JSW Neo Energy Limited — Combination C-2022/08/961

Notice under Section 6(2) of the Competition Act, 2002 given by JSW Neo Energy 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 16 August 2022, the Competition Commission of India (‘Commission’) received a notice under Section 6(2) of the Competition Act, 2002 (‘Act’), given by JSW Neo Energy Limited (JSW Neo/Acquirer) for the acquisition of the entire shareholding of certain subsidiaries of Mytrah Energy (India) Private Limited (Mytrah/Seller), viz., Mytrah Vayu Urja Private Limited (Urja), Bindu Vayu Urja Private Limited (Bindu), Mytrah Vayu (Pennar) Private Limited (Pennar), Mytrah Vayu (Manjira) Private Limited (Manjira), Mytrah Vayu (Krishna) Private Limited (Krishna), Mytrah Vayu (Godavari) Private Limited (Godavari), Mytrah Vayu (Som) Private Limited (Som),

Mytrah Vayu (Indravati) Private Limited (Indravati), Mytrah Vayu (Tungabhadra) Private Limited (Tungabhadra), Mytrah Vayu (Sabarmati) Private Limited (Sabarmati), Mytrah Akshaya Energy Private Limited (Akshaya), Mytrah Advaith Power Private Limited (Advaith), Mytrah Adarsh Power Private Limited (Adarsh), Mytrah Abhinav Power Private Limited (Abhinav), Mytrah Agriya Power Private Limited (Agriya), Mytrah Aakash Power Private Limited (Aakash), Mytrah Aadhya Power Private Limited (Aadhya) and Nidhi Wind Farms Private Limited (Nidhi) (hereinafter, these subsidiaries of Mytrah are collectively referred to as Targets, and the Acquirer and Targets are collectively referred to as the Parties) (Proposed Combination)1. The notice was filed pursuant to the execution of individual Share Purchase Agreements dated 9 August 2022 (SPAs) between the Acquirer, each of the Targets, the Seller, and the nominee shareholder of that particular target2. As submitted, these SPAs will also be governed by an Umbrella Agreement dated 9 August 2022, entered by and between the Acquirer, Seller and Targets.

2. In terms of Regulations 14(3) of the Combination Regulations, the Commission, vide communication dated 8 September 2022, sought certain information and clarifications regarding, inter alia, activities of the Parties, market presence, etc. The response to the same was submitted by the Acquirer on 13 September 2022.

3. The Acquirer is a wholly owned subsidiary of JSW Energy Limited (JEL), which belongs to the JSW Group (Acquirer Group). JEL has established its presence across the value chains of power sector, and presently, JEL (also through its other subsidiaries) is engaged in power generation, power transmission, power trading and power plant equipment manufacturing. Currently, JEL (inclusive of the Acquirer) has an installed capacity of 4,784 MW for power generation in India, which consists of 1,391 MW of hydropower, 235 MW of solar and 3,158 MW of thermal energy. As submitted, the Acquirer was incorporated on 6 July 2021 as per JEL’s proposed reorganisation of its 1 With respect to Manjira, only 73.2% shares are being acquired by the Acquirer and the remaining shareholding will be held by captive consumers. 2 With exception of Tungabhadra and Nidhi for which, as submitted by the Acquirer, the binding documents are in an agreed form and are yet to be executed.

energy business into grey (thermal) and green (renewable), and post the proposed reorganisation, the existing and upcoming renewable energy businesses will be housed in the Acquirer.

4. The Targets belong to the Mytrah group and are engaged in power generation through wind energy and solar energy in India. While Urja, Bindu, Pennar, Manjira, Krishna, Godavari, Som, Indravati, Tungabhadra and Sabarmati are engaged in power generation through wind energy (Wind SPVs), Akshaya, Advaith, Adarsh, Abhinav, Agriya, Aakash and Aadhya are engaged in power generation through solar energy (Solar SPVs). The Wind SPVs have a total installed capacity of 1,331 MW and the Solar SPVs have a total installed capacity of 422 MW. As submitted, Nidhi currently does not have any commercial operations. Therefore, the total installed capacity of the Targets for power generation in India is 1,753 MW, which is all renewable energy.

5. Based on the information provided in the Notice regarding the activities of the Acquirer and the Targets, the Commission observed that the Parties exhibit horizontal overlaps in the business of power generation at a broader level. At a narrower level, the Parties exhibit overlaps in the sub-segment of power generation from renewable sources, and at a further narrower level in terms of specific source of power generation, the Parties exhibit overlaps in solar power generation. Further, as submitted, the Acquirer is proposing to participate in the market for wind power generation in the future.

6. The Commission assessed the Proposed Combination, considering both the broader and narrower segments of power generation and power generation through renewable sources and further narrower level in terms of specific source of power generation, viz., solar and wind, and decided to leave the delineation of the relevant market open, as the Proposed Combination, for reasons detailed in the 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.

7. The Commission observed that the Acquirer Group uses power generated by its power plants both for the purposes of captive consumption within the Acquirer Group and for sales to external customers. Further, it was observed that, apart from the existing operational capacity, the Acquirer is in the process of making certain planned capacity additions to power generation which are at various stages of construction/commissioning and are going to be operational in the next three years. Considering that the aspect of captive consumption and that of planned capacity additions are also relevant to the assessment of the presence of the combined entity, the same were duly considered in the competition assessment.

8. The Commission observed that the total power generation capacity of the Acquirer and the Target (including under construction and pipeline capacity) is around 8 GW and 1.75 GW, respectively. As stated above, of the 8 GW current and future production capacity of the Acquirer, certain capacity is used/proposed to be used for captive purpose.

9. Considering that the overall market size for power generation, renewable power generation, solar power generation and wind power generation in terms of installed capacity is estimated to be around 400 GW, 160 GW, 56 GW and 41 GW1, the combined entity is estimated to constitute less than 5 percent of the installed capacity in power generation, renewable power generation and solar power generation segment and less than 10 percent of the wind power generation segment regardless of the inclusion or exclusion of capacity used/proposed to be used for captive consumption. The presence of the Parties as reflected in their market share estimates is insignificant to cause any concerns of appreciable adverse effect on competition. It may also be noted that even the aforesaid calculations overestimate the presence of the Parties as the same do not take into account the planned capacity additions by other players in the various segments of power generation.

10. The Commission further observed that, as both the existing and pipeline capacities underlying the market share estimates are committed for the long term (around 25 years) 1 Based on information available at website of Ministry of Power, Government of India as on 31 May 2022.

under 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. Accordingly, the Commission considered the information in relation to capacities won by the Parties in the last three years. The Commission observed that the Acquirer won around 1.5 GW capacity while Mytrah/Targets did not participate in any bids in the last three years with respect to the PPAs. While, on the one hand, the same indicates that the presence of the Acquirer is not significant, on the other hand, it indicates that the acquisition of Targets by the Acquirer and the consequent elimination of Targets as independent competitors is not likely to cause any significant changes in competition dynamics.

11. Based on the consideration of the overall presence of the Parties in terms of installed capacity base, and considering the position in the capacity auctions, it appears that the Proposed Combination is not likely to result in any appreciable adverse effect on competition in the renewable power generation segment or any of the sub-segments of the same.

12. As regards the existing/potential vertical relationships, the Commission observed that, considering the specificities of the power generation sector and considering the extent of the Parties presence in the power sector supply chain, the Proposed Combination is not likely to result in conferring the combined entity with any ability or incentive to foreclose competition in any market segment or sub-segment.

13. 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.

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

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

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