Project Finance 2023

Last Updated November 02, 2023


Trends and Developments


LNT & Partners is a leading independent law firm in Vietnam, specialising in corporate, M&A, competition, pharmaceutical, real estate, finance, and high-profile litigation. It has earned recognition from esteemed international publications, including the Financial Times, Asian Legal Business, In-House Community, Legal 500, Chambers and Partners, Benchmark Litigation and IFLR1000. The firm proudly serves numerous Fortune 500 companies as their trusted legal advisers. Its dedicated teams cover transactional and litigation areas, providing practical, cost-effective legal solutions to local and international clients. The firm builds strong relationships with Vietnamese authorities and business leaders to enhance its capabilities, as well as maintains alliances with top Asian law firms. The firm also excels in cross-border transactions. With its seasoned experts and over 70 professionals and offices in Ho Chi Minh City, Hanoi and Singapore, LNT & Partners is a globally recognised Vietnamese law firm with extensive knowledge of domestic and international business landscapes.

Bankability in Renewable Energy and the Express Railway and Metropoline Project


In the realm of project finance, whether in Vietnam or elsewhere, “bankability” stands out as the linchpin for successful ventures. Achieving bankability implies having a financial structure robust enough to garner support from financial institutions and investors. A crucial component of this structure is a steady cash flow, the lifeblood of any project. This financial predictability assures lenders that repayments will be made on time, instilling confidence in the project’s viability.

To attain this steady cash flow, key elements come into play. Firstly, a commitment from off-takers or buyers is vital, ensuring a stable income stream through agreements such as “take or pay”. Secondly, reducing the cost of critical components such as fuel or materials proves essential, driving profitability and further enhancing bankability.

In 2023, these principles hold immense weight, particularly in sectors such as energy and transportation in Vietnam. This article explores the nuances of project finance, highlighting the interplay of legal frameworks and strategic commitments that underpin the bankability of ventures in this dynamic landscape.

2023 witnessed a chain of novel legal bases that significantly influence project finance structures in Vietnam’s energy sector, such as Power Development Plan 8 (PDP8), and international agreements such as the European Union-Vietnam Free Trade Agreement (EVFTA), the Just Energy Transition Partnership (JETP) and COP26. Furthermore, several noteworthy regulations have come into effect adopting transit-oriented development (TOD) projects, which will also be discussed in terms of their impacts on urban railways and metropoline project bankability.

The Panorama: the National Master Plan

Through Resolution No 81/2023/QH15 on the National Master Plan issued on 9 January 2023 (the “National Master Plan”), Vietnam unveiled a roadmap for the country’s development. This National Master Plan sets out the long-term goals, investment priorities and strategic sectors, providing a legal foundation for the alignment of projects and investments. Specifically, the long-term goal set for 2050 is to emerge as a developed nation with high income, indicating a quantum leap in economic development and an improved standard of living for its people. Equally impressive is Vietnam’s commitment to environmental sustainability, as it strives for net-zero emissions.

Projects seeking approval to enter the Vietnamese market must align with the National Master Plan’s objectives and possess either a Master Plan certificate or an appropriate investment decision. In addition, the plan for carrying out projects using various funding sources, including public investment capital and non-public investment capital, follows a systematic approach based on government directives outlined in Resolution 81/2023/QH15, in conjunction with Resolution 90/NQ-CP in 2023.

Projects funded by public investment capital are divided into two distinct phases, as follows.

  • Phase 1 (2021–2025): This period is characterised by the implementation of the Medium-Term Public Investment Plan for 2021–2025. The primary focus is on executing extensive technical infrastructure projects with a significant regional and interprovincial scope. These projects aim to foster connectivity among nationally vital economic zones and corridors.
  • Phase 2 (2026–2030): During this phase, the strategy shifts towards the research and development of investment projects that align with the objectives and directions set forth in Resolution 81. These specific projects will be detailed in the Medium-Term Public Investment Plan spanning 2026–2030.

On the other hand, projects funded by capital sources other than public investment will follow a separate set of guidelines, as follows.

  • Sectors of transportation infrastructure, energy infrastructure, information technology infrastructure, water and waste treatment systems, education and health infrastructure, agriculture, forestry and fisheries are industries with projects where Vietnam is calling for foreign investors. According to Decision 1831/QĐ-TTg, there are more than 150 relevant projects in the period of 2021–2025.
  • In parallel, concerted efforts will be made to attract projects that promote the development of production and business activities, in alignment with the objectives and orientations articulated in Resolution 81/2023/QH15, as delineated in Appendix III.

Commitment From Power Development Plan 8 (PDP8)

PDP8 offers a roadmap for power generation and transmission projects during the 2021–2030 period, with a long-term vision extending to 2050. In comparison with PDP7, PDP8 demonstrates a noticeable shift away from traditional power sources such as hydropower and coal-fired generation to an emphasis on renewable energy. Similar to the National Master Plan, energy projects aligned with PDP8 can benefit from a well-defined direction for sectoral growth. PDP8 provides a legal basis for the Electricity Law and related governmental decrees, which define the planning, operation and management of the power sector, establishing a framework for investment and providing assurance to stakeholders, including investors and lenders, and thus enhancing project bankability. This alignment has the potential to attract increased investment and interest from lenders, thereby enhancing the prospects for projects within the energy sector. A few takeaway points include the following.

  • Grid development: the plan aims for a 60,000-kilometre expansion by 2030. However, most 500 KV lines are concentrated in the North and South regions, while the Central regions such as Ninh Thuan and Binh Thuan have fewer lines, mostly at 200 KV (consisting of 100 projects). There is an expectation of increased private sector involvement and privatisation in grid development. The high-voltage direct current is currently in progress.
  • Onshore wind: there are significant opportunities for mergers and acquisitions in transitioning onshore wind projects to reach a total capacity of 16 GW.
  • Offshore wind: the plan targets 6 GW by 2030, with expectations of a much higher capacity by 2050. Wind power projects are seen as the way to achieve Vietnam’s COP26 commitments.
  • Solar: the focus is on rooftop and direct power purchase agreement (DPPA) projects, alongside addressing the transition of existing projects and adopting advanced storage technology.
  • LNG: only projects approved in PDP VII extension, such as Nhon Trach 3-4 or Quang Ninh, or those converted from coal to LNG, are in the spotlight. Two LNG terminals, Thi Vai and Son My, are the main focus. Despite challenges such as the Ukraine war and fluctuating LNG prices, LNG is now considered less challenging compared to PDP VII. By 2035, new LNG projects should be designed to convert to hydro energy.
  • Coal-fired: only projects initiated under PDP VII and commencing by 2024 will be retained. All coal power plants must transition to clean energy or ammonia production by 2050. The fate of “new” coal plants and their project financing remains uncertain.
  • Hydropower: a few hydropower projects are still in the planning stages.
  • FIT and bidding market: PDP8 does not mention feed-in tariffs (FIT) or the bidding market. New guidance is awaited. FIT rates for projects completed after 31 October 2021 are set at 1,200 VND/KWH (approximately 5.5 cents), posing challenges for project owners.
  • Additional considerations: the issuance of FIT rates, which may undergo thorough price and cost assessments by state auditors, although not explicitly mentioned in PDP8.

The future appears promising for grid and wind power development. While solar projects may experience limited changes, the combined capacity of solar and wind projects is expected to reach 71% by 2050.

Project investors should be prepared to justify their prices and be more accountable in negotiations with EVN under the scrutiny of State auditors. High equity and low debt will be key factors in justifying lower prices, resulting in enhanced bankability.

The electricity competition market is also developing as a result of the MOIT. It is important to note that PDP8 is not designed to legalise problematic projects with insufficient documentation. Instead, it provides a path for transition projects, DPPAs and clarification for other initiatives. For PDP8 to be implemented effectively, the MOIT needs to clarify FIT rates for transition projects and the competitive electricity tariff market.

Therefore, it is imperative to explore alternative or supplementary financing mechanisms to comprehensively support the development and implementation of PDP8.

Financing Mechanisms

As of the end of June 2022, the total credit allocated to renewable energy projects amounted to an estimated VND212 trillion (approximately USD9 billion), equivalent to about 2.2% of Vietnam’s GDP. However, relying solely on bank credit to guarantee bankability of renewable projects may prove insufficient due to various constraints, including regulatory limits on credit expansion, risk mitigation measures, and the substantial capital demands inherent in renewable energy projects.

Vietnam’s electricity sector is set to attract an estimated investment of approximately USD135 billion between 2021 and 2030. To realise the goals set forth in PDP8, renewable energy projects in Vietnam must broaden their funding sources, moving beyond conventional bank loans. As a result, corporate bonds and private credit investments from non-banking entities, both at home and abroad, are poised to emerge as the primary capital providers.

Furthermore, a notable concern arises from the mismatch between the operational lifespan of renewable energy assets and the maturity periods of funding sources. This incongruity may prompt project developers to actively seek long-term financing with favourable terms. Numerous developers in the renewable energy sector have grappled with financial hurdles as their earlier projects were primarily funded through medium and long-term loans from local banks, which have recently matured. Additionally, bonds typically come with maturities spanning four to five years, while the payback duration for renewable energy ventures can extend from ten to 15 years, contingent upon whether they are solar or wind projects (see here).

This scenario has placed investors in the potential predicament of dealing with impending bond maturities, despite ongoing endeavours to restructure their debts. A growing trend has also emerged, marked by delays in bond repayments and extensions of bond terms. Given the scale and significance of Electricity Plan VIII, there exists an unmistakable requirement for long-term funding sources, encompassing the domestic corporate bond market, international debt markets and the stock exchange.

The anticipated “financing gap” hinges largely on the ability to attract foreign direct investment (FDI), foreign indirect investment (FII) and corporate bonds. Notably, green bonds could play a pivotal role in this context, given their purpose of funding environmentally beneficial projects, rendering them particularly suitable for renewable energy initiatives.

Pricing Mechanisms

In previous years, the FiT prices for electricity purchase were relatively high, presenting opportunities for investors in renewable power projects to generate profits from electricity production. However, recently FiT prices have been on a decreasing trend, creating disadvantages for the renewable energy market – specifically, as follows.

  • In grid-connected solar power projects, Decision 11 issued on 11 April 2017 established FiT1 at 2,086 VND/kWh. Decision 13 dated 6 April 2022 introduced FiT2 at 1,644 VND/kWh, and Decision 21 dated 7 January 2023 for transitional projects set it at 1,184.90 VND/kWh.
  • In wind power projects, Decision 39 dated 10 September 2018 set the FiT at 1,928 VND/kWh for onshore projects and at 2,223 VND/kWh for offshore projects. By 2023, these rates will decrease to 1,587.12 VND/kWh for onshore projects and 1,815.95 VND/kWh for offshore projects.
  • In rooftop solar power projects, Decision 11 on 11 April 2017 stipulated FiT1 at 2,086 VND/kWh, and Decision 13 on 6 April 2020 introduced FiT2 at 1,943 VND/kWh.

The declining FiT rates have significantly reduced the attractiveness of the renewable energy market both for investors and for lenders. This trend poses substantial challenges to the growth of the renewable energy sector. In particular, the decrease in profitable transactions has resulted in unstable cash flows for projects, undermining their financial viability and dampening interest in Vietnam’s renewable energy investment market.

International Legal Framework in the Renewable Energy Sector

The EVFTA in relation to renewable energy

The EVFTA incorporates clauses pertaining to sustainable development and renewable energy investments, thereby fostering investment streams and establishing a dependable legal framework for projects’ bankability.

Vietnam, along with other signatories of the EVFTA, is required to transition from coal-fired power stations to cleaner and renewable energy sources.

The bankability of Vietnam’s transition to renewable energy rests upon several pivotal factors. Foremost, the nation must cultivate financially robust and commercially viable energy projects to ensure the transition is both sustainable and attractive to investors. However, this shift also mandates securing a dependable baseload power source to replace coal, thereby guaranteeing grid stability and continuous development.

To address these challenges and enhance bankability, Vietnam is exploring a diverse range of solutions. This includes harnessing hydrogen, wind and solar energy alongside efficient storage systems, which not only promotes a more flexible energy grid but also increases project attractiveness to financiers.

Furthermore, the integration of scalable behind-the-meter renewables solutions further enhances bankability by providing adaptive responses to changing energy demands. Energy efficiency initiatives, too, are instrumental in optimising resource utilisation, bolstering the financial viability of these projects.

JETP in relation to renewable energy

The political declaration of JETP lays the foundation for a fair and inclusive global initiative dedicated to achieving an energy transition. This partnership, operating on a global scale, is committed to several key objectives:

  • promoting the shift towards cleaner energy sources;
  • fostering technological innovation to facilitate green conversion;
  • reducing emissions; and
  • advancing the development of a low-carbon economy.

JETP plays a significant role in attracting foreign investments totalling an initial value of USD15.5 billion over the next three to five years to support Vietnam’s transition to green energy. However, when compared to the ambitious USD135 billion investment in PDP8, this contribution appears relatively modest. Consequently, projects must tap into green bond sources or secure funding and capital replenishment for environmentally beneficial initiatives to ensure their bankability.

To achieve this objective, projects must adhere to specific criteria related to objectives, green standards, transparency reporting, and independent assessments (see here).

COP26 in relation to renewable energy

Vietnam’s robust commitments and responsible contributions at the COP26 climate conference have garnered widespread praise on the global stage. Key highlights of Vietnam’s engagement are as follows.

  • Firstly, Vietnam has pledged to achieve net-zero emissions by the middle of this century. This commitment demonstrates Vietnam’s dedication to reducing its carbon footprint and transitioning towards cleaner and more sustainable energy sources.
  • Secondly, Vietnam has joined the international pledge to reduce methane emissions globally by 2030, compared to 2010 levels.
  • Furthermore, Vietnam’s endorsement of the Glasgow Leaders’ Declaration on Forests and Land Use underscores its commitment to combat deforestation and to promote responsible land use practices. Preserving and restoring forests are vital for both carbon sequestration and biodiversity conservation.

Renewable energy projects in Vietnam hold the potential to generate carbon credits, which are currently traded in voluntary markets worldwide. Vietnam is poised to initiate a carbon credit market trial from 2025, with full-scale operation scheduled for 2028. The future trading of carbon credits is expected to bolster the revenue streams of renewable energy projects, thereby enhancing their bankability. By participating in the carbon credit market, Vietnam’s renewable energy projects can not only contribute to environmental conservation but also strengthen their financial viability.

Expressway and Metropoline: TOD Approach

At present, public-private partnership (PPP) projects are primarily utilised in the field of transportation infrastructure, particularly through build-operate-transfer (BOT) contracts.  One of the notable projects within this overarching plan is the ambitious North-South railway project. This railway project is envisioned to span a substantial total length of 1,545 kilometres, encompassing 24 railway stations, with the potential for three additional planning stations, along with five depots and 42 infrastructure maintenance facilities.

In addition, regarding urban railway and metropoline projects, transit-oriented development (TOD) projects are increasingly gaining recognition not only for their role in fostering sustainable urban development but also for their inherent bankability. Article 4 of the National Master Plan also introduces an innovative approach through the TOD model, marking a significant and forward-thinking decision. This concept provided a legal basis for the draft Capital Law for Hanoi and Resolution 98/2023/QH15 on the strategic development of Ho Chi Minh City, and other laws and regulations in terms of transportation, zoning and land use planning elevates the bankability of these projects to new heights.

In the context of urban planning, Hanoi has laid out an ambitious vision that includes the integration of a comprehensive network of 417 kilometres of urban railways, distributed across ten lines with an overall investment of approximately USD40 billion. This commitment to urban rail infrastructure underscores Hanoi’s determination to enhance mobility, alleviate traffic congestion, and elevate the quality of urban life for its residents.

Similarly, Ho Chi Minh City has set its sights on the development of a robust urban railway network, encompassing 220 kilometres and spanning eight lines. Realising this vision entails a projected total investment of around USD25 billion.

By reducing urban congestion, promoting efficient land use, and enhancing public transportation systems, TOD projects align with the long-term vision and legal framework of sustainable urban development while concurrently minimising risks and maximising returns. This convergence of objectives between sustainability and bankability reinforces the appeal of TOD projects, drawing in the necessary financial support and ensuring their long-term viability.

For transportation projects cash flow, the revenue sharing mechanism outlined in Article 82 of the Investment Law for PPP projects plays an important role. Specifically, if the actual revenue in a PPP project contract exceeds 125% of the estimated financial plan, the investor and PPP project enterprise are obligated to share 50% of the surplus revenue with the State. Besides, when revenue declines, the State’s sharing of the burden comes with specific conditions, including:

  • that projects are developed and executed under BOT, BTO or BOO contracts;
  • changes in planning, policies and applicable laws that lead to reduced revenue;
  • the implementation of price adjustments, product fees or public service measures without achieving the minimum 75% revenue threshold; and
  • that the reduced revenue has been audited by the State Audit.

The sequence and procedures for risk sharing are guided by Article 17.4 of Decree 28/2021/ND-CP. Accordingly, the proposal for financial sharing will be sent to the Ministry of Finance or the Provincial Department of Finance, and will include:

  • the SAV report on audit of the decrease in revenue of the PPP project enterprise (certified true copy); and
  • the contract-signing authority’s request for sharing of the decrease in revenue, which specifies the decrease in revenue to be shared by the State with the PPP project enterprise (original copy).

In practice, this mechanism faces several challenges, including the following.

  • Lacking clear guidelines regarding the timing for reviewing and evaluating the risk-sharing process. Specifically, the activation of the revenue reduction sharing is conditional on factors that can be difficult to substantiate, such as changes in planning, policies and relevant laws resulting in reduced revenue.
  • The requirement that “the State Audit has audited the revenue reduction” poses difficulties, as the State Audit typically operates according to its planned schedule, conducting audits irregularly when issues arise, making it less predictable and available for verification.
  • The regulations governing the conditions and criteria for competent authorities to consider and approve the application of the reduced revenue-sharing mechanism are still general, leading to uncertainty for parties to the project.

Furthermore, requiring an appraisal of capital sources and the ability to balance and arrange reserve resources at the pre-feasibility study report stage is impractical, because it is challenging to determine future capital sources during this early phase of project development.


In the realm of Vietnamese project finance, the key to success lies in achieving “bankability” – a robust financial structure that attracts vital support. This bankability is a cornerstone, assuring both investors and financial institutions of the project’s viability through the steady generation of cash flow. This essential cash flow is sustained through two critical elements: firm commitments from off-takers and the implementation of cost-efficient strategies, both of which are fundamental drivers of bankability.

Vietnam’s legal framework is a linchpin in this process, offering a solid foundation for the development of energy projects, which are vital for achieving bankability. Laws such as the Law on Investment and the Renewable Energy Law provide essential guidelines and support, ensuring that energy projects align with the national vision. Additionally, the presence of national masterplans and sector-specific laws further enhances project bankability by fostering harmony between the projects and the overarching goals of the country.

EVN’s unwavering commitment to this cause, as evidenced by strategic initiatives such as PDP8, plays a pivotal role in reinforcing bankability within the energy sector. Furthermore, international collaborations such as the EVFTA and JETP act as catalysts for renewable energy projects, aligning them with global objectives and further elevating their bankability on a global scale.

Looking forward, new horizons are emerging in the form of transit-oriented development, offering exciting opportunities. Vietnam’s legal framework is poised to evolve towards accommodating and driving bankable ventures within these domains. The ever-evolving landscape of project finance in Vietnam will continue to rely on bankability as the linchpin of success.

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Trends and Development


LNT & Partners is a leading independent law firm in Vietnam, specialising in corporate, M&A, competition, pharmaceutical, real estate, finance, and high-profile litigation. It has earned recognition from esteemed international publications, including the Financial Times, Asian Legal Business, In-House Community, Legal 500, Chambers and Partners, Benchmark Litigation and IFLR1000. The firm proudly serves numerous Fortune 500 companies as their trusted legal advisers. Its dedicated teams cover transactional and litigation areas, providing practical, cost-effective legal solutions to local and international clients. The firm builds strong relationships with Vietnamese authorities and business leaders to enhance its capabilities, as well as maintains alliances with top Asian law firms. The firm also excels in cross-border transactions. With its seasoned experts and over 70 professionals and offices in Ho Chi Minh City, Hanoi and Singapore, LNT & Partners is a globally recognised Vietnamese law firm with extensive knowledge of domestic and international business landscapes.

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