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B A N G L A D E S H | C A M B O D I A | I N D O N E S I A | L A O P D R | M Y A N M A R | S I N G A P O R E | T H A I L A N D | V I E T N A M
BANGLADESH | CAMBODIA | INDONESIA | LAO PDR | MYANMAR | SINGAPORE | THAILAND | VIETNAM
Lao PDR HydropowerConcession Agreements
Key Issues12 September 2013
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DFDL Legal and Tax Advisory: Unique in SE Asia
In 1994, a foundation with a unique vision:
To build an integrated international standard law and tax firm,
With in-depth knowledge of the Mekong Region (now Southeast Asia),
While providing specialized and personalized advisory services to theinternational business community.
Our Strategy: Not “Go Where our Clients Go”, BUT “Go BEFORE you Go”.
2
“Pioneers in Frontier Markets”
Laos
1994 - 19 years
Cambodia
1995 - 18 years
Myanmar
1996 - 17 years
Contact: Walter Heiser, Senior Counsel: [email protected]
www.dfdl.com
mailto:[email protected]://www.dfdl.com/http://www.dfdl.com/mailto:[email protected]
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Regional experience
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Government Grant of Rights/Privileges
Infrastructure or Natural Resources Exploitation
Sectors: Electricity; Mining; Industrial Plantations; Railroads; Toll Roads
Limited Term
New Assets: Build-Own-Operate-Transfer
Existing Assets: Own-Operate-Transfer
Concession Agreements: Uses
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MOU
Project developmentexclusivity rights: 18months-extendable 1x, 9mos. No guarantee ofconcession.
ProjectDevelopment
Agreement
Project developmentexclusivity rights: Moredetailed than MOU: 18months- extendable 2x, 6mos. (domestic project), 3x,6 mos. (export project). Noguarantee of concession.
ConcessionAgreement
Right to develop, construct,own and operate the Project.Maximum 30 year term fromCOD. Transfer of ProjectAssets to GOL at termination.
Preliminary Agreements:
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Feasibility Study: Ministry of Energy and Mines (“MEM”)
Environmental Impact Assessment (“EIA”): Ministry of Natural Resources
and Environment (“MoNRE”)
Social Impact Assessment (“SIA”): MoNRE
Health Impact Assessment (“HIA”): Ministry of Public Health (“MPH”)
Environmental Management and Monitoring Plan (“EMMP”): MoNRE
Social Management and Monitoring Plan (“SMMP”): MoNRE
Relocation Action Plan (“RAP”): MoNRE
Ethnic Minority Development Plan (“EMDP”): MoNRE
Health Action Plan (“HAP”): MPH
Parallel Requirements: Studies and Plans
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Shareholders Agreement
Articles of Association
Concession Registration Certificate
Parallel Requirements: Project Company Formation
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• Tariff MOU: Electricité du Laos(“EDL”)/MEM/Prime Minister
• PPA: EdL
Domestic Lao
Power Sales
• Tariff MOU: EGAT? EVN?
• PPA: EGAT? EVN? GovernmentApprovals?
Export PowerSales
Parallel Requirements: Power Off-Take Agreements
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ProjectCo.
Share-
holdersProject
Lenders
Off-
Takers
EPCContractor
O&MContractor
FuelSupplier
Govern-ment
Lessor
Insurance
Project Finance Risk and Reward Sharing
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Concession Agreement Terms
GovernmentProject
Company
– Exclusive Project Rights
– Term
– Transfer to Government
– Royalties and Taxes
– Social Benefits
– Environmental Duties
– Buy-Out Conditions
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The Concession Term: How Long? Maximum: 30 years from COD
Government Equity Participation?
Force Majeure: Sovereign Risk. Political Risk Insurance?
Force Majeure: Natural FM; Hydrology. Sponsor Risk?—PPA Deferral?
Special Incentives: Tax and Duty Holidays and Reductions; Exemption
from Regulations. No more “tax free” deals.
Change of Law Risks
Pre-Existing Conflicting Concession Rights
Off-Taker Credit Issues: Government Guarantee?
Termination Compensation
Key Concession Agreement Issues
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Government Equity— %? Carried Interest? Special Financing?
Government Veto Rights– Contractors? Project Contracts?
Secured Financing Rights— Step-In Rights?
EdL Second Lien?
Share Transfer Limitations-- Pre-COD? Post-COD?
Subordination of Taxes/Royalties to Debt Service
Set Off Rights
Force Majeure Risks
Change of Law— C ompany Risk?
Penalties– Caps?
The Sticking Points
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Government Equity— %? Carried Interest? Special Financing?
Government Veto Rights– Contractors? Project Contracts?
Secured Financing Rights— Step-In Rights?
EdL Second Lien?
Share Transfer Limitations-- Pre-COD? Post-COD?
Subordination of Taxes/Royalties to Debt Service
Set Off Rights
Force Majeure Risks
Change of Law— C ompany Risk?
Penalties– Caps?
The Sticking Points
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B A N G L A D E S H | C A M B O D I A | I N D O N E S I A | L A O P D R | M Y A N M A R | S I N G A P O R E | T H A I L A N D | V I E T N A MB A N G L A D E S H | C A M B O D I A | I N D O N E S I A | L A O P D R | M Y A N M A R | S I N G A P O R E | T H A I L A N D | V I E T N A M
Domestic:
EDLExport:
EGAT/EVN
No Lao PDR “National Grid”
EDL Grid: Limited Reach; Limited
Capacity—115kV; 230 kV
T-Lines to EGAT: Owned by Specific
Projects: Need to NegotiateWheeling Charge and Capacity
Upgrade—Non-Cooperation an issue
No T-Line to Vietnam
Financing? EDL Lacks Funds―
Project Must Pay. No ADB CurrentFunding
Turn-Over of T-Line to EDL or GOL?
Compensation?
Line Loss: Distant EGAT/EVN
Delivery Points
Transmission Line Blues
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Buy-Out or Take-or-Pay Continuation?
Debt + Equity + Return?
Company Default
Government/Off-Taker Default
Force Majeure—Company Side
Force Majeure—Government/Off-Taker Side
Government Events
Lao PDR vs. Other South and SE Asian Countries
Termination Compensation
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Insurance
Insurers
ProjectCompany
ProjectLenders
Insurance
– Construction Risks
• Hazards
• Delayed Opening
– Commercial Risks
• Operating Hazards
• Natural Force Majeure
•
Business Interruption
– Political Risks
• Debt
• Equity
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Enterprise Law/Investment Law
Shareholders’ Agreement/AOA 70:30 Debt: Equity/ 10% Reserve
Lao PDR Limited Company
GOL Right to Equity Stake: Electricity Req. in Practice: Negotiable
Direct Foreign Investment?
Not Permitted for Concessions
The Investment Vehicle
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Ministry of Planning and Investment(“MPI”)/ Relevant Sector Ministry (Dept.of Energy Business of MEM)
Permitting Bodies: MoNRE; InvestmentPromotion Dept. of MPI; MPH; Ministryof Industry and Commerce, etc.
Ministry of Finance; Prime Minister;National Assembly/National AssemblyStanding Committee
Government Approvals
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B A N G L A D E S H | C A M B O D I A | I N D O N E S I A | L A O P D R | M Y A N M A R | S I N G A P O R E | T H A I L A N D | V I E T N A M
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BANGLADESH | CAMBODIA | INDONESIA | LAO PDR | MYANMAR | SINGAPORE | THAILAND | VIETNAM www.dfdl.com