A Retrospective Evaluation of the GDF/Suez Merger: Effects on Gas Hub Prices

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Meagan Andrews May 2017 Abstract:We present an ex-post analysis of the effects of GDF's acquisition of Suez in 2006 created one of the world's largest energy companies. We perform an econometric analysis, based on Difference-in-Difference techniques on the market for trading on the Zeebrugge gas hub in Belgium. Removing barriers to entry and facilitating access to the hub through ownership unbundling were an important part of the objectives of the remedies imposed by the European Commission. Our analysis shows a price decline after the merger. This decline suggests the remedies were effective in limiting the potential anti-competitive effects of the merger. Moreover, it suggests that ownership unbundling has generated improved access to the hub. Therefore, the remedies may have done more than simply mitigate the potential anticompetitive effects of the merger; they may have effectively created competition.

The Impact of Competition Policy Enforcement on the Functioning of EU Energy Markets

“…The fact that it is EU merger policy that especially has an impact in energy markets should perhaps not come as a surprise since the EC might have used the 'windows of opportunities' created through large European cross border merger proposals (Pakalkaite, 2014). Indeed, some of the remedies put in place, in principle only to mitigate the potential anti-competitive effects of mergers, may have effectively been used to promote market liberalisation in energy markets (Argentesi et al, 2017;Böckers et al, 2017). Thus, one question is whether the EC has overreached by using merger control to create competition that would not have arisen absent the merger.…”

“…Moreover, the EC feared reduced incentives to invest in infrastructure. The merger received approval in November 2006, after the merging parties proposed a series of remedies, both structural (the divestment of some important assets) and behavioral (through the promise to invest in infrastructure post-merger); see Argentesi et al (2017) for more details on this case.…”

“…For example, some of the merger remedies put in place in the GdF-Suez merger in 2006 may have effectively been used to promote market liberalisation in order to achieve effective unbundling of network and supply activities and, thus, to enhance competition(Argentesi et al, 2017).3 For example, specific policy decisions affecting investment in electricity generation capacity also affect incentives and market outcomes in transmission and distribution.4 In this vein,Holmes and Schmitz (2010) show that firms facing stronger competition make substantial investments to increase productivity in order to stay competitive.5 To meet the EU's ambitious climate and energy targets, and at the same time secure the provision of energy, companies are expected to increasingly invest in electricity generation capacity -particularly in renewable energies-as well as in national and cross-national infrastructure projects, such as interconnector transmission grids(Hirschhausen et al, 2014).…”

The Impact of Competition Policy Enforcement on the Functioning of EU Energy Markets

“…Indeed, some of the remedies put in place, in principle only to mitigate the potential anti-competitive effects of mergers, may have effectively been used to promote market liberalisation in energy markets (Argentesi et al, 2017;Böckers et al, 2017). Thus, one question is whether the EC has overreached by using merger control to create competition that would not have arisen absent the merger.…”

Market Power and Spatial Arbitrage between Interconnected Gas Hubs

“…During that period, the IUK pipeline was thus the unique infrastructure linking the UK and Continental natural gas markets. From an industrial organization perspective, both countries experienced stable market structures during this period which is posterior to the deep restructuring process of the UK gas sector (Wright, 2006) and precedes the merger between Gaz de France and Suez that strongly impacted the Belgian market after November 2006 (Argentesi et al, 2017). In addition, that period corresponds to a steady institutional environment with unchanged access rules for both the IUK and the adjacent national pipeline systems.…”