Alternative Energy & Power 2019

Last Updated August 07, 2019

Cambodia

Law and Practice

Authors



Bun & Associates benefits from a cross-cultural working environment and management team. It takes pride in its integrated, multi-disciplinary team of legal experts with advanced law degrees from some of the most renowned universities in Asia, Europe and North America, covering multiple languages including Chinese (Mandarin), English, French, Japanese, Khmer, and Thai. The firm provides comprehensive legal services in key sectors including business entry (including mergers and acquisitions), banking and financial services, insurance, property development and large scale agro-industry as well as environment-related matters, mining, and oil and gas. The firm has recently launched a new practice, which is Telecommunications and New Technology. Bun & Associates' clients are key players in their respective industries. The firm is very familiar with and experienced in Cambodian legal and practical aspects, enabling delivery of high-quality services, and enhancing the efficiency of clients’ investment implementation. Bun & Associates has also been recognised for its skills and knowledge in dealing with many cross-border transactions and is regularly referred by numerous renowned international law firms.

The energy sector in Cambodia is governed by the Electricity Law and its subsequent amendments in 2007 and 2015 (“Electricity Law”), which has been followed by other regulations issued since then. The Electricity Law, among other things, stipulates the separation of responsibilities between the two organisations governing the power sector, (i) the Ministry of Mines and Energy (“MME”) (formerly known Ministry of Industry, Mines and Energy before a ministry split in late 2013); and (ii) the Electricity Authority of Cambodia (“EAC”).

The same law also provides for private-sector participation in electrification, including seeking to promote rural electricity enterprises (“REEs”) and encourage competition in the sector.

The electricity market in Cambodia is open and competitive. Private investments have been encouraged by the Royal Government of Cambodia (“RGC”) and called for through a public procurement process. Generation, transmission, distribution and supply segments of the power industry, therefore, are a combination of state-owned and private investments.

One of the key players in electricity market in Cambodia is the Electricité du Cambodge (“EDC”), a vertically integrated power utility, which is a wholly state-owned limited liability company established by the Royal Decree NS/RKT/0396/10, dated 9 March 1996, with responsibility for generating, transmitting and distributing electricity in the areas assigned by the EAC. The EDC’s mandate is to develop the transmission grid, including integrating the local grids of private energy producers into one national grid and extending the national grid to rural areas, as well as facilitating the import and export of electricity to and from neighbouring countries.

It is important to note that, for facilitating rural electrification, the RGC provides support and subsidies to the EDC and the Rural Electrification Fund (“REF”), a governmental body responsible for subsidising rural electrification, which was integrated into the EDC in 2012.

Note also that, under Cambodian laws, there is no restriction on foreign ownership in power industry sectors.

The EDC is the only principally state-owned entity in the power industry, which holds a consolidated licence for generation, transmission and distribution of electricity throughout the country.

There are currently about 350 licence-holders throughout the country for all types of licences, including generation, transmission, dispatch, distribution, bulk, retail, sub-contract, and consolidated licences.

Cambodia is considerably liberal towards foreign investments. Cambodia welcomes investments in all economic activities from both Cambodian and foreign entities and provides investment incentives to all investors, regardless of their nationalities and whether or not they are wholly owned by foreign investors. In spite of Cambodia’s friendly investment nature, there are certain investment activities which might be restricted. The only prohibition relating to the power industry is the processing and production of electricity power by using any waste imported from a foreign country.

It is important to note that only a state-owned licence-holder may hold more than one licence or own shares in, or have any other direct financial interest in, any other licence-holder. Also, no one other than the RGC and state-owned companies may own any shares in or have a direct financial interest in any other licence-holder.

In order to obtain investment incentives or protection, investors must meet certain requirements set by the Council for the Development of Cambodia (“CDC”), a regulated body established by the government of Cambodia to supervise private and public sector investments. 

If qualified, the investors will acquire a qualified investment project (“QIP”) status granted by the CDC, which will allow the investor to be entitled to certain incentives or protections, depending on the types of QIP and the investor’s election of each type of incentives or protection during the submission of an investment proposal to the CDC. The QIP can be classified into three types: (i) a domestic QIP, which refers to a QIP that does not aim at export; (ii) a supporting industry QIP, which refers to a QIP that supplies 100% of its products to the export industry to replace the raw materials and accessories that are usually imported; and (iii) an export QIP, which refers to a QIP that sells or transfer a portion of its products overseas.

Investment activity for power plant is one of the eligible activities that would be entitled to a customs and tax incentive, except for the activity of processing and producing electricity powered by using waste imported from other countries.

An enterprise that qualifies as a QIP can choose only one of the three options below:

  • tax on income incentives and an investment guarantee;
  • special depreciation and an investment guarantee; or
  • an investment guarantee (when the investor does not require any incentives).

All of these choices still benefit from custom duties exemptions. Customs incentive for Investment Activity is dependent on whether the final product is for domestic sale and/or export to other counties, as described below:

  • domestic QIP: production equipment and construction materials are exempt from customs duty;
  • export QIP: production equipment, construction materials, and production inputs are exempt from customs duty.

For a tax on income incentive, all types of QIP, regardless of where the final product is sold, are exempt from corporate tax on income for a tax-holiday period which includes a “Trigger Period plus 3-Year Period plus Priority Period”. The Priority Period is determined by the type of project and amount of capital investment and its maximum is three years. In short, a tax-holiday period for a QIP is for a minimum of three years, counting from receipt of final approval from CDC.

Cambodia presently does not have any mandatory provisions on governing laws and dispute resolution mechanisms to which a foreign investor in the power industry is subject. Accordingly, parties have the liberty and discretion to decide on their choice of governing laws and dispute resolution mechanisms.

There is no restriction regarding the sale of power industry assets or businesses, or other transactions, including amalgamations and mergers, except for the following:

  • the EAC may approve, disapprove, or restrict

       (i) conducting a business merger or reorganisation, acquisition or sale of immovable properties or securities; or

       (ii) expansion of business activities of the electricity licence-holder.

  • the electricity licence-holder must not rent, sell or pledge its licence to any other person. Disposal or assignment of a licence may be done only with special approval from the EAC. The RGC, however, may transfer the licences held by it or by state-owned companies to another person as part of the reform of the power sector.

In addition to the above, provision of various laws such as the Civil Code, and the Laws on Commercial Enterprises (“LCE”) , which are applicable for sale of assets or business, including amalgamations and mergers in general, will apply in the same way for transactions in the power industry. Terms and conditions, if any, in the electricity licences or government guarantee, if any, will also have to be taken into account.

Furthermore, if the company holds QIP status, it will also be subject to Sub-Decree No 111 ANK/BK on the Implementation of the Law on Amendment on the Law on Investment dated 27 September 2005 and its amendments.

Generally, in accordance with the LCE, the Ministry of Commerce (“MOC”) is the only institution which oversees and finally approves the application for mergers. Upon receipt of articles of a merger, the MOC will review it and, if it is approved, issue a certificate of merger to that company. However, in practice, as yet there is no clear procedure for submission of articles of a merger to the MOC.

In addition, if a company holds QIP status and is subject to the supervision of the CDC, the company is required to obtain approval of the merger from the CDC. In practice, any such approval must be obtained prior to submission to the MOC.

There is no single central authority that oversees and administers the electricity supply and the development of transmission facilities to ensure the reliability of the electricity system and the adequacy of supply to satisfy the demand for electricity in Cambodia. There are a few authorities that fulfil these responsibilities: 

The MME— the MME is responsible for developing government policies and strategies, plans, technical standards, safety and other environmental standards with respect to electricity facilities, in addition to overseeing electricity trade with neighbouring countries, major investment projects and management of the rural electrification. Also, the MME may award an approval or a Memorandum of Understanding on a feasibility study of generation, transmission or distribution of electricity as well as issue Prakas (ministerial approval) which permits implementation of an investment project in generation, transmission or distribution of electricity.

The EAC— the EAC is the electricity regulator, an autonomous agency created by the Electricity Law, tasked with authority to:

  • issue rules, regulations, uniform standards and procedures on power market operations;
  • award licences;
  • set tariffs, impose penalties; and
  • resolve energy-related complaints.

The EAC is an agency funded from licence applications and fees, which is led by a chairman and two members, who are appointed by the Prime Minister and confirmed by royal decree. All power generators, suppliers, and distributors must be licensed by the EAC and those licences are generation, transmission, dispatch, distribution, bulk sale, retail, sub-contract and consolidated licence.

The Ministry of Environment (MOE) — reviews and approves Environmental Impact Assessments (EIAs) and Environmental Management Plans (EMP) for all energy-related projects.

The Ministry of Water Resources and Meteorology (MOWRAM) — issues water licences for hydropower projects.

The REF— a governmental body responsible for subsidising rural electrification, which was integrated into the EDC in 2012.

Regulations No 018 dated 26 January 2018 of the EAC the brief of this regulation is as follows: 

  • providing general conditions for connecting solar PV generation sources to the electricity supply system of the national grid or to the electrical system of a consumer connected to the electricity supply system of the national grid;
  • only the EDC may purchase electricity from all sources injected to national grid, including the Solar PV system or injected at any level either through the system owned by the EDC or other licence-holders;
  • determining the technical standard that the Solar PV project connecting to the electricity supply of national grid has to meet; and
  • all licence-holders and big consumers or bulk consumers who intend to install Solar PV in order to supply more electricity for their own use by synchronising with the supply system of the national grid are subject to these Regulations.

Decision No 395 on 8 May 2018 of the EAC—the brief of this regulation is as follows: 

  • determining the electricity price list for the electricity supplier to sell to bulk consumers and large consumers who have installed a solar PV system by synchronising with the electricity supply system of the national grid for their own electricity usage; and
  • any power purchase agreement that sets forth any other tariff has to be amended.

Cambodia has strived to increase electricity supply by encouraging more private investments in power generation across the country over the next few years in order to avoid power shortage, as the country faced earlier in 2019.

Recently, in June 2018, the ADB completed a country-wide solar generation master plan for the EDC. This master plan includes impacts and recommended actions to prepare the grid for solar penetration scenarios of greater than 1,000 MW by 2030.

It is worth noting that building sector is identified as the second largest sector that is responsible for energy consumption in Cambodia. Energy efficiency in building is consequently determined as one of the strategies listed in March 2019 draft version of National Policy on Energy Efficiency for 2018 to 2035. According to this draft policy, energy efficiency in buildings is expected to be achieved through appropriate policy, i.e., law on energy efficiency for new building, and technical measures and practices in the design, operation, and maintenance of new and existing buildings.

Energy efficiency in industry is another strategy included in the same document, which focuses on:

  • reducing energy consumption of key industrial productions such as garment industry and brick production by providing (i) financial incentives and/or technical training to achieve energy conservation and energy saving solutions; and (ii) support for local development of and manufacturing by energy efficient equipment; and
  • electricity generation and distribution at the rural areas. 

Under Regulation No 018 dated 26 January 2018 of the EAC, only the EDC may purchase electricity from all sources injected into the national grid, including the Solar PV system or injected at any level, either through the system owned by the EDC or the other licence-holders.

All large consumers or bulk consumers, who have installed solar PV for their own use by synchronising with the electricity supply system of the national grid, are subject to special tariffs and additional rates based on their transformer capacity.

The Electricity Law authorises the EAC to determine and review the tariff rates, charges and service terms and conditions of the licence-holder. The EAC may approve different tariffs for each customer category to reflect the quantity of peak, average, or overall usage of electricity at different times, seasons, the time of day or year, the types of services purchased, or other similar factors. The licence-holders may file an application for a tariff with the EAC, and the EAC will examine, approve, revise, or disapprove this request, including the effective date for new tariff or the revised tariff, no later than 90 days from the EAC’s receipt of the tariff application and sufficient information for making a decision.

The electricity has been transmitted and distributed primarily via the national grid throughout the country. However, the national grid operated by the EDC could not be expanded toward some rural and remote areas. In order to resolve this issue and make it possible to supply electricity to those remote areas, Cambodia imports the electricity from neighbouring countries, ie, Thailand, Vietnam and Laos, either through the state-owned EDC or from some private companies.

Cambodia also plans to export some of its generated electricity to neighbouring countries in the near future.

According to the Salient Feature of Power Sector 2018 report, the supply mix of electricity for the Cambodian Market as of December 2018 was as follows:

Source Quantity (GWh)

  • coal 3,211.26;
  • hydro power 4,511.44;
  • fuel oil 179.79;
  • renewal energy 42.52;
  • captive generation by industry and licence-holders 8.63; and
  • import 1,353.80.

There is no market concentration limit regarding the percentage of electricity supply that is controlled in the market by any one entity.

Currently, Cambodia has yet to introduce a competition law. According to the Electricity Law, for the purpose of encouraging efficiency and competition where this will contribute the lowest long-term marginal cost of electricity, the EAC has to make it a condition that generation, transmission and distribution services over a specific territory be separated between different licence-holders.

In terms of climate change, the RGC has devised, principally, two strategic plans to combat the ever-threatening issues of global warming, ie, Cambodia Climate Change Strategic Plan 2014-2023 and National Strategic Plan on Green Growth 2013-2030. Both plans were adopted in 2013 with the identical aim of working towards a green and sustainable society as well as green economic growth of the country. 

Certainly, the existing policies provide for varieties of possibilities in executing the above-mentioned plans, ranging from a simple tax incentive to collaboration with the Royal Government itself. However, to date, there has not been any mechanism or specific regulation directed at the limitation of carbon emissions specifically from a generator.

However, there are thresholds on the amount of different emissions allowed to be emitted into the air either from movable or immovable sources, which is governed by Sub-Decree No 42 RNKr/BK on Air Pollution and Noise Disturbances Control, dated 10 July 2000.

Note that the Kingdom of Cambodia is also one of the signatories to the Paris Agreement on Climate Change, dated 22 April 2016, which was officially ratified on 19 December 2016.

Cambodia still predominantly relies on coal-fired power plants and will continue to do so for many years to come, despite some environmental concerns.

The current coal-fired plants include the following:

  • a 120 MW plant operated by Cambodia Energy Limited (a wholly owned subsidiary of Leader Universal Holdings, a Malaysian company) in Preah Sihanouk Province, commissioned in 2014;
  • a 405 MW plant operated by Cambodia International Investment Development Group and PRC-based Erdos Hongjun Electric Power Co Ltd, also in Preah Sihanouk Province. At this site, 270 MW of generators were commissioned in 2015 and an additional 135 MW were commissioned in 2017.
  • a 135 MW coal-fired plant in Preah Sihanouk Province, a build–own–operate project of Cambodian Energy II Co Ltd (a wholly owned subsidiary of Leader Universal Holdings, a Malaysian company) and constructed by Toshiba, the first Japanese company to receive a power-plant construction contract in the country. This plant is expected to be operational by 2019.]
  • a 700 MW coal-fired plant in Preah Sihanouk Province, a build-operate-own project of Cambodia International Investment Development Group (CIIDG). Construction of the plant is expected to be carried out in 2023.

In an attempt to provide access to electricity throughout the country, Cambodia has put considerable effort into diversifying its energy sources, from the traditional fuel-fired and coal-fired to hydropower, and other renewable energy, mainly solar power, from both the national grid and off-grid.

The RGC has recently encouraged private investments and joined hands with its development partners to increase investments in renewable energy, especially solar power.

Cambodia has yet to enact a specific law to provide incentives for the development of alternative energy sources, but its draft Law on Environment and Natural Resources contains provisions on the introduction of incentives for companies that generate electricity in the form of renewable energy, such as exemption from the tax on import of devices and equipment for power generation and exemption from paying environmental protection fees.

Licence and permit

Construction Permit from the MLMUPC

Currently, there are no specific provisions that govern the construction approval of power generation facilities. This implies, on the assumption that those generation facilities constitute some form of building infrastructure, that they are under the scope of provisions of the Sub-Decree No 86 ANK/BK, dated 19 December 1997 (“Sub-Decree No 86”) on Construction Permit and its implementing regulations. The issuance of such authorisations is under the competence of either a local entity, ie, commune/district or municipal/provincial Department of Land Management, Urban Planning, Construction and Cadastre, or a national level entity, ie, the Ministry of Land Management Urban Planning and Construction (MLMUPC), depending on the scale of a respective project.

EIA report from the MOE

While the provisions of Sub-Decree No 86 do not directly command an approved Environmental Impact Accession (EIA) report in order to obtain a construction permit, the possession of such a report, if applicable, qualifies as a precondition for obtaining a construction site opening permit which, in turn, will also condition the obtaining of a construction site closing permit. The EIA report is governed principally by the Law on Environmental Protection and Management of Natural Resources, dated 26 December 1996 and Sub-Decree No 72 ANK/BK on the Procedure for Environmental Impact Accession, dated 11 August 1999.

Electricity Licence from the EAC

For the purpose of construction and operation of power-generation facilities, a licence from the EAC must be obtained in addition to the above. Generation of electricity may be approved by the EAC within the scope of a generation licence or a consolidated licence.

According to the Electricity Law and subject further to terms and conditions provided in the granted Generation Licence or Consolidated Licence, the licence-holder will have the right to own, operate and manage or control the specifically fixed identified generation facilities for generating electricity for sale and not solely for their own consumption. The validity of the licence will generally be for the expected useful life of the generation facilities, except when the term of the Power Purchase Agreement is shorter.

Relevant applicable laws and regulations

Following the Electricity Law in 2001 and its subsequent amendments, a number of ministerial documents and regulations have been issued by, respectively, the MME and the EAC.

The MME: the MME issued a Prakas No 470 on 16 July 2004, which was amended on 19 August 2007 by Prakas No 496 to establish electricity technical standards for: (i) Thermal Generating Facilities; and (ii) Transmission and Distribution Facilities. On 17 July 2007, the MME issued Prakas No 701 to establish specific requirements of electricity technical standards for: (i) Thermal Generating Facilities; and (ii) Transmission and Distribution Facilities. These apply for all persons, including licence-holders, consultants, contractors and consumers, who are connected to the study, design, construction and operation of thermal power-generating facilities.

The EAC: see the section on ‘EAC’ in 6.1.1 Principal Laws Governing the Construction and Operation of Electricity Distribution Facilities, although it is not expressly relevant to construction and operation of generation facilities but, by interpretation, it is reasonable to deem that the matters discussed in 6.1.1 Principal Laws Governing the Construction and Operation of Electricity Distribution Facilities may apply in the same way for construction and operation of generation facilities.

The key steps required to obtaina regulatory licence and permit of an electricity project can be summarised as follows:

  • consult with the MME about the feasibility of the intended generation project;
  • consult with the MOE about the EIA to which the project may be subject;
  • consult with the EAC about the operating licence to which the project may be subject;
  • negotiate the terms of the power purchase agreement (“PPA”);
  • undertake an EIA study with a certified EIA consultant company;
  • submit a draft PPA for the EAC’s review and execute once approved by EAC; and
  • apply for the applicable licence, eg, a generation licence, from the EAC.

Application Process for a Construction Permit from the Ministry of Land Management Urban Planning and Construction (MLMUPC)

In order to obtain a construction permit, the applicant, ie, the project owner, must meet a series of requirements and prepare supporting documents as stated in Article 9 of Sub-Decree No 86. The applicant must then start filing an application, which shall be written in the Khmer language, alongside other required supporting documents to the competent authority, to either local or national level. The approval process takes approximately 45 working days upon receipt of the application and all completed supporting documents. As straightforward as the process described above is, possible delays or suspensions of the timeline do occur without any prior notice to the applicant, which in practice could stretch the decisional period to several months. These delays or suspensions could be the result of the competent authority verifying the ownership rights on the surface of the project as well as evaluating other compliances with technical norms and standards.

To obtain a construction site opening permit, the project-owner must file an application to the competent authority that issued the construction permit for the project. The project-owner shall, with the approved construction permit, conduct a soil test on the construction site, prepare a structural blueprint in compliance with the approved architectural plan and arrange a site visit with the officials from the competent authority. The timeline for obtaining a construction site opening permit is approximately one month.

To obtain a construction site closing permit, the project-owner must file an application to the competent authority, instruct the engineer in charge of the construction to prepare a compliance report and arrange a construction site inspection with the officials from the competent authority. The timeline for obtaining a construction site closing permit is identical to the timeline for the previous permit, which takes around one month. In practice, the obtaining of a construction site closing permit is adequate and serves both as a construction site closing permit itself and a certificate of compliance. This signifies both the completion of construction and related works, and the compliance of construction-related regulatory approvals.

Application Process for EIA report from the MOE

As for obtaining approval of an EIA report, it is regulated by Prakas No 376 on General Guideline for Preparing an Initial Environmental Impact Assessment and Full Environmental Impact Assessment Report, issued by the MOE, dated 2 September 2009. The process commences from a request by the project-owner to the MOE clarifying and informing the intention to solicit preparation of an EIA report by an EIA consultant. The EIA consultant is in charge of conducting public consultation on the project’s site with the aim of assessing possible environmental impacts to the neighbouring community. A first draft of the EIA report is then submitted to the MOE for a preliminary review before a designated inspection team is dispatched to verify the assessment on site. At this stage, further dialogue remains possible between the MOE and the EIA consultant on any unresolved remarks. Once the MOE is satisfied with the first draft, a ministerial level meeting is called to deliberate on the final approval for the EIA report. All in all, the timeline for drafting and approval of an EIA report should take three to six months respectively, depending on the scale of the project.

Application Process for an Electricity Licence from the EAC

To obtain the electricity licence, the applicant who has already obtained Prakas from the MME has to file a written application including fee and any required supporting documents with the EAC. Within the given timeframe, the applicant also has to provide additional information or documents, if further required by the EAC. Upon receipt of sufficient information and documents, the EAC will issue a letter to confirm this to the applicant and that date will be considered the “Date of Submission”.

First, the EAC will set up the schedule for the following, within three weeks from the Date of Submission:

  • publication of the application;
  • site inspection;
  • public consultation;
  • consultation with an applicant;
  • analysis and evaluation of the application; and
  • organising the agenda for the EAC’s session for review and decision on the application.

For the purposes of public consultation, the EAC will publish a summary of the application’s contents, including the licence's terms and conditions imposed on the applicant, in particular to the local authorities and local people within the area of the facilities. Alternatively, the EAC may also invite public consultation by:

  • sending a letter asking for opinions;
  • interviewing; or
  • inviting the public, institutions, or concerned parties for discussion and providing opinions.

The EAC will determine a certain period for public consultation, which must be at least 30 calendar days. During the public consultation period, all institutions of the Royal Government, local authorities, companies or the public may provide written comments with the supporting documents, if required, to the EAC as to whether the contents of the application should be modified or the application for the licence be rejected. Simultaneously, the EAC will inspect the site to verify the information provided in the application, and to consult with the local authority.

The EAC, in practice, will hold another session with concerned parties and the public to decide whether to grant or refuse the licence, including discussion on modifications of the terms and conditions, if any. This session is generally held within 30 days from the lapse of the public consultation period. If no issue arises or the modifications have been made, the EAC may grant the licence applied for accordingly.

Electricity Licence from the EAC

Typical terms and conditions imposed in the generation licence are:

  • general obligations of the licence-holder:

(i) compliance with the Laws, Sub-Decrees, Orders and PPA;

(ii) provision of the licence-holder’s financial statements;

(iii) provision of information to the EAC; and

(iv) payment of licence fees.

  • service conditions:

(i) conditions on the generation facilities;

(ii) conditions on the generation operation;

(iii) conditions on the business;

(iv) settlement of the dispute relating to PPA;

(v) compliance with the Grid Code;

(vi) health and safety of employees; and

(vii) communication.

The conditions can be added or amended by the EAC in accordance with consultations with the public, applicant and relevant authorities. If the licence-holder wishes to amend its licence with regard to the terms and conditions, the licence-holder may do so by following all the same procedures stated in 4.2.Regulatory Process for Obtaining All Approvals to Construct and Operate Generation Facilities.

The rights to the surface of land for the construction and operation of generation facilities can be obtained via expropriation, which is governed by the Law on Expropriation, dated 26 February 2010. However, the Law on Expropriation provides specific sets of rules that could also limit the ability to justify the previous statement. According to its Article 6 and so forth, the faculty to exercise such rights belongs exclusively to the State, ie, the Royal Government of the Kingdom of Cambodia, on the grounds of public and the State’s interests in consideration of reasonable and just indemnities to the owner of the expropriated property, in whole or in part. Article 5 of the Law on Expropriation has an exhaustive list of projects susceptible to expropriating procedures in which it founded “the construction or expansion of power plant, of the electrical structure, equipment and transmission and distribution lines”. Even if all the above-mentioned conditions are met, the procedural implementation could prove to be challenging. Furthermore, the expropriated land surfaces will become the State’s public property, therefore its usage is regulated by provisions governing State-owned properties.

However, on a more practical note, acquiring surface access and use for such a facility may also be rendered possible by means of easement and lease rights. These mechanisms can be exploited successfully without the intervention of the State and are based on contractual negotiations.

Currently, there is no specific regulation on decommissioning a generation facility. It is reasonable to understand that decommissioning of the facility must meet the technical standards for ensuring safety and comply with the EIA study and environmental regulations.

Licence and permit

Construction Permit from the MLMUPC

See the section on Construction Permit from the MLMUPC in 4.1 Principal Laws Governing the Construction and Operation of Generation Facilities.

EIA report from the MOE

See the section on the EIA report from the MOE in 4.1 Principal Laws Governing the Construction and Operation of Generation Facilities.

Electricity Licence from the EAC

For the purposes of construction and operation of transmission facilities, a licence from the EAC must be obtained in addition to the above. Distribution of electricity may be approved by the EAC within the scope of a Transmission Licence or a Consolidated Licence.

According to the Electricity Law and subject further to terms and conditions provided in the granted Transmission Licence or Consolidated Licence, the licence-holder will have the right to provide the transmission service, including the right to own, operate and manage the transmission facilities for transferring and delivering or selling the electricity in bulk. There are two types of Transmission Licence: National Transmission Licence and Special-Purpose Transmission Licence.

Note that the National Transmission Licence is issued only to the state-owned transmission¬company, which has the right to provide the transmission service for delivering the electricity to the distribution companies and bulk electricity consumers throughout the country, except in the territory served by isolated systems and subject to the rights of special-purpose licence-holders as provided under the electricity laws. The validity of the licence may be of an indefinite term unless revoked by the Electricity Law.

Relevant applicable laws and regulations

Following the Electricity Law in 2001 and its subsequent amendments, a number of ministerial documents and regulations are issued respectively by the MME and the EAC.

MME

The MME issued Prakas No 470 on 16 July 2004, which was amended on 19 August 2007 by Prakas No 496 to establish electricity technical standards for: (i) Thermal Generating Facilities; and (ii) Transmission and Distribution Facilities. On 17 July 2007, MME issued Prakas No 701 to establish specific requirements of electricity technical standards for: (i) Thermal Generating Facilities; and (ii) Transmission and Distribution Facilities. All persons, including licence-holders, consultants, contractors and consumers who are connected to the study, design, construction and operation of transmission and distribution facilities, are the subject of the applicable Prakas.

EAC

Please see the section on ‘EAC’ in 6.1.1 Principal Laws Governing the Construction and Operation of Electricity Distribution Facilities, although it is not expressly relevant to construction and operation of generation facilities but, by interpretation, it is reasonable to deem that matter discussed in 6.1.1 Principal Laws Governing the Construction and Operation of Electricity Distribution Facilities may also apply for construction and operation of generation facilities.

See 4.2. Regulatory Process for Obtaining All Approvals to Construct and Operate Generation Facilities.

Construction Permit from the MLMUPC

See the section on ‘Construction Permit from the MLMUPC’ in 4.3 Terms and Conditions Imposed in Approvals to Construct and Operate Generation Facilities.

EIA report from the MOE

See the section on ‘EIA’ report from MOE’ in 4.3 Terms and Conditions Imposed in Approvals to Construct and Operate Generation Facilities.

Electricity Licence from the EAC

Typical terms and conditions imposed in the licence are:

  • general obligations of the licence-holder:
  • compliance with the Laws, Sub-Decrees, Orders and PPA;
  • provision of the licence-holder’s financial statements;
  • provision of information to the EAC; and
  • payment of licence fees.
  • service conditions:
  • preparing of transmission codes;
  • transmission system security standard and quality of service;
  • compliance with distribution codes;
  • disposal of relevant assets;
  • restriction on the use of certain information and independence of transmission business; and
  • transmission system outages.

In addition, for a special-purpose transmission licence, the licence-holder must follow the service conditions below:

  • transmission/sub-transmission facilities;
  • operating of the transmission system;
  • providing non-discriminatory open access and connection to the transmission system;
  • sale of electricity to bulk consumers;
  • compliance with Grid Code and Distribution Codes;
  • business;
  • tariff for transmission service and bulk sale;
  • settlement of disputes relating to the transmission agreement;
  • health and safety of employees;
  • communication; and
  • conditions of sale of the transmission/sub-transmission facility in case they are required by the EAC.

The conditions can be added or amended by the EAC in accordance with consultation with the public, applicant and relevant authorities. If the licence-holder wishes to amend its licence with regard to the terms and conditions, the licence-holder may do so by following all the same procedures stated in 4.2.Regulatory Process for Obtaining All Approvals to Construct and Operate Generation Facilities.

See 4.4 Proponent’s Eminent Domain, Condemnation or Expropriation Rights.

There are two types of Transmission Licence: National Transmission Licence and Special-Purpose Transmission Licence.

Note that the National Transmission Licence is issued only to the state-owned transmission¬company, which has the right to provide the transmission service for delivering the electricity to the distribution companies and bulk electricity consumers throughout the country, except in the territory served by the isolated systems and subject to the rights of special-purpose licence-holders as provided under the electricity laws. Presently, it is the EDC that is authorised by the EAC to generate, transmit and distribute electricity, with the main functions of supplying electricity and developing the national transmission grid. The EDC is the only main transmission system-owner to transmit the electricity from the national grid throughout the country.

There, however, are some special-purpose transmission licence-holders operated by private individuals and entities.

See 5.1.1. Regulation of Construction Governing the Construction and Operation of Transmission Facilities.

Terms and conditions of the transmission agreements and the granted Transmission Licence or Consolidated Licence with a scope of transmission will take precedence, in addition to the applicable laws.

Only the EAC may determine and review the tariff rates, charges and service terms and conditions of the licence-holder. The EAC may approve different tariffs for each customer category to reflect the quantity of peak, average, or overall usage of electricity at different times, seasons, the time of day or year, the types of services purchased, or other similar factors. The licence-holders may file an application for a tariff with the EAC, and the EAC will examine, approve, revise, or disapprove this request, including the effective date for a new tariff or the revised tariff, no later than 90 days from the EAC’s receipt of the tariff application and sufficient information for making a decision.

The conditions can be added or amended by the EAC in accordance with consultation with the public, the applicant and the relevant authorities. If the licence-holder wishes to amend its licence with regard to the terms and conditions, the licence-holder may do so by following all the procedures stated in 4.2.Regulatory Process for Obtaining All Approvals to Construct and Operate Generation Facilities.

In addition to the applicable laws, provision of a transmission service is subject to the terms and conditions of the transmission agreement and the granted Transmission Licence or Consolidated Licence with a scope of transmission.

The National Transmission Licence-holder is the EDC, with the right to provide the transmission service for delivering the electricity throughout the country to the distribution companies and bulk electricity consumers, except in the territory served by the isolated systems and subject to the rights of special-purpose licence-holders as provided under the electricity laws. The Special-Purpose Transmission Licence-holder will be authorised to construct, own and/or operate the specifically fixed identified transmission facilities for a specified purpose and ensure the public interest. In such a case, the licence-holder may not be free to provide the transmission service only to a third party.

Licence and permit

Construction Permit from the MLMUPC

See the section on ‘Construction Permit from MLMUPC’ in 4.1 Principal Laws Governing the Construction and Operation of Generation Facilities.

EIA report from the MOE

See the section on the ‘EIA’ report from MOE’ in 4.1 Principal Laws Governing the Construction and Operation of Generation Facilities.

Electricity Licence from the EAC

For the purpose of construction and operation of distribution facilities, a licence from the EAC must be obtained in addition to the above. Distribution of electricity may be approved by the EAC within the scope of a Distribution Licence or a Consolidated Licence.

According to the Electricity Law and subject further to terms and conditions provided in the granted Distribution Licence or the Consolidated Licence, the licence-holder will have the right to provide the electricity distribution services in a determined contiguous territory. The right to provide the electricity distribution services includes the right of ownership, operation and managing or controlling the distribution facilities for supplying and selling the electricity to the customers. Ownership, operation and managing or controlling the distribution facilities in a private territory for their own use is not considered to be the provision of the distribution service. The licence issued under this Article may be of an indefinite term, subject to revocation under this Law. The validity of the licence may be of an indefinite term, subject to revocation under the Electricity Law.

Relevant applicable laws and regulations

Following the Electricity Law in 2001 and its subsequent amendments, a number of ministerial documents and regulations are issued respectively by the MME and the EAC.

MME

The MME issued Prakas No 470 On 16 July 2004, which was amended on 19 August 2007 by Prakas No 496 to establish electricity technical standards for: (i) Thermal Generating Facilities; and (ii) Transmission and Distribution Facilities. On 17 July 2007, the MME issued Prakas No 701 to establish specific requirements of electricity technical standards for: (i) Thermal Generating Facilities; and (ii) Transmission and Distribution Facilities. All persons including licence-holders, consultants, contractors and consumers who are connected to the study, design, construction and operation of transmission and distribution facilities are the subject of this Prakas.

EAC

The EAC issued Regulations on General Conditions of Supply of Electricity in 2003 to govern the negotiations in the supply of electric power between suppliers and consumers, to ensure the efficient and qualitative supply of electricity in a transparent manner and in accordance with the Electricity Law. These Regulations are applicable to all Distribution Licence-Holders, Retail Licence-Holders and Consolidated Licence-Holders which may have one of the above licences and all electricity consumers. Its second version, issued in 2016, requires, among other things, the supplier to apply by every 30th November for the EAC’s approval for new construction work and the upgrading of an existing network that is proposed to be taken up for the following year. No construction work may be commenced without an approval from the EAC. Also, for work that is not proposed in the annual proposal, a request for the EAC’s approval has to be filed at least 30 days prior to the intended commencement date of the work.

In 2004, the EAC issued another Regulations for Distribution Licence-Holders, Retail Licence-Holders and Consolidated Licence-Holders that have a Distribution licence or Retail licence by determining the overall standards of performance of licence-holders relating to the quality of electricity supply and services.

See 4.2. Regulatory Process for Obtaining All Approvals to Construct and Operate Generation Facilities.

Construction Permit from the MLMUPC

See the section on ‘Construction Permit from MLMUPC’in 4.3 Terms and Conditions Imposed in Approvals to Construct and Operate Generation Facilities.

The EIA report from the MOE

See the section on the ‘EIA’ report from the MOE’ in 4.3 Terms and Conditions Imposed in Approvals to Construct and Operate Generation Facilities.

Electricity Licence from the EAC

Typical terms and conditions imposed in the licence are:

  • general obligations of the licence-holder:
  • compliance with the Laws, Sub-Decrees, Orders and PPA;
  • provision of the licence-holder’s financial statements;
  • provision of information to the EAC; and
  • payment of licence fees.
  • service conditions:
  • conditions on electricity service area;
  • conditions on electricity service utilities;
  • conditions on distribution system operation;
  • conditions on electricity business;
  • conditions on electric power supply to customers;
  • conditions on public interest;
  • communication;
  • sale condition of distribution facility in the case it is required from the EAC;
  • authorised distributing area; and
  • term of revocation.

The conditions can be added or amended by the EAC in accordance with consultation with the public, applicant and relevant authorities. If the licence-holder wishes to amend its licence with regard to the terms and conditions, the licence-holder may do so by following all the same procedures stated in 4.2.Regulatory Process for Obtaining All Approvals to Construct and Operate Generation Facilities.

See 4.4. Proponent’s Eminent Domain, Condemnation or Expropriation Rights.

There are no monopoly rights expressly allowed or prohibited under the law.

In practice, the RGC and the EAC allow a location-based monopoly to private investors as an incentive for investments in an area which is not covered or has not been reached by the national grid.

Note, however, that a monopoly of this kind is based and limited on the validity period of the relevant licence.

See 6.1 Principal Laws Governing the Construction and Operation of Electricity Distribution Facilities.

Terms and conditions of the power-purchase agreements and the granted Distribution Licence or Consolidated Licence with a scope of distribution will take precedence, in addition to the applicable laws.

Note that a tariff for a distribution service is governed by the Electricity Law 2001 and the Regulations on General Principles for Regulating Electricity Tariffs approved by EAC Session No 113, dated 26 October 2007. Only the EAC may determine and review the tariff rates, charges and service terms and conditions of the licence-holder. The EAC may approve different tariffs for each customer category to reflect the quantity of peak, average, or overall usage of electricity at different times, seasons, the time of day or year, the types of services purchased, or other similar factors. The licence-holders may file an application for a tariff with the EAC, and the EAC will examine, approve, revise, or disapprove this request, including the effective date for new tariff or the revised tariff no later than 90 days from the EAC’s receipt of the tariff application and sufficient information for making a decision.

The conditions can be added or amended by the EAC in accordance with a consultation with the public, applicant and relevant authorities. If the licence-holder wishes to amend its licence with regard to the terms and conditions, the licence-holder may do so by following all the procedures stated in 4.2.Regulatory Process for Obtaining All Approvals to Construct and Operate Generation Facilities.

Bun & Associates

#29, Street 294
Phnom Penh
Cambodia

+855 23 999 567

info@bun-associates.com www.bun-associates.com
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Law and Practice

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Bun & Associates benefits from a cross-cultural working environment and management team. It takes pride in its integrated, multi-disciplinary team of legal experts with advanced law degrees from some of the most renowned universities in Asia, Europe and North America, covering multiple languages including Chinese (Mandarin), English, French, Japanese, Khmer, and Thai. The firm provides comprehensive legal services in key sectors including business entry (including mergers and acquisitions), banking and financial services, insurance, property development and large scale agro-industry as well as environment-related matters, mining, and oil and gas. The firm has recently launched a new practice, which is Telecommunications and New Technology. Bun & Associates' clients are key players in their respective industries. The firm is very familiar with and experienced in Cambodian legal and practical aspects, enabling delivery of high-quality services, and enhancing the efficiency of clients’ investment implementation. Bun & Associates has also been recognised for its skills and knowledge in dealing with many cross-border transactions and is regularly referred by numerous renowned international law firms.

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