Developing Vietnam's renewable energy industry: Thinking and action in the new phase

WVR - "It should not be said that foreign enterprises take over Vietnam's electricity industry".
Vietnam's electricity industry:
Developing Vietnam's renewable energy industry: Thinking and action in the new phase. (Photo: Vietnam-briefing)

That is a view related to the fact that foreign enterprises are accelerating to acquire of completed wind power and solar power projects from Vietnam, expressed by Mrs. Hong Kim Vi - Deputy General Director of public relations, Super Energy Group (Thailand) at the Vietnam renewable energy network in 2022 with the theme "Renewable energy development in Vietnam: Thinking and action in the new phase” on 6/1/2023.

Need to have a price mechanism soon

At the forum, Deputy General director of public relations, Super Energy Group - who has nearly 20 years of working in the field of finance and investment credit, shared some views from the perspective of banks as well as enterprises about credit capital for renewable energy projects such as wind power, and solar power.

According to Mrs. Vi, the field of electricity investment in Vietnam could be divided into three groups: foreign investors, Vietnamese corporations that can arrange credit with domestic and foreign banks, and corporations which have not had time to arrange capital but want to do a project.

For the group of foreign investors, in the period from 2017-2019, they can get foreign capital at a price of about 4-5% (USD), while Vietnamese businesses have to get capital from domestic banks with a capital of 11-15% of all capital costs are included. Therefore, domestic investors are pushed to invest very high compared to foreign enterprises.

Not to mention, Vietnamese corporations and businesses still need help accessing credit because foreign banks do not lend to domestic enterprises due to insufficient credit scores. Therefore, Vietnamese enterprises will have to ask Vietnamese banks to issue letters of credit guarantee, from which they can apply for foreign loans.

However, only a few large enterprises in Vietnam can do that. Most of the remaining enterprises will use the form of the general contractor. With this form, most of the general contractors are from China, and they will give enterprises a delay to pay of 2-3 years.

According to Mrs. Vi, enterprises often think of a "pinky" picture when the projects take about two years to complete, and when the State pays, it is also the time to pay for the general contractor. However, when the FIT price is not up to date, there is no money to pay the general contractor, forcing the general contractors to distraint debts while the enterprise's mortgages by their projects.

"So, in the future, we should not say that foreign enterprises will take over Vietnam's electricity industry", said Mrs. Hong Kim Vi.

According to Mrs. Vi, if you calculate the implementation time from 2019-2020 until now, it has been enough for three years for "people to squeeze their debts," - but at this stage, if we still don't have a price to save Vietnamese enterprises anymore, "It's just cutting off our own hands and feet." Therefore, the urgency of the price for the current power project is significant.

Another story is that there is currently an exciting trend in the merger and acquisition market. Mrs. Vi concerned that foreign investors from Europe, the US, or many Asian countries, instead of researching and investing in new projects in Vietnam, will participate in the market by buying and selling COD projects in Vietnam.

"This is a great opportunity when Vietnamese businesses are stuck with money. If they press the price, they will buy a good price instead of investing in new projects and taking risks," the businesswoman stated.

From her experience while working at Super Energy Group, Mrs. Vi shared that a renewable power project of this group in Thailand with a capacity of 76 MW is paid up to 16 cents, generating 100% of electricity. Or like the price of electricity in Korea is also about 9-10 cents.

Thereby, Mrs. Vi also concerned that if Vietnam called for foreign investors, with the current electricity price in Vietnam, compared with the opportunity cost, those investments would be transferred to other countries instead of investing in Vietnam.

Vietnam's electricity industry:
Vietnam Renewable Energy Network in 2022 with the theme "Renewable Energy Development in Vietnam: Thinking and Action In The New Phase” on January 6, 2023.

Thereby, she hopes experts, when calculating and planning, how to make Vietnam's investment environment more attractive, attract investors, and limit our domestic money to run abroad. Regarding electricity prices, it is necessary to develop a plan to harmonize the interests of the State – enterprises, and the people.

Besides, regarding the development of renewable energy, at this forum, many opinions, exchanges, suggestions, and even frustrations were raised by speakers, representatives of management agencies, and investors. The discussions and sharings revolved around stories from major bottlenecks in policy mechanisms and inadequacies in the implementation process, the risks and difficulties of enterprises to capital or access to finance

Price for transition projects

Regarding the price issues of transitional power projects, Mr. Phan Cong Tien, a market research expert in electricity and renewable energy, said that from the current policy being implemented, we should not equate transition projects but should focus on projects that enjoy FIT. Because transition projects will become future projects, but the way to deploy with current prices, future projects will not have any investors.

Mr. Tien said that the electricity price of power plants depends on two factors: the investment cost, which is the cost of forming the asset value of that project, and the electricity output, which depends on the region for renewable energy projects. Therefore, the critical issue is to determine how much the value of the assets invested or whether the stakeholders have a solution to pick to form the electricity price.

The expert recommends that investors hire an independent auditor to determine the actual asset value invested in the project. Simultaneously, that asset value will go along with output based on similar construction and forecasts to calculate electricity prices.

Meanwhile, the representative of the investor of 4/62 transition projects - Mr. Tran Minh Tien, said that the total capacity of these four projects is 160 MW, worth about 300 million USD, has completed the whole categories a few days after 31/10/2022 and had to "cover a blanket" since then.

"With this $300 million, we have had absolutely no revenue for more than a year," he stated, adding that other investors of 62 projects without a pricing mechanism are in a similar situation.

Mr. Tien mentioned that in the current situation, the investment capital of the enterprise had been generated a lot. It arises when the State's policy prioritizes the development of clean and renewable energy. Still, when it comes to practical implementation, it could be more fluent but very short-term.

When the policy expires, there is no support for unfinished projects. But in fact, this delay is primarily due to the objective factor that the COVID-19 epidemic caused projects to be delayed due to blockade, isolation ...

Besides, as a project using foreign capital, this enterprise said that there are more strict requirements in terms of procedures. For example, the clearance and compensation of land are challenging with little support from the State.

At the same time, from the completion of the project up to now, after "putting the mat" for more than a year, businesses still have to pay more for preservation and protection.

"When the equipment and machinery keep lying in the sun and drying the mist until it can be run, I don't know if it can run or not" said Mr. Tien.

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