09 Walter Heiser ConcessionAgreements


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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

3


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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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Documents

09 Walter Heiser ConcessionAgreements