The lack of an answer for feed-in tariffs and generally available infrastructure is slowing down the prospects of mergers and acquisitions in Vietnam’s renewables arena.
Given that Vietnam’s population, economy, and energy consumption are all expected to continue to rise over the coming years, renewable energy is one of the industries that has attracted the attention of foreign investors seeking merger and acquisition (M&A) prospects in Vietnam.
|Some foreign-invested energy groups in the past have benefited from Vietnam’s previous tariff schedule, Photo: Shutterstock |
However, while Vietnam witnessed 10 big M&A deals last year, so far 2022 has seen only two deals announced. Vaibhav Saxena from Vietnam International Law Firm told VIR, “In the past 3-4 months there has been a market slowdown. The issue is the lack of a feed-in tariff (FiT) rate to calculate returns on investment, and competitive market regulations are yet to be seen. We will see an enormous interest from foreign investors after we have the tariff policy in place. Now, it is more about asset management and diversifying investments that have a cash flow in the renewable energy industry.”
After being assigned by the government to advise on solutions for the projects that missed the FiT deadline last November, the Ministry of Industry and Trade (MoIT) sent official options in late July to solve problems for projects and avoid wasting investment.
This is not the first time the MoIT has sought solutions to help the delayed projects. It was originally proposed that projects be allowed to negotiate purchase prices with Electricity of Vietnam (EVN) but final decisions have not yet been made.
The MoIT has argued that because the FiT provisions have expired but the legality remains, the prime minister should reverse any current decisions on incentives for the growth of wind and solar power. It has also been noted that some regulations on exchange rate fluctuations and term lengths are no longer relevant.
A range of groups, including Thailand-based trio Gulf, Super Energy Corporation, and Banpu Company, had become more active in Vietnam through M&A transactions thanks to FiT incentives.
Banpu invested in five wind and solar power plants with a combined total capacity of 218MW in Vietnam through both M&A deals and direct investment. Earlier this year, Banpu CEO Somruedee Chaimongkol said, “Our substantial investment expansion in renewable energy in Vietnam over the past two years is just the right timing.”
Meanwhile, M&A transactions are also the method used by Super Energy to expand in Vietnam. It owns nine solar power projects with total installed capacity of nearly 840MWp, and five wind power projects are in progress with a planned total capacity of 471MW.
“We see the most M&A interest from foreign investors targeting operational renewable projects - as in those that were entitled to the FiT incentives,” said Giles Cooper, partner at Allens. “There is still some M&A interest in projects that missed the deadline. However, policy rules for those projects are not yet certain. For example, how much will they get paid for power? How will investors be selected? And what will the terms of their power purchase agreements be?”
Last year, 62 wind power projects with a total capacity of 3.48MW missed the November deadline to enjoy the FiT incentives, and five solar projects with a total capacity of 452.6MW are also awaiting the determination of electricity prices according to EVN.
Although many advertisements have been posted online aiming to sell renewable energy in Vietnam from local developers, especially projects that missed the FiT deadline, no successful transactions have been made among the 62 unfinished wind ventures.
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