On 29 June 2018, GLOW Energy Public Company Limited (GLOW), an electricity generation company in Thailand, notified the Thai Energy Regulatory Commission (ERC) regarding the sale of GLOW’s shares by a majority shareholder to Global Power Synergy Public Company Limited (GPSC), another electricity generation company in Thailand. The potential sale was worth an estimated $3 billion. On 11 October 2018, the ERC denied the consolidation of GLOW and GPSC. The ERC deemed that the consolidation would result in a reduction in competition or alternative options for certain petrochemical industrial electricity customers in Thailand. The ERC gave GLOW 30 days to appeal the ERC’s decision pursuant to section 121 of the Thai Energy Business Act.

NERA was asked by a law firm representing GPSC to rapidly evaluate the impact on competition of the proposed consolidation of GLOW and GPSC. NERA sent a team to Bangkok to review the ERC’s rejection of the proposed merger. Over the course of two weeks, the Bangkok-based NERA team obtained detailed information about the economic conditions of electrical power supply in Thailand and the specific economic conditions of power supply in the industrial estate (IE) areas southeast of Bangkok in which GLOW and GPSC operated.

NERA concluded that the proposed merger would have no material effect on Thailand’s public electricity supply system. Rather, because of the method of regulation and the inability of the state-owned electricity grid and its institutional and regulatory infrastructure to serve industrial customers reliably, the petrochemical firms in the IE areas in Thailand have had to fend for themselves with specific bilateral deals to procure power output from private electricity generators such as GLOW and GPSC. Rather than constituting a Thailand electricity market matter, the ERC’s objection to the merger was an industrial input supply matter.

NERA recommended that the transaction proceed without any structural or contractual remedies, and concluded that any such remedies (i.e., targeted divestments) were unnecessary given the “bilateral dependency” between GLOW and its petrochemical customers in the IE areas in which GLOW operated. NERA concluded that ERC ignored the evident countervailing power of the petrochemical industry in those areas and the ability of the industrial/petrochemical sector to bargain effectively to purchase electricity or generate their own electricity.

Nonetheless, NERA recommended that if, in the face of the ERC denial of permission, the merging parties were to offer remedies to clear the way for the merger to proceed, the merging parties should consider 1) ensuring contract terms enabled industrial customers to switch electricity suppliers on a non-discriminatory basis and 2) divestment of certain assets of the merging parties to maintain an independent source of supply in the IE areas of concern.

NERA’s report was included in the appeal that GLOW submitted to ERC on 9 November 2018. On 28 December 2018, ERC approved the transaction under the conditions that GLOW sell one of its power plants and allow customers in the IE area to switch electricity providers, precisely the two remedies that NERA recommended in its report.