Jus Laws & Consult: 2016 Renewable Energy Sector in Thailand. May Draft Contents for Marketing Brochure Only

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1 Jus Laws & Consult: 2016 Renewable Energy Sector in Thailand May 2016 Draft Contents for Marketing Brochure Only

2 1) Thailand s Energy scenario and the potential for renewable energies According to the Asian Development Bank, Thailand s GDP will grow 3% in 2016 and 3,5% in 2017 while the Thai Government is planning a very ambitious infrastructure projects that will expand the local energy demand. Nowadays, basically the industrial sector and transportation are the largest source of demand that account for 36% of the total energy consumption. In fact the power demand from BTS, MRT and 10 mass rapid transit infrastructure projects in the capital of Thailand and the ambitious high speed train project will contribute to the notably increase of the energy consumption. Regardless these transportation and infrastructure projects, Thailand holds beside Indonesia already the highest electricity consumption of Asean region (MW h/yr). Based on the Ministry of Energy estimations, Thailand energy consumption is actually growing an average of 2.67 % per year and will grow a minimum of 75% in the next two decades within a socio-economic context where the Government needs to upgrade and improve the efficiency of the current power plants, renovate transmission and distribution lines (19 transmission system developments are in studying process) and at the same time implement new power plants to face the growth of population and nationalregional economy integration. On 14 th of May 2015, The National Energy Policy Committee (NEPC) approved the PDP 2015 Power Development Plan for and the 30 th of June the Cabinet acknowledged it. As a background before this, in 2012, the Ministry of Energy and the Electricity Generating Authority of Thailand (EGAT) had approved the Thailand Power Development Plan but the PDP 2015 for introduced significant changes and a rereading on aspects such as energy security (less dependent on natural gas and rely more in renewable energies), economy (less impact on people cost of living), Asean regional integration (during the 14 th ASEAN Summit in Thailand in 2009, the meeting recognized the challenge of climate change, and agreed to cooperate on energy security, ASEAN energy cooperation, and development of renewable and alternative energy) and ecology (releasing 37% less carbon monoxide). Based on the PDP 2015, the Alternative Energy Development Plan (AEDP) estimates that even if the power generation cost of the renewable or alternative energies is still higher than the classic sources, the commitment to make Thailand a Low Carbon Society and the incompatibility of certain conventional energy resources with the key tourist industry (tourism contributes to almost 10% of GDP and it is forecast to rise to THB 4,496.7 billion by 2025) offers outstanding opportunities to renewable energy companies and foreign investors looking for long term and high returns. As a matter of fact the AEDP wants to increase 30% the dependence on renewable energies. In 2036 Thailand expects to have a power demand of 326,119 GWh and 49,655 MW. In South of Thailand, pushed by the growth of tourism, the demand would grow 3% and at least 3 new power plants would be set up in Krabi and Thepa district. In Central Thailand area we must highlight the energy projects in South Bangkok, Wang Noi and Bang Pakong area. Find below a table with the analysis of the potential in each segment:

3 Thailand Potential in Renewable Energy (MW) Solar 42,356 Wind 14,141 Hydro 2,906.4 Mini Hydro 410 MSW 697 Biogas 4,567 Biomass 8,492 Nowadays the dependence of energy import is a big concern for the Thai Administration, therefore the Government plans to rely more in renewable energies and exploration activities to look for natural gas and oil. In fact the Government expects that, by this order, Biomass, Photovoltaic, Wind energy and hydropower will cover a 25% of the energy consumption by Indeed, the segment covered by wind energy companies can reach a potential of quota of 14,141 MW in the areas of the country with average wind over than 6 m/s and the target in 2036 is to reach 3,002 MW. The wind potential before mentioned refers to Surat Thani, Nakhon Si Thammarat, Songkhla, Yala, Pattani and offshore locations. Regarding the solar energy, the real potential of 1% of possible installation in Thailand would be 42,356 MW while the government targets 6,000 MW in was a record year, the total market of new installed projects grew more than 50% from 470 MW in 2014 to 722 MW in Solar Energy is considered to play an important role in remote but strategical areas for its importance for the Thai economy, such as the group of Islands that go from Koh Tao Koh Phangan to Koh Samui with current frequent energy disruption. On the other hand due to the rapid increase of population and growing urbanization, Thailand has a growing waste problem. More than half of the waste produced per day 48,000 of 74,000 tons could be reused for energy or recycling but less than 3,700 tons per day are. The Municipal Solid Waste (MSW) Potential can reach 697 MW. The New Alternative Energy Development Plan (AEDP) states clearly to encourage waste, biomass and bio gas power generation as the first priority but meets sometimes obstacles through the approval process and finance. The New Energy Policy will be probably launched during 2016 with a new five years plan ( ) and a budget of Bt60-billion for the Energy Conservation Promotion Fund (ENCON Fund). ENCON Fund was established in 1992 to foster the establishment of renewable energy projects in Thailand. According to an internal proposal, the ENCON Fund will increase its budget to promote renewable-energy activities from Bt7 billion annually to Bt12 billion annually. 2) Regulation, Feed-in Tariff and Board of Investment Tax and Non Tax Incentives The Energy Industry Act B.E (A.D. 2007) started to be effective in December It established a new regulatory regime for electricity and natural gas businesses. One of the purposes of the Act was to separate policy making, regulation and operating functions. The Energy Industry Act set up the Energy Regulatory Commission that is responsible for the prevention of abusive use of monopoly power and protection of energy consumers.

4 Last 26 th of December 2006, the National Energy Policy Committee approved that the Electricity Generating Authority of Thailand (EGAT) could purchase power from generators using renewable energy. On 2007, EGAT announced Regulations for the Purchase of Power from Small Power Producers exclusively from renewable energy sources. Thailand was a pioneer by being the first country in Asean to implement feed-in tariff (FiT) and in 15 th of December 2015 the National Energy Policy Council announced new FiT figures. The FIT is granted for 20 years, except for power systems fueled by landfill gas that will be granted only for 10 years. The Thailand FIT is composed of three components: FIT = FIT(F) + FIT(V) + FIT Premium. The main legal and regulatory framework that apply to the Renewable Energy sector comprehend among others: Energy Development and Promotion Act Energy Conservation Act The Energy Industry Act Factory Act Hazardous Substance Act Improvement and Conservation of National Environmental Quality Act Industrial Estate Authority of Thailand Act Industrial Product Standard Act Investment Promotion Act Ministerial regulations and other subsidiary legislation issued under the above law The above mentioned Thai Laws regulate the control and the use of energy resources and the environment appropriately in terms of quantity and quality control. Renewable energy companies are granted with Tax and Non tax Incentives from the Board of Investment Thailand (BOI). Renewable energy projects such as that produced from Biomass, Biogas, Municipal Solid Waste, Biofuels, Solar Energy, Wind Power, Hydropower, among others, are eligible for BOI support. We would like to emphasize that the production of energy from Waste or refuse-derived fuel ( RDF ) has been classified as an activity of special importance for Thailand. These types of projects will be granted an 8- year corporate income tax exemption without being subject to a corporate income tax exemption cap,

5 as well as exemptions of import duties on machinery and import duties on raw or essential materials, as well as non-tax incentives. Production of electricity or steam from renewable energy sources and projects that manufacture fuel from agricultural products, garbage or waste will receive an 8-year corporate income tax exemption. Projects that manufacture biomass briquettes and pellets will receive a 5-year corporate income tax exemption. 3) A new renewable Energy hub in Asean Region From our point of view, based in our experience as corporate, energy and infrastructure lawyers who on a regular base provide legal advice and professional services to Thai and Foreign renewable energy companies, the renewable energy market in Thailand is rapidly restructuring itself and will experience deep positive changes in the near future. As an example of this, recently it was announced that private companies will be allowed to develop solar rooftops. The Thai sector will be liberalized allowing enterprises to obtain solar rooftop licenses with the capacity of 100 MW. Metropolitan Electricity Authority will coordinate solar projects in the area of Bangkok, Nonthaburi and Samut Prakan while other areas will be managed by the Provincial Electricity Authority. On the other hand we believe that future renewable energy plants and projects will be larger and for sure more ambitious than today s one and will receive financial support from a more multi-faceted public and private organizations not limited to the domestic scale but multi-lateral international scale. Thailand will become a renewable energy hub in the next years and the market will be more competitive with the arrival of new highly specialized EPC contractors and Technology suppliers from Europe, United States and Japan. Nowadays our professional team of Thai and Foreign Associate Lawyers and Partners at Jus Laws & Consult International Law Firm (J&C) provide comprehensive legal services to renewable energy companies and foreign investors. From private contractual agreements, public concession agreements, project finance, EPC projects, feasibility studies, Power Purchase Agreements, public procurement, tenders, joint ventures, company and tax structure to building or operation advisory services, J&C can assist in the following areas: -Solar and Photovoltaic Energy -Wind Energy -Hydro Power Energy -Waste to Energy Since 6 th of January 2016 J&C is recognized by the Ministry of Finance and Thai Consult to deliver legal advice and provide consultancy services to Type A government projects in Thailand. This allows our firm to be accredited consultants in most of the infrastructure and energy projects taken place in the future of Thailand.

6 4) Contacts: If you would like to discuss any of the matters raised in this report, please speak with a member of our Jus Laws & Consult Infrastructure & Energy team below: Yuthana Promsin Managing Partner yuthana@juslaws.com Jose Herrera Partner jherrera@juslaws.com