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[2015] ZACT 36
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K2014158795 Proprietary Limited v Intikon Energy Proprietary Limited (020511) [2015] ZACT 36 (15 April 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 020511
In the matter
between:
K2014158795
PROPRIETARY
LIMITED
..............................................................................
Acquiring
Firm
And
INTIKON
ENERGY 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 K2014158795
(Proprietary)
Limited (“TriAlpha SPV”) and Intikon Energy (Proprietary)
Limited (“Intikon’’).
[2] The reasons for
approving the proposed transaction follow.
Parties to
Transaction and their Activities
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 Intikon, a firm incorporated in accordance with the
laws of the Republic of South Africa. Intikon
is controlled by the
Triangle Unit Trust, a trust incorporated in Australia and which is
controlled by the S Donnelly Family Trust.
Neither the Triangle Trust
nor the S Donnelly Family Trust controls any firm. Intikon controls
Oakleaf 90 (Pty) Ltd and Oakleaf
83 (Pty) Ltd, collectively referred
to as the “Intikon Group.”
[6] The Intikon
Group comprises of Independent Power Producers (IPPs) that generate
renewable energy, using solar photovoltaic technology
(Solar PV) at
plants in the Free State and the Northern Cape Provinces. The
electricity generated by the Intikon Group is exclusively
supplied to
Eskom.
Proposed
Transaction and Rationale:
[7] TriAlpha SPV
will obtain all the issued share capital in Intikon from the
respective shareholders. Following the implementation
of the proposed
transaction, TriAlpha will have sole control over Intikon.
[8] TriAipha intends
to invest in renewable energy whilst Intikon wishes to expand its
footprint.
Relevant market
and Impact on competition
[9]
As stated above, the Intikon Group comprises of IPPs that produce
renewable energy. On the other hand, TriAlpha is an investment
firm
which does not hold any shares in any firms that produce renewable
energy in South Africa. Thus, there is no product overlap
in the
activities of the merging parties. However, the Commission considered
the extent of TriAlpha’s investment in the energy
sector as
TriAlpha has notified another transaction to the Commission in terms
of which it intends to acquire control over Dorper
Wind Farm (RF)
Proprietary Limited (“DWF”), an IPP firm that produces
renewable energy.
1
Accordingly, the Commission considered the overlap in respect of the
production of renewable energy in South Africa.
[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 supply
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 fmraan Valodia concurring
Tribunal Researcher:
Ammara Cachalia
For the merging
parties: Leana Engelbrecht, DLA Cliffe Dekker Hofmeyr.
For
the Commission: Dineo Mashego.
1
See
K2014158670 (Pty) Ltd and Dorper Wind Farm (RF) (Pty) Ltd Case no:
020222.