EON Gives In to EU Pressure, Sells Power Network | Business| Economy and finance news from a German perspective | DW | 28.02.2008
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EON Gives In to EU Pressure, Sells Power Network

In a shock move, German energy giant EON has said it will sell its power grid in order to end a major antitrust investigation by the European Commission. The EU hopes other power companies will follow EON's lead.

High-voltage power lines

EON will continue to produce energy, but someone else will distribute it in future

The EU's executive body said on Thursday, Feb. 28, that it would check whether the move by EON will end the company's antitrust problems. The European Commission has been trying for years to push energy companies to divest their grids in order to increase competition in the electricity and gas market and make prices more consumer-friendly.

EU leaders agreed last year to separate power production from distribution networks. The commission favors complete "ownership unbundling" or having an independent company to run pipelines and energy grids, but a group of eight countries, led by France and Germany, was pursuing an alternative to avoid the break-up of their vertically integrated utilities.

EON's announcement on Thursday came as a complete turnaround.

"EON proposes to commit to sell its electricity transmission system network to an operator which would have no interest in the electricity generation and/or supply business," the European Commission said in a statement.

Move could end antitrust inquiry

The European Commission building

Brussels will now check whether it antitrust proceedings against EON can be dropped

EU economics ministers were meeting in Brussels on Thursday to discuss ways of increasing competition in the gas and power sector. EU Energy Commissioner Andris Pielbalgs welcomed EON's decision, adding that he hoped other companies would act in a similar fashion.

Wulf Bernotat, chief executive of EON, had discussed the possible sale with German Chancellor Angela Merkel, a government spokesperson said. Still, the news is likely to have come as a surprise, as the German government had made a point of lobbying in Brussels for the company to avoid such a sell-off.

The company has also promised to divest 4,800 megawatts of generation capacity to rivals. Brussels said it would ask EON's customers and competitors for their views on the proposal, and would close the antitrust cases once a legally binding decision was made.

EU aims to lower prices

The EU's investigations concerned problems in the power sector where, according to Brussels, former state-run monopolies had too much control over the supply chain, keeping prices high and limiting much-needed investment to expand capacity.

"We have been aware for some time that EON but also RWE and Vattenfall are in close touch with investment banks to sell their grids," Claude Turmes, a member of the European Parliament's energy committee for the Greens group, told Reuters. "This is a tipping point in the debate."

RWE, Germany's second-largest utility, said it was not going to sell its grid.

A spokesman for Vattenfall Europe, a Swedish-based company that is vertically integrated in Germany, confirmed that it was looking at alternative ownership structures for its German transmission network.

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