In Europe, the words “national” and “power” have lived side-by-side peacefully for decades. National Power of the UK has long been seen as the standard bearer of the UK industry, even in its privatised and steadily diminished domestic form. “National” also lurks behind the “n” in Endesa (Spain) and Enel (Italy). Electricité de France (EDF), Electrabel and Electricidade de Portugal (EDP) speak for themselves. So does Statkraft of Norway. But the banal and confining mindset these names represent is losing its potency every day. Postwar common sense is simply irrelevant in a fully unified European market. Admitting this may be hard, but deep down everyone knows, even in Paris, that the “n” word’s time is up.
For its part, National Power has already decided to shed its legacy name. It is splitting into “npower”, a UK utility operation, and “International Power”, a portfolio of far-flung projects offering potential riches or just more perils, depending on your outlook. Both units, if they are separately listed as planned, may have only a very short spell in the stock market before being acquired by foreign players.
If this happens, the UK will clearly have moved on from the mid 1990’s. Even the Conservative government of that time, which generally accepted the US acquisition onslaught with equanimity, saw fit to step brusquely in when National Power was stalked. So, so much for champions. National service is no longer required, thank you.
Elsewhere in northern Europe, the Dutch utility generation sector made a valiant attempt to form a national champion before its market opened to competition. The idea was a strong player ready to challenge big neighbours, Like Electrabel and PreussenElektra, in an open European market. But the merger talks foundered in 1998. What has happened since? Three of the four utility generators were sold to foreign players (including Electrabel and PreussenElektra), while the fourth was absorbed by Pnem Mega, a leading Dutch distributor. Electrabel in turn is ultimately controlled by Suez Lyonnaise of France. In generation at least, the national game is over, and so far the Dutch don’t seem to have many regrets.
In the Nordic region, Statkraft has reportedly embarrassed its owner with a request for a cash boost to its own cross-border acquisition campaign, while the state instead aims to take a bigger slice of Statkraft’s net income next year. The subtext in Oslo is “time for privatisation” and a secure position for Statkraft in the European first tier, not local politics as usual. Pressures and division seem less acute in Sweden, where Vattenfall remains a state vehicle, even if it sports commercial colours. But the nuclear dispute and crazy consolidation on all sides may yet put Stockholm’s patience and its good name to the test.
Southern Europe is no refuge for nationalists either. Nationalist politicians and regional princelings are not in check. But the corporatist, full control projects they promote are in fundamental conflict with the European realities utility boards deal with. If boards welcome such political support, one wonders how long it will last, since sooner or later mutual interests will diminish and conflict will increase. Unless, of course, the corporatist solution is so “successful” that no competitor can make a mark on the champion, and the champion – surprise, surprise – fails just about every time it crosses the border into a competitive market.
Endesa and Enel have drawn the lessons of reform. They are, in fact, increasingly treated by their political masters as regulatory headaches and handy cash dispensers rather than protected champions. Both are indeed likely to go for cross-border mega-mergers at some point, further loosening national loyalties. To keep up with the strategic shifts, Portugal’s EDP is apparently urgently reviewing its own options, including an unthinkable one – a merger with a Spanish player. Anyone familiar with Iberian aspirations and the more humble realities of business there should sit up and take notice. This is the deepest kind of change – the end of nationalism.
Is France, half northern and half southern, no exception? Nationalists won the day in November, when the bill to transpose the European Union electricity directive into French law was rejected by legislators. The Senate made the fatal mistake of leaning moderately rightwards to the market in its last deliberations on the draft bill passed to it by the Assembly, only to see its concerns scorned by the left of the Assembly in a final bicameral committee meeting. The French power market should have opened no later than February 1999, but that may not happen now until March 2000, or later. So France is in deep trouble with the European Commission. Shame is heaped on it by its neighbours. And some Paris legislators are over the moon.
They will crash down to earth soon enough. State ownership is a financial burden for EDF in merger-mad Europe, as noted here before. The oppression of that burden may only increase, dramatically, over the next year or two. Furthermore, let’s see how sharp EDF looks when official data is in on 1999/2000 prices for European industrial users.
For now, it is true that Eurostat reports should silence some of France’s critics. As of early 1999, major French industrial users (10 to 70 GWh/year) paid 3.8 per cent less than the EU average price. Can your country do better, no matter what market machinations it has devised? Maybe not. But the answer in 2000, after wild price cutting across the region, may be a very embarrassing (for France) “yes”.
Poor price performance would provoke new and angry questions in French boardrooms. Not coincidentally, this is – or was – the Commission’s favoured solution. French intransigence, it hoped, would end as French industry got angry and demanded change. This would spare the Commission and France a public battle. Even if that battle is now being joined, and perhaps precisely because it is being joined, French industry should make its voice very clearly heard. And new entrants should start probing the “impossible” eligible market, which is big – around 100 TWh/year – and more open to new ideas than the political rhetoric in Paris might suggest.
One reason to wish France well in trying times is its role in the one major Continental market with no national problems – Germany. Germany has no national grid company, no dedicated national energy regulator, and no national champions. But it does have a trio (or a duo soon enough) of regional champions with direct lines to the capital, and this is no better. EDF is the only foreign player that has stayed the course in bidding for a 25 per cent stake in EnBW, one of the few German utilities capable of inflicting severe damage on the emerging monoliths. EDF itself leads (for now) a select group of top players that can compete across Europe with the likes of RWE. How nice it would be if EDF had a fully “legitimate” role in Germany.