The proposal to increase the guaranteed purchase rate of LNG power to 75 per cent and accelerate the signing of power purchase agreements (PPA) is a significant policy move aimed at boosting new investments.
According to a report by VIS Rating, this policy is crucial and attractive as no other ASEAN country offers a similar mechanism. However, some investors are still hoping to extend the guarantee period from 10 years to 20-25 years to improve cash flow and project profitability.
Besides, infrastructure and legal bottlenecks are still threatening the targets of Power Development Plan VIII (PDP8), as nearly 25 per cent of LNG projects do not have investors and more than half are behind schedule.
According to VIS Rating, most of the 21 projects need to connect to LNG receiving port infrastructure, increasing complexity in planning and permitting.
Additionally, delays in planning and constructing transmission grids in many localities also affect project progress. VIS Rating expects these obstacles to be gradually resolved, thanks to expected stable governance of the two-tier local governments in the 4th quarter of this year.
According to PDP8, LNG thermal power is a strategic pillar to ensure energy security after 2030. Vietnam aims to achieve 25,600 - 36,000 MW of LNG power capacity in the 2030-2035 period, compared to almost zero before 2025.
With an average construction time of 4-5 years and a requirement to operate before 2031 to enjoy incentives, VIS Rating expects implementation progress to accelerate from 2026. The funding structure is expected to follow the norm of 30 per cent equity and 70 per cent debt, thereby strongly boosting bank credit demand as projects improve feasibility.
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