CDPQ Infrastructures Asia II Pte. Ltd. — Combination C-2022/07/957

Notice under Section 6(2) of the Competition Act, 2002 given by CDPQ Infrastructures Asia II Pte. Ltd.

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 19th July 2022, the Competition Commission of India (‘Commission’) received a Notice under Section 6(2) of the Competition Act, 2002 (‘Act’), given by CDPQ Infrastructures Asia II Pte. Ltd. (‘Acquirer’). The Notice was filed pursuant to the execution of (i) Share Purchase Agreement (‘SPA’) dated 12th July 2022 between the Acquirer and CLP GPEC (Mauritius) Holdings Limited (‘Seller’) and (ii) Restated Shareholders’ Agreement (‘Restated SHA’) dated 12th July 2022 amongst the Acquirer, Seller and Apraava Energy Private Limited (‘Target’) [Hereinafter, the Acquirer and the Target are collectively referred to as ‘Parties’].

2. The Proposed Combination envisages acquisition of additional 10% shareholding of the Target by the Acquirer from the Seller. At present, the Acquirer and Seller hold 40% and 60% shareholding of the Target, respectively.

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 3rd August 2022, certain information and clarifications were sought from the Acquirer. The response was filed on 8th August 2022. Further, the Acquirer, vide its email dated 29th August 2022, submitted certain additional information by way of voluntary submissions.

4. The Acquirer is incorporated in Singapore and forms a part of the group consisting of Caisse de Dépôt et placement du Québec (‘CDPQ’) and its affiliates (‘CDPQ Group’), which is a long-term institutional investor with net assets of approximately USD 420 billion. The Acquirer is an institutional investor that manages the funds of its depositors comprising primarily public and para-public pension and insurance plans.

5. The Acquirer does not have any direct presence in India. CDPQ Group is indirectly present in India through its subsidiaries, namely, CDPQ India Private Limited, Ivanhoe Cambridge Investment Advisory (India) Private Limited and SITQ India Private Limited. CDPQ has also set up the India Highway Concession Trust, an infrastructure investment trust.

6. In the power sector, CDPQ Group is indirectly present in the business of power generation in India through its shareholding in Azure Power Global Limited (‘Azure Power’) which, in turn, operates through its subsidiaries, viz., Azure Power India Private Limited (‘Azure India’) and Azure Power Rooftop Private Limited (‘Azure Rooftop’). Azure India in engaged in power generation through renewable energy while Azure Rooftop is engaged in power generation only through solar energy. The total installed capacity of Azure Power in India is 2633 MW.

7. The Target has been operating in the power sector in India since 2002 with presence in power generation through renewable energy (including wind and solar), combined cycle power plant and supercritical coal-fired plant and power transmission. Its ultimate parent, i.e., CLP Holdings Limited (HK) (‘CLP Group’), is one of the largest investor-owned power businesses in Asia-Pacific and has a diversified portfolio of generating assets that use a wide range of fuels including coal, gas, nuclear and renewable sources. It also has operations in transmission, distribution and retail of energy. The total installed capacity is 2494 MW.

8. 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 source of power generation, viz., renewable sources and other sources. The market for generation of power through renewable sources may be sub-segmented as power generation through solar and other renewable 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.

9. 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 through renewable sources and further, at the narrowest level, into power generation through solar energy.

10. 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.

11. Based on the submission of the Acquirer, the combined market share of the Parties, on the basis of installed capacity and actual production, is in the range of [0-5]% in the broad market of power generation as well as narrow segment of power generation through renewable sources. In the segment of power generation through solar energy, the combined market share of the Parties is in the range of [5-10]% on the basis of installed capacity and actual production. The incremental market share of the Parties in each of the broad as well as narrow segments is in the range of [0-5]%.

12. Based on the pipeline capacities, the market presence of the Parties in any of the above mentioned segments/sub-segments will not change as such so as to cause any competition concerns. It is submitted that presently CDPQ (through Azure) is not engaged in power generation through wind energy. However, Azure India has been awarded a wind project, which is expected to be commissioned soon. Considering this, the Commission noted that the combined and the incremental market share of the Parties, based on installed capacity, is not significant.

13. The Commission further observed that, as both the existing and pipeline capacities underlying the market share estimates are usually committed for the long term (around 25 years) under the Power Purchase Agreements (‘PPAs’) and considering the general functioning of the power generation sector relating to the execution of PPAs on the basis of bidding, market shares appear to have limited relevance. Based on the bidding data provided by the Acquirer, the Commission noted that the capacity allocated to the Parties is insignificant so as to cause any competition concerns.

14. With regard to the vertical relationship between the Parties, it is submitted that the Parties exhibit a potential vertical overlap in the generation of power in India by the Acquirer (upstream market) and transmission of power in India by the Target through its subsidiary/affiliates, namely, Satpura Transco Private Limited and Kohima – Mariani Transmission Limited (downstream market).

15. Based on the submission of the Acquirer, the Commission observed that the market share of the Acquirer is in the range of [0-5]% in the upstream market and the market share of the Target is minimal in the downstream market. Thus, it appears that the Parties do not have the ability or incentive to cause foreclosure in any market in India.

16. 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.

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

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

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