Centrica’s plan to buy a 20 per cent stake in Britain’s nuclear industry from EDF, the European energy giant, raises monopoly concerns and should be referred to competition authorities, the head of Britain’s second-largest utility said yesterday.
Ian Marchant, chief executive of Scottish and Southern Energy, said that the proposal from Centrica, the British Gas owner, to form a joint venture with EDF, the new owner of British Energy, raised serious concerns about the health of the UK’s wholesale energy market.
“We think there are a lot of questions that require careful scrutiny,” he said. “The competition authorities need to properly understand what the ongoing relationship between Centrica and EDF will be . . . Joint ventures between major players in any industry always raise competition issues.” Mr Marchant stopped short of calling for regulators to block the deal. However, he expressed concern that the joint venture would grant the companies undue control over energy market liquidity and pricing. Taken together, Mr Marchant pointed out that EDF and Centrica control about 40 per cent of the market supplying UK commercial energy customers. They also control 25 per cent of the power generation market.
Under the terms of the proposed joint venture, which was announced on May 11 but will not be completed before July, the companies will generate electricity from British Energy’s fleet of nuclear power plants and will build at least four reactors, with the first of these scheduled to start producing electricity in 2017.
EDF and Centrica will use available power from the British Energy fleet of nuclear reactors based on their respective 80 per cent and 20 per cent shareholdings. EDF will also supply Centrica with an additional 18 terawatt hours of power at market prices for five years from 2011.
Centrica and Ofgem, the industry regulator, both declined to comment.
Separately, Mr Marchant said that Scottish and Southern would be interested in buying EDF’s £3 billion UK power grid if it is put up for sale by the French state-controlled company.
EDF is seeking ways to bolster its balance sheet and pay off its debt pile after a string of big acquisitions last year. As well as paying more than £12.5 billion for British Energy, it has agreed to pay $4.5 billion (£2.8 billion) for half of Constellation Energy, the US power group.
Mr Marchant was speaking as Scottish and Southern unveiled a 2 per cent rise in 2008-09 profits to £1.25 billion and forecast growth in profits, dividends and customers in 2009-10.
The company also announced new power developments, including a gas-fired power station in Wales and a wind farm in the Shetlands.
Scottish and Southern, based in Perth, eastern Scotland, said that it had gained about 600,000 customers to bring the total above nine million. Shares in Scottish and Southern were down 7p, or about 0.6 per cent, at £11.48, valuing the company at about £10.6 billion.
— Electricity consumption worldwide is set to fall this year for the first time since 1945, according to the International Energy Agency. The Paris-based agency will inform energy ministers from the Group of Eight leading economies this weekend that electricity demand will fall 3.5 per cent in 2009. Consumption in China will be more than 2 per cent lower than last year. Russia will fall almost 10 per cent.
“We think there are a lot of questions that require careful scrutiny,” he said. “The competition authorities need to properly understand what the ongoing relationship between Centrica and EDF will be . . . Joint ventures between major players in any industry always raise competition issues.” Mr Marchant stopped short of calling for regulators to block the deal. However, he expressed concern that the joint venture would grant the companies undue control over energy market liquidity and pricing. Taken together, Mr Marchant pointed out that EDF and Centrica control about 40 per cent of the market supplying UK commercial energy customers. They also control 25 per cent of the power generation market.
Under the terms of the proposed joint venture, which was announced on May 11 but will not be completed before July, the companies will generate electricity from British Energy’s fleet of nuclear power plants and will build at least four reactors, with the first of these scheduled to start producing electricity in 2017.
EDF and Centrica will use available power from the British Energy fleet of nuclear reactors based on their respective 80 per cent and 20 per cent shareholdings. EDF will also supply Centrica with an additional 18 terawatt hours of power at market prices for five years from 2011.
Centrica and Ofgem, the industry regulator, both declined to comment.
Separately, Mr Marchant said that Scottish and Southern would be interested in buying EDF’s £3 billion UK power grid if it is put up for sale by the French state-controlled company.
EDF is seeking ways to bolster its balance sheet and pay off its debt pile after a string of big acquisitions last year. As well as paying more than £12.5 billion for British Energy, it has agreed to pay $4.5 billion (£2.8 billion) for half of Constellation Energy, the US power group.
Mr Marchant was speaking as Scottish and Southern unveiled a 2 per cent rise in 2008-09 profits to £1.25 billion and forecast growth in profits, dividends and customers in 2009-10.
The company also announced new power developments, including a gas-fired power station in Wales and a wind farm in the Shetlands.
Scottish and Southern, based in Perth, eastern Scotland, said that it had gained about 600,000 customers to bring the total above nine million. Shares in Scottish and Southern were down 7p, or about 0.6 per cent, at £11.48, valuing the company at about £10.6 billion.
— Electricity consumption worldwide is set to fall this year for the first time since 1945, according to the International Energy Agency. The Paris-based agency will inform energy ministers from the Group of Eight leading economies this weekend that electricity demand will fall 3.5 per cent in 2009. Consumption in China will be more than 2 per cent lower than last year. Russia will fall almost 10 per cent.
Source: The Times
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