THE PRIME MINISTER'S IN-PRINCIPLE APPROVAL
On 11 September 2018, the Prime Minister has approved a draft decision on new feed-in tariffs (FITs) applicable to wind power projects in Vietnam. This FITs decision will become effective 1 November 2018 (the "PM Decision"). The PM Decision will amend and revise certain articles of the Prime Minister's Decision No. 37/2011/QD-TTg on the mechanisms supporting the development of wind power projects in Vietnam.
FITS PRICE FOR WIND ENERGY PROJECTS
FITs price for wind power projects will be increased from the current 7.8 US cents / kWh to (i) 8.5 US cents / kWh applicable to onshore wind power projects, and (ii) 9.8 US cents / kWh applicable to offshore wind power projects.
Onshore and offshore wind power projects are roughly defined in the PM Decision as follows: (i) onshore wind power project means on-grid wind power project that having its wind turbines to be built and operated on inland areas and coastal zones (NB: boundary of such inland areas and coastal zones is the average low water line for 18.6 years), and (ii) offshore wind-power project means on-grid wind power project that having its wind turbines to be built and operated outside inland areas and coastal zones to the sea.
We believe that the MOIT should provide further guidelines for a better definition of onshore and offshore wind power projects.
COD FOR NEW FITS – WIND POWER PROJECTS
The new FITs price must apply to a part or the whole of a wind power project that achieves commercial operation date ("COD") before 1 November 2021, and such new FITs will apply for 20 years from the COD of such wind power project.
For wind power projects that have achieved COD prior to the effective date of the PM Decision (i.e., 1 November 2018), the new FITs price may apply for the remaining term of the relevant signed wind power purchase agreement (PPA). However, it is not crystal clear if the new FITs price will automatically apply to the current operating wind power projects, or it is still required to re-negotiate and revise the current signed wind PPA with EVN. In case of the latter, it will be very challenging to re-negotiate and revise the current signed wind PPA with EVN.
AUCTION MECHANISM AFTER 1 NOVEMBER 2021
According to the PM Decision, MOIT must prepare and submit a policy on auction for selection of new wind power projects and wind power prices since 1 November 2021 onward.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.