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[2018] ZACT 39
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Thebe Renewable Energy Holdings (RF) (Pty) Ltd vPhembani Solar Energy 1 (Pty) Ltd and Others (LM273Jan18) [2018] ZACT 39 (13 April 2018)
COMPETITION TRIBUNAL OF SOUTH
AFRICA
Case
No: LM273Jan18
In
the matter between:
Thebe
Renewable Energy Holdings (RF) (Pty) Ltd
Primary
Acquiring Firm
and
Phembani
Solar Energy 1 (Pty) Ltd
Shanduka
Black Umbrellas Energy (Pty) Ltd
Phembani
Renewables (Pty) Ltd
Pulida
Energy (RF) (Pty)
Ltd
Primary Target
Firms
Panel
: Yasmin Carrim (Presiding Member)
: Medi Mokuena (Tribunal Member)
: Fiona Tregenna (Tribunal Member)
Heard
on
: 14 March 2018
Order
Issued on
: 14 March
2018
Reasons
Issued on
: 13 April 2018
Reasons
for Decision
Approval
[1] On
14 March 2018, the Competition Tribunal ("Tribunal")
approved the proposed
transaction between Thebe Renewable Energy
Holdings (RF) (Pty) Ltd and Phembani Solar Energy 1 (Pty) Ltd,
Shanduka Black Umbrellas
Energy (Pty) ltd, Phembani Renewables (Pty)
Ltd, and Pulida Energy (RF) (Pty) ltd.
[2]
The reasons for approving the proposed transaction follow.
Parties to proposed transaction
Primary acquiring firm
[3]
The
primary acquiring firm is Thebe Renewable Energy Holdings (RF) (Pty)
Ltd ("Thebe Renewable"), a private company incorporated
in
accordance with the laws of South Africa. Thebe Renewable is a wholly
owned subsidiary of Thebe Investment Corporation ("TIC"),
which itself is controlled by a number of firms.
[4]
TIC
is an investment holding company that manages investment portfolios
in various industries. Of relevance to the proposed transaction
are
TIC's investments in the energy industry. In the energy industry, TIC
operates through Thebe Renewable, which holds and manages
the entire
group's renewable energy (solar energy and wind energy) investments
through special purpose ring-fenced investment companies.
Thebe
Renewable has a minority (non-control conferring) shareholding in a
number of renewable energy projects.
Primary target firms
[5]
The
primary target firms are Phembani Solar Energy 1 (Ply) Ltd ("Phembani
Solar"), Shanduka Black Umbrellas Energy (Pty)
Ltd ("Shanduka
Black Umbrellas"), Phembani Renewables (Pty) Ltd ("Phembani
Renewables"), and Pulida Energy
(RF) (Pty) Ltd ("Pulida"),
collectively referred to as the Target Firms.
[6]
The
Target Firms are special purpose companies created by the sellers to
hold shareholding interests in two renewable energy projects
namely;
the Nobelsfontein Wind Project and the Pulida Solar Park Project.
[7]
Phembani
Solar and Phembani Renewables are wholly owned subsidiaries of
Phembani Energy (Pty) Ltd ("Phembani Energy").
Phembani
Energy is ultimately controlled by the Phembani Group (Pty) Ltd
("Phembani Group").
[1]
[8]
Shanduka
Black Umbrellas Energy is controlled by Shanduka Black Umbrellas
BBBEE Investment Trust ("Shanduka 8-BBEE Trust").
[2]
[9]
Pulida
Energy is controlled by Enel Green Power RSA (Pty) Ltd ("Enel
Green Power"). Enel Green Power is ultimately controlled
by Enel
S.p.A, a public company listed on the Borsa ltaliana. Other
shareholders in Pulida Energy include Phembani Solar and Shanduka
Black Umbrellas Energy.
[10] Given
that Thebe Renewable will acquire both Phembani Solar and Shanduka
Black Umbrellas Energy and
their shareholding in Pulida Energy, this
implies that Thebe Renewable will acquire negative control in Pulida
Energy.
Proposed
transaction and rationale
Primary
acquiring firm
[11]
Thebe Renewable submitted that the Target Firms presented the primary
acquiring firm with the
opportunity to increase its exposure in the
renewable energy industry.
Primary
target firm
[12] The
Target Firms had made the strategic decision to exit their renewable
energy investments to focus
on other investments.
[13] In
terms of the proposed transaction, Thebe Renewable intends to acquire
direct control over Phembani
Solar, Phembani Renewables and Shanduka
Black Umbrellas Energy as well as indirect control in Pulida Energy.
[14] The
merging parties submitted that the proposed transaction comprises of
a single and composite transaction
from both a factual and legal
point of view. This is because the acquiring firm's rationale for the
various transactions is the
same. Further, the various transactional
agreements provides for the cross-conditionality of each acquisition.
The Commission considered
whether there was a factual link as well as
a legal link between the proposed transactions.
[15] The
Commission found that the ultimate target firms are the Nobelsfontein
Wind Project and the Pulida
Solar Park Project. The Target Firms are
special purpose companies created by the sellers to hold the
shareholding interests in
the ultimate target firms. In order for
Thebe Renewable to acquire the ultimate target firms as intended, it
needed to acquire
the special purpose companies i.e. the Target
Firms.
[16] The
Commission concluded that there is a link between the Target Firms in
that both Phembani Solar
and Phembani Renewables are controlled by
the same holding company, Phembani Energy. The Commission noted that
although Shanduka
Black Umbrellas is controlled by a different
shareholder, Phembani Solar and Shanduka Black Umbrellas are common
shareholders in
Pulida Energy (the holding company for the Pulida
Solar Project).
[17]
Further,
the Commission found that there was a legal link between the
transactions as the proposed merger between Thebe Renewable,
Phembani
Solar and Phembani Renewables will not take place without a sale
agreement having been signed by Thebe Renewable and the
Shanduka
8-BBEE Trust for the sale of Shanduka Black Umbrellas Energy and vice
versa.
[18]
The
Commission thus concluded that the transactions are both factually
and legally linked and should be considered as one indivisible
transaction.
Impact on competition
[19]
The
Commission found that there were no overlaps arising out of the
transaction. Although the acquiring group holds interests in
renewable energy projects, none of these interest confer control, as
such there is no overlap between the acquiring group and the
Target
Firms.
[20]
The
Commission did consider whether the transaction was likely to enhance
or create a platform for coordination. This is because
the renewable
energy projects have one customer (Eskom) and Thebe Renewable is able
to appoint at least one director in all its
renewable energy
projects.
[21]
I
n
this regard, the Commission found that coordination was unlikely to
result from the transaction. The target projects are already
in
existence and have already signed Purchase Power Agreements and
Implementation Agreements with Eskom and the Department of Energy
("DOE"). The prices to Eskom and escalation rates have
already been agreed to when these contracts were signed.
[22]
The
Commission also found that the renewable energy market is tender
based and the DOE decides the maximum capacity (MW) available
for
tender per technology and price caps per technology to ensure that
bid tariffs are within acceptable limits. For every tender
bidders
must submit a proposal that will involve establishing a new renewable
energy power generation facility, in line with the
requirements of
the tender and/or the socio-economic objectives of the DOE.
Public
interest
[23]
The
merging parties submitted that the proposed transaction will have no
adverse effect on employment.
[3]
[24]
The
Commission noted that Enel manages a number of projects besides the
Pulida Project, thus regardless of what happens to the Pulida
Project, Enel's employees should remain unaffected and no job losses
are likely to occur as there are other projects for its employees
to
manage at Enel.
Conclusion
[25]
In
light of the above, we concluded that the proposed transaction is
unlikely to substantially prevent or lessen competition in
any
relevant market. Accordingly, we approved the proposed transaction
unconditionally.
Ms
Yasmin Carrim
Mrs
Medi Mokuena and Prof. Fiona Tregenna concurring
13 April 2018
Case
Manager:
Kameel Pancham
For
the merging parties: Mmadika Moloi from
Webber Wentzel on behalf of Thebe
Renewable Energy Holdings
Rick van Rensburg from ENSafrica on behalf of
Phembani Renewables and Shanduka Black Umbrellas
For
the Commission:
Billy Mabatamela and Raksha Darji
[1]
The Phembani Group is controlled by Mr Phuthuma Nhleko through a
number of firms.
[2]
The Shanduka B-BBEE Trustees are: Allan John Hannie, Brian John
Stephenson Wilkinson and Yvonne Nokukhanya Themba.
[3]
Inter alia
Commission's Recommendation page 23.