IP/07/196

Brussels, 15^th February 2007

Mergers: Commission approves planned acquisition of Scottish Power by Iberdrola

The European Commission has cleared under the EU Merger Regulation the proposed acquisition of Scottish Power plc, a UK energy company, by Iberdrola, S.A., a Spanish energy company. After examining the operation, the Commission concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

Iberdrola is active in the electricity, gas, engineering and construction industries and real estate services, mainly in Spain and Latin America. Scottish Power is active in the electricity and gas industries in the UK and, to a minor extent, in Ireland.

The Commission’s examination of the proposed transaction showed that the horizontal overlaps between the activities of Iberdrola and ScottishPower are limited to the trading at European level of so-called "financial" electricity and CO₂ emissions rights and that their combined position in both markets is very limited.

The activities of the parties would also overlap in the near future in electricity generation in the UK, where Iberdrola has plans to develop wind farms. However, even considering this future market entry by Iberdrola, the Commission's investigation has shown that the combined position of the parties does not create competition concerns either in the UK as a whole or in Scotland.

For all products concerned, the combined firm will continue to face several strong, effective competitors with significant market shares.

The Commission also studied the potential impact on the merger of fiscal incentives in Spain which allow Spanish companies purchasing shareholdings in foreign companies to amortize the cost of financial goodwill and to offset up to 12% of the price paid against tax to the extent to which the purchase leads to increased export activities. Under the EU Merger Regulation, the Commission must assess whether these incentives could increase the financial strength of the merging parties to an extent that, in combination with other relevant factors, the merger would significantly impede effective competition on the energy markets concerned. This was not found to be the case. Looking at previous acquisitions by Iberdrola, it may be that a tax benefit of up to 10% of Scottish Power's 2006 turnover could follow from the incentives. However, even were this to be the case here, the resulting financial strengthening of the company would not lead to a threat to effective competition on UK or Spanish energy markets (Scottish Power has no current or planned activities in Spain), because of the limited scope of the parties' activities and the strength of competitors. This conclusion is unaffected by the question whether or not these incentives constitute state aid under the EC Treaty, because the Commission's assessment of the proposed transaction under the Merger Regulation must be based on whether the merging parties could impede effective competition.
More information on the case will be available at:

http://europa.eu.int/comm/competition/mergers/cases/index/m83.html#m_4517