Chapter 897 Power Mergers

At the end of March, British media revealed that United Power, the largest power company in the UK, was making an offer to Scottish \u0026 Southern Energy (SSE) to acquire the company for £7.5 billion (approximately US$9.64 billion). One of the six largest electricity companies in the UK.

After this news emerged, some MPs raised objections. They claimed that as the largest power company in the UK, United Power Group has complete power generation, transmission and distribution industries. If the acquisition of South Scotland Power Company is completed, The scale gap between it and other power companies will widen, which is not conducive to fair competition in the British power market.

Of course, there are also people who hold different views on this, pointing out that Scotland's two power companies (South Scotland Power Company is one of them) do not fully compete in the power supply in Scotland, but often form alliances in terms of electricity prices. Making it difficult for other competitors to benefit from the Scottish market.

Because although Scotland's two electricity companies can nominally bid in the power pool, Scotland exports electricity to England and Wales through several transmission lines with extremely limited transmission capacity and inefficient transmission prices, thus creating barriers to entry.

For example, in 1990, the average residential electricity price in London, England, was 10% higher than that in Edinburgh, Scotland. However, after 2001, the average residential electricity price in Edinburgh was more than 10% higher than that in London.

And judging from the way the dividends are distributed, consumers don't benefit from it.

Therefore, if United Power Group completes the acquisition of Southern Scotland Electricity Company, it means that its market will enter Scotland, which will have a positive effect on local power competition...

As mentioned before, United Power Group, a subsidiary of United Energy Group, was formed by merging it with UK Power Networks after they acquired Enel.

British Electricity Distribution Company owns 3 of the 14 regulated power grids in the British market, with a total length of approximately 190,000 kilometers of cables and a grid coverage of approximately 29,000 square kilometers, supplying electricity to more than a quarter of the British population. The power distribution service covers London, southeastern and eastern England, with a number of users reaching 8.3 million.

In addition, British Power Distribution Company is also engaged in the non-regulated business of providing power distribution services to private facilities in the local area in the form of commercial contracts, including 4 airports in London, the London Underground and the Channel Tunnel Link Railway.

Therefore, the British Distribution Company is the largest among the six major electricity companies in the UK.

The so-called six major power companies in the British market are British Gas, a subsidiary of Centrica, one of the largest utility companies in the UK, and E.ON UK, a subsidiary of Germany's E.on. , Scottish Power, EDF subsidiary EDF Energy, Southern Scotland Electricity (SSE) and United Power Group (formerly British Distribution Company).

The "Big Six" have always occupied 90% to 95% of the British market.

Among the six major energy suppliers in the UK, Scottish Power and Southern Scotland Electricity Company (SSE) have their main markets in Scotland.     Don't think that the name of SSE is Southern Scotland Electricity Company, just because their market is in southern Scotland. In fact superior……

Scottish Power mainly serves central and southern Scotland, while South Scotland Electric mainly serves northern Scotland.

The current market value of South Scotland Electricity and Power Company is around 6.4 billion pounds. United Power Group's bid can be said to have given a premium of nearly 15%, which is still very attractive.

After all, with the previous increase in international energy prices, coupled with the British electricity price ceiling, this has reduced the profitability of many power companies, including Southern Scotland Power Company - even if they can compete with British Energy The Market Regulator (OFGEM) negotiates price limits for electricity, but its profits are beginning to be squeezed, subject to the need to consider public acceptance.

At present, the British Competition and Markets Authority (CMA) has publicly stated that it will review United Power Group's acquisition of Southern Scotland Electricity Company to assess whether it constitutes a monopoly.

If the British Competition and Markets Authority can approve the transaction, United Power Group will complete the acquisition of South Scotland Electricity Company within two months. The market share will reach 40%!

Of course, the premise is that CMA can pass this acquisition. It can be said that an acquisition of this size is a challenge to the British concept of "liberalized market" that previously encouraged full competition.

Correspondingly, however, the Times also recently published an article titled "Are the British Electricity Privatization Reform Measures Successful?" "The article summarizes some of the situations in Britain since Margaret Thatcher's reform of electricity privatization, and points out some of the problems that have arisen in the past two decades of reform.

These include the following points:

First, the number of engineers has decreased. In order to improve efficiency and reduce costs, power grid companies have laid off a large number of personnel, resulting in an insufficient number of engineers and no spare engineering and technical personnel to participate in policy formulation;

Second, the investment in international cooperation and technical research has decreased, and the technical advantages of the UK in the international electrical field have gradually been lost, which is related to insufficient participation;

Third, there is a lack of a systematic perspective. There are almost no young generation of experts who understand how the entire power industry operates. After the split, the company only cares about its own business and has no chance to cultivate experts with a global perspective;

Fourth, the split improves efficiency and competition, but also leads to an isolated pattern. Whether it is conducive to long-term development requires more in-depth evaluation;

Fifth, policy decisions consider the economy more, but the power system is complex. Economic decisions can provide references, but the current economic model does not have the ability to consider the overall issues of energy security, and cannot make decisions that are more conducive to the overall situation;

Sixth, cost reduction is also overdrawing the power grid. Some local areas have already had serious equipment safety hazards. For example, the National Grid Company of the UK (NG) has reduced employees and reduced costs through active operations. These costs are reflected in the reduction of transmission costs since the reform.

In addition, the article also mentioned that 60% of the electricity market in Britain was once controlled by French and German companies (the British power distribution company was a subsidiary of the French Electricity Group at that time), which was a threat to Britain's energy security.

The implication is that the growth of the British company United Power Group is not a bad thing for the British power industry. At least it can enable Britain to have a large power group that ranks among the top in Europe and even the world, and can also invest more resources in technology research and development in the power field...