Risk when foreign investors acquire renewable energy projects

	Policies needed to encourage investment in waste-to-energy
	New strategy opens great opportunities for private sectors to develop energy
	Serious energy shortage despite running oil-fired power

An energy project has a number of distinct characteristics that require oversight and supervision of relevant State management agencies. Photo: Nguyen Thanh

Step by step change of owner

Referring to the issue of changing owners of large solar power projects, the case of B.Grimm Power Company, an investment arm of B.Grimm Group (Thailand) is one typical example. Initially, this company worked with domestic investors to do projects, then gradually increased ownership to the majority. It is worth mentioning that this company is associated with XuanCau Group to make DauTieng solar power project.

The DauTieng solar power project in TayNinh of TayNinh Oil Power Joint Stock Company (a joint venture of B.Grimm Power and XuanCau Group) is considered as one of the biggest projects in Southeast Asia on clean energy, with a capacity of up to 420 MW. From August 2019, PreeyanatSoontornwata, Chairman of B.Grimm Power is the legal representative of TayNinh Oil Power Joint Stock Company and is currently Chairman of the Board of Directors. Notably, Soontornwata is also the legal representative of Phu Yen TTP Joint Stock Company (Hoa Hoi solar power) and Viet Thai Solar Power Company Limited.

Apart from B.Grimm, the case of Super Energy Corporation (Thailand) gradually acquiring shares and investing in dozens of renewable power projects in Vietnam is also remarkable.

Since mid-2018, this company has acquired shares and invested in dozens of renewable power projects in Vietnam (including solar and wind power) such as Van Giao 1, Van Giao 2, Phan Lam 1, Binh An, Thinh Long, Sinenergy NinhThuan and many other wind power projects. In addition, the Thai energy group Gulf Energy Development has spent trillions VND to buy nearly 100% of shares of two solar power projects in TayNinh: TTC1 and TTC 2 and the energy project of ThanhThanh Cong Group in Ben Tre.

In addition to the above cases, Fecon Joint Stock Company sold the majority of VinhHao 6 solar power project to its partner, ACWA (Saudi Arabia); AC Energy, a subsidiary of the Ayala Group of the Philippines, has also invested in many projects of the BIM Group, a "giant" in the market of renewable energy.

An investor in renewable energy said: “In other countries like Vietnam, the world's leading energy groups rarely develop projects themselves. This is to avoid legal and procedural issues. In fact, many domestic investors will set up businesses, conduct research, surveys, carry out investment procedures for projects, and then transfer shares in that enterprise to investors capable of carrying out the project.”

Need to check and supervise tightly

Ha Dang Son, Director of Research Center Energy and Green Growth, said he believed that these transfers of ownership rights should be considered normal activities in the market mechanism. Accordingly, a good project, capable of achieving high financial ratios, will get interest in acquisition. The transfer of ownership of the project can also help the developers of the initial project adjust their business goals, focus capital to carry out larger projects; or allow a better qualified investor to participate in project construction and completion.

However, Son also emphasized that, unlike normal project transactions, an energy source project has specific characteristics that require supervision by relevant State management agencies. It should be clarified whether such a transferrable project poses any potential energy security risks. If the transfer of the project occurs during the initial stage of construction and installation, there may be the intervention of the new investor in changing or adding equipment not in the initial feasibility study file, devices that can remotely interfere with the system can even be installed.

"In addition, when the proportion of renewable electricity (wind, solar) increases to a sufficiently large level, concurrent incidents in some projects can be harmful as objective or intentional causeaserious impact on the national electricity grid, affecting the ability of electricity supply in a large geographical area, the system management and operation agencies need to workclosely to quickly replenish, completing standards and technical regulations related to connecting to the national grid system ("Grid Code") as well as assessing possible incident scenarios to devise appropriate solutions, timely and ensure safe operation of the national grid,” Son emphasised.

Analysing from the perspective, renewable energy projects are actually being subsidized when the price of electricity is higher than the average retail price of electricity, Ha Dang Son said, essentially, consumers are indirectly paying. As a subsidy for these projects, it is important to note what social benefits are guaranteed through the transfer of such projects. For example, whether the Government will collect project transfer tax, or the granting of licenses or the application of support mechanisms in accordance with current law will create an extraordinary incentive or not?”

“When an investor applies for a project with extraordinary incentives, and then transfersownership to the foreign investor, the ’implicit’ profit will be generated by these extraordinary incentives, but for the State it is very difficult to handle when discovering a mistake, not to mention the legal problems with foreign investors that will affect the investment environment," said Son.

Giving a somewhat more optimistic view, focusing on the analysis of the perspective of solar power projects, a senior officer in the electricity industry recognises, currently solar power accounts for only few percent. Each year 10 billion kWh of solar power compared with 270 billion kWh of electricity a year is only 3-4%. In that 3-4%, foreign investors account for only a very low rate. Regarding foreign investors becoming the real owner of many renewable energy projects, he said: "That is the line of indirect investment. Their capital inflows into Vietnam have shown a good profit market. They also take care of their money, to recover capital.”