Protectionism sets rules for Europe’s power games

France’s efforts to protect its energy sector with the proposed merger of Gaz de France and Suez has had Europeans crying foul, but nowhere as loudly as in Italy. The move is seen in Rome as a blatant attempt to block the ambitions of Italy’s electricity behemoth Enel to expand in France and Belgium.

Now, the Italians appear to be adopting the same tactics as the French. Even while continuing to complain about GdF-Suez, Italy seems to be considering an energy alliance of its own by forging closer links between Enel and its Eni oil group.

The reason for this is that Rome – like Paris in the case of Suez – fears Enel might become the target of a foreign predator. It is particularly worried that Eon may turn its sights on the Italian electricity group should the German utility be thwarted by Spanish protectionism in its efforts to take over Endesa.

Despite all the public denials, an idea long mooted in Rome is for Eni to take a 20-30 per cent stake in Enel in exchange for handing over to Enel its gas distribution and electricity interests. Such a deal would have the added attraction of enabling the Rome government to reduce part of its 30 per cent holdings in both energy groups, raising money for its hard-pressed Treasury.

These various manoeuvres – at a time when Gazprom is banging on the door for more access into Europe in return for guaranteeing Russian gas supplies – should have policy makers reviewing current proposals to liberalise European energy markets.

Everybody continues to pay lip service to opening up their domestic energy markets, but the ultimate goal of individual countries is to ensure the security of supplies and competitive prices to their consumers. And governments worry cross-border mergers risk undermining their national interests.

Perhaps Brussels now needs to address these national concerns, before it can ever hope for these governments to play by its new open market rules. After all, creating national energy champions is not necessarily wrong as long as the underlying logic is industrial and not merely economic patriotism.

Hedging bets

Albert Frère, the veteran Belgian financier, has just made a cool €4bn selling his 25 per cent stake in Bertelsmann back to the German media group’s founding family. He has already spent €300m of it increasing his stake in Suez to 8 per cent. And he clearly has enough pocket money to raise it even further.

But beware of reading this as a sign of his unflinching support for Suez’s efforts to merge with Gaz de France. In fact, Mr Frère seems to be making a canny each-way bet.

Certainly, he feels the merger makes industrial sense and will increase the value of his investment. But he is also aware of the strong possibility of the deal collapsing.

The French government has already postponed a crucial vote to privatise GdF and allow the merger not to go ahead until after the August holidays. French unions have promised a summer-long campaign to block the deal.

And French public opinion, according to a poll published yesterday, is beginning to have second thoughts after wholeheartedly endorsing the merger a few months ago.

So what happens if the deal falls through? Italy’s Enel says it is still keen to bid for Suez and its interest is tempting others to consider a move on the Franco-Belgian utility. All this cannot be bad for the Suez share price. Either way, Mr Frère looks set to make a tidy profit.

New boys

Gerrardo Braggiotti and Joe Perella share several things in common. Ironically, both have worked at some stage with Lazard’s Bruce Wasserstein. Both have decided to break into the independent investment banking business raising about a billion dollars of capital each to back their new ventures. And both are active in the same business areas: M&A advisory, private equity and high net worth wealth management. So what’s the difference?

Perella’s boutique – Perella Weinberg Partners – is adopting a global approach and intends to compete all around the world.

Braggiotti – whose Banca Leonardo has just absorbed the French boutique of Toulouse & Associés – is focusing on continental Europe.

Perella’s shareholders are rich individuals who are banking on making a handsome return when the business is eventually listed within a couple of years. Braggiotti’s are drawn from a who’s who of European corporate investors who take a longer-term view.

But there is clearly room for both in the market, especially as old-fashioned advisory-style merchant banking seems to be back in demand.

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