Wind and solar energy developers are concerned they may go bankrupt as the government’s new feed-in tariffs are too low for them to make profits.
Some 36 renewable energy developers who did not complete projects in time for recent 20-year incentive feed-in tariffs have asked Prime Minister Pham Minh Chinh to resolve issues in the new tariffs.
There are 84 renewable energy projects across the country – with a total capacity of 4,676 megawatts – that will fall under the new tariffs. Among them, 34 projects have been completed.
These projects were offered feed-in tariffs of VND1,185-1,508 per kilowatt-hour for solar power and VND1,587-1,816 for wind energy, 20-30% lower than previous tariffs issued to projects that had been completed early.
The 34 completed projects have received total investments of nearly VND85 trillion, of which 68% was borrowed from banks.
The low tariffs might make it impossible for developers to pay back the loans and therefore may collapse the companies altogether because the projects may never open for business.
Analysts at the brokerage VNDirect said in January that the new tariffs were a disappointment to many developers as they might lower their internal rate of return (IRR), which is the annual rate of growth that an investment is expected to generate.
Developers fear that the new tariffs will not ensure an IRR of 12%, which is what they expected.
VNDirect analysts say that the actual IRR of solar projects could be just above 5% with the new tariff, but could rise to 11.7% if the old tariff is applied.
For onshore wind power, the ratio would be 8% with the new tariff and 12.7% with the old one.
The 36 renewable energy developers have proposed that the Ministry of Industry and Trade hire an independent consultancy to evaluate the tariff and proposed a new and more suitable one.
While a new tariff is being studied, developers want the government to buy electricity from the completed projects with the U.S. dollar.
They also said that the ministry needs to quickly complete the legal framework for power purchasing as many big companies are ready to buy from these projects.
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