaire to customers . As to competitors, two of the five that expressed
     a view were of the same opinion (see replies to question 45 of questionnaire to competitors).
103 See replies to question 36 of questionnaire to customers .
104 See replies to question 37 of questionnaire to customers .
105 See replies to question 38 of questionnaire to customers, s ee replies to question 48 of questionnaire to
     competitors.
106 See replies to question 42 of questionnaire to customers, s ee replies to question 51 of questionnaire to
     competitors.
107 Form CO, paragraphs 114 and following.
108 Form CO, paragraphs 120.
                                                          25
 ---pagebreak---         Parties’ combined share would be between [10-20]% (in terms of production) and
        [10-20]% (in terms of consumption).109
(93)    The Commission considers that it is unlikely that the Transaction may give rise to
        any customer or input foreclosure, for the following reasons.
(94)    First of all, because Andel already purchases […] its electricity supplies from Energi
        Danmark, the Transaction cannot give rise to […] customer foreclosure.
(95)    Second, as regards input foreclosure, the Parties do not appear to have the ability to
        restrict to downstream rivals access to electricity. In the first place, the combined
        entity’s share post-Transaction will be limited, so it cannot be assumed to have a
        significant degree of market power in the upstream market. In the second place, there
        are sufficient alternative suppliers upstream110 and since electricity is a
        homogeneous product it cannot be said that any of these alternative suppliers are less
        efficient than the Parties in any meaningful way. In the third place, the electricity
        sold by Energi Danmark is traded on the Nord Pool exchange, so Energi Danmark is
        not in a position to set or influence its price, and the market investigation has not
        revealed any relevant barriers or significant costs for retailers to switch electricity
        supplier. In the fourth place, other competitors of the Parties in the downstream
        market are also vertically integrated.111 .
(96)    Third, and most importantly, Andel already purchases […] its electricity supplies via
        Energi Danmark – and according to the Notifying Party […] –112 and the electricity
        purchased by Andel from Energi Danmark already represents […]% of the total sales
        of Energi Danmark in the generation and wholesale market in Denmark.113 In other
        words, the Parties already are highly integrated from a commercial point of view.
        This means that, even if the Parties had the ability to put in place a strategy to restrict
        access to their competitors, such a strategy would not have any meaningful effects
        neither on the volume of electricity – as it would equate to withdrawing from the
        market a […]% of Energi Danmark’s total sales in the market, i.e. approximately a
        [0-5]% of the total consumption in the Danish market – nor on its price and, given
        these very limited effects, the Parties would have no meaningful incentive for
        engaging in such a strategy.
(97)    Fourth, the replies to the market investigation seem to support these conclusions. A
        majority of producers of electricity replied that the Parties would not have, post-
        Transaction, the ability and incentive to restrict or limit their access to a customer
        base for the wholesale supply of electricity.114 One generator which is also vertically
        integrated [Ørsted] indicated that, although the combined entity will have a relevant
        market position in the downstream market and a strong product line, the Transaction
        would not change the situation as Andel and Energi Danmark were already “working
        together”.115 Moreover, while the Parties’ competitors’ in the downstream market
109 Form CO, paragraphs 127.
110 Such as Ørsted, Vattenfall, Aalborg Energi, HOFOR and Fjernvarme Fyn .
111 According to the Notifying Party, this includes the Parties’ main competitor in the retail supply to large
    industrial customers, Ørsted, and a new entrant (Vattenfall) (Form CO, paragraph 431).
112 Form CO, paragraph 76.
113 Reply to question 3.2 of RFI 5.
114 See replies to question 12 of questionnaire to generators.
115 See replies to question 13 of questionnaire to generators
                                                          26
 ---pagebreak---          were divided as to whether Energi Danmark had a competitive advantage in the retail
         supply of electricity to large industrial customers resulting from its role as
         wholesaler of electricity or balancing responsible party, 116 none of them considered
         that the Parties had the ability and/or the incentive to restrict or limit their access to
         the purchase of electricity.117 Finally, none of the respondents to the market
         investigation considered that the Transaction could lead to an increase of prices in
         the generation and wholesale market in electricity, nor in the retail supply of
         electricity.118
(98)     In view of the above, the Commission takes the view that it is unlikely that the
         Transaction may give rise to any foreclosure effects in the vertical relationship
         between generation and wholesale supply of electricity and retail supply of
         electricity to large industrial customers.
6.3.2. Generation and wholesale supply of electricity (upstream) and e-mobility services
         (downstream)
(99)     Andel controls Clever A/S (‘Clever’), an entity active in e-mobility services,
         installing and operating charging stations for electric vehicles in Denmark in public
         locations and also offering charging stations to households and businesses. 119 This
         market would therefore be downstream from the market for the generation and
         wholesale supply of electricity in Denmark, where both Andel and Energi Danmark
         are present.
(100) The Notifying Party estimates Clever’s market shares, based on the number of
         available charging points, to be around [40-50]%.120
(101) Despite this relatively high share, Commission                      considers       unlikely that the
         Transaction may lead to any vertical effects.
(102) As already mentioned in paragraph (94), input foreclosure is unlikely due to the
         Parties’ relatively low combined share in the generation and wholesale supply
         market and to the small increment resulting from the Transaction. Moreover, there
         are a number of other competitors available and it does not result from the market
         investigation that there are any relevant costs or barriers to switch supplier. Finally,
         as the Notifying Party submits, final customers always have the option of charging
         their car at home, whereby the customer’s own electricity supplier delivers the
         power.121
(103) Customer foreclosure is also implausible for several reasons. First, there are
         alternative suppliers in the downstream market, accounting for almost [60-70]% of
         the market. Second, e-mobility experiences are expected to experience a significant
116 See replies to question 41 of questionnaire to competitors. The advantages indicated were a deep
    knowledge of the market or direct access from wholesale to the final customer, thus eliminating the
    retailer.
117 See replies to question 42, 52 of questionnaire to competitors.
118 See replies to question 14 of questionnaire to generators . The vast majority in fact replied that prices will
    remain essentially at the same level.
119 Form CO, paragraphs 14 and 70.
120 Reply by Andel to question 4 of RFI 5.
121 Reply by Andel to question 4 of RFI 5.
                                                          27
 ---pagebreak---         growth in the following years, which will incentivise new entry and expansion of the
        current players, thus making any customer foreclosure strategy ineffective. And
        third, and most important, e-mobility players represent only a negligible fraction of
        the demand of electricity, which means that even if the combined entity had the
        ability and incentive to foreclose e-mobility customers, electricity suppliers would
        have a wide array of other alternative customers available, from essentially any
        economic sector.
(104) In view of the above, the Commission takes the view that it is unlikely that the
        Transaction may give rise to any foreclosure effects with respect to the vertical
        relationship between generation and wholesale supply of electricity and e-mobility
        services.
6.3.3. Balancing power services (upstream) and retail supply of electricity to large
        industrial customers (downstream)
(105) Energi Danmark is a balance responsible party in Denmark in terms of production,
        trade, and consumption. Andel currently has a portfolio agreement with Energi
        Danmark to secure continuous supply and balancing of physical electricity for the
        retail consumers’ continuous consumption of electricity. 122 That means that, on a
        daily basis, Energi Danmark prepares a consumption forecast and submits it to the
        TSO, Energinet. Energi Danmark, as balancing responsible party for Andel, is
        financially liable towards Energinet in terms of any imbalances between expected
        and actual consumption during the day. Any such imbalances are covered by the
        capacity reserves procured by Energinet.
(106) Energi Danmark’s presence in the balancing market is moderate or low. Its share for
        sale of the overall balancing power in Denmark is estimated to be less than 10%.
        Taking into account the hourly reserves, Energi Danmark’s share would be [0-5]% in
        FCR (primary reserve) and [10-20]% in mFRR (tertiary or manual reserve).123
(107) Balancing services provided by Energi Danmark to Andel – and potentially to other
        retailers – are associated to the supply of physical electricity. Therefore, for the same
        reasons applicable to the vertical link between generation and wholesale supply and
        retail supply to large industrial customers, the Commission considers any vertical
        effects resulting from Energi Danmark’s activity as balance responsible party to be
        unlikely.
122 Form CO, paragraphs 151-152.
123 Reply to question 1.4 of RFI 5. Energi Danmark is not present in the secondary reserve (aFRR) and there
    are no non-hourly reserves (FADR and PLR) in Denmark according to the Parties. These shares represent
    sales to the TSO, Energinet, to maintain the frequency of the electricity grid. Andel does not purchase
    FCR or mFRR reserves from Energi Danmark, only Energinet does so. But as explained in paragraph
    […], Energi Danmark is financially liable towards Energinet in terms of any imbalances between expected
    and actual consumption during the day and any such imbalances are covered by the capacity reserves
    procured by Energinet.
                                                        28
 ---pagebreak--- (108) First of all, as regards customer foreclosure, Andel already purchases […] balancing
         services from Energi Danmark, which means that the Transaction cannot give rise to
         […] customer foreclosure.124
(109) Second, as regards input foreclosure, Energi Danmark’s share post-Transaction is
         moderate or even low, so it cannot be assumed to have a significant degree of market
         power in the upstream market. Second, there are other alternative providers of
         balancing services125 and it does not result from the market investigation that Energi
         Danmark has any particular competitive advantage in the provision of this service,
         that other providers may be less efficient or that there are significant barriers or costs
         to switch service provider. Therefore, the parties do not appear to have post-
         Transaction the ability to limit to downstream competitors their access to adequate
         balancing services.
(110) Third, the results of the market investigation are consistent with these conclusions.
         None of the balancing responsible parties consulted in the market investigation
         perceives Energi Danmark as being, in its role of balance responsible party, an
         indispensable partner for retailers or producers of electricity for the sale of electricity
         or for the provision of balancing services.126 In the same line, none of them
         considered that the Transaction would have any impact on the balancing services
         market.127 And all of them agreed that the combined entity would not have post-
         Transaction, the ability to foreclose or restricting access to other suppliers. 128
(111) As regards the Parties’ competitors in the retail supply market, all players that
         responded to the market investigation agreed that, besides Energi Danmark, there are
         other balancing responsible parties to which they could turn to for the supply of
         electricity to large industrial customers, mentioning names such as Danske
         Commodities, Centrica, Markedskraft “and many others”. 129 One of the competitors
         [NRGi], in particular, indicated that although they currently “use Energi Danmark as
         balancing responsible partner on a part of [their] portfolio and Danske
         Commodities on another part of [their] portfolio. It would not limit our business to
         change our balancing setup to only one partner”, thus underlying the lack of
         obstacle to switch supplier.130 This same competitor underlined the “large number of
         balancing companies” as the main reason to be express any concerns in relation to
         the Transaction.131 And whilst it is true that competitors were divided as to whether
         Energi Danmark had a competitive advantage in the retail supply of electricity to
         large industrial customers resulting from its role as a balancing responsible party, 132
124 Furthermore, as explained in Sections 6.2.1.2(C) and 6.2.1.2(D), there are a number of credible alternative
    retailers of electricity to large industrial customers (and to other customers) that will remain in the market
    post-Transaction and there are no significant obstacles for these and other smaller retailers to expand.
125 Such as Centrica, Danske Commodities, Markedskraft.
126 See replies to question 8 of questionnaire – balancing power.
127 See replies to question 12 of questionnaire – balancing power.
128 See replies to question 13 of questionnaire – balancing power. One of the balancing parties (NEAS)
    considered that the Transaction would have a negative impact for them due to Energi Danmark’s greater
    financial strength (Q.10).
129 See replies to question 43 of questionnaire to competitors.
130 See replies to question 43 of questionnaire to competitors.
131 See replies to question 52 of questionnaire to competitors.
132 See replies to question 41 of questionnaire to competitors.
                                                             29
 ---pagebreak---         none of them considered that, post-Transaction, the Parties would have the ability
        and/or incentive, to restrict or limit their access to balancing services. 133
(112) Finally, as regards the impact of this vertical relationship on the provision of “green”
        electricity through PPAs, when asked whether Energi Danmark had any competitive
        advantage resulting from its position as balancing responsible party to enter into
        PPAs on behalf of or for customers, market players were divided. But of those
        producers that indicated that there was some sort of advantage, one explained that all
        balancing responsible parties have the same advantage and another one explained
        this advantage in terms of simplicity (less contracts to be signed for the producer). 134
        In any case, all producers that replied to the market investigation were of the view
        that Energi Danmark is not an indispensable partner (due to its role as balance
        responsible party) for them to enter into PPAs with customers in Denmark, 135 and all
        of them agreed that in case they needed to enter into a PPA with customers in
        Denmark, there would be alternatives to Energi Danmark as balancing responsible
        party that could provide balancing services, mentioning players such as Danske
        Commodities, Centrica, Ørsted, Axpo or Vattenfall.136
(113) In view of the above, the Commission takes the view that it is unlikely that the
        Transaction may give rise to any foreclosure effects with respect to the vertical
        relationship between balancing power services and retail supply of electricity to
        large industrial customers.
6.3.4. Distribution of electricity (upstream) and retail supply of electricity to large
        industrial customers (downstream)
(114) Andel owns Cerius A/S (‘Cerius’) and Radius Elnet A/S (‘Radius’), two DSOs
        which own and run the electricity distribution networks in certain areas of Eastern
        Denmark.137 In the distribution markets concerning those areas, therefore, Andel has
        a 100% market share. Energi Danmark does not have any activities in distribution
        but it is present (as Andel) in the downstream market for the supply of electricity to
        large industrial customers.
(115) Denmark has implemented the EU legislation concerning unbundling and regulated
        third-party access is in place both for transmission and distribution activities, as
        confirmed by the Danish Utility Regulator (“Forsyningstilsynet”, ‘DUR’). 138
(116) The Notifying Party argues that distribution activity is subject to intense regulation,
        which would leave no room for Andel to engage in any input foreclosure or
        discrimination strategy after (or before) the Transaction.139 The legislation in force
133 See replies to question 42 of questionnaire to competitors.
134 Generators, Q9. [Ørsted] explained that “Energi Danmark will be able to provide both retail services and
    balancing as well as PPA volumes which would make it easier for corporates to transact with Energi
    Danmark compared to a developer which cannot do the balancing services for the corporate. These
    developers would first need to make a separate agreement with the provider of balancing services which
    may mean that the corporate will need two agreements”.
135 See replies to question 12 of questionnaire to generators.
136 See replies of question 10 to generators.
137 Form CO, paragraph 14.
138 See minutes of the call with DUR of 16 June 2021. See also COMP/M.3868, DONG / Elsam / Energi E2,
    paragraphs 46-48.
139 Form CO, paragraphs 89-99.
                                                          30
 ---pagebreak---          includes a number of obligations for DSOs aiming at avoiding discrimination
         between integrated and third-party suppliers, such as (i) obligation to provide non-
         discriminatory access to their networks and to customer data to all electricity
         suppliers; (ii) obligation to set tariffs and access conditions on the basis of fair,
         objective and non-discriminatory principles, with prices being determined on the
         basis of publicly available methods and approved by DUR; and (iii) profit band
         regulation which imposes certain limits on DSO’s income and costs.140
(117) The Commission notes that on May 2021 the Danish NCA published a study on the
         retail electricity markets in Denmark – carried out at the request of the Ministry of
         Climate, Energy and Utilities – focusing on whether vertically integrated retailers
         pose a competitive problem in these markets.141 The NCA, in particular, analysed
         whether vertically integrated retailers enjoy any competitive advantage in the retail
         market. The conclusion of the study is that, although there is still a relatively low
         switching rate in Denmark compared to other European countries (which according
         to the NCA might be an indication of the existence of barriers to entry due to the
         presence of vertically integrated operators), there is no indication in the market of
         systematic differences between electricity prices or gross margins between integrated
         and non-integrated retailers and that, in fact, non-integrated retailers, have been
         increasingly capturing more customers over time. The NCA also found that low
         prices and low gross margins in isolation as well as low concentration at national
         level were indicators of a well-functioning competition in the market.142 The overall
         conclusion of the NCA is that although there are signs that competition in the retail
         electricity market could improve, there is no indication that vertically integrated
         suppliers enjoy any particular competitive advantage vis-à-vis independent
         retailers.143
(118) This conclusion seems supported by the market investigation. All retailers
         responding to the market test were of the view that suppliers such as Andel do not
         have any competitive advantage with respect to non-integrated suppliers, for instance
140 The band consists of a cost band and a rate of return band, which together determines the upper range for
    how much a network distribution company can charge annually to cover the company’s costs and ensure a
    fair return on the invested capital (see From CO, paragraph 91).
141 https://www kfst.dk/analyser/kfst/publikationer/dansk/2021/20210503-analyse-af-konkurrencesituationen-
    pa-detailmarkedet-for-el/. The main focus of the study was on the consumer and small business customers,
    although it also touches upon the segment of larger B2B customers (see email by Danish NCA of 28 May
    2021).
142 Although the NCA also warns that more recent increases in gross margins should be closely monitored.
    The NCA also found that integrated companies appear to have a legacy of inactive customer base from the
    time before the liberalisation although it noted that this situation is historically contingent and that,
    probably, even in the case of full unbundling, such an inactive customer base would remain inactive.
143 A study on the unbundling regulation was also undertaken by DUR on October 2019
    (https://forsyningstilsynet.dk/aktuelt/publikationer/elmarkedet/undersoegelse -af-konkurrencesituationen-
    paa-elmarkedet-med-fokus-paa-de-koncernforbundne-virksomheders-aktiviteter, see email by Danish
    NCA of 28 May 2021). This study focused on whether the regulation in place in Denmark ensured
    effective separation between activities within integrated groups. The conclusion was that there were s ome
    areas where regulation does not ensure neutral and independent behaviour of network operators and where
    rules and/or enforcement could be strengthened. However, DUR also stressed that its analysis focused on
    regulatory weaknesses, but it did not conclude on whether DSOs abused on these weaknesses or whether
    there had been any anticompetitive conducts in the market. These conclusions were reiterated in a call
    held by DUR and the European Commission where DUR expressed the view that the lack of recent new
    entrants and the relatively low switching rate in Denmark could be due to obstacles for non -vertically
    integrated companies. But DUR also affirmed to have conducted a study which showed that the main
    DSOs in Denmark were compliant with the regulation in force (see minutes of call of 16 June 2021).
                                                           31
 ---pagebreak---         in the form of better tariffs, preferential conditions, easier access to data of final
        customers etc.144 Moreover, none of those suppliers said to have ever been
        discriminated by Andel (or by any other supplier) vis-à-vis integrated suppliers.145 At
        the same time, none of the competitors in the downstream retail supply market which
        replied to the market investigation considered that the combined entity would have,
        post-Transaction, the ability to distort competition in the market, for instance, by
        reducing the quality of services or foreclosing or restricting access to necessary
        services (such as distribution).146
(119) In view of the above, the Commission takes the view that it is unlikely that the
        Transaction may give rise to any foreclosure effects with respect to the vertical
        relationship between distribution of electricity and retail supply of electricity to large
        industrial customers.
6.3.5. Certificates trading (upstream) and retail supply of electricity to large industrial
        customers (downstream)
(120) Energi Danmark is active in the sale of GoOs and CO2 allowances under ETS. 147
        Andel currently purchases GoOs and CO2 allowances from Energi Danmark and
        also from third parties.148
(121) Energi Danmark’s share in 2020 in the market for sales of GoOs in the EU is
        approximately [0-5]%,149 whereas in the CO2 allowances in the EU, its share would
        be even lower, approximately [0-5]%.150
(122) In view of the negligible presence of Energi Danmark in the upstream markets and
        the fact that Andel already purchases […] of its needs of these certificates from
        Energi Danmark, the Commission considers it unlikely that the Transaction may
        give rise to any foreclosure effects in respect to this vertical link.
6.3.6. Financial trading of electricity (upstream) and retail supply of electricity to large
        industrial customers (downstream)
(123) Energi Danmark offers a wide range of financial hedging instruments to both
        consumption and production customers. 151 Andel has entered into a management
        agreement with Energi Danmark Securities, enabling Andel to enter into financial
        trading agreements in the Nordic countries and in Germany. Andel does not have
        other financial trading partners.152
(124) Energi Danmark’s share in 2020 in the market for the sale of financial electricity
        instruments excluding EPADs in the Nord Pool area is approximately [0-5]%. As
        regards EPAD-sales, Energi Danmark’s share would represent circa [10-20]% and
144 See replies to question 38 of questionnaire to competitors.
145 See replies to question 39 of questionnaire to competitors.
146 See replies to question 52 of questionnaire to competitors.
147 Form CO, paragraph 142.
148 Form CO, paragraph 140-141.
149 Form CO, paragraph 147.
150 Form CO, paragraph 148.
151 Form CO, paragraph 133.
152 Form CO, paragraph 133.
                                                          32
 ---pagebreak---        [5-10]% in each of the Denmark’s pricing zones (DK1 and DK2, respectively) and
       less than 10% national-wide.153
(125) In view of the fact that Andel already purchases […] financial trading needs from
       Energi Danmark and the very limited market shares of the latter, the Commission
       considers it unlikely that the Transaction may give rise to any foreclosure effects in
       respect to this vertical link.
7.     CONCLUSION
(126) 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
153 Form CO, paragraph 137.
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