Baker overcomes cross-border issues in solar farm financing

solar farm renewable energy

Baker McKenzie’s Bangkok office counselled the Export-Import Bank of Thailand (EXIM Thailand), the Industrial and Commercial Bank of China’s (ICBC) Hanoi branch, and ICBC Thai in the project financing of a solar farm in Vietnam.

The project financing of a 50MW photovoltaic solar farm in Vietnam for Thinh Long Phu Yen Solar Power Joint Stock Company, a wholly-owned subsidiary of Super Energy Corporation Public Company, was valued at THB1.2 billion (US$38.6 million).

Vit Vatanayothin, Baker McKenzie’s renewable energy partner in Bangkok, led the transaction with the support of associates Tatcha Thumpramoth, Pranisa Chinkulkitniwat and Andy Thamsirisup.

Vatanayothin told Asia Business Law Journal: “The Vietnamese legal landscape is rather complex, untested, and is relatively different from that of Thailand. Vietnamese law does not recognize an offshore letter of credit issued at the request of a local Vietnamese company, but recognizes a shareholder’s offshore loan extended to a local Vietnamese company.”

To overcome this legal hurdle, Vatanayothin said the firm assisted its clients to restructure the letter of credit reimbursement obligations to shareholder loan repayment obligations by putting in place a shareholder guarantee in favour of an offshore issuing bank. “

After the shareholder guarantor has made payment to the issuing bank, the local Vietnamese company’s reimbursement obligations under the letter of credit would be replaced by shareholder’s loan extended by an offshore shareholder to the local Vietnamese company,” he said. This legal treatment of shareholder’s loan may be unusual in Thailand, but it is quite common from a Vietnamese legal perspective.

“Through our close collaboration with our Vietnamese legal counsel, we were able to assist our clients to successfully overcome the legal restrictions and hurdles with practical solutions that are not only complying with Vietnamese legal restrictions but also addressing all parties’ concerns on the issues in question.”

EXIM Thailand is a state-owned specialized institution under the Ministry of Finance’s supervision. The bank’s objective is to conduct business that promotes and supports Thai exports, imports and investment for the purpose of national development by providing credit facilities, guarantees, insurance against risks or other services conductive to its goals.

ICBC is a multinational Chinese banking company. The state-owned commercial bank is on the Forbes Global 2000 list of the world’s biggest public companies.