UK claws back electricity deal

THE pounds 1.9bn takeover of London Electricity by the state-owned group Electricite de France ran into trouble yesterday after the Government asked Brussels to hand back responsibility for investigating the deal to the UK competition authorities.

Based on past cases where the European Commission has agreed to similar requests, there is a strong possibility of the EdF deal being referred to the Monopolies and Mergers Commission (MMC).

The Department of Trade and Industry said it had asked for authority to be handed back on the grounds that the takeover last December raised public interest concerns and could distort competition in the UK electricity market. The takeover amounts to vertical integration, since EdF already supplies 7 per cent of the UK electricity market through the cross-Channel interconnector.

This is the fourth time UK authorities have asked Brussels to cede authority to London, citing article nine of the EC merger regulations. This states that national competition authorities can investigate a merger if it threatens to strengthen a dominant position or impede competition in a distinct market.

In two of the three previous cases - GEHE's bid for Lloyds Chemists and the Tarmac-Steetley merger - the deals were subsequently sent to the MMC.

The Government has also invoked the less-often used article 21 of the merger regulations, which is normally only used to claim back responsibility for vetting mergers that involve national security, control of the media and the operation of financial institutions.

The DTI has used the "public interest" clause in the article, claiming the takeover raises concerns about the regulation of the electricity sector. The EC has three to four weeks to respond.

A prolonged MMC investigation would be a blow to EdF since it made the pounds 1.9bn takeover unconditional on regulatory clearance and has already paid London Electricity's former owner, the US company Entergy.

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