OREANDA-NEWS. The Commission has assessed the impact of the proposed acquisition on competition in the markets for (i) the excavation and supply of lignite, (ii) the supply of pulverised lignite in Germany and (iii) generation and wholesale supply of electricity.

The Commission's investigation has shown that the proposed transaction will not have an adverse effect on the market for the excavation and supply of lignite as neither of the parties exerts any competitive constraint on each other. Vattenfall's activities are limited to the Lusatia region ("Lausitzer Revier") in Germany while EPH, via its subsidiary Mibrag, operates open cast mines in Central Germany ("Mitteldeutsches Revier").

The Commission considered that switching lignite supply between Vattenfall mines and EPH mines would be unlikely in the future for several reasons, including high transportation costs and differences in lignite quality between Vattenfall and EPH mines. Moreover, lignite will still face increasing competition from other sources of energy such as natural gas in the years ahead due to Germany's energy policy aiming to reduce CO2 emissions, which will significantly constrain the parties after the transaction.

Both parties are also active in the supply of pulverised lignite in Germany. However, the pulverised lignite of both parties is not substitutable due to differences in quality. Moreover, the increase in market share through the merger is small and the merged entity will still face significant competition from RWE, the market leader in this sector.

The Commission also analysed whether the merged entity would be able to foreclose access to generation and wholesale supply of electricity. The market investigation confirmed that, after the transaction, the merged entity will have neither the ability nor the incentive to deny customers access to supplies. This is in particular given the limited substitutability of different lignite supplies, the existence of long-term supply agreements between players and the interdependency of the suppliers and customers.

The transaction was notified to the Commission on 18 August 2016.

Companies and products

Vattenfall Europe Generation is active in electricity generation. Vattenfall Europe Mining is active in the mining of raw lignite in the Lusatia region of Eastern Germany and the supply of the excavated lignite to intra-group power plants and refinement plants. Both companies are wholly-owned by Vattenfall GmbH, which is a holding company incorporated under German law.

EPH is a holding company incorporated in the Czech Republic and is engaged in coal extraction, electricity and heat distribution and production, from conventional and renewable sources, as well as gas distribution and supply.

PPF is an international private equity group with limited liability under the jurisdiction of the Island of Jersey.