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Spain's power tie in doubt
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January 10, 2001: 7:41 a.m. ET
One-month countdown for Endesa, Iberdrola as questions loom over deal
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LONDON (CNNfn) - Spanish utilities Endesa SA and Iberdrola SA face a nail-biting month's wait before discovering if their agreed $20 billion merger gets regulatory approval.
The country's competition court made its recommendations on the merger to the Madrid government Wednesday, setting off a one-month clock for ministers to deliver decision.
Unattributed Spanish media reports the same day said the court was inclined to approve the merger, but had recommended imposing conditions so strict that they might scuttle the deal.
The tie-up, agreed between the companies last October, would unite the country's two biggest utilities, controlling roughly 80 percent of the domestic electricity industry. However, the companies were expected to have to sell some of their combined assets to assuage regulatory authorities' concerns about the possible overconcentration of market power.
The combination, valued by Thomson Financial IB/CM at $19.6 billion in stock and the assumption of debt, has run into a political thicket, analysts said, speculating that regulators were calling for greater disposals than first thought.
Asked whether the merger was likely to get the go-ahead, John Willis, an analyst with Deutsche Bank, said "it's pretty borderline. The government wants the merger to happen to create a global leader, but it also wants to ensure competition on its terms."
Executives at Endesa, previously regarded as adept at handling the political aspects of their industry, "didn't realize the government was going to be so aggressive," Willis added.
A spokeswoman for Endesa said the company hasn't seen the court's recommendations, adding that "all the things in the newspapers are just speculation."
Iberdrola fell 0.6 percent to  14.33 in Madrid Wednesday afternoon, while Endesa, whose American depositary receipts trade on Wall Street under the ticker symbol ELE, rose 0.3 percent to 19.25.
Endesa and Iberdrola have said they hope to emerge from the deal with about 62 percent of Spain's electricity distribution market, 40 percent of the generation capacity and 50 percent of the energy marketing business.
"The tribunal does not appear willing to accept these limitations," said business daily Expansión, citing sources close to the competition court.
The chief executives of the companies said last December that strict conditions, as recommended by Spain's National Energy Commission in a separate report in December, could spoil the deal.
Rivals in the Spanish energy sector, including oil and gas company Repsol YPF SA, which once had its own designs on Iberdrola, have bitterly opposed the merger, in part because Endesa and Iberdrola have not said what assets they plan to divest.
-- from staff and wire reports 
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Endesa
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