Vietnam - The Very First Solar Law – Government's Supporting Regime For Solar Powered Projects In Vietnam Finally Out.
Legal News & Analysis - Asia Pacific - Vietnam - Energy & Project Finance
19 April, 2017
On 11 April 2017, the Prime Minister officially approved the issuance of Decision No. 11/2017/QD-TTg on supporting regime for the development of solar power projects in Vietnam.
We note below some major points in this Decision:
Feed-in-tariff (FIT) rate
EVN is responsible for buying the whole electric output from on-grid solar power projects with the electric buying price at the point of electricity receipt to be 2,086 Vietnamese dong/kWh (equivalent to 9.35 UScents/kWh) (VAT excluded). This FIT only applies for on-grid projects with capacity of solar cell being over 16% or of solar module being over 15%.
There is no FIT for rooftoop solar power projects if such projects are not grid-connected. This is one of the differences compared with the previous Draft Solar Decision which sets a seperate FIT for rooftop projects when they are connected to the grid.
The FIT is based on the VND/USD exchange rate issued by the State Bank of Vietnam on 10 April 2017 (USD 1 = VND22,316). This FIT will be adjusted according to the fluctuation of the VND/USD exchange rate as specified in the standard Power Purchase Agreement (PPA) to be issued by the Ministry of Industry and Trade. We note that the solar PPA will have a term of 20 years from the commercial operation date of the solar plant and can be extended/ renewed based on regulations in effect at that time.
Investment capital: Investors may mobilize capital from domestic or overseas organizations and individuals to invest in solar power projects.
Import duty: Solar power projects are exempted from import duty on goods imported to create fixed assets of the projects; components, materials and semi-finished products which are not available at home for the project’s operation.
Corporate income tax: solar power projects will also enjoy the same corporate income tax exemption and reduction as projects in sectors receiving investment incentives according to the current regulations on taxation. For example, corporate income tax rate of 10% will be applied for 15 years, tax exemptions within 4 years and tax reduction by 50% in the next 9 years.
Land: Solar power projects, lines and transformer stations connected to the national grid enjoy the same exemptions and reductions in land use, land rental as projects being entitled for preferential investment treatment. Such incentives, among other things, include exemption of land rental within 3 years from the operation date of the project.
Projects included in the Power Master Plan
The Power Master Plan, whether it is national or provincial, only applies for on-grid solar projects.
Projects of 50MW or below will be approved by the Ministry of Industry and Trade to be included in the Power Master Plan, while those of more than 50MW will be approved by the Prime Minister.
Thus, it could be understood that off-grid and rooftop projects do not have to be included in the Power Master Plan. This will save the investors the hassle of negotiating the PPA with EVN.
The Decision has effect from 01 June 2017 to 30 June 2019.
For further information, please contact:
Oliver Massmann, Partner, Duane Morris