Only a tiny proportion of already-approved solar projects may qualify for Vietnam’s next feed in tariff (FiT 2) according to draft opinions from the MOIT. If the Prime Minister agrees with the approach, many projects with already-signed PPAs, some in very advanced stages of development, look set to be forced into participating in tariff auctions or, worse, have their approvals withdrawn altogether.
The unsigned and undated MOIT document follows the Prime Minister’s surprise announcement dated 22 November that FiT 2 will only be available for projects with signed PPAs that are “under construction” and provided they reach COD by end of 2020. The MOIT document seeks to define what “under construction” means for this purpose. It takes a narrow view, referring to Article 6.1.b of Decree 59/2015/ND-CP dated 18 June 2015 re management of construction projects to suggest that for a project to be considered “under construction” the project must have completed appraisal of detailed / technical construction designs prior to 22 November 2019.
According to the MOIT’s data contained in the draft, it appears that only four out of 23 projects having already-signed PPAs but not yet reached COD would meet this criteria (some sources indicate there may be in excess of 30 such projects). That would leave the vast majority of projects with signed PPAs out of contention for FiT2 and left scratching their heads as to what happens next.
As noted, the draft letter sighted is unofficial and draft only at this time so it is not yet definitive. From our point of view, the MOIT is offering a far too narrow interpretation of what “under construction” could/ should mean. Article 6.1.b of Decree 59 provides for numerous additional steps in the construction process that, if considered, would broaden the net substantially. For example, it also refers to land allocation or lease; site investigation works, demining (if any); construction survey work; formulation, appraisal and approval of design and construction estimates; issuance of construction permits (if required); selection of contractors and signing of construction contracts, among other points. There are approved projects that have paid for land clearance and compensation and started some site preparatory works but have held off completing detailed construction design appraisal pending the next FiT policy news.
As ever, it remains to be seen what final decision the PM will make on this issue. It is not unreasonable to believe that the PM may consider the MOIT’s suggestion to be too narrow considering the substantial resources already committed by developers on many of these projects, some of which signed PPAs late 2017/ early 2018 expecting to make the FiT 1 cut off of 30 June 2019 and that have been left in limbo over the past nearly 6 months while the PM mulls the country’s new solar policy.
Watch this space.
For more information about Vietnam’s energy sector, please contact Giles at GTCooper@duanemorris.com or any of the lawyers in our office listing. Giles is co-General Director of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.