OREANDA-NEWS. June 24, 2013. The Federal Antimonopoly Service (FAS Russia) decided not to allow companies within the group of persons of “Gazprom” OJSC to purchase over 50% voting shares of a generating company – “Quadra” OJSC.

In 2011, FAS made a similar decision refusing “Quadra” OJSC to purchase “INTER RAO Capital” CJSC. The petitioned transactions could have restricted competition on the wholesale market of electric power (capacity) and created dominance of the petitioner (the petitioner’s group of persons) within the “Centre” free power (capacity) transfer zone.

The share of companies – members of the group of persons of “Gazprom” OJSC on the wholesale market within the boundaries of the Europe – Urals price zone (under the established capacity and according to the generation share) is much higher that similar shares of companies – members of the group of persons of “INTER RAO Capital” CJSC, which constituted the grounds for the refusal.

As established by FAS Russia, in prospect, with due account of capacity commissioning under capacity supply agreements, upon completing the transaction the share of generating companies of the group of persons of “Gazprom” OJSC would reach 20.5% (under the established capacity) within the “Centre” free power (capacity) transfer zone, which would create dominance in the area.

Apart from it, economic concentration within the “Centre” free power (capacity) transfer zone increases from a moderate to a high level (CR3 increases from 61.9 to 71.9, HHI increases from 1894 to 2104). It can lead to introducing the maximum level of prices within the “Centre” free power (capacity) transfer zone in competitive capacity outtake.

Estimates completed by FAS and the “Market Council” Non-Commercial Partnership enable to conclude that if the transaction takes place the group of persons of “Gazprom” OJSC would be able to significantly increase its ability to influence prices on day-ahead market (increasing the frequency of possessing the necessary volume of electric power, enabling to exercise decisive influence upon на формирование equilibrium price for electric power, during the 24-hour trading period up to 80.3%).

“Analysis showed that “Quadra” OJSC joining the group of persons of “Gazprom” OJSC would considerably worsen the competitive environment on both the market of electric power and the market of capacity”, Deputy Head of the FAS Department for Control over Electric Power Industry, Dmitry Vasiliev commented FAS decision.

“Such transactions increase the risk of prices manipulation on the wholesale market of electric power and capacity and also do not support one of the most important principle of organizing economic relations in electric power industry: employing market relations and competition as one of the main instruments of establishing a stable system of satisfying the demand for electric power”, emphasized Dmitry Vasiliev.