Wind CEO criticises country's 'unheard of' failure to honour contracts

Developers up in arms after Vietnam broke offtake contracts with wind and solar farms

The CEO of an Asian renewables developer has criticised Vietnam for its “unheard of” move to renege on contracts with wind and solar farms – but the head of a huge new wind project powering the country has explained why he is not worried.

Olivier Duguet, chief executive of The Blue Circle, a Singapore-based renewables developer, was speaking at the Recharge Wind Power Summit that took place in the city-state last week.

The Blue Circle has invested in wind power projects in Vietnam under a partnership with Spain’s Acciona Energía. However, the two developers reorganised their partnership last year to focus on different markets, with The Blue Circle exiting the country.

This exit came during a tumultuous period for developers in the country. Vietnam unilaterally cut power prices from around 12GW of projects following investigations into alleged abuses ​in accessing preferential rates.

This infuriated developers and resulted in threats of legal action from chambers of commerce in several countries in March.

Speaking on a panel at the Recharge summit, Duguet said that it is a “very difficult” market situation for developers right now.

These developers include major foreign players including not just Acciona but its Iberian peer EDP Renewables.

“We are not talking about renegotiation of a past PPA [power purchase agreement],” said Duguet. “We’re talking about a political struggle in an emerging country where the government decided to cut paying.”

Vietnam’s decision to cut tariffs came amid its “blazing furnace” anti-corruption crackdown, which included a probe into whether officials abused their power concerning 22 wind and 10 solar farms. The probe also led to high-level arrests – including of several government ministers – and resignations.

Duguet said that the move to cut tariffs means that state-owned Vietnam Electricity (EVN) is effectively not paying for 1.4GW of installed wind and solar capacity right now.

“This is unheard of, we have never seen that before,” he said, continuing that “there will be some legal action considered.”

“Some will say, ‘That’s your risk, you’re going to emerging countries,’” said Duguet. “Yes, that’s the case, but I think in the future the risk premium for Vietnam will be much higher.”

“But of course we all have very short memories,” he said, and eventually “everybody will rush again to Vietnam forgetting what has happened in the past.”

Duguet was joined on the panel regarding opportunities and challenges for renewables developers in Asia by Impact Electrons Siam (IES) chief executive Nat Hutanuwatr.

The Thai developer last year powered up a 600MW wind farm in Laos that is connected directly to Vietnam’s grid, having signed a 25-year PPA with EVN.

Asked how concerned he was about the recent reneging on contracts, Hutanuwatr said that while the “situation in Vietnam is getting a bit critical” from a broad perspective, “in our case it’s a bit different.”

This is because the project is cross-border from Laos to Vietnam, which meant that IES was able to “negotiate certain terms” that are different to domestic PPAs, where you get a “template” and “just have to accept the terms”, he said.

Most significantly, Monsoon was able to negotiate that disputes be resolved through international arbitration, he said.

This would see a dispute typically resolved by an independent three-member tribunal of lawyers and legal experts in a neutral venue, as opposed to IES being at the mercy of Vietnamese courts.

Monsoon Wind was a project 14 years in formulation that now claims to be the most powerful wind farm in southeast Asia. It features 133 wind turbines from China’s Envision Energy.