STOXPLUS joined as Speaker at Vietnam Power Development Summit 2019
Hanoi, 24th January 2019, Mr. Dong Le, Director of Research & Consulting division at STOXPLUS, joined the Wind Energy Panel Discussion in the Vietnam Power Development Summit 2019. He shared some in-depth insights and experience in Vietnam renewable energy, particularly the wind energy market.
Throughout the conference, the high-level speakers, experienced developers and lawyer presented the key milestones, main challenges as well as their experience in renewable energy project development in Vietnam. Especially, the panel discussion focused on Wind Energy development issues including the difficulties on project financing and timeline to meet the FiT incentive. Below are some key points highlighted during the panel discussion.
Key milestones for renewable energy projects
Developing a renewable energy project has to overcome two key milestones including investment permission and land planning. Mr. Long from FECON pointed out the main reasons for lengthy project permission is the complicated investment procedures via many levels of authority. Besides, the conflict between investors and resident results in long site clearance phase and project delay. To invest smoothly, developers should work with local partners who understand the regulation, take some risk first to ensure the project is running and prepare a broad view for long-term to deal with unfavored scenarios.
The best investment forms
Mr. Oliver Massmann, General Director, Duane Morris Vietnam provided guidelines for investors to choose the best form of investment. In his opinion, BOT would be the best option to negotiate the FiT, obtain the Government’s guarantee, incentives and achieve a project-based financing agreement. He also shared his experience that developers can find the guarantee from MIGA (Multilateral Investment Guarantee Agency) of World Bank or from a State-owned commercial bank in negotiating with lenders to eliminate all recourses that lenders may ask.
Financing and developing wind energy projects
In financing wind projects, Mr. Olivier Duguet, Chairman of Blue Circle and Mr. Dong Le from STOXPLUS pointed out Vietnamese wind projects are being financed in the corporate-based rather than project-based. Banks structure the loans through the parent company and require parent company’s property as collateral. According to Mr. Dong, in practice of joint ventures, foreign companies finance the project through the foreign shareholder loans or require foreign shareholder company guarantee. In some cases, foreign banks finance the EPC contract and require LCs from local banks. In substance, foreign banks provide liquidity and banks provide the guarantee.
As stated by Mr. Dong, there are around 60 wind projects but only 6 projects in operation, over 90% of projects are on the paper. Local investors usually come from real estate, trading, etc., and don’t have expertise in renewable energy. They find difficulties in finding EPC contractors and arranging projects. In order to ensure the success of wind energy projects, there should be a good co-operation between local and foreign investors, in which foreign investors bring in expertise and local investors have relationship local authority.
The ability of meeting COD deadline for wind projects
According to the Decision 39/2018/QD-TTG, wind FiT would increase from 7.8 US cents/kWh to 8.5 US cents/kWh for onshore projects and 9.8 US cents/kWh for offshore projects whose COD before 1 November 2021, for 20 years. Developers are rushing to meet the COD deadline. Mr. Hung from Mainstream Renewable Power expressed his confidence that there is still enough time for on-shore projects which are already in the Power Development Plan to meet the deadline in 3 years. On the other hand, in his opinion, off-shore projects require more time and study, would be much difficult to meet the COD deadline.
To explore the most up-to-date research and data regarding Vietnam Renewable Energy, please have a look at our Vietnam Renewable Energy Report 2018.