Austria's share of European energy consumption only amounts to
2%, a relatively small figure compared to the interest shown by
European energy providers in the Austrian market. More than 50% of
Austrian annual production volume comes from hydro-power plants
making Austria the number one hydro-power country in the EU. The
past few years have brought new movements in the energy sector. The
implementation of European Directives has brought full market
liberalization in the electricity sector. The gas sector has only
been fully liberalized beginning with October this year. The
newly-created Energie Austria fulfils the political wish for an
Austrian energy solution and thereby pursues the aim of reaching an
Austrian energy provider of European scale. However, before
reaching Energie Austria, several European suppliers have revealed
their interest in participations in Austria. EdF and RWE have
already acquired stakes in the regional suppliers in Styria and
Carinthia. So far, E.on has not succeeded in combining its
hydro-power activities with the hydro-power activities of
Österreichische Elektrizitätswirtschafts Aktiengesellschaft, the
Verbund, Austria's largest producer of electricity, almost all of
it by hydro-power.
Electricity market structure
The organization of the Austrian energy market follows a federal
system. According to constitutional law, a stake of at least 51% in
Verbund must be owned by the Republic of Austria. In order to
safeguard the Republic's influence over Verbund the law further
contains a voting right restriction of 5% of the company's share
capital. However, this restriction does not apply to regional
authorities (such as the state, the federal provinces, the
municipalities) and companies in which such regional authorities
hold at least a 51% stake. The same system works for the regional
suppliers, in which the respective federal provinces or companies
held by the federal provinces must own at least 51% of the share
capital. However, the law does not contain voting rights
restrictions for these regional suppliers.
Constitutional law in that respect expressly mentions the
ownership of shares. The law does not prohibit a potential
purchaser of shares in an Austrian energy supplier from entering
into a shareholders agreement with a regional authority as
shareholder of the target. A purchaser can on the basis of a
shareholders agreement economically take control of these
companies, the legal acquisition of shares beyond this percentage
is still prohibited. Special attention must be paid to Austrian
takeover regulation in that respect. As long as a regional
authority holds the majority of a listed supplier, a purchaser will
not gain a controlling interest and therefore will not shift into
the burden of a mandatory bid with mandatory pricing provisions.
However, acquisition of joint control by a shareholders' agreement
could again mean the obligation for a mandatory bid. Constitutional
law may only be amended by a resolution from parliament with a
majority of two-thirds of the votes cast. For the past few years, a
two-thirds majority in parliament could not be reached by the
governing parties. However, in the future this may change.
Mandatory majority state ownership is not set in stone.
Energie Austria and European suppliers
The Austrian Market is mainly divided among the Austrian
suppliers. After publication of the intended merger of the
hydro-power activities of Verbund and E.on into European Hydro
Power and thereby intensive and politically-motivated negotiations,
Verbund as the number one distributor on the one side and BEGAS,
BEWAG, Energie AG, EVN AG, Linz AG and Wien Energie GmbH as
partners of Energie Allianz Austria, the principle wholesaler, on
the other agreed on the formation of Energie Austria. The trading
activities, electricity-sourcing and power station use of all
partners of Energie Austria will be administered by a joint company
(APT AG). Verbund will have a stake of around two-thirds in APT AG,
the Energie Allianz Austria partners a total of one-third. Several
regional suppliers (ESTAG, KELAG, Salzburg AG, TIWAG, VKI) have not
joined Energie Austria, although the "Austrian energy solution"
will be open to all Austrian suppliers. E&S GmbH, in which the
Energie Allianz Austria partners will have a two-thirds stake,
Verbund a one-third stake, is responsible for industrial customers
with annual consumption of at least 4 GWh.
The new joint companies will commence their activities on
January 1 2003. However, the Austrian energy solution does face
merger control difficulties due to high-yield concentration. The
justification of the spread, based on national economic
requirements, could disappear if the European Commission takes
charge of the case. However, the parties involved hope to get the
transaction cleared, because competition in their view is not
affected. After the relatively early liberalization of the Austrian
electricity market (compared to other EU member states), the
proposed link-up should strengthen both the international
competitiveness and the Austrian character of the national power
industry. It is seen as a positive side effect and the result of
the most likely failed Verbund/E.on transaction that Austrian
hydro-power will be retained for the domestic population.
Most regional suppliers outside Energie Austria are already
strongly linked with European suppliers: RWE is invested in
Carinthian KELAG, EDF holds a prominent 25% stake in Styrian ESTAG,
EnBW holds a 6.3% stake in Verbund and more than 5% in EVN AG and
west-enders TIWAG and VKI are completely independent with
non-Austrian partners on a non-stake basis. The sensible system
could be unbalanced if a merger clearance holds the requirement of
divestments. Most of the share capital of Verbund and the regional
suppliers not held by regional authorities, that is, the Republic
or the federal provinces, is held by the suppliers themselves.
Prominent divestitures could put some of them on a silver plate for
non-Austrian suppliers, such as Salzburg AG in the case of a sale
of the strategic 26% stake by its shareholder Energie AG.
Conclusion
The Austrian energy market is on the move. Full liberalization
in the electricity and gas sectors and the high share of
electricity production by clean hydro-power plants have attracted
the attention of the big players in the European market. The state
has established its influence by law. In spite of the existence of
this hypothetical acquisition barrier, the big European suppliers
have arranged their starting positions for the day after it falls.
The Austrian energy solution means a cautious attempt to keep the
energy sector Austrian. The next few years will show how successful
Austria is in developing an energy provider on a European
scale.
Cerha Hempel Spiegelfeld
Partnerschaft von Rechtsanwälten
Parkring 2
A-1010 Wien
Tel: +43 1 514 35 0
Fax: +43 1 514 35-35
Web:
www.chs.at