Adani Power Limited — Combination C-2022/08/963

Notice under Section 6(2) of the Competition Act, 2002 given by Adani Power Limited

CORAM:

Mr. Ashok Kumar Gupta Chairperson

Ms. Sangeeta Verma Member

Mr. Bhagwant Singh Bishnoi Member

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

1. On 22nd August 2022, the Competition Commission of India (‘Commission’) received a Notice under Section 6(2) of the Competition Act, 2002 (‘Act’), given by Adani Power Ltd. (‘Acquirer’). The Notice was filed pursuant to the execution of Binding Memorandum of Understanding (‘Binding MoU’) dated 18th August 2022 between the Acquirer, Diliigent Power Private Limited (‘Diliigent Power’/‘Target 1’), and the Selling Shareholders (comprising DB Group, The Rohatyn Group and Warburg Pincus).

2. The Proposed Combination envisages the Acquirer acquiring 100% of the share capital and economic rights in Diliigent Power and DB Power Limited (‘DB Power’/‘Target 2’) [Hereinafter, Diliigent Power and DB Power are collectively referred to as ‘Targets’ and the Acquirer and Targets are collectively referred to as ‘Parties’]. Prior to the Proposed Combination, the share capital of Diliigent Power was held by the Selling Shareholders, and Diliigent Power would own 100% of DB Power.

3. In terms of Regulation 14 of the Competition Commission of India (Procedure in regard to the transaction of Business relating to Combinations) Regulations, 2011 (‘Combination Regulations’), vide letter dated 14th September 2022, certain information and clarifications were sought from the Acquirer. The Acquirer and Diliigent Power filed responses to the letter, each dated 20th September 2022.

4. The Acquirer, belonging to the Adani group (‘Acquirer Group’), is a power company with eight operational power plants in India. It has a power generation capacity of 13,650 MW comprising thermal power plants in Gujarat, Maharashtra, Karnataka, Rajasthan, and Chhattisgarh and a 40 MW solar power project in Gujarat.

5. The Acquirer Group is, inter alia, engaged in the power generation sector through the businesses of (i) generation of thermal power, (ii) coal management services, (iii) building, commissioning, operating and maintaining electric power transmission systems, and (iv) distribution of electricity.

6. Diliigent Power is primarily engaged in the activities of a holding company. It also provides project management and consultancy services, but only to DB Power. On the other hand, DB Power, engaged in the business of generation of thermal power, operates a coal based thermal power plant with an installed capacity of 1200 MW per hour in Chhattisgarh.

7. The Commission in its decisional practice has considered generation, distribution and transmission of power as separate relevant product markets and has further segmented the market for generation of power based on the source of power generation, viz., renewable sources and non-renewable sources. The market for generation of power through non-renewable sources may be sub-segmented as thermal power generation (through coal) and other sources. In relation to the relevant geographic market, the Commission has observed that the relevant geographic market for power generation activities may be considered as the entire territory of India.

8. Considering the activities of the Parties, there is a horizontal overlap in the market of power generation in India at a broader level. At a narrower level, this can be segmented into power generation in India through thermal source (using coal).

9. The Commission decided to leave the delineation of the relevant market open as it was observed that the Proposed Combination is not likely to cause an appreciable adverse effect on competition in any of the relevant markets.

10. Based on the submission of the Acquirer, the Commission noted that the combined market share of the Parties is in the range of [5-10]% and [0-5]% on the basis of installed capacity and actual production, respectively, in the broader market. Further, in the narrower segment, the combined market share of the Parties is in the range of [5-10]% on the basis of installed capacity as well as actual production. The incremental market share of the Parties in each of the segment/sub-segment is in the range of [0-5]%.

11. Based on the pipeline capacities for the next 5 years in the segment for generation of thermal power (using coal), it is noted that the market presence of the Parties will not change such as to cause any competition concerns. Further, with respect to the bidding data provided by the Acquirer, the increment in terms of bids won by DB Power does not appear to cause any significant change in the market dynamics in the thermal power generation segment (using coal).

12. It is submitted that the Parties exhibit an existing vertical overlap in the provision of coal management services (procurement of coal and allied services such as stacking, piling and logistics coordination) by Adani Group (through Adani Enterprises Limited (‘AEL’) (upstream market) and generation of power by DB Power (downstream market).

13. The Commission observed that the presence of DB Power is minimal in the downstream market and the market share of Adani Group is in the range of [0-5]% in the upstream market. Additionally, it was observed that a part of DB Power’s requirement for coal is met through existing long term fuel supply agreements (‘FSA’) with South Eastern Coal Fields Ltd (‘SECL’), wholly owned subsidiary of Coal India Limited (‘CIL’). The balance coal required is procured via e-auctions conducted by CIL companies and open market. The quantum of coal procured by DB Power from AEL forms a minuscule portion of AEL’s revenue. There is also a significant difference between the cost of the coal supplied via FSA with SECL and the landed cost of coal from Carmichael coal mines in Australia, supplied by the Acquirer Group.

14. In addition to the above, the Parties exhibit the following potential vertical overlaps: (i) generation of power by DB Power (upstream market) and transmission of power by Acquirer Group (through Adani Transmission Limited) (downstream market); and (ii) generation of power by DB Power (upstream market) and distribution of power by Acquirer Group (through Adani Electricity Mumbai Limited) (downstream market).

15. The Commission observed that the market share of DB Power is minimal in the upstream market and the market share of Adani Group is in the range of [0-5]% in the downstream markets of transmission of power as well as distribution of power.

16. Based on the foregoing, it appears that the Parties do not have the ability or incentive to cause foreclosure in any market in India.

17. 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.

18. This order may be revoked if, at any time, the information provided by the Acquirer is found to be incorrect.

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

20. The Secretary is directed to communicate to the Acquirer accordingly.