Energy and Infrastructure 2015: Asia-Pacific industry trends

Asia-Pacific journalists Adam Majeed and Hill Choi Lee look at the key trend in the region's energy and infrastructure sectors in 2014/15

Australia

Significant reforms in the past decade geared towards enhanced productivity in the energy sector has produced gains in the electricity and gas sectors. But the sought out solution is for regulatory reform to promote cost-efficient investment, operation and use of energy infrastructure, rather than building new infrastructure – and a number of independent bodies oversee such developments.

Despite being mired in partisan politics, there has been much talk about privatisation of the electricity networks in New South Wales (NSW) and Queensland. The combined $48 billion sale would be a boon for bankers and advisers, but while the NSW networks are 100% state-owned - comprising TransGrid and Networks NSW – a number of other states in Australia privatised their electricity assets at an early stage. The plans, however, remain uncertain after state elections saw the business friendly Liberal National Party take a hit in NSW and Queensland.

In Australia itself there has been an overall decline in the demand for energy and the coal industry – with notable exceptions in the $10 billion Roy Hill iron ore project and Adani Group's $16 billion Carmichael mine project - has taken a hit. “At the moment clients are too scared to build a coal-fired plant,” one practitioner says. The biggest change has been that project development has stopped as commodity prices are at a level that doesn't inspire activity. Since mid-tier coal players are short of cash, corporate work is now more streamlined and productivity oriented.

Another consequence of the dearth in the demand for energy has been a slowdown in renewable energy work. The government unveiled a Direct Action Plan (DAP) to reach its emissions reduction target, but lack of demand for new energy and policy uncertainty hasn't sparked interest to invest in such projects.

Since Australia is an energy exporter selling 80% of the energy it produces, demand for liquified natural gas (LNG) has not decreased as Asia “has an insatiable appetite for Australian gas”. But the drop in commodity prices has made things more difficult for ongoing projects and there have been some substantial disputes arising from LNG projects. “The size of the claims are so large they'll make you weep,” one partner says.

Deal flow is much stronger on the social and economic side of infrastructure as transport has been a key sector in the past 12 months. In fact Australia is midway through a long phase of infrastructure growth, especially utilising the PPP (public-private partnership) model in NSW and Queensland and so “everyone wants to be known as an infrastructure leader”. Most of these projects are in road and rail with two of Australia's most significant being the A$8 billion North West Rail Link (NWRL) and the A$7 billion East West Link – Stage One (EWL).

The legal market in Australia is fragmented, competitive and fluid. For the independents there is much less work in Australia, but there are more lawyers fighting over a shrinking pool of mandates. Over the past few years, we have seen international firms enter the market with cases of large domestic brands partnering the internationals in a variety of ways. This year hasn't bucked the trend with Pinsent Masons and Hogan Lovells the latest set to open energy and infrastructure-focused practices. Another trend has seen the internationals in Australia pivot towards Asia with cases of Australian talent being transferred to the money-centres in Hong Kong and Singapore.

Cambodia

Cambodia’s energy sector is looking forward to a boost in its energy sector in the coming years. In 2014, the Prime Minister announced plans to deliver electricity to all Cambodian villages by 2020 with up to 70% of households having access to power by 2030.

2,100km of transmission lines will be built to deliver to support the distribution of electricity in which 50% of the total power supply will come from hydropower dams.

As an example, in 2012, Cambodian Royal Group and Chinese Hydrolancang International Energy signed a joint venture agreement for building a 400MW hydropower dam, which is the first non-governmental project comprising of shareholders from Cambodia, Vietnam and China.

Chinese investors in particular are regarded as crucial components to the development of Cambodia’s energy sector.

To tackle concerns about the potential harmful impact on food security including fish stocks that could come with hydropower projects, the government has also approved several coal-fired power plant projects, including a 100MW coal-fired power plant which is being developed under the CDC’s Power Development Plan in the Preah Sihanouk province. DFDL advised on the project with partner Martin Desautels in the lead.

With this surge in energy projects, the Cambodian government is also looking to develop a PPP (public-private partnership) program.

China

China is a huge consumer of energy and this is likely to continue well into the future. The country’s energy consumption continues to be dominated by coal, and it now consumes over half of the world’s coal. At the same time China’s energy production has risen, but it is still outpaced by consumption. After coal, oil is the nation’s second-largest source of energy consumption. In the 1990s China used to be a net exporter of oil but in more recent times it is known – alongside the United States – as a top oil importer, and its spending patterns have an important impact on producers. This isn’t likely to change any time soon as Rosneft – the Russian state-owned oil company – entered an agreement with China National Petroleum Corporation for the supply of 365 million tonnes of Russian crude oil worth approximately $270 billion over a 25 year period, which was one of the biggest deals in the history of the global oil industry.

The country has however made efforts to shift away from coal and has attempted to diversify its supply with forms of energy including hydroelectricity, natural gas, nuclear power and other renewables. In its 12th Five-Year Plan, the government set a target to raise non-fossil fuel energy consumption to 15% by 2020 in efforts to alleviate its dependence on coal. “It is a trend in China that there has been a shift from traditional to renewable energy as coal plants are a big problem,” one practitioner says. “Energy projects are related to environmental problems and we’re now looking to use gas to replace coal, especially in eastern China.”

In the research period, China made big news in global economic governance as it launched the $50 billion Asian Infrastructure Investment Bank to meet Asia’s large infrastructure needs. Last month, countries such as the United Kingdom, Germany, France and Italy joined alongside 30 other countries. The country itself experienced huge growth and expansion in airports, roads, and railway construction, but reduced growth prompted China’s State Council to decide last year to allow private capital investment in infrastructure. There will be some 80 projects open to public bidding in sectors such as railway, port construction, IT infrastructure, oil and gas pipelines, renewable energy, coal and petro chemicals, and storage facilities. “We’ll see a lot more private and foreign capital, so we’re looking forward to more PPPs related to local government construction and infrastructure construction,” one partner says. “It’s unlikely with the high speed railway, but in urban transport there’ll be more private capital. So we’re looking at subways, water and waste disposal facilities.”

China has a robust independent legal market and international firms often work on outbound matters. However, as the country gradually opens up we have seen its legal market soften ever so slightly. In the research period, Chinese firm Dacheng combined with Dentons to form the world's largest firm by headcount. It was only the second time ever a Chinese firm completed a substantial merger – albeit through a Swiss verein - with an international firm after Chinese firm King & Wood, Australian outfit Mallesons and the UK's SJ Berwin formed King & Wood Mallesons in 2012.

India

India’s energy and infrastructure sectors are generally seen as active markets with a focus recently on renewable energy and port and road infrastructure development. Since 2011 however the market has slowed due to the stalling in India’s economy following the Vodafone tax case and the subsequent general election.

Following the instalment of the Modi administration in 2014, the government has increased its efforts in promoting India’s energy sector to foreign investment, including introducing a new electricity bill that will give guidelines on feed-in tariffs – a crucial step towards improving the country’s energy market.

Renewable energy is a big topic in India. The country’s ambitions in this area include upgrading its solar energy infrastructure and in 2014, the government announced that it is to increase solar capacity to 20,000MW nationwide. Plans are in the works to establish these solar parks within the next five years, with 10 of them projected to be set up in 2015. The government later revised its power generation target to 100,000MW by 2022.

Several policies have been implemented to create further opportunities for India’s energy sector. Including encouraging renewable energy use for telecom towers in the country which are currently running on diesel as a main power source.
India’s wind energy market has reached a certain level of maturity and lenders are attracted by the tariffs for projects that have risen in the last three years. In mid-2014, India’s minister of power and energy, Piyush Goyal, announced the intention to add 10,000MW of wind power capacity to the sector every year. That is near to 70,000MW by 2022, the target year in which India has pledged to reduce 20-25% in emissions per unit of GDP from its 2005 level under the United Nations Framework Convention on Climate Change (UNFCCC).

Nevertheless, there are still several hurdles the government need to overcome to push its renewables program forward. One of which is the enforcement of penalties should companies fail to meet the mandatory minimums the government has set in terms of how much renewable energy distribution companies and large-scale consumers must purchase.

While India has the world’s fifth largest coal reserves and was the fourth largest energy consumer globally in 2013, emissions targets means that it is set to reduce its dependency on fossil fuels. The government has been cutting subsidies whilst increasing taxation in this area.

Further initiatives attempt to provide energy access in rural areas via microgrids, which the government said it will provide up to 90% of the capital funding for their construction.

Indonesia

Indonesia remains one of the most popular investment destinations in the Asia Pacific region. Its mining, infrastructure, energy and manufacturing sectors are its key selling points.

The mining industry saw FDI worth $4.7 billion in 2014 figures. The infrastructure sector including telecommunications and transport reached $3 billion. Most of its investors originate from Europe and Japan with the Java region drawing most attention.

Recent changes affecting the Indonesian energy and infrastructure (E&I) market include the inauguration of President Joko Widodo, also known as “Jokowi”, the Indonesian central bank’s issuing of new controversial offshore borrowing rules, and the introduction of a raw ore exportation ban at the start of 2014.

Indonesia’s power sector received a lot of attention from Jokowi’s new administration as he announced plans to construct power generating plants with a capacity of 35,000MW in capacity by 2020. 20,000MW will be tendered out to independent power producers (IPPs) and 15,000MW is to be built by state-owned utility PLN. The tender for two 1000MW power projects known as Java-7 and Java-5 has already been launched by PLN.

Expansion plans in Indonesia’s natural resources sector have also been pushed. Earlier this year, Pertamina and a consortium of developers from Japan and South Korea closed the multi-billion dollar financing deal for the high-profile Donggi-Senoro LNG plant.

Projects in the transport sector have slowed down. However, negotiations have restarted on the Soekarno-Hatta International Airport (SHIA) rail link.

PPP (public-private partnership) projects in Indonesia have remained quiet as a result of the last administration due to issues relating to land acquisition and other bottleneck factors.

Despite ongoing issues, Indonesia continues to attract a wealth of investors. Ever since the new administration came in, which is known to be pro-reform and business-friendly, investors’ confidence has returned. One of the main hurdles to overcome is developing the country’s infrastructure which is necessary to support Indonesia’s growing economy.

Japan

Traditionally Japan's energy supply structure is vulnerable, considering that the resource-poor country depends on imports for 96% of its primary energy supply. Oil accounts for 50% of the country's energy supply and 90% of the imported oil comes from the politically unstable Middle East. But having said all this, the recent fall in oil prices - while causing its economy some short-term jitters – stands to benefit Japan greatly in the long-term as a consequence of supply-side factors that impact commodity-importing countries.

Nonetheless, Japan is a developed market and its energy and infrastructure companies are significant players on the global stage, so a lot of work is outbound, exploring opportunities and exporting expertise and know how to emerging markets in South East Asia, Africa and the Middle East.

Domestically, after the 2011 Fukushima nuclear disaster, Japan pushed to diversify its energy base and established an attractive feed-in-tariff regime that aggressively encouraged the development of renewable energy resources, bringing in a lot of investment and generating a lot of work for law firms. However, of late there has been an inevitable halt to new applications due to utilities' struggle to accommodate the flood of newcomers to the green energy business. “The energy issue is still part of the wider national debate,” one practitioner says. “But the share of renewable energy is still very little. Solar has difficulties at the moment and wind is likely to continue to grow.”

In a parallel effort to reduce reliance on nuclear power – which before the disaster accounted for 30% of the nation's energy demands – and reduce import costs, Japan has also allowed the construction of new coal-fired power plants. Other potential movements in the pipeline tied to the drive to reduce dependence on nuclear power is the prospective liberalisation of the country's electricity and gas industries, and the Abe administration has readied two bills to realise this goal.

Recently there has been a notable push towards improving the legal and regulatory framework of the Japanese PPP (public-private partnership), with the national and local governments exploring the possibility of adopting a concession type of PPP to privatise infrastructure such as airports, water supply and sewage facilities and toll roads. “In domestic inbound work the most interesting topic is airports,” one partner says. “There'll probably be more than 10 airport projects in the pipeline.”

In order to further investment opportunities in Japan’s infrastructure assets, the aviation industry will be a source of PPP and privatisation work in the near future. The state has already launched the bidding process to award the rights to operate and improve facilities at Sendai Airport, and similar plans are in line for the Kansai and Osaka international airports.

The Japanese legal market is difficult to access for international firms as client relationships run deep and attributes such as loyalty play a far more important role within the business community then it may in 'Western' inclined markets. The stable domestic market is made up of the ‘big four’ comprising Anderson Mōri & Tomotsune, Mori Hamada & Matsumoto, Nagashima Ohno & Tsunematsu and Nishimura & Asahi. These four - along with TMI Associates who aren't far behind - have the lion share of inbound work, while international firms are mostly focused on outbound mandates.

Laos

Laos, or Lao PDR, continues to attract a wealth of Thai and Chinese investors, particularly in the hydropower sector. The country’s position along the bank of the Mekong River leads to an abundance of water resources – making hydropower production a huge contribution to the national output. Electricity generated not only meets the country’s energy demand, the remaining production which is as high as 70% of the total generation goes out to neighbouring countries such as Thailand, Vietnam and China, according to an OECD report in 2013-2014.

The development of Laos’s hydropower projects has led to an increase in water management projects, which has also drawn the interest of foreign investors.

One of the most recent hydropower projects is the 290MW Nam Ngiep plant, with the bulk of the electricity produced being sent to Thailand. Allen & Overy acted as sponsors counsel, DFDL was the sponsor’s local counsel, Clifford Chance represented the lenders, and MacDonald Steed McGrath Lawyers acted as the lenders’ local counsel. The Asian Development Bank is one of the financing bodies active in Laos.

Elsewhere the International Finance Corporation (IFC) has been involved with the development of roads infrastructure in Laos. In a project with the Ministry of Public Works and Transport, IFC is looking to structure and implement a public-private partnership (PPP) for the rehabilitation of the main highway Road 13 North and South. Domestic law firm VNA Legal acted as Lao counsel to the IFC.

The government is currently drafting and formalising its PPP decree which will further open up the market to FDIs.

Malaysia

The focus of Malaysia’s projects industry in 2014 is heavily focused on its infrastructure sector. Malaysia’s transport infrastructure received a boost from the government which announced in October 2014 to invest $23 billion into the industry.

The government seeks to build an $8.3 billion Pan-Borneo highway spanning over 1,660km between Sabah and Sarawak. In addition, Prime Minister Najib Razak also announced the construction of a mass rail transit system in Kuala Lumpur with a price tag of $7 billion, a $2.8 billion light railway, and four highways aggregating to a value of $4.9 billion. All in a bid to upgrade Malaysia’s east coast railway infrastructure.

In accordance with Razak’s promise to push the country’s road infrastructure to further sophistication, local construction companies MMC and Gamuda were chosen as joint project development partners for Line 2 of the 156km Klang Valley MRT project. Line 2 will cover 56km with a five year construction plan starting in 2015.

More expansion work is happening in Malaysia’s port sector. Container terminal 8 of terminal operator Wesports Holdings is undertaking an expansion worth RM1 billion ($300 million). Work starts in early 2015 and will be completed in two phases. The first phase relates to a 300m wharf including supporting port facilities and relevant equipment due to be completed by 2016. The second phase is projected to complete by mid-2017 and will see the expansion of capacity from 11 million twenty-foot equivalent units to 13.8 million.

An expansion project related to container terminal operator Wesports Holdings’ container terminal 8 has been allocated RM1 billion ($300 million) and is expected to commence work by early 2015.

Malaysia’s strategic location in Southeast Asia has led to the development of several significant upstream and downstream oil and gas projects within the maritime energy sector.

As the second largest exporter of liquefied natural gas (LNG) in the world, and the second largest oil and natural gas producer in Southeast Asia, Malaysia’s energy industry makes up almost 20% of the country’s total GDP. Fiscal and investment incentives imposed in 2010 are to become leverage in pushing Malaysia’s position in the region as top energy supplier by 2020.

One such incentive passed in late 2012 when the government announced more tax benefits for oil and gas trading companies following the 2010 tax incentives for upstream investment in recovery and field projects. Back in 2010, the Malaysian government introduced subsidy reductions for LPG, gasoline and diesel, which is coming to an end in 2015 – this is perfectly timed with the introduction of the new Goods and Services Tax (GST) on April 1 2015 this year.

The GST comes at an appropriate time. A global drop in oil prices together with Malaysia’s positive employment rate and a growing economy have set a favourable platform to implement these fiscal reforms. The elimination of fuel subsidies will also help offset the impact of lower energy revenues on its federal budget, according to an online International Monetary Fund survey.

There is also talk of the Malaysian government pushing the renewables market. As such, the government is now revising its country’s PPP (public-private partnership) framework and are looking to implement changes to existing provisions.

Mongolia

Often dubbed as the ‘Saudi Arabia of coal’, mining is critical to Mongolia’s economy and the country hosts 10% of the world’s coal reserves. It is rich in other minerals too, such as gold, copper, uranium and rare earth elements and in Oyu Tolgoi, it has the world’s largest copper mine. Around 80% of electricity comes from coal-fired power plants; 4% is produced by diesel generators; 3% by renewable energy sources, mainly hydropower; and the remaining 13% is imported, especially from Russia.

Mongolia is a vast country that is largely undeveloped. There is huge scope for energy and infrastructure work and in 2011 the country was driven by a mining boom. It appeared as if a healthy business environment was evolving as demand was certainly there given its proximity to major consumers of coal such as China, South Korea, Japan and India, and the ensuing economic boom allowed the country to implement large infrastructure projects such as the massive 7000km grid extension programme. International and regional coal mining groups started to invest and a number of international law firms followed suit. Yet after the government changed in 2012 - alongside a modicum of nationalistic sentiment – activity rapidly slowed down.

Corruption is a continuous concern in the country as is historic anti-Chinese sentiment. There is very high Chinese demand but the government - reluctant to embrace the windfall - has looked for ways to limit its exposure and dependence on China. There is a lot of potential in Mongolia but activity has stalled due to uncertainty and trial and error approaches from the state.

With such potential there is also scope for landmark projects and some have been going ahead despite the stall. Shearman & Sterling, Ince & Co and White & Case advised on the $1 billion CHP5 heat and power project, which is Mongolia’s first independent power producer (IPP) project. Allens, OMD Law Office and Shearman & Sterling again advised on the $1 billion Tavan Tolgoi IPP, which is the first public-private partnership (PPP) in the country, and more are expected. Sidley Austin advised the lead sponsors on the development, construction and financing of the $6 billion 1800km freight rail network that’s meant to be the main transport for Mongolia’s rich mineral resources to international markets. There have also been landmark projects in the commercial real estate and oil and gas sectors.

Myanmar

FDI in Myanmar is growing and the 2014-2015 projection is $5 billion. By March 2014, the number stood at $4.11 billion whereby 31% was invested in telecoms, over 23% in oil and gas, and an approximate 18% in real estate.

Despite the growing FDI interest in Myanmar, industry figures have criticised the situation caused by the United States for the delay in lifting its sanctions – dampening a cross-border potential.

Visible financial bodies in Myanmar are the Asian Development Bank (ADB) and the World Bank, which just before the start of 2014 was reported to have loaned $60 million for grid infrastructure refurbishment, and $140 million for the refinancing of a 106MW gas-fuelled plant in Mon State.

ADB was consulted in the drafting of Myanmar’s new electricity rules in 2014, which is expected to be completed this year in March. One of its main features is to establish the Electricity Regulatory Commission (ERC) that oversees electric power players.

One of the first 100% foreign direct investment projects is the Thaketa 500MW combined-cycle energy project to be built with the government under a BOT agreement. DFDL is one of the law firms involved and managing partner James Finch and partner Thida Aye are highly regarded in Myanmar’s legal market, as is William Greenlee who assumed the position of managing director in 2014 based in Yangon.

With BOT models in place, the rise of infrastructure projects has also driven the government to implement PPP (public-private partnership) strategies in their development.

Myanmar also introduced a new telecommunications law in 2014 that led to the issuance of two telecom licenses to international corporations. Ooredoo is one of the successful bidders. They were represented amongst others by regional law firm VDB Loi as local counsel. In addition, VDB Loi continues to work in the country’s oil and gas, and financing sectors. Partner Edwin Vanderbruggen is the key partner in the firm’s Myanmar practice.

Other developments saw the market lifting restrictions that saw the government issuing licenses to several foreign banks. And until recently, oil and gas exploration concessions were typically awarded to foreign firms. This changed for the 2013 onshore oil and gas tender when the Ministry of Energy announced that related explorations must be conducted with a local partner.

New Zealand

New Zealand has a small population and abundant natural resources, but it is still a net importer of energy in the form of petroleum products. About 60% of the country's primary energy is traditional and 40% comes from renewable energy. 70% of its electricity comes from renewable energy, especially hydropower and geothermal power. This is expected to rise with more wind power down the line. Also, the country doesn't operate nuclear power stations.

Taking all this into account, environmental concerns are integral to most deals in the country, and that makes environmental and resource management practices key. “In the energy space, from windfarms to hydro-electric schemes, mining, oil and gas, little can be done without approval,” one practitioner says. “This is probably more so than other jurisdictions as it's more rigorous and protective.”

Recent headline deals occurred in the electricity industry, which also saw the revival of the country's equity capital markets as the government introduced the mixed ownership model (MOM) to reduce public debt and shift its investment priorities. New Zealand's three largest energy companies were privatised through IPOs: Meridian Energy raised $1.6 billion; Mighty River power fetched $1.4 billion; and Genesis Energy raised $638 million.

As an early stage public-private partnership (PPP) market, New Zealand has been focused on road and housing infrastructure, especially in the Auckland region – part of the Auckland Unitary Plan. For example, City Rail Link is one of many transport projects aimed at improving Auckland's transport system. With the state's major highway programmes, it has also been the “year of the highway”, but the country's treasury and national infrastructure unit's drive is geared towards “vital but not sexy infrastructure in the long-run”. PPPs in New Zealand are focused on building hospitals, schools and prisons.

New Zealand's legal market is small and stable and its energy and infrastructure players are comprised of familiar independent firms that cover a broad range of practice areas. However, within this, some firms have carved themselves niche specialities. For example, Chapman Tripp is strong in transport, Bell Gully and Greenwood Roche Chisnall are strong in oil and gas, Buddle Findlay and Russell McVeagh are strong in electricity, and Simpson Grierson tends to advise local authorities.

Philippines

Despite being one of Asia’s fastest growing economies, the Philippines struggles to address issues plaguing its infrastructure and energy sectors.

In infrastructure, public transport is a major concern. In power, as well as being one of the most expensive consumer markets in Southeast Asia, the country experiences constant power failures even in the capital. The few electricity producers have aging power plants that are no longer able to keep up with the growing demand.

On top of that, Manila also has issues with water shortages, deteriorating roads and airports. The few electricity producers there are have aging power plants that are no longer able to keep up with the growing demand.

Efforts to improve public transport and reduce corruption have been a priority for current president Benigno Aquino III. It was reported that by introducing more streamlined processes for government spending and reducing the public debt in addition to an anti-corruption campaign, the president has paved the way for improvements in the Philippine economy.

Improving the country’s infrastructure will alleviate a range of socio-economic burdens. Nevertheless, uncertainty has crept in as the current presidential term is set to end in 2016. Aquino has only one more year to push projects ahead.

A redeeming characteristic in this area is that the Philippines possesses a good PPP (public-private partnership) regime. The government has identified a long list of projects ranging from airport and highway upgrades and development, to rail improvements and the construction of a natural gas pipeline. The emphasis though is on power projects and a growing trend is the interest of local companies taking on these projects. This is helped by domestic banks slowly coming into majority. The PPP framework has also attracted a wealth of funds coming in from Europe and the United States as well as foreign investors.

For example, the country is currently building a P20 billion ($450 million) elevated highway running above the Philippine National Railway’s railroad tracks, called the NLEX-SLEX (South Luzon Expressway) Connector Road. This highway is said to help many of the commuters to bypass traffic from the city centre.

Port development work is also prominent. Projects such as the NLEX-Harbour Link Road due to be completed in 2017 will reduce the number of cargo containers in Manila, also helping to avoid or create worse traffic.

The country’s PPP system is a crucial tool for the country to improve its infrastructure but with the end of Aquino’s term, investors are already slowing down the pace. The next administration will be pivotal for the countries development in these areas.

Singapore

As a hub to the rest of Asia-Pacific, Singaporean domestic law firms continue to act on project deals most notably in Indonesia and Malaysia. Foreign firms operating out of Singapore have a wider reach in the region due to firm alliances and office presences in diverse locations.

Energy and infrastructure work in the city state touches often on real property, private energy deals and the oil trade. However, Singapore’s public utilities market has seen significant growth in recent years. The water and waste sector has received a lot of interest from the private sector. A growing population and economy means that waste management infrastructure has to expand with the populace. Last year, Singapore completed a greenfield waste-to-energy public-private partnership (PPP) project. Separately, Sembcorp began work on a waste to energy facility in the Sakra area of the island with a completion date in 2016.

Back in 2008, the Sports Hub PPP was the largest project announced in Singapore. It has recently entered into a refinancing deal after opening up its 55,000-capacity national stadium to the public.
Its location in Southeast Asia also lends Singapore the opportunity to develop its port facilities and the government has recently been looking at proposals for the construction of a port terminal.

South Korea

Similar to Japan, South Korea is a major importer of energy. It imports almost all of its oil and is the second largest importer of LNG in the world. Electricity generation in the country comes from thermal and nuclear power. And it is in these areas where law firms have developed regular and wide experience. In the past 12 months there has been activity in the corporate space with ownership changing hands. For example, POSCO Energy acquired 100% of Tongyang Power’s - a coal power plant company - stocks for $393 million, and GS Holdings acquired 71.9% of STX Energy’s shares from Buffalo E&P for $575 million.

Traditionally the country has placed a heavy emphasis on nuclear power although more recently there has been an inclination towards renewable energy in solar, wind and biofuels. “We’ve seen an increase in renewable energy,” one practitioner says. “The government changed the feed-in tariff to an RPS system and brought in a penalty for failing to meet its requirement.”

The future of its economy depends on how it balances energy security with environmental concerns, and the country’s recent documentation scandal that escalated into a corruption fracas between the state-owned nuclear company, the industry, and within the government itself dented public confidence in a post-Fukushima age. There was also a recent trend – thanks to Japan’s attractive feed-in tariff – for Korean investors to invest in solar power plants in Japan.

As a developed market, a lot of work in South Korea is outbound utilising the expertise of Korean companies in emerging markets. “Generally there’s not a lot of infrastructure activity in Korea, so investors go out to focus on less developed nations such as the Philippines and in places in Africa and the Middle East,” one partner says. Most of these outbound projects are in hard infrastructure, focusing on toll roads, bridges, ports and railways - of course South Korea has developed rich experience in implementing public-private-partnerships (PPP).

Domestically, the development of a new smart city, Songdo, is drawing to a close. It has been hailed as the city of the future at a cost of $40 billion, and is the largest private real estate development in history with the most cutting-edge infrastructure as part of day-to-day life.

The legal market in South Korea is independent, strong and stable, with a core of large self-confident domestic firms seated at the top. Like Japan, client relationships run deep and attributes such as loyalty play a far more important role within the business community then it may do so in other market contexts. The market is opening up to international firms in phases and already a number of firms have planted flags in its landscape. However, it will be a real challenge for global brands to find a place in such a developed market.

Thailand

The overall energy and infrastructure market in Thailand has remained moderately quiet in 2014 until the latter part of the year saw the announcement of a $75 billion “master” plan approved by the country’s ruling military regime. Thailand’s national infrastructure is to benefit greatly from this plan – facilitated by a new PPP (public-private partnership) act – especially its transport system which is going to see some changes in the next seven years. The plan incorporates projects that are referred to as “Strategies on Thailand’s Infrastructure Development in Transportation” implemented by the National Council for Peace and Order (NCPO) and proposed by the Ministry of Transport.

The Thailand Board of Investment stated in a 2014 report that 78% of the $75 billion will go to railway development with a priority given to the expansion and improvement of the country’s national railway network.
The revision of the country’s PPP framework passed in 2013 has largely been overshadowed by the events in early 2014 comprising of protests and political gridlock. The current law “Private Investment in State Undertaking Act” replaced the 1992 “Act on Private Participation in State Undertaking”.

The 1992 act caused several issues for investors including bureaucratic delays, with certain projects falling outside of the scope of the act (e.g. BOO and turnkey projects), a lack of oversight in procurement and project valuation and the absence of a central agency. The new PPP act is projected to streamline the processes and provide a more efficient platform for private investment into Thailand.
In energy more specifically, there is an oversubscription on the feed-in tariffs set by the Ministry of Energy. The implementation of the tariffs benefits the very small power producers with production capacity less than 10MW. The new subsidy will vary in range of years and rates subject to fuel types and power plant size. Equivalent waste-to-energy operators receive higher incentives from the government.

Vietnam

Vietnam is a natural resources-rich country that has recently signed a $500 million deal in late 2014 with the World Bank in a bid to boost its energy and infrastructure sectors.

The 2014-2015 outlook has improved from 2013 with developers seeing a recovery in the market. Renewable energy is very much on the government’s agenda.

The country was also looking at developing public-private partnership (PPP) type laws and policies to strengthen its projects framework. February 14th marked the day a new PPP decree for infrastructure projects was issued, which came into effect on April 10 2015. The new decree allows for more PPP project forms, and incentives to investors during the tendering process with project proposals and feasibility studies. There is now also government guarantees and incentives. In addition, regulators have removed the cap on State equity participation and offers different forms of viability gap funding. Very importantly, there is a choice of foreign law and dispute settlement.

A new law on electronic bidding as also been issued earlier in 2015 which is likely to affect domestic as well as foreign contractors

There has been a prompt from a political level to improve Vietnam’s infrastructure. An election is due to take place in 2016 and sentiment has been growing within people to see infrastructure projects moving forward.
In the area of foreign direct investment, Vietnam is looking to pass four new laws at the end 2015 within the areas of real estate, foreign investment, housing and enterprise.