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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM174Mar20
In the matter between:
Mulilo Renewable Energy Proprietary Limited Primary Acquiring Firm(s)
and Greenstreet 1 (Pty) Ltd
And
Mulilo Renewable Energy Solar Primary Target Firm(s)
PV Prieska (RF) (Pty) Ltd
and Mulilo Renewable Energy Solar PV De Aar (Pty) Ltd
Panel : Enver Daniels (Presiding Member)
: Fiona Tregenna (Tribunal Member)
: Thando Vilakazi (Tribunal Member)
Heard on : 13 May 2020
Order Issued on : 13 May 2020
Reasons Issued on : 07 July 2020
Reasons for Decision
Approval
[1] On 13 May 2020, the Competition Tribunal (“Tribunal”) unconditionally
approved the transaction involving Mulilo Renewable Energy (Pty) Ltd and
Greenstreet 1 (Pty) Ltd and Mulilo Prieska and Mulilo De Aar.
[2] The reasons for approving the proposed transaction follow.
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Parties to the proposed transaction
Primary acquiring firm
[3] The primary acquiring firms are Mulilo Renewable Energy (Pty) Ltd (“Mulilo”)
and Greenstreet 1 (Pty) Ltd (“Stanlib Fund II SPV”). Mulilo is wholly owned and
controlled by Mulilo Group Holdings (Pty) Ltd (“Mulilo Group Holdings”), which
is in turn wholly owned and controlled by Mulilo Energy Holdings (Pty) Ltd
(“Mulilo Energy Holdings”).
[4] Stanlib Fund II SPV is ultimately controlled by Stanlib Asset Management, a
subsidiary of Stanlib Ltd (“Stanlib”). Stanlib Fund II SPV is a private equity
investment fund established with the objective of acquiring a portfolio of long-
term infrastructure assets.
[5] Mulilo is ultimately controlled by Mulilo Energy Holdings (Pty) Ltd (“Mulilo
Energy Holdings”). In addition to Mulilo, Mulilo Energy Holdings controls
various other firms within the renewable energy industry. Moreover, Mulilo
Energy Holdings is an independent renewable energy developer and strategic
equity investor.
[6] Mulilo Prieska and Mulilo De Aar are jointly controlled by Mulilo and X-Elio
Energy S.L (“X-Elio”) as to 20% and 60%, respectively. The remaining 20%
non-controlling interest in Mulilo De Aar is held by Mulilo De Aar Solar
Community (RF) (Pty) Ltd (“De Aar Solar Community”). The remaining 20%
non-controlling interest in Mulilo Prieska is held by Mulilo Prieska Solar
Community (RF) (Pty) Ltd (“De Aar Solar Community”). Mulilo De Aar and
Mulilo Prieska are involved in the production of renewable energy using photo-
voltaic (PV) technology.
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[7] Mulilo and Stanlib Fund II SPV shall be referred to as the “Acquiring Firms”.
Primary target firm
[8] The primary target firms are Mulilo Prieska and Mulilo De Aar. Mulilo Prieska
and Mulilo De Aar are jointly controlled by Mulilo as to 20% and X-Elio Energy
S.L (“X-Elio”) as to 60%.
[9] The remaining non-controlling 20% in Mulilo Prieska is held by Mulilo Prieska
Solar Community (RF) (Pty) Ltd (“Prieska Solar Community”). The remaining
20% non-controlling interest in Mulilo De Aar is held by Mulilo De Aar Solar
Community (RF) (Pty) Ltd (“De Aar Solar Community”).
[10] Mulilo Prieska and Mulilo De Aar, shall jointly be referred to as the Project
Companies. The Project Companies do not control any firm.
[11] Mulilo De Aar and Mulilo Prieska are involved in the production of renewable
energy using photo-voltaic (PV) technology.
Proposed transaction and rationale
[12] The Commission and the merging parties submitted that the proposed
transaction would take place in two steps:
[13.1] Step one, according to the Subscription Agreement concluded by Mulilo
Group Holdings and Mulilo Energy Holdings, Stanlib Fund II SPV will
subscribe for 56.25% interest in Mulilo. Post this step, Stanlib Fund II SPV
will hold 56.25% in Mulilo and the remaining 43.75% will be held by Mulilo
Group Holdings.
[13.2] Step two, according to the Equity Purchase Agreement entered by X-Elio
and Mulilo, Mulilo will exercise its pre-emptive rights and acquire 60%
interest in Mulilo Prieska and Mulilo De Aar, from X-Elio. Post transaction,
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Mulilo will have sole control over Mulilo De Aar and Mulilo Prieska. As a
result of its interest in Mulilo, Stanlib Fund II SPV will also have indirect
control over the Project Companies.
[13] The Acquiring Firms submitted that Mulilo currently holds a 20% interest in the
Project Companies. They also submitted that the decision by X-Elio, as the
current majority shareholder in the Project Companies, to exit as a shareholder
in the Project Companies provides an opportunity for Mulilo to increase its
shareholding in the Project Companies. The Project Companies operate
profitably and as an existing shareholder with pre-emptive rights it makes
commercial sense for Mulilo to increase its shareholding in the Project
Companies and, in so doing, strengthen it owns balance sheet and increase
its operational scale for the future.
[14] According to the Target Group, Stanlib Fund II SPV has a mandate to invest
in renewable energy infrastructure assets. Acquiring a significant shareholding
in Mulilo and an indirect shareholding in the Project Companies will provide
meaningful exposure to this asset class from an overall portfolio perspective,
commensurate with the increase in the size of the fund.
Impact on competition
[15] The Commission considered the activities of the merging parties and found
that there are overlaps in (i) private equity investments and (ii) the supply of
Solar PV and wind energy to Eskom. The Commission found that the Acquiring
Firms are both involved in private equity investments. In addition, the Acquiring
Firms both hold interests in firms that are involved in the production of
renewable wind and Solar PV energy.
[16] In relation to the overlap in private equity investments, the Commission found
that this market is highly fragmented with at least 166 private equity firms. The
Commission also found that Stanlib holds approximately 1% of general private
equity investments.
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[17] Regarding overlaps in the production and supply of renewable wind and Solar
PV energy, the Commission found that the merging parties and their
subsidiaries form part of South Africa’s Renewable Energy Independent Power
Producer Procurement Programme (“REIPPPP”). In terms of the REIPPPP,
Independent Power Producers (IPPs) enter standardised non-negotiable, 20-
year power purchasing agreements (PPAs) with Eskom. In terms of these
PPAs, the IPPs cannot alter the price and volume of energy supplied to
Eskom. As such, post-transaction the merged entity will not have the ability to
substantially change prices and/or volumes supplied to Eskom. The
Commission submits that the merged entity will have 9.10% and 18.81%
market share in the national market for the production and supply of wind
energy and solar energy, respectively. The Commission also found that the
merged entity will continue to face competition from other firms such as
Mainstream, African Clean Energy Developments and EDF, amongst others.
[18] The Commission also considered the impact that this merger will have at a
local level. In relation to operations at District Municipality level, the
Commission found that Stanlib and the Mulilo Group both operate projects
located in towns that fall under the Pixley Ka Seme District Municipality in the
Northern Cape and that there are also six alternative projects in Pixley Ka
Seme District. The Commission also found that the merged entity (Stanlib) will
hold approximately 51% of the market for renewable energy in the Pixley Ka
Seme District, with 32% accretion. The merged entity will continue to face
competition from Solar Capital (26%), Greefspan (11%), De Aar Solar Power
(9%) and Herbert PV Power Plant (3%).
[19] At Local Municipality Level, the Commission submitted that the activities of the
merging parties overlap in Emthanjeni Local Municipality. The Commission
submitted that there are currently three other renewable energy projects in this
submitted that there are currently three other renewable energy projects in this
Municipality and that the merged entity is likely to hold 38% market share in
Emthanjeni, with an accretion of 5%. The Commission found that the merged
entity will continue to face competition from other projects such as those
operated by Solar Capital (46%) and De Aar Solar Power (15%).
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[20] The Commission indicated that, it is worth noting that these market shares (at
both District and Local Municipalities) are likely to be overstated as most of the
current capacity by each of the merging parties’ projects is committed to Eskom
for a period of 20 years. Furthermore, the terms at which Municipalities are
likely to procure electricity from, as well as the process to be undertaken in
identifying IPPs is still unclear. The Commission submitted that it would
continue to monitor policy and concentration changes at municipal level.
[21] Given the above, the Commission concluded that the proposed transaction is
unlikely to substantially prevent or lessen competition in any relevant market
in South Africa.
Public interest
[22] The merging parties confirmed that the proposed transaction will have no
adverse effect on employment in South Africa. 1 With respect to the effect on
shareholdings by historically disadvantaged individuals, the Commission found
that Prieska Solar Community holds 20% non-controlling interest in Mulilo
Prieska and that De Aar Solar Community holds 20% non-controlling interest
in Mulilo De Aar. Both Prieska Solar Community and De Aar Solar Community
(jointly the Communities), are companies established to benefit their respective
communities. In this regard, the Commission found that the shareholding held
by the Communities in the Project Companies will not be affected by the
proposed transaction.
[23]
1 Merger Record, pages 17.
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[24] The proposed transaction raises no other public interest concerns.
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. In addition,
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no public interest issues arise from the proposed transaction. Accordingly, we
approved the proposed transaction unconditionally.
07 July 2020
Mr Enver Daniels DATE
Prof Fiona Tregenna and Dr Thando Vilakazi concurring
Tribunal Case Manager : Ms Busisiwe Masina
For the merging parties : Ms Leana Engelbrecht and Mr Nick Altini of Herbert
Smith Freehills South Africa LLP
For the Commission : Mr Hlumani Mandla and Mr Magau Aphane