52001XC0905(01)

Notice pursuant to Article 19(3) of Council Regulation No 17(1) concerning case COMP/E-3/37.921 - Viking Cable

(2001/C 247/04)

(Text with EEA relevance)

I. The notification

On 11 July 2000, the Commission received a notification pursuant to Articles 2 and 4 of Regulation No 17 of three agreements concluded between PreussenElektra (now "E.ON Energie"), Statkraft, Statnett and Viking Cable AS. The agreements concern the creation of a joint venture (JV), Viking Cable AS, for the construction and operation of a new sub-sea cable between Norway and Germany for the transmission of high-voltage electricity.

II. The Parties

E.ON Energie is active in the production, transmission, distribution and trading of electricity. Following the merger between VEBA and VIAG, E.ON Energie is the largest subsidiary of the E.ON AG Group with its registered seat in Germany.

Statkraft SF is a Norwegian State-owned company active in the production, supply and trade of electricity.

Statnett SF is a Norwegian State-owned company responsible for the operation of the national grid.

Viking Cable AS is JV company owned and operated by Statnett and E.ON Energie. It has as its object the construction, management, financing, maintenance and operation of the Viking Cable and the transportation of electricity in the Viking Cable. It will not engage in trade of electricity.

III. The agreements

Three agreements were notified:

(i) The General Agreement of 5 May 1993 concluded between E.ON Energie and Statkraft concerning the firm power delivery from Statkraft to E.ON Energie and the mutual electricity exchange between the Parties via the Viking Cable.

(ii) The Shareholders Agreement of 5 May 1993 concluded between E.ON Energie and Statkraft containing the terms of the functioning of Viking Cable AS.

(iii) The Master Agreement of 25 August 1993 between Statkraft and Statnett by which Statkraft assigns all of its rights and obligations under the Shareholder Agreement to Statnett. The assignment was made after the Norwegian Parliament announced the principle that Statnett should own and operate all new international interconnectors.

IV. The purpose of the agreements

Viking Cable AS has been set up in order to build a new high-voltage sub-sea cable ("interconnector") between Norway and Germany. The joint venture company will be owned on a 50/50 basis by Statnett and E.ON Energie. The new cable will have a transmission capacity of 600 MW and is scheduled to enter into operation in late 2004. The agreements provide for an exchange of electricity between Norway, which has a hydropower electricity system, and Germany, with a predominantly thermal-based electricity system. The main purpose is to export electricity from Norway to Germany through a firm power delivery. By building the new cable, E.ON Energie seeks to avoid constructing a new power plant in Germany.

The power delivery will take place through a firm power delivery from Statkraft to E.ON Energie and through a short-term exchange between the two companies. The firm power delivery will have a maximum output of 600 MW and 1200 GWh per year during 25 years after the commissioning of the cable. To the extent that the transmission capacity is not occupied by the firm power delivery, it will be used for short-term exchanges via the NordPool spot exchange in Norway. Such short-term exchanges, with a duration of one day or less, will be triggered automatically when there is a certain price difference between the NordPool spot price and E.ON Energie's marginal cost of production. The Parties intend to base the price difference on the reference price of either of the two German power exchanges (the Leipzig Power Exchange and the Electricity Exchange in Frankfurt am Main) rather than on E.ON Energie's marginal cost, once the power exchanges are sufficiently established to provide a respected spot price. The earnings from the short-term exchange will be shared equally by E.ON Energie and Statkraft.

The agreements provide that the Statkraft and E.ON Energie will have the exclusive rights to use the Viking Cable for a period of 25 years.

V. The market

The new cable will be used by the parties for the transmission of electricity between Norway and Germany. There are currently no other direct electricity transmission links but only lines going through neighbouring countries.

Today, electricity can be transmitted between Norway and Germany through a number of transmission lines including the Skagerakk cable between Norway and western Denmark, the Kontiskan cable between Sweden and western Denmark, the Kontek cable between eastern Denmark and Germany, the Baltic cable between Germany and Sweden and the SwePol link between Sweden and Poland.

However, some of these links are partly or entirely blocked by long-term reservation agreements. Other links may not be commercially viable links due to transportation fees, their geographical location and network congestion. As for the Skagerakk cable, which links Norway to Denmark, its full transmission capacity of 1000 MW has been made available to the NordPool power exchange from 1 January 2001. In order to allocate the scarce capacity at the Danish-German network, auctions are held on a daily, monthly and yearly basis. E.On Energie has a long-term reservation right of 300 MW at the Danish-German border for the EV3 power plant situated in Denmark. The responsible network operators are bound to apply transparent and non-discriminatory criteria when granting third parties access to their networks. The responsible network operators, E.ON Netz and Eltra, have been planning necessary reinforcements of the existing interconnector capacity at the Danish/German border independently of the Viking Cable project. Reinforcements could be in place by the time the Viking Cable will be operational.

E.ON Netz has furthermore expressed its intention to reinforce its network in northern Germany by the time the Viking Cable will be operational in order to avoid that the operation of the Viking Cable will cause new or increased congestion in northern Germany.

At present, it could be questioned whether all of the abovementioned transmission lines form part of the same product and geographic market. However, since the notified agreements will not have any effect contrary to the competition rules on any transmission market, or any possible other market, e.g. the supply markets in Gemany and Norway, it is not necessary, in this context, to give a precise market definition.

VI. Arguments of the Parties

The construction and operation of sub-sea cables covering long distances in deep waters is very capital intensive. The Power Exchange Agreements must therefore be long-term to ensure investment. To secure the viability of the investment in transmission capacity via the new cable, the notifying parties that it is necessary to have long-term arrangement over the same lifespan as a normal power plant, i.e. approximately 25 years. Moreover, the fulfilment of the Power Exchange Arrangements is dependent upon that full transmission capacity on the Viking Cable being available to the Parties on demand.

According to the Parties, it is not possible to make transmission capacity available to third parties. The only way third parties will have access to electricity transmitted through the cable will be via NordPool where the short-term exchange on the Norwegian side will take place. E.ON Energie will specify a daily plan for the firm power delivery and the short-term exchange volumes. Once the short-term volumes are settled and communicated to the NordPool spot exchange at noon the day before trading, they cannot be changed. If there remains available after the short-term volumes have been settled, E.ON Energie may change (renominate) the firm power volume at very short notice, even on the day of delivery. This high degree of flexibility can only be ensured if E.ON Energie and Statkraft have the entire transmission capacity at their disposal.

VII. Intention of the Commission

The construction of the Viking Cable will result in new capacity being added to the transmission connections between Germany and Norway. It also requires substantial investments by the notifying parties. The Commission takes the preliminary view that the notified agreements will not restrict competition in the sense of Article 81 nor will they be contrary to Article 82 of the EC Treaty. Consequently, the Commission intends to take a favourable view towards the agreements. Before doing so, it invites interested third parties to send their observations, within one month from the date of publication of this notice, by fax or by mail to the following address, quoting the reference Case E-3/37.921 to: European Commission Directorate-General for Competition

Directorate E, Unit E-3

Rue Joseph II/Jozef II-straat 70 B - 1000 Brussels Fax (32-2) 295 01 28.

(1) OJ 13, 21.2.1962, p. 204/62.