Tag Archives: solar

Solar FIT 2 finally announced in Vietnam but strict timeline remains

Vietnam’s Prime Minister has finally issued a decision on new FITs for solar power projects. The Decision formalizes amounts many had been expecting based on previously circulated draft information but comes nearly a year after the previous FIT rate expired (June 2019) and will leave many wondering why the decision couldn’t have been made much sooner.

Decision 13/2020/QD-TTg dated 6 April 2020 confirms that the new FITs will only be available – for now at least – for projects that COD prior to 31 December 2020.   This is a ridiculously short time line considering the long lead in time for delivery of inverters and, for many projects, completing land acquisition procedures.

The new FITs are:

  • For floating solar energy projects: 7.69 US cents/ kWh
  • For ground mounted solar energy projects: 7.09 US cents/ kWh
  • For rooftop energy solar energy projects: 8.38 US cents/ kWh

While providing welcome certainty, the long delay has seriously stressed many approved and licensed solar projects.   Investors and developers had been left in the dark about what revenue they would receive while simultaneously under pressure to meet construction deadlines stated in investment approvals and PPAs.

On the positive side, the Decision confirms that projects that are eligible for the new FITs are those that obtained Decisions on investment policy prior to 23 November 2019. This throws a wider net than previously-floated criteria that projects would have to have already started construction by that date. Practically speaking however, given the tight COD deadline, it will not dramatically affect the number of projects that have a realistic shot at securing the new FIT. Project owners need to make a very calculated decision now about how hard and fast to push ahead for COD by end of the year. Among myriad factors that could threaten such a target – including COVID-19 supply chain issues – must be EVN’s capacity to integrate and connect a potential flood of projects before the deadline.

The alternative, according to the new Decision, is that project owners will need to participate in competitive auctions. Though, also coming into view now, is a new corporate direct power purchase pilot program that will be an attractive option for many developers, albeit initially limited in scope. Read some more about that scheme here.

Notably, the new Decision does not suggest that any improvements will be made to the template solar power PPA, a form widely considered unbankable for international banks. Surely however the days must be numbered for this form if the Government wants to see sound future development of solar power, not to mention lower prices, in future.

With respect to rooftop solar projects, the Decision does not – as many had hoped – increase the existing 1 MW limit (which is not a true limit per se but rather a threshold for dramatically simpler licensing). Many had advocated to increase this to 3MW but not to be.

The Decision does however expressly recognize the concept of private rooftop power sales, something previously not clearly regulated. On that point, the Decision provinces that if EVN is not the power buyer, the parties can agree on their own PPA terms, provided they are consistent with existing regulations. This will be welcome news for rooftop developers who have been currently operating in something of a grey area, often using unconventional contractual arrangements. Further detailed regulation may come from the MOIT to further elaborate this.

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 Chairman of Duane Morris Vietnam LLC, branch director of Duane Morris’ HCMC office and Asia lead for Duane Morris’ Energy Industry Group.

BREAKING NEWS – Vietnam’s PM decides to do away with solar FiTs in favor of auctions

Get ready for auctions!  After months of confusion and uncertainty over the policy for solar power development in Vietnam Prime Minister Nguyen Xuan Phuc today issued his conclusions and looks to have signed the death knell for solar feed in tariffs (FiT) in favor of competitive auctions.

In Notification No. 402/TB-VPCP dated 22 November 2019, the Prime Minster concluded that rational future development of the sector necessitates introducing an auction system for ground-mounted solar projects.  FiTs will continue to apply only for rooftop solar projects and certain already-approved ground-mounted projects.

The decision comes nearly five full months after expiry of the blanket 9.35c/ kWh FiT issued in April 2017 that kicked off a huge, and largely uncontrolled, rush that culminated in some 4,500MW of solar generation capacity becoming operational by July 2019 and, reportedly, an incredible 35GW of registered interest.  The first number alone is some 500% more than the 850MW of solar that was planned to be operational by 2020 in National Power Development Masterplan 7 (revised as of 2016).  That both highlights just how frenetic the activity was and also how efficiently the private sector is able to get these projects developed, financed and constructed.  Just imagine what could be done with an international-standard PPA and a developed grid infrastructure.

The Prime Minister, in his conclusions, chides the MOIT for the helter skelter development over the past two years, with many projects concentrated in areas where grid infrastructure is unable to properly serve the facilities resulting in widespread curtailment problems.  The Prime Minister has urged the MOIT to learn its lessons and re-orient itself towards a new reality.  The gold rush days are over and developers can expect a more rigorous licensing and approval process for new projects now.

FiTs aren’t entirely dead yet though.  The Prime Minister’s conclusions suggest, without stating definitively, that certain projects will still be entitled to FiTs.  Specifically, ground-mounted projects that already have signed PPAs and can be put into operation in 2020 appear set to continue to enjoy FiTs.  Rooftop solar projects will also continue to enjoy FiTs.  The Prime Minister has instructed the MOIT to propose the final FiT terms, including a list of projects entitled to enjoy the new FiT, and present them for his approval by 15 December 2019.  While the number is still unknown, it is widely expected to be 7.09c for ground-mounted projects and stay at 9.35c for rooftop projects (which are favored due to not needing land to be allocated).

Certain, already announced, special rules for Ninh Thuan province will continue to apply with some adjustment.  Specifically, some already-approved projects in that province will continue to enjoy the 9.35c FiT but only until total operational capacity there reaches 2000 MW or until the end of 2020, whichever comes first.  The race is on there.

For all other ground-mounted solar projects, the Prime Minister has determined that competitive auctions are the way forward.  No doubt having an eye on the September 2019 auctions in Cambodia that resulted in solar tariffs as low as 3.87c, and record low prices in other markets around the world, this is seen as the appropriate way to marry investor appetite with actual conditions.  There is of course a huge question mark over how such auctions will function in practice and there remains a lot to be seen.  Most significantly, will there be any changes to the standard PPA terms to facilitate low prices.  If not, the market will have to put a firm price on the bankability and contractual risk.

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.

Vietnam’s draft new solar tariffs – more sun, less cents, more sense

A new proposed tariff structure for solar energy projects in Vietnam sets out different rates for different irradiation regions and gives long-awaited indication of direction for the market after 30 June 2019.  On 29 January 2019, the Ministry of Industry and Trade (“MOIT“) released parts of a draft decision to update the country’s current feed in tariff (FiT) structure which is only valid until 30 June 2019 (the “Draft”).

The Draft is of course still just that, a draft, but forecasts a clear change in strategy with respect to FiTs.

Under the current FiT policy (regulated by Decision 11 and Decision 16) there is only one FiT for all projects regardless of location.  That is an internationally respectable FiT of 9.35 US cents per kWh for all on-grid solar power projects that achieve commercial operation date (“COD”) prior to 30 June 2019 (with the exception of some projects in Ninh Thuan province which have a later COD timeline).

The Draft however sets out a wide range of differing FiTs that vary based on: (i) when COD happens, (ii) location (3 regions are identified based on solar irradiation data), and (iii) the type of solar projects (i.e., floating, ground-mounted, integrated storage system or rooftop solar).

The table below shows what the Draft contemplates:

Projects with COD from 1 July 2019 to 30 June 2020

 

Solar power types Region 1 (see regions below)

(28 northern provinces with annual solar irradiation of up to 1,432.8 kWh/m2/year)

Region 2

(6 central provinces of Vietnam with annual solar irradiation of up to 1,676.1 kWh/m2/year)

Region3

(29 central highlands and southern provinces of Vietnam with annual solar irradiation of up to 1,910.3 kWh/m2/year)

VND / kWh US cent equivalent VND / kWh US cent equivalent VND / kWh US cent equivalent
Floating solar power projects 2,135 9.35 1,838 8.05 1,612 7.06
Ground-mounted solar power projects 2,095 9.18 1,802 7.89 1,583 6.94
Solar power projects with integrated storage system N/A N/A N/A N/A 2,052 8.99
Rooftop solar power projects 2,448 9.85 1,933 8.47 1,697 7.43
Projects with COD from 1 July 2020 to 30 June 2021

 

Floating solar power projects 2,028 8.88 1,746 7.65 1,531 6.71
Ground-mounted solar power projects 1,990 8.72 1,712 7.50 1,504 6.59
Solar power projects with integrated storage system N/A N/A N/A N/A 1,949 8.54
Rooftop solar power projects 2,023 8.86 1,740 7.62 1,527 6.69

 

While no changes will please everyone, especially the many developers who have committed considerable resources based on assumptions of the current FiT rate, the changes still indicate strong support for solar power projects generally and a rational approach to reflect the markedly different irradiation levels across the country.  Such an approach should take some pressure of heavily-stretched Southern hotspots (stretched from both power infrastructure and bureaucratic bottleneck perspectives).

We will continue to monitor this and update further as possible.  Meanwhile, we’d be delighted to hear views from developers and financiers about the change of strategic policy direction and FiTs forecast by the Draft.  Get in touch and tell us what you think.

Region 1: comprising 28 northern provinces of Vietnam with annual solar irradiation of 1,225.6 – 1,432.8 kWh/m2/year or daily solar irradiation of 3.36 – 3.92 kWh/m2/day. Including: Ha Giang, Bac Kan, Cao Bang, Tuyen Quang, Thai Nguyen, Lao Cai, Yen Bai, Lang Son, Quang Ninh, Phu Tho, Vinh Phuc, Bac Giang, Hai Duong, Hoa Binh, Hanoi, Ha Nam, Bac Ninh, Hung Yen, Hai Phong, Ninh Binh, Thai Binh, Ha Tinh, Nam Dinh, Quang Binh, Thanh Hoa, Lai Chau, Nghe An and Son La.

Region 2: comprising 6 central provinces of Vietnam with annual solar irradiation of 1,456 – 1,676.1 kWh/m2/year or daily solar irradiation of 3.99 – 4.59 kWh/m2/day. Including: Quang Tri, Dien Bien, Thua Thien Hue, Quang Nam, Da Nang and Quang Ngai.

Region 3: comprising 29 central highlands and southern provinces of Vietnam with annual solar irradiation of 1,703.9 – 1,910.3 kWh/m2/year or daily solar irradiation of 4.67 – 5.23 kWh/m2/day. Including: Kon Tum, Ca Mau, Hau Giang, Binh Dinh, Phu Yen, Bac Lieu, Kien Giang, Soc Trang, Gia Lai, Can Tho, Vinh Long, Tra Vinh, Dak Lak, Khanh Hoa, Lam Dong, Ben Tre, Tien Giang, An Giang, Dak Nong, Ho Chi Minh City, Dong Nai, Dong Thap, Ba Ria – Vung Tau, Long An, Binh Duong, Binh Phuoc, Tay Ninh, Ninh Thuan and Binh Thuan.

For more information about Vietnam’s solar and renewable energy sectors, please contact Giles at GTCooper@duanemorris.com, Tran Thanh at MTTran@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.

Solar project COD extension for Ninh Thuan province finally confirmed

Prime Minister Nguyen Xuan Phuc signed Resolution 115/NQ-CP on 31 August 2018 to confirm some special policies to support Ninh Thuan province (“Resolution 115”). Pursuant to Article 1.1.e of the Resolution 115, the Prime Minister  confirmed that the commercial operation date (COD) deadline (previously 30 June 2019) for solar projects in Ninh Thuan province to enjoy the 9.35 US cents feed in tariff has been extended to the end of 2020.  This extension applies to those solar energy projects approved in the relevant Master Plan (approx. 2000MW).  Resolution 115 took effect on 31 August 2018 and lays to rest the badly kept secret that Ninh Thuan, a literal hot spot for solar projects, will enjoy more favorable terms than projects in other locations which remain bound to the 30 June 2019 COD deadline.   Clear and definitive statements as to what will happen after 30 June 2019 for projects in other locations is now desperately required.  Our view and intel is that no-one else should bank on extensions and should develop strategies now to mitigate risks of missing the 30 June 2019 date (e.g. – look to be an early mover in the hotly-anticipated DPPA (direct power purchase) market).

For more information about renewable energy projects in Vietnam, 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.

VIETNAM – SOLAR POWER BREAKING NEWS – EXTENSION PROPOSAL BY MINISTRY OF PLANNING AND INVESTMENT OF DEADLINE FOR FEED IN TARIFF REJECTED – WHAT YOU MUST KNOW

Last June, the whole solar energy industry rocked (and became excited!) with the news that the Deputy Prime Minister, in one of his meetings with the Ministry of Industry and Trade (MOIT) on 20 June 2018, has agreed in principle that the COD extension for solar energy projects under the Decision 11 shall be extended beyond the original deadline of 30 June 2019. According to Vietnam’s political tradition, this development would normally mean the subsequent issuance of official legislation to formalize the decision. One source infomed the market players that the decision for extension would first be issued by end of July for Ninh Thuan projects due to the province’s economic downturn, and by the end of this year, a decision to extend nationwide will follow. On 4 July 2018, the Ministry of Planning and Investment (MPI), in coordination with the MOIT, submitted an official letter No. 4545 (Letter 4545) to the Prime Minister to formally propose the COD extension. That letter 4545 was addressing Ninh Thuan solar energy projects only but market players expected that proposal for nationwide extension would follow very soon.
However, in a rare and unpredictable move, on 26 July 2018, the Government’s Office issued an Official Letter No. 7108 (Letter 7108) to reject the proposal for COD extension for Ninh Thuan solar energy projects, without mentioning any rationale behind it or any reference to the Deputy Prime Minister’s in-principle agreement with the MOIT. That means, as a result of Letter 7108, everything under Decision 11 would stay the same, at least for Ninh Thuan solar energy projects.
What remains unclear is whether the MOIT/MPI would continue pushing for a nationwide COD extension, amidst the Letter 7108. One source continues insisting that such a nationwide COD extension (which was planned to go through by end of 2018) is still reviewed by the Prime Minister. From the IPP’s perspectives, it is understandably viewed as a 50/50 decision. A high-yielder would continue go for bigger projects with hope that nationwide COD extension will take place, while others may choose to go with smaller one to ensure the construction time to be secured.
We will keep our clients updated on the development of this saga. Time is of essence now yet everything is still up in the air. For prudent reasons, we would have to advise IPPs to go with smaller projects now for the purpose of plausible construction time. We can help introducing such projects.
Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any lawyers in our office listing if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Vietnam – Solar Power Breaking News – Possible Extension of deadline for Feed in Tariff (9.35 USD cent per KW) – what you must know:

The current solar Feed-in-Tariff for on-grid projects in Vietnam is 2,086 Vietnamese dong/kWh (equivalent to 9.35 UScents/kWh) (VAT excluded). According to Decision 11/2017/QD-TTg, this solar FIT applies for projects which come into operation before 30 June 2019 and within 20 years from the commercially operational date (“COD”) (i.e., the date when the solar plant is ready to sell electricity to the buyer – EVN).

However, from our informal high level contact within the MOIT recently, it is very likely that the solar FIT of US9.35 cents/kWh will continue to apply beyond the original COD (i.e. 30 June 2019). The deadline shall be likely extended for another half a year or another year for solar projects across Vietnam, except for projects in Ninh Thuan. This policy is not yet formally adopted but very likely will be publicized at the end of this year.

For solar projects in Ninh Thuan, the COD deadline extension will be longer (i.e. for another one and a half year from 30 June 2019). This is due to the fact that, in Ninh Thuan province, nuclear energy development has been stopped and the Government would like to develop solar energy there to support the province’s economic development.The special policy for solar projects in Ninh Thuan will be coming very soon, according to our MOIT contact. He informed us that the Deputy Prime Minister has already approved this special policy for Ninh Thuan and all await formal procedures.

We will closely monitor to update on any further changes.

Please contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have questions on the topic or any other lawyer in our office listing. Dr. Oliver Massmann is the General Director of Duane Morris LLC.

What’s next for green energy in Vietnam – 4 steps to the future

Now that the United States has retreated from the Paris Climate Accords, and relinquished its leadership role in the fight against climate change, it remains to be seen whether smaller nations will stick to their pledges of greenhouse gas reduction.

Eyes are on countries like Vietnam to see if they keep to their commitments or revert to the pursuit of cheap and dirty coal-powered solutions for their energy needs.

Vietnam, in particular, faces some of the biggest risks. Global warming is a major threat to the country, where rising sea levels are predicted to swallow up nearly half of the Mekong Delta, a crucial area for domestic food production, in coming decades.

Currently, coal-fired plants in Vietnam contribute to thousands of premature deaths and air quality in big cities is getting worse. In 2017, the capital Hanoi enjoyed just 38 days of clean air, with contaminant levels four times those deemed acceptable by the World Health Organization.

Business as usual?

Unlike Obama, the Trump administration seems unlikely to apply any real pressure on other countries to pursue clean energy or combat climate change, and so it will be up to domestic forces to really push for change.

According to the government’s current national plan, electricity generated from coal will rise five-fold between now and 2030, and GHG emissions will increase in lockstep. This is at odds with Vietnam’s pledge to the Paris Climate Accord, which targets 8 percent emissions reduction by 2030, and could rise as high as a 25 percent reduction with international support, such as financing for solar panels and wind turbines.

Energy and environment experts worry that the country’s next national power development plan, which is under revision this year, could hold to those figures or, worse, embrace a more aggressive coal strategy.

The story, however, is not all doom and gloom. Vietnam does have the potential to become a regional clean energy leader, if only the country’s energy development and investment environment can be reshaped. Business involvement in this process will be crucial, as the commercial and industrial sectors consume more than 60 percent of Vietnam’s electricity.

Khanh Nguy Thi, founder of the Vietnamese nonprofit Green Innovation and Development Centre, recently won the 2018 Goldman Environmental Prize for her work convincing state agencies to increase their use of renewable energy. Her efforts were instrumental in halting the construction of two hydropower plants in a national park and securing a 20,000 MW reduction in planned coal expansion.

Government leaders have also demonstrated a desire to utilise Vietnam’s abundant sunlight and over 2,026 miles of coastline in the pursuit of renewable energy.

4 solutions for a sustainable energy sector

Clearly, clean energy opportunities are available, the question is how to encourage more investment. Obstacles persist with the regulatory environment, preventing the country from tapping its potential in this area. Here are four small changes which could bridge the gap between policy and implementation, ensuring the green energy dream becomes a reality:

  1. Streamline regulations regarding Power Purchase Agreements (PPA) and support the use of Direct Power Purchase Agreements (DPPA).

Negotiating standard PPAs with EVN, the sole power purchaser, is time-consuming, which cause rising total project costs. The streamlining of such deals would render them more attractive to power producers and cut lengthy approval time, which often leads to execution delays or complete abandonment of projects.

USAID and Vietnam’s Ministry of Industry and Trade are working together to enable private sector electricity buyers and renewable energy providers to enter into DPPA. This would allow industrial energy buyers to purchase electricity directly from independent renewable energy producers.

Such a mechanism would help companies enjoy constant power prices and ultimately save power costs. By signing a long-term DPPA to buy power from a clean energy generator, businesses can have a constant power price, reducing risk and helping firms establish long-term business plans with no surprises down the road.

  1. Improve the transparency of electricity rate forecasting.

Electricity prices will have to increase in order for Vietnam’s national utility to finance new energy projects, but the schedule for such increases remains vague. Better transparency of expected price increases will allow buyers and investors to more accurately value fixed-cost renewable energy contracts, which can offer some price protection.

Additionally, improving the quality and sourcing of data on renewable energy can help clarify for investors available locations, infrastructure capabilities and government targets, as well as other information to help reduce risk on investment decisions.

  1. Encourage supporting industries.

Supporting industries plays a crucial role in the development and adoption of renewable energy technologies. The government should promote domestic SMEs through capital subsidy and incentives such as tax breaks and preferential loans. A competitive supporting industry will help in reducing the tariff and investment costs for renewable projects, nurturing their development as part of Vietnam’s energy sector.

  1. Develop a renewable energy model for industrial parks.

Given the expectation that industrial areas will continue to play a big role in Vietnamese manufacturing and commerce, these parks are an important place to explore renewable solutions. Aggregating demand from tenants in the parks would help scale clean energy and make it more affordable for all.

Green power pioneer

Renewable energy has the capacity to power Vietnam and with the right policies in place, the country can deliver affordable, safe and clean power for continued economic growth.

Vietnamese businesses and the government could chart an unprecedented course for clean energy, and represent a role model for Southeast Asia — if they can address some key barriers. The changes detailed above would help drive the country’s energy transition toward a sustainable, greener future, and demonstrate that the fight against climate change can continue without American leadership.

For more information about Vietnam’s renewable 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.

LAWYER IN VIETNAM DR. OLIVER MASSMANN LEGAL UPDATE MAY 2018 – SOLAR ENERGY ROOFTOP TAX BENEFITS – SOLAR POWER MASTER PLAN – PUBLIC PRIVATE PARTNERSHIPS – LATEST ON INDUSTRIAL AND ECONOMIC ZONES

1. Official No. 5111/VPCP-KTTH issued by the Government Office in response to Official Letter No. 5400/BTC-CST of the Ministry of Finance in relation to tax preferences applicable to solar roof projects of 50 kW or less.
Issuance date: 31 May 2018
Effective date: 31 June 2018
The Government in-principle approves the request from the Ministry of Finance on tax advantages applicable to solar roof projects of 50 kW or less. The Government also assigned the Ministry of Finance to issue relevant legal documents to implement this policy. Currently, request of the Ministry of Finance and draft future regulations on this topic have not yet been published.

2. Legal news: Solar power master plan – rumor on delay
The Ministry of Industry and Trade (“MOIT”) must report the list of approved solar power plants to the Prime Minister before 15 July 2018. The MOIT must also promptly finalize the national solar power development master plan for the Prime Minister’s consideration.
Currently, the number of solar power projects submitted by investors to the MOIT is significant. According to Vietnamnews, the MOIT has approved more than 70 solar power projects, with a total capacity of over 3,000MW, to come into operation before June 2019. The capacity is much larger than the combined capacity of projects by 2020 (i.e., 850 MW for solar power projects) as approved by the Prime Minister in the current power master plan VII.

Unconfirmed rumor: the MOIT (and other authorities) would likely not review and approve any application for addition of new solar power projects to the power development master plans / solar power development master plans from now until 30 June 2019. In addition, the MOIT would issue an official letter to confirm this temporary suspension.

3. Decree No. 63/2018/ND-CP issued by the Government on Investment in Form of Public-Private Partnerships (“PPP”) (“Decree 63”) replacing the old PPP Decree 15/2015/ND-CP (“Decree 15”)
Issuance date: 4 May 2018
Effective date: 19 June 2018
Decree 15, when introduced in 2015 was highly praised by legal commentators to be well drafted and make the PPP laws and regulations in Vietnam move closer towards bankable projects. However, in implementation process, there have been conflicting legal issues that deter investors from choosing PPP as an investment method, leading to a humble number of PPP projects thus far. Moreover, as PPP laws are only at Decree level, regulatory framework for PPP projects mainly includes the Law on Enterprises, Law on Public Investment, Law on Bidding, etc. most of which regulate public investment instead of private one or investment cooperation between the Government and private investors. The investors are also concerned about the stability of PPP regulations, as they are mainly Decrees. While a PPP project could take years to complete, regulations at Decree level may change and cause investors confusion in implementation of the laws. The state agencies also face certain difficulties in managing these PPP projects.
We provide below key notes on Decree 63:

Capital contribution responsibility
The investor is responsible for contributing and mobilizing capital for the project implementation, in particular, the ratio of the investor’s equity capital in total project investment capital is determined as follows:
– For projects with total investment amount of up to VND1,500 billion, the equity capital that the investor must maintain must be at least 20% of the total investment capital;
– For projects with total investment capital of more than VND1,500 billion:
o For investment portion of up to VND1,500 billion: the equity capital that the investor must maintain must be at least 20% of the total investment capital;
o For investment portion that exceeds VND1,500 billion: the equity capital that the investor must maintain must be at least 10% of the total investment capital.
There is no capital contribution requirement from the Government side.

Project approval authority
Decree 63 makes it clear the following authorities will approve PPP projects:
– The National Assembly decides the investment policy of important national projects;
– The Prime Minister decides the investment policy of the following projects:
o Projects Type A using state budget from 30% or above or below 30% but more than VND300 billion of the total investment capital of the project;
o Projects Type A using BT contracts.
– Ministers of relevant ministries decide investment policy of their own projects not falling within the approval authority of the National Assembly and the Prime Minister.
– Provincial People’s Councils decide investment policy of the following projects:
o Projects Type A not falling under the approval authority of the Prime Minister;
o Projects Type B using public investment budget; and
o Projects Type B using BT contracts.
– The provincial People’s Committee decides the investment policy of projects in their provinces not falling within the approval authority of the National Assembly, the Prime Minister and the provincial People’s Council.

Payment methods in BT projects
Practice shows that investors are very interested in well-located land when implementing BT projects. However, when such land fund gradually becomes exhausted, BT projects seem not to attract investors. Decree 63 has added another method in addition to the exchange of land for infrastructure, so that the investors will have more options in receiving payments. Specifically, the investor may also receive payment in the form of the transfer of right to conduct business, exploit works/ services, etc.

Conversion of existing public projects
Decree 63 contains procedures on converting existing public projects to PPP projects aside from other revised provisions. Those who are engaged in infrastructure projects in Vietnam may want to review how to implement such conversion in practice.

4. Decree No. 82/2018/ND-CP issued by the Government on the management of industrial zones and economic zones (“Decree 82”)
Issuance date: 22 May 2018
Effective date: 10 July 2018
Decree 82 regulates the planning, establishment, operation, policies and state management of industrial zones (IZ) and economic zones (EZ). It governs state management agencies, organizations and individuals related to investment, production and business activities in industrial zones and economic zones.
IZs are geographical areas eligible for investment incentives and enjoy preferential policies applicable to geographical areas with difficult socio-economic conditions under the investment law.
EZs are geographical areas eligible for investment incentives and enjoy preferential policies applicable to geographical areas with special difficult socio-economic conditions under the investment law.

Capital for investment on infrastructure of IZs
Investment projects on infrastructure development in IZs in areas with difficult socio-economic conditions or areas with particularly difficult socio-economic conditions shall be supported with capital from the central budget for the infrastructure investment.
Provincial People’s Committees shall balance local budgets to support investors in developing technical infrastructure systems inside and outside the IZs.

Capital for investment on technical infrastructure and social-economic infrastructure of EZ
EZ’s technical infrastructures, social infrastructure facilities and important environmental protection and treatment works shall be allocated capital from development investment sources of local budgets and support capital sources.
Large-scale infrastructure investment projects which play a key role in the development of EZs, may mobilize capital from bonds issuance. The technical and social infrastructure facilities, service works and public facilities of the economic zone may be financed by official development assistance (ODA) capital, preferential credit capital and supports other techniques.
Investment projects on construction and business of infrastructure in functional zones in EZ may mobilize capital by allowing investors to lease a part or whole of the land area in EZ for their investment or sub-lease business activities.
***
Please do not hesitate to contact Dr. Oliver Massmann and Tran Minh Thanh under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director and Tran Minh Thanh is the Vietnamese lawyer of Duane Morris Vietnam LLC.
THANK YOU !

Land speculation clouds Vietnam’s renewable energy projects

Vietnam’s southern province of Ninh Thuan continues to see growth in its renewable energy resources, with Spain’s Siemens Gamesa Renewable Energy (SGRE) winning in its bid for the second phase of the existing 39MW Dam Nai wind farm.

 

According to the plan, the company will supply 12 turbines by October this year. SGRE will also handle the management and maintenance of the facility over the course of the next ten years for Dam Nai’s operator, independent power producer Blue Circle.

 

The first phase of the Dam Nai wind farm kicked off in April last year, with total investment capital of US$15 million. During the first phase SGRE installed three turbines, which are already operational. Siemens Gamesa has said it expects “significant growth” in Vietnam over the coming years as the country “begins to utilise some of the best wind resources in Southeast Asia.”

 

As of April 2018, the country had 197MW of installed wind power capacity, split between 98MW onshore and 99MW offshore.

 

On top of turbines, the province of Ninh Thuan has also been targeted by firms for solar power development, thanks to its status as one of the driest areas of the country. A number of companies have already signed up to develop projects in the province. However, despite excellent solar conditions, a growing economy and a strong manufacturing base, Vietnam’s solar ambitions have been relatively modest compared to its near-neighbors in the region.

 

Not all blue skies

 

Vietnam is among the most promising renewable energy markets in Southeast Asia, offering significant opportunities for investment in clean energy, especially wind and solar power. With a population touching 92 million and energy demand forecast to grow by 13 percent annually over the next four years, the country is eyeing an energy policy that includes a substantial mix of renewables.

 

According to the government’s revised Power Development Master Plan VII, Vietnam needs investment in the power sector amounting to US$150 billion for the period up to 2030 in order to keep pace with the nation’s projected annual growth of 10-12 percent. The renewable energy sector is considered a priority for investment with contributions set at 7 percent by 2020 and 10 percent by 2030.

 

A large number of firms have already been lured to take advantage of the market’s huge potential. A recent report by USAID (United States Agency for International Development) found that in the solar power sector, as of 2017, more than 100 new projects had been planned, including 70 in the province of Binh Thuan.

 

There are, however, issues hindering the sustainable development of the sector. These include poor administration and low transparency, leading to corruption among investors and officials. The major risks are related to programming and licensing of investors and access to land. The rosy picture of deals hides a more problematic truth.

 

Many investors registering projects don’t intend to join the market immediately, but instead are snapping up advantageous plots of land. For wind and solar power projects in particular, location is everything. Areas with strong and consistent natural wind or intense sunshine will inevitably bring better returns for firms who set up shop with their panels or turbines.

 

One expert said that nearly all land plots in advantageous positions are now occupied, though the renewable power plants remain on paper, and may never be developed. This speculation over land poses a risk of harming the market, and slowing the much-needed transformation of Vietnam’s energy sector.

 

As the top spots get booked up, real investors will have to stump up a premium for their projects, or shell out fees for intermediaries. Transparency in development programming, licensing procedures and project execution supervision is a must for the market to run effectively.

 

Coupled with relatively low feed-in tariffs (FiT) and arduous legislative hurdles to overcome, the added headache of a premium on land may cause investors to look elsewhere when considering locations for their renewable power projects.

 

A recent StoxPlus report has identified 245 renewable energy projects currently in Vietnam, including wind and solar power as well as biomass, which are being deployed at different stages. Obviously, if all planned projects begin operation the country’s targets would be met overnight. However, of the total projects, only 19 percent have reached the construction phase and 8 percent have begun operation. Most projects are still in the preparatory stages.

 

Investors are also struggling with a lack of clear information about the market. Even though information about renewable energy projects in Vietnam has been floating around, there is no clear details on the number of projects or their development status, creating confusion and uncertainty among developers and other stakeholders.

 

Joint ventures between foreign and domestic enterprises may help to address some of these bottlenecks – with local firms providing some much-needed information and international players adding the technical know-how that is lacking from the domestic market. This is, unfortunately, only a partial solution. In the long term, a stronger legislative framework will be needed to support to sustainable development of the renewable power sector in Vietnam, and help the country to meet its targets and support its booming energy needs.

 

For more information about Vietnam’s renewable 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.

Rechtsanwalt in Vietnam Dr. Oliver Massmann – Solar Strom – Zahlungsmechanismen von Vietnam Electricity (früher Electricity of Vietnam, EVN) für den Solarstromproduzenten (Independent Power Producer, IPP) – Was Sie wissen müssen:

Rechtsanwalt in Vietnam Dr. Oliver Massmann – Solar Strom – Zahlungsmechanismen von Vietnam Electricity (früher Electricity of Vietnam, EVN) für den Solarstromproduzenten (Independent Power Producer, IPP) – Was Sie wissen müssen:

  1. Die Periodizität der Zahlung von Energieverkauf vom Kunden (EVN) zum IPP

Der IPP und EVN werden gemeinsam das Messergebnis auf monatlicher Basis eines gemeinsam beschlossenen Datums ablesen. Der IPP wird das Ergebnis schriftlich aufnehmen und gemeinsam mit der Rechnung an EVN, innerhalb von 10 Tagen ab Ablesedatum, schicken. Die Zahlungsfrist fuer EVN sind 15 Werktage vom Erhalt Rechnung des IPP.

  1. Frequenz der Preisanpassungen, sodass Zahlungen in VND dem entsprechenden USD-Wert entsprechen

Es ist in Entscheidung 11 und Rundschreiben 16 nicht klar formuliert, aber wir verstehen es so, dass die Anpassungen zur Zeit der Zahlung, fuer ins Stromnetz integrierte Projekte durchgefuehrt werden. Fuer Stromnetzprojekte wird die Anpassung jaehrlich durchgefuehrt. Vorschriften wurden in vorherigen Stromprojektdokumenten eingefasst.

  1. Mechanismen fuer Preisanpassungen (sprich: anwendbare Preisanpassungen sind nach dem Durchschnitt der Anpassungsperiode gewichtet, sodass der Verkäufer den VND/USD Wechselkursraten nicht ausgesetzt ist

Für Stromnetzprojekte wird die Anpassung zum Zeitpunkt der Zahlung durchgeführt. Fuer Stromnetz Dachzellenprojekte wird die Anpassung jährlich durchgeführt. Das heisst, dass der FiT fuer Stromnetzprojekte im gesamten Jahr gleich bleibt. Der FiT fuer Stromnetzprojekte des nächsten Jahres wird basierend auf dem Wechselkurs VND/USD am letzten Arbeitstag des Vorjahres bestimmt.

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Falls Sie irgendwelche Fragen haben bzw. Details erfahren wollen, zögern Sie bitte nicht Dr. Oliver Massmann unter omassmann@duanemorris.com zu kontaktieren. Dr. Oliver Massmann ist der General Direktor von Duane Morris Vietnam LLC.

 

Vielen Dank!