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Business-Managed Democracy » Government » Privatisation » Conglomerates » Electricity |
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.
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.
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).
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 |
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
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 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.
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.
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.
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