2. www.duanemorris.com
AGENDA
• POTENTIAL OF SOLAR ENERGY INDUSTRY
IN VIETNAM
• GOVERNMENT’S POLICY ON RENEWABLE
(SOLAR) ENERGY
• MARKET ACCESS FOR FOREIGN INVESTORS
• OPPORTUNITIES FOR INTERNATIONAL
DEVELOPERS
• RECOMMENDATIONS
*
3. www.duanemorris.com
Energy Sector Background
• Electricity consumption grew by an average of 14% annually
during 2004–2010, compared with 7% economic growth rate
per year during that period
• Electricity demand is expected to increase by up to 14.2 pct.
annually for the 2011-2015 period, 11.4 pct. for the 2016-
2020 period and 7 times to 800 billion Kwh in 2030
• Electricity consumption is projected to increase from 85,932
gigawatt hours (GWh) in 2010 to 251,763 GWh in 2020
• By end of 2014, The Vietnamese solar power market is still
relatively small with only around 4.5 MW installed capacity.
*
4. www.duanemorris.com
POTENTIAL OF SOLAR ENERGY INDUSTRY
IN VIETNAM
• Total number of sunshine hours up to 1400 – 3000
hours/year
• The average total radiation amounts to 230 – 250
kcal/cm2, and strengthens towards the south.
• Solar energy can be used for water boiling, power
production and other purposes, as e.g. drying, cooking
etc.
*
5. www.duanemorris.com
GOVERNMENT’S POLICY ON RENEWABLE
(SOLAR) ENERGY
• Viet Nam currently does not have a full-fledged legal
framework on renewable energy, especially solar energy
investment.
• Amended National Master Plan VII
• Decision No. 2068/QD-TTg specifically on development
plan for renewable energy (biomass, wind, and solar energy)
until 2030 and with a vision to 2050
• Draft Decision on supporting regime for solar power projects
to be adopted in the next 1-2 months
*
6. www.duanemorris.com
Clean energy policy reform – The dynamic process
*
• PROVINCIAL
• GOVTS
BLOCK
COAL/ BIG
HYDRO
• LOCAL
SOURCING/
• MANUFACTU
RING OF
EQUIPMENT
• LOCAL
POLLUTION
HEALTH/
SOCIAL
IMPACT AND
DISHARMON
Y
• SOE +
GoVN
• MARK
ET
• CONTR
OL
• ENERG
Y
INFLAT
ION
CONCE
RNS
• STA
TE/E
VN
• CAPI
TAL
• SCA
RCIT
Y
• ENER
GY
SUPP
LY
• SPEE
D OF
• GRO
WTH
Climate
Change
Commitments
International
Trade
Agreements
PRICE + SUPPLY CAPACITY = SPEED
SPEED + SUPPLY CAPACITY = PRICE
Key to the Dynagram
Arrows
• Direction Weakening/Growing Impact on
Policy Reform to Clean Energy
• Width Extent of Impact
Box /Circles
•Colour Green Dynamic Force For Change
Red Barriers to Change
Grey Circles No Force for Change
Donor Soft
Loans / Grants
• CAPEX-
FUELLE
D
CORRUP
TION
• POWER
CONSUMER
S DEMAND
GREEN
7. www.duanemorris.com
Amended Power Master Plan VII on the development
of electricity in Vietnam
• Revised National power development plan for 2011-2020 period with the vision to 2030
approved by the PM under his Decision No. 428/QD-TTg dated 18 March 2016
• Amended Master Plan VII focuses on energy security, energy efficiency, renewable
energy development and power market liberalization
• Objectives:
– To increase the aggregate output of imported and produced electricity to 235-245
billion kWh by 2020; 352 – 379 billion kWh by 2025 and 506 – 559 billion kWh by
2030
– To prioritize to develop renewable energy generation so that the proportion of
electricity generation of renewable energy will be increased from the present 3.5% of
the total electricity production to 7% in 2020 and 10% in 2030
– To promote the rural electrification program so that most of the rural households
will have access to the electricity by 2020
– To build flexible operation of electricity grid, high automation of the transmission to
distribution process, development of substations with no requirement for operating
personnel.
8. www.duanemorris.com
Amended Power Master Plan VII
• Strategies:
– Higher quality of electricity supply and more reasonable electricity price
– Diversification of domestic resources for power generation
– Developing new renewable power sources and updating technologies used in
existing plants
– Diversification of investment sources to overcome the lack of financial and technical
resources and also to improve economic efficiency
• Investment capital demand:
– Approximately USD 40 billion up to 2020: Two-thirds for power generation
development and one-third for power network development
– Approximately USD 108 billion for the period from 2021 to 2030: 74% for power
generation development and 26% for power network development
*
9. www.duanemorris.com
Amended Power Master Plan VII
• State to keep monopoly on transmission
• Prioritize development of renewable energy
• Renewable energy target rate at 7 pct. of total energy
output by 2020 and more than 10 pct. by 2030.
• Increase the solar power output to 850 MW by 2020,
4,000 MW in 2025 and 12,000 MW in 2030.
*
10. www.duanemorris.com
Vietnam’s electrical energy mix
• Vietnam policy emphasises the need to diversify the country’s
energy mix whilst maximising the use of local energy reserves
• Currently Vietnam is developing an energy mix sector with
the mainstay of coal fired power
*
13. www.duanemorris.com
DRAFT DECISION ON SUPPORTING REGIME
FOR SOLAR POWER PROJECTS
• EVN has to purchase electricity from on-grid solar energy projects at
VAT-excluded price of 11.2 US cents/kWh
• For on-grid rooftop solar projects, the rate will be 18 UScents/ kWh
• The rate in VND will be indicated in the final Decision based on the
USD/VND exchange rate at that time and the MOIT will issue an
Official Letter every year to adjust the rate in VND according to the
fluctuation in the exchange rate.
• Rooftop solar projects of less than 50kW will not have to connect to
the grid. For those of more than 50kW, connection to the grid is
required and an electricity operating permit must be obtained.
• Term of solar energy PPAs: 20 years (renewable)
*
14. www.duanemorris.com
ENERGY RETAIL PRICES
• Circular 12/2014/TT-BCT:
– 7-10% increase with MOIT approval
– More than 10% requires PM approval
– EVN can decide independently for less than 7%
increases?
• Energy retail prices are expected to increase Raise FiT
• It is unofficially known that the MOIT proposed to the
Government to approve for an FIT increase of up to
11.2 UScents/kwh to make the solar energy projects
become more financially feasible.*
15. www.duanemorris.com
Market access and Forms of investment
• No foreign ownership restriction
• Investment forms:
ü A wholly-owned foreign enterprise
ü A joint venture company between a foreign investor and domestic investor
ü Investment pursuant to the BOT legal framework (which includes establishment
of a project entity in the form of a wholly-owned foreign enterprise by way of a
BOT contract with the MOIT which is implemented through a wholly-owned
foreign enterprise; or a joint venture company by way of a BOT contract with
the MOIT which is implemented through a joint venture with a Vietnamese
entity (usually including EVN, but it is also possible with a private domestic
IPP)
ü Through the purchase of shares in either an EVN subsidiary being or having
been equitized or a private IPP holding power assets. investment in the form of
establishment of a new company can be undertaken in one or more of the
following ways.*
16. www.duanemorris.com
BOT – BEST INVESTMENT FORM
• Government’s Decree No. 15/2015/ND-CP on Public-
Private Partnership: making projects more bankable
• Easier to negotiate more favorable electricity rates.
• Easier to obtain more government guarantees, especially
in terms of EVN’s obligations to purchase all electricity
from the project.
• More fiscal and financial incentives.
• Precedent large-scaled BOT power projects in Vietnam:
Phu My, Vung Ang, Mong Duong 2
*
17. www.duanemorris.com
INVESTMENT INCENTIVES
• Land: exemption of land rental within 3 years from the operation date of the
project, etc.
• CIT 10%
– 15 years for new enterprises investing in power plant projects
– tax exemptions within 4 years and tax reduction by 50% in the next 9 years.
• Import duty exemption
– on goods imported to create fixed assets of the projects; components, materials and
semi-finished products which are not available at home for the project’s operation.
• Investment capital
– investors could apply for a loan of up to 70% of the total investment capital of their
project with a term of maximum 12 years.
– investors could also enjoy export credit incentives in the form of a loan of up to
85% of the export/ import contract value or L/C value also with a term of
maximum 12 years.
*
18. www.duanemorris.com
Project planning
• Investors has to obtain prior agreement of EVN on power purchase prior to
licensing procedure.
• Commitment of banks or credit institutions on financing the project must be
obtained prior to issuance of Investment Registration Certificate .
• In-principle approval of the local People’s Committee is required prior to
issuance of Investment Registration Certificate depending on the project size
• A solar power plant must obtain a power generation permit from the competent
State authorities in order to conduct power generation operations in Vietnam
• Term of the permit: maximum 20 years for large power plants with particularly
important meaning on economy, society, national defense and security as per
the list approved by the Prime Minister; and 10 years for other power plants
projects.
• The permit cannot be renewed but the investor may apply for a new one within
60 days prior to the expiry date of the current permit.
*
19. www.duanemorris.com
Project licensing
• Step 1: The investor obtains approval from the competent authority [e.g., Prime
Minister, MOIT] approving the solar power plant as part of the power
development master plan (if required).
• Step 2: The investor obtains in-principle approval from the competent People’s
Committee (or other competent authorities subject to the details of the project)
approving the solar power plant project, land demand / location, environment,
construction plan, other terms of the project.
• Step 3: Application for issuance of the Investment Registration Certificate and
the Enterprise Registration Certificate
• Step 4: Preparation of construction / operations of the solar power plant (for
example, acquiring land area, site clearance, preparation, land investigation,
conducting environmental assessment)
• Step 5: The project company to obtain necessary permits and relevant
agreements for its and the power plant’s operation.
• Step 6: Construction of solar power plant and operation
*
22. www.duanemorris.com
EVFTA – Bilateral negotiations
*
Launch of
negotiations
First
round in
Hanoi
15 rounds
alternately
in Vietnam
and
Brussels
Last
round in
Hanoi
Agreement
in
principle
• 06/
201
2
• 1
0
/
2
0
1
2
• H
a
r
d
w
o
r
k
• 7
/
2
0
1
5
• 8
/
2
0
1
5
• 0
2/
1
2/
2
0
1
5
• 0
2
/
0
2
/
2
0
1
6
Conclusion
of
negotiation
FTA text
released
26. www.duanemorris.com
TPP and AEC intersection
*
Thailand
Malaysia
Brunei
CanadaAustralia
Cambodia
Indonesia Myanmar
Peru
Philippines
Japan
Laos
Mexico New Zealand
Singapore
The United States
Vietnam
Chile
27. www.duanemorris.com
ASEAN TPP: Market Access Liberalization as
Consequence of TPP
• Indonesia plans to loose restrictions on foreign investment in
nearly 50 sectors, including e-commerce, retail, healthcare,
movie and several other industries
• Indonesia prepares for the so-called “Negative Investment
List”, which provides a greater openness to foreign
investment and gets itself ready for the TPP
• China, Korea, the Philippines, Indonesia and Thailand are
also keen to join the TPP to overcome the disadvantages
*
29. www.duanemorris.com
Power/ Energy Sector
• WTO /
AFAS
• EVFTA • TPP
• N/A • Commitments are only
made in 3 sub-sectors
• Vietnam makes
commitments in all sub-
sectors with listed
restrictions (no other
restrictions are permitted).
•
*
30. www.duanemorris.com
RECOMMENDATIONS FOR INVESTORS
• Difficult time but opportunities await.
• Public private partnerships (e.g. - BOT) should be the first option.
• Due care on negotiations of the PPA and grid connection agreement with EVN
• Electricity selling in off-grid areas can be a good choice
• Sound financing structure, good business model and great legal assistance are keys
to success.
• Accurate prediction of where the market is heading to, in the context of Vietnam’s
critical power shortage, should be considered.
• More pressure on the government to adequately address key issues on tariff
increase, demonopolization of the power market and government guarantee.
• Vietnam’s market is extremely in need of financing and EPC capability. There are
rooms for cost-effective and high quality EPC contractors and resourceful lenders.
• In many cases, you can “test the water” with a small power plant project.
*
31. www.duanemorris.com
DUANE MORRIS VIETNAM LLC
Thank you very much!
HANOI OFFICE HO CHI MINH CITY OFFICE
Pacific Place, Unit V1307/08, 13th Floor, Suite 1503/04, Saigon Tower
83B Ly Thuong Kiet, Hoan Kiem District 29 Le Duan Street, District 1
Hanoi, Vietnam Ho Chi Minh City, Vietnam
Tel.: +84 4 39462200 Tel.: +84 8 3824 0240
Fax: +84 4 3946 1311 Fax: +84 8 3824 0241
Contact email:
omassmann@duanemorris.com
*