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Workshop looks at wind power project financing

Released at: 20:27, 11/06/2019

Workshop looks at wind power project financing

Photo: Minh Do

"Accelerating Wind Project Financing in Vietnam" workshop held on June 11 in Hanoi as Vietnam Wind Power 2019 Conference opens.

by Minh Do

There remain a number of regulatory challenges to be addressed in order for wind power project developers to secure power purchase agreements (PPAs) that are bankable from the point of view of international project finance, and this was one of many issues featured in discussions between local and foreign international finance institutions, development banks, and government officials at the “Accelerating Wind Project Financing in Vietnam” workshop held on June 11 in Hanoi.

The workshop was organized on the first day of the Vietnam Wind Power 2019 Conference and hosted by the Global Wind Energy Council in partnership with GIZ, the Embassy of Denmark, and the Embassy of Ireland.

Mr. Oliver Behrend, Principal Investment Officer at the International Finance Corporation (IFC), said Vietnam is one of the most exciting wind power markets in Southeast Asia but faces many challenges, particularly in regard to PPAs. Of a similar mind, Ms. Huong Tran, Commercial Manager at Mainstream Renewable Power, also raised infrastructure as another concern for wind projects in the country. Projects tend to be located in low-load areas and have low demand, and some areas even lack a power grid. The process of site clearance and compensation is also a challenge.

Mr. Behrend believes local developers still have limited experience and the industry will bear certain risks into the future. This is the same concern local banks have in deciding to finance wind projects in Vietnam, according to Mr. Hoang Phuong, an Investment Banker at Techcombank. “Recently, with the government’s open-door policy, the private sector has been investing in renewable energy projects after investing in main business lines such as real estate,” he told the workshop. “But they don’t have the experience to develop such projects.”

Coordination is also lacking between government entities, Electricity of Vietnam (EVN), and private investors in implement projects, Mr. Phuong added. Most banks are willing to support the sector but only big banks have sufficient experience in the field, but they believe that EVN has the capacity and transmission lines to absorb electricity supplied by private investment projects.

Long-term policies are also a matter of concern. “The country needs to simplify the process of investment registration and determine how to build a master plan for wind power in the future,” said Mr. Bruce Weller, Managing Director, Head of Power and Project Finance Asia Pacific, at BNP Paribas.

According to Mr. Ashish Sethia, Head of APAC Analysis and Consulting at Bloomberg New Energy Finance, there are many factors helping to reduce investment costs and bolster project efficiency. Initial investment costs in equipment procurement have also fallen substantially, with wind turbine prices down about 45 per cent in the last eight years. Operational and maintenance costs are also being kept stable and are tending to decline.

Turbine capacity, meanwhile, increases by 1 percentage point each year. Borrowing costs for projects are also decreasing because of lower interest rates being introduced to stimulate economic growth.

Experts at the workshop agreed that the price of equipment is heading downwards and technology will be promoted to create greater capacity and higher project efficiency. The remaining issue, therefore, is how to mobilize capital to develop projects.

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