*Please note that this newsletter is for informational purposes only and does not constitute legal advice. In addition, it is based on information as of its date of publication and does not reflect information after such date. In particular, please also note that preliminary reports in this newsletter may differ from current interpretations and practice depending on the nature of the report.
Overview
On June 5, 2026, the Provincial Electricity Authority (PEA) implemented new regulatory criteria governing changes in power user identities and shareholding structures. This regulatory shift introduces a strict three-year lock-up period on share transfers and Power Purchase Agreement (PPA) transfers, together with a requirement to maintain an aggregate majority stake exceeding 50% of the subject total shares, thus fundamentally altering deal structuring for cross-border M&A and introducing critical considerations for project financing.
1. Scope
The PEA Notification on the Change and Transfer Criteria for Data Center and Large Industrial Power Users (PEA Notification) is specifically directed at businesses operating data center facilities and at major industrial enterprises characterized by high electricity demand. These entities, which typically require substantial and continuous power capacity, are now subject to enhanced PEA scrutiny designed to ensure long-term project commitment and prevent speculative reservations of grid capacity.
2. The 3-Year Lock-Up and Majority Retention Rule
Under the new regulation, the power user is subject to a strict change of control restriction for three years from the date actual electricity usage begins. During this lock-up period, the original shareholders in the initial power usage application must continuously maintain an aggregate majority stake of more than 50% of the total shares in the project company.
3. Power Purchase Agreement Transfer Criteria
The regulation establishes a bifurcated approach to transferring a PPA, imposing conditions which differ based on the project’s operational timeline:
A. Transfers Prior to or Within the First 3 Years of Operation
If the power user has not yet commenced electricity usage, or has been utilizing electricity for less than three years, transferring the PPA is subject to stringent conditions. The transferee must be a juristic person incorporated in Thailand with the same corporate objectives as the transferor. Furthermore, the transfer must fulfil one of the following requirements:
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Common Control: The transferor must hold more than 50% of the total shares in the transferee as of the novation application date, and must strictly maintain this minimum shareholding for no less than three years following the successful PPA transfer.
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Public Company Conversion: The transferor is a private limited company that legally transforms into a public limited company.
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Amalgamation: The transferor undergoes a statutory amalgamation resulting in a newly formed corporate entity under the Thai Civil and Commercial Code or the law governing public companies, provided that the shareholders of the original transferor maintain more than a 50% shareholding in the newly amalgamated entity.
B. Transfers After 3 Years of Operation
Following the expiration of the initial three-year operational period, the regulatory requirements revert to the general standard, requiring only that the transferee’s corporate objectives align with those of the original power user.
4. Mandatory Security and Consequences of Non-Compliance
In all instances of PPA transfer-whether executed during or after the three-year lock-up window-the transferee must furnish a replacement performance security to the PEA.
Strict compliance with the shareholding and transfer restrictions is critical. The PEA is empowered to treat any unauthorized change of control or non-compliant PPA transfer as a material breach of the PPA and to suspend the supply of electricity to the facility or terminate the PPA entirely.
5. Deal Structuring Implications for M&A and Project Financing
The regulatory restrictions necessitate harmonization between equity structuring and debt financing parameters:
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M&A and Joint Venture Structuring
With respect to joint venture arrangements: Exit strategies, call/put option exercises, and phased buyouts must be precisely calibrated. Any equity transfer that reduces the original sponsors’ aggregate shareholding to 50% or below during the initial three-year operational window will constitute a regulatory breach, risking power disconnection.
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Project Financing Considerations
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Enforcement of Share Pledges
With respect to project finance lenders: Enforcing a share pledge upon a borrower default during the lock-up period by transferring pledged shares to a lender nominee or third-party purchaser could reduce the original shareholders’ aggregate equity stake to 50% or below. Under the PEA framework, this triggers an unauthorized change of control, jeopardizing the project’s energy supply.
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Constraints on Step-in Rights
Similarly, exercising step-in rights under direct agreements to novate the PPA to a substitute entity during a distress scenario requires the substitute entity to meet the strict “Qualified Transferee” criteria (such as requiring the defaulting original sponsor to hold more than 50% of the substitute entity for three years). This creates a major structural obstacle for lenders seeking unencumbered operational control of the asset.
6. Recommended Actions for Stakeholders
To safeguard project bankability and ensure regulatory compliance, stakeholders should consider the following proactive measures:
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Audit the Security Packages
Sponsors, lenders, and investors should systematically review transaction documentation including share pledges, direct agreements, and step-in protocols to identify potential enforcement constraints or operational exposure arising during the three-year lock-up window.
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Re-evaluate Transaction and Governance Frameworks
Parties involved in the development or ongoing debt financing should re-examine equity joint venture agreements, shareholder arrangements, and credit agreement terms, to ensure equity transfer restrictions and default triggers are harmonized with the PEA criteria.
Conclusion
Early strategic evaluation is critical to safeguarding project bankability and operational continuity. Should you wish to discuss any aspect of the PEA Notification or analyze its precise implications for your projects and transactions, please contact Supasit Boonsanong at supasit.b@nagashima.com and Kobchai Nitungkorn at kobchai.n@nagashima.com.
This newsletter is given as general information for reference purposes only and therefore does not constitute our firm’s legal advice. Any opinion stated in this newsletter is a personal view of the author(s) and not our firm’s official view. Given the nature of this newsletter as general information, statutory provisions and source citations may have been intentionally omitted. For any specific matter or legal issue, please do not rely on this newsletter but make sure to consult a legal adviser. We would be delighted to answer your questions, if any.
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