SOLAR POWER M&A CONSULTING SERVICE IN VIETNAM

The issue of renewable energy development is a common trend around the world, and this is also the goal of Vietnam. Realizing the increasing demand for energy in Vietnam, many foreign investors are entering the market through mergers and acquisitions (M&A), especially focusing on renewable energy projects such as wind power and solar power.

SigLaw Firm will provide information about solar power M&A activities and solar power M&A deals in Vietnam in this article.

SOLAR POWER M&A IN VIETNAM

Difficulties in implementing solar energy M&A in Vietnam

Previously, the reasons for the limited number of solar energy (and other renewables) M&A deals emanated from various industries, some of which have been highlighted as barriers to the development of the solar energy industry. For the M&A sector alone, the factors that create barriers to developing the acquisition potential of the project include:

• Covid-19: Many ongoing M&A deals have been delayed or canceled because of the pandemic, forcing Vietnamese project owners to adjust their strategies.
• Development Fees and Financial Feasibility: Due to the cumbersome, expensive, and risky development process, developers demand higher development fees that most investors consider reasonable at a level of current returns and risks – the situation is also made worse by Covid-19 resulting in increased development time and costs for many developers. For projects developed under the Phase 1 FiT and cannot achieve the Commercial Operational Date (COD) before June 2019, the nonconformity from the Phase 2 FiT or other mechanisms is particularly clear.
• PPA model and loanability: For developers, this risk is adversely affecting investment decisions due to unresolved loanability concerns.
• Limited access to non-recourse financing: For developers, the financial landscape still lacks the large-scale participation of the international project funding community, with some large projects, mainly in co-financing projects led by the Asian Development Bank (ADB).
• Environmental and Social (E&S) Concerns: Some renewable energy projects (especially hydropower) lack the necessary documentation and due diligence on E&S aspects, which makes investors institutions and lenders must be vigilant.
• Lack of standardized M&A processes: Clear and standardized M&A processes and related documents, e.g., investment reports, investment memorandums, financial models, structured data rooms structure with English documents, etc., have not been established in Vietnam because most of the sellers are inexperienced and information collection is still tricky.
• Cuts: The significant reduction of solar power plants, especially in the South and Central regions, with partial cuts in some projects >50%, is a reason for continued concern. Although the Vietnamese government has declared a priority to expand the transmission line network, it is still a long-term task to realize and – combined with the sample PPA and loanability concerns – poses significant financial risks to project investors and lenders.

M&A deals of solar power projects in Vietnam

Buyer (Nation)	Target Project	Transaction detail	Time	Wattage	Location
Super Energy (Thai Lan)	Loc Ninh solar power plant 1–4	Acquiring70% of shares for 70 million USD	March 2020	550 MW	Binh Phuoc
B. Grimm (Thai Lan)	Hoa Hoi Solar Power Plant	Acquiring 80% of shares from Truong Thanh Group of Vietnam (TTVN) for $35.2 million	August 2018	275 MW	Phu Yen
BC Container Glass (Thai Lan)	Xuan Tho Solar Power Plant 1&2	Acquisition of 12.86% shares for an undisclosed amount	September 2020	99,2 MW	Phu Yen
Gulf Energy (Thai Lan)	TTCIZ-02 Solar Power Plant	Buy 41% more (up to 90% total) for an undisclosed amount	January 2019	50 MW	Tay Ninh
Begistics (Thai Lan)	GA Power Solar Park Cam Xuyen and GA Power Solar Park Huong Son	Acquiring 40% of shares for an undisclosed amount	July 2019	2 x 29 MW	Ha Tinh

POTENTIAL DEVELOPMENT OF SOLAR POWER M&A ACTIVITIES IN VIETNAM

Although development has been slow so far, there are reasons to expect that Vietnam’s still relatively quiet solar M&A scene will begin to heat up in the coming months as investors begin to assess risk from others rather than focusing solely on the funding concerns of the PPA model:

• Massive supply of solar projects in operation: 2,988.9 MW of terrestrial solar projects will likely reach COD by the end of 2020, adding to existing operating solar assets with many properties to be acquired
• EVN’s Positive Credit Rating: In June 2018, Fitch gave EVN a first and positive credit rating of “BB,” confirmed in April 2020 with a stable outlook on par with the credit rating of Vietnam. Therefore, besides the sample PPA,  EVN will likely pay under the PPA.
• Foreign lenders are more eager to lend: As noted, the first major projects received loans from international financial institutions – a trend is likely to continue given the high demand for such financing and lenders’ growing comfort with analyzing and reducing underlying risks.
• Attractive electricity tariff: Compared to other regional solar projects and potential future tariffs in Vietnam under the published competitive selection process, the rates offered in both FiT phases FiT are high, allowing relatively high profits.
• Prospects of the competitive selection process: The announced competitive selection process may make it more difficult for developers who want to sell their projects after completion to participate, leaving the market to IPPs will hold these assets for a long time and effectively reduce the number of projects to buy.

M&A CONSULTING SERVICES FOR SOLAR POWER PROJECTS OF SIGLAW

In the current market context, many businesses in the energy sector need to buy and sell solar power projects. However, sophisticated procedures along with substantial legal risks may need the selection of a reputable M&A consulting firm. When using Siglaw’s M&A consulting services, clients will receive the most enthusiastic support as follows:

• Consulting on current legal provisions related to business mergers and acquisitions.
• Consulting and assessing M&A solar power forms for customers to select the type that best meets their demands.
• Consulting, supporting to build a solar power M&A strategy for businesses, assessing potential targets.
• Consulting and assisting clients in verifying the target business’s legal system, assessing risks and complying with the law.
• Assisting clients in planning the acquisition of the target company.
• Supporting customers to perform valuation analysis, business due diligence.
• Based on the purposes of the Buyer and the Seller of the solar power project, Siglaw supports consulting the transaction structure to ensure the most optimal time, legal procedures and tax obligations.
• Consulting, representing the Buyer or the Seller to negotiate the contract.
• Based on the transaction structure, Siglaw drafts or reviews contracts and legal documents to ensure optimal transaction execution.
• Monitor the transaction execution process of the two parties and support when required until the merger and acquisition procedure is completed.

For a free comprehensive M&A consultation, please contact:

Siglaw Firm

Head office in Hanoi City: 12A Floor Sao Mai Building, No. 19 Le Van Luong Street, Nhan Chinh Ward, Thanh Xuan District, Hanoi City.

Email: [email protected]

Branch in the South: 21 N4 Street, Commercial, Service and Residential Complex at 16/9 Bui Van Ba Street, Tan Thuan Dong Ward, District 7, Ho Chi Minh City.

Central Branch: 177 Trung Nu Vuong Street, Hai Chau District, Danang City

Email: [email protected]

Hotline: 0961 366 238