Inconsistent regulations are hindering progress for various solar and wind ventures Photo: Le Toan

In a petition sent to the government earlier in March, 28 signatories including private equity fund Dragon Capital, ACEN, the Vietnamese subsidiary of the Philippines’ ACEN energy group, and investors from Thailand, the Netherlands, Singapore, and China expressed worry that they will no longer enjoy a previous feed-in tariff (FiT) price.

On February 18, Vietnam Electricity (EVN) sent a letter to the Ministry of Industry and Trade (MoIT) stating that projects currently benefiting from FiT pricing but lacking official construction completion acceptance from the relevant state authority will no longer receive FiT payments.

The proposed policy changes would involve a retrospective review of eligibility criteria for these FiTs, even for projects that are already operational.

“If this requirement is implemented, not only will a series of renewable energy projects face great risks, when suffering losses corresponding to all equity capital, threatening $13 billion of investment, but also a series of capital suppliers and financial institutions will be affected,” the petition said. “This is having a very serious financial impact, with some projects already facing default on their debt obligations to domestic and international lenders.”

Law firm Vilasia pointed out that inconsistent regulations has led to complications in determining FiT eligibility. “A previous decision in 2017 clearly stated that meeting investment and construction conditions was a prerequisite for EVN to sign power purchase agreements (PPAs) and apply the preferential FiT rate of 9.35 US cents/kWh,” the firm said. “However, Decision No.13/2020 shifted the approach, basing FiT eligibility on the project’s commercial operation date (COD) instead of construction investment conditions. Since CODs do not explicitly reference construction investment requirements, revoking FiT incentives solely due to incomplete construction acceptance is questionable.”

A representative of one foreign energy company told VIR that although investment incentives were granted, in 2019 when projects were booming because this was a new type of energy, investors had no experience and had to hire foreign consultants and contractors, causing costs to rise. In particular, the price of solar panels was also about 150-200 per cent higher than at present.

“Many investors were even pressured to complete progress in the context of the pandemic in 2020-2021, so many costs were pushed very high,” he said. “Up to now, most projects have only completed about 40 per cent of the loan term of credit contracts. The cash flow is only enough to pay interest and bank principal, and the owner’s equity has not been recovered.”

Investors via the petition called on the government to pay attention to the FiT electricity purchase price agreed under the PPA for these projects and requested EVN to properly perform its contractual obligations.

“Investors recommend that the government, the MoIT, and EVN confirm and enforce the initially approved COD of the affected project, and ensure that EVN fully performs its contractual obligations under the signed PPAs with full and timely payment for affected projects, so as to avoid their financial exhaustion,” the document said.