Wind power companies suffers losses as bond interest rates soar
Many companies in the wind power industry are suffering losses after raising capital by issuing bonds whose interest rates have surged.
🗓️ Failing to qualify for the feed-in-tariff (FIT), a policy to support renewable energy production by providing a guaranteed, above-market price, has been a double whammy for some. To be eligible for the FIT, power plants had to begin commercial operations by December 31, 2020.
☔ Some of the losses have been big, leaving companies in debts of five or six times their equity. According to the Hanoi Stock Exchange most of the losing projects are in the south-central region comprising the Central Highlands and the coast, which saw a wind power boom a few years ago.
💸 A common theme among renewable energy projects in Vietnam is that they all issued bonds worth large sums at high interest rates (9-10.75% a year) in the beginning and then floating rates.
💣Analysts warned about this right in the beginning, saying even those projects that qualified for the FIT have electricity prices fixed for 20 years while bonds have floating interest rates, which could cause losses by spiking.