Untangling the bottlenecks to attract private capital into energy

Policy, procedural and access to capital barriers are still hindering private enterprises from investing in the energy sector.

With Vietnam’s determination to achieve double-digit economic growth in the coming period, energy growth is a must to meet this target. Speaking at a workshop on encouraging the private sector to invest in Vietnam’s energy sector last week, Dr. Nguyen Sy Dung, former Deputy Head of the National Assembly Office, said that if GDP growth increases by 1%, electricity must grow by 2%.

To promote energy development and facilitate the private sector's participation in energy development, in February 2020, the Politburo issued Resolution No. 55-NQ/TW on the orientation of Vietnam's National Energy Development Strategy to 2030, with a vision to 2045. The Resolution clearly states: "Encourage and create all favorable conditions for economic sectors, especially the private sector, to participate in energy development".

Besides Resolution No. 55-NQ/TW, other legal documents such as the Electricity Law, Investment Law... also mention the issue of private sector participation in energy development.

Ms. Vu Quynh Le, Deputy Director of the Bidding Management Department (Ministry of Planning and Investment) said that the Law on Investment under the Public-Private Partnership (PPP) method in 2020 has created a legal corridor to attract private investment in projects, including the energy sector. To date, there have been 19 BOT projects in the energy sector, with a capacity of 27,000 MW, and a total mobilized capital of nearly 2,000 billion USD. Of which, 2 projects have been transferred to EVN (Phu My 3 and Phu My 2.2 Thermal Power Plants), 10 projects have signed contracts.

According to Mr. Philip Timothy Rose, Director of the Southeast Asia Energy Transition Partnership (ETP), promoting the private sector's participation in energy development is necessary, especially in the context that in the 2021 - 2030 period, the total investment capital for power development in Vietnam is expected to reach over 134 billion USD.

However, Dr. Nguyen Sy Dung said that promoting private investment in the electricity sector in Vietnam still has obstacles related to investment attraction policies, energy infrastructure, administrative procedures and capital access opportunities.

In addition, according to experts, the private sector investing in energy faces many risks, because of the large capital demand and slow capital recovery. Meanwhile, the majority of Vietnamese private enterprises are small and medium-sized, even micro-sized, so access to capital is extremely difficult.

Associate Professor, Dr. Nguyen Thi Nhung, Head of the Department of Financial Investment (Faculty of Finance and Banking, University of Economics, Vietnam National University, Hanoi) said that it is necessary to address policy and legal issues to increase investor confidence in renewable energy projects, such as building an electricity price framework for renewable energy projects, building preferential policies on taxes, fees and charges for green investments in general and renewable energy projects in particular.

Associate Professor, Dr. Nguyen Thi Nhung also proposed prioritizing domestic capital by promoting corporate bonds and green bonds. Building a comprehensive monitoring system to evaluate the effectiveness of funding sources in general, with a special focus on green capital flows.

In addition, according to Dr. Le Xuan Nghia, member of the National Financial and Monetary Policy Advisory Council, the Government needs to have solutions to encourage all businesses to use energy most efficiently and economically, not just investing in wind power and solar power. Policies should encourage private investors to invest in all types of electricity such as wind power, solar power, nuclear power, gas power, etc.

“Resolving policy and legal issues well will increase investor confidence in renewable energy projects,” Mr. Nghia suggested.

Source: https://baodautu.vn/go-nut-that-de-thu-hut-von-tu-nhan-vao-nang-luong-d249129.html