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62 wind-power projects unfinished: MOIT comes up with new solution

The Ministry of Public Security (MPS) is collecting information about credit contracts, outstanding loans and debt classification of project developers, while the Ministry of Industry and Trade (MOIT) has proposed new mechanisms for the projects.

MOIT has submitted to the Prime Minister a report on a mechanism to be applied to unfinished wind and solar power projects.

According to the ministry, in the past, especially in 2019-2021, Vietnam witnessed a rapid increase in solar and wind power sources in Vietnam. 

Reports from the Electricity of Vietnam (EVN) and localities showed that of the 78,121 MW of installed power capacity nationwide, there are 16,564 MW of solar power (8,904 MW of concentrating solar power plants and 7,660 MW of rooftop solar power), and 4,126 MW of wind power has become operational, enjoying the FIT (feed in tariff) mechanism as per the Prime Minister's decision.

Meanwhile, there are many more wind and solar power projects under execution. The projects could not be completed before November 1, 2021 in order to be eligible for the FIT. 

Of these, the developers of 62 wind power projects with total capacity of 3,479 MW have signed PPAs (power purchase agreements) with EVN, but the prices have not been fixed as the FIT has expired, while five solar power projects with total capacity of 452.62 MW are also waiting for electricity prices to be fixed. 

It is necessary to define the pricing for projects to avoid waste of society’s resources.

MOIT, when referring to current laws, found that Option 1 (negotiation about electricity prices between projects’ developers and EVN within the price framework to be set by MOIT), will comply with regulations of the Law on Price, Electricity Law and documents that guide the implementation of the Electricity Law.

The procedures to create price frameworks, negotiations and PPA signing are clear and have been applied to other power sources, including hydropower, thermal power and gas turbines.

MOIT thinks that if Option 2 is applied (EVN would organize bids to choose sellers), the legal framework would not be clear enough.

Only Clause 4, Article 5 of the Prime Minister’s Decision No 13/2020 says that power purchase prices from solar power projects that do not satisfy criteria in Clauses 1 and 3 will be determined through competition.

In this case, competition could be understood as bidding to choose electricity sellers.

However, the bidding procedure to buy electricity of projects that have investors and are still under implementation is not addressed in legal documents. 

MOIT said that during the design of the electricity bidding mechanism, the ministry received feedback from investors and most of them disagreed with the option, saying that there is still no legal foundation, and this will affect their calculations about cash flow, capital recovery possibility, and debt payments.

Based on analyses about the legal foundation, MOIT believes that wind and solar power projects in the future will have to be implemented according by negotiation, i.e. project developers will negotiate electricity prices and sign PPAs with EVN within the price framework to be set by MOIT. This will ensure compliance with the Law on Electricity, Law on Price and related legal documents.

In order to solve problems for transitional solar and wind power projects, and help investors and at the same time lay the foundation for projects in the future, MOIT has asked the government to allow investors to negotiate electricity prices with EVN within the price framework to be set by the ministry.  

Regarding projects in the future, MOIT has asked the Prime Minister to approve electricity price negotiation and the PPA procedure to ensure consistency of the legal framework.

As for projects with recognized COD (commercial operations date), MOIT asked the Prime Minister to release a document guiding the review of contracts between EVN and investors in order to ensure harmonious benefits to both sellers and buyers.

Meanwhile, local newspapers have reported that MPS has asked the State Bank of Vietnam to provide information about credit contracts, outstanding loans, and debt classification of wind-power project investors.

Sixty-two projects could not be completed prior to November 1, 2021 to enjoy the preferential electricity price mechanism in the Prime Minister’s Decisions 37 and 39. The investors therefore don’t have revenue and face many difficulties, which has affected their debt repayment to credit institutions.

Luong Bang

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