EUROPEAN COMMISSION

DG Competition

Only the English text is available and authentic.

REGULATION (EC) No 139/2004

MERGER PROCEDURE

Article 6(1)(b) NON-OPPOSITION

Date: 30/04/2021

In electronic form on the EUR-Lex website under document number 32021M10173

EUROPEAN COMMISSION

Brussels, 30.4.2021 C(2021) 3200 final

PUBLIC VERSION

In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description.

Luminus S.A. Boulevard du Roi Albert II 7 1210 Saint-Josse-ten-Noode Belgium

Subject: Case M.10173 – Luminus/Essent Belgium Commission decision pursuant to Article 6(1)(b) of Council Regulation 1 No 139/2004and Article 57 of the Agreement on the European Economic 2Area

Dear Sir or Madam,

(1) On 23 March 2021, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which Luminus S.A. (‘Luminus’, Belgium) acquires within the meaning of Article 3(1)(b) of the Merger Regulation sole control of the whole of Essent Belgium NV (‘Essent Belgium’, 3 Belgium). (Luminus and Essent Belgium are designated hereinafter as the ‘parties’ to the proposed transaction.)

1 OJ L 24, 29.1.2004, p. 1 (the ’Merger Regulation’). With effect from 1 December 2009, the Treaty on the Functioning of the European Union (‘TFEU’) has introduced certain changes, such as the replacement of ‘Community’ by ‘Union’ and ‘common market’ by ‘internal market’. The terminology of the TFEU will be used throughout this decision. 2 OJ L 1, 3.1.1994, p. 3 (the ‘EEA Agreement’). 3 Publication in the Official Journal of the European Union No C 113, 31.3.2021, p. 14.

Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË

Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.

1.THE PARTIES

(2) Luminus is controlled by EDF S.A. (‘EDF’, France). It is active in Belgium in the markets for generation and supply of electricity, gas trading on hubs, supply of gas to dealers as well as the retail supply of electricity and gas to large industrial and commercial (‘I&C’) customers, small I&C customers and household customers. Luminus also provides various energy-related services in Belgium for both household and I&C customers, including heating, ventilation, and air conditioning solutions, photovoltaic panels, e-mobility solutions, and energy performance contracts.

(3) Essent Belgium is active in the retail supply of electricity and gas to small I&C customers and household customers and in the supply, installation and maintenance of photovoltaic panels in Belgium.

2.THE TRANSACTION

(4) The proposed transaction consists of the acquisition by Luminus of 100% of the shares of Essent Belgium. Upon completion of the Transaction, Luminus will exercise sole control over Essent Belgium.

3.U NION D IMENSION

(5) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million [EDF: EUR 71,317 million; Essent Belgium: EUR 4 497 million] . Each of them has a Union-wide turnover in excess of EUR 250 million [EDF: EUR […]; Essent Belgium: EUR […])], and they do not achieve more than two-thirds of their aggregate Union-wide turnover within one and the same Member State. The Transaction therefore has a Union dimension within the meaning of Article 1(2) of the Merger Regulation.

4.C OMPETITIVE ASSESSMENT

(6) The Parties’ activities overlap horizontally as regards the retail supply of electricity and high-calorific gas (‘H-gas’) and low-calorific gas (‘L-gas’) to small I&C customers and household customers in Belgium. There are also horizontal overlaps in the supply, installation and maintenance of photovoltaic panels, trading of 5 Guarantee of Origin certificates (‘GoOs’)and, marginally, in other activities in 6 Belgium, none of which gives rise to an affected market under any plausible product or geographic market definition.

(7) The Transaction also gives rise to the following vertical links: (i) between the generation and supply of electricity in Belgium (upstream) where Luminus is present, and the retail supply of electricity to small I&C customers and household

4 Turnover calculated in accordance with Article 5 of the Merger Regulation. 5 See footnote 101 of the form CO. 6 Namely, the supply and installation of smart home services, the maintenance of gas boilers for household customers, and the supply of electric vehicle charging stations in Belgium.

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customers (downstream) in Belgium where both Luminus and Essent Belgium are present; and (ii) between gas trading on hubs and the supply of H-gas and L-gas to dealers in Belgium (upstream) where Luminus is present, and the retail supply of H- gas and L-gas to small I&C customers and household customers (downstream) in Belgium, where both Luminus and Essent Belgium are present. These overlaps do not give rise to any vertically affected market under any plausible product and geographic market definition.

(8) The present Decision will therefore focus on the impact of the proposed transaction on the retail supply of electricity, H-gas and L-gas to small I&C customers and to household customers in Belgium.

4.1.Markets for the retail supply of electricity to small I&C and household customers

4.1.1.Relevant markets

4.1.1.1.Product market definition

(A)Distinction by type of customers

(9) In the past the Commission distinguished, within the retail supply of electricity in Belgium, three separate product markets for the supply of electricity to: (i) large I&C customers connected to the transmission network (at above 70 kilovolts (kV)); (ii) small I&C customers connected to the distribution networks (below 70 kV); and (iii) 7 household customers.These definitions, which are not contested by the Parties and 8 have been confirmed by the market investigation , are to be retained for the purposes of this Decision. The Parties’ activities only overlap with respect to the latter two.

(B)Retail supply of “green” electricity

(10) The Commission considered whether a separate product market for the retail supply of electricity energy generated from renewable sources (‘green electricity’) to small 9I&C and household customers should be defined.

(11) The Parties considered that there are no separate markets for the supply of green 10 electricity for several reasons.First, green energy is supplied under very similar tariffs to non-green energy. In addition, the Parties stress that price remains the main selection criterion of consumers and that ultimately whether energy is green or not

7 In relation to Belgium, see Cases COMP/M.9587 Engie / EDP Renovaveis / EDPR Offshore Espana (25/02/2020), paragraphs 21-24, 27-28; COMP/M.8855 Otary / Eneco / Electrabel / JV (05/07/2018), paras. 26-28; COMP/M.5549 EDF/Segebel (12/11/2009), paragraphs 131-133, 138; COMP/M.4180 Gaz de France/Suez (14/11/2006), paragraphs. 689-695, 738-743. 8 See replies to question 3-5 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas and electricity and to question 3-5 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas and electricity. 9 See Decision 21-DCC-18 of the French competition authority (29 January 2021) concerning Dijon Métropole, Storengy and Rougeot, paragraphs 66–73, where ultimately the question of whether there should be a new retail segmentation for the supply of green electricity in France was left open. (https://www.autoritedelaconcurrence fr/fr/decision-de-controle-des-concentrations/relative-la-prise-de- controle-conjoint-de-la-societe-dijon). 10 Paragraph 156 of the form CO.

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only has a minor influence on customers’ choice. Moreover, GoOs and green gas certificates systems are designed in such a way that all suppliers can offer green energy. Furthermore, the parties underline that launching a “green tariff” is straightforward and only requires slight tweaks in the procurement strategy. Lastly, the parties emphasise that all suppliers currently offer “green energy products”.

(12) The Commission agrees that, at the present stage, narrower markets for the retail supply of green electricity are not warranted in Belgium, for the following reasons.

(13) The Belgian federal energy regulator, the Commission for Electricity and Gas Regulation (‘CREG’), told the Commission that it considers green energy to be an element of competition rather than a separate market and that it has not seen a 11particular increase in the number of green electricity contracts being offered.

(14) From the demand side, six of the 12 small I&C customers responding to the 12 Commission’s market investigationreplied that green electricity should be considered a separate segment of the market, with five of those respondents stating 13 that they are ready to pay a higher price for green electricity.However, most of the competitors and customers who responded to the questionnaires confirmed that price is the most important factor by which customers select their electricity supplier, and only two of the customers ranked the type of electricity (green) amongst the two 14most important factors and none of the competitors did so.

(15) From the supply-side, all competitors responding to the market investigation indicated that the supply of green energy should not be considered a separate segment of the retail market, with two competitors commenting that “[g]reen energy is likely to be another element of competition rather than a separate market” and “[g]reen electricity is an additional product attribute a supplier can offer to its 15 customers, but doesn’t justify to be a separate segment per se”. All respondents to the market investigation have indicated that they already supply at least some green 16 electricity.This can be done either by producing green electricity themselves or by purchasing GoOs. GoOs allow for the traceability of the electricity that is purchased by a supplier on the wholesale market and offer the guarantee that a quantity of electricity equivalent to the certificate has been produced using a renewable energy

11 See paragraph 6 of the Minutes of the call between DG COMP and CREG of 24 February 2021. 12 In relation to customers of the Parties, for its market investigation the Commission engaged with some of their small I&C customers but not with any household customers as it was impractical to do so. It seems reasonable to suppose that the comments of small I&C customers would reflect similar views of household customers. In any case, the Commission did engage with competitors active in the supply to household customers and, in addition, it also engaged with CREG and the views of the regulator cover, among other things, the household markets. 13 See replies to questions 6 and 7 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas and electricity. 14 See replies to question 19 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas and electricity and replies to question 29 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas and electricity. 15 See replies to question 9 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas and electricity. 16 See replies to question 7 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas and electricity.

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Case COMP/M.4180 Gaz de France / Suez (2006), paragraphs 78-81.

The criteria used to delineate the border between large and small I&C customers is either (i) whether the customer is connected to the transmission or distribution networks or (ii) a threshold of annual consumption (which the Parties suggest should be 10 GWh). In this decision, the analysis is based on the distinction between connection to the transmission or to the distribution network, but in any case the information provided shows that using the consumption threshold would not have any impact on the assessment (paragraphs 204-210 of the form CO).

See replies to questions 8-10 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas and electricity and replies to question 16-18 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas and electricity.

For cases relating to Belgium, see COMP/M.4180 Gaz de France/Suez (2006) and COMP/M.5467 RWE/Essent (2009).

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significant price differences, and it easy for all suppliers to procure both types of gas.

(40) The responses to the market investigation were mixed, with a slight majority of competitors responding that the supply of L-gas and H-gas should not be considered as being separate markets. Nearly half of the small I&C customers who responded did not know which type of gas they are supplied.

(41) In any event, the question whether separate markets exists for the retail supply of H-gas and L-gas can be left open as the proposed transaction does not raise serious doubts as to its compatibility with the internal market under any plausible product market definitions.

(C) Default customers and protected customers

(42) As done for electricity in Section 4.1.1.1(C), the Commission considered whether within the market for the retail supply of gas in Belgium separate product markets should be considered for the supply to (i) default customers, i.e. customers who did not change supplier since the liberalisation of the market, and (ii) protected household customers eligible for a social tariff. The analysis for gas is the same as presented above for electricity. Therefore the question whether separate markets exist for the retail supply of gas to default and protected customers can be left open as the proposed transaction does not raise serious doubts as to its compatibility with the internal market under any plausible product market definitions.

4.2.1.2. Geographic market definition

(43) The Commission has previously held that the markets for the retail supply of gas in Belgium to I&C customers are national in scope, but for the retail supply to household customers it left open whether it should be considered national or regional (Flanders, Wallonia, Brussels region) in scope. The Parties consider that the markets for the retail supply of gas in Belgium should be defined as national for all customers. The responses to the market investigation were mixed and inconclusive.

(44) In any case, the question whether the gas retail supply markets in Belgium should be considered national or regional (Flanders, Wallonia, Brussels region) in scope can be left open as the proposed transaction does not raise serious doubts as to its compatibility with the internal market under any plausible geographic market definition.

See paragraphs 172-186 of the form CO. The Notifying Party further mentions that with Dutch L-gas fields rapidly depleting, and in the absence of appropriate alternative sources for L-gas imports in Belgium, the Belgian government is preparing to transition from L-gas to H-gas entirely by 2029.

See replies to question 21 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas and electricity.

See replies to question 11 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas and electricity.

Cases COMP/M.5549 EDF / Segebel (2009), paragraph 184; COMP/M.4180 Gaz de France / Suez (2006), paragraph 105.

See replies to questions 16-18 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas and electricity and replies to questions 26-28 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas and electricity.

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Wallonia/Brussels regions combined, both for household and for small I&C customers.

(63) As regards protected customers, the Commission refers to the assessment in Section 4.1.1.1(C). The Parties’ shares at national level for the retail supply of gas to protected customers would be in line with those for the general market, i.e. approximately [20-30]% (for Luminus) and [5-10]% (for Essent Belgium).

(C) Other elements

(64) On the supply-side, in addition to the moderate market share levels of the Parties, the Commission notes that there are at least eight other market players that supply gas to small I&C and household customers and there seem to be no apparent obstacles for these suppliers to expand their sales in the market as a response to a price increase by the Parties’ post-merger. The market investigation has indeed confirmed this. In fact, as in the case of electricity markets, a majority of respondents to the market investigation have indicated (i) that the Parties do not have any competitive advantage vis-à-vis other entities which already offer H-gas or L-gas retail supply services in Belgium, and (ii) that following the proposed transaction H-gas and L-gas prices would remain essentially unaltered since sufficient competition would remain post-merger. Moreover, the responses to the market investigation do not support that the Parties could be considered particularly close competitors, neither in H-gas nor in L-gas. Finally, a majority of competitors considered that they could increase significantly the amount of H-gas or L-gas that they currently supply to retail customers.

(65) One competitor voiced some concerns in relation to the alleged duopolistic structure of the market(which are addressed in Section 4.3 below) although at the same time admitting that commodity prices in the market are currently low,and another referred generically to the size of the merged entity as a possible advantage. However, both of them also indicated that prices in the gas market would not increase in the short or medium term as a result of the proposed transaction In fact, all competitors considered that (i) were the merged entity to increase prices, there

See replies to questions 29 and 30 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas and electricity and replies to question 38 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas and electricity. One competitor raised concerns about possible coordination effects between Engie and Luminus; these are addressed in Section 4.3.

See replies to question 39 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas and electricity.

All customers and competitors consider Engie as Luminus’ closest competitor. Competitors consider Essent to be Luminus’ third or fourth competitor (at similar levels as Lampiris and Eneco). Customers place Essent as the second closest at the same level as Eneco. Competitors and customers consider that Engie and Luminus are similarly close competitors to Essent, with Eneco and Lampiris following closely. Competitors do not see any differences in closeness depending in the type of gas (H-gas or L-gas). See replies to questions 27 and 28 of Questionnaire Q1 – Questionnaire to Customers in the retail supply of gas and electricity and replies to questions 36 and 37 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas and electricity.

See replies to question 22 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas and electricity.

See replies to question 41.1 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas and electricity.

See replies to question 43 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas and electricity.

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would be alternative suppliers for customers to turn to, and that (ii) the proposed transaction will have no impact on prices in the market. None of the Parties’ competitors identified any other possible effects that the proposed transaction could have in the market.

(66) From the demand side, most small I&C customers responding to the market investigation explained that they organise tenders for their gas contracts, for which they receive at least three offers.And – like competitors – most of them were of the view that if the merged entity were to increase prices, there would be alternative suppliers, in addition to Engie, to turn to.

(D) Conclusion

(67) In view of the (i) moderate market shares that the combined entity would have post-merger (in the case of market shares in terms of volume in the supply to small I&C even insufficient to give rise to affected markets); (ii) the limited market share increase brought about by the proposed transaction; (iii) the distance behind the market leader (Engie); (iv) the existence of other competitors with market shares higher or equivalent than the market share increase; (v) the majority opinion by market respondents that the Parties have no particular competitive advantages in H-gas or L-gas, that there are sufficient alternatives (other than Engie) in the market, that there is scope for competitors to expand their sales of H-gas or L-gas to retail customers, and that the proposed transaction will have no impact on prices or on other aspects of competition, the Commission takes the view that the proposed transaction does not raise serious doubts as to its compatibility with the internal market as regards the markets for the retail supply of H-gas and L-gas to small I&C customers and to household customers in Belgium.

4.3. Vertical and coordinated effects

(68) One competitor raised concerns that, due to the combined market share of Luminus and Engie post-merger in the electricity generation and retail markets, the market could evolve towards a “duopoly of vertically integrated companies” that may enable coordinated effects leading to less competition and possibly higher prices in the long term. Another competitor mentioned that suppliers with electricity generation capacity have in general a significant advantage although it also considered that the proposed transaction would not have a negative impact on the market or would lead to higher prices.

(69) As regards the Parties’ vertical integration, the Commission observes, first, that the proposed transaction does not lead to any vertically affected markets. Second, since

Essent Belgium is not present in the electricity generation market, the proposed transaction does not “create” a vertical integration (Luminus’ vertical integration is not merger-specific) but simply adds some market share to the downstream market. Third, Luminus has provided data showing […], .

(70) In relation to any possible coordinated effects, the Commission notes, first, that the asymmetry between Engie and Luminous remains significant after the proposed transaction ([30-40]% vs [20-30]% in supply to small I&C and [40-50]% vs [20-30]% for household customers). Second, as explained in Section 4.1.2.2(A), the structure of supply will remain essentially unaffected by the proposed transaction given the very limited share of Essent Belgium in retail supply to household customers (barely above [5-10]%) and its negligible presence in the supply to I&C customers (not present in the supply to large customers and [0-5]% share to small customers). In fact, the delta HHI of the proposed transaction in the retail supply of electricity to small I&C customers in Belgium would only be 65 in electricity and 50 in gas (H-gas and L-gas combined). Therefore, the proposed transaction does not seem to change in a significant way any incentives of Luminus and Engie to engage in any coordination. Third, there is consensus in the market that the proposed transaction will not give rise to an increase in prices. Fourth, the same competitor that raised concerns about the duopolistic structure of the market admits that commodity prices are currently low.

(71) In view of the above, the Commission considers that the Proposed Transaction does not raise serious doubts as to its compatibility with the internal market as a result of any vertical or coordinated effects.

5. C ONCLUSION

(72) For the above reasons, the Commission has decided not to oppose the notified operation and to declare it compatible with the internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation and Article 57 of the EEA Agreement.

For the Commission

(Signed) Margrethe VESTAGER Executive Vice-President

101 See paragraph 461 et seq.of the form CO. […].

102 See Commission Horizontal merger Guidelines, paragraph 48.

103 See Commission Horizontal merger Guidelines, paragraph 20. In the case of retail supply of gas to small I&C customers the proposed transaction would not even give rise to affected markets if markets shares in terms of volumes are considered.

104 See Section 4.1.2.2(C).

105 See replies to questions 42 and 43 of Questionnaire Q2 – Questionnaire to Competitors in the retail supply of gas and electricity.

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