Vietnam – General – Page 27 – Duane Morris Vietnam

September 17, 2018 by Dr. Oliver Massmann

Anwalt in Vietnam Dr. Oliver Massmann – ERNEUERBARE ENERGIE – NEUE TARIFE FÜR WINDENERGIE – ERSTAUNLICHE ENTWICKLUNG – SOLARKRAFT – SPEZIELLE POLITIK FÜR NINHTHUAN PROVINZ

NEUE ENTWICKLUNGEN

Bis Juni 2018, wurden ca. 286 Solarstromprojekte mit einer Gesamtleistung von 19.300 MW bei den Lizensierungsbehörden zu den Power Master Plänen eingereicht, aber nur 100 Projekte wurden genehmigt (ca. 4.700 MW). Beachten Sie, dass sich 90% der Projekte noch in anderen Lizenzprozesse befinden, wie das Ersuchen für die Registrierung von Investitionslizenzen, Baugenehmigungen etc.
Mindestens 10 Solarstromprojekte wurden kürzlich mit der EVN für PPA unterzeichnet. Bis Ende September 2018 soll das erste Solarenergieprojekt eine Verbindung zum nationalen Stromnetz (35 MW in der Provinz Hue) haben.
Im Hinblick auf die verbleibenden Projekte, die noch nicht in den Power Master Plänen enthalten sind, hat der stellvertretende Ministerpräsident Trinh Dinh Dung hat entschieden, dass MOIT darüber beraten und zustimmen muss zusätzlich, wenn solche Solarenergieprojekte eine der folgenden Bedingungen erfüllen:
· MOIT hat den Untersuchungsprozess der Anwendung zur Ergänzung vom Energiesubstitut abgeschlossen zum Power Masterplan eines solchen Projekts; oder
· Die Projekte haben den Antrag zum Ersatz des Power Master Plan für MOIT und solche Projekte befinden sich in Provinzen mit Potenzial für die Entwicklung von Solarenergieprojekten

SONDERPOLITIK NUR FÜR NINH THUAN – NICHT FÜR ANDERE PROVINZEN

Am 31. August 2018 veröffentlichte der Premierminister Nguyen Xuan Phuc die Resolution 115 / NQ-CP (“Resolution 115”) um endgültig zu entscheiden, dass die kommerzielle Operationsfrist (COD) (vorher 30. Juni 2019) für Solarprojekte in der Provinz Ninh Thuan, um die 9,35 US-Cents zu genießen, bis Ende 2020 verlängert wurde. Diese Verlängerung gilt für diese Solarenergie Projekte, die im entsprechenden Power Master Plan genehmigt wurden. Die Resolution 115 trat am 31. August 2018 in Kraft und unterstreicht das schlecht gehütete Geheimnis, dass Ninh Thuan, ein wörtlicher Hotspot für Solarprojekte ist. In Ninh Thuan werden günstigere Konditionen zu genießen sein als für Projekte an anderen Standorten, die an die 2019 COD Deadline (wie unten angegeben) gebunden sind.

NEUE REGELUNGEN FÜR SOLARENERGIEPROJEKTE NACH DEM 30. JUNI 2019?

Die Regierung wird neue FIT und neue PPA für Projekte, die nach dem 30. Juni 2019 in Kraft treten, veröffentlichen. Eine solche neue FIT wird viel niedriger sein als die jetzige (mündlich bestätigt von Herrn Nguyen Ninh Hai, stellvertretender Direktor des New and Renewable Energy Department, MOIT).
Die Regierung arbeitet jetzt auch an einem Wettbewerbsauktionssystem für Solarenergieprojekte welche etwa um 2020 abgeschlossen werden kann. Die neue FIT wird nur angewendet bis sich auf das Wettbewerbsauktionssystem geeinigt wurde und dieses implementiert wird.

ÜBER DIE ENTWICKLUNG DER POLITIK FÜR NEUE FIT FÜR WINDENERGIEPROJEKTE

MOIT hat dem PM eine neue und sehr vielversprechende FIT Windenergieprojekte für seine Überlegungen und Zustimmung vorgeschlagen:
o FIT für Onshore-Projekt: 8,5 Cent
o FIT für Offshore-Projekt: 9,8 Cent
Zu Ihrer Information, Onshore- und Offshore-Projekte sind in unserem aktuellen Entwurf wie folgt definiert:
“Onshore-Windenergieprojekt bedeutet netzbetriebene Windkraftanlage mit Windturbinen, die im Binnenland und in Küstengebieten gebaut und betrieben werden (Anmerkung: Grenze dieser Binnengebiete und Küstenzonen ist die durchschnittliche Niedrigwasserlinie für 18,6 Jahre)
Offshore-Windenergie-Projekt bedeutet, dass Netz-Wind-Projekte mit Windturbinen außerhalb der Binnengebiete und Küstenzonen zum Meer gebaut und betrieben werden.”

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Zögern Sie bitte nicht, sich mit Dr. Oliver Massmann unter omassmann@duanemorris.com in Verbindung zu setzen, wenn Sie Fragen haben. Dr. Oliver Massmann ist der Generaldirektor von Duane Morris Vietnam LLC.

September 14, 2018September 14, 2018 by Dr. Oliver Massmann

VIETNAM – STROMSEKTOR – NEUE FEED-IN-TARIFE FÜR WINDENERGIEPROJEKTE

GENEHMIGUNG DES PREMIERMINISTERS

Am 11. September 2018 hat der Premierminister einen Entwurf eines Beschlusses über neue Einspeisetarife (FITs) genehmigt welche anwendbar auf Windkraftprojekte in Vietnam sind. Diese Entscheidung wird am 1. November 2018 wirksam (die “PM-Entscheidung”). Der PM-Beschluss wird bestimmte Artikel des Premierministers ändern und überarbeiten Beschluss Nr. 37/2011 / QD-TTg über die Mechanismen zur Unterstützung der Entwicklung von Windenergieprojekten in Vietnam.

PREIS FÜR WINDENERGIEPROJEKTE

Der Einspeisetarif für Windkraftprojekte wird von derzeit 7,8 US-Cent / kWh auf (i) 8,5 US-Cents erhöht für Onshore-Windkraftprojekte und auf (ii) 9,8 US-Cent / kWh für Offshore- Windkraftprojekte.
Onshore- und Offshore-Windenergieprojekte werden im PM-Beschluss wie folgt grob definiert: (i) Onshore Windkraftprojekt bedeutet netzbetriebenes Windkraftprojekt, das seine Windturbinen auf Binnen- und Küstengebiete bauen und betreiben lässt (Anmerkung: Die Grenze dieser Binnengebiete und Küstengebiete ist der Durchschnittswert Wasserlinie für 18,6 Jahre). (ii) Offshore-Windenergie-Projekt bedeutet, dass Windenergieanlagen außerhalb von Binnengebieten und Küstengebieten zum Meer gebaut und betrieben werden sollen.
Wir sind der Meinung, dass das MOIT weitere Richtlinien für eine bessere Definition von Onshore und Offshore Windkraftprojekten bereitstellen sollte.

COD FÜR NEUE FITS – WINDENERGIE-PROJEKTE

Der Preis für neue FITs muss für einen Teil oder die Gesamtheit eines Windenergieprojekts gelten, das kommerziell vor dem 1. November 2021 genutzt wird (COD), und diese neuen FITs sollen für 20 Jahre vor dem COD eines solchen Windkraftprojektes gelten.
Für Windenergieprojekte, die vor Inkrafttreten der PM – Entscheidung COD erreicht haben (d. H. 1. November 2018), kann der neue Preis für FITs für die Restlaufzeit der betreffenden unterzeichneten Windenergie Kaufvertrage (PPA) gelten. Es ist jedoch nicht klar, ob der neue FIT-Preis automatisch angewendet wird zu den aktuell laufenden Windenergieprojekten, oder es noch erforderlich ist, den momentan unterschriebenen Vertrag des Wind PPA mit den EVN neu zu überarbeiten und verhandeln. Im letzteren Fall wird es eine große Herausforderung sein.

AUKTIONSMECHANISMUS NACH DEM 1. NOVEMBER 2021

Gemäß der PM-Entscheidung muss MOIT eine Auktionspolitik für die Auswahl neuer Produkte vorbereiten und Windkraftprojekte und Windenergiepreise seit dem 1. November 2021 einreichen.
Zögern Sie bitte nicht, sich mit Dr. Oliver Massmann unter omassmann@duanemorris.com in Verbindung zu setzen. Dr. Oliver Massmann ist der Generaldirektor von Duane Morris Vietnam LLC.

September 12, 2018 by Dr. Oliver Massmann

VIETNAM – POWER SECTOR – NEW FEED-IN-TARIFFS FOR WIND ENERGY PROJECTS

THE PRIME MINISTER’S IN-PRINCIPLE APPROVAL
On 11 September 2018, the Prime Minister has approved a draft decision on new feed-in tariffs (FITs) applicable to wind power projects in Vietnam. This FITs decision will become effective 1 November 2018 (the “PM Decision”). The PM Decision will amend and revise certain articles of the Prime Minister’s Decision No. 37/2011/QD-TTg on the mechanisms supporting the development of wind power projects in Vietnam.

FITS PRICE FOR WIND ENERGY PROJECTS
FITs price for wind power projects will be increased from the current 7.8 US cents / kWh to (i) 8.5 US cents / kWh applicable to onshore wind power projects, and (ii) 9.8 US cents / kWh applicable to offshore wind power projects.
Onshore and offshore wind power projects are roughly defined in the PM Decision as follows: (i) onshore wind power project means on-grid wind power project that having its wind turbines to be built and operated on inland areas and coastal zones (NB: boundary of such inland areas and coastal zones is the average low water line for 18.6 years), and (ii) offshore wind-power project means on-grid wind power project that having its wind turbines to be built and operated outside inland areas and coastal zones to the sea.
We believe that the MOIT should provide further guidelines for a better definition of onshore and offshore wind power projects.

COD FOR NEW FITS – WIND POWER PROJECTS
The new FITs price must apply to a part or the whole of a wind power project that achieves commercial operation date (“COD”) before 1 November 2021, and such new FITs will apply for 20 years from the COD of such wind power project.
For wind power projects that have achieved COD prior to the effective date of the PM Decision (i.e., 1 November 2018), the new FITs price may apply for the remaining term of the relevant signed wind power purchase agreement (PPA). However, it is not crystal clear if the new FITs price will automatically apply to the current operating wind power projects, or it is still required to re-negotiate and revise the current signed wind PPA with EVN. In case of the latter, it will be very challenging to re-negotiate and revise the current signed wind PPA with EVN.

AUCTION MECHANISM AFTER 1 NOVEMBER 2021
According to the PM Decision, MOIT must prepare and submit a policy on auction for selection of new wind power projects and wind power prices since 1 November 2021 onward.

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Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any lawyer in our office listing if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

September 7, 2018 by Dr. Oliver Massmann

Vietnam – Power Sector Reform Competitive Auction Mechanism For New Generation Investment – What You Must Know:

On 31 August 2018, Asian Development Bank (ADB) and Ministry of Industry and Trade (MOIT) co-arranged a workshop to introduce the first ADB’s Technical Assistance (TA) on competitive auction mechanism for new power generation investment in Vietnam. The TA aims at improving the arrangements for investment to ensure adequate energy supply and to be compatible with Vietnam Wholesale Electricity Market (VWEM) in Vietnam’s power sector.
Please find below key topics of the workshop since this may affect the power generation sector and its policy in the upcoming years.

1. MOIT’s Highlights on Current Status and Challenges for New Generation

Vietnam has enjoyed one of the world’s most rapid economic growth rates i.e., an average of more than 6% p.a. Vietnam has a wide range of primary energy sources such as crude oil, coal, natural gas and hydropower for economic development. However, it has still relied heavily on less “environmentally friendly” primary fossil fuel, though it started to promote renewable energy recently.
The revised Power Development Plan for 2011 – 2020, vision to 2030 (revised PDP VII), adopted in 2016, is evidence of a growing appreciation of the role alternative sources of energy, targets a 7% share of electricity generated from renewable energy by 2020 and 10% plus by 2030. The revised PDP VII forecasts the electricity demand using an annual average growth rate at 10% from 2011 to 2030. The demand will increase from 86 TWh in 2010 to 265 – 278 TWh in 2020 and 572-632 TWh in 2030. The estimated installed capacity would be 60 GW in 2020 and 129.5 GW in 2030.

2. Foreign investment is a must!

Vietnam desperately need a significant amount of investment on new power generation to achieve its demand under the revised PDP VII, approx. US$7 billion to US$10 billion annually. However, the Government of Vietnam does not currently provide guarantee for this sector, and ODA loan is not a viable option for new generation investment. Local financing and resource are also constrained as Electricity of Vietnam (EVN)’s credit limit has been reached. Currently, several power generation projects have been delayed for 3 to 5 years, that would cause the revised PDPVII’s estimates for 2025 to be outdated very soon.
It is also noted that Vietnam is facing a high risk on fuel guarantee for power generation as one of its key sources (natural gas) is unstable as a result of crisis at Bien Dong area (or South China Sea). In fact, the progress of Block B and Blue Whale are very risky and delayed.
Accordingly, Vietnam must reform its playfield and framework to harmonize the system and policies to attract more foreign investment projects on power generation sector.
Vietnam Full Wholesale Electricity Market is coming soon!
The MOIT reported its 4 steps timeline for implementation of full VWEM: (i) 2016: Pilot VWEM Step 1 (Paper Market), (ii) 2017 to 2018: Pilot VWEM Step 2, (iii) 2019: Initiating VWEM under MOIT’s decision 3038, and (iv) finally after 2019: implementing full VWEM under MOIT’s Decision 8266.
Full VWEM will have the following key features:
– Market Model (Mandatory Cost-Based Gross Pool): (i) all generators (30MW or more) is required to directly participate the full VWEM to sell its power, (ii) all retailers (5 Power Corporations under EVN) must buy energy from the full VWEM, and (iii) gradually, the cost-based Pool will be transformed to Price-Based Pool.
– Trading and Dispatch intervals: will be reduced to 30 minutes from 1 hour.
– Generation Scheduling: will apply the model of full transmission network stimulation when the full market IT system available.
– Key types of contracts under VWEM: vesting contract, bilateral contract and centrally contract auction.

3. Competitive Auction Mechanism for New Generation Investment

The TA is to recommend the Vietnam Government to consider and implement policies for implementation of Competitive Auction Mechanism for new generation projects with the following key features:
– To ensure that new power generation projects to be selected through auction process based on least cost and greatest value;

– To improve and ensure the competition between domestic and international developers, and competition between technologies;

– To consistently implement VWEM-compatible contracting framework irrespective of type of developer or technology; and

– To apply and prefer BOO like long term CFDs (contracts for difference) rather than current PPAs (power purchase agreements) as the CFDs are more bankable and may produce more efficient outcome over the generator’s lifetime.

Unfortunately, details of Competitive Auction Mechanism such as forms of PPAs, CFDs, BOO projects, auction process, currency exchange and repatriation guarantee, will be researched and presented by ADB later within this year.

4. Other MOIT’s Highlight on Renewable Power Projects

At the workshop, the MOIT’s representative also commented on certain new policies for renewable power projects as below:

– The MOIT is drafting a policy to introduce new Feed-in Tariff (FIT) and draft PPA for Solar Power Projects that fail to meet COD deadline under Decision 11. The MOIT confirmed that such new FIT will be lower than the current 9.35 US Cent. This policy is likely to be approved by the Government within this year.

– The MOIT is drafting a policy to promulgate new FITs and draft PPAs for wind projects. This policy is likely to be issued within this year.

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Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any lawyers in our office listing if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

September 7, 2018 by Dr. Oliver Massmann

VIETNAM – RENEWABLE ENERGY – NEW FEED IN TARIFFS FOR WIND ENERGY – AMAZING DEVELOPMENT – SOLAR POWER – SPECIAL POLICY FOR NINH THUAN AND ONGOING DRAFT POLICY

RECENT DEVELOPMENT
Until June 2018, approx. 286 solar power projects of total capacity of 19,300 MW have been submitted to the licensing authorities to be supplement to the Power Master Plans, but only 100 projects have been approved (approx. 4,700 MW). We also note that 90% projects are still in other licensing processes such as application for investment registration license, construction permit, etc.
At least 10 solar power projects that investors have signed PPAs with EVN recently. By end of September 2018, the first solar energy project will connect to the national power grid (35 MW in Hue province).
With regards to the remaining projects have not yet been included in the Power Master Plans, the Deputy PM Trinh Dinh Dung has decided and instructed that MOIT must consider and approve to addition if such solar energy projects satisfy one of the following conditions:
• MOIT has completed the investigation process of the application to supplement to Power Master Plan of such project; or
• Projects have submitted the application to supplement to Power Master Plan to MOIT and such projects are located in provinces that have potential to develop solar energy projects.

SPECIAL POLICY ONLY FOR NINH THUAN – NOT FOR OTHER PROVINCES
On 31 August 2018, the Prime Minister Nguyen Xuan Phuc issued Resolution 115/NQ-CP (“Resolution 115”) to finally decide that the commercial operation date (COD) deadline (previously 30 June 2019) for solar projects in Ninh Thuan province to enjoy the 9.35 US cents feed in tariff has been extended to the end of 2020. This extension applies to those solar energy projects approved in the relevant Power Master Plan. Resolution 115 took effect on 31 August 2018 and lays to rest the badly kept secret that Ninh Thuan, a literal hot spot for solar projects, will enjoy more favorable terms than projects in other locations which remain bound to the 30 June 2019 COD deadline (as noted below).

NEW REGULATIONS FOR SOLAR ENERGY PROJECTS AFTER 30 JUNE 2019?
The Government will issue new FIT and new PPA for projects coming into operation after 30 June 2019. Such new FIT will be much more lower than the current one (verbally confirmed by Mr. Nguyen Ninh Hai, Deputy Director of New and Renewable Energy Department, MOIT).
The Government is now also working on a Competition Auction System for solar power projects that may be completed at around the 2020. The new FIT will be applied only until the Competition Auction System is decided and implemented.

ON GOING DRAFT POLICY ON NEW FIT FOR WIND ENERGY PROJECTS
MOIT has proposed the below a new and very promising FIT for wind energy projects to PM for his consideration and approval:
o FIT for Onshore project: 8.5 cents
o FIT for Offshore project: 9.8 cents
FYI, in current draft available to us, onshore and offshore projects are defined as below:
“Onshore wind power project means on-grid wind power project that having its wind turbines to be built and operated on inland areas and coastal zones (NB: boundary of such inland areas and coastal zones is the average low water line for 18.6 years)
Offshore wind-power project means on-grid wind power project that having its wind turbines to be built and operated outside inland areas and coastal zones to the sea.”

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Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any lawyers in our office listing if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

September 4, 2018September 4, 2018 by Dr. Oliver Massmann

VIETNAM – POWER ENERGY – NON-RECOURSE FINANCING AND BANKABILITY – HOW TO ACHIEVE? – How to make use of CPTPP and EUVNFTA – BEST PRACTICE!

Overview on the recent developments in the power sector

The recent increasing interest from investors in the energy sector in general and renewable energy in particular has prompted the Government to work on the revision of the National Power Master Plan VII (amended) to attract more investment in the sector as well as to ensure a stable and clean supply of energy in the country.
To achieve that goal, the Government should improve the transmission and distribution system, encourage both small and large-scale renewable energy projects by a sound regulatory regime, as well as accelerate decision-making process for other sources of power projects.
The Government is also working on improvements of the Power Purchase Agreement template (PPA) to bring it to a more bankable and acceptable level to both international and domestic banks. In particular, the PPA is not bankable due to the following main reasons:
• There is no clear risk allocation framework between the Government and private sector;
• There is no Government guarantee in terms of foreign exchange convertibility;
• It is not clear whether the PPA is a “take or pay” agreement;
• Procurement and negotiation of PPPs are not transparent and usually takes much time; and
• International arbitration is not a dispute settlement method provided in the PPA.
The Electricity Regulatory of Vietnam under the Ministry of Industry and Trade (“MOIT”) has been tasked with a study on direct PPAs Pilot Scheme. In general, direct PPA is an agreement made between the power generator and a corporate customer in which the power is physically delivered and sold to the corporate customer for its operations. The MOIT planned the pilot to be implemented as early as the first quarter of 2019. The pilot should set a target of at least new 300 – 500 MW power generation.

Solar power projects – Amazing development!

Vietnam’s potential capacity for solar power is considered to be similar as Spain or China, but solar power projects capacity, prior to 2017, is extremely low i.e., less than 10 MW. However, hundreds of solar power projects have been approved by the end of 2017. According to the MOIT, the combined capacity of all approved solar power projects, which will operate prior to 30 June 2019, is over 3 GW.
The solar FIT of US9.35 cents/kWh will continue to apply beyond the original COD (i.e. 30 June 2019). The deadline shall be likely extended for another half a year or another year for solar projects across Vietnam, except for projects in Ninh Thuan. This policy is not yet formally adopted but very likely will be publicized at the end of this year.
For solar projects in Ninh Thuan, the COD deadline extension will be longer (i.e. for another one and a half year from 30 June 2019). The current template solar PPA may also be amended and take effect from 01 July 2019.

How to achieve non-recourse financing for renewable power projects

Given the current bankability status of PPAs, it is important to secure a loan for the projects which is guaranteed by a charge on specific assets or on the revenues generated from a specific project or assets. This is how a non-recourse financing works. If the borrower defaults and the security does not realise the full value of the loan, the lender cannot recover the shortfall from the borrower or from its other assets or revenues.
In essence, the ability to reach non-recourse financing arrangement will mostly depend on the negotiation between the lenders and the borrowers, e.g. whether or not the collateral is sufficient to cover the repayment obligations, as well as the potential economy benefits of the projects, from the lenders’ point of view. Meanwhile, the concept of non-recourse financing is barely introduced in Vietnam, and it is quite difficult to find a bank in Vietnam which is willing to finance projects on non-recourse basis. Generally speaking, non-recourse financing may be very costly (in terms of interest rates) and requires a lot of effort to negotiate with stakeholders. It is essential that the investor use a special purpose vehicle (“SPV”) so that the SPV will be the borrower of the project financing arrangement, while the investor is to be the sponsor of the deal. Since the SPV shall not have any projects other than project assets, the lenders will have to rely heavily on the financial prospects of the project to minimize their risk. A full recourse finance deal will mean that the sponsor (or any other asset-rich entities related to the sponsor) shall guarantee for the debt of the SPV, while a non-recourse deal shall see no involvement of any third party. Our objective is to have SPV lend (in a full recourse arrangement) without the sponsor to be exposed to any recourses (non-recourse). In that case, a non-recourse financing arrangement shall be deemed achieved.
There are three possible options to achieve non-recourse/limited recourse financing arrangement:

Option 1: Entering into a BOT (Build-Operate-Transfer) contract with the Government. With this option, as it is agreed that the investors shall build and operate the project for a certain period of time (and receive the profit during such period) and it is the Government who will own the project at the end upon the expiration of the BOT contract, the BOT contract will be more bankable and thus the non-recourse/limited recourse financing arrangement can be achievable.
Currently, there is no foreign ownership restriction in energy sector in local laws or Vietnam’s international commitments. The foreign investor may choose among permitted investment forms: 100% foreign invested company, joint venture or public private partnership in the form of BOT contract. For your information, Vietnam ties in first place with Singapore in terms of market access liberalization.

Option 2: To seek guarantee from Multilateral Investment Guarantee Agency (“MIGA”). As the guarantee from the MIGA covers 5 types of non-commercial risks, i.e. (i) currency inconvertibility and transfer restriction; (ii) expropriation; (ii) war, terrorism, and civil disturbance; (iii) breach of contract; non-honoring of financial obligations; separately or together with Option 2, MIGA’s guarantee can help to enhance the bankability of the power purchase agreement.

Option 3: To cooperate with a State-owned commercial bank (“SOCB”) for its guarantee of the project and then, negotiate with lenders to eliminate all recourses that lenders may ask from the sponsors and/or the borrowers. This appears to be the more realistic option but it may come with a higher interest rate and requires extensive negotiation with the SOCB and lenders.

How to make use of the CPTPP and the EU- Vietnam FTA

The recent conclusion of the EU- Vietnam FTA (EVFTA) negotiation and the signing of the CPTPP further opens the market to foreign investors. The investors now can bring their technology and know-how, especially those from countries with high level of development in renewable sectors such as Germany, to Vietnam with less market access barriers and being more secured. In particular, the CPTPP and the EVFTA make it possible that foreign investors could sue Vietnam’s Government for its investment related decisions according to the dispute settlement by arbitration rules. The final arbitral award is binding and enforceable without any question from the local courts regarding its validity. This is an advantage for investors considering the fact that the percentage of annulled foreign arbitral awards in Vietnam remains relatively high for different reasons.

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Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any lawyers listed in our office listing if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

August 23, 2018August 23, 2018 by Dr. Oliver Massmann

VIETNAM – SOLAR POWER – Breaking News – PRIME MINISTER’s FINAL WORD ON POSSIBLE COD EXTENSION FOR SOLAR POWER PROJECTS IN NINH THUAN PROVINCE – WHAT YOU MUST KNOW:

Solar energy industry in Vietnam remains one of the most legally unpredictable areas as the saga around the possible COD extension appears to re-emerge. On 8 August 2018, the Government issued a Resolution No. 104/NQ-CP summarizing the decisions that this authority reached in its regular meeting in July 2018. In this 12-page long document, the Government only briefly addressed the issue of possible COD extension for PV energy projects in Ninh Thuan (Point 14). Accordingly, it appears that after many backs-and-forths, the long proposed COD extension for Ninh Thuan solar power projects will be approved.

This proposal has been through a lot of hectic struggles. The market would recall that rumor for such extension was first emerged in June 2018, before an official letter from the Prime Minister Office killed it off in July 2018. Now, it appears that the advocates for COD extension finally prevail as this is the first ever such COD extension is approved by a legal document issued by the Government rather than quasi-judicial official letters.

It must be noted that the language under Resolution No. 104 does not provide a certainty as it still calls for MPI to finalize another legal document to formalize this extension. However, Resolution No. 104 provides a clear mandate that MPI must finalize such legal document prior to 20 August 2018. As this article is published, such document should be already in place but there is no such information available on the public domain to confirm it. That means the players in this market will need to take every movement by the Government with a pinch of salt in light of internal struggles that we have witnessed.

A very important note is that this COD extension is not for every one. First, it only limits to solar power projects in Ninh Thuan province, which adds up so far to 2,000 MW. So, a project owner in Binh Thuan would need to pass this news as reference only even though we learn that many players and watchdogs are pushing for a nationwide COD extension, expecting to be out end of this year. Second, only projects which are already in the master plan approved by the MOIT and the Government will receive this treatment. That means, new and upcoming projects will not receive this COD extension.

As experience will tell, there will be a lot more to learn from this new area for both sides, government and the investors. Please stay tuned for more updates!

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If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com . Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Thank you very much!

August 1, 2018 by Dr. Oliver Massmann

VIETNAM – SOLAR POWER BREAKING NEWS – EXTENSION PROPOSAL BY MINISTRY OF PLANNING AND INVESTMENT OF DEADLINE FOR FEED IN TARIFF REJECTED – WHAT YOU MUST KNOW

Last June, the whole solar energy industry rocked (and became excited!) with the news that the Deputy Prime Minister, in one of his meetings with the Ministry of Industry and Trade (MOIT) on 20 June 2018, has agreed in principle that the COD extension for solar energy projects under the Decision 11 shall be extended beyond the original deadline of 30 June 2019. According to Vietnam’s political tradition, this development would normally mean the subsequent issuance of official legislation to formalize the decision. One source infomed the market players that the decision for extension would first be issued by end of July for Ninh Thuan projects due to the province’s economic downturn, and by the end of this year, a decision to extend nationwide will follow. On 4 July 2018, the Ministry of Planning and Investment (MPI), in coordination with the MOIT, submitted an official letter No. 4545 (Letter 4545) to the Prime Minister to formally propose the COD extension. That letter 4545 was addressing Ninh Thuan solar energy projects only but market players expected that proposal for nationwide extension would follow very soon.
However, in a rare and unpredictable move, on 26 July 2018, the Government’s Office issued an Official Letter No. 7108 (Letter 7108) to reject the proposal for COD extension for Ninh Thuan solar energy projects, without mentioning any rationale behind it or any reference to the Deputy Prime Minister’s in-principle agreement with the MOIT. That means, as a result of Letter 7108, everything under Decision 11 would stay the same, at least for Ninh Thuan solar energy projects.
What remains unclear is whether the MOIT/MPI would continue pushing for a nationwide COD extension, amidst the Letter 7108. One source continues insisting that such a nationwide COD extension (which was planned to go through by end of 2018) is still reviewed by the Prime Minister. From the IPP’s perspectives, it is understandably viewed as a 50/50 decision. A high-yielder would continue go for bigger projects with hope that nationwide COD extension will take place, while others may choose to go with smaller one to ensure the construction time to be secured.
We will keep our clients updated on the development of this saga. Time is of essence now yet everything is still up in the air. For prudent reasons, we would have to advise IPPs to go with smaller projects now for the purpose of plausible construction time. We can help introducing such projects.
Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any lawyers in our office listing if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

July 9, 2018 by Dr. Oliver Massmann

Vietnam Investment Review interviewing lawyer in Vietnam Dr. Oliver Massmann on trends in Mergers and Acquisitions in Vietnam

1. How do you judge the M&A trends in Vietnam at the current time?

The M&A market in Vietnam since the beginning of this year is very active. Foreign investors tend to invest in public listed companies or companies with good brand in the market. Sectors that attract the most interest of foreign investors are finance, real estate, retail, consumer goods, etc.
The reason is that the investors are very optimistic about the development of Vietnam’s market. In addition, the Government has also made several successful attempts to improve the investment environment, including the consideration for the amendment of the Law on Securities, which is believed to bring better financial sources to the country.

2. What should foreign investors benefit from the trends and what should they be aware of?

The Government’s privatization of many state-owned enterprises this year together with the fact that many enterprises with large capitalization and of great interest to foreign investors in these sectors are now preparing for the public listing give foreign investors more investment choices. However, they should conduct a full due diligence on the target to make sure that their investment is secured and in compliance with Vietnam laws.

3. What are still the shortcomings of the M&A deals in Vietnam?

Transparency is a barrier to foreign investors. The local target companies do not adopt international accounting standards or the equivalent, or are not willing to disclose sensitive information to their potential partners. In certain cases, for example, in real estate development projects, under table expenses are of great concern to foreign investors, especially those from the US, EU, UK, Japan and Korea.

4. Many people keep worry of the loss for not only local brands but also the local culture with more foreign domination after the M&A. What are your opinions about the matter?

It should not be of great concern. Foreign investors when buying in local companies/ brands usually bring technology, high-quality management standards and capital, which local companies lack. This helps the local companies/ brands better compete in the market, especially in case of Vietnam’s deep integration into the world and regional economy. Moreover, culture is something that foreign investors have to adapt to be able to survive in Vietnam. The case of Grab and Uber is an example.

5. What is the forecast of the trend in the future? And how they will drive the market?

Leading enterprises with good financial capacity and high growth in the sectors will attract both foreign and domestic investment. It is noted that in 2018, there will be a number of state-owned enterprises privatized under the Prime Minister’s decision. These enterprises include Habeco, Vinamilk, etc. which is believed to be successfully privatized following the recent success of Sabeco, another state-owned enterprise in the beverage sector under the Ministry of Industry and Trade’s management.
In terms of capital sources, we can expect a cash flow coming from major Asian economies such as Japan, Korea, Singapore, Hong Kong and especially mainland China which increases their strong presence in the market.
We strongly believe that the equitisation of SOEs of a larger scale and with a strong determination from the top would play a key role in driving the market.

If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any other lawyer in our office listing. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

July 3, 2018 by Dr. Oliver Massmann

VIETNAM – RENEWABLE ENERGIES – Identifying the Amazing Development – what you must know:

In recent years, Vietnam has enjoyed one of the world’s most rapid economic growth rates with an average of more than 6% p.a. Such growth has transformed the country from one of the poorest in the world into a middle-income country. Vietnam has long recognised the important role of renewable energy (including solar power) in achieving energy security, sustainable development and stable growth rate.

The revised Power Development Plan for 2011-2020, vision to 2030 (revised PDP VII), adopted in 2016, is evidence of a growing appreciation of the role alternative sources of energy, targets a 7% share of electricity generated from renewable energy by 2020 and 10% plus by 2030. The revised PDP VII forecasts the electricity demand using an annual average growth rate at 10% from 2011 to 2030. The demand will increase from 86 TWh in 2010 to 265-278 TWh in 2020 and 572-632 TWh in 2030. The estimated installed capacity would be 60 GW in 2020 and 129.5 GW in 2030.

Vietnam has a wide range of primary energy sources such as crude oil, coal, natural gas and hydro power for economic development. However, Vietnam has experienced formidable risks for its economy to be based on fossil fuels. For example, in April 2015, thousands of residents blocked a national highway for more than 30 hours in a protest against pollution by the Vinh Tan 2 coal power plants. It seems most of the hydro resource potential for hydro power plants will be fully exploited soon. Those are just two examples of incidents that could significantly impact on the national power security power of Vietnam. Accordingly, Vietnam must reduce its reliance on less “environmentally friendly” primary fossil fuel, and promoting renewable energy promptly.

Since early 2017, there has been a surge of solar and wind projects approved by the Government after the promulgation of new feed-in-tariffs (“FITs”) for on-grid solar projects and other reforming policies to attract foreign and local investment on this green industry. We highlight below some developments for your reference:

Solar power projects – Amazing development!

Vietnam’s potential capacity for solar power is considered to be similar to Spain or China, but solar power projects capacity, prior to 2017, is extremely low (less than 10 MW). However, hundreds of solar power projects have been approved by the end of 2017. So far, the Ministry of Industry and Trade (“MOIT”) informed that the combined capacity of all approved solar power projects, which will operate prior to 30 June 2019, is over 3 GW.

First time, FIT for on-grid solar power projects

Decision No. 11/2017/QD-TTg dated 11 April 2017 of the Prime Minister on the mechanism for encouragement of the development of solar power projects in Vietnam (“Decision 11”) set for the first time the FIT of US cent 9.35 pWh for on-grid solar power projects.

Solar power purchase agreement (“PPA”) template has been firstly introduced together with Circular 16/2017/TT-BCT of the Ministry of Industry and Trade. It shows that the Government has given its full support for the development of solar power projects in Vietnam.

Direct PPA Pilot for Private Sectors

Generally, solar Direct PPA is an agreement made between the solar power generator and a corporate customer in which solar power is physically delivered and sold to the corporate customer for its operations. Since early 2017, MOIT has assigned ERAV to cooperate work with USAID and consultants to research international experience and feasible models for solar Direct PPA in Vietnam. ERAV expected that its consultants could prepare the final report on solar Direct PPA models within July 2018. MOIT planned the pilot could be implemented as early as the first quarter of 2019. The pilot could realise at least 300-500 MW private solar power plants under the Direct PPA model.

Wind

With more than 3,000km coastline and plenty of islands, Vietnam has a significant potential for wind energy with an average wind speed of more than 6m/s, surpassing that of all other Southeast Asian countries. From technical perspective, Vietnam’s potential for wind power development is estimated to be 27 GW.

However, Vietnam’s wind market is still in its infancy. Up to now, there have only been five wind farms in operation with total capacity of 197 MW, up 38 MW from 2016. Other 50 projects are under different phases of development. The Vietnamese government sets a target for wind development at 800MW by 2020, 2,000 MW by 2025 and 6,000 MW by 2030.

The current wind FIT is 1,614 dong/kwh (excluding VAT, equivalent to 7.8 UScents/kwh). The MOIT has proposed the Government to increase wind FIT for inland wind power plants to 8.77 UScent/ kWh for onshore projects and to 9.97 UScent/kWh for near shore wind projects. Vietnam also expects foreign investments on development of its poor grid infrastructure, creating reliable wind speed studies and wind speed towers to measure, and improving technology and skilled workforce.

Biomass

As the agriculture in Vietnam is widespread, the capacity for sustainable power production from biomass amounts to 150 million tons per annum, 700-780 MW for electricity generation alone can be reached.

The Government’s target is to increase the biomass power to 500 MW (0.6 pct. of electricity production) by 2020 and 2,000 MW (1.1 pct.) by 2030. Until now, there have been six sugar factories out of 40 selling electricity to the national grid with a total installed capacity of 76.5 MW. Thus, there is still much potential in the market and the investors should take advantage of locations close to agricultural vicinities and focus on high season (i.e., shortly after seasonal harvests) to have the most output.

For on-grid biomass power projects, EVN is to buy all of the plant’s biomass energy output at the current price of 1,220 VND/kWh (excluding VAT, about 5.8 UScent).

Market access in WTO, CPTPP and EVFTA

Currently, there is no foreign ownership restriction in energy sector in local laws or Vietnam’s international commitments. The foreign investor may choose among permitted investment forms: 100% foreign invested company, joint venture or public private partnership in the form of BOT contract. For your information, Vietnam ties in first place with Singapore in terms of market access liberalisation.

Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any lawyers listed in our office listing if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.