Vietnam: Solar deals despite doubts: bankable or not, investors dive in

Vietnam: Solar deals despite doubts: bankable or not, investors dive in

Foreign interest in Vietnam's solar sector had surged after the Ministry of
Industry and Trade (MoIT) announced a solar feed-in tariff (FiT) and a draft
solar PPA earlier this year. Concerns over the bankability of the proposed
agreement have done little to dampen enthusiasm, with a number of players
eager to get a slice of a Southeast Asian success story.

In an effort to capitalise on Vietnam's ever-growing energy needs, Ho Chi
Minh City-based TTC Group is planning to spend around $1 billion on an
ambitious solar power portfolio.

The sugar and real estate conglomerate is on the hunt for new investors in
up to 20 solar parks expected to go live by 2018. TTC will put forward 30
percent of the investment and is in talks with potential partners for the
remainder of the funds needed. The project is expected to have total
capacity of around 1,000MW.

The group's announcement came hot on the heels of the government's own solar
energy policy, including the FiT and PPA which were revealed earlier last
month. Incentives supporting renewable energy will be in place until June
2019, and will be crucial in attracting the kind of investment needed and
realising the country's solar energy potential.

Though incomplete, the recent government decision is the first sign of a
reasonable regulatory framework for the solar energy sector, and investors
are already starting to show an interest. Coupled with low development costs
and growing concern over coal-fired power sources, Vietnam's expansion into
clean energy looks promising.

Sun-soaked south

TTC's move is hardly the first in Vietnam, which boasts fertile ground for
solar power. Southern and central regions in particular are top of the list,
thanks to abundant sunshine and relatively flat ground.

The country's first significant on-grid solar energy investment came in 2015
with a 19.2MW plant in the province of Quang Ngai. The $40 million project
was led by local Thien Tan Group, including investors from India and
Thailand, and using solar photovoltaic technology from Thailand.

Thien Tan will likely remain at the forefront of Vietnam's foray into solar
power and is already planning to develop a further 2GW of capacity in the
coastal province of Ninh Thuan. Located in south eastern Vietnam, Ninh Thuan
is well connected, with both National Route 1A as well as the North-South
Railway running through the province. It is also one of the country's most
arid corners, receiving less than 800mm of rain a year. For this reason,
Ninh Thuan is a prime candidate for Electricity of Vietnam's (EVN)
diversification away from hydro-power.

As well as the Thien Tan Group, Canada's CMX Renewable Energy is eyeing the
region, having applied for a licence last year to build a 150MW project.

In total around 30 power projects, ranging from 20MW to 500MW, have
registered for licences, mostly in central and southern Vietnam. Investors
include groups from Germany, South Korea, and the United States.

In early June, Japan's Fujiwara was approved for a 64MW solar plant and a
36MW wind power project in Binh Dinh Province, with combined investment of
more than $65 million.

Hanwha Group, from South Korea, has signed on to a $100 million, 125
hectare, solar plant scheduled for 2019. The project, slated for the
southern province of Long An, delivers yet more fresh foreign impetus into
Vietnam's fledgling solar sector.

Personal power

As part of the government's policy package, a net metering scheme for
residential PV installations may convince some previously sceptical
households to get in on the action.

A fact-finding trip to Binh Thuan province in 2016 found that many
households were still wary about installing solar cells on their roofs.
However, with the new scheme, owners will be able to sell electricity back
to the national grid at prices set by state management agencies.

Ho Chi Minh City alone has the ability to install solar systems on 300,000
roofs. Hypothetically, with two solar panels on every roof, the city will
have total capacity of up to 78MW, equal to the output of the Can Don
Hydropower Plant in Binh Phuoc. With the cost of the required technology
plunging worldwide, the question will be one of pricing.

Words into action

The agreements certainly look promising, and it is undeniable that Vietnam
has the opportunity to be a big player in the renewable scene, however, the
government has a mountain to climb in reducing the country's dependency on
fossil fuels.

The actual development of solar power will rely on the ability to negotiate
better terms, introduce more transparency and give investors good reason to
pick Vietnam over regional competitors.

As things stand, the Vietnam Business Forum, comprising international
Chambers of Commerce, is pessimistic. On the other hand, that hasn't stopped
the deals listed above, especially TTC's billion-dollar project. The
potential is there, but it may be that investors have to incorporate
potential risks into the costs of their renewable energy projects to get a
spot in the sun.

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

Link to Original Article:
http://www.lexology.com/library/detail.aspx?g=f2327566-831e-497d-b73a-ced7c4
d05c17&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+Gen
eral+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexolog
y+Daily+Newsfeed+2017-07-13&utm_term=

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com