Spain’s National Competition Commission (NCC) has decided to examine the proposed acquisition of Union Fenosa, the third largest electricity provider in the country, by Gas Natural, the dominant gas provider, under a second phase investigation.

The first phase of the investigation showed that, as Gas Natural and Union Fenosa would cease to exist as separate entities, the acquisition would most likely have a negative effect on competition, increase the interrelation between the gas and electricity sectors and create heavy barriers to entry in both markets.

Both companies are active in Latin America and the acquisition has already obtained approval from Mexico’s Federal Competition Commission, making the new company the second largest private electricity provider in Mexico. Nevertheless, the Spanish NCC will have two months to complete its investigation, and the merger will also require approval from the Spanish Energy Commission.