Office of Fair Trading (OFT) said today it has given merger clearance to the anticipated acquisition by Centrica (CNA.LN) from EDF Group (EEN.FR) of a minority interest in British Energy.
Under the terms of an agreement with EDF, Centrica is proposing to purchase a 20% shareholding in Lake Acquisitions, the EDF subsidiary that owns British Energy, with EDF retaining the remaining 80%.
British Energy is the owner and operator of eight nuclear power stations in the UK.
Under the agreement, EDF and Centrica will have the right to take uncontracted power supply from the existing British Energy nuclear fleet in proportion to their respective shareholdings in Lake Acquisitions.
The OFT's inquiry generated a large response from the energy industry, with many raising concerns about potential adverse competition effects from the proposed transaction.
The main concern related to a possible decrease in liquidity in the wholesale electricity market in Great Britain, which could lead to more price volatility and, potentially, increase barriers to entry or expansion in electricity generation or supply.
A number of these concerns related, at least in part, to uncertainty about the effect of EDF's recent acquisition of British Energy, and the remedies given to the European Commission as part of that case, on EDF's position on the wholesale electricity market.
After careful analysis of the parties' respective wholesale trading positions, both current and over the short to medium-term, and taking account of the British Energy remedies given by EDF to the European Commission, the OFT concluded that the proposed transaction would not result in any significant decrease in liquidity in the wholesale electricity market.
Some market participants also raised concerns about the potential for coordination resulting from a structural link between two of the 'Big Six' players in the energy generation and supply market.
OFT concluded that the proposed transaction would not have any impact on the parties' incentives to engage in such activity, in particular given that EDF and Centrica will remain independent players in the market with different cost bases, generation mixes and retail market positions.
Amelia Fletcher, OFT Senior Director of Mergers, said: 'After careful and detailed analysis, which included close liaison with Ofgem and positive co-operation from the parties, we were able to rule out any competition concerns.'