The OFT has issued two update documents in relation to its infrastructure stock take exercise.
The stock-take exercise was launched in May 2010 with the dual aims of:
- producing a high-level map of ownership and control of certain UK economic infrastructure assets in the water, energy, ports, rail, waste and communications sectors; and
- assessing how ownership of infrastructure assets might affect outcomes for consumers in these markets.
On the first point, the OFT has issued draft ownership maps which set out the ownership of the selected UK infrastructure assets and a draft working paper which contains a summary analysis of the data, for example showing the proportion of ownership type by sector. The OFT notes however that no conclusions on how ownership might affect outcomes have yet been drawn.
On the second point, the OFT has clarified the areas it will be focussing on for the remainder of the exercise - following calls for a more focussed project scope. One area the OFT is interested in assessing is the extent to which assets are cross-owned (both across and within the different sectors) and whether such linkages allow firms a degree of market power which may negatively impact on competition.
The OFT will continue to analyse the different types of ownership (such as listed companies, private companies, infrastructure funds, private equity and not-for-profit companies) and how these might affect outcomes for consumers (e.g. in terms of prices, investment and innovation). The OFT has clarified however that it will only be looking at ownership structures at a high level and whether these might lead to differing consumer outcomes. In addition, the impact of highly leveraged structures is no longer going to be assessed in any detail.
Instead the OFT will focus on the risk of failure of infrastructure assets. The OFT notes that the failure of an infrastructure asset for even a short time, can impose significant costs. It proposes to look at how the risk of asset failure can be managed without distorting the incentives of infrastructure owners.
Finally, as regards foreign ownership, the OFT states that the ability and willingness of overseas firms to invest in UK infrastructure is generally regarded as positive from a competition perspective, as it increases capital market competition for the assets.
The final report is expected sometime in autumn 2010. The OFT has asked for any comments, corrections or insights on the latest data by 1 October 2010
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