COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM036Jun23
In the matter between:
G.D.F International S.A. Acquiring Firm
And
Actis Energy Okavango Mauritius Limited Target Firm
Panel: Sha’ista Goga (Presiding Member)
Fiona Tregenna (Tribunal Member)
Andiswa Ndoni (Tribunal Member)
Heard on: 07 September 2023
Order issued on: 07 September 2023
Reasons issued on: 05 October 2023
REASONS FOR DECISION
Introduction
[1] On 07 September 2023, the Competition Tribunal (“Tribunal”) unconditionally
approved the large merger whereby G.D.F International S.A. ("GDFI") intends to
acquire a 100% interest in Actis Energy Okavango Mauritius Limited ("Actis
Okavango").
[2] Upon implementation of the proposed transaction, GDFI will exercise sole
control over Actis Okavango.
Parties to the transaction and their activities
Primary acquiring firm
[3] The primary acquiring firm is GDFI, a wholly owned subsidiary of Engie S.A.
Engie S.A. is a public company dual listed on the Paris and Brussels stock
exchanges.
[4] The shares of Engie S.A. are widely dispersed and no single firm or individual
controls Engie S.A.
[5] Internationally, GDFI’s subsidiaries include Engie Asia Pacific (Singapore) Pte
Ltd, Mescat Middle East DMCC and Engie Renewables Australia Proprietary Ltd.
GDFI does not directly or indirectly control any firm in South Africa.
[6] GDFI, all the firms that it controls and the firms controlling it will collectively be
referred to as the "Engie Group".
[7] The Engie Group operates globally as an independent power producer ("IPP")
in the fields of low carbon dioxide power generation, power and natural gas
transmission and the distribution and the provision of related energy services.
Primary target firm
[8] The primary target firm is Actis Okavango, a wholly owned subsidiary of Actis
Energy Okavango Holdings Mauritius Limited ("Actis Holdings"). Actis Holdings is a
wholly owned subsidiary of Actis Energy 4 LP and Actis Energy 4A LP (the "Actis
Fund").
[9] Actis Okavango owns and controls the Actis Energy Okavango Services
Limited, Okavango Kenya Mauritius Limited and Okavango Biology Mauritius
Limited.
[10] Actis Okavango and all the entities under its control are referred to as the
"Actis Group".
[11] Actis Okavango is an IPP operating through several subsidiaries and has an
operating portfolio of nearly 500 MW of onshore wind and solar photovoltaic ("solar
PV") power projects in South Africa and Kenya.
Proposed transaction and rationale
Transaction
[12] In terms of the proposed transaction, GDFI will acquire 100% of the issued
shares in Actis Okavango from Actis Holdings. Upon the implementation of the
proposed transaction, GDFI will exercise sole control over Actis Okavango.
Rationale
[13] The Engie Group submits that it has identified Actis Okavango as an attractive
investment opportunity and contributing to the group's growth. The proposed
transaction offers the Engie group the opportunity to increase its global presence and
operations in renewable energy generally, and in the onshore wind and solar PV
energy markets specifically, as well as reinforce the acquiring group's industrial
footprint in the fast-growing renewable energy market in South Africa.
[14] From the seller’s perspective, the proposed transaction will enable the seller
to deliver a return to its institutional investors.
Relationship between the parties
[15] The proposed transaction gives rise to a horizontal overlap in the market for
the
(i) production and supply of renewable energy by IPPs under Power Purchase
Agreements (“PPAs”); (ii) production and supply of electricity in terms of PPAs using solar
PV; and (iii) production and supply of electricity in terms of PPAs using onshore wind.
Relevant markets
[16] In Globeleq South Africa Holdings (Pty) Ltd and SA Springbok Holdings (Pty)
Ltd and Others1 wherein the Tribunal acknowledged that there is a separate and
distinct product market for the generation of electricity using wind farms, which is
different from the market for the generation of electricity using solar plants.
[17] In light of the above and without definitively concluding on the relevant
product market, we consider the effects of the proposed transaction in the narrow
market for (i) the production and supply of renewable energy by IPPs under PPAs;
(ii) the production and supply of electricity by IPPs using solar PV; and (iii) the
production and supply of electricity by IPPs using onshore wind.
[18] As regards the geographic ambit of the relevant markets, we consider the the
geographic market for the provision of renewable energy as national.
Competition assessment
[19] Based on market share estimates provided by the merging parties, the
Commission found that the merged entity will have a post-merger market share of
approximately 10% with a market share accretion of 5.4% in the market for the
production and supply of renewable energy.
[20] As regards the market for production and supply of electricity by IPPs using
solar PV, the merged entity will have a post -merger market share of approximately
10.4% with a market share accretion of 9.5%.
[21] Additionally, the merged entity would have a combined market share of 7.2%
with an accretion of 4.5% in the market for the production and supply of electricity by
IPP using onshore wind.
[22] Both merging parties have tendered and entered into contracts for rounds of
the Renewable Energy Independent Power Producer Procurement Programme
(“REIPPPP”) with Eskom in South Africa. In terms of the REIPPP, IPPs enter into
1 Globeleq South Africa Holdings (Pty) Ltd and SA Springbok Holdings (Pty) Ltd and
Others (LM164Aug18).
non-negotiable contracts with Eskom which fixes the prices and volume of energy to
be supplied. As such, there is no competition between the existing projects of the two
companies at present as they are bound by the terms of their contract.
[23] In terms of future competition, the merger is not likely to have a significant
impact on competition. Competition between IPPs occurs at the bidding stage and
despite the reduction in one potential bidder for the next bidding window as a result
of the merger, the merged entity will continue to face competition from other bidders
including Red Rocket South Africa, African Infrastructure Investment Managers,
Mainstream Renewable Power, EDF Renewables, Scatec Solar Africa and Enel
Green Power RSA, amongst others. Furthermore, as a single buyer, Eskom, is able
to exert countervailing power.
[24] In light of the above, the horizontal overlap between the activities of the
merging parties is unlikely to result in a substantial prevention or lessening of
competition given the characteristics of the market and the fact that the merging
parties combined market shares and market share accretions in the relevant markets
are relatively low.
[25] Based on the above, we are of the view that the proposed transaction is
unlikely to result in any substantial prevention or lessening of competition in any
relevant market.
Public interest assessment
Effect on employment
[26] The merger parties submitted that there will be no retrenchments in South
Africa as a result of the proposed transaction.
[27] GDFI does not have any employees in South Africa while the employees of
the Engie Group are represented by both the National Union of Metal Workers of
South Africa (“NUMSA”) and Thuli Moloto (“Ms Moloto”).
[28] NUMSA did not make any submissions despite the Commission reaching out
to them on several occasions. On the other hand, Ms Moloto submitted that the
employees of Engie Group had been notified about the proposed transaction and all
employee-related concerns, which mostly relate to the employees’ role in the new
organization, have been addressed by the management.
[29] The employees of Actis Okavango are not unionised and are represented by
Mr Simamkele Mngqete. Mr Mngqete submitted to the Commission that all
employees have been notified about the proposed transaction and no major
concerns were raised.
[30] We therefore conclude that the proposed transaction is unlikely to have a
negative effect on employment.
Effect on the spread of ownership
[31] Both GDFI and Actis Okavango do not have any shareholdings held by
historically disadvantage persons (“HDPs”) in South Africa. However, each of the
Engie Group project companies has between 10% and 50.275% of their shares held
by HDPs whilst each of the project companies of Actis Okavango have 40% of their
shares held by HDPs.
[32] Although both the merging parties have no HDP ownership, their REIPPP
project companies of the merging parties have notable HDP ownership. The merging
parties further confirmed to the Commission that the HDP shareholding in the project
companies will not change post-merger.
[33] Considering the above, the Commission concluded that the proposed merger
is a foreign- to-foreign transaction, and the Engie Group will be operating through
project companies that are transformed and with shareholding held by HDP
ranging between 10% and 51%. Thus, the proposed merger will not reduce participation
by local firms in the REIPPPP.
[34] Based on the above facts, there was no evidence by the Commission or any
party that the transaction has a negative effect on the greater spread of ownership in
terms of the Competition Act 89 of 1998, as amended.
Conclusion
[35] For the reasons set out above, the Tribunal concludes that the proposed
transaction does not raise any significant competition or public interest concerns, and
therefore approves the proposed transaction unconditionally.
Signed by: Shaista Goga
Signed at:2023-10-05 11:46:24 +02:00
Reason: Witnessing Shaista Goga
Ms Sha’ista Goga 05 October 2023
Date
Concurring: Prof. Fiona Tregenna and Ms. Andiswa Ndoni
Tribunal case manager :Juliana Munyembate and Baneng Naape
For the merging parties :Chris Charter and Leago Mathabathe of Cliffe
Dekker Hofmeyr
For the Commission :Nhlakanipho Mbhense, Zanele Hadebe and Ratshi
Maphwanya