INVESTING IN RENEWABLE ENERGY SECTOR Solar and Wind power projects – Getting deals done

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DR. OLIVER MASSMANN
Partner, General Director
DUANE MORRIS VIETNAM LLC
INVESTING IN RENEWABLE ENERGY SECTOR
Solar and Wind power projects – Getting deals done
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AGENDA
• BACKGROUND OF SOLAR AND WIND
ENERGY INDUSTRY IN VIETNAM
• REGULATORY FRAMEWORK ON SOLAR AND
WIND ENERGY
• INVESTMENT GUIDELINES FOR INVESTORS
• RECOMMENDATIONS
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Why investing in Vietnam?
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Vietnam 2017 Economy at a glance
• GDP: US$220.3 billion
• GDP per capita: US$2,385
• GDP Growth: 6.81% (record breaking in 10
years)
• Inflation: 1.41%
• Population: About 91.70 million
• Labor force aged 15 and above: 54.61 million
• Total export and import turnover: : >US$420
billion (7.1% increase)
• Regional Minimum wage (Region I): VND
3.980 million (US$ 175) per month (Jan
2018)
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Vietnam’s super rich population is growing
faster than anywhere else….
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… and is on track to continue leading
the growth in the next decade

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Communist Vietnam Has More Millionaires
Than Capitalist Philippines
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POTENTIAL OF RENEWABLE ENERGY
IN VIETNAM
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Energy Sector Background
• Electricity demand is expected
to increase by up to 11.4 pct.
for the 2016-2020 period and
7 times to 800 billion Kwh in
2030
• Electricity consumption is
projected to increase from
85,932 gigawatt hours (GWh)
in 2010 to 251,763 GWh in
2020
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POTENTIAL OF WIND/ SOLAR ENERGY
IN VIETNAM
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Wind
Solar
Potential: 7,000MW
Current use: 90 MW
Potential: 4-6 kWh/m2
Current use: 5 MW

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CURRENT GOVERNMENT’S
POLICIES ON RENEWABLE ENERGY
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Current Government’s policies on renewable
energy – General documents
• Electricity Law 2004 and 2012
• The Revised Power Development Plan 2011-2020 (revised PDP
VII) approved by Prime Minister in Decision 428/QD-TTg dated
18 March 2016
• Decision 2068/QD-TTg dated 25 November 2015 on
development strategy and vision of RE to 2050.
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Vietnam’s electrical energy mix
• Vietnam policy emphasises the need to diversify the country’s
energy mix whilst maximising the use of local energy reserves
• Currently Vietnam is developing an energy mix sector with
the mainstay of coal fired power
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Coal production – World Bank no longer supports???
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Current Government’s policies on renewable
energy – Wind power
• Decision No. 37/2011/QD-TTg dated 29 June 2011 on support
mechanism for wind power projects
• Circular No. 32/2012/TT-BCT dated 12 November 2012 on
development of wind power projects and power purchase
agreement for wind power projects
• FIT: 7.8 UScents/kWh(Buyer has financial support of
1UScent/kWh from the Environmental Protection Fund) –
proposed by the MOIT to increase to 8.77 UScents/kWh (pending
approval by the Prime Minister, most likely until the second half of
2019)
• PPA: Based on sample PPA.
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REGULATORY FRAMEWORK ON SOLAR
ENERGY
• Decision 11/2017/QD-TTg dated 11 April 2017 by the PM on
support mechanism for development of solar power projects in
Vietnam
• Circular 16/2017/TT-BCT dated 12 September 2017 setting out
requirements on protect development and template PPA for solar
power projects
• Solar Master Plan will be released in 2018.
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Solar Decision
• FIT:
– On-grid projects: 9.35 US cents/kWh. The rate in VND will be adjusted
annually according to the fluctuation in the VND/USD exchange rate.
– No FIT for off-grid rooftop projects
– Only one off-taker (EVN)
– The FIT applies for projects which come into operation before 30 June 2019
and within 20 years from the commercially operational date (i.e., the date when
the solar plant is ready to sell electricity to the buyer – EVN)
– No reference to Consumer Price Index to address inflation risks
• Net metering: applicable for rooftop projects. Oversupply amount will be
credited to the following month. At the end of the year or expiry of the
PPA, exceeded amount will be sold to EVN at 9.35 US cents/ kWh.
• Under 1MW rooftop solar projects are not subject to power generation
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Solar PPA
• Non-negotiable PPA and compulsory application for grid connected
solar projects
• EVN has the obligation the buy all electricity generated from solar power
projects. However, in the PPA, EVN may stop buying electricity in
certain circumstances beyond the reasonable control of the seller,
without any compensation or payments to the seller/project developer.
• The purchaser must pay the seller only for the electricity that is received
by the purchaser. The solar PPA does not include any provision where
the purchaser is unable to take the electricity produced.
• Dispute resolution: by litigation before Vietnamese courts or mediation/
resolution at authorized energy state authorities of Vietnam. No
international arbitration is mentioned!
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Back up from the Government re. the PPA
• In the recent concluded wind PPAs, the Government
subsidizes EVN 1 US cent/ kWh with regards to the
whole power output sold to EVN
• This subsidy no longer exists in the recent Solar Decision.
• Solar PPA: no provision on any form of government
guarantee to enhance the creditability of EVN
• No hint to make the solar PPA bankable.
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The EVN
• PPA is required to follow a specific template, which is
not bankable.
• The PPA template is unclear whether it is a “take or pay”
agreement.
• No amendment of the PPA template is possible, except
the supplementation to clarify the rights and obligations
of the parties, PROVIDED that it does not change the
basic contents of the PPA template.
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I am only EVN (Human)I am only EVN (Human)

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Legal solutions for getting deals done in reasonable
time without having to negotiate with EVN
• Try small projects And Go off-grid
• Only provincial People’s Committee and the direct
buyer (a company in an industrial zone for example)
involved
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Direct solar PPA
• The Government in practice does not support off-grid
projects.
• The Government is working on a pilot program for
direct PPA to come in Q3 2018.
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But don’t worry! We have the EU – Vietnam
FTA and CPTPP
• EU – Vietnam FTA:
– EU-Vietnam Free Trade Agreement (EVFTA) are ratified, Vietnam will have
more legal certainty than even Germany.
– EVFTA implements investor-to-state dispute settlement (ISDS)
mechanisms – investors can claim in case that an investor protection
obligation has been breached
– Domestic courts cannot question the legal validity of the decisions
• Comprehensive and Progressive Agreement for the Trans-Pacific
Partnership (CPTPP):
– The TPP was already concluded on 06 October 2015 but President Trump
decided to withdraw from it upon his inauguration
– TPP continues without the US, to be signed on 08 March 2018.
– New TPP accounts for 12.9% of global GDP and 14.9% of global trade.
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Multilateral Investment Guarantee Agency (MIGA)
• What’s MIGA?
In short, a political risk insurance (guarantees) for projects with the World Bank as the Insurer.
• What does MIGA cover?
All risks & losses of the insured projects relating to:
§ Currency inconvertibility and transfer restriction
§ Expropriation
§ War, terrorism, and civil disturbance
§ Breach of contract
§ Non-honoring of financial obligations
• What are the leverages?
MIGA’s valued added benefits are:
§ Deterring harmful actions - MIGA’s status as a member of the World Bank Group and its relationship with shareholder governments
provides additional leverage in protecting investments.
§ Resolving disputes - As an honest broker, MIGA intervenes at the first sign of trouble to resolve potential investment disputes before they
reach claim status, helping to maintain investments and keep revenues flowing.
§ Accessing funding - MIGA guarantees can help investors obtain project finance from banks and equity partners.
§ Lowering borrowing costs - MIGA-guaranteed loans may help reduce risk-capital ratings of projects.
§ Increasing tenors - The agency can provide insurance coverage for up to 15 years (in some cases 20), which may increase the tenor of
loans available to investors.
§ Providing environmental and social expertise - MIGA helps investors and lenders ensure that projects comply with what are considered
to be the world’s best social and environmental safeguards.25

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Multilateral Investment Guarantee Agency (MIGA)
• Eligibility?
– MIGA insures cross-border investments made by investors in a MIGA member
country into a developing member country (181 countries members: Vietnam is a
developing member country).
– In certain cases, the agency may also insure an investment made by a national of the
host country, provided the funds originate from outside that country.
– Corporations and financial institutions are eligible for coverage if they are either
incorporated in, and have their principal place of business in, a member country or
if they are majority-owned by nationals of member countries.
– A state-owned company is eligible if it operates on a commercial basis. An
investment made by a non-profit organization may be eligible if it is carried out on a
commercial basis.
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Multilateral Investment Guarantee Agency (MIGA)
• How to apply for and obtain MIGA?
Essentially this is a two-step process:
Ø Filing a Preliminary Application.
Notes: Before filing the Preliminary Application make sure your investment meets MIGA’s eligibility criteria.
Ø After MIGA processes your Preliminary Application and determines your project is
potentially eligible for MIGA cover, you should submit the Definitive Application,
supporting documents, a refundable application fee of US$10,000 and a non-
refundable processing fee.
Detailed information is available at www.miga.org/investment-guarantees.
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Investment guideline for foreign investors
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WTO ANALYSIS OF LIBERALIZATION
OF MARKET ACCESS
Vietnam ties in first place with Singapore
• *Typical restrictions: number of opened sectors, JV
requirement, limits on foreign-owned shares, permission
requirement
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Country Limitation of market
access*
Country Limitation of
market access*
Malaysia medium Myanmar high
Indonesia medium Cambodia medium
Philippines medium Laos medium
Singapore low India high
Thailand medium China medium
Brunei high Vietnam low

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Market access and Forms of investment in power market
• No foreign ownership restriction
• Investment forms:
ü A wholly-owned foreign enterprise
ü A joint venture company between a foreign investor and domestic
investor
ü Investment pursuant to the BOT legal framework
ü Through the purchase of shares in either an EVN subsidiary being or
having been equitized or a private IPP holding power assets.
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BOT – BEST INVESTMENT FORM
• Government’s Decree No. 15/2015/ND-CP on Public-
Private Partnership: making projects more bankable
• Easier to negotiate more favorable electricity rates.
• Easier to obtain more government guarantees, especially
in terms of EVN’s obligations to purchase all electricity
from the project.
• More fiscal and financial incentives.
• Precedent large-scaled BOT power projects in Vietnam:
Phu My, Vung Ang, Mong Duong 2
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INVESTMENT INCENTIVES
• Subject to the decision of the local People’s Committee
where the project is located
• Land: exemption of land rental within 3 years from the operation
date of the project, etc.
• CIT 10%
– 15 years for new enterprises investing in power plant projects
– tax exemptions within 4 years and tax reduction by 50% in the next 9 years.
• Import duty exemption
– on goods imported to create fixed assets of the projects; components,
materials and semi-finished products which are not available at home for
the project’s operation.
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Project planning
• Investors has to obtain prior agreement of EVN on power purchase prior to
licensing procedure.
• Commitment of banks or credit institutions on financing the project must be
obtained prior to issuance of Investment Registration Certificate .
• In-principle approval of the local People’s Committee is required prior to
issuance of Investment Registration Certificate depending on the project size
• A solar power plant must obtain a power generation permit from the competent
State authorities in order to conduct power generation operations in Vietnam
• Term of the permit: maximum 20 years for large power plants with particularly
important meaning on economy, society, national defense and security as per the
list approved by the Prime Minister; and 10 years for other power plants projects.
• The permit cannot be renewed but the investor may apply for a new one within
60 days prior to the expiry date of the current permit.
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Project licensing
• Step 1: The investor obtains approval from the competent authority [e.g., Prime
Minister, MOIT] approving the solar power plant as part of the power
development master plan (if required).
• Step 2: The investor obtains in-principle approval from the competent People’s
Committee (or other competent authorities subject to the details of the project)
approving the solar power plant project, land demand / location, environment,
construction plan, other terms of the project.
• Step 3: Application for issuance of the Investment Registration Certificate and
the Enterprise Registration Certificate
• Step 4: Preparation of construction / operations of the solar power plant (for
example, acquiring land area, site clearance, preparation, land investigation,
conducting environmental assessment)
• Step 5: The project company to obtain necessary permits (e.g. electricity
generating permit) and relevant agreements (e.g. PPA) for its and the power
plant’s operation.
• Step 6: Construction of solar power plant and operation
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RECOMMENDATIONS FOR INVESTORS
• Public private partnerships (e.g. - BOT) should be the first option.
• Due care on negotiations of the PPA and grid connection agreement with EVN
• Electricity selling in off-grid areas can be a good choice
• Sound financing structure, good business model and great legal assistance are keys
to success.
• Accurate prediction of where the market is heading to, in the context of Vietnam’s
critical power shortage, should be considered.
• More pressure on the government to adequately address key issues on tariff
increase, demonopolization of the power market and government guarantee.
• Vietnam’s market is extremely in need of financing and EPC capability. There are
rooms for cost-effective and high quality EPC contractors and resourceful lenders.
• In many cases, you can “test the water” with a small power plant project.
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CONNECTIONS ARE BUSINESS
PLEASE CONNECT WITH ME ON
LINKEDIN:
OLIVER MASSMANN
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WHEREVER YOU ARE - BE ALL THERE
JimElliot
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DUANE MORRIS VIETNAM LLC
Thank you very much!
HANOI OFFICE HO CHI MINH CITY OFFICE
Pacific Place, Unit V1307/08, 13th Floor, Suite 1503/04, Saigon Tower
83B Ly Thuong Kiet, Hoan Kiem District 29 Le Duan Street, District 1
Hanoi, Vietnam Ho Chi Minh City, Vietnam
Tel.: +84 4 39462200 Tel.: +84 8 3824 0240
Fax: +84 4 3946 1311 Fax: +84 8 3824 0241
Contact email:
omassmann@duanemorris.com
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References (1)
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References (2)
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References (3)
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References (4)
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