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Vietnam Today

Baker McKenzie: Vietnam offers greatest opportunities in greenfield renewables

Released at: 14:02, 25/06/2018

Baker McKenzie: Vietnam offers greatest opportunities in greenfield renewables

Photo: nangluongvietnam.org

Poll conducted by global law firm at its recent renewables conference shows Vietnam at the top of greenfield investment destinations and Australia in brownfield investments.

by Linh San

Vietnam offers the greatest opportunities for greenfield renewables investments in Asia-Pacific, while Australia is seen as offering the most opportunities in terms of brownfield renewables investments, according to a poll conducted by global law firm Baker McKenzie at its flagship renewables conference held in Singapore earlier this month.

Mr. Martin David, Head of Energy, Mining & Infrastructure, Asia-Pacific, at Baker McKenzie said the results were an accurate snapshot of where he sees the renewables industry heading in the years ahead, and while Australia, along with Vietnam and Taiwan on the greenfield side and Japan on the brownfield front, is set to offer some potentially high-quality opportunities, the dearth of quality projects across the region as a whole remains an endemic problem.

Vietnam’s opportunities are not without their own challenges. “While Vietnam’s renewable resources are matched only by its boundless energy needs, the current template of the Power Purchase Agreement is not a bankable document, at least in traditional terms,” Mr. Fred Burke, Managing Partner of Baker McKenzie Vietnam, pointed out. “Fortunately, the will has been there to negotiate and structure around the pitfalls, leading to more confidence as the track record of successful projects starts to accumulate.”

The survey of more than 120 renewables industry representatives also found the sector is suffering from a chronic shortage of quality projects to invest in or finance across the region. Just 3 per cent of those surveyed believe there are currently enough projects to meet investor and lender demand.

The poll also revealed that international and multilateral lenders are today experiencing increasing competition from all sides, with respondents seeing China as a fierce competitor in this space, while increasing liquidity in local banking markets is forcing international lenders to compete harder with domestic and regional players, according to 85 per cent of business leaders surveyed.

The survey also found that the notable squeeze on tariffs in the Asia-Pacific renewables market was not likely to end any time soon, with a full 84 per cent of those surveyed predicting that tariffs would continue to fall.

“The need and appetite for infrastructure investment across many countries in Asia-Pacific does not, unfortunately, correlate with the availability of quality projects to invest in,” said Mr. David. “One of the great challenges in the infrastructure sector globally is to find a more balanced and viable spread of risk between project stakeholders. Many governments in the region are pushing against the conventional boundaries of risk at a time when tariffs are falling and, with it, investment returns. Add to this is the emergence of regional asset-hungry infrastructure developers and the Chinese-driven BRI push, and this creates a potent cocktail of riskier investments and extreme competition.”

“It will be interesting to see who blinks first: governments across the region as they see their ambitious renewable targets not met or investors and lenders accepting a new world order in terms of risk appetite.”

Which markets in Asia-Pacific offer the greatest opportunities in the greenfield renewables sector?

Country

% of Total

Vietnam

26.6%

Australia

24.5%

Taiwan

18.2%

Indonesia

14.7%

India

4.9%

Japan

3.5%

Thailand

2.1%

China

2.1%

South Korea

2.1%

Myanmar

1.4%

Which markets in Asia-Pacific offer the greatest opportunities in the brownfield/M&A renewables sector?

Answer options

% of Total

Australia

33.6%

Japan

32.0%

Vietnam

9.4%

India

7.8%

Thailand

7.0%

Indonesia

5.5%

China

3.1%

Taiwan

0.8%

South Korea

0.8%

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