Part 5: Material Contracts - Series Key Notes of Legal Due Diligence for Renewable Energy Projects in Vietnam
When conducting legal due diligence (LDD) on renewable energy (RE) projects in Vietnam, material contracts play a crucial role in assessing project risks and value. Here are key considerations:
LEGAL SHARING
Nguyễn Thị Lan Giang
2/23/20251 min read
1️⃣ Change of Control
Some critical contracts, such as Power Purchase Agreements (PPAs) and relevant agreement with EVN, which may be sorted in Licences and Permits part, EPC, and O&M contracts, may contain change of control clauses. These clauses can restrict or trigger penalties upon a change in project ownership, affecting potential M&A transactions.
Further, the corporate approvals for related-party transactions should be reviewed and flagged out.
These issues are common with other projects.
2️⃣ Pending Liabilities
Buyers must carefully review any outstanding claims, disputes, or obligations under material contracts, as these could impact the financial viability of the project. Hidden liabilities—such as unresolved warranty claims or liquidated damages—can pose significant risks.
3️⃣ O&M and EPC Contract
* O&M/EPC Contracts are often lengthy (hundreds of pages) but essential for ensuring the long-term reliability and performance of the project. Key aspects to review include:
✅ Availability Commitments: Does the supplier guarantee a minimum availability rate? What compensation applies if this threshold is not met?
✅ Failure and Remediation: What rights and obligations does the project company have in case of an operational failure?
✅ Termination Flexibility: If the seller wants to bring O&M in-house, can the contract be terminated early without excessive penalties?
* EPC Contracts: Ensuring that EPC contractors remain liable for construction defects and performance guarantees even after project completion is crucial. Delay penalties, defect liability periods, and warranty provisions should be carefully analyzed.
Understanding these contractual elements helps investors and lenders mitigate risks and make informed decisions.
Please comment and let me know if I forget any important issues for this part :)
In the next part of my LDD series, we’ll dive into Land and Real Property issues. Stay tuned!
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