Case Summary 26 July 2012

Transcription

1 Case Summary 26 July 2012 Clearance of merger between Gazprom and VNG Sector: Ref: Energy B8-116/11 Date of Decision: The Bundeskartellamt has cleared plans by Gazprom Germania GmbH (GPG) to raise its share in VNG to % by revoking its earlier decision to forgo 1.88% of the voting rights and a seat on the supervisory board of VNG Verbundnetz Gas AG (VNG). As a result of the merger, GPG together with another shareholder (Wintershall/BASF) will be able to jointly exercise competitively significant influence on VNG. However, the project will not create or strengthen a dominant position on any of the markets concerned and was therefore cleared after close examination. GPG is a 100% subsidiary of OOO Gazprom export, whose shares are wholly owned by the parent company OAO Gazprom (Gazprom). Gazprom's key activities are the exploration, extraction, processing, transport, storage of and trade in natural gas, liquid gas and gas condensate. GPG mainly manages equity financing and holdings within the Gazprom company group. It is not involved in the sale of natural gas in Germany. GPG owns 50 % of the shares of WINGAS GmbH & Co. KG (WINGAS). WINGAS supplies natural gas to municipal utilities, regional gas distributors, industrial plants and power plants in Germany and within Europe and is active in the trade and procurement of natural gas and the operation of gas pipelines and storage facilities. The remaining shares in WINGAS are held by Wintershall Erdgas Beteiligungs GmbH, a 100% subsidiary of Wintershall Holding GmbH (Wintershall). Wintershall belongs to BASF, which is active in the sale of chemicals, plastics and performance products, plant protection products, fine chemicals as well as oil and gas. BASF's oil and gas activities are concentrated in Wintershall and its subsidiaries. 1

2 VNG is a long-distance wholesale transmission company supplying the entire territory of the new Länder, its main activities being the import, trading, transport and storage of natural gas and related services. Apart from GPG the shareholders of VNG are EWE Aktiengesellschaft (EWE) with 47.9 %, VNG Verbundnetz Gas Verwaltungs- und Beteiligungsgesellschaft mbh (VUB) with % and Wintershall with %. When Ruhrgas was incorporated into the E.ON company group (E.ON is one of the leading German energy suppliers), the Federal Minister of Economics and Technology issued a ministerial authorisation on 18 September on the condition that E.ON relinquish its own and Ruhrgas's participation in VNG. The largest part of Ruhrgas's stake in VNG was taken over by EWE, whose total share increased to 47.89%. The East German municipalities with participations in VNG, whose shares are pooled in the VUB holding company, were allowed to acquire some of the Ruhrgas package in order to increase their stake in VNG to 25.79% in total. At first VNG was jointly controlled by EWE and VUB on the basis of the consortium contract concluded between the two companies on 8 December However, in May 2007 a public dispute broke out between EWE and other VNG shareholders. On 2 September 2008 VUB extraordinarily cancelled the consortium agreement with EWE. Based on these circumstances VNG cannot currently be considered as being under the joint control of EWE and VUB. GPG's plans to revoke its decision to forgo 1.88% of the voting rights and a seat on VNG's supervisory board and hence to raise its share in VNG to 10.52% constitutes a concentration which allows Wintershall and GPG to directly exercise a competitively significant influence on VNG, therefore fulfilling the conditions of 37 (1) No. 4 of the Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen, GWB). The merger project affected the nationwide market for the development, production and sale of natural gas. Based on the overall volume of gas production determined by the Bundeskartellamt, Gazprom was the market leader, Dutch GasTerra B.V. was number 2, followed by Norwegian Statoil ASA. In 2010 Gazprom's market share was 33%. As the merger project is not expected to worsen the structural conditions on the market by creating or strengthening a single dominant position in the development, production and sale of mineral gas in Germany, the question whether 1 2 Ministerial authorisation II; published in WuW/E DE-V 643 ff Bundeskartellamt, Activity Report 2003/2004; BT printed matter pages 135f. 2

3 Gazprom already had a single firm dominance on the German market for the development, production and sale of mineral gas before the merger could be left open. Neither is the merger expected to create or strengthen a joint dominant position. Although the market share thresholds above which the existence of an oligopoly can be presumed are reached because Gazprom, GasTerra B.V. and Statoil ASA jointly had a share of 74 % of the development, production and sale of mineral gas in Germany, this national market has certain structural features such as long-term supply contracts, which do not lend themselves to tacit coordination. It can also no longer be expected that VNG and WINGAS, jointly controlled by GPG and Wintershall, would operate independently in the market due to the joint competitively significant influence which GPG and Wintershall will gain on VNG as a result of the merger. The project will therefore also affect the supply of regional distributors by long-distance wholesale transmission companies, the supply of load profile end consumers by long-distance wholesale transmission companies and, based on a national market definition, also underground gas storage facilities because both shareholders, WINGAS and GPG, as well as VNG operate such facilities. In particular, the Bundeskartellamt has closely examined how the above mentioned product markets should be defined in geographic terms. Its investigations revealed that a nationwide definition is appropriate for the supply of gas to regional transmission companies and distributors by long-distance wholesale transmission companies. In the past, most recently in the "EnBW/VNG proceedings 3, this market was still defined as network based. In the last three years all long-distance wholesale transmission companies were active in the market areas, which since April 2011 have become the market area NetConnect Germany and since October 2011 the market area GASPOOL, even though they still had different traditional areas of focus. As there is no significant hindrance to competition between the two market areas, either as a result of physical or contractual bottlenecks or an aggregation of the network fees, and no further trade barriers could be identified, a definition of the geographically relevant market according to market areas would provide a distorted picture of market and competitive conditions. For these reasons the Bundeskartellamt also defined the market for the supply of gas to load profile end consumers by long-term wholesale transmission companies as a national market. 3 B8-67/09 3

4 In respect of the operation of underground gas storage facilities, the authority examined whether the distance between the storage facility and the final customer is still important for the geographic market definition, i.e. whether the supply of a final customer from a storage facility is only economically viable within a certain radius. The Bundeskartellamt came to the conclusion that where underground storage facilities are integrated into the market area in terms of capacity management and accounting i.e. in an entry-exit system spanning several network operators, the physical transport distance from the gas storage facility to the end consumer plays no role. Moreover, there are no significant restraints of competition between the two market areas, either in terms of physical or contractual bottlenecks or due to the aggregation of network fees, which limit the customer's possibilities to switch to an alternative source to their respective market area. The planned merger is not expected to have horizontal effects which could have a negative impact on competition conditions on any of the markets concerned. Even after the merger E.ON AG (E.ON) will remain market leader, WINGAS/VNG number 2, followed by RWE AG (RWE). There are no indications that the merger creates possibilities and incentives for E.ON and WINGAS/VNG to coordinate their behaviour in future or to facilitate or stabilize any existing coordination. First of all, in a competitive assessment of the market positions of E.ON and WINGAS/VNG, it should be considered that there are significant structural differences between E.ON, WINGAS and VNG. E.ON is a vertically integrated energy company supplying distributors on the downstream markets with gas via affiliated companies such as E.ON Avacon, E.ON Bayern, E.ON Edis, E.ON Hanse, E.ON Mitte, E.ON Westfalen Weser, E.ON Thüringen and Ferngas Nordbayern, and supplies end customers with gas via almost 100 participations in municipal utilities and regional distributors. WINGAS, by comparison, is purely a gas trader which, although it supplies regional gas transmission companies and distributors with natural gas, has no equity holdings in these companies. VNG has a total of five participations in distributors and municipal utilities and is thus also vertically integrated to a very limited extent. With regard to the long-distance wholesale transmission level in general, the Bundeskartellamt found that there have been structural improvements since the EU Commission's decision in the COMP/M.1383 EXXON/MOBIL case, which established the collective dominant position of Ruhrgas AG, BEB Erdgas und Erdöl GmbH and Thyssengas GmbH on the German long- 4

5 distance wholesale transmission market 4. The reason for this is that almost all equity links still existing in 1999 between E.ON, RWE, VNG, ExxonMobil Gas Marketing Deutschland GmbH & Co. KG, ExxonMobil Gas Marketing GmbH and Shell Erdgas Marketing GmbH & Co. KG have meanwhile been eliminated. The merger is therefore not expected to create a single dominant position for WINGAS/VNG or a collective dominant position for E.ON and WINGAS/VNG in the supply of distributors by longdistance wholesale transmission companies, in the supply of load profile end consumers by long-distance wholesale transmission companies and in the storage facilities market. The Bundeskartellamt s clearance decision is legally valid. E.ON AG and E.ON Ruhrgas AG as third parties to the proceedings had initially appealed against the clearance to the Düsseldorf Higher Regional Court but withdrew their appeal in July See Commission decision of 29 September 1999, para