Proposed Acquisition By City Energy Pte. Ltd. (As Trustee Of City Energy Trust) Of Tan Soon Huah Gas Supply Pte. Ltd.’s Liquified Petroleum Gas Business

Notifying Parties:

City Energy Pte. Ltd. (as trustee of City Energy Trust)

Notifying Date:

26 April 2023

Summary of transaction:

(i) the names of the merger parties;

• City Energy Pte. Ltd. (as trustee of City Energy Trust) (“City Energy”);

• Tan Soon Huah Gas Supply Pte. Ltd. (“TSH”)

(together, the "Parties").

(ii) a description of the transaction;

The application relates to the proposed acquisition by City Energy of TSH’s liquefied petroleum gas (“LPG”) business (“Proposed Transaction”).

(iii) a description of the business activities of the merger parties worldwide and in Singapore;

City Energy

City Energy produces and retails town gas to residential and commercial and industrial customers in Singapore. In addition to town gas, City Energy retails natural gas to commercial customers and, through City-OG, retails natural gas to industrial customers in Singapore. City Energy also provides the following products or services: (a) sale of residential and commercial appliances/equipment; (b) provision of gas supply related services; (c) through CE Go, EV charging services and installation of EV charges on commercial and residential premises; (d) though City-OG, energy consultancy services; and (e) through City-OG, energy service solutions.

Apart from its EV charging services which are offered in both Singapore and Malaysia, City Energy has no business activities outside Singapore.

TSH

TSH retails LPG cylinders to residential and commercial and industrial customers in Singapore. TSH also provides the following ancillary products and services: (a) sale of residential and commercial appliances/equipment; (b) sale of LPG equipment; and (c) provision of design, installation, maintenance and emergency response services (gas leak incidents) for LPG withdrawal systems.

TSH has no business activities outside of Singapore.

(iv) a description of the overlapping goods or services, including brand names;

City Energy submits that both Parties are retailers of fuels in the residential, commercial and industrial sectors. Specifically:

(a) TSH is a retailer of LPG cylinders in the residential, commercial and industrial sectors;

(b) City Energy is a retailer of town gas in the residential, commercial and industrial sectors; and

(c) City Energy is a retailer of natural gas in the industrial sector.

Both Parties are also retailers of heating and cooking appliances such as hobs and water heaters. However, City Energy submits that this overlap is insignificant as this segment of the Parties’ businesses represents a negligible portion of their turnover. Further, there are many other reputable retailers of such appliances which are clearly larger than the Parties.

(v) a description of substitute goods or services;

City Energy is of the view that LPG, town gas, and natural gas are all close substitutes of one another as fuels in the residential, commercial and industrial sectors.

In addition, electricity is also a close substitute to each of LPG and town gas in the residential and commercial sectors.

(vi) The applicant's views on:

a. definition of the relevant market(s);

City Energy submits that the relevant markets should be defined broadly as follows:

1. Market for retail supply of LPG, town gas, and electricity to residential customers in Singapore;

2. Market for retail supply of LPG, town gas, and electricity to commercial customers in Singapore; and

3. Market for retail supply of LPG, town gas, natural gas, and electricity to industrial customers in Singapore.

b. the way in which competition functions in this market;

City Energy submits that due to the homogeneity of product, competition amongst retailers of LPG, town gas, and natural gas is heavily dependent on price. Retailers of LPG, town gas, and natural gas also generally face stiff competition from electricity retailers as electricity is increasingly viewed as a more convenient, safe and environmentally friendly alternative to LPG, town gas, and natural gas.

c. barriers to entry and countervailing buyer power

For town gas, City Energy submits that due to the Energy Market Authority (“EMA”) licensing requirements needed to produce, transport, and retail town gas in Singapore, and the high capital expenditure needed to set up the plant and piping network, the barriers to entry for the town gas market are high.

For LPG, City Energy submits that there are no material barriers to entry for the LPG market as regulation plays a limited role in the LPG industry and there is no direct regulation on the sale of LPG. The capital expenditure required to supply LPG is also relatively low.

For natural gas, City Energy submits that although the retail of natural gas in Singapore is subject to EMA licensing requirements, the gas distribution network in Singapore is controlled and maintained by PowerGas as the gas transporter. There is therefore no necessary infrastructure capital required to enter the natural gas market. Thus, apart from obtaining the necessary licenses from EMA, there are no material barriers to entry for the natural gas market.

City Energy is of the view that generally, length of contracts in the relevant markets are shorter and LPG in particular can be purchased on an ad-hoc basis. Market players in the relevant markets are highly constrained in their actions by conduct of buyers in Singapore due to buyers’ ability to switch suppliers.

Regulations in the relevant markets also keep switching costs low. For instance, licensed electricity retailers are required to ensure that any early termination fee charged is reasonable. This further reduces the likelihood of end customers being locked into a long contract out of reluctance to pay penalties for early termination.

d. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).

Non-coordinated effects

City Energy submits that non-coordinated effects will not arise in the relevant markets. As City Energy is not active in the LPG business and TSH is not active in the town gas or natural business, customers do not view City Energy’s and TSH’s products as each other’s ‘next best alternative’. The Parties will continue to be constrained by other strong LPG competitors, strong natural gas competitors, and strong electricity competitors, as well as by additional competitive constraint from new and potential entrants, after the Proposed Transaction.

Coordinated effects

City Energy submits that coordinated effects will not arise in the relevant markets. It is not feasible for competitors in the relevant markets to coordinate increases in price or reduction of quality or output as there are too many players and potential entrants in the markets for effective monitoring of compliance with any coordinated behaviour. Any unjustified increase in price or decrease in quality of LPG, town gas or natural gas will also result in customers switching to rely on electricity for cooking or heating instead.

 Decision:

Following its assessment, CCCS has concluded that the Proposed Transaction, if carried into effect, will not infringe the section 54 prohibition of the Competition Act 2004.

 Decision Date:

 2 August 2023

Read the Media Release.

Read the Grounds of Decision.