Translated material
Endesa is getting closer
The Spanish Prime Minister promised E.ON a quick happy ending
The battle for the Spanish energy company Endesa, which unfolded between the German concern E.ON and patriotic officials of the government of socialist José Luis Zapatero, is approaching its finale. The Spanish Prime Minister himself announced last week that he was ending his opposition to the deal and was committed to a happy ending. This unexpected turn in the position of the most implacable opponent of the idea of transferring the largest Spanish energy enterprise into German hands seems to be explained by some concessions on the part of the management of E.ON.As the German magazine Wirtschaftswoche reported recently, citing “circles in the supervisory board” of E.ON, the concern is ready to abandon the Spanish business in South America if it acquires Endesa. In this way, E.ON CEO Wulf Bernotat reportedly intends to encourage the Spanish government to stop building more and more barriers to the merger of E.ON and Endesa. According to the management of E.ON, the abandonment of Endesa's South American business should result in quick and final agreements with the Spanish authorities.
Theoretically, Endesa's activities in the South American region should in themselves be of interest to the company's buyer - it was there that the highest growth rates were observed within the entire concern. In addition, Endesa has made significant investments, for example, in hydroelectric power in Chile.
“This type of activity is not suitable for E.ON,” Wirtschaftswoche quotes an anonymous member of the supervisory board of the German concern as saying. The implication is that businesses in Latin America are too far away to be effectively controlled from decision centers in Düsseldorf or Munich. Along with this, the German concern in no case intends to abandon nuclear energy and coal power plants owned by Endesa. Namely, this is what (among 19 other conditions) the Germans were obliged to do by the Spanish Energy Supervisory Authority in exchange for their consent to the sale of Endesa. E.ON was also required to give up business in the Balearic and Canary Islands, where Endesa has a virtual monopoly. The German concern also does not agree to this.
It seems that both sides are trying to put an end to the history of the takeover of the Spanish Endesa as soon as possible. Last week, the Spanish Ministry of Industry announced its readiness to review the imposed restrictions if E.ON provides reliable guarantees that future agreements will be maintained. However, will the German concern really be ready to sacrifice business in South America? This issue looks very controversial today from the point of view of experts.
Last spring, the European Commission recognized the restrictions that the Spaniards were then just planning to impose on this deal as contrary to EU norms. Now Competition Commissioner Neely Kroes has promised to announce a decision on all 19 conditions set out in Madrid “as soon as possible”. If the critical attitude towards Madrid’s understanding of national interests remains in the European Commission, E.ON will be able to confidently go to court and defend the deal according to its own scenario, including its Latin American aspect. True, the “Brussels argument,” with all its weight, is not able to reduce the time of legal proceedings in Spain or the European Court of Justice. The process can take at least three years. Düsseldorf is not planning to wait that long.
With all the remaining uncertainty, E.ON's management hopes for a successful completion of the transaction worth 27.1 billion euros, which will result in the creation of the world's largest energy concern with 50 million customers and an annual turnover of 65 billion euros. In an interview with Capital magazine, Wulf Bernotat said that at the moment he is “very, very confident” that everything will work out with Endesa on the terms that the German concern is striving for. Mr Bernotat has seen "encouraging signs" recently.