NTPC Limited

Page 1 of 10 COMPETITION COMMISSION OF INDIA 22nd August 2023 Proceedings against NTPC Limited under Section 43A of the Competition Act, 2002 CORAM: Ms. Ravneet Kaur Chairperson Ms. Sangeeta Verma Member Mr. Bhagwant Singh Bishnoi Member Appearances For NTPC Limited: Mr. Ramji Srinivasan. Sr. Advocate, Ms. Nisha Kaur Uberoi, Advocate, Mr.Gautam Chawla, Advocate, Mr. Ankush Walia, Advocate, Ms. Akansha Agrawal, Advocate, Ms. Namrata Saroagi, Advocate, Ms. Sangeeta Kaushik, Representative of NTPC, Mr. P.C. Vishwanathan, Representative of NTPC. Order under Section 43A of the Competition Act, 2002 1. This Order shall dispose of the proceedings under Section 43A of the Competition Act, 2002 (Act) against NTPC Limited (NTPC/Acquirer) regarding acquisition of 35.47% of the equity share capital in Ratnagiri Gas & Power Private Limited (RGPPL/Target). Background 2. The Commission had observed from the information available in the public domain that NTPC had acquired 35.47% of the equity share capital of RGPPL without giving a notice Page 2 of 10 to the Commission in terms of Section 6(2) of the Act. In this regard, on 8th February 2022, the Commission issued a letter to NTPC under Section 36(4) of the Act, in relation to acquisition of 35.47% shares in RGPPL by NTPC from the Lenders i.e., IDBI, ICICI, SBI, IFCI and Canara Bank whereby the shareholding of NTPC in RGPPL increased from 25.51% to 60.98%. The letter was issued for seeking information so as to assess whether further proceeding is required under Section 20(1) and/or Section 43A of the Act. 3. NTPC, in its response submitted on 8th March 2022, provided information pertaining to its acquisition of 35.47% equity shareholding in RGPPL from lenders of RGPPL (Transaction 1). Further, NTPC also disclosed: (a) Demerger of the 5 million metric tons per annum (MMTPA) regasified Liquid Natural Gas (LNG) terminal and associated facilities of RGPPL (LNG Undertaking) and vesting the same into Konkan LNG Limited (KLL) [Demerger of LNG Undertaking/Transaction 2]; (b) Acquisition by GAIL (India) Limited (GAIL) of 14.82% equity stake in KLL from NTPC (Transaction 3); and (c) Acquisition by NTPC of 25.51% equity stake in RGPPL from GAIL (Transaction 4). Since the information provided in the response was not complete, a letter was issued to NTPC on 7th April 2022 seeking certain clarifications. After seeking extension of time, NTPC submitted a comprehensive response on 15th July 2022. 4. In the response dated 15th July 2022, NTPC, inter alia, stated with respect to Transaction 1 that NTPC‟s 35.47% acquisition in RGPPL was undertaken as an independent transaction (i) to revive RGPPL and resolve its Non-performing Asset classification, (ii) make RGPPL a viable business and (iii) supplement the Central Government's vision for RGPPL. Further, NTPC consummated the composite resolution plan with RGPPL and its lenders, i.e., IDBI, ICICI, SBI, IFCI and Canara Bank on 31st December 2020. Given that the debt was a One-Time Settlement (OTS) by NTPC, equity shares of RGPPL held by such lenders (as security) were consequently transferred to NTPC. Thus, NTPC‟s shareholding in RGPPL increased from 25.51% to 60.98%. Page 3 of 10 Initiation of proceedings and issue of SCN 5. The Commission, in its meeting held on 20th October 2022, considered the material on record including NTPC submissions dated 15th July 2022 and noted that, prior to Transaction 1 i.e., acquisition of 35.47% equity shareholding in RGPPL, NTPC already held 25.51% equity shareholding in RGPPL. Therefore, when NTPC acquired 35.47% equity shareholding in RGPPL, its shareholding in RGPPL increased to 60.98%. Considering that the shareholding of NTPC in RGPPL after Transaction 1 exceeded 50%, Transaction 1 did not benefit from Item 1A of Schedule I of Competition Commission of India (Procedure in Regard to the Transaction of Business relating to Commission) Regulations, 2011 (Combination Regulations). Thus, the Commission was of the prima facie opinion that Transaction 1 was a notifiable transaction that ought to have been notified to the Commission prior to its consummation on 31st December 2020 in terms of the provisions of Section 6(2) of the Act read with Regulation 5 of the Combination Regulations. However, NTPC failed to comply with such requirement. 6. Further, based on submissions of NTPC with respect to Transaction 2 i.e., demerger of LNG Undertaking and Transaction 3 i.e., GAIL‟s 14.82% acquisition, the Commission noted that the exemption given vide Government of India Notification no. S.O. 988(E) dated 27th March 2017 and extended vide Notification no. S.O. 1192(E) dated 16th March 2022 was applicable to these transactions. With respect to Transaction 4 i.e., NTPC‟s 25.51% acquisition in RGPPL, it was noted that the benefit given under Item 2 of Schedule I of the Combination Regulations was available for the transaction. 7. In view of the above, the Commission issued a show cause notice (SCN) vide its letter dated 27th October 2022 to NTPC under Section 20(1) and 43A of the Act read with Regulation 8(2) of the Combination Regulations and Regulation 48 of the Competition Commission of India (General) Regulations, 2009 (CCI General Regulations, 2009) to explain, in writing, why NTPC should not be found in contravention of the obligation contained in Section 6(2) of the Act and why no penalty in terms of Section 43A of the Act should be imposed on it. NTPC was also asked to explain why the Commission Page 4 of 10 should not direct it to give notice in terms of Regulation 8(2) of the Combination Regulations. 8. After taking extensions, on 23rd December 2022, NTPC submitted its response to the SCN and the Commission considered the same in its meeting held on 18th May 2023. The Commission also considered NTPC‟s request for grant of hearing and decided to allow the same. Accordingly, NTPC was directed to appear before the Commission for hearing on 18th July 2023. 9. On 18th July 2023, the Commission heard NTPC at length. The Commission further allowed NTPC to file its written submissions, which were received on 28th July 2023. Submissions of NTPC 10. By way of background, NTPC has submitted that it is a Central Public Sector Enterprise (CPSE). It was incorporated in 1975 to accelerate power development in India. NTPC became a Maharatna company in May 2010 and presently, the Government of India owns 51.1% equity stake in NTPC. 11. Dabhol Power Company Limited (DPCL) was incorporated on 23rd April 1993 as a joint venture with Enron being the majority shareholder with 65% equity stake in DPCL. On 8th July 2005, in compliance with the directives of the Government of India, RGPPL was incorporated. NTPC contributed INR 500 crore towards equity in RGPPL and a similar amount was contributed by GAIL and Institutional Financial Investors (IFIs), respectively. Accordingly, on 6th October 2005, the Special Purpose Vehicle (SPV) i.e., RGPPL took over the assets of DPCL on an „as is where is basis‟, including an integrated gas based combined cycle power project with an estimated capacity of approximately 1967 MW (Power Undertaking) and LNG Undertaking. 12. NTPC has submitted that due to the curtailment of natural gas from KG D-6 basin, RGPPL‟s Power Undertaking operations were stopped in July 2013. Subsequently, Maharashtra State Electricity Distribution Company Limited (MSEB) terminated the PPA with RGPPL in May 2014, which added further financial burden upon RGPPL. In