Países Bajos : July 18, 2009

The last several months have seen the Benelux markets faced with some considerable changes which will affect how businesses interact with their energy markets.

In the Netherlands, the consolidation process has continued as Vattenfall, the large Scandinavian supplier, announced the takeover of NUON. Vattenfall, which already has a strong presence in Germany, also gains access to the Belgium market via this purchase, as NUON has offices close to Brussels and has been active in the Belgium market for a number of years. It remains to be seen whether or not NUON, with the additional strength of Vattenfall behind it, can become a more serious threat to the undisputed king of the Belgium market, namely Gaz de France-Suez via its daughter Electrabel.

RWE has also strengthened its position in the Dutch market by purchasing Essent for an estimated 9 billion Euros. Just in the last few weeks the EU cartel authorities gave their go ahead to the purchase after the major shareholders of Essent gave up their resistance and decided to cash in on RWE’s offer. These shareholders, primarily local governments, no doubt saw an opportunity to improve their financial situation by accepting the offer they had initially rejected. In addition, RWE also gains access to the Belgium market via the Essent purchase.

For customers in the Netherlands we see this development as being negative, as both Essent and RWE were aggressive players in the gas markets, often pitted against each other in contract tenders and both showing a considerable flexibility in attempting to win or keep customers. The merger of the two companies means less competition in the Dutch markets for electricity and gas; officially after 1 August 2009 these companies will no longer compete against each other. We view this development as a potential warning signal for price increases in the Dutch market.

The situation in Belgium is hardly better; indeed, it would seem that France is controlling the Belgium electricity market via the back door. The major shareholder of Electrabel is the French state, via its shares in Gaz de France-Suez, and now EdF has announced the purchase of Luminus-Spe, the second largest player in the Belgium market after Electrabel. The largest shareholder of EdF is, you guessed it, France. It would appear therefore that competition in Belgium has suffered a major setback, despite the fact that both companies emphasize that their major shareholder has no influence on business decisions, and that continued competition is guaranteed. It sounds to us like this statement comes from the same category as “the higher demand in India and China was responsible for the high prices we saw last year”. Under these circumstances, it seems odd that suppliers both in Belgium and the Netherlands reported record profits last year.