With the merger of the UK’s International Power and GDF Suez’ business outside of Europe now approved, attention has turned to the reaction of the region’s power regulators to the deal.
According to Suez, the takeover has resulted in the creation of the largest independent power producer in the world. While many developers may be uneasy at the prospect of competing against such a behemoth in tenders for upcoming independent power projects (IPPs), others will be keen to take advantage of the acquisition potential.
The new company will exceed the allowed ownership share of generating assets in several jurisdictions. In Oman and Bahrain, regulatory limits on ownership are likely to raise compliance issues and force divestiture.
According to Omani law, a company is allowed to hold no more than 25 per cent of the country’s total power production capacity. GDF Suez has ownership stakes in the 653MW Rusail, 678MW Barka 2 and 585MW Sohar 1 projects. International Power has a 65 per cent stake in the 285MW Al-Kamil power plant.
Combined, the assets represent a significant portion of Oman’s overall capacity and far exceed the 25 per cent criteria. However, if the regulator in Oman considers it in the public interest to relax the 25 per cent threshold, it is allowed to do so.
Alternatively, once GDF Suez’ Barka 3 and Sohar 2 projects are operational, the regulator may deem the combined company a threat to competition. Should this happen, the company will need to sell down an existing interest in one or more of its plants, which presents an opportunity for investors eager to purchase regulated assets.