The first official PPA - Vietnam investment review

The first official PPA - Vietnam investment review

1. Could you point out for me the good point of this solar PPA?

While the previous draft solar PPA does not require the Feed-in-Tariff (FiT)
conversion between USD and VND be according to the exchange rate at the time
of payment, this newly issued solar PPA repeats the language in Decision No.
11/2017/QD-TTg (Decision 11) that the FiT will be adjusted according to the
fluctuation in the VND/USD exchange rate. This is consistent with what is
stipulated in Decision 11. In addition, I note that while the FiT for power
output from on-grid projects is adjusted according to the fluctuation in the
VND/USD exchange rate, meaning at any time during the year, it is not the
same for rooftop projects. Instead, the mentioned FiT for excessive power
output generated from rooftop projects remains the same throughout the first
year of operation, and the new FiT for the next year will be adjusted based
on the announced VND/ USD exchange rate of the last working day of the
previous year.

2. Are there any concerns of investors that the solar PPA has not solved?

The rights of the investors are not fully protected in the following cases:
- when EVN is in the process of installing equipment, or making repairs,
replacement, inspection or examination of the grid connection of the
seller's power plant; - when the transmission grid or the distribution grid
connected to EVN's grid has a problem or grid equipment directly connected
to EVN's transmission grid or the distribution grid has a problem; and -
when EVN's grid needs support to recover after the incident in accordance
with the provisions of operation of the national power system and the
standards, technical regulations of the electric industry. - allocation of
feeding points into the grid It is quite risky for the producer if the
output is ready to be fed to the grid but the connection is not available to
do so. Absent a clear indication of whether the Solar PPA is a 'take or pay"
agreement, investors will find it difficult to secure and ensure the profits
and revenue of their projects. . No international arbitration dispute
resolution clause . No Government guarantee to enhance the credit of EVN as
the sole off-taker; . No provision addressing the risks of changes in
applicable laws; and . The Solar PPA is required to follow a specific
template, which is not bankable.

3. Is this PPA solar bankable or not?

This PPA is not bankable due to reasons specified in 2).

4. In your opinion, how Vietnam government should do in order to reach their
target for solar power capacity in the coming to time?

There is an increasing interest of foreign investors in the sector, proven
by the fact that there are many solar projects with total capacity of 10,000
MW registered with the MOIT. However, not many of them have submitted the
pre-feasibility study to the MOIT for consideration. There are many reasons
behind this, but the most important ones are the lack of Government
guarantee of EVN's payment obligation in the PPA and currency hedging. Thus,
the Government should consider a mechanism where EVN has to fulfil its
payment obligation and the investors are ensured that they will be able to
remit their profits abroad in foreign currency.

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com