Transmission Line for Offshore Wind Power Projects in Vietnam

Please download the pdf version here.

Transmission line is an integral part of any power project in Vietnam. For an offshore wind power project (Offshore WPP), if the Government and Vietnam Electricity (EVN) does not agree to assume the usual responsibility to develop and operate the transmission line of an Offshore WPP as in the case of onshore projects, then the project sponsor will need to assume such responsibilities and the risks associated with them. This post examines in detail the legal issues which may arise when an Offshore WPP develops, owns and operates its own transmission line under the current legal framework.

Read MoreInfo
Comment
Written by Nguyen Quang Vu On In ,

Structure for foreign lenders to take mortgage over the Land Use Right held by Vietnamese borrower

Under Land Law 2013, a foreign lender (Foreign Lender) is not permitted to take mortgage over land use right (LUR) from a Vietnamese borrower. However, a foreign lender with the support of a Vietnamese bank may consider the following the structure to allow a Vietnamese company (Borrower) to use its LUR as security for a foreign lender. The structure could be summarized as follows:

  • A Vietnamese bank (Vietnam Bank) will lend a loan (Domestic Loan) to the Borrower. The Borrower will mortgage to the Vietnam Bank its LUR as security for the Domestic Loan (such mortgage, the LUR Mortgage). Under the Land Law 2013, a company in Vietnam can mortgage its LUR to a bank licensed to operate in Vietnam.

  • Under Vietnamese law, upon enforcement of LUR Mortgage by the Vietnam Bank, the Borrower has the right to receive the remaining proceeds after payment of the Domestic Loan (Right to LUR Mortgage). If the value of the Domestic Loan is less than the value of the LUR then the Right to LUR Mortgage could have substantial value. The Right to LUR Mortgage is usually recorded in the mortgage agreement between the Borrower and the Vietnam Bank. Accordingly, Right to LUR Mortgage is a type of contractual property right, which can be used to secure performance of obligation under Article 14 of Decree 21/2021.

  • Accordingly, the Borrower could mortgage the Right to LUR Mortgage to a foreign lender (Foreign Lender) as a mortgage of contractual rights (Rights Mortgage) in order to secure a loan extended by the Foreign Lender (Foreign Loan) to the Borrower.

Read MoreInfo
Comment
Written by Nguyen Quang Vu On In ,

Allocating Sea Area for Offshore Wind Power Projects In Vietnam

Applicability of Decree 11/2021

It is likely that an offshore wind power project (Offshore WPP) will need to follow the procedures under Decree 11/2021 in order to be allocated with the necessary sea area for development and operation of the Offshore WPP. This is because:

  • Under the current wind power development regime of Vietnam, an Offshore WPP is defined as a grid-connected wind power project with wind power turbines constructed and operated “from the average lowest seawater line over several years off the coast” (nằm ngoài đường mép nước biển thấp nhất trung bình trong nhiều năm ra ngoài khơi);

  • Decree 11/2021 applies to the allocation of certain sea area “from the average lowest seawater line over several years off the coast” for exploitation and use of “sea resource” (tài nguyên biển); and

  • Sea resource is defined to include biological and non-biological resource of the water mass, the [sea] bed and the soil beneath the seabed.

Read MoreInfo
Comment
Written by Nguyen Quang Vu On In , ,

Offshore Wind Development in Vietnam – Legal Issues Relating to the Use of Sea Area

Vietnam appears to have great potential to develop offshore wind. And recently, many foreign investors are interested in developing large offshore wind farms in Vietnam. Unfortunately, except for regulations on offshore oil and gas development under the Petroleum Law, Vietnam does not have adequate regulations to develop a large offshore infrastructure project such as offshore wind farms. This starts with inadequate legal framework on the use of sea under the Law on Sea 2012 and Decree 11/2021. In particular,

  • The Law on Sea 2012 and Decree 11/2021 allow certain sea areas (khu vực biển) to be allocated for exploitation and use of “sea resources” (tài nguyên biển). While the term “sea resources” is not clear, it appears to include offshore wind farm development. Decree 11/2021 requires a project developer of an offshore wind farm to pay from US$ 125/ha/year to US$300/ha/year for the sea area allocated to the project. Payment for the allocated sea area could be a substantial amount since an offshore wind farm could require significant sea area for not only the wind turbines and the floating sub-station but also the sea area for the undersea transmission line and other protective area/corridor. On the other hand, sea area allocated to offshore oil development is exempt from payment under Decree 11/2021.

Read MoreInfo
Comment
Written by Nguyen Quang Vu On In , ,