VIETNAM Trends and Developments Contributed by: Adam Moncrieff and Thuy Huynh, Orrick
Project tendering may become more prevalent, but the track record is mixed Investor selection for power projects in Vietnam has long centred on direct appointment, but that may change. The Law on Electricity 2024 and Decree No 56 introduced compulsory bidding requirements for certain categories of power generation projects, reflecting a broader policy objective to improve trans- parency, value for money and investor confidence in project selection. Under the latest framework, com- petitive bidding is required for new power projects that fall within the National Power Development Plan (including new thermal power and renewable energy projects), with limited exceptions for projects with spe- cial characteristics such as those involving national defence, security or emergency energy supply needs. This is an important shift, and how this plays out in practice remains to be seen. Many of the large-scale projects slated under the Revised PDP8 already designate the project devel- opers. However, if competitive bidding is required for a large number of new projects, this could have some serious implications, not so much for the bidding itself but for how the bid processes are conducted. In par- ticular, a number of concerns are clear from the pro- posed requirements for compulsory bidding: • There are concerns around the experience, resources and budgets of bidding authorities to prepare and conduct well-considered bidding documents and processes. • Tariff caps apply, so it is not clear whether there can be any adjustment for variable costs in the inevitably long time between bid awards and pro- ject implementation. • The ability to negotiate model PPAs and other documents post-bid is unclear, especially if there are deficiencies or bankability concerns in the bid documents in the first place. • Impracticably strict timelines apply post-bid for feasibility study approval and PPA negotiations, with no practical fallbacks if timelines are not met. Required project re-tendering will face the same issues. Vietnam’s problematic track record in conducting bid- ding processes for investor selection for large-scale
However, despite the promise, inaction on implemen- tation, insufficient commitment on tariff and conces- sion support, lack of support for planning co-ordi- nation and the usual issues regarding risk allocation (similar to LNG-to-power) have all combined to see many experienced international developers of off- shore wind quit the country. A few remain committed, but what is clear is that state commitment and partici- pation will be needed to get the sector off the ground. The practical issues are substantial. Offshore wind projects require survey rights, sea area allocation, environmental approvals, defence and security clear- ances, port and marine infrastructure, supply-chain capacity and long-distance grid connection. These are not small extensions of onshore or near-shore wind projects. They require a dedicated regulatory framework and substantial addressing of the above- mentioned issues. Resolution No 253 and related draft guidance are important because they propose special mechanisms for offshore wind. Projects scheduled to achieve com- mercial operation in the 2025 to 2030 period may ben- efit from Prime Minister-level approval with concurrent investor selection, without a land use rights auction or competitive bidding, if they meet the relevant defence, security and planning requirements. Survey activities may also involve state-owned enterprises where no investor has been selected. The minimum contracted output support and tariff ceil- ings are positive, but they do not seem to be enough by themselves. A bankable offshore wind PPA will still need to deal with curtailment, grid delay, change in law, termination compensation, foreign exchange, force majeure and government-side obligations. Vietnam represents a high-potential opportunity for offshore wind, but remains at a cross-roads. The decisive issues will be to what extent the Vietnamese government will start taking the steps to support sur- vey rights, grid connection, tariff formulation, investor selection, local partner strategy and other risks that developers in what is an untried country for offshore wind will expect to be properly managed before they commit the very large amounts of capital necessary.
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