MERGER AND ACQUISITION OF SOLAR POWER PROJECTS IN VIETNAM

M&A PROCEDURES (MERGER AND ACQUISITION) OF SOLAR POWER PROJECTS

1. Definition of mergers and acquisitions (M&A) according to the provisions of the Law, stating the legal basis

M&A is the abbreviation of two English terms: Mergers and Acquisitions. M&A is considered a method for gaining control over a company or enterprise through merger and acquisition activities of that company or enterprise.

The merger of companies is regulated in Article 201 of the Enterprise Law 2020 and Clause 2, Article 29 of the Competition Law 2018. Accordingly, business mergers are the merger of one or several companies and enterprises. another company or enterprise by transferring the assets, rights, obligations, and legal interests of the merged company to the receiving company. This process officially terminates the existence of the merging company

 Under Clause 4, Article 29 of the Competition Law 2018, the acquisition of a company or company can be understood as follows: a company acquires an industry or profession or acquires part or all of the shares and assets of a company. another company to control and dominate the company.

2. Definition of Solar Power Projects

Solar energy is an enormous energy source received by the Earth daily from the Sun in the form of light and heat. It is considered a natural, clean, and inexhaustible energy source. To utilize this energy efficiently and effectively, solar power has emerged. Solar power refers to electricity generated by directly converting sunlight into electrical energy through solar panels (photovoltaic cells).

With the increasing demand for energy and commitments to environmental protection, large solar power projects in Vietnam have emerged as a potential and sustainable energy solution. A solar power project can be understood as a project that harnesses the infinite energy from sunlight and converts it into electricity for living and production needs. In Vietnam, these projects are implemented by constructing solar power plants, which are facilities that use thousands of photovoltaic panels to directly convert sunlight into electrical energy. These plants are built on large areas to capture the maximum amount of sunlight.

Vietnam, with its geographical advantage of a long coastline and high solar radiation levels, is considered a country with significant potential for solar energy development. The government has issued numerous incentive policies to encourage investment in this field. As a result, solar power projects have been widely deployed across the country, playing a crucial role in enhancing the electricity supply and reducing negative environmental impacts.

3. Introduction to the Development Potential of Solar Power Projects in Vietnam

Favorable Geography and Climate   

Vietnam is a country with a tropical monsoon climate so it is considered to have great potential for solar energy with the average number of sunshine hours in the country ranging from 1700 to 2500 hours/year. With a solar radiation intensity of approximately 4.6 kWh/m²/day promising a large electricity output, in recent years, many solar power investors have sought to exploit the energy source. this endless.

The demand for energy is increasing

With economic development and population growth, coupled with rapid urbanization, the demand for energy consumption in daily life (electricity, water, and fuel) has also increased. As living standards improve, the need for electronic devices and household appliances has risen significantly, contributing to higher electricity consumption. Solar power is an effective solution to sustainably meet these growing energy demands.

Government Support Policies

The Vietnamese government has implemented and continues to introduce various policies to encourage the development of renewable energy, including solar power. These policies create favorable conditions for investors to participate in the solar power market.

Leading in the ASEAN Region

According to a report by the International Renewable Energy Agency (IRENA), as of 2023, Vietnam recorded 17 GW of installed solar power capacity. Vietnam leads ASEAN countries in solar power capacity, nearly doubling the combined total capacity of other ASEAN nations. The country is working towards phasing out coal-fired power generation by 2050 and increasing the share of installed solar power capacity to 34%, up from 23% in 2022. Energy planning also forecasts that energy storage capacity will rise to 300 MWh by 2030 and 26 GWh by 2050.

4. Trends in Mergers and Acquisitions (M&A) of Solar Power Projects

Vietnam ranks among the top 20 countries with the largest renewable energy capacity in the world and leads Southeast Asia, with 16 GW of solar power and approximately 5 GW of wind power. The trend of mergers and acquisitions (M&A) in the solar power sector in Vietnam is currently very active and is expected to continue increasing in the coming years.

Strong Interest from Foreign Investors:

International investors, particularly from Singapore, South Korea, Japan, Thailand, and European countries, have shown significant interest in Vietnam's solar power market. They primarily engage in M&A by acquiring projects that are already operational or in the development stage.

The trend of "aggregating" solar energy companies in Vietnam is emerging, highlighting the market dominance strategies of foreign investors. This is evident from numerous moves made by foreign investors over the past year. For example, in June 2024, Sembcorp Solar Vietnam Pte Ltd (Singapore) announced the completion of its acquisition of controlling stakes in three subsidiaries of Gelex Group (GEX), operating in the renewable energy sector with a total capacity of 196 MW of solar and wind power. Similarly, in July 2024, Levanta Renewables, another Singapore-based investor, announced its acquisition of a 28.7 MWp rooftop solar project from entities associated with Tien Nga Joint Stock Company,…

M&A will be the model shaping the next phase of the renewable energy market

The initial phase of solar power development in Vietnam was driven by the feed-in tariff (FiT) mechanism. Policies encouraging investment in renewable energy have attracted a wave of companies into the market over the past two years. However, as this mechanism ends, M&A becomes an important way for investors to continue participating in the market. M&A allows investors to save time and costs compared to developing a project from scratch, while also taking advantage of existing permits, infrastructure, and power purchase agreements (PPA)

5. Procedures for mergers and acquisitions of businesses in solar power projects

Business Acquisition Procedure of LHD Law Firm

Step 1: Identifying needs and conducting business valuation and negotiations

(i)     Valuation: The buyer bases the valuation on the criteria for evaluating and auditing the business, determining the value of the business according to market standards and their financial capacity. The valuation may be carried out by the buyer independently, by a third-party valuation firm, or based on the seller's proposed price;

(ii)    Negotiation: Both parties negotiate the purchase price, the method of acquisition, payment terms, and the payment schedule.

Step 2: Preparing the contract

The business acquisition contract must be approved in writing by the highest competent authority of the company. The contract should include the following contents: the transfer price, the total amount of outstanding debts of the company, which party (buyer or seller) is responsible for the debts, ownership of assets, employment contracts, and other signed contracts that have not yet been fully executed. The contract must ensure a balance of interests between the parties to guarantee a successful transaction.

The subject of the sale should be clearly defined in the contract, including the name and address of the acquired company, its registered business activities, investment capital or charter capital of the company, the portion of equity or shares being transferred by the business owner, and the types of tangible and intangible assets of the company.

Step 3: Legal procedures and transferring the business

After completing the above steps, the buyer makes the payment, and the seller transfers ownership and management rights of the business to finalize the business acquisition transaction.[1]

Business Merger Procedure 

Step 1: The involved companies prepare the merger agreement and the draft charter of the receiving company.

The merger agreement must include the following key contents: the name and address of the receiving company’s headquarters; the name and address of the merged company’s headquarters; merger procedures and conditions; employment usage plan; the methods, procedures, timeframes, and conditions for converting assets, equity shares, and bonds of the merged company into those of the receiving company; the timeline for completing the merger;

Step 2: The members, owners, or shareholders of the involved companies approve the merger agreement and the charter of the receiving company.

The merger agreement must be sent to all creditors and notified to the employees within 15 days from the date of approval;

Step 3: The receiving company completes the business registration procedures by the provisions of the Enterprise Law 2020.

6. Related articles and reference content:
7. https://kinhtetrunguong.vn/kinh-te/viet-nam-van-con-nhieu-tiem-nang-trong-phat-trien-nang-luong-tai-tao.html
8. https://dangcongsan.vn/kinh-te-va-hoi-nhap/tiem-nang-phat-trien-ben-vung-dien-mat-troi-va-dien-gio-tai-viet-nam-655972.html
9. https://www.tinnhanhchungkhoan.vn/thi-truong-ma-nhon-nhip-hon-post358628.html
10. https://forbes.vn/ma-se-dinh-hinh-thi-truong-nang-luong-tai-tao-giai-doan-ke-tiep

[1] Article 50 of Decree 01/2021/ND-CP.

[2] Clause 2, Article 201 of the Enterprise Law 2020

LHD Law Firm services (M&A)

Our lawyers and professionals have extensive experience which enables us to advise investors well and to represent them in all matters relating to mergers and acquisitions as well as joint venture matters, both foreign and domestic. Before you merge with or acquire another company you should consult with us concerning: