Commission Decision of 26/01/2011 declaring a concentration to be compatible with the common market (Case No COMP/M.5978 - GDF SUEZ / INTERNATIONAL POWER) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

• Published date: 26 January 2011
• Subject Matter: Competition,Concentrations between undertakings

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Commission Decision of 26/01/2011 declaring a concentration to be compatible with the common market (Case No COMP/M.5978 - GDF SUEZ / INTERNATIONAL POWER) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|EUROPEAN COMMISSION Competition DG Markets and cases I: Energy and Environment |

Brussels , 26.01.2011

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 Where possible the information omitted has been replaced by ranges of figures or a general description. PUBLIC VERSION SG-Greffe(2011) D/1408 C(2011) 524 CORR

MERGER PROCEDURE ARTICLE 6(1)(b) DECISION IN CONJUNCTION WITH ARTICLE 6(2)

To the notifying party

Dear Sir/Madam,

Subject: Case No COMP/M.5978 – GDF SUEZ/ INTERNATIONAL POWER Notification of 29 November 2010 pursuant to Article 4 of Council Regulation No 139/2004 [1]

1. On 29 November 2010, the European Commission received a notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which the undertaking GDF Suez S.A. ("GDF Suez", France) acquires within the meaning of Article 3(1)(b) of the Merger Regulation sole control over International Power plc ("International Power", England and Wales) (hereinafter the "parties") by way of acquisition of 70% of the shares in International Power (hereinafter the "proposed transaction").

I. THE PARTIES AND THE OPERATION

2. GDF Suez is present across the entire energy chain, in electricity and in natural gas, including: (i) purchase, production and commercialization of natural gas and electricity; (ii) transport, distribution, management and development of major natural gas infrastructures; and (iii) design and commercialization of energy services and environment related services. 39.9% of GDF Suez' share capital is held by the French Government and another 51% are publicly held.

3. International Power is an international operator with activities in North America, Europe, Middle East, Australia and Asia. International Power is an operator of power generation facilities generating a (gross) capacity of approximately 32,000 MW.

4. The proposed transaction will be implemented in two steps: (i) GDF Suez will first carry out an internal reorganisation aimed at constituting a separate subgroup of subsidiaries owning most of the international energy assets of the GDF Suez group, located mainly outside Europe; the subgroup will be held by Electrabel SA ("Electrabel"), a wholly owned subsidiary of GDF Suez. (ii) The shares in this subgroup of subsidiaries will be transferred to International Power in return for the issuance of new International Power shares representing (post-share capital increase) 70% of the share capital of International Power. GDF Suez will as a result, through Electrabel, hold 70% of the share capital of a new International Power (enlarged by the assets previously held by GDF Suez) ("New International Power").

5. The proposed transaction will lead to sole control of GDF Suez over International Power. Not only will GDF Suez hold 70% of New International Power's share capital but it will also be its only significant shareholder. The remaining 30% in New International Power will be split among the current public shareholders of International Power. The parties estimate that, on the basis of today's distribution of the shares, no shareholder will hold more than 4% of the shares in New International Power. GDF Suez will have the right to nominate […]. GDF Suez will enjoy reserved matters at New International Power board level which require the approval of […] which will include the approval of the annual budget and of the business plan as well as strategic transactions and capital expenditure over EUR 50 million.

6. Consequently, the proposed transaction consists in an operation of concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

II. REFERRAL REQUEST

7. On 20 December 2010, the Belgian Competition Authority requested, on the basis of Article 9(2)(a) of the Merger Regulation, a partial referral of the proposed transaction in relation to the parts of the case concerning the Belgian markets for generation and wholesale supply of electricity and the provision of balancing and ancillary services, with a view to assessing them under the Belgian competition law (the "Referral Request").

8. In the Referral Request, the Belgian Competition Authority asserted that the proposed transaction threatened to significantly affect competition in the Belgian markets for (i) generation and wholesale supply of electricity and for (ii) the provision of balancing and ancillary services, which present all the characteristics of distinct markets in accordance with Article 9(2)(a) of the Merger Regulation.

9. According to the Belgian Competition Authority's preliminary assessment, the proposed transaction threatened to affect competition in two ways. First, the Belgian Competition Authority was concerned that the proposed transaction would provide GDF Suez with the necessary information to raise the electricity prices in the wholesale market to the detriment of final consumers and, second, that such information would confer to GDF Suez the ability and the incentives to put RWE Essent at a competitive disadvantage, thereby dissuading the latter to expand in the Belgian wholesale market. Analogous concerns were expressed also in relation to the provision of balancing and ancillary services in Belgium.

10. On 19 January 2011, in the light of the Modified Commitments submitted by the parties, the Belgian Competition Authority withdrew its Referral Request.

III. EU DIMENSION

11. The undertakings concerned have a combined aggregate world-wide turnover in 2009 of more than EUR 5 000 million [2] (GDF Suez: EUR 79.91 billion and International Power: EUR 5.53 billion). Each of them has an EU-wide turnover in 2009 in excess of EUR 250 million (GDF Suez: EUR […], International Power: EUR […]), but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. The proposed transaction therefore has an EU dimension within the meaning of Article 1(2) of the Merger Regulation.

IV. RELEVANT MARKETS AND COMPETITIVE ASSESSMENT

12. In previous decisions concerning the electricity sector, the Commission has considered that the following product markets should be distinguished [3] : (i) generation and wholesale supply of electricity [4] ; (ii) transmission [5] ; (iii) distribution [6] ; (iv) retail supply (further subdivided according to the category of customers) [7] and ancillary services and balancing power [8] . Each of these activities belongs to a distinct product market as they require different assets and resources. Moreover, these activities correspond to distinct market conditions and structures.

13. Both GDF Suez and International Power are active in electricity related markets in Portugal, the Netherlands, Belgium, the UK, Italy, Spain, Germany and France.

14. Given the number of markets and since the proposed transaction results in affected markets in Portugal, in the Netherlands and raises serious doubts in Belgium, the Commission proceeds to its competitive assessment with regard to these Member States by presenting its conclusions on each individual market. In the present decision, also a competitive assessment with respect to the provision of balancing power in Great Britain has been carried out since within the course of the Commission market investigation concerns have been voiced as to the impact of the proposed transaction on this potential market.

15. As it will be explained in the present decision, the proposed transaction as originally notified, raised competition concerns as regards the Belgian electricity generation and wholesale market given that it would have led to the reinforcement of GDF Suez' dominant position in the Belgian wholesale market.

16. In the course of the proceedings, the parties submitted to the Commission commitments designed to eliminate the serious doubts identified by the Commission, in accordance with Article 6(2) of the Merger Regulation. In the light of these commitments, the Commission has concluded that the proposed transaction falls within the scope of the Merger Regulation and does not raise serious doubts as to its compatibility with the internal market or with the proper functioning of the EEA Agreement.

A. Portugal

17. Both parties are active in electricity generation and wholesale in Portugal.

Generation and wholesale of electricity

1. Product market definition

18. As already emphasized in previous decisions, the Commission has considered that electricity generation and wholesale constitute a separate product market.

19. The parties agree with the Commission's EDP/GDP decision [9] in that, since the reform of the electricity markets in Portugal, the relevant product market for electricity wholesale should encompass the two market segments formerly distinguished, namely, the "Sistema Eléctrico de Serviço Público" ("SEP") and the "Sistema Eléctrico Independente" ("SEI") [10] . As regards power generation, the new legal structure distinguishes two different regimes, namely, power production under the general regime ("produção de electricidade em regime ordinário" or "general regime") and under the special regime ("produção de electricidade em regime especial" or "special regime").

20. The special regime is particular in the sense that generation assets eligible for this system, i.e., renewable resources or co-generation, are entitled to enter into a Power Purchase Agreement with the last resource supplier, the Portuguese transmission...