Case No COMP/M.2684 - EnBW / EDP / CAJASTUR / HIDROCANTABRICO

Only the English text is available and authentic.

REGULATION (EEC) No 4064/89 MERGER PROCEDURE

Article 6(2) NON-OPPOSITION Date: 19/03/2002

Also available in the CELEX database Document No 302M2684

Office for Official Publications of the European Communities L-2985 Luxembourg

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 19/03/2002

SG (2002) D/228961/228962/228963

In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EEC) No 4064/89 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus [Ö]. Where possible the information omitted has been replaced by ranges of figures or a general description.

PUBLIC VERSION

MERGER PROCEDURE ARTICLE 6(2) DECISION

To the notifying parties:

Dear Sir/Madam,

Subject: Case No COMP/M.2684 - EnBW / EDP / CAJASTUR / HIDROCANT¡BRICO Notification of 4 February 2002 pursuant to Article 4 of Council Regulation 1No 4064/89

1.On 4 February 2002, the Commission was notified of a proposed merger under Article 4 of Council Regulation (EEC) No 4064/89 (the "Merger Regulation"), in which the undertakings ELECTRICIDADE DE P ORTUGAL S.A. (EDP), E NERGIE BADEN -W ‹RTTEMBERG A.G. (EnBW) and C AJA DE AHORROS DE ASTURIAS (Cajastur), would acquire joint control of the Spanish firm HIDROEL…CTRICA DEL C ANT¡BRICO S.A. (Hidrocant·brico), by means of purchase of shares and contract of management.

2.After examining the notification, the Commission has concluded that the operation fell within the scope of Council Regulation (EEC) No 4064/89.

3.The parties have submitted undertakings designed to eliminate the competition concerns arising from the transaction. Subject to full compliance with these undertakings, the Commission has decided not to oppose the notified operation and to declare it compatible with the common market and with the functioning of the EEA Agreement.

1OJ L 395, 30.12.1989 p. 1; corrigendum OJ L 257 of 21.9.1990, p. 13; Regulation as last amended by Regulation (EC) No 1310/97 (OJ L 180, 9. 7. 1997, p. 1, corrigendum OJ L 40, 13.2.1998, p. 17).

2OJ L 395, 30.12.1989, p. 1; corrigendum OJ L 257, 21.9.1990, p. 13; Regulation last amended by Regulation (EC) No 1310/97 (OJ L 180, 9. 7. 1997, p. 1, corrigendum OJ L 40, 13.2.1998, p. 17).

Commission europÈenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone: (32-2) 299 11 11

I. THE PARTIES

4.EDP is mainly active in the production and distribution of electricity in Portugal, where it is the incumbent electricity utility. EDP operates as well in the sectors of gas and telecommunications in Portugal.

5.EnBW is active in electricity generation, transmission, distribution, trading and supply of electricity, mainly in the Southwest of Germany. Other business activities comprise the supply of gas and district heating, telecommunications, waste recycling and financial services. EnBW is jointly controlled by the French undertaking ElectricitÈ de France (EDF) and Zweckverband Oberschw‰bische Electrizi‰tswerke (OEW), an association of nine public districts in the Southwest of Germany.

6.EDF is a state-owned company whose main activities are the generation, transmission, distribution and trading of electricity in France. Through EDF/RTE, a division of EDF, it operates the national electricity grid and interconnectors with neighbouring countries. Through its subsidiary EDF International ("EDFI"), a holding company, EDF owns shares in electricity companies in various European countries. It is also involved in the construction sector, the maintenance of electricity generating plants and transmission grids, recycling and city lighting.

4Cajastur is a savings bank, whose core business consists of retail deposit taking and mortgage lending. Cajastur also provides other banking services such as general consumer lending facilities and lending to small and medium sized companies.

8.Hidrocant·brico is mainly active as a generator, distributor and supplier of electricity in Spain and as a distributor and supplier of gas and telecommunications in the Spanish region Asturias.

II. THE OPERATION

9.The proposed operation is the acquisition of joint control over Hidrocant·brico by EDP, EnBW and Cajastur, through the acquisition vehicle ADYGESINVAL S.L. (Adygesinval).

10.In 2001, Hidrocant·brico was the target of different operations aimed at acquiring control over it. In particular, the Commission authorised three proposed public offers for the Spanish utility, presented respectively by (1) EDP/Cajastur/CompaÒÌa de Seguros y Reaseguros (C·ser), (2) the German undertaking RWE, and (3) the Spanish Grupo Villar Mir and EnBW through the acquisition vehicle Ferroatl·ntica, a company belonging to Grupo Villar Mir to be jointly controlled by EnBW after the conclusion of the operation. After the implementation of the competing bids,

3Case COMP/M. 1853-EDF/ENBW.

4Cajastur's legal status is that of a "Caja de Ahorros", a non-profit making credit institution.

5Case COMP/M.2340 - EDP / Cajastur / C·ser / HidroelÈctrica del Cant·brico.

6Case COMP/M.2353 - RWE / HidroelÈctrica del Cant·brico.

7Case COMP/M.2434 - Grupo Villar Mir / EnBW / HidroelÈctrica del Cant·brico.

11.the distribution of Hidrocant·brico's shares was: (1) Ferroatl·ntica: 60%; (2) Adygesinval (owned by EDP and Cajastur on a 50% basis): 19%; (3) Cajastur: 10%; (4) C·ser: 5%; (5) Treasury stock: 2%; and (6) free float: 4%.

12.On 4 December 2001, EnBW, EDP, Cajastur and C·ser entered into a Shareholders' Agreement which shall govern the relations among the notifying parties as jointly controlling shareholders of Hidrocant·brico and of C·ser as a minority (non-controlling) shareholder. The objective of the parties to the said agreement is to control 100% of the share capital of Hidrocant·brico, preliminarily through the acquisition vehicle Adygesinval. To this end, EnBW has assigned to Adygesinval its rights over the Hidrocant·brico's shares acquired by Ferroatl·ntica, though subject to several suspensive conditions (in particular, clearance from the competition authorities). Furthermore, Adygesinval intends to purchase the shares currently held as free-float.

III. CONCENTRATION

13.Further to the aforementioned Shareholders' Agreement, after the completion of the operation EDP will hold [Ö] of Hidrocant·brico's shares, EnBW [Ö] thereof and Cajastur [Ö].

14.The Agreement sets forth detailed rules regarding the appointment of Hidrocant·brico's management and the passing of resolutions both at Board's meetings and at the General Assembly. As regards the Board of Directors, the agreement foresees two possibilities: (i) in respect of Hidrocant·brico, it shall be made up of 14 directors: 4 appointed and removed by EnBW, 3 by Cajastur, 5 by EDP and the remaining two will hold the position of Chairman and CEO; and (ii) as regards Adygesinval, it shall be made up of 12 directors to be appointed and removed as follows: 3 of them by Cajastur, 4 by EDP and 3 by EnBW (the remaining two will hold the positions of Chairman and CEO). [Ö]

15.Resolutions will be passed according to the following rules with regard to ìLimited Reserved decisionsî (which comprise in particular the approval of the business plan and the budget). These resolutions will be adopted by consensus of EDP, EnBW and Cajastur; however, the position of EnBW can be overruled by EDP and Cajastur after a conciliation procedure. In case EDP overrules EnBW's opposition to the adoption of a resolution regarding ìLimited reserved mattersî, EnBW is granted an irrevocable put option right. The important financial consequences for EDP in case EnBW exercised such a right (EDP will be bound to acquire all of EnBW's shares in Hidrocant·brico at a strike price to be calculated in accordance with a pre-defined formula) are likely to have a clear deterrent effect on EDP (the parties estimate that the price to be paid would account for around [5-20%] of EDP's turnover). No overruling is foreseen in case EDP or Cajastur oppose a decision concerning Limited Reserved matters.

[Ö]

[Ö]

[Ö]

[Ö]

IV. COMMUNITY DIMENSION

16.The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 billion in 2000. Each one of these undertakings has a Community-wide turnover in excess of EUR 250 million, but they do not achieve more than two-thirds of their aggregate Community-wide turnover within one and the same Member State.

17.The notified operation has therefore a Community dimension.

V. COMPETITIVE ASSESSMENT

(1) Product markets

18.According to previous Commission decisions, the definition of the relevant product market(s) in the electricity sector must take into account the existing degree of liberalisation thereof.

19.With reference to the Spanish electricity sector, the Spanish Competition Court (Tribunal de Defensa de la Competencia) has asserted that "the relevant product market must be defined as the generation of electricity that is bought and sold through the pool or wholesale market. On the supply side in this market, electricity from the generators is in competition with that from the special regime over 50 MW and from imported electricity. On the demand side, there are the distributors [who sell electricity to tariff customers], retailers [who sell electricity to eligible customers] and eligible customers. It also includes the electricity sold via bilateral contracts [i.e., between generators and eligible customers], in so far as these contracts are agreed upon in a system of free competition". Exporters of electricity to third countries are also included in the demand side of the wholesale market. Until 2003, Spanish generators are not allowed to conclude direct contracts with retailers (they can only sell electricity in the pool or to eligible customers). External agents, on the other hand, can conclude contracts with Spanish retailers.

12Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Notice on the calculation of turnover (OJ C66, 2.3.1998, p25). To the extent that figures include turnover for the period before 1.1.1999, they are calculated on the basis of average ECU exchange rates and translated into EUR on a one-for-one basis.

13Cases IV/M.1557 - EDF / Louis Dreyfus and COMP/M.1853 - EDF / EnBW.

14Report C-60/00 on the Endesa/Iberdrola proposed merger.

15Article 21 of Royal Decree-Law No 6/2000 of 23 June 2000 on urgent measures to step up competition in goods and services markets.

20Eligible customers in the Spanish market are those consumers, regardless of their level of consumption, who are supplied at a nominal voltage of more than 1 000 volts. From 1 January 2003, all consumers of electricity, without distinction, will have the status of eligible customers. Eligible customers in Spain who wish to buy electricity under the liberalised system have currently three options: (a) through the pool, (b) by means of "bilateral contracts" with generators or foreign operators or (c) through contracts with retailers. The market for eligible customers potentially represents 54% of consumption in Spain, but during the last months those who have actually chosen to buy electricity in the liberalised market (directly through the pool, via bilateral contracts or contracts with retailers) represent less than one third of total consumption. In other words, around two thirds of the electricity bought in the wholesale market is purchased by distributors, for subsequent supply to tariff customers and one third is purchased by exporters, retail sellers and eligible customers.

21The pool comprises: (i) the daily market, which represents more around 85% of the total electricity sold in the wholesale market; there is a single price for each hourly period, the hourly marginal price; and (ii) the intra-daily market (around 15% of total electricity sold in the wholesale market): energy which is not sold in the daily market can be sold subsequently in this intra-daily market. Together with this organised wholesale market, there exist bilateral contracts between generators/external agents and eligible customers, that nevertheless represent less than 1% of total sales in the wholesale market.

22In view of the above, it is possible to conclude, in line with a recent Commission decision, that the relevant product markets for the purposes of the assessment of this case comprise respectively:

(1) the electricity offered through the wholesale market: the pool and bilateral contracts between eligible customers and generators; and

(2) the retail market: the electricity offered subsequently by retailers to eligible customers.

16Article 6 of Royal Decree-Law No 6/1999 of 16 April 1999 on urgent measures to liberalise markets and strengthen competition.

17Source: OMEL.

18The daily market is a balanced market: energy sold is equal to energy bought. The remuneration of each seller is calculated as the product of the energy sold and the hourly marginal price and, similarly, the payment obligations of each buyer are calculated as the product of energy bought and the hourly marginal price. The daily market is used to make transactions for the next day by means of the submission of offers for sale or purchase. These offers are submitted to OMEL, the market operator, and are included in a matching procedure for the purposes of the next day's trading, which will cover 24 consecutive hourly periods. The market operator will match the offers for sale and purchase of electricity using a simple matching method, which obtains, in an independent manner, the marginal price and the volume of energy needed from each generating unit, for purchase in each hourly period. In this way, the marginal price is obtained for each hourly period according to the offer made for the sale of electricity by the holder of the last generating unit which is needed to feed into the system in order to meet the demand.

19Case COMP/M.2434 - Grupo Villar Mir / EnBW / HidroelÈctrica del Cant·brico.

20The relevant geographic market for the supply of energy on the liberalised market(s) has been traditionally considered by the Commission to be no wider than national. Such a market delineation has been confirmed, as far as Spain is concerned, by four recent Commission decisions.

21In particular, imports to the Spanish market are constrained by the limited interconnection capacity currently available. The commercial interconnection capacity between Spain and neighbouring countries nowadays amounts to approximately 1 900-2 100 MW: (1) 1 000-1 100 MW with France; (2) 600-650 MW with Portugal; and (3) 300-350 MW with Morocco. This represents approximately 6.6% of the capacity needed at peak demand times. Further, the regulatory framework and the structure of supply (i.e., the organisation of the wholesale market) differ from those of other neighbouring national electricity systems, such as France's and Portugal's.

22The aforementioned market delineation has not been altered as yet by the political agreement arrived at by the Governments of Spain and Portugal on 14 November 2001 calling for the creation of an Iberian electricity market. The agreement provides for the progressive convergence of the electrical systems of the two countries, the coordination of the operators charged with the management of the systems, the strengthening of the interconnections between Spain and Portugal and the application of a common set of principles (free competition, transparency, efficiency and objectivity) aimed at ensuring equal treatment for national operators and operators from the other country. This political agreement notwithstanding, the emergence of a truly Iberian market will still be hindered in the coming years by the limited interconnection capacity available between Spain and Portugal, and furthermore, will depend on the progressive implementation of a number of successive steps, that include not only technical measures on the electrical grids and interconnectors but also the elimination of regulatory and administrative barriers and the harmonisation of the functioning and management methods of the systems' operators.

23Consequently, for the purposes of the assessment of the notified operation the relevant geographic markets for electricity offered through the wholesale and retail activities are made up of mainland Spain.

20Cases IV/M.1659 - Preussen Elektra/EZH; Case IV/M 1557 - EDF/Louis Dreyfus; Case COMP/M 1673 - VEBA/VIAG; Case COMP/M 1803 - Electrabel/Eon; and Case COMP/M.1853 - EDF/EnBW.

21Case COMP/M.2353 ñ RWE/HidroelÈctrica del Cant·brico, Case COMP/M.2340 ñ EDP/Cajastur/ C·ser / HidroelÈctrica del Cant·brico, Case COMP/M.2434 - Grupo Villar Mir / EnBW / HidroelÈctrica del Cant·brico and Case COMP/M.2620 - Enel / Viesgo.

22Source: ComisiÛn Nacional de la EnergÌa (National Energy Commission).

23Protocol of collaboration between the Administrations of Spain and Portugal in view of the creation of the Iberian electricity market, signed in Madrid on 14 November 2001.

27The activities of the notifying parties and the target company in the liberalised part of the Spanish electricity sector are relatively limited. Among them, only Hidrocant·brico has generation activities in Spain, its share in terms of total installed capacity being around 5% in 2001. Neither EDP nor EnBW or EDF operate as producers in the Spanish electricity market. However, EDP, EnBW and EDF are allowed to operate as exporters into and importers from the Spanish market, since they are authorised to act in Spain as external agents sellers as well as external agents buyers.

28With regard to the wholesale market, Hidrocant·brico's share in terms of sales to the pool's daily market was [between 5 and 10 %] in 2000 (around [5 to 10%] in 2001). EDP has traditionally not offered electricity to the Spanish pool (the first time was in December 2001) and EnBW's sales have been negligible. EDF's exports (the long term contract with Red ElÈctrica EspaÒola included) accounted for [less than 5 %] of total demand during the period June-December 2001. On the other hand, and as far as the retail market for electricity is concerned, Hidrocant·brico's share in terms of supply to eligible customers was around [5-10%] in 2001, while the combined market share of EDP, EnBW and EDF was below 1%. In conclusion, the proposed operation would result in relatively limited horizontal overlaps in the Spanish wholesale and retail electricity markets.

29Notwithstanding the above, and in line with the Commission decision in the case COMP/M.2434 - Grupo Villar Mir / EnBW / HidroelÈctrica del Cant·brico, the proposed operation must be assessed in the light of the high degree of concentration on the Spanish electricity market and of its isolation due to a shortage of interconnections with other systems.

30In particular, the Commission concluded in the referred case, after an in-depth investigation, that the Spanish electricity market is characterised by the existence of a duopolistic dominant position by the firms Endesa and Iberdrola, on the basis of (1) their shares of total installed generating capacity (Endesa 46% and Iberdrola 37% in 2001); (2) their shares of sales to the wholesale market (Endesa 47% and Iberdrola 27% in 2000, and 44% and 34% respectively between January and May 2001); and (3) their ability to set prices in the wholesale electricity market (60 to 80% of cases in the daily market). This duopolistic scenario has not been altered since by the recent divestiture by Endesa of Viesgo (which accounts for around 5% of the total installed capacity in Spain) which brought the entry of a new operator, Enel.

31Endesa and Iberdrola play a pivotal role in the Spanish wholesale market, their capacity being necessary to provide the additional supply needed on the market in order to meet the demand, especially at times of peak demand. This means that the combined supply of the rest of the generators is insufficient to satisfy demand and the pivotal firms can increase their prices in response to demand, generally without fear of losing business. Moreover, the marginal price-setting capabilities of Endesa and Iberdrola in the Spanish wholesale market are enhanced by the technological composition of their installed capacity (the generation mix).

24Both EDP and EDF have nevertheless a participation in the company ELCOGAS (4% and 29%, respectively).

25This finding confirmed the approach taken by the Spanish Competition Court in two cases: (1) Report C-60/00 on the Endesa/Iberdrola merger; and (2) Report C-54/00 on the UniÛn ElÈctrica Fenosa/HidroelÈctrica del Cant·brico merger.

26Case COMP/M.2620 - Enel / Viesgo.

33In this context, and in line with its decision in the referred case COMP/M.2434, the Commission takes the view that the notified operation, for the reasons set out in detail below, would strengthen the aforementioned duopolistic dominant position on the wholesale electricity market in Spain. In particular, as a result of the merger there would no longer be the incentives that existed beforehand for EDF to promote or accept a substantial expansion of the interconnection capacity between France and Spain. This would both eliminate the existing Spanish generating companies' main potential independent competitor (accounting for around [55-65%] of total imports to Spain and more than [60-70%] of imports through the French-Spanish interconnectors) and maintain the isolation of the Spanish electricity market from other European electrical systems outside the Iberian Peninsula. The operation would therefore have the effect of consolidating the existing joint dominant position on the Spanish electricity market, which would be protected from potential competition from operators based in other European countries outside the Iberian Peninsula by an entry barrier constituted by the limited international interconnection capacity, without any real prospects for significant further development.

34In effect, EdF, which jointly controls EnBW, is nowadays the main exporter into the Spanish market and, as such, the main alternative to the Spanish generators and therefore the main source of potential competition on the Spanish oligopolistic wholesale electricity market. EDF has extensive generating capacity with low variable costs in France, largely due to its nuclear electricity, which puts it in a position to supply power to the Spanish wholesale market when demand is low.

35Due to higher relative prices for electricity in Spain and an excess in its production capacity, EdF has been traditionally interested in increasing its exports into the Spanish market. This interest corresponds as well to a pan-European supply strategy pursued by EdF. Before the acquisition of

36The share of total electricity demand in Spain which is met by imports across the French/Spanish border currently stands at only around 3 to 3.5% (6 500 to 8 000 GWh). The inadequacy of the interconnection with France, which isolates the Spanish electricity market, is clearly demonstrated by the capacity ratio and the interconnection capacity with France in relation to demand at peak times, which are less than 2.5% and 3.3% respectively for Spain. It may thus be concluded that imports are extremely limited as a result of this restricted commercial interconnection capacity. A comparison between the installed interconnection capacities of other European States reveals that Spain has the lowest value as a percentage of the capacity needed at peak demand times (see decision in Case No COMP/M.2434).

37The wholesale electricity market in Spain offers attractive prices to operators based in other countries. The price level applied to eligible customers is generally between 20 and 30% higher than in France.

38significant generation capacity in Spain, EdF's only way to increase substantially its presence in the Spanish market was through an increase of its exports into Spain. Due to the referred scarce interconnection capacity between France and Spain and the level of saturation of interconnectors for electricity transmitted from the French border into Spain, any substantial increase in exports will require first an increase in that capacity. To this effect, EdF has supported in the past several projects for the increase of interconnection capacity.

39A substantial increase in exports into Spain, once the interconnection capacity has been expanded, would give rise to greater competition in the Spanish electricity market, thereby weakening the existing oligopoly. In particular, the market investigation in the case COMP/M.2434 revealed that a relatively large increase in low cost electricity exports to Spain would have notable effects on the level of prices charged on the Spanish wholesale market, pushing electricity prices down and weakening the oligopolists' ability to set prices in the pool. Such an increase in supply on the wholesale market would lead not only to a reduction in the relative market shares of the two main Spanish operators but also, and more importantly, to a weakening of their respective power to set prices in the pool. Provided that exports to the Spanish wholesale market consist of low-cost electricity (for example electricity generated by nuclear power stations in France), those exports would displace offers of more expensive electricity in the formation of the marginal price, thereby introducing competitive forces into the market. The scenario described, in which sales by foreign operators contribute to a lowering of prices, either directly (setting the marginal price) or indirectly (forcing the main operators to offer electricity at lower prices), would of course take place to a greater extent the greater the volume of exports to the Spanish market.

40This scenario, however, will change after the proposed operation. In particular, by acquiring joint control over Hidrocant·brico, EDF will obtain an important foothold in Spain, without however increasing neither its exports into Spain nor the interconnection capacity between this country and France. EDF will stop being a mere external agent (exporter) and will jointly control one of the operators in the Spanish market. The combination of (joint) control of an important amount of domestic generation capacity in the Spanish market, resulting from the proposed operation, with the use of a majority of the existing interconnection capacity, will bring about predictably a qualitative change in the strategic interests of EDF. Thus, EDF would logically be more interested in exploiting its comfortable situation on the oligopolistic Spanish market, taking advantage of the supracompetitive prices prevailing in the pool, than in boosting exports to Spain by increasing interconnection capacity.

41This is due to the fact that a substantial increase of the interconnection capacity, and the resulting increase of imports into the pool, will entail a substantial decrease of the prices in the latter. Such a decrease of prices will have an impact on Hidrocant·brico's profits (and, indirectly, on EDF's). Given Hidrocant·brico's generation mix, such a reduction of prices will be probably further accompanied by a relative reduction of the amount of electricity sold by it, particularly that produced at higher marginal costs. This decrease in the amounts sold by Hidrocant·brico and in the prices of the pool will reduce EDF's profit stemming from the exploitation of the Spanish company, and will not be compensated by the increase of EDF's exports into the Spanish market (those exports being also paid at the lower marginal price resulting from the opening up of the market).

42Hence, it will be advantageous for EDF to maintain the existing status quo with high prices enabling it to maximise profits and recoup its investment. In this sense, the strategy allowing EDF to maximise its profits will not consist anymore of a substantial increase of the interconnection capacity but of a relatively limited development of Hidrocant·brico's generation capacity and of EDF's sales to the Spanish market without jeopardising the current level of prices in the pool. Indeed, through the expansion of the generation capacity of Hidrocant·brico in Spain, EDF will maintain total control over the impact of its decision in the structure of capacity in the Spanish market, while an increase in interconnection capacity would not only benefit EDF but also other operators established beyond the Iberian Peninsula, with whom EDF will have to compete in order to get a substantial use of the new interconnection capacity (in particular in an auction system).

43In sum, EDF, once obtained a significant presence in the Spanish market, will be interested in the maintenance of the barrier to entry constituted by a clearly insufficient interconnection capacity. The decision to oppose such an increase in interconnection, however, does not eliminate EDF's strategic alternatives to grow in the Spanish market, which will consist, as explained above, in developing Hidrocant·brico's generation capacity. In other words, the lack of increase of the interconnection maintains the barriers to entry into the Spanish markets for operators not established in this country, without significantly affecting, however, EDF's strategic alternatives. As noted in the Case COMP/M.2434, it is not unreasonable to conclude in this regard that, without denying the functional autonomy and management independence of EDF/RTE (the operator of the French grid), interconnection capacity between France and Spain will not be substantially increased if this is likely to be clearly detrimental to EDF's interests and, consequently, those of its owner, the French State, which holds the power to take the final decisions on the issue.

44In the light of the factors outlined above, it can therefore be concluded that the most advantageous strategy for EDF, following implementation of the merger, would be to align its commercial strategy on that of the other Spanish electricity companies, within the framework of the existing duopoly. EDF, like the other generators, would earn large profits as long as prices remained high in the pool. EDF, as an exporter to Spain, would also continue to benefit from the higher level of prices in Spain than in France. Under such circumstances it would be highly unlikely that other competitors not established in Spain could successfully compete on the Spanish market, given the limited interconnection capacity, even if the new capacity allocation system was to grant them greater access thereto.

45It is possible thus to conclude, that EdF will lose after the merger any incentive to promote or accept any further substantial increase in interconnection capacity between France and the Iberian Peninsula. Being the scarcity of such interconnection capacity an unbeatable barrier to entry into the Spanish market, the operation will result in the consolidation of Spain as an "electricity island", preventing operators established in other European (non-peninsular) countries to compete effectively in the Spanish market and therefore reinforcing the current collective dominant position in the said market.

The Portuguese and French markets

The transaction is not likely to have any substantial effects in the markets for electricity in Portugal and France, where EDP and EDF have respectively very strong positions as the incumbent electricity utilities.

33EDF/RTE is entrusted with the task of operating the electricity grid in France, which includes taking decisions on the allocation and increase of the interconnection capacity between France and Spain by either upgrading existing lines or planning new ones. In carrying out these tasks, EDF/RTE claims that it enjoys financial and operational independence and has resources of various kinds necessary for fulfilling them. Nevertheless, as noted in the referred Case COMP/M.2434, from a legal and organisational standpoint, EDF/RTE is a division of EDF and has no separate legal personality [Article 12 of Law No 2000-108 of 10 February 2000]. Furthermore, the Director of EDF/RTE is appointed by the French Energy Minister from a shortlist of three candidates submitted up by the Chairman of EDF. In any event, both EDF and EDF/RTE form part of one and the same economic unit, an industrial group belonging to the French State. Under such circumstances, decision-making on key issues or strategic decisions for the operation of EDF/RTE are clearly subordinated to the French authorities, and in particular the Energy Ministry, without prejudice to the powers of the electricity regulator, the Commission de RÈgulation de líElectricitÈ (CRE). Thus, the French State is ultimately responsible for decisions on interconnection issues. In particular, EDF/RTE must submit to the approval of the Ministry of Energy, every two years at the latest, the plan on the development of the public transport grid.

34Available commercial capacity on the French/Spanish interconnection amounts approximately to [500-600%] MW (total commercial capacity of 1 100 MW minus the [500-600%] MW reserved under the long-term contract between EDF and REE). Account also has to be taken of the fact that there is no guaranteed commercial interconnection capacity for third parties since the only commercial capacity guarantee is reserved for the EDF/REE contract. Even assuming that the allocation mechanism were altered so as to offer foreign suppliers greater interconnection capacity, the total amount of imported electricity offered to the Spanish wholesale market would represent a market share of less than 2%. Being on such a small scale, those offers would not be able to significantly influence prices in the pool.

44On the one hand, the acquisition of a relatively minor actor, in terms of generation capacity and electricity production, will not increase to a significant degree EDPís and EdF's potential for retaliation in Spain with regards to Spanish companies willing to compete aggressively in the Portuguese or French markets. Hidrocant·brico (see the figures set out in previous sections) is a minor actor, with no particular advantages, compared to companies like Endesa or Iberdrola.

45Further, even if we were to assume that the merger will imply the disappearance of potential "ex novo" entrants both in the Portuguese (EDF and Hidrocant·brico) and French markets (EDP and again Hidrocant·brico), the impact of the merger in these countries, given the number of other potential competitors, will be negligible. Moreover, EDF does not operate as yet in the Portuguese liberalised electricity market (it has only some de minimis activities in the bound system), where Endesa and to a lesser extent Iberdrola seem to be stronger external competitors. Finally, both EDP and Hidrocant·brico not only have never been active in the French market but have a very small size compared to the dimensions of the market in France.

Co-ordination of competitive behaviour

46EDP and EnBW/EdF are active both in the Spanish electricity market, home territory of their joint venture Hidrocant·brico, and in neighbouring geographic markets.

47As regards a possible co-ordination of competitive behaviour in France and/or Portugal, it has to be pointed out that EDF and EDP have no activities in each other's home liberalised markets and that they do not compete with each other in any other market in Europe (apart from the Spanish market). Further, there is no indication that the transaction will have as its object or effect a co-ordination of the competitive behaviour of EDP and EnBW/EdF.

48As far as the Spanish market is concerned, there is no evidence that the transaction will result in a co-ordination of the parties' competitive behaviour with respect to their activities as external agents in the Spanish wholesale market (exports from and imports into Spain). [Ö]

UNDERTAKINGS SUBMITTED

49In order to remove the competition concerns resulting from the proposed transaction, EDF/RTE and EDF have re-submitted the undertakings that had been accepted by the Commission in relation to the case COMP/M.2434. These undertakings, none of which has been implemented as yet, are annexed to the decision (Annexes I and II) and form an integral part thereof.

Undertakings offered by EDF/RTE

EDF/RTE undertakes to adopt the measures and implement the works necessary to increase the commercial interconnection capacity France-Spain according to the following phases:

(1) 300 additional MW through the technical improvement of existing lines before the end of 2002

(2) 1200 additional MW through the construction of a new line [Ö]. This additional capacity could be increased up to [Ö] MW after verification of the technical and economic feasibility of this last amount of increase.

(3) 1200 additional MW through the construction of an alternative line, the doubling of an existing line or the reinforcement of the French lines, at mid term, inasmuch as studies on technical and economic feasibility, to be carried away before the end of 2002, will justify such works.

51The increase of commercial capacity shall bring about an available capacity equivalent to 75% of the additional increase during 85% of the hours of the year.

52The aforementioned deadlines can be extended in the event that the works will not be concluded for reasons which are not attributable to EDF/RTE. Further, the Commission wants to precise, in line with its previous decision in the Case COMP/M.2434, that as far as the third phase of the increase in interconnection is concerned, and without prejudice of the fact that the concrete determination of the timetable for the works shall result from the aforementioned feasibility studies, the undertakings include nevertheless a relevant time framework (the construction must be implemented "at mid term"). The exact determination of this time framework will depend upon the particular project to be implemented (construction of a new line, doubling or reinforcement of existing lines). To this effect, and according to the investigation undertaken by the Commission, this time framework must be interpreted as including a period of 4 to 8 years after the culmination of the referred studies.

One (several) third person(s) or entity(ies) (tiers certificateurs) will be nominated to monitor the fulfilment of the undertakings. They shall be approved by the Commission. In particular, they shall receive from EDF/RTE all the information and assistance necessary in order to fulfil their tasks, and they will inform regularly on the implementation of the undertakings and, if needed, they may propose to the Commission all necessary measures to guarantee the respect of the undertakings, among others the production of feasibility studies alternative and/or complementary to those to be submitted by EDF/RTE. Likewise they shall take into account, when fulfilling their tasks, all information or studies by third interested parties, in particular by the Spanish ComisiÛn Nacional de la EnergÌa and/or REE.

Undertakings offered by EDF

In order to solve the competition problems raised by its acquisition of joint control over Hidrocant·brico, EDF undertakes to support the increase in interconnection between France and Spain and particularly the commitments of EDF/RTE mentioned above, according to the referred phases.

To that effect, EDF undertakes to participate in the activities of the group of users established by EDF/RTE and to furnish RTE the elements in its possession that could be useful for the implementation of the studies on technical and economic feasibility regarding the building of new lines or other projects for the reinforcement of the interconnection between France and Spain.

Further, EDF undertakes to remunerate, if need be, the third person(s) or entity(ies) that will be nominated to monitor the fulfilment of the undertakings subscribed by EDF/RTE.

Assessment

As the Commission already indicated in its decision in the referred case COMP/M.2434, the aforementioned undertakings will mitigate in the future the isolation of the Spanish market for electricity, increasing significantly the possibility for operators established beyond the Pyrenees to compete in the said market. The increase in interconnection capacity will make possible an increase in the exports of electricity into the Spanish market, which will positively affect both the level of prices in the pool and the ability of the members of the existing duopoly to determine them.

Therefore, the undertakings offered by EDF/RTE and EDF are adequate to prevent the reinforcement of the dominant position of Endesa and Iberdrola that would result, after the merger, from the foreseeable maintenance in the future of the current (clearly insufficient) electrical interconnection capacity between France and Spain.

Finally, the Commission intends to precise again that, contrary to the statement of EDF/RTE in its submission of undertakings (in particular, its Preliminary Declaration), EDF/RTE constitutes an undertaking concerned for the purposes of Article 8 (2) of the Merger Regulation, and therefore susceptible of assuming commitments entered into with a view to rendering the notified operation compatible with the Common Market. This results, without prejudice of the alleged independence of EDF/RTE from EDF, from both entities being part of the same industrial group ownership of the French State.

In sum, having regard to the above mentioned considerations, the proposed operation, provided that the undertakings contained in the Annexes incorporated to this Decision are fully respected, will not create or strengthen a dominant position as a result of which effective competition would be significantly impeded in a substantial part of the common market. Therefore, the operation is declared compatible with the common market and the functioning of the EEA on the basis of Article 6 (2) of the Merger regulation, on condition that the parties comply with the following commitments:

(a) the increase in the interconnection capacity set out in Chapter 2 of Annex I (which are subject to change by the Commission pursuant to Chapter 4 of Annex I);

(b) the compliance with any measure imposed by the Commission upon recommendation of the tiers certificateurs to make the parties comply with their commitment as indicated in paragraph 8 of Chapter 3 of Annex I.

The above aspects of the commitment constitute conditions, as only by fulfilling them (subject to any change pursuant to Chapter 4 of Annex I), can the structural change on the wholesale market for electricity in Spain be achieved. The remaining aspects of the commitment constitute obligations as they concern the implementing steps which are necessary to achieve the structural change that is sought. In particular, this relates to the provisions relating to the tiers certificateurs entrusted with the monitoring of the fulfilment of the undertakings (Chapter 3 of Annex I, with the exception of the issue referred to in letter b above).

CONCLUSION

The Commission concludes that the undertakings submitted by EDF/RTE and EDF during the course of the proceedings are sufficient to address the competition concerns raised by this concentration. Accordingly, subject to full compliance with the undertakings, the Commission has decided not to oppose the notified operation and to declare it compatible with the common market and with the functioning of the EEA Agreement. This decision is adopted in application of Article 6(2) of Council Regulation (EEC) No 4064/89.

For the Commission

Mario MONTI Member of the Commission (signed)

ANNEXE I

Dossier. CAS COMP M 2684 EDP/ EnBW/ CajAstur - HidroelÈctrica del Cant·brico ENGAGEMENTS DE EDF-RTE

1. DECLARATION LIMINAIRE DE EDF-RTE

EDF-RTE, gestionnaire du rÈseau franÁais de transport d'ÈlectricitÈ, est un service placÈ ´ au sein d'…lectricitÈ de France ª. Ainsi, il s'agit d'une entitÈ ne disposant pas d'une personnalitÈ juridique

propre. Pour autant, EDF-RTE est "indÈpendant sur le plan de la gestion des autres activitÈs

d'…lectricitÈ de France" (article 12, alinÈa 2 de la loi du 10 fÈvrier 2000).

Cette indÈpendance est attestÈe principalement par l'article 12 de la loi prÈcitÈe qui a prÈvu:

• Le mode de dÈsignation de son directeur et la protection dont il bÈnÈficie pendant la durÈe de

ses fonctions (troisiËme alinÈa): il est nommÈ pour 6 ans par le ministre chargÈ de l'Ènergie sur

proposition de trois candidats par le prÈsident d'EDF et aprËs avis de la Commission de

RÈgulation de l'…lectricitÈ (ci-aprËs la "CRE"). Le Directeur de RTE ne peut Ítre dÈmis de ses

fonctions que dans l'intÈrÍt du service, par le ministre chargÈ de l'Ènergie, aprËs avis motivÈ de

la CRE ;

• Le fait que le Directeur de RTE rende compte de ses activitÈs ‡ la CRE et non ‡ la

PrÈsidence ou ‡ la Direction GÈnÈrale d'EDF (ibidem) ;

• L'existence d'un lien de subordination exclusif entre les agents de RTE et le Directeur de

RTE, la Direction GÈnÈrale d'EDF ne pouvant donner aucune instruction aux agents de RTE

(alinÈa 5) ;

• L'existence d'un budget propre ‡ RTE (alinÈas 6 et 7) ;

• Les pouvoirs de gestion confiÈs au Directeur de RTE: celui-ci est seul responsable de la

gestion de RTE et dispose du pouvoir d'engager les dÈpenses liÈes ‡ son fonctionnement et ‡

l'accomplissement de ses missions (alinÈa 7).

En outre, l'indÈpendance de RTE est assurÈe par d'autres articles de la loi du 10 fÈvrier 2000:

• L'article 13 qui interdit aux agents de RTE ayant eu ‡ connaÓtre des informations

confidentielles, l'exercice d'un certain nombre d'activitÈs (dont la liste doit Ítre axÈe par un

dÈcret ‡ intervenir) ;

• L'article 14 qui dispose que RTE soumet d'une part son programme annuel d'investissements ‡

l'approbation de la CRE et, d'autre part, le schÈma bi-annuel de dÈveloppement du rÈseau

public de transport ‡ l'approbation du ministre chargÈ de l'ÈlectricitÈ aprËs avis de la CRE ;

• L'article 16 qui soumet les agents de RTE ‡ une stricte obligation de confidentialitÈ. 11 en

rÈsulte que ceux-ci ont interdiction de communiquer aux autres services d'EDF des

informations confidentielles concernant es autres utilisateurs du rÈseau;

• L'article 23 qui impose ‡ RTE de conclure avec EDF des protocoles en vue de dÈterminer les

conditions d'accËs au rÈseau et de leur utilisation par cette derniËre ;

L'article 38 qui confËre ‡ la CRE le pouvoir de se prononcer sur tout diffÈrend entre un

gestionnaire de rÈseau et un utilisateur relativement ‡ l'accËs au rÈseau et ‡ son utilisation. Ainsi,

la CRE peut Ítre saisie par RTE ou EDF si un litige de cette nature venait ‡ les opposer.

EDF-RTE dispose donc d'une autonomie de gestion et d'une indÈpendance financiËre garanties par la

loi du 10 fÈvrier 2000 et par la CRE. Son activitÈ se limite strictement, de par la loi, ‡ la gestion du

rÈseau de transport, ce qui exclut toute prise d'intÈrÍt ou de participation dans le capital d'un

producteur d'ÈlectricitÈ, quel qu'il soit.

Compte tenu de cette situation, EDF-RTE considËre qu'il constitue, au regard du droit de la

concurrence (cf notamment CJCE 23 avril 1991, affaire C-41/90, Rec.p.1-1979 et 17 fÈvrier 1993,

affaire C-159/91, Rec.p.l-067 ; cf Ègalement le considÈrant n∞ 12 du rËglement 4064/89), une

entreprise distincte de EDF. A ce titre, EDF-RTE estime qu'il ne saurait Ítre considÈrÈ comme une

"entreprise concernÈe" au sens du rËglement 4064/89, ni comme une "partie intÈressÈe" au sens du

rËglement 447/98.

EDF-RTE rappelle, au demeurant, que tout au long de la procÈdure EDF/OEW/EnBW, il a ÈtÈ

considÈrÈ comme une "partie tierce intÈressÈe".

C'est en se rÈfÈrant expressÈment ‡ cette situation juridique que EDF-RTE, faisant suite ‡ son

intention dÈj‡ annoncÈe prÈcÈdemment de dÈvelopper les interconnexions avec l'Espagne et dans

l'esprit de transparence attachÈ ‡ sa mission de gestionnaire de rÈseau, accepte de souscrire aux

engagements suivants qui relËvent de sa responsabilitÈ exclusive, sous le contrÙle du Ministre

chargÈ de l'Ènergie et de la CRE, de veiller ‡ assurer un niveau de dÈveloppement optimal aux

infrastructures de transport d'ÈlectricitÈ et aux interconnexions avec les pays voisins.

NATURE DES ENGAGEMENTS SOUSCRITS PAR EDF-RTE

EDF-RTE s'engage ‡ prendre les mesures et ‡ exÈcuter les travaux nÈcessaires y compris la mise ‡

disposition des ressources financiËres, ‡ fixer par les autoritÈs compÈtentes, pour procÈder ‡ une

augmentation de la capacitÈ commerciale d'interconnexion France-Espagne selon les Ètapes

suivantes

1. 300 MW supplÈmentaires ‡ travers l'amÈlioration technique des lignes existantes avant fin 2002

2. 1200 MW supplÈmentaires ‡ travers la construction d'une nouvelle ligne [Ö]. Cette capacitÈ

supplÈmentaire pourra Ítre portÈe ‡ [Ö], aprËs vÈrification de la faisabilitÈ technicoÈconomique

de cette derniËre valeur.

3. 1200 MW supplÈmentaires ‡ travers la construction d'une ligne alternative, le dÈdoublement

d'une ligne existante ou bien le renforcement des lignes franÁaises, ‡ moyen terme, dans la

mesure o˘ des Ètudes de faisabilitÈ technico-Èconomique ‡ accomplir avant fin 2002

justifieraient de tels travaux.

L'augmentation de capacitÈ commerciale d'interconnexion devra donner lieu ‡ une capacitÈ disponible

Èquivalente ‡ 75% de l'augmentation additionnelle pendant 85% des heures de l'annÈe.

Si les travaux pour lesquels EDF-RTE est responsable n'Ètaient pas achevÈs dans les dÈlais indiquÈs

ci-dessus pour des raisons non imputables ‡ EDF-RTE, EDF-RTE pourra demander ‡ la Commission

la prolongation du dÈlai Ètabli pour la terminaison des travaux, pour une pÈriode correspondant aux

retards rÈsultant directement des raisons non imputables ‡ EDF-RTE. Ce dÈlai supplÈmentaire

pourra Ítre refusÈ par la Commission si les raisons du retard des travaux sont imputables ‡

EDF-RTE.

On entend comme raisons non imputables ‡ EDF-RTE:

- l'absence des autorisations lÈgales nÈcessaire ‡ la rÈalisation de la liaison

- le refus de la Commission de RÈgulation de l'…lectricitÈ d'approuver les investissements en cause

- une contestation devant les tribunaux conduisant ‡ la suspension des autorisations prÈalablement

obtenues ou ‡ des dÈlais supplÈmentaires pour la rÈalisation de l'ouvrage;

- une dÈcision gouvernementale interdisant la rÈalisation ;

- l'absence de collaboration de Red ElÈctriea de EspaÒa (REE), et notamment l'absence de

financement et de rÈalisation de la part des travaux qui lui incombe ;

- Les limitations de la capacitÈ disponible qui rÈsulteraient de rËgles d'exploitation imposÈes par

REE qui seraient plus restrictives que les rËgles gÈnÈralement admises par les gestionnaires des

rÈseaux de transport europÈens ;

- force majeure liÈe ‡ des calamitÈs naturelles.

Les engagements dÈcrits ci-dessus peuvent faire l'objet d'une rÈvision en cas de changements

substantiels du marchÈ espagnol. Ces changements devraient entraÓner (condition sine qua non pour

la rÈvision des engagements) une situation de concurrence effective dans le marchÈ qui fait l'objet de

la dÈcision de la Commission (marchÈ libÈralisÈ ´ au gros ª : pool et contrats bilatÈraux). Dans ces

circonstances, le niveau d'augmentation de la capacitÈ d'interconnexion pourrait Ítre revu. Le

changement de la situation du marchÈ espagnol pourra Ítre constatÈ a) par des Ètudes rÈalisÈes par

un(des) expert(s) indÈpendant(s) sous rÈserve de vÈrification et acceptation de l'/les Ètudes) par la

Commission europÈenne b) par les autoritÈs compÈtentes espagnoles sous rÈserve de vÈrification et

rÈvision par la Commission europÈenne c) par la Commission europÈenne, suite ‡ une enquÍte de

marchÈ.

Les obligations inhÈrentes ‡ ces engagements commencent ‡ courir ‡ partir de la date

de la dÈcision d'approbation par la Commission.

EDF-RTE s'engage ‡ prendre les mesures nÈcessaires pour entreprendre des Ètudes de faisabilitÈ

visant ‡ augmenter la capacitÈ commerciale d'interconnexion France Espagne au-del‡ des capacitÈs

susmentionnÈes.

TIERS CERTIFICATEURS) Dans un dÈlai de deux semaines ‡ partir de la date de la dÈcision de la Commission EDF-RTE

devra proposer ‡ la Commission le nom d'au moins deux personnes ou d'un groupe de personnes

indÈpendantes ou bien d'une ou plusieurs institutions ou un ensemble d'institutions qu'ils

considËrent appropriÈs pour Ítre nommÈs tiers certifcateur(s). Le(s) tiers certificateur(s) devront

avoir l'expÈrience, la compÈtence et l'indÈpendance nÈcessaires pour contrÙler d'une faÁon

objective la mise en oeuvre des engagements. Il incombe ‡ EDF-RTE de fournir ‡ la Commission

toutes les informations qui lui permettront de vÈrifier si le(s) tiers certiftcateur(s) remplit(ssent) ces conditions. EDF est chargÈ de la rÈmunÈration, si nÈcessaire, de chaque tiers certificateur pour tous les services rendus lors de l'exÈcution de leurs t‚ches, et le systËme de la rÈmunÈration doit

Ítre tel qu'il n'entrave pas l'indÈpendance et l'efficacitÈ du tiers certificateur dans l'exercice de sa

mission. Nonobstant cette prise en charge de la rÈmunÈration, EDF n'aura aucun droit d'accËs aux

informations fournies au tiers certificateur par EDF-RTE.

Il appartient ‡ la Commission d'approuver la nomination du(es) tiers certificateur(s).

Si le(s) tiers certificateur (s) proposÈ(s) est (sont) rejetÈ(s) par la Commission, EDFRTE proposera

dans un dÈlai de 5 jours ouvrables ‡ partir de la date du rejet de la Commission au moins deux

autres possibles tiers certificateurs ou groupes de tiers certificateurs (personnes ou institutions).

Si ce(s) tiers certificateurs) est(sont) ‡ nouveau rejetÈ(s) par la Commission, celle-ci dÈsignera

le(s) tiers certificateurs) ‡ nommer par EDF-RTE.

EDF-RTE nommera le(s) tiers certificateurs) 5 jours ouvrables aprËs son(leur) approbation

dÈfinitive par la Commission.

EDF-RTE est obligÈ de fournir aulx) tiers certificateurs) toutes les informations et assistance

nÈcessaires pour l'accomplissement de sa(leur) mission. Le(s) tiers certiflcateur(s) devront Ítre

astreints au secret professionnel pour toutes les informations qui leur seront communiquÈes dans

l'exercice de leur mission. Ils ne pourront en faire aucun autre usage que celui strictement dÈfini

dans le cadre des prÈsents engagements.

En parallËle avec la proposition du (des) tiers certificateur(s), EDF-RTE soumettra ‡ la

Commission un projet de lettre de mission dÈtaillant le contenu de celle-ci et les t‚ches ‡ remplir

par le(s) tiers certifleateur(s). Cette lettre de mission sera modifiÈe sur demande de la Commission

en vue d'assurer qu'elle est en ligne avec les engagements ci-dessus. Le(s) tiers certificateurs)

sera(ont) notamment tenu(s) de

veiller ‡ ce que les Ètudes de faisabilitÈ concernant l'augmentation de la capacitÈ commerciale

d'interconnexion tiennent compte de la situation du marchÈ espagnol et des possibilitÈs d'exportation

de tous les opÈrateurs Ètablis en-deÁa des PyrÈnÈes. La Commission approuvera les termes de cette

lettre de mission, qui devra Ítre irrÈvocable sauf si un motif valable peut Ítre donnÈ ‡ la Commission

pour justifier la dÈsignation d'un nouveau tiers certificateur.

Le(s) tiers certificateur(s) a(ont) un rÙle de surveillance et en mÍme temps il(s) a(ont) le droit de

proposer ‡ la Commission EuropÈenne toutes les mesures que le(s) tiers certificateur(s) jugera(ont)

nÈcessaire(s) pour garantir le respect de chacun des engagements. Sur la base des propositions du/es

tiers certificateurs) la Commission EuropÈenne pourra adopter les mesures qu'elle estimera nÈcessaire

pour garantir le respect de chacun des engagements. Le(s) tiers certificateurs) doit(vent) prÈsenter ‡ la

Commission des rapports trimestriels sur le respect des engagements et sur les progrËs faits pour

respecter les engagements.

Le(s) tiers certilicateur(s) chargÈ(s) de 1a vÈrification de l'accomplissement des engagements pris par

EDF-RTE fera(ont) rapport ‡ la Commission sur le contenu des informations fournies par EDF

notamment en vue de constater si : LDl' omet de fournir des informations nÈcessaires pour

l'accomplissement des Ètudes, si EDF donne des indications inexactes, dÈnaturÈes ou incomplËtes.

En vue de vÈrifier que l'augmentation de capacitÈ commerciale d'interconnexion a donnÈ lieu ‡ une

capacitÈ disponible Èquivalente ‡ 75% de l'augmentation additionnelle pendant 85% des heures de

l'annÈe, la mission du tiers certificateur expirera 2 ans aprËs la rÈalisation des travaux ayant donnÈ

lieu ‡ une augmentation de la capacitÈ commerciale d'interconnexion France-Espagne jusqu'‡ un

niveau de 2600 MW ‡ 3000 MW. En outre, si le tiers certificateur constate l'impossibilitÈ d'atteindre

les objectifs d'augmentation d'interconnexion prÈvus dans ces engagements, pour des raisons

techniques, Èconomiques ou liÈes ‡ des autorisations, il en fera rapport ‡ la Commission qui pourra

autoriser de mettre fin ‡ sa mission.

CLAUSE DE REVISION DES ENGAGEMENTS

Sur demande de EDF-RTE, et aprËs avoir reÁu l'opinion du tiers certificateur, la Commission peut

Ètendre les dÈlais prÈvus dans les engagements dÈcrits ci-dessus ou rÈviser le contenu de ces

engagements en cas de circonstances exceptionnelles qui justifieraient une extension ou une rÈvision.

Une telle demande doit spÈcifier les circonstances exceptionnelles qui, d'aprËs le tiers certificateur,

justifieraient une telle extension des dÈlais ou une telle rÈvision du contenu des engagements.

NATURE DES CHARGES QUI SERAIENT IMPOSEES A EDF-RTE

Bien entendu, si une des parties concernÈes ne satisfaisait pas aux conditions et charges qui lui

seraient imposÈes dans la dÈcision de la Commission autorisant l'opÈration de concentration "EDP/

EnBW/ CajAstur - HidroelÈctrica del Cant·brico" et que ce nonrespect desdites conditions et

charges Ètait susceptible de faire obstacle au respect par EDF'-RTE de ses propres engagements (ce

qui serait en particulier 1e cas pour ce qui concerne la rÈmunÈration du tiers certificateur par EDF'),

les engagements visÈs cidessus seraient caducs.

ANNEX II

COMMITMENTS

given by …lectricitÈ de France

in case

COMP.M 2684 EDP/EnBW/HidroelÈctrica del Cant·brico.

…lectricitÈ de France (EDF) recognise the necessity to proceed to an increase

in the interconnection capacity between France and Spain and thereby

strengthen competition on the Spanish market.

EDF commits itself to support, within the limits of its competences and in

due respect of the competences of EDF-RTE, the increase of the

interconnection capacity between France and Spain, the commitments of

EDF-RTE to increase the commercial interconnection capacity between

France and Spain and to finalise the works for which the latter is responsible

in accordance with the following stages:

1. 300 additional MW through the technical improvement of the

existing lines before the end of 2002.

2. 1 200 additional MW through the construction of a new line parallel

[Ö]; this additional capacity could be increased [Ö] after

verification of the technical and economical feasibility of such

increase.

3. 1 200 additional MW through the construction of an alternative line,

the doubling of an existing line or the reinforcement of the French

lines, at medium term, to the extent that the studies concerning the

technical and economical feasibility to be accomplished before the

end of 2002 justify such works.

According to the commitment given by EDF-RTE, the increase of the

commercial capacity should lead to an available capacity equivalent to 75%

of the additional increase during 85% of the hours of the year.

In order to facilitate a significant increase in the interconnection capacity

between France and Spain in accordance with the commitments provided by

EDF-RTE, EDF commits itself:

• to participate in the work of the user group set up by EDF-RTE in

parallel to the intergovernmental working group,

• to provide RTE with the elements in its possession that could be

useful for the elaboration of the technical and economical studies

regarding the implementation of the works referred to in point (3)

above and aiming at reinforcing the interconnection capacity between

France and Spain.

Moreover, EDF commits itself to remunerate the third party/ies entrusted

with the monitoring of the implementation of the commitments entered into

by EDF-RTE and approved by the Commission for all services rendered in

the execution of its/their task. The remuneration system must be such as not

to impede the independence and efficacy of the third party/ies in the exercise

of its/their mission. Notwithstanding the taking in charge of the remuneration,

EDF will have no right of access to the information given by EDF-RTE to the

third party/ies referred to above.

As mentioned, EDF will adopt all measures necessary to support EDF-RTE

in the elaboration of the above-mentioned technical and economical studies

which are aimed at increasing the interconnection capacity between France

and Spain.

The progress of the studies will be detailed in a bi-annual report of EDF to

the European Commission.

The third party/ies entrusted with monitoring the implementation of the EDF-RTE commitments will provide the Commission with a report on the contents

of the information given by EDF, in particular in order to report whether EDF omits supplying the information necessary for the implementation of the studies or supplies incorrect, misleading or incomplete indications.

In case of non respect by EDF-RTE of the time-limits laid down for the accomplishment of the works increasing the interconnection capacity between France and Spain, and taking into account a possible prolongation thereof, the Commission could request EDF to adopt the measures required to divest its participation in HidroelÈctrica del Cant·brico [Ö]. Prior to adopting such a decision, the Commission will provide EDF the opportunity of being heard, in particular as to the development of competition in the Spanish electricity sector.

Paris,

GÈrard Wolf Directeur Coordination Groupe …lectricitÈ de France

22