DNV GL © 07 June 2018 SAFER, SMARTER, GREENERDNV GL ©
07 June 2018
ENERGY
Current issues with the Development of wind power in Vietnam
and challenges in supply chain and finance
Supply chain and financing challenges
by Peter C. Brun, Global Offshore Segment Leader, DNV GL
DNV GL © 07 June 2018
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Global - Local: Bringing experience to the Asia region – by maintaining international standards
▪ APAC region has a diverse and wide ranging list of onshore & offshore wind challenges
▪ Some beyond those found in Europe, hence require:
Comprehensive local understanding
Location specific adaptive methods
European experience:Over 30 years of experience and lessons learnt. Extensive expert capacity in on- & Offshore Wind widely recognized in industry
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Local knowledge:Key APAC differencesGeotechnics, Extremes (typhoon, Earthcrages
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DNV GL’s approach to project development and risk management
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PRE-DEVELOPMENT
PRE-FID STUDIES(Financial Investment Decision)
FID & CONTRACTING OPERATION
20+ yrs1-2 yrs1 yr1-2 yrs1 yr
Concept Design (FEED), Met Mast, Offshore Surveys Operation
Construction Project Full-Feasibility
FID, Specs. & Bids
High Impact Risks80% Risks Born
Only ~10% CAPEX
FEED Study Critical✓ X
>80% Risk Events (bad design)80-90% CAPEX
Poor Operational Performance
Non-optimised O&M Strategy
Inaccurate Energy Assessment
High Cost of Energy
OPEX Modelling
Detailed Design
1 yr
De-risking Stage
Project Timeline - know your Risks and Design Well!
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Life cycle cost and risk reduction with DNV GL
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Time
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Cost
end of warranty for mast, turbine
etc.
Investment costs
O&M
costs
Influence on
development
OperationDesign
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Our advanced cost of energy modelling tool, Turbine.Architect, allows engineering design decisions
to be made on the bases of LCoE. It contains engineering models of the main components of the
wind turbine and wind farm, including balance of plant, construction and O&M, and combines these
with financial models to allow you to understand the complex relationships involved in the
integrated system to optimise the overall design.
Turbine.Architect can also be used to aid wind turbine OEMs or support structure designers when
bidding for wind farm development opportunities.
Demonstration Wind Farm Location
Gujarat – zone A, 19 sub-zones Tamil Nadu – zone A, 10 sub-zones
Optimum LCOE zone = A3lower CAPEX costs due to shallow
water depth and shorter distance to shore. Despite A3
having the lowest annual mean wind speed.
Optimum LCOE zone = A3relatively close to shore and having a shallow water depth.
A3 does not possess all the most favourable values in these
properties out of all the sub-zones, but has the best
combination of favourable values.
-15.5 mLAT
6.99 m/s (at 120 m AGL)
25.3 km to coast
-18.1 mLAT
8.01 m/s (at 120 m AGL)
12.4 km to coast
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Vietnam’s opportunity to harvest its wind power potential
DNV GL © 07 June 2018
The opportunity in Vietnam – lots of potential and interest…..
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Current issues with supply chain
Active Turbine
Suppliers
Current Component
Suppliers in Vietnam
• Currently, GE has invested in a new factory located in Hai Phong city to manufacture wind
turbine components to help support the global demand for GE's wind turbines.
• Towers are available locally with the largest producer being CS Wind (South Korea) in Baria-
Vungtau Province. Another producer is Vina Halla Heavy Industries which has a factory in Ba
Ria Vung Tau Province
• Driven by the competitive markets globally for the supply of equipment, OEM have always
been looking at cost reductions considering the economics of scale. India and China has been
the key locations for a lot of the turbine manufacturers for opening of factories.
• General Electric (GE), Vestas, Siemens Gamesa (SGRE), Fuhrländer and Enercon are some of
the turbine suppliers active in Vietnam.
Opportunities
• With India and China in the region being the top producers of turbine components and the
regional onshore activities being limited, the challenge will be the achievement of an economic
of scale.
• With promotion of offshore wind in Vietnam and the neighbouring APAC regions (e.g. Korea,
Japan, Taiwan, China and India), there could be a demand for the offshore substructures.
• Promotion of local content policies (LCP) for local projects could also drive OEMs to consider
local content or for international suppliers to partner with local facilities.
DNV GL © 07 June 2018
Are regulated local content requirements… adding investment risk ?
▪ Wind power delivers lots of local content – naturally. WTG only btw
30-50 value of project. Rest sourced locally – see value pie
▪ OEM’s want to make own investment decisions based on economic
sustainability
▪ OEM’s open to source locally – if quality & business case is present
▪ Vietnamese industry is already supplier to international supply
chain (bigger market – more sustainable business strategy)
▪ Local content requirement – illegal according to internatrional law
(WTO). Two principal LCR-rulings: Ontario-wind/Canada 2013 (DS
412) and India-solar in 2014 (DS 456)
▪ International developments banks decline financing of projects
with local content requirement (f.x. EIB) Source: Vestas
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Permitting Process in Vietnam
▪ Approximately 29 individual permits,
agreements, or licenses were identified for
utility sized wind farm that can be classified
into the 8 categories shown on the right.
▪ Agencies involved includes: EVN, DPI, MPI,
MoIT, DoIT, DoNRE, DARD, Provincial PC,
EPTC, EVN, NPT, etc.
▪ Approval process ranges from a few days to
several months with the whole process taking
years so it is important to plan ahead and
understand the requirements.
▪ Government should consider a “one-stop-
shop” planning and approval process for both
on- & offshore wind.
DNV GL © 07 June 2018
Main challenges for project financing
Lack of Bankable
standardized PPA
Exchange Rate Risk
and Currency
Convertibility
Electricity Offtake
and Guarantee of
Offtaker Obligation
• Some terms in the PPA are not typical in international PPAs, so these addition risks
and corresponding mitigations measures would need to be in place.
• F.x. Termination Payment, Force Majeure, Offtake interruptions, Dispute
Resolution, Grid Connectivity, Change in Law and Tariff escalation are just some of
the atypical issue with the standardized PPA.
• Since 2011, Government of Vietnam generally only provides a guarantee of
foreign exchange to BOT power projects up to 30% of revenue after deduction
of expenses in VND in accordance with Official Letter 1604. Exceptions where
100% currency convertibility guarantee has been seen for some projects
(e.g. 1,200 MW Vung An 2 coal-fire IPP project) which requires in-principal
approvals by National Assembly.
• Usually, wind IPP projects are financed through non-resource (project finance)
debt, serviced by cash flow from the sale of electricity through the PPA.
• If offtaker’s creditworthiness is under question, then lenders tend to require a
“backstop” for the offtaker’s obligation under the PPA, usually in the form of a
government guarantee.
DNV GL © 07 June 2018
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Thank you !
Peter C. Brun, Offshore Wind Segment Leader
+45 604 338 78
DNV GL © 07 June 2018
Case studies for Wind IPP in Vietnam
Phu Lac Wind Farm
- Phase I (24MW)
Bac Lieu Wind Farm
– Phase 1&2
Dam Nai Wind Farm
• Project Developer: Thuan Binh Wind Power Joint Stock (TBW)
• Equity Investor: Thuan Binh Wind Power Joint Stock (TBW)
• Debt Investor: KfW Development Bank (EUR 35 million ODA Loan from a DFI)
• Located in Binh Thuan province, developed in two phases
• Debt/Equity ratio (80/20) with total investment at USD 52 million
• Project Developer: Cong Ly Ltd Company
• Equity Investor: Cong Ly Ltd Company
• Debt Investor: Vietnam Development Bank (VDB), with ECA funding (U.S. Ex-IM Bank)
• Located in Bac Lieu province, developed in two phases
• Debt/Equity ratio (85/15) with total investment at USD 260 million
• Project Developer: The Blue Circle / TSV Investment
• Equity Investor: The Blue Circle / TSV Investment
• Debt Investor: Not defined yet.
• Located in Dam Nai province, developed in two phases
• Phase 1 was through equity finance, second phase might be debt-financed