Austrian power play
European utilities continue their march to consolidation. The latest move is in Austria, where the #1 energy company, OMV AG, announced it would merge with the #1 utility, Verbund. The Austrian government currently has 51% stake in Verbund and a 31% stake in OMV. The new company will have a market value of over $35 billion.
The new company will be known as OMV Verbund. The deal has to pass muster with both the Austrian government and European regulators. The latter group may object on the grounds that it would limit competition from utilities in other EU nations.
OMV is supplies heating oil and natural gas for heating, and is a major operator of gas stations. According to a Wall Street Journal story ("Austria's OMV, Verbund
Agree to Merge", 5/10/04):
The company has been on a recent buying spree, acquiring gasoline station chains in Bosnia, Croatia, the Czech Republic, Italy, Romania and Slovenia.
In addition, a new gas pipeline sending Caspian Sea natural gas to Europe will run through Austria, giving the company increased and varied supplies (current supplies come from Russia.) OMV also makes plastics, fertilizers, and other chemicals.
Verbund owns hydroelectric facilities and owns the main transmission grid in Austria. It also trades electricity surpluses with neighboring countries. The OMV deal will help it in acquiring natural gas. The united company will likely also continue to push into Eastern Europe.
Otheractive European energy deals are noted in a Financial Times article ("OMV and Verbund create Austrian energy champion", 5/10/06):
The deal follows plans to link Suez and Gaz de France, wrangling over an alleged attempt by Spain to hinder Eon of Germany's bid to take over Endesa, and concern in the UK about a possible move on gas distributor Centrica by Russia's Gazprom
The consensus is that such deals will only proliferate. Another Financial Times article ("Another day, another national gas champion", 5/9/06) sees this move as a defensive one, to keep Austrian energy assets out of the hands of foreigners: "When hungry giants such as Gazprom and Eon are on the prowl, it is perhaps natural that the locals should bolt the town gates and huddle inside waiting for the danger to pass." In addition, the article notes that "Vienna is also worried about gas supplies at a time of consolidation in Europe and only months after Austria became the unwitting victim of a fuel spat between Russia and Ukraine."
