Duane Morris Vietnam

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generation projects have been delayed for 3 to 5 years, that would cause the revised PDPVII’s estimates for 2025 to be outdated very soon.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.

June 29, 2018 by Dr. Oliver Massmann

Vietnam – Solar Power Breaking News – Possible Extension of deadline for Feed in Tariff (9.35 USD cent per KW) – what you must know:

The current solar Feed-in-Tariff for on-grid projects in Vietnam is 2,086 Vietnamese dong/kWh (equivalent to 9.35 UScents/kWh) (VAT excluded). According to Decision 11/2017/QD-TTg, this solar FIT applies for projects which come into operation before 30 June 2019 and within 20 years from the commercially operational date (“COD”) (i.e., the date when the solar plant is ready to sell electricity to the buyer – EVN).

However, from our informal high level contact within the MOIT recently, it is very likely that 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). This is due to the fact that, in Ninh Thuan province, nuclear energy development has been stopped and the Government would like to develop solar energy there to support the province’s economic development.The special policy for solar projects in Ninh Thuan will be coming very soon, according to our MOIT contact. He informed us that the Deputy Prime Minister has already approved this special policy for Ninh Thuan and all await formal procedures.

We will closely monitor to update on any further changes.

Please contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have questions on the topic or any other lawyer in our office listing. Dr. Oliver Massmann is the General Director of Duane Morris LLC.

June 25, 2018June 25, 2018 by Dr. Oliver Massmann

VIETNAM – THOMSON REUTERS INTERVIEWING DR. OLIVER MASSMANN ON INITIAL PUBLIC OFFERINGS (IPO)

1. Why has there been so much IPO activity in Vietnam of late? What has been driving it?

The investors are very optimistic about the development of Vietnam’s market. Vietnam’s GDP in Q1/2018 is 7.4%, the highest rate in the past 10 years. In addition, there is growing middle class with great purchasing power. The World Bank predicts that the middle class will account for 26% of Vietnam’s population by 2026, double than the current statistics. The Government has also made several attempts to improve the investment environment.

2. How is this resulting in the legal work that the law firm is seeing out of Vietnam? What kinds of clients are you advising, and what kinds of advice are they requesting?

When the investors are new to the market, they will need legal advice to secure their investment and comply with Vietnam laws. We see this a great chance to improve our business and show our expertise in the sector. Most of our clients are from the US and Europe, who would like to take advantage of the upcoming free trade agreements such as the EU- Vietnam FTA and the CPTPP and expand their business to other neighboring countries. We mainly advise clients on due diligence of the partner, how to structure the investment and the best cooperation form.

3. What are some of the key trends you have seen among Vietnamese IPOs? How are these different from other markets in Asia/Southeast Asia?

In my view, the Government of Vietnam is more than ever expected to get money to cover its huge investment and regular payment expenses. This would serve as a key engine for a new waive of equitisiation of large State owned enterprises, especially after the successful placement of Sabeco’s shares.
In a short term, the cash flow may come to portfolio of SCIC’s list including major manufacturing companies but, in a long run, we may expect a come-back of banks, retails and real estate’s shares.
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.
When it comes to how the IPO market of Vietnam may differ from the rest of Asia/Southeast Asia, 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.

4. What industries are seeing the most activity – and can expect to see the most activity going forward? Why?

Financial (with major focus on real estate) sector, banking, consumption services and power sectors have been and will see further significant growth. The reason is in Q2/2018, many enterprises with large capitalization and of great interest to foreign investors in these sectors are now preparing for the public listing.

5. What are your predictions for the Vietnam IPO market in the immediate future?

The Vietnam IPO market will continue the growth. 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.

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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 of Duane Morris Vietnam LLC.

June 20, 2018 by Dr. Oliver Massmann

Vietnam – Secteur de l’immobilier – Problèmes actuels et solutions pour l’investissement et les perspectives sur les principaux accords commerciaux CPTPP et EUVNFTA

A. INTRODUCTION
Le cadre juridique pour le secteur de l’immobilier au Vietnam est défini par la loi sur le commerce immobilier de 2014 (LREB), la loi sur les logements résidentiels de 2014 (LRH) (tous deux en vigueur depuis le 1er juillet 2015). La LREB est régi par le décret n ° 76/2015 / ND-CP, la LRH est respectivement guidé par le décret n ° 99/2015 / ND-CP. En outre, le décret n ° 01/2017 / ND-CP, attendu depuis longtemps, a été rendu public le 6 janvier 2017 et modifie trois décrets régissant la loi foncière de 2013.
Les dispositions des règlements mentionnés ont attiré plus d’investissement dans le marché immobilier au Vietnam. Ils ont réduit les obstacles à l’investissement et élargi l’accès aux propriétés au Vietnam.
B. ENJEUX
Cependant, tous les problèmes ne sont pas encore résolus.
1. Retard dans la délivrance du certificat d’utilisation des terres (LURC) pour les investisseurs étrangers
La délivrance du certificat de droit d’utilisation des terres aux étrangers est une exigence essentielle pour le développement de projets sur des terres achetées. L’article 75 du décret n ° 95/2015 prévoit l’obligation pour le Département de la construction de délivrer la “Liste des projets interdits de propriété étrangère”. Cependant, la liste n’est pas encore publiée. Par conséquent, le ministère des Ressources naturelles et de l’Environnement s’abstient de délivrer des permis de conduire étrangers aux étrangers.
En conclusion, la Liste des projets interdits de propriété étrangère devrait être publiée dès que possible afin que les étrangers qui achètent des terres au Vietnam puissent obtenir le LURC et soient en mesure de développer leurs projets.
2. Que sont les « entreprises à capitaux étrangers » ?
La LREB, la loi foncière et la loi sur l’investissement de 2014 (LOI) régissent les « entreprises à capitaux étrangers ». Il reste des incertitudes sur ce terme.
La LREB ne fournit aucune définition des entreprises à capitaux étrangers. En outre, la loi foncière prévoit que les entreprises conjointes, les entreprises à capital 100% étranger et les entreprises vietnamiennes dont les étrangers achètent des actions, les fusionnent et les acquièrent sont considérées comme des entreprises à capitaux étrangers sans aucune indication quant au pourcentage de propriété. En vertu de la loi sur l’investissement, une organisation économique dont les investisseurs étrangers sont membres ou actionnaire doit être une entreprise à capitaux étrangers si la part de l’étranger dans l’organisation économique est égale à 51% ou plus. D’autre part, les organisations ayant des membres ou des actionnaires étrangers détenant moins de 51% ne sont pas classées comme des entreprises nationales en vertu de la Loi sur l’investissement.
Cependant, cette question est cruciale en raison du traitement différent des entreprises à capitaux étrangers et des entreprises nationales. Par exemple, les entreprises nationales peuvent transférer des droits d’utilisation des terres sous forme de division, alors que cela est interdit aux entreprises à capitaux étrangers.
En outre, le document n ° 386 / BXD-QLN (28 février 2017) publié par le Ministère de la construction indique que la LREB n’a pas besoin de fournir des dispositions relatives aux entreprises à capitaux étrangers comme l’a déjà fait la lettre d’intention. Cependant, le Document 386 n’indique pas que la LREB peut adopter la même définition d’entreprise à capitaux étrangers, le terme reste ambigu en vertu de la LREB.
3. Restrictions sur les sources de capital
En raison de la limitation des sources de capital pour le logement résidentiel par la LRH, les promoteurs étrangers ne peuvent plus obtenir de prêts auprès d’établissements de crédit offshore et d’institutions non-crédit. Cette mesure réduit la capacité et l’opportunité de lever des capitaux efficacement et la compétitivité pour les développeurs étrangers. Même si, il n’est pas nécessaire de limiter les possibilités de mobiliser des capitaux auprès de sources légitimes.
4. Changement des droits d’utilisation des terres en cas d’acquisition d’actions / d’apport en capital
L’article 2.27 du décret 01/2017 prévoit l’obligation pour les entreprises de céder des droits d’utilisation du sol ou d’enregistrer des changements dans le terrain et les biens attachés au terrain lorsqu’il y a un changement d’utilisateur foncier en cas d’acquisition d’actions ou de contribution droits d’utilisation inclus. En cas d’acquisition de terres, la terre reste toujours avec la même entreprise. De plus, le processus d’attribution peut imposer des obligations financières. Cette question peut entraîner des difficultés pour les investisseurs lorsqu’ils acquièrent des actions ou apportent du capital dans des entreprises.
5. Approbations d’investissement
L’approbation principale pour les développements résidentiels est une décision d’investissement de principe (IID) ou l’approbation de principe de l’investissement (IAA). En outre, un investisseur souhaitant établir une société au Vietnam a besoin d’un certificat d’enregistrement d’investissement (IRC).
a. Circonstances nécessitant un IID :
L’article 32 de la loi sur l’investissement régit l’exigence de l’IID qui ne s’applique qu’aux projets dans lesquels les promoteurs reçoivent des droits fonciers de l’État directement par attribution ou location de terres sans enchères, appels d’offres ou transferts. En outre, la loi foncière stipule que la seule façon dont les promoteurs peuvent recevoir des terres de l’État est d’attribuer ou de louer des terres. En conséquence, il est incertain de quelle manière le promoteur peut recevoir des terres par transfert.
b. Approbation de l’investissement pour la contribution en capital au titre des droits d’utilisation des sols:
Dans le cadre d’une coentreprise entre un investisseur national et un investisseur étranger pour développer des projets de logements résidentiels, l’investisseur national apportera du capital sous forme de droits d’utilisation des terres. Dans ce cas, l’IID n’est requis que dans les cas d’attribution ou de location de terrains par l’Etat sans appel d’offres ou transfert. Il n’est pas certain que l’IIA sera requis en cas d’appel d’offres ou de transfert.
En vertu de la loi sur la construction de 2014, le promoteur doit obtenir le permis de construction avant de pouvoir commencer le projet. Il n’est pas clair si l’IIA est nécessaire pour obtenir le permis de construire. Cette exigence pourrait entraîner un manque de capacité à mener le projet dans les cas où l’obtention de l’IIA a échoué.
D’un autre côté, si l’IID est requis, le développeur aura plus d’assurance en raison de la possibilité d’obtenir l’IID avant que le droit d’utilisation des terres soit apporté.
c. Contourner les approbations d’investissement
Comme mentionné ci-dessus, la Loi sur l’investissement fournit l’exigence de l’IRC en dehors de l’IID et de l’IIA. Pour les projets nécessitant l’IID, l’IRC sera automatiquement délivré après 5 jours ouvrables à compter de la délivrance de l’IID. Le contenu de l’IID est similaire à l’IRC et aucun document supplémentaire n’est nécessaire pour l’émission de l’IRC. Par conséquent, l’IRC n’est pas nécessaire lorsque le IID est émis.
Pour les projets nécessitant l’IIA, le développeur doit d’abord obtenir l’IRC, puis mettre en place l’entreprise avant d’obtenir l’IIA. Comme mentionné ci-dessus, le développeur est incapable de développer le projet dans les cas d’échec de l’obtention de l’IIA. En outre, l’IIA et l’IRC traitent avec les autorités et leurs approbations et l’IIA est délivré sur la base de l’approbation de planification au 1/500, de sorte que la nécessité de l’IRC n’est pas requise.
6. Contribution du capital sous forme de droit d’utilisation des terres
La loi foncière et la loi sur les entreprises de 2014 prévoient la possibilité de verser des droits d’utilisation des terres par des individus d’une terre à titre de capital à une entreprise pendant une certaine période.
En vertu de l’article 80 du décret no 43/2014 / ND-CP (15 mai 2014) relatif à l’orientation de la loi foncière, la contribution en capital sous forme de droits d’utilisation des terres prend fin en cas de décès du contributeur individuel. En conséquence, si le contributeur de capital est en train de disparaître, l’accord de contribution en capital sera résilié, ce qui affectera le LURC de l’entreprise et de ses droits d’utilisation des terres. D’autre part, la loi sur les entreprises de 2014 stipule que si une personne apporte des terres en tant que capital, l’entreprise aura le droit sur la terre.
Par conséquent, l’article 80 du décret no 43/2014 / ND-CP a causé de la confusion et de l’incertitude chez les promoteurs au cas où ils envisageraient de recevoir des droits d’utilisation des terres de particuliers.
7. Conduite d’affaires immobilières sur des terrains apportés en capital
En vertu de la Loi foncière, les entreprises à participation nationale et étrangère ont le droit de recevoir une contribution en capital sous forme de droits d’utilisation des terres. Cependant, il n’y a aucune disposition dans la LREB concernant les contributions en tant que capital pour les organisations et les individus. Par conséquent, les organisations n’ont pas le droit de recevoir une contribution en capital au titre des droits d’utilisation des terres pour développer des projets immobiliers. Cela provoque des inégalités et une concurrence déloyale dans le secteur immobilier.
C. PERSPECTIVES SUR LES PRINCIPAUX ACCORDS COMMERCIAUX CPTPP (TPP 11) ET EUVNFTA
En janvier 2017, le président américain Donald Trump a décidé de retirer les Etats-Unis de l’accord TPP. En novembre 2017, les membres restants du TPP se sont rencontrés lors des réunions de l’APEC et ont conclu à la promotion de l’actuel CPTPP (TPP 11) sans les États-Unis. L’accord doit être signé par tous les États membres au premier trimestre de 2018. Ensuite, il doit être ratifié dans chaque État membre avant d’entrer en vigueur.
Les effets du TPP 11 promettent de grands avantages pour le secteur immobilier au Vietnam. Le TPP 11 vise à éliminer les lignes tarifaires et les droits de douane entre les États membres sur certains biens et produits à 100%. Cela rendra le marché vietnamien plus attractif et pourrait inciter les entreprises étrangères à s’installer au Vietnam pour construire des entrepôts, des bureaux, installer des usines ou même investir dans le secteur immobilier car le marché devient plus dynamique avec le TPP.
Un autre accord commercial important est l’accord EUVNFTA entre l’Union européenne et le Vietnam. L’EUVNFTA offre une excellente opportunité d’accéder à de nouveaux marchés pour l’UE et le Vietnam. Cela aidera à apporter plus de capitaux au Vietnam. En outre, l’EUVNFTA stimulera les secteurs les plus économiques au Vietnam. Les établissements dans d’autres secteurs économiques au Vietnam auront un impact sur le secteur immobilier en raison de son association avec ces secteurs tels que la santé, la technologie ou l’éducation.
En outre, le Règlement des différends entre investisseurs et États (ISDS) garantira les normes les plus strictes de sécurité juridique, d’applicabilité et de protection pour les investisseurs. Nous alertons les investisseurs pour qu’ils utilisent ces standards! Nous pouvons vous conseiller sur la meilleure façon de le faire! Il va être appliqué dans le cadre du TPP 11 et de l’EUVNFTA. En vertu de cette disposition, pour les litiges liés aux investissements, les investisseurs ont le droit d’introduire des demandes d’indemnisation auprès du pays hôte au moyen d’un arbitrage international. La procédure d’arbitrage doit être rendue publique par souci de transparence dans les cas de conflit. En ce qui concerne le TPP, la portée de l’ISDS a été réduite en supprimant les références aux « accords d’investissement » et aux « autorisations d’investissement » suite à la discussion sur l’avenir du TPP lors des réunions de l’APEC les 10 et 11 novembre 2017.
D’autres titres sont assortis de l’Accord sur les marchés publics (GPA) qui fera partie du TPP 11 et de l’EUVNFTA.
Le GPA dans les deux accords, traite principalement de l’exigence de traiter les soumissionnaires ou les soumissionnaires nationaux avec du capital d’investissement et les soumissionnaires vietnamiens également quand un gouvernement achète des biens ou des demandes de service valant au-delà du seuil spécifié. Le Vietnam s’engage à publier en temps opportun les informations sur l’offre, à laisser suffisamment de temps aux soumissionnaires pour préparer et soumettre leurs offres, maintenir la confidentialité des offres. Le GPA dans les deux accords exige également que ses Parties évaluent les offres sur la base de principes objectifs et équitables, évaluent et attribuent les offres uniquement sur la base des critères énoncés dans les avis et les documents d’appel d’offres, créent un régime efficace pour les plaintes et règlement des différends.
Cet instrument assurera une concurrence loyale et des projets de développement de qualité et efficaces.
D. CONCLUSION
Les problèmes mentionnés affectent la compétitivité dans le secteur immobilier. Les restrictions données, les obligations supplémentaires pour les investisseurs étrangers, l’absence de directives claires sur les règlements d’application constituent des obstacles pour les investisseurs qui cherchent à investir dans ce secteur au Vietnam. Compte tenu des engagements du gouvernement à assurer la croissance et les problèmes mentionnés ci-dessus, il est nécessaire de créer des lignes directrices claires pour éliminer la confusion pour les investisseurs et les acheteurs immobiliers. En outre, les principaux accords commerciaux à venir auront un impact important sur le développement du secteur immobilier au Vietnam. D’un autre côté, le gouvernement vietnamien doit encore améliorer l’environnement juridique pour assurer la mise en œuvre des accords.

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Si vous avez des questions sur ce qui précède, n’hésitez pas à contacter Dr. Oliver Massmann à l’adresse suivante : omassmann@duanemorris.com. Dr. Oliver Massmann est le directeur général de Duane Morris Vietnam LLC.
Merci beaucoup!