site logo

Business-Managed Democracy

“Business-managed democracies are those in which the political and cultural arrangements are managed in the interests of business”

Sharon Beder

Business-Managed Government

Electricity Conglomerates

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

reference

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.

reference

Enron symbol In the US the mergers and acquisitions have expanded the horizontal reach of the power corporations, vastly increasing their customer base. Many companies, like Enron, saw opportunities in international investment “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 the US market tended to be more static. 

reference

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

Merger chart

Source of data: E.B. Flowers, U.S. Utility Mergers and the Restructuring of the New Global Power Industry, Westport, Connecticut: Quorum Books. 1998, p. 4.
reference

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.”

reference

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).

back to top

Concentration in Electricity and Gas Market in European Union 2008


 
Share of 3 largest electricity retail suppliers
Share of 3 largest electricity generators
Share of 3 largest gas companies
Austria
62%
50%
86%
Belgium
na
97.5%
(2 companies)
92%
Denmark
na
75% (2)
na
Finland
40
68%
100% (1)
France
97%
93%
88%(2)
Germany
52%
85%
62%
Ireland
84%
86%
82%
Italy
59%
58%
85%
Netherlands
na
70%
88%
Portugal
99.6%
72% (2)
0
Spain
85%
73%
66%
Sweden
na
75%
na
UK
na
42%
na
reference

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
Source: Steve Thomas, ‘ An analysis of the company developments and corporate policies in the European energy sector‘, London: Public Services International Research Unit (PSIRU), December 2009, p. 7.

Market concentration of electricity wholesale marketMarket concentration of electricity wholesale market

back to top

Concentration in Australia

reference

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.

reference

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 3.8 million retail electricity and gas customers, and owns coal, gas-fired and hydroelectric power stations in Victoria, NSW and SA, has hydroelectric schemes in Victoria and NSW, has co-generation plants in Victoria and SA.

reference

Another major player is Origin Energy which provides gas and electricity to over 4 million Australian retail customers and more than 550,000 in New Zealand. It "operates Australia's largest power generation portfolio" and "is one of the largest owners and developers of natural gas-fired power generation in Australia" as well as generating electricity from coal and renewables. It also has part-ownership of gas distribution networks and explores for and produces natural gas and oil.

reference

The third major player operating in Australia is EnergyAustralia (formerly TRUenergy). It has over 2.7 million electricity customers, and its "portfolio of electricity generation facilities – including coal, gas and wind assets – is spread across Australia, including Queensland, Victoria, Australian Capital Territory, New South Wales and South Australia". EnergyAustralia is owned by the Hong Kong-based CLP (China Light and Power) Holdings, one of the largest electric companies in Asia.

back to top

Links