Shell Overseas Investments B.V. — Combination C-2022/06/934

Notice under Section 6(2) of the Competition Act, 2002 given by Shell Overseas Investments B.V.

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 3rd June 2022, the Competition Commission of India (‘Commission’) received a Notice under Section 6(2) of the Competition Act, 2002 (‘Act’), given by Shell Overseas Investments B.V. (‘Acquirer’). The Notice was filed pursuant to the execution of a Share Purchase Agreement (‘SPA’) dated 29th April 2022, by and amongst the Acquirer, Solenergi Power Private Limited (‘Target’) and Actis Solenergi Limited (‘Actis’) [Hereinafter, the Acquirer and the Target are collectively referred to as ‘Parties’].

2. The Proposed Combination envisaged the acquisition of 100% shareholding and sole control of the Target by the Acquirer from Actis, which presently owns 100% shareholding of the Target.

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 24th June 2022, certain information and clarifications were sought from the Acquirer. The response was filed on 30th June 2022.

4. The Acquirer, incorporated in the Netherlands, is a wholly owned subsidiary of Shell Plc. The Acquirer is a holding company and does not have any business activities in India apart from its operations as a holding company. Shell Plc is the ultimate parent company of the Shell Group of companies (‘Shell Group’), which consists of energy and petrochemical companies engaged in the exploration, production, refining and marketing of oil and natural gas, and the manufacturing and marketing of chemicals and lubricants. Shell Group also has investments in the power sector globally, including from low carbon sources such as wind and solar to new fuels for transport such as advanced biofuels and hydrogen.

5. In India, Shell Group is present in the renewable energy sector through, inter alia, the following investee entities: (i) Cleantech Renewable Assets Pte. Limited (‘Cleantech’): Provides and operates solar photovoltaic rooftops and ground-based solar generation capacity, which are used to generate and supply solar electricity to commercial and industrial customers in India. (ii) Orb Energy Private Limited (‘Orb’): Manufactures and installs photovoltaic modules, capable of producing solar electricity, on the rooftops of individual, commercial and industrial customers. Orb does not sell or operate photovoltaic modules for the generation of solar electricity to be fed into the national/state electricity grids in India. (iii) Husk Power Systems Private Limited (‘Husk’): Provides hybrid electricity (generated through solar and biomass sources) only to rural areas in India that lack access to electricity through the national grids/state grids. (iv) Punjab Renewable Energy Systems Private Limited: Involved in biomass supply chain management. It does not have any power generation capacity.

(v) D. Light Energy Private Limited (‘Dlight’): Sells solar modules indirectly to customers in India that lack access to grid electricity. These solar modules enable individual customers to generate electricity (such as for powering residential light bulbs, lanterns, etc.). Thus, it does not generate or sell electricity.

6. Shell Group is also present in India, inter alia, in the manufacture and sale of lubricants (including greases and oils) through its subsidiary Shell India Markets Private Limited (‘SIMPL’).

7. The Target is an investment company incorporated in Mauritius and belongs to Actis Group. It has investments in India in the renewable energy sector, and these entities are engaged in (i) the business of constructing and operating large-scale solar power plants for generation and supply of solar energy (‘Solar Target Entities’1) and (ii) operation of wind energy farms for generation and supply of wind energy in India (‘Wind Target Entities’2).

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 through renewable sources and further sub-segmented into the power generation through solar energy.

9. 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, such as thermal, nuclear, hydro, 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 defined as the “entire territory of India”.

1 Solar Target Entities are Arinsun Clean Energy Private Limited, Sprng Solar India Private Limited, Sprng Solar Plus Private Limited (formerly called Fortum Solar Plus Private Limited), Sprng Agnitra Private Limited, Sprng Photovoltaic Private Limited, Sprng Solren Private Limited, Sprng Suryoday Energy Private Limited and Sprng Transform Sun Energy Private Limited 2 Wind Target Entities are Sprng Alt Energy Private Limited and Sprng Renewable Energy Private Limited

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, it is observed that a horizontal overlap exists between the Acquirer/Shell Group and the Target (through the Solar Target Entities) in the generation of power. The combined market share of the Parties as well the incremental market share is in the range of [0-5]% in terms of installed capacity and actual production in each of the broad and narrower segments of power generation.

12. Based on the information provided in the Notice, the Commission also observed that the customers of Solar Target Entities are state utilities with whom the Solar Target Entities have executed long-term Power Purchase Agreements (‘PPAs’) to supply the power generated by them. On the other hand, due to differences in the scale of the generation capacity required, Shell Group’s entities such as Cleantech would not generally be able to participate in the relevant auctions to supply solar energy to the state utilities under long term PPAs to compete with the Solar Target Entities.

13. With regard to the vertical relationship between the Parties, it is submitted that the Parties exhibit a potential overlap in the manufacture and sale of lubricants by SIMPL (upstream market) and operation of wind turbines for generation of wind power by Wind Target Entities (downstream market).

14. Based on the submission of the Acquirer, the Commission observed that, in the upstream market of manufacture and sale of lubricants at a broader level, as well as at a narrower level of manufacture and sale of industrial lubricants, the market share of SIMPL is in the range of [0-5]%. In the downstream market of generation of power through wind energy, the presence of the Target is insignificant. Thus, it appears that the Parties do not have the ability or the incentive to cause any foreclosure in any market in India.

15. 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.

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

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

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