Act 3/2013, of June 4, on the creation of the national market and Competition Commission (Comisión Nacional de los Mercados y de la Competencia - CNMC), has revoked the so-called "Function 14" which to date had regulated business transactions in the energy sector being subjected to administrative control.

In short, the control procedure consists of the ex post notification of certain business transactions in the energy sector, emphasizing the inclusion of certain activities related to liquid hydrocarbons, together with the already traditional competences in the gas and electricity sectors. The competent authority is the Ministry of Industry, Energy and Tourism.

The new system is the following:


The administrative body responsible for exercising this competence will be the Ministry of Industry, Energy and Tourism, instead of the CNMC.


The Act includes the following entities:

Electricity sector: companies performing activities deemed to be regulated (transport and distribution, and the operation of the system), or consisting of the operating of the electrical pool or activities in island or extra-peninsular territories pursuant to the provisions of Act 54/1997, of November 27, on the Electricity Sector. Excluded, therefore, are companies exclusively performing non-regulated activities, such as the generation and marketing of electrical power (except for island or extra-peninsular activities).

Gaseous hydrocarbon sector: companies performing activities deemed to be regulated (storage, transport and distribution), or consisting of the technical management of the gas system pursuant to the provisions of Act 34/1998, of October 7, on the hydrocarbon sector.

Liquid hydrocarbon sector: companies performing activities in the hydrocarbon sector such as oil refining, oil pipeline transportation and the storage of oil products.

The three cases also include companies which, without performing the said activities, do possess the assets necessary to perform them, and hold energy sector assets of a strategic nature included in the National Catalogue of critical infrastructures pursuant to the provisions of Act 8/2011, of April 28.

The law mentions (by way of example) as strategic assets nuclear power stations and coal-fired power stations of particular relevance in the consumption of domestic mined coal, as well as oil refineries, oil pipelines and the storage of oil products. Those companies possessing such assets, therefore, are subject to control.


As was the case with Function 14, both transactions in which the active subject (acquirer) is a regulated energy sector company and those affecting regulated energy companies from a debit perspective are subject to control, i.e. those transactions in which the shareholdings or assets acquired are regulated.


Any acquisitions of any type (whether or not they are within the energy sector) carried out by entities performing regulated activities are subject to notification, whether they perform them directly or through companies controlled by them in accordance with the criteria established under article 42.1 of the Commercial Code.

The law is not fully clear on the application in cases of corporate groups. It is evident that any acquisitions carried out directly by regulated companies must be notified, as well as those acquisitions carried out by entities forming part of their corporate group vertically-speaking, i.e. those companies which would comprise the group the head company of which is precisely the regulated company.

Greater doubts arise as to whether notification is required in the case of companies forming part of the same group as the regulated company, but which are not direct affiliates of the same. The National Energy Commission (Comisión Nacional de Energía) (CNE) had understood that Function 14 was applicable to corporate groups in the broad sense, although the wording has changed, and now Act 3/2013 seems to have opted for a more restrictive concept, allowing it to be defended that only a group the head of which is the regulated company will be affected by the obligation to notify.

Notification may only be demanded in respect of relevant transactions, understanding these to be acquisitions of stakes in other commercial companies or assets of any nature which, taking into account their worth valor or any other circumstances, have a relevant impact or significant influence on the performance of the activities of the company notifying the transaction.

No embodiment exists in the law of the material threshold, although it could be understood that those transactions to be subject to control are those which might affect the capacity or financial or economic solvency of the acquirer, jeopardizing the investments or obligations to maintain assets which should be carried out, as well as those involving a material increase in the situation of indebtedness. Small transactions, therefore, need not be notified.

No delimitation has been made of the territorial scope of the transactions. The CNE, under the former Function 14, opted for a broad application in territorial terms, so that only acquisitions performed by foreign entities outside Spain were excluded, even if such entities belonged to a group with an affiliate with regulated activity in Spain. If the Ministry decides on a limited application from the point of view of corporate groups and, bearing in mind the ratio legis, it would be possible to understand that those transactions performed by Spanish regulated companies, even outside Spain, either directly or through intermediary vehicles, will be subject to notification providing they belong to the group. Nevertheless, this is an unspecified issue regarding which the stance taken by the Ministry will have to be seen.


The purchase of regulated assets or the acquisition of stakes in a percentage of share capital granting significant influence in the management of the company is subject to notification to the Ministry. The law does not speak of control, whether joint or individual, but of "significant influence", a broader concept. Also included are any amendments which jointly or in isolation are considered to possibly involve a significant change in the stake.

In contrast to what has happened to date, no thresholds have been accepted above which notification becomes obligatory. The reference to significant influence is ambiguous, since there is no a single legal definition of "significant influence"; securities market legislation considers 3% (and each subsequent 5%) stakes to be so, whereas in other cases (e.g. the IFRS) a significant influence is related to 20%, although this is a reference point which may change on a case by case basis.

In order to determine the stake percentage in need of notification, account will be taken of any agreements the acquirer company might have with other acquirers or partners for the joint or coordinated exercise of voting rights in the company affected.

As will later be explained, although debit transactions must be notified whatever the nationality of the acquirer entity, control only exists in truth when the acquirer is a national entity of a State which is not a member of the European Union or the European Economic Area. In other words: if the party purchasing the stake is an entity which is Spanish or a national of a State of the European Union or the EEA, the transaction must be notified, but will not be subject to the imposition of conditions or restrictions.


All transactions involving regulated companies must be notified to the Ministry of Industry, Energy and Tourism within the 15 days following the performance of the corresponding transaction, with justified indications being able to be given of which part of the data or information provided is deemed to be of commercial or industrial relevance for the effects of its confidentiality being declared.

Control may only be exercised by the Ministry in respect of (i) transactions in which the buyer is a regulated company, and (ii) any transactions affecting any stake of regulated companies in which the acquirer is not a national of the European Union or the EEA. In any other cases, therefore, only the obligation to notify exists, but there is no risk of subjection to conditions.

If the Ministry of Industry, Energy and Tourism considers there exists a true, sufficiently serious threat of risks arising to the guarantee of the supply of electricity, gas and hydrocarbons, it may establish conditions relating to the exercise of the activity of the companies affected or the acquirer. This wording of the legal text is questionable, since it suggests conditions may be imposed on the acquired company, when in truth any conditions should be imposed, where applicable, on the acquirer, or on the rights and obligations thereof as shareholder. In principle, it does not seem right that the entry into a company of a new shareholder should be able to alter the system of the company itself or of the rest of the shareholders.

These risks refer to the following aspects:

  1. The quality and safety of the supply, understood as the physical uninterrupted availability of the products or services on the market at reasonable prices in the short or long term for all users, regardless of their geographic location.
  2. Security in respect of the risk of an insufficient maintenance or investment of infrastructures which do not enable a minimum set of services required for the guarantee of the supply to be continually ensured. To such end, account will be taken of the level of indebtedness to secure the investments, as well as compliance with any undertakings acquired in this respect.
  3. The non-fulfillment of the requisites of the legal, technical, economic and financial capacity of the acquirer or of the company acquired.

The conditions imposed must always be proportional (respecting the principle of minimal intervention), and to impose them, the Ministry may take into consideration any stakes the acquirer might have or intend to acquire in other regulated assets or companies, whether from the perspective of an excessive concentration of risks, or to appreciate risks in respect of the economic and financial capacity of the acquirer when making the investments that the quality and safety of energy supplies require.

The resolution must be adopted with due justification and notified within a maximum period of 30 days from the notification, subject to a non-binding report from the CNMC. Once such period has elapsed, it will be understood that the Ministry has accepted the transaction without conditions.