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[2015] ZACT 35
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K2014158670 Proprietary Limited v Dorper Wind Farm (RF) Proprietary Limited (020222) [2015] ZACT 35 (15 April 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 020222
In the matter
between:
K2014158670
PROPRIETARY
LIMITED
..............................................................................
Acquiring
Firm
And
DORPER
WIND FARM (RF) PROPRIETARY
LIMITED
..........................................
Primary
Target Firm
Panel : Anton Roskam
(Presiding Member)
: Fiona Tregenna
(Tribunal Member)
: Imraan Valodia
(Tribunal Member)
Heard on: 18 March
2015
Order Issued on: 18
March 2015
Reasons Issued on :
15 April 2015
Reasons for
Decision
Approval
[1] On 18 March
2015, the Competition Tribunal (“Tribunal”)
unconditionally approved the merger between K2014158670
(Proprietary)
Limited (“TriAlpha SPV”) and DorperWind Farm (RF)
(Proprietary) Limited (“DWF”).
[2] The reasons for
approving the proposed transaction follow.
Primary acquiring
firm
[3] The primary
acquiring firm is TriAlpha SPV, a newly formed entity specifically
incorporated for the purpose of the proposed
transaction. It is a
wholly owned subsidiary of TriAlpha Specialised Investments Trust III
(“TriAlpha Trust”). TriAlpha
SPV is managed by Gaia
Energy infrastructure Funds (“GAIA”). TriAlpha is managed
by TriAlpha Investment Management
Proprietary Limited (“TriAlpha
Investment”). Neither TriAlpha SPV nor TriAlpha Trust controls
any firms.
[4] TriAlpha SPV is
a special purpose vehicle established for the current transaction and
as such does not conduct any operations.
TriAlpha is an investment
firm that manages various investment mandates, predominantly for
institutional clients in various sectors
within South Africa.
Primary target
firm
[5] The primary
target firm is DWF, a private company incorporated in accordance with
the laws of the Republic of South Africa.
DWF is controlled by Summit
Wind Power South Africa proprietary Limited (“SWPSA”)
which is a wholly owned subsidiary
of Sumitomo Corporation
(“Sumitomo”), a public company incorporated in terms of
the laws of Japan and listed on the
Tokyo Stock Exchange. DWF does
not control any firm.
[6] DWF is engaged
in the development, construction, financing, commissioning and
operation of onshore wind energy generation facility
in the Eastern
Cape Province. DWF was selected as a preferred bidder in terms of the
Renewable Energy Independent Power Producer
Procurement Programme
(“REIPP”) run by the South African Department of Energy.
[7] In terms of the
proposed transaction, TriAlpha SPV will acquire an interest in DWF’s
issued ordinary share capital and
certain of its shareholder loans.
Upon implementation of the proposed transaction, DWF will be jointly
controlled by TriAlpha SPV
and SWPSA.
[8] In terms of
rationale, TriAlpha submits that investing in DWF will deliver
returns which are in line with its investment aims.
On the other
hand, Sumitomo is interested in infrastructural development in South
Africa and other Sub-Saharan countries.
Relevant market
and Impact on competition
[9]
In terms of the relevant market, DWF produces renewable energy whilst
TriAlpha is an investment firm that does not hold shares
in any firms
that produce renewable energy in South Africa. Accordingly, the
Competition Commission (the “Commission) concluded
that there
are no horizontal overlaps between the activities of the merging
parties. However, based on the fact that TriAlpha has
notified
another transaction to the Commission in terms of which it, through
TriAlpha SPV, intends to acquire control over Intikon
Energy
(Proprietary) Limited,
1
the Commission assessed the impact on competition in the national
market for the production of renewable energy.
[10] In relation to
the market for the production of renewable energy in South Africa,
the Commission found that DWF and the Intikon
Group are both IPP’s
meaning that their operations are limited to the provisions of the
Renewable Energy Independent Power
Producers Programme (“REIPP”).
Thus, the Commission considered the procurement process and the roles
of the key participants
directly involved in the programme, namely
the Department of Energy (“DOE”), the National Energy
Regulator of South
Africa (“NERSA”) and Eskom Holding SOC
Limited (Eskom).
[11] Upon
considering this supply chain, the Commission found that competition
between IPPs takes place at the bidding stage where
firms compete to
be appointed as preferred renewable energy suppliers. Further,
services of IPPs are procured per technology meaning
that only
companies with the same technology are considered competitors.
[12] The Commission
ultimately concluded that although both the Intikon Group and DWF
produce electricity under the REIPP and supplies
it exclusively to
ESKOM, they do not use the same technology for this purpose. The
Intikon Group generates electricity through
Solar PV whereas DWF
generates electricity using onshore wind technology. Thus, members of
the Intikon Group and DWF are not competitors
in the market and there
is no product overlap.
[13] Further, based
on the fact that Eskom has Power Purchase Agreements (PPA’s)
with approximately 60 IPPs which will continue
to supply renewable
energy until 2030, it is unlikely that the merged entity will have
market power.
[14] The Commission
thus concluded that the proposed transaction will not substantially
lessen or prevent competition in any relevant
or related market.
Public interest:
[15] The Commission
concluded that the proposed transaction does not raise any public
interest concerns.
Conclusion:
[16] In light of the
above, we conclude that the proposed transaction is unlikely to
substantially prevent or lessen competition
in any relevant market.
In addition, no public interest issues arise from the proposed
transactions. Accordingly we approve the
proposed transaction
unconditionally.
DATE: 15 April
2015
Anton Roskam
Fiona Tregenna
and Imraan Valodia concurring
Tribunal Researcher:
Ammara Cachalia
For the merging
parties: Daryl Dingley, Webber Wentzel.
For
the Commission: Dineo Mashego.
1
See
K201458795 (Pty) Ltd and Intikon Energy (Pty) Ltd case no: 020511.