Vietnam's Renewables Programme

Vietnam's Renewables Programme

1. Market Readiness

1.1 Overview

Historically, hydropower has been a major part of Vietnam's power mix,
although Vietnam also has excellent wind and solar potential - Vietnam has
one of the world's highest annual hours of sunshine.

Vietnam's solar and wind sectors remain under-developed and conventional
power, together with hydro, is expected to remain important in the
short-medium term. The solar and wind sectors remain underdeveloped because
no FIT is currently available for solar and, although a FIT is available for
wind, it is low by regional standards. We understand that the Ministry of
Industry and Trade (MOIT) has proposed a new FIT for solar PV projects,
which may incentivise new investment in the sector.

1.2 Statutory Framework

Although Vietnam does not have any standalone renewables legislation,
Vietnam has adopted environmental protection legislation and accompanying
regulations which will be relevant for renewables developers. These include
the following:

Environment Protection Law 2014, which contains general environmental
protection measures

law on Economical and Efficient Use of Energy 2010, which contains measures
to promote the economic and efficient use of energy

Power Law 2004 (as amended in 2012), which regulates all activities relating
to the power industry, including as to generation, transmission and
distribution. The Power Law outlines the permits and approvals required
(including for project development and power operation licenses), as well as
requirements for the power price tariff, connection and the PPA

Decision No. 428/QD TTg, dated 18 March 2016, approving changes to the
National Power Master Plan.

Decision No. 2068/QD-TTg, dated 25 November 2015, of the Prime Minister,
approving the renewable energy development strategy of Vietnam by 2030 with
an outlook to 2050 (known as the "National Renewable Energy Development
Strategy")

Decision No.1208/QD-TTg, dated 21 July 2011, of the Prime Minister,
approving the Master Plan for National Electricity Power Development (known
as the "National Power Master Plan" or "NPMP") for the period from 2011 to
2020, with an outlook to 2030. The NPMP promotes the development of
renewable energy, as well as power market liberalisation more generally

Decision 1855/QD-TTg, dated 27 December 2007, of the Prime Minister,
approving the National Energy Development Strategy of Vietnam up to 2020,
with an outlook to 2050 (known as the "National Energy Development
Strategy")

Generally speaking, Vietnam's current laws and policies are supportive of
foreign investment in its renewables sector.

1.3 Targeted Capacities

The total installed capacity of power in Vietnam was around 34.1GW in 2014.
According to the March 2016 revisions made to the National Power Master
Plan, Vietnam aims to raise its total installed capacity to the following:

total capacity of hydro (including small scale, medium scale and pumped
storage) will be raised from 17 GW to 21.6 GW by 2020, 24.6 GW by 2025 and
27.8 GW by 2030

total capacity of wind will be raised (significantly) from 140 MW at present
to 800 MW by 2020, 2 GW by 2025 and 6GW by 2030.

total capacity of solar (including ground mounted and rooftop) will be
raised (significantly) from its current negligible level to 850 MW by 2020,
4 GW by 2025 and 12 GW by 2030.

1.4 Key Regulators

The key regulators in Vietnam's power industry are the following:

Electricity Vietnam (EVN), which is responsible for the transmission and
distribution of power, and most of its generation

Ministry of Industry and Trade (MOIT), which proposes laws, policies and
strategies for the Vietnamese power market

Ministry of Finance, which is responsible for all tariffs

Ministry of Natural Resources and Environment, which develops energy and
environmental protection policies

1.5 Grid

EVN has a monopoly in power transmission and distribution and is currently
the sole purchaser of power in Vietnam. EVN is responsible for all grid
connections and upgrades to the grid, although it is not clear whether
Vietnam's grid is in a state that can accommodate significant levels of new
sources of intermittent power. Vietnam experiences frequent power shortages
and blackouts.

A grid connection is required before EVN will enter into a PPA. The
connection point must be agreed between the project developer and EVN, and
located at a point which is permitted by provincial planning requirements.

1.6 Feed-in-Tariff

EVN purchases all power from renewables projects.

A Feed-in-Tariff (FIT) is currently available for wind and waste-to-energy
projects only, although we understand that MOIT has proposed a new FIT for
solar PV projects. All FIT payments are made from the Vietnam Environment
Protection Fund, are payable in Vietnamese Dong (VND) and are currently set
at:

the VND equivalent of 7.8 US cents/kWh for wind; and

the VND equivalent of 10.05 US cents/kWh for solid waste-to-energy.

Other renewables projects may be eligible for a tariff on an "avoided cost"
basis.

Vietnam has signalled that it intends to adopt a FiT regime for solar PV.
However, the formal regulations have not yet been released by the
Government.

The solar FiT rate was expected to be released in June 2016 but that has not
yet occurred. The reason for the delay is unclear. However, we understand
that the relevant regulation has been submitted to the Prime Minister for
signature and market participants are expecting the rate to be released
shortly.

It is not clear what revised FiT rate has been submitted for signature. We
understand from recent reports that the rates will likely be:

non-rooftop solar - approximately 0.112 USD/kWh

rooftop solar - between 0.167 USD/kWh and 0.180 USD/kWh

In any event, once the FiT rates have been adopted into law, EVN will be
required to purchase the entire capacity from grid-connected solar projects.


International participants in Vietnamese projects will also be interested in
whether the Government intends to address Dong/US$ convertibility issues in
its latest proposals. We understand that some periodic adjustment between
the Dong and the US$ is likely in the new regulation.

1.7 Other support mechanisms

Various incentives may be available to renewables developers including:
capital and tax incentives, import tax exemptions, corporate income tax
exemptions and certain exemptions from land levies. The current incentives
for solar PV projects may be increased if the MOIT's proposal referred to
above is adopted in Vietnam.

1.8 Power Purchase Agreements

Power Purchase Agreements (PPAs) may only be entered into with EVN. PPA
payments are made in VND and Vietnamese law will apply. A PPA may be subject
to arbitration, including foreign arbitration (Vietnam is a signatory to the
New York Convention) or the Vietnamese courts.

The Vietnamese Government has historically guaranteed EVN's obligations
under certain PPAs.

Contractual rights under a PPA are assignable to project lenders.

2. Project Considerations

2.1 Content Requirements

There are no local content requirements in the Vietnamese power sector,
although in practice, provincial requirements may differ.

2.2 Land Requirements

In Vietnam, all land is owned by the State and a project company may be
granted a land-use right only. Foreign investors may obtain land-use rights
(typically through a lease or sub-lease) and those rights may be
transferred, leased, subleased, donated or mortgaged. However, there may be
restrictions on foreign lenders taking security over land in Vietnam.

2.3 Consents and Permits

A variety of consents and permits are required by a foreign renewables
investor. The principal consents required are the following:

EVN consent

investment registration certificate

agreement with EVN as to the connection point and metering design

PPA with EVN

approval of Environmental Impact Assessment Report

land lease

construction permits

power operation permit

2.4 Tax

Renewables developers are likely to be subject to a range of taxes in
Vietnam, although, as noted earlier, a range of incentive-based concessions
are also available. In addition, Vietnam has entered into a number of double
taxation agreements and foreign developers should check whether any such
agreement applies and reduces their tax exposure in Vietnam.

3. General Investment Considerations

3.1 Foreign Ownership

There are no foreign ownership restrictions on Vietnamese companies.
Vietnamese companies can be 100% foreign owned.

3.2 Incorporating Companies

Incorporating a company in Vietnam is a process that typically takes up to
60 days and requires a series of registrations with various Government
agencies A project company may be either a limited liability company (LLC)
or a joint stock company (JSC). An LLC may be either a single medium LLC or
a multi member LLC.

3.3 Selling or Pledging Shares

Generally speaking, shares in a project company may be sold or pledged to a
lender, although restrictions apply to the disposal of shares in certain
types of companies.

3.4 Availability of Debt Finance

A list of the institutions active in Vietnam's power sector and the types of
borrowings available for renewables developers are set out below:

renewables developers may be eligible for preferential investment credits
from the Vietnam Development Bank, the National Scientific and Technological
Development Fund or the Environmental Protection Fund

official development assistance (known as ODA) may be available from the
Vietnam Government

various foreign banks are active lenders in Vietnam, although all loans with
a tenor exceeding 12 months must be registered with the State Bank of
Vietnam

the local banking sector will only lend in VND

3.5 Other Considerations

Foreign developers should be aware of the following legal considerations
(and seek appropriate advice):

Vietnamese law on tendering places restrictions on the participation of
foreign bidders in power projects which are subject to Government tender
foreign shareholders need to comply with certain requirements set out in
Vietnam's forging exchange regulations in order to repatriate dividends from
the country

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com