Green Economy: Financing renewable energy projects in Vietnam

Most large-scaled renewable energy projects in Vietnam so far have been developed by domestic companies. 

>> Renewable energy helps Việt Nam meet its goal of Net zero emissions by 2050

In the three years before COVID-19, Vietnam experienced one of the world’s fastest growth rates in investment in solar power. The country surpassed Thailand in 2019 to enjoy the greatest installed solar power capacity in ASEAN (according to Wood Mackenzie, a consulting firm in the energy industry), which skyrocketed from a mere 105 MW in 2018 to 16,660 MW in 2020, far exceeding the government’s targets.

"This growth was driven primarily by attractive feed-in tariffs (FITs), which provide developers with a guaranteed price for a period of time, meaning "certainty,"  which is loved by investors,"  said Ms. Stephanie Betant – Head of Wholesale Banking, HSBC Vietnam.

Most large-scaled renewable energy projects in Vietnam so far have been developed by domestic companies. Data from the Mekong Infrastructure Tracker suggests that c.60% of renewable energy projects in the country were developed entirely by Vietnamese companies, with a further 27% developed by a Vietnamese company with an international partner.

Only 12% (or c.10 projects) were developed without a Vietnamese partner. Until now, almost all investment into Vietnam’s renewable energy sector has come from domestic sources. The domestic capital market, with lending rates (historically) in the range of c.10% has provided the necessary capital to jump-start projects under earlier FiTs, and similar to other emerging markets, the key to getting these projects off the ground was the ability to leverage existing banking relationships and corporate balance sheets to obtain financing.

>> Vietnam needs laws for sustainable energy development

Since 2020, Vietnamese renewable energy companies have issued over USD 3 billion worth of VND-denominated corporate bonds on the domestic market (estimated by Institute for Energy Economics and Financial Analysis - IEEFA). However, none have yet approached the offshore market. There have been only seven international issuances by Vietnamese corporates from 2021 until now, mostly for real estate development.

"While it's not yet exactly clear how much solar and wind are included in the final Power Development Plan 8 (PDP8), they are clearly set to rise. The question now is how to fund a large amount of new renewable energy required to achieve net zero emissions by 2050. The World Bank’s Country Climate and Development Report indicated that investments in the clean energy transition could reach USD15-17 billion/year from the current USD7-8 billion/year. In order to unleash our advantages and open up more opportunities for Vietnam in renewable energy, every player in the market has their own role to perform,", emphasized Ms. Stephanie Betant.