Cambodia Legal Update: New Solar Park Project Receives Approval from the Council of Ministers

The Council of Ministers of Cambodia has recently approved the long-awaited project for the construction of a 60MW solar power plant. This is the first part of a 100MW project, which, according to the pre-feasibility study, proves to be not only viable, but will also contribute to national grid stability and an increase in energy access.

After the success of the first industrial-scale 10MW solar power plant in Bavet, Electricite du Cambodge (“EDC”) has been working to move to the next stage of including renewable energy in the country’s power generation mix. Under the new project, we understand that a build-own-operate contract will be awarded under a public-private partnership (“PPP”) scheme. EDC would purchase the electricity under a Power Purchase Agreement at an expected tariff of seven to nine cents per kWh.

The Council of Ministers’ approval of the solar power project is key to moving Cambodia forward with increased renewable energy production. 

The firm conducting the detailed feasibility study for the solar power project is expected to report by August of this year. In the meantime, it appears that a bankable PPP framework is under development, which will be tested under this project, with a view to using it as a template for future PPPs in Cambodia. Subsequently, we understand EDC will open a tender to select the most viable independent private producer.  We now anticipate that bidding will start by the third quarter of 2018 or early 2019.

The chosen location of the project has been receiving increasing interest from potential bidders in anticipation of possible land acquisitions (we understand that the plant may be located in Kampong Speu Province or Kampong Chnnang), and on about 200 hectares of land.

We assisted the Asian Development Bank (“ADB”) as legal advisers on the first 10 MW solar power plant in Bavet. This project encountered numerous challenges due to the lack of regulations and precedent. However, the experience gained by all the parties involved, and the recent guidelines developed by the Electricity Authority of Cambodia, should surely provide a smoother path for the new project.

If you have any questions, or would like more information about investing in this sector, please contact me.

VDB Loi is a network of leading law and tax advisory firms with offices in Cambodia, Indonesia, Laos, Myanmar and Vietnam. We provide the highest quality solutions for transactions and taxation. Our general areas of practice are corporate, finance, licensing and disputes. Our principal specialized areas of practice are energy, infrastructure, real estate and construction, telecom, and taxation.

You can find more information on our Cambodia office here.