Norwegian public entities have traditionally enjoyed a strong position in the Norwegian power market. This is mainly because Norwegian legislation on the granting of concessions for waterfalls applies differently to municipalities, counties and state owned undertakings, including limited liability companies in which the state owns a shareholding of at least two-thirds. According to Act 16 of December 14 1917, the acquisition of waterfalls by foreign investors is subject to a concession. However, the concession is only granted for a maximum of 60 years. After 60 years all the installations must be returned to the state without any compensation for the concessionaire. Municipalities, counties and state owned undertakings have the right to unlimited concessions. However, a recent government statement signals that this position may be changing (for further details please see "Waterfall Concessions are Found Restrictive").

This difference in legislation has made it possible for Norwegian public entities, in particular Statkraft Holding AS, to establish a dominant position in the Norwegian power market. Statkraft Holding is a holding company wholly owned by Statkraft SF, which is a state owned company under the jurisdiction of the Ministry of Trade and Industry. With an annual production of approximately 30% of total Norwegian production, Statkraft is Norway's largest producer of electric power. Statkraft Holding also operates in all the Nordic countries except Iceland, and in several European countries.

However, two decisions by the Norwegian Competition Authority and a government proposal to Parliament may make the Norwegian power market more attractive to foreign investors.

On September 26 2001 Statkraft Holding entered into an agreement to acquire 45.5% of the shares of Agder Energi AS. However, in a decision of March 21 2002 the Competition Authority found that Statkraft's acquisition would create or intensify a significant restriction of competition, contravening Section 1(1) of the Norwegian Competition Act. The decision has been appealed to the Ministry of Labour and Government Administration, which will make a decision by October 2002.

The Competition Authority found that in South Norway the acquisition would increase Statkraft Alliance's capacity as follows:

  • production from 38% to 47%;

  • installed effect from 42% to 50%; and

  • magazine capacity from 43% to 52%.

In addition, Statkraft owns 20% of E-CO Vannkraft, which has 11% of the magazine capacity in South Norway. The efficiency that would be gained through the acquisition was therefore not sufficient to outweigh the economic losses that would result from the restriction of competition.

For the same reasons the Competition Authority found in a decision of July 5 2002 that Statkraft's acquisition of 100% of the shares in Trondheim Energiverk would significantly restrict competition in the power markets of Central and North Norway in contravention of the Norwegian Competition Act.

Foreign investment in the Norwegian power market has been steadily increasing in the last few years, mainly due to the market's liberalization. If the Ministry of Labour and Government Administration upholds the Competition Authority's decisions, Statkraft's market share will not increase further.

Combine this stance with the government's proposal to Parliament to change the legislation related to concessions to acquire waterfalls, and it appears as if private and foreign investors will be given more or less the same opportunities to achieve ownership in the Norwegian energy sector as those currently enjoyed by Norwegian public entities.

For further information on this topic please contact Charlotte Aspehaug or Kristin Bjella at Haavind Vislie by telephone (+47 22 40 21 00) or by fax (+47 22 40 21 013) or by email ([email protected] or [email protected]).