Bundeskartellamt clears EWE's acquisition of a majority interest in VNG

23.10.2014

Today the Bundeskartellamt has cleared the acquisition of a further 15.79% of the shares in VNG AG, Leipzig, by EWE AG, Oldenburg. EWE AG acquired the shares from Wintershall Holding GmbH, Kassel. EWE AG will now hold a total of 63.69% of the shares in VNG and gain sole control of the company under merger control law.

Andreas Mundt, President of the Bundeskartellamt: "The merger project could be cleared due to the positive development of competition in the gas sector. In view of the recent developments in the gas sector, the markets at the wholesale level have merged and can be defined as national markets. Only the market for household customers in the so-called basic supply sector must still be defined as a local or regional market.”

EWE AG is an energy supplier active in the supply of electricity, gas and water mainly in the Ems/Weser/Elbe region, in east Brandenburg and on Rügen Island. It is the largest German gas distribution network operator with the highest number of household customers. In 2013 EWE AG's sales revenue was about 8.9 billion euros, of which more than 90% was achieved in Germany.

VNG is a gas transmission company which is active throughout the new German federal states. Its activities focus mainly on the import, trade, transport and storage of natural gas. Via its subsidiary ONTRAS the company operates the gas transmission network in the east German federal states which covers more than 7,200 kilometres. VNG is also active in the production of natural gas in Norway, Denmark as well as in five other European countries. In 2013 VNG's sales revenue amounted to approx. 11 billion euros, of which more than 80% was accounted for by sales in Germany.

In the course of its merger control proceedings and following intensive investigations the Bundeskartellamt took into consideration new developments in the gas markets and changed its practice of defining these markets which, in some cases, had been applied for decades. The authority has reached the following conclusions:

  • Generally speaking the market power of the German gas transmission companies has shifted mainly towards foreign gas producers, above all Gazprom and Statoil. These have also become increasingly active as traders on the downstream levels of the market.
  • The differentiation that has so far been made between the supply of supra-regional gas transmission companies (1st level) and regional gas transmission companies (2nd level) will therefore be abandoned. Both levels of the market, including the traders, will be covered by one single gas wholesale level (for H-gas and L-gas). The geographic wholesale market for natural gas is defined as a national market; its definition will no longer be based on the network or market area. This also applies to the downstream market for the supply of gas to regional and local distributors, in particular municipal utilities.
  • In the end customer markets the Bundeskartellamt differentiates between a market for the supply of gas to load profile end customers (in particular industrial customers) and standard load profile customers (household customers). The market for the supply of gas to industrial customers will also no longer be defined on the basis of the network or market area, but as a national market.
  • In accordance with its practice in the electricity sector, the Bundeskartellamt now differentiates between basic supply household customers and special contract customers. This practice is based on empirical data on differences in price, customer switching behaviour and supply structure. Due to the positive development of competition, the markets for special contract customers are defined as national markets. The geographic market for the supply of gas to basic supply household customers will still be defined on the basis of the network. Under this definition each basic supplier has a monopoly position in its region.

A diagram illustrating the new product market definition applied by the Bundeskartellamt in the gas sector is available at the Bundeskartellamt's website. Logo: Offene Märkte | Fairer Wettbewerb

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