1. PFC Projects Limited 2. REC Limited 3. SJVN Limited 4. Damodar Valley Corporation — Combination C-2023/08/1051

Notice under Section 6(2) of the Competition Act, 2002 given by PFC Projects Limited, REC Limited, SJVN Limited and Damodar Valley Corporation

CORAM:

Ms. Ravneet Kaur Chairperson

Mr. Anil Agrawal Member

Ms. Sweta Kakkad Member

Order under Section 31(1) of the Competition Act, 2002

1. On 22nd August 2023, the Competition Commission of India (‘Commission’) received a notice under Section 6(2) of the Competition Act, 2002 (‘Act’), given by PFC Projects Limited (PPL), REC Limited (REC), SJVN Limited (SJVN) and Damodar Valley Corporation (DVC) [hereinafter PPL and REC are referred to as “Resolution Applicant”, SJVN and DVC are referred to as “Participating Entities” and the Resolution Applicant and Participating Entities are collectively referred to as “Acquirers”] for the acquisition of the entire shareholding of Lanco Amarkantak Power Limited (Target), which is currently undergoing corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC). The notice was filed pursuant to the submission of a resolution plan for the Target dated 11th August 2022 which was modified on 1st November 2022 and on 5th December 2022 (by way of an addendum) [“Resolution Plan”].

2. In terms of the Resolution Plan, PPL, REC, SJVN and DVC would acquire 25 percent, 24 percent, 41 percent and 10 percent respectively. However, as submitted, the Acquirers may adjust their shareholding, inter se, only in case of certain exceptional contingencies and consequently the shareholding of PPL, REC, SJVN and DVC may be in the ranges of 25 to 52 percent, 24 to 50 percent, up to 46 percent and up to 10 percent respectively (Proposed Combination).

3. In terms of Regulations 14(3) of the Combination Regulations, the Commission, vide communication dated 20th September 2023, sought certain information and clarifications regarding, inter alia, details of bidding, terms of Resolution Plan, etc. The response was submitted by the Acquirers on 26th September 2023.

Acquirers

4. PPL is a wholly owned subsidiary of Power Finance Corporation Limited (PFC), a Government of India (GOI) undertaking. PPL has been set up to, inter alia, carry out the business of generation, accumulation, distribution, and supply of electricity generated through various means (including, thermal, hydel, solar, wind, etc.).

5. REC is a subsidiary of PFC. It is presently a Non-Banking Financial Company categorized as an Infrastructure Finance Company by the Reserve Bank of India. REC is engaged in financing projects and schemes for the entire power sector value chain including generation, transmission, distribution, rural electrification, and activities having forward or backward linkage with power projects.

6. SJVN is a listed company which is held by the GOI, Government of Himachal Pradesh and public shareholders. SJVN has commissioned several power generation and transmission projects. At present, SJVN is implementing and operating projects in, inter alia, the States of Himachal Pradesh, Uttarakhand, Bihar, Maharashtra, and Uttar Pradesh in India.

7. DVC is a statutory corporation set up under the Damodar Valley Corporation Act, 1948. DVC is under the administrative control of the Ministry of Power, GOI. It is engaged in the businesses of power generation, power transmission, water management, mining, and provision of related consultancy services in India.

Target

8. The Target is an unlisted public limited company engaged in thermal power generation in India. Prior to the CIRP, the Target was a 52% subsidiary of Lanco Thermal Power Limited, which in turn, is held by the ultimate parent entity, Lanco Infratech Limited.

Competition Assessment

9. Based on the information provided in the Notice, the Commission observed that the Acquirers are engaged in various activities forming part of power sector in India. The PFC Group is engaged in power generation, provision of credit services and consultancy services to power sector entities, financial services for rural electrification schemes, power trading solutions, etc.; SJVN Group is engaged in activities of power generation, transmission, power trading and provision of consultancy services in relation to hydel power generation and DVC Group is engaged in activities of power generation, transmission, consultancy services etc.

10. Considering the aforesaid activities of the Acquirers and thermal power generation activity of the Target, the Commission noted that the activities of the Parties exhibit horizontal overlaps in the business of power generation in India at a broader level and in the sub-segment of power generation in India from non-renewable sources.

11. Further, the activities of the Parties also lead to creation of following vertical linkages: (i) upstream activity of power generation and downstream activity of power transmission; (ii) upstream activity of power generation and downstream activity of power trading; (iii) upstream activity of provision of consultancy services to power sector entities and downstream activity of power generation; and (iv) upstream activity of provision of credit services to power sector entities and downstream activity of power generation.

12. The Commission assessed the Proposed Combination considering both the broader and narrower segments of power generation and power generation through non-renewable sources and decided to leave the delineation of the relevant market open as the Proposed Combination, for the reasons detailed in ensuing paragraphs, is not likely to cause an appreciable adverse effect on competition in any of the plausible alternative relevant markets that could be delineated.

13. The Commission observed that the total power generating capacity of the Target (including planned capacity) is 1920 MW. The same amounts to less than 1 percent of the all India installed capacity of power stations as on 31st March 2022 (in terms of both the total installed capacity of power generation and installed capacity of power generation from non-renewable sources). Considering the same and further considering that the Target is undergoing CIRP and as confirmed by the Acquirers, it has not been active in the bidding of Power Purchase Agreements in the last 3 years, the Commission observed that the Proposed Combination is not likely to result in any significant change in competition dynamics of the power sector regardless of the existing presence of the Acquirers in the value chain in any of the horizontally or vertically affected segments.

14. Considering the material on record including the details provided in the Notice and the assessment of the Proposed Combination based on the factors stated in Section 20(4) of the Act, the Commission is of the opinion that the Proposed Combination is not likely to have any appreciable adverse effect on competition in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act.

15. This order shall stand revoked if, at any time, the information provided by the Acquirers is found to be incorrect.

16. The information provided by the Acquirers shall be treated as confidential in terms of and subject to provisions of Section 57 of the Act.

17. The Secretary is directed to communicate to the Acquirers accordingly.