Introduction

The draft Decree detailing certain provisions of the Electricity Law on renewable and new energy has been completed by the Ministry of Industry and Trade and is now open for public consultation.

According to the draft Decree, foreign investors may engage in offshore wind power development through two avenues: forming joint ventures with domestic investors or acquiring shares and capital via mergers and acquisitions (M&A). However, several conditions must be satisfied for foreign investors to participate in these projects:

• Ownership rate: Foreign investors must adhere to market access conditions established by international agreements between Vietnam and the investor's home country. In all cases, the foreign investor's ownership of charter capital in a new or target company must not exceed 65%. For offshore wind projects exporting electricity without connecting to the national grid, foreign ownership is limited to 50%.
• Experience: The foreign investor must have successfully implemented at least one comparable offshore wind project either in Vietnam or internationally.
• Financial Capacity: The investor must demonstrate financial capacity through a capital mobilization plan or a loan commitment from financial institutions. Additionally, the investor’s net assets in the last three audited years must exceed the total investment capital of the project.
• Expertise and Resources: The investor must possess the human resources, expertise, and experience necessary for project execution.

Licensing Procedures

For licensing, the procedures vary based on the chosen method:

1.  Joint Venture Method: Investors must obtain an Investment Registration Certificate (IRC) and an Enterprise Registration Certificate (ERC) from the Department of Planning and Investment (DPI) in accordance with the Law on Investment and the Law on Enterprise. Under the draft Decree, to proceed, unified opinions are required from the Ministry of Defense, Ministry of Public Security, and Ministry of Foreign Affairs.

However, the draft Decree does not provide specific guidance on whether these opinions must be obtained before submitting application dossiers to the DPI or during the IRC and ERC application process. This ambiguity means investors may need to secure the required opinions independently before applying to the DPI or rely on the DPI to internally coordinate with these ministries during the application process.

2.  M&A Method: The draft Decree requires compliance with the Laws on Investment, Article 26 of the Electricity Law, and written approval from competent authorities responsible for assigning marine areas for the project.  It is worth noting that, according to Decree 21/2021/ND-CP, the Prime Minister has the authority to decide on the allocation, recognition, extension, modification, or withdrawal of marine areas for resource exploitation projects. The Ministry of Natural Resources and Environment or  Provincial People's Committee also holds authority in certain cases.

For the M&A method, the draft Decree mandates obtaining unified opinions from the Ministry of Defense, Ministry of Public Security, Ministry of Industry and Trade, and Ministry of Foreign Affairs. If there are conflicting opinions, the matter must be referred to the Prime Minister for a final decision. Furthermore, the Investment Law stipulates three scenarios requiring foreign investors to register for share/capital acquisition with the Department of Planning and Investment:

• When the investment, share purchase, or equity acquisition increases the foreign investor’s ownership in an organization operating in industries with market access conditions for foreign investors.
• When the investment results in the foreign investor or the foreign-invested organization holding more than 50% of the charter capital of an economic organization.
• When the foreign investor invests in an organization holding land use rights in islands, border areas, coastal regions, or other areas affecting national security and defense.

Consequently, foreign investors opting for the M&A method face multiple procedural steps, including:

• Getting M&A approval from the DPI.
• Obtaining approvals from the Ministry of Defense, Ministry of Public Security, Ministry of Industry and Trade, and Ministry of Foreign Affairs.
• Gaining consent from authorities responsible for assigning marine areas for the project.

These intricate procedures pose challenges, including overlapping authorities among different agencies. Moreover, The draft Decree does not establish clear timelines for completing these steps, potentially leading to delays and challenges in project implementation. Furthermore, requiring agencies to review the same project multiple times under different procedures adds to the administrative burden.

Other Conditions

For offshore wind power projects exporting electricity without using the national power grid, an additional condition is that the export price must not be lower than the highest rate in the domestic power generation price framework, as determined by the Minister of Industry and Trade.

Incentives

Under the 8th Power Plan, Vietnam aims to achieve 6,000 MW of offshore wind power by 2030 and 30,000-50,000 MW by 2050, establishing itself as a regional hub for offshore wind power production in Southeast Asia. To promote this development, Article 6 of the draft Decree outlines various incentives:

• Exemption from marine area usage fees during the construction phase and a 50% reduction in these fees for up to 12 years post-operation.
• Exemptions and reductions in land use fees during construction, with further reductions governed by investment and land laws.
• A minimum long-term electricity contract volume of 80% during the loan repayment period, not exceeding 12 years for projects selling electricity to the national grid.

Thus, if the draft Decree is enacted, it will provide a clear legal framework for foreign investors to engage in Vietnam’s offshore wind projects, a sector previously deemed sensitive due to national security concerns. However, the existing procedural requirements are perceived as cumbersome, involving multiple agency approvals and lacking defined timelines for decision-making. Additionally, some agencies may need to approve the same project multiple times under different procedures, further hindering efficient project implementation.