FDI firms in Vietnam concerned about losses if FIT rates are recalculated

By Minh Hue
Mon, March 31, 2025 | 8:00 am GMT+7

A possible reduction in the feed-in-tariff (FIT) has raised concerns among foreign solar power investors about the risk of losing their capital and exiting the Vietnamese market.

A solar power farm developed by Trungnam Group in Ninh Thuan province, south-central Vietnam. Photo courtesy of the government's news portal.

A solar power farm developed by Trungnam Group in Ninh Thuan province, south-central Vietnam. Photo courtesy of the government's news portal.

A conclusion from the Government Inspectorate at the end of 2023 noted that allowing several solar power projects to enjoy the FIT rate of 9.35 U.S. cents per kWh for 20 years was not in compliance with regulations, requiring a recalculation of the electricity purchase price.

Accordingly, the FIT1 rate of 9.35 U.S. cents per kWh may fall to the FIT2 rate of 7.09 cents or even 4.8 cents, down 24-47% from the current rate paid by the Vietnam Electricity (EVN).

The Ministry of Industry and Trade (MoIT) said that the adjusted rate reflects the actual investment and operational costs.

However, many businesses argued that this rate is not suitable, given that interest rates in Vietnam are significantly higher than in other countries in the region.

At an event held for FDI businesses investing in renewable energy in Ho Chi Minh City on Friday, a representative of Thailand-backed B.Grimm Power Vietnam stated that the company’s two 500 MWp projects are being heavily impacted.

The firm borrowed funds from Vietnamese bank BIDV to invest in the projects. If the FIT2 or the lower rate (4.8 cents per kWh) is applied, the company will not be able to recover its investment and will be unable to repay its loans, the rep claimed.

Sharing similar concerns, Tran Minh Tien, CEO of the Xuan Tho 1-2 and My Son 1-2 solar plants of Thailand’s Bangkok Glass Energy (BGE), claimed that the company faces bankruptcy risks if the FIT is revised.

BGE has invested in these projects based on the FIT1 (9.35 U.S. cents), but they now faces the risk of being subject to the FIT2 (7.09 cents). Moreover, the company purchased the projects from a partner at a higher investment rate, resulting in significant losses if the price is recalculated.

Not only BGE or B.Grimm Power but also Dragon Capital, a foreign investment fund with three renewable energy projects in Vietnam, has not received any payments since September 2023.

Nguyen Huu Quang, portfolio manager of clean investments at Dragon Capital, stated that the retroactive adjustment of the FIT based on the issuance date of the project completion acceptance document lacks clear legal grounds.

Currently, the parent company in Singapore is providing financial support to repay loans for a 40 MWp project in Vietnam, but if the situation is not resolved, it will not be able to continue investing, he added.

According to a report from the Ministry of Industry and Trade, 173 solar and wind power plant projects or project components connected to the national grid are facing this issue. Of these, nearly 150 are solar power projects that are delivering power to the national transmission lines.

About one-third of the projects involve foreign investors from Europe (France, Portugal, Spain, Switzerland, the UK) and Asia (India, Japan, the Philippines, Singapore, Thailand, China).

The total investment value of these foreign-owned projects, comprising more than 3,600 MWp of solar power and 160 MW of wind power, is estimated at approximately $4 billion.

The foreign investors argued that they have complied with the power purchase agreements (PPAs) signed with EVN, with the commercial operation dates (COD) already recognized.

The requirement for a project completion acceptance document from the trade ministry or a relevant authority was only introduced in Circular 10/2023, while most of these projects began operations before or in 2021.

In addition, comparing Vietnam's FIT with other countries' as a basis for adjustment is considered unreasonable by investors. For example, Cambodia has lower interest rates and cheaper investment costs, while in Vietnam, lending interest rates were up to 10-11% in the 2018-2019 period. Moreover, businesses had to bear exchange rate risks and high land rental costs.

According to some international financial institutions, the minimum FIT to ensure the efficiency of solar power investment needs to reach 9.6-10 cents per kWh, they argued.

Therefore, FDI firms proposed the government maintain the FIT rate as initially promised and refrain from retroactive adjustments. They also hoped that EVN would ensure full and timely payments.

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