ExpertiseElectricity

Highlights of our practice:

  • Assisted with the licensing of the first western-owned power plant investment in Myanmar, now in operation
  • Advised the Japanese Government on the structure of power regulations in Myanmar
  • Advised a Japanese conglomerate on the financing of a US$500M BOT in the power sector
  • Extensive experience with major hydro and coal power projects in Laos, Vietnam and Cambodia

VDB Loi is at the forefront of the dynamic Myanmar legal and regulatory architecture of power generation. Our team assisted clients to secure the first “international” Power Purchase Agreements and has worked extensively on a number of power generation projects, from 50MW to 500MW, comprising coal, gas, biofuel and hydro. Independent power producers (IPPs) seek the firm’s assistance on a variety of issues, ranging from Myanmar law advice on the documents of the investment, to investment licensing and tax structuring. Equipment manufacturers and EPC providers consult our advisors on contractual issues, Government procurement rules and tax implications. Our team has also advised the Japanese Government on the regulatory structure of investment in the Myanmar power sector.

Of particular note is the firm’s report “The Legal and Regulatory Framework of Foreign Investment in Myanmar’s Power Sector” which can be downloaded here. The report analyzes the current practices and obstacles in power investment from a legal angle, and formulates recommendations for improvement.

The Myanmar team can, if required, draw on the expertise and resources of our offices in Laos, Cambodia and Vietnam, where the firm’s lawyers and advisors have extensive and longstanding experience with power projects.

Corporate and tax structure of power sector investments

A combination of three particular skill sets make our firm uniquely placed to meet client needs for structuring solutions: our practical approach, our unrivaled experience with investment and operating licenses, and our tax skills. Being able to integrate these three aspects effortlessly right in the conference room saves precious time in devising the right corporate structure that ticks all the boxes.

The firm is renowned for its superior tax knowledge in Myanmar. Few firms are able to field a highly experienced tax advisory team in Myanmar, let alone with an engaged resident tax partner. At VDB Loi, both resident partners have backgrounds as highly accomplished tax specialists with global firms, which is a unique proposition. The firm provides technical assistance to tax and customs authorities in Myanmar and throughout the region.

In the power sector, for example, our deep understanding of import duties on fuel stock, the Commercial Tax implications of electricity supply, and accounting rules allowed us to construct an accurate financial model for our client, an international owner of a dozen power plants in Southeast Asia, backed by a major UK banking group. To cite another example, during our representation of a Japanese conglomerate in a proposed supply of a 500MW power facility, we were able to advise in detail on the Government’s internal processes and hurdles for approving a transaction of this nature, allowing the client to improve the targeting of its dialogue.

Our IPP clients most often need assistance and advice in relation to a wide range of aspects of their project structure, including:

  • Foreign ownership restrictions
  • Shareholding structure options
  • Capitalization
  • Financing and security
  • Profit extraction
  • Foreign exchange issues
  • Importation
  • Land lease rights

Licensing of investments in the power sector

Obtaining an investment permit from the Myanmar Investment Commission (MIC) for the IPP’s project company is a crucial step in the investment process, and a major specialty of VDB Loi. The preparation for obtaining the MIC Permit can be a lengthy process and should start as soon as possible after the IPP has passed the MOU stage.

Service providers in Myanmar use quite different approaches and fee structures in relation to obtaining an MIC Permit. Our firm’s approach is to provide not just high-level advice on the process, but to actually prepare the legal documents and the voluminous financial portion of the application ourselves. Of course, this is only possible with an interdisciplinary team which comprises accountants and financial specialists (overseen by a partner with a CPA and Big Four background), as well as lawyers.

Our firm’s unique holistic approach to licensing of power projects allows the client to save precious time and costs by centralizing the legal, financial, tax and regulatory work in one, integrated team with all required skill sets. All decisions and review takes place in Nay Pyi Taw, where the firm has a fully operational office to support our clients’ needs for frequent and constant contact with the Government decision makers. In our recent representation of an international IPP for a gas-fired 50MW plant in Ahlone, for example, being able to interact directly with and between the Ministry of National Planning and Economic Development, the Ministry of Electric Power and the Ministry of Finance proved invaluable.

  • We drive and monitor the document collection process with precision and unparalleled responsiveness: Our deep understanding of the small but often very important details of the process allows us to be clearer in our communications with the client, and to eliminate unnecessary costs and time.
  • We actually complete the investment proposal and, more importantly, the financial projections that are required to be added to the proposal: The financial projections and analysis is the area where clients lose a lot of time if they are not properly assisted by an advisor who has a deep understanding of the particular requirements and expectations of the MIC. Our team, not the client, will have the labor-intensive task of preparing the investment proposal and its annexes, based on the client’s business plans or budgets.
  • Lodging the proposal with the MIC: We will lodge the investment proposal dossier with the MIC on your behalf.
  • Following up the proposal and project presentation: We will liaise with the authorities in order to obtain the MIC Permit. This usually requires us to provide additional information to the authorities upon their request before they accept or agree to pass on the proposal internally.
  • Very often face-to-face meetings and an actual project presentation will be required. We will conduct such meetings (with or without your representatives), assist in preparing the presentation (for example pointing out where to put emphasis, based on our prior experience with the MIC), and assist you at the time of the presentation (or make it on your behalf if you are unable to attend).

Assistance with drafting and reviewing documentation

Our clients primarily seek our assistance with respect to the Myanmar law issues of the contractual framework, which may include a number of documents, including:

  • Power purchase agreement (PPA)
  • Memorandum of Agreement (MOA): In many cases this is the keystone document in Myanmar, preceding the PPA. The MOA is essentially a BOT contract which provides that a PPA, a land lease and, if applicable, a feedstock agreement is to be concluded between the parties.
  • Land lease
  • Gas Supply Agreement or other feedstock agreement
  • Joint Venture Agreement: certain power investments require a joint venture with the Government, such as hydropower and coal-fired projects. Wholly foreign ownership is allowed for most other projects. Nevertheless, a number of IPPs are joint ventures between foreign and/or local investors.
  • O&M Agreement
  • EPC Agreement
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