Business-Managed Democracy

Business-Managed Government

Electricity Conglomerates

The world of electricity supply is also becoming more concentrated. It was noted in 1999 that:

many newly fledged electricity companies created by privatization and restructuring  in the past decade are being progressively engulfed by a new breed of voracious predator, the multinational electricity corporation, advancing across national borders to buy up or take over smaller prey.

“to escape from stringent US regulation into the comparatively deregulated market context of countries where liberalization had progressed further, including the UK, Argentina, Australia and Brazil.” Many developing countries also offered expanding electricity markets whereas the size of theUS market tended to be more static. 

There were some $70 billion worth of  mergers announced worldwide between 1992 and 1996 with 83% of them undertaken by US companies. They were joined in the buying frenzy by newly privatised companies in the UK and even state-owned companies such as Electricité de France (EdF). The two large British companies, PowerGen and National Power, began a spree of overseas acquisitions in 1997 in Asia, Australia, Europe and the US.  “Some analysts now suggest that by the year 2010 the world electricity scene will be dominated by eight or even fewer global companies – electricity multinationals.”

Mergers and Acquisitions of Utilities Announced  1992 – 1996

The Transnational Institute claims the big energy “corporations are already exceptionally well placed to operate jointly or to form a cartel to pressure governments, control prices and limit competition.”

In Asia, transnational corporations have been withdrawing with those likely to stay on being European firms – EdF, Trachtebel-Suez, International Power and CDC – a US firm – AE – and a Canadian firm –Transalta. Asian-based transnationals are moving in, including Cheung Kong, CLP and YTL (Malaysia). In Latin America, dominant transnationals in the electricity sector include Endesa, Iberdrola, and Union Fenosa (Spain), EdF and Tractebel-Suez (France), EdP (Portugal), and AES (USA).

Concentration in Electricity and Gas Market in European Union 2008

In Europe seven electricity transnational corporations dominate. Three of these – Electricité de France (EdF), E.ON and RWE – control a majority share of generating capacity and retail sales in most European nations and that share is growing. ENEL and GDF Suez are now also of comparable size as a result of mergers and take-overs. The concentration of ownership in electricity worldwide also continues to grow with the combined value of electricity and gas cross-border mergers and acquisitions in 2001-2002 alone, being US$84 billion.

Company	Country of Origin	Turnover 2008 €bn	% increase
GDF Suez	France	83.1	17
EON	Germany	86.8	26
EDF	France	64.3	11
ENEL	Italy	61.2	40
RWE	Germany	48.9	15

Market concentration of electricity wholesale market

Concentration in Australia

Part of the rhetoric of privatisation in Australia had been that it would create “new operators, nimble and competitive that would give consumers a new deal”. In each state generation, transmission, distribution and retail supply of electricity were separated and corporatised. Generation and retail monopolies were separated into smaller units and in Victoria and SA sold off to encourage competition. Barriers to interstate trade were removed and open access to electricity networks established. By separating generation and retail, and having smaller companies, the barriers to new retailers or generators entering the market were reduced, and it was agreed this would encourage competition.

However the disaggregation of the horizontally and vertically integrated electricity industry that was meant to foster competition has been undone as a result of privatisation. Mergers and acquisitions are usually undertaken for strategic reasons that include reducing competition and increasing market power. In electricity these are supplemented by the goal of risk management. Today AGL, Origin and TRU dominate the Victorian electricity and gas markets, control almost all the electricity and gas markets in SA, QLD and ACT, and AGL dominates the NSW gas market.

AGL, a dominant supplier of electricity and gas throughout the eastern Australian retail energy market, said in 2002: “We want to be one of what we predict will be the three or four national energy players.” It has largely succeeded in this. Today AGL has some 4.1 million retail electricity and gas customers, has gas-fired power stations in Victoria and SA (with more planned for NSW and Queensland), has hydroelectric schemes in Victoria and NSW, has co-generation plants in Victoria and SA, and is a large shareholder in Loy Yang, one of the country’s biggest power generators.

Another major player is Origin Energy which provides gas and electricity to over 3 million Australian customers and more than 600,000 in New Zealand. It has part-ownership of gas distribution networks, explores for and produces natural gas and oil, and operates a “portfolio” of gas-fired power stations with more planned for Victoria and Queensland.

The third major player operating in Australia is TRU Energy. It has over a million electricity customers, owns generating plant in SA and Victoria, including SA’s largest electricity generating plant, and is building a gas-fired plant in NSW. TRU Energy is owned by the Hong Kong-based CLP (China Light and Power) Holdings, one of the largest electric companies in Asia. It would be keen to buy into the NSW retail sector in order not to be left behind by AGL and Origin Energy in the consolidation stakes.

Links

• ‘Électricité de France‘, Wikipedia
• ‘EDF’, PowerBase
• ‘E.ON‘, Wikipedia
• ‘E.ON’, PowerBase
• ‘E.ON’, SourceWatch
• 'RWE', PowerBase
• 'RWE', Wikipedia
• ‘ENEL’, Wikipedia
• ‘Enel’, SourceWatch
• 'GDF Suez', Wikipedia
• ‘Suez’, SourceWatch
• ‘AGL Energy‘, Wikipedia
• ‘Origin Energy’, Wikipedia
• ‘TRUenergy’, Wikipedia