Company Infrastructure in a Foreign

Company Infrastructure in a foreign country

Infrastructure: Scottish and Southern Energy (SSE) and Spain

Scottish and Southern Energy (SSE) is a United Kingdom-based energy company specializing in sustainable energy. At present, SSE "owns around 10,700MW of electricity generation capacity, including its share of joint ventures and associates. This makes it the second largest electricity generator across the UK and Ireland. The capacity comprises 4,500MW of gas- and oil-fired capacity, 4,000MW of coal-fired capacity (with biomass 'co-firing' capability), and over 2,200MW of renewable capacity" (About us, 2010, SSE). Like many energy companies, SSE has been considering expanding into other nations. Spain has long been a source of potential interest for foreign enterprises. SSE could create a partnership with one of Spain's main energy companies, or buy parts of Span's massive, behemoth energy corporations Endesa and Iberdrola.

Both Endesa and Iberdrola are national companies and collectively control 80% of the Spanish market. Foreign investors have often made bids to buy parts of these two companies, most recently in the case of a failed attempt of a German electricity company to buy Iberdrola (Spain, 2010, Encyclopedia of the Nations). Today, "almost half of Spanish electricity is based on fossil fuels (48.23%), 31.23% on nuclear power, 19.16% on hydroelectricity, and 1.38% by other means (1998). In 1998 Spain produced 179.468 billion kWh of electricity and of that consumed only 170.306 billion kWh. National shortage of petroleum and gas is compensated with nuclear energy" (Spain, 2010, Encyclopedia of the Nations). This is a possible argument against a joint venture -- there has been little opposition to the use of nuclear energy in Spain, and to increase the nation's energy independence, Spain might simply shift more of its energy policy focus to this self-sustaining means of providing its citizens with power, rather than address the national gas and petroleum shortage with an agreement with SSE.

From a British company's perspective, Spain has one important attraction: it is part of the economic 'free zone' of the EU, like Great Britain. This reduces the onerous regulatory barriers between the new nations. However, the UK chose to 'opt out' of the euro. The pound has been steadily weakening: "While the pound is probably a big enough currency to be able to survive, it has weakened by 25% in the last four months against the dollar and lost about 20% of its value against the euro" (British pound, 2009, Euro Business). The value of the pound in relation to the euro could be an argument against doing business with Spain.

Concerns about the economic stability of Spain and the viability of doing business in Spain in the near future are even more pressing concerns: recently, the European Community has had to undertake extraordinary measures to save the troubled economy of Greece from defaulting on its debt obligations. Spain's economy is also fragile. Given the role of the Spanish government in the energy industry, and the long-standing partnership that would exist between SSE and any agreement resulting in an expansion effort into Spain, it is essential to have a clear-headed view of the nation's likely economic future and stability when negotiating an agreement (Sullivan 1999).