Thailand: A green approach

Thailand: A green approach

There's no denying Thailand is going to see a massive spurt in energy demand
in the coming decades. Even factoring in conservative assumptions such as
the country's population remaining the same, the successful implementation
of its Energy Efficiency Programme, and the development of a smart grid,
energy consumption is set to jump 75 percent over the next two decades,
according to the Thailand Power Development Plan of 2015. At the same time,
energy imports are expected to rise from 42 percent in 2013 to a staggering
78 percent in 2040.

Driven by the need to secure its energy supply for the foreseeable future,
as well as increase its economic competitiveness regionally and globally,
Thailand became one of the first countries in Asia to encourage alternative
energy investment, according to Jessada Sawatdipong, senior partner at
Chandler & Thong-Ek Law Offices. "As early as 2008, government introduced
the Alternative Energy Development Plan or AEDP," says Jessada. "Today, we
are seeing positive results. Thailand is currently the leading biofuel
producer and user in Southeast Asia, and at the end of 2015, it had more
solar power capacity than all of Southeast Asia combined. At the same time,
the country also encourages production of other renewable energy resources."

In September last year, Thailand's National Energy Policy Council (NEPC)
approved the AEDP 2015-2036, an action plan that aims to increase energy
consumption from renewable energy sources to 30 percent by 2036.
Additionally, in order to boost private sector investment in renewable
energy, the country's Board of Investment (BOI) is providing a number of
incentives, including tax-related ones such as an exemption or reduction of
import duties on machinery and raw materials.

RED CARPET

Apart from taxation incentives, Jessada says that incentives for prospective
investors in energy projects include benefits available under BOI promotion
schemes, incentives under the Foreign Business Operations Act (FBOA), and
financial institution lending programmes. For starters, BOI - the principal
agency tasked with providing investment information, services to investors
and investor incentives - offers benefits for developers of renewable power
plants under numerous categories.

When it comes to tax incentives, projects can receive benefits like an
eight-year corporate income tax exemption, exemption of import duty on
machinery, and others, says Jessada. He adds that developing and operating
renewable power plants in Thailand is not subject to FBOA-related
restrictions. "A foreign shareholder may thus hold up to 100 percent of the
shares in the project without having to obtain any approval under the FBOA,"
says Jessada. "However, a non-Thai company cannot own land under the Land
Code unless BOI promotion is granted."

Finally, both local and foreign financial institutions are willing to
provide financing for renewable energy power projects, says Jessada. "Thai
banks, in particular, are strong financially and have the appetite to
provide financing for renewable projects on a project finance basis," he
adds.

RISKS AND CONSIDERATIONS

According to Jessada, prospective investors in energy, and particularly
renewable energy projects, should consider three major factors. These are
grid capacity, land issues and, most importantly, availability.
"Applications for sale of power from each type of renewable project will be
announced by the Energy Regulatory Commission in accordance with the NEPC's
resolution from time to time," he says.

"So investors need to carefully follow the government's current policies in
this area, conduct independent research, and prepare in advance with energy
sector specialists to ensure requirements are met prior to submission of
applications."

Additionally, investors need to be certain that grid capacity is available
in the area where the project will be developed, says Jessada. And then of
course, there are land issues. "Securing the land throughout the period of
the renewable project is critical," he says. "Investors can acquire or lease
the land depending on the type of qualifications or limitations incumbent on
the land. Both private and public land can be leased in Thailand for up to
30 years - with the possibility of renewal - and leases have to be
registered through the Land Department."

Again, the feasibility of the land for the project could be a potential
concern, notes Jessada. "The type of land required would depend on the
project contemplated," he says. "Wind power plants require the project site
to be located in areas with suffcient wind speed and energy, and these sites
are often not available for implementation as there are limited freehold
lands with these characteristics remaining." Finally, forest land and other
lands that do not have title documents will also be an issue raised by
financial institutions when conducting their due diligence, explains
Jessada.

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Ref:
http://www.legalbusinessonline.com/features/thailand-green-approach/73180

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com