The Department of Energy’s (DoE) Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) provides independent power producers (IPPs) with the right to operate renewable energy producing plants.
Investors must be careful when taking a controlling stake in a renewable energy project because approval by the DoE for a change of control does not absolve one from obtaining a separate approval from the competition authorities.
Competition authority clearance
With an increasing number of acquisitions taking place in this sector it is crucial for companies to assess whether a notification to the competition authorities is required.
[quote]With original developers of projects seeking to realise some of their investment and with new players entering the market by acquiring a shareholding in the original projects, there are currently a large number of transactions which could trigger a merger notification. The transfer of shares in a project development company to a company that will operate the renewable energy business potentially constitutes a merger that you need the competition authorities’ permission to implement.
Competition clearance is required where there is a change of control over the whole or part of a business and the monetary thresholds are met. With projects at various stages of development, the key question may be whether the project being transferred constitutes a “part of a business”. This is a complicated question that depends on the stage of development of the project.
For example, if there is a change of shareholding before the power purchase agreement is awarded, the project company is not likely to constitute a "part of a business" and hence, no notification is required.
As these projects get closer to the point at which they are capable of generating power (even if they are not fully in operation yet), this will no longer hold true.
The precise point at which the company is said to constitute “a part of a business” could for example occur once construction has commenced and a power purchase agreement has been signed.
Once the project company is operational, the project is indeed a business. If there is a change of control and the monetary thresholds are met, then notification is required by the South African competition authorities.
About the authors
Marianne Wagener, Director of Norton Rose Fulbright, is an antitrust and competition lawyer, and heads up the South African life sciences and healthcare practice, based in Johannesburg. She is experienced in competition and trade law and has significant experience in a variety of regulatory matters and investigations. She advises clients in South Africa, Namibia, Botswana and Tanzania, particularly in the healthcare, financial services, information technology, agriculture, construction and mining industries.
Candice Upfold, Associate, Norton Rose Fulbright, is an antitrust and competition lawyer based in Johannesburg. She is an associate in the antitrust and competition team. She has extensive experience providing competition law opinions and obtaining merger clearances from the competition authorities within South Africa, other Sub-Saharan African jurisdictions and COMESA.