Iberdrola cleared to buy ScottishPower
The European Commission has given the go-ahead today for Iberdrola to proceed with its £11.6 billion takeover of ScottishPower.uSwitch.com, the independent, online switching and comparison service comments on the takeover which will make the Spanish energy giant the third largest utility company in Europe – leaving only Centrica (British Gas) and Scottish and Southern Energy still in British hands.
This follows a precedent of three recent cross-border deals involving Spanish takeovers of UK companies – Ferrovial and BAA, Banco Santander and Abbey, and Telefonica and O2 – which have all progressed smoothly. Each have faced their own obstacles and Iberdrola, accused by the Scottish National Party of using tax breaks to subsidise its expansion, will now have to battle for Scottish hearts and minds.
Geoff Slaughter, Energy Product Manager at uSwitch.com comments: “The energy market is turning into a global market. This merger will create a player large enough to compete effectively on a global level and with deep enough pockets to be able to afford the huge levels of investment needed in our outdated energy systems – some £6 billion is being sought for electricity transmission alone.
“Iberdrola is the largest renewable energy operator in the world. It recently announced plans to build over 10,000 MW of renewable energy worldwide by the end of 2011 and has already installed capacity of 3914 Megawatts from renewable sources. It has a good and well-recognised track record on green issues and will hopefully be able to bring some of its experience to bear in the British market.
“However, ScottishPower has earned a reputation for above average customer service in an industry that can sometimes leave a lot to be desired. Consumers’ key concern following the takeover is whether ScottishPower will be able to maintain or even build on this reputation.
“It is vital that the customer is kept top of mind before, during and after the takeover – we would not want to see a fall in consumer confidence and Ofgem should monitor company performance post-sale to safeguard against this.“
Slaughter concludes: “Iberdrola plans to retain ScottishPower’s offices in UK and use its growth in size to expand its geographical and operational presence thereby diversifying its portfolio.
“Whilst this is positive, if Iberdrola is looking to implement cost cutting measures to improve the value of the merger, employees and customers alike will be interested to see where these savings will come from and whether customers will be adversely affected.
“If costs are to be cut, then this could lead to ‘off-shoring’ - where customer service operations are handled overseas. This has proved a deeply unpopular and highly contentious issue with British consumers in the past, but remains popular with those businesses attracted by the cost benefits. If new ownership were to introduce this, it could tip the balance for ScottishPower customers and prompt an exodus to competitors.”