Funding, policy difficulties hassle independent power producers

Construction of the $1-billion An Khanh-Bac Giang Thermal Power project in the northern Bac Giang Province has stalled for over a year after the investor, An Khanh-Bac Giang Thermal Power Jsc, had difficulty securing credit.

Ngo Quoc Hoi, its CEO, said since regulations prevent banks from lending over 15 percent of their equity to a single customer, his company has to apply to several local banks or foreign lenders, which is not an easy task.

Adding to the challenge is the fact the government does not guarantee a certain minimum power purchase, which leads to more difficulties for the producer to get bank loans.

Hoi said: "Our request for funding has been rejected by over 20 international credit organizations. They all wanted to know how we would repay the loan if [national utility] EVN did not buy the power we produce."

Banks want EVN to commit to buying 90 percent of output for 10 years, but it has not agreed with this demand.

Hoi said there should be a guarantee policy so that EVN buys electricity produced by private plants.

His project is one of seven approved private power projects with a total capacity of nearly 2,000 MW that have been delayed for years as a result.

Some of them were scheduled to be commissioned last year or this year, but have been delayed to 2021-2023 or indefinitely, according to a report by the Vietnam Energy Association.

Energy expert Nguyen Thanh Son said one of the reasons for these issues is that the so-called independent power producers in Vietnam are not really independent.

Independent projects are supposed to have their own grid and serve a specific area, but in Vietnam they are dependent on the national grid managed by EVN, he said.

Duong Quang Thanh, EVN chairman, said since last year over 100 solar power projects have begun production without requiring government-guaranteed loans thanks to the attractive feed-in tariff from the government.

The same mechanism could be used to resolve the issues faced by independent thermal and hydropower producers, he suggested.

A government plan to establish a competitive power distribution market in 2022 could also benefit them since then EVN would be just one of several distributors selling directly to customers, he added.

The competitive market means customers and power producers could settle on a price without government intervention. Currently EVN decides electricity prices.

Independent producers account for 16,400 MW, or 28.3 percent of the country’s installed capacity, according to the National Steering Committee for Electricity Development.

Of this, 44 percent is from renewables while hydropower and thermal power account for the rest, it added.