Vietnam at Risk of Mass Power Firms Bankruptcies, Chamber Says

(Bloomberg) — Vietnam could experience a wave of bankruptcies of solar and wind producers if the state utility proceeds with its planned change in pricing for renewable energy, the Vietnam Chamber of Commerce and Industry said in a letter to parliament.

The application of a new power purchasing price — which would be implemented retroactively for several years — by Vietnam Electricity, or EVN, puts 173 solar and wind projects at risk of insolvency, according to the March 24 letter the chamber made public Friday. The chamber accused the state-owned monopoly of “a serious violation of contractual principles.”

The utility did not immediately respond to a request for comment.

“If EVN proceeds with the adjustment, which will cut by 25%-46% revenue of these projects, most of them will become insolvent, potentially triggering mass bankruptcies,” it said.

The wind and solar power companies would struggle to generate enough cash for debt repayments, potentially creating 200 trillion dong ($7.8 billion) in bad debt in the nation’s financial system, according to the letter. The power companies, which collectively have invested as much as $15 billion in Vietnam, received loans based on projected revenue from its previously agreed-upon power price, it said. 

“This would cause significant instability in both the banking sector and the financial markets in Vietnam,” the chamber latter said.

The chamber backed complaints made by the renewable power companies in a March 5 letter addressed to the nation’s top leaders, including Communist Party chief To Lam and Prime Minister Pham Minh Chinh.

About 30% of the affected projects have received an estimated $4 billion in foreign investment, according to the letter from the companies.

Attracting future investments in renewable energy is crucial for Vietnam’s economic growth and its continued ability to be a high-tech manufacturing hub, the chamber letter said. EVN’s change in pricing policies would put attracting future renewable energy investments at risk, it said.

–With assistance from Linh Vu Nguyen.

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