Offshore wind power mechanism: Still unattractive, many risks

The offshore wind power development mechanism is expected to create an incentive mechanism for foreign businesses and investors to participate. However, businesses assess that many regulations are still inappropriate and may pose risks to investors.

Investors believe that it is necessary to increase the foreign investor ownership ratio to 85% when implementing offshore wind power projects - Photo: P.SON

The draft decree regulating a number of articles of the revised Electricity Law (effective from February 1, 2025) on the development of renewable energy and new energy electricity, which was put forward for comments by the Ministry of Industry and Trade, has a separate chapter regulating the development of offshore wind power with many special mechanisms to encourage and give incentives to investment.

Many new offers with selection criteria

Specifically, the project will be exempted from sea area usage fees, land usage fees, and land rent during construction; and a 50% reduction in sea area usage fees for a period of 12 years from the date of operation.

The minimum long-term contract electricity output is 80% within the loan principal repayment period but not exceeding 12 years for projects selling electricity to the national power system.

For foreign investors, when implementing offshore wind power projects, they will have to meet market access conditions and selection criteria.

Accordingly, investors must implement at least one offshore wind power project of equivalent scale in Vietnam or the world. Meet the requirements of financial capacity, capital mobilization plan or loan commitment, human resources, expertise and experience.

Foreign investors must also have audited total net assets for the last three years that are greater than the total planned investment of the project.

Also according to the draft, foreign investors are not allowed to participate in 100% of the project's capital, but must have the participation of domestic investors, with a maximum capital ratio of 65%.

The project must have the consensus of the Ministry of National Defense, the Ministry of Public Security, and the Ministry of Foreign Affairs. Domestic investors participating in the project must have financial capacity, a capital mobilization plan or loan commitment, and human resources, expertise, and experience to implement the project.

According to the draft, the selection of investors is based on bidding regulations. In which, the ceiling price of electricity in the bidding documents is not higher than the maximum price of the electricity generation price frame issued by the Ministry of Industry and Trade; the winning price of electricity for the investor selection is the maximum price for the electricity buyer to negotiate with the winning investor.

But many constraints, high risk

After a long wait for policies, investors believe that the new mechanisms will open up many opportunities to attract investment in offshore wind power. However, many businesses assess that some of the regulations are not appropriate.

For example, assessing financial capacity with the total net asset value in the last three years is considered inconsistent with international practices and bidding guidelines, which can eliminate capable investors.

In fact, according to an investor, large-scale investment projects will be invested in the form of project finance capital mobilization.

"Investors will not use equity to contribute the entire investment capital of the project, but this ratio only accounts for about 20 - 25%, the rest is mobilized from international lenders in different forms.

Therefore, the investor's net asset value can be lower than the total investment but still ensure the capacity to implement the project thanks to loans and other forms of mobilization," he said.

According to businesses, the regulation that foreign investors own a maximum of 65% of charter capital is not suitable for the initial stage of offshore wind power development because the total investment capital of an offshore wind power project is very large, up to 4 - 5 billion USD for 1GW.

Meanwhile, domestic investors currently have no experience in developing offshore wind power projects and will find it difficult to mobilize investment capital equivalent to 35% or more of the total project investment capital.

Therefore, foreign investors recommend raising the maximum ownership ratio to 85% and domestic investors to 15%.

Many risks in negotiating electricity prices with EVN

Regarding the regulation on negotiating electricity prices with EVN after winning the bid, the wind power business community is concerned that it will prolong the time for negotiating the power purchase contract, implementing the project and increasing costs for investors. In case the investor and EVN cannot agree on the electricity price, it may lead to the cancellation of the results, reorganization, causing damage to the investor and related parties.

Not to mention, the regulation that the winning bid price can continue to decrease after negotiating the electricity price with EVN will not encourage investors to participate in bidding to offer the lowest electricity price, because they will have to calculate the risks of price negotiation and not achieve the goal of bidding with the best electricity price.

Source: https://tuoitre.vn/co-che-dien-gio-ngoai-khoi-van-kem-hap-dan-nhieu-rui-ro-20241225084931556.htm