Vietnam solar PPA is 'non-bankable'

Vietnam solar PPA is 'non-bankable'

A consortium of international chambers of commerce has advised the
Vietnamese government that its draft solar PPA template is "non-bankable"
and cannot attract financing for PV in Vietnam, particularly for medium and
utility-scale projects, according to documents seen by PV Tech.

Vietnam Business Forum (VBF), an umbrella group for all international
Chambers of Commerce, which facilitates dialogue between the business
community and the Vietnamese leadership, submitted its response on the draft
solar PPA to Vietnam's Ministry of Industry and Trade (MOIT) last week.

The repsonse stated: "If the Draft Circular and the Draft PPA are not
improved and the PPA template of the MOIT remains to be non-bankable, actual
development and investment in solar power projects may be [more] limited
than expected or planned under the amended Power Development Plan VII, even
though Vietnam remains to have a high potential for solar power investment."

Back in April, Vietnam confirmed a long-awaited feed-in tariff (FiT) scheme
for utility-scale solar projects, with a net metering scheme for rooftop PV,
along with standardized PPAs.

However, shortly afterwards multinational law firm Baker McKenzie said
MOIT's solar guidelines failed to address a range of issues that could
impact large-scale project bankability, issuing a warning about the
'non-negotiable' template drafted for all grid-connected solar PPAs.

No foreign bank will touch this PPA

The VBF consortium, which includes Amcham (USA), Japan Banker's Association,
Eurocham, Kocham, the Nordics and Vietnam Chamber of Commerce International
(VCCI) among its members, has now added to the backlash.

Following their response, a member of the finance industry, who preferred
not to be named, also told PV Tech that "no foreign bank will touch this
PPA".

VBF has now put forward various recommendations to MOIT including adopting
an international standard bankable PPA template, localized under Vietnamese
law. This is particularly important for large-scale projects but relevant to
all segments.

The Forum also said that if MOIT retains its PPA template then it "must be
significantly improved" and the VBF response goes on to detail a lengthy
number of issues with the current design.

Echoing the issues raised by Baker McKenzie regarding monopoly utility EVN
being the sole off-taker for all solar projects, VBF said that EVN's
payments obligations should be supported by a Government guarantee or
another mechanism to resolve the related payment risks.

VBF also found a lack of protection against retroactive changes in policy
that could effect existing projects.

The PPA was also found to lack clauses on project insurance, anti-corruption
measures and a waiver of sovereign immunity. Meanwhile, no offshore dispute
resolution in a neutral location is provided.

VBF claimed: "This will be a serious concern to investors and creditors."

Given that the FiT would be subject to fluctuations in the VND/USD exchange
rate, VBF also warned: "No escalation clause is provided in the Draft PPA.
The Draft PPA does not include any indexation of the FiT by way of
escalation in accordance with the Consumer Price Index (CPI) or any other
provision to address inflation risks."

These were just a few of the major issues highlighted by the consortium.

Ultimately, VBF said: "without a bankable PPA, it will be impossible or very
difficult for developers/investors to be able to get or convince financing
from international or foreign lenders on a 'project finance' basis."

The response will cause serious concern among players hoping to enter the
Vietnamese market, especially given that the country appeared to have gained
momentum in project announcements. On the other hand, EVN is set to go ahead
with its own large-scale PV plans, with subsidiary Power Generation Corp 3
working on 350MW across two projects in Phuoc Minh Thuan Nam district.

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Link to Original Article:
https://www.pv-tech.org/news/international-banks-declare-vietnam-solar-ppa-n
on-bankable

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com