Tag Archives: moit

VIETNAM – PRIME MINISTER REQUESTS MOIT TO SUPPLEMENT MORE WIND POWER PROJECTS INTO THE ELECTRICITY DEVELOPMENT PLAN AND TO EXTEND THE DEADLINE OF FiT RATE

On 9 June 2020, the Prime Minister issued Document No.693/TTg-CN on the addition of wind power projects to electricity development planning. In this Document, the PM requests the Ministry of Industry and Trade (“MOIT”) to:

1. Accelerate the process of approving the inclusion of more wind energy projects into the Master plan to avoid the inherent possibility of electricity shortage nationwide due to large coal thermoelectricity power plants don’t start COD until 2023.

2. Quicken the process of appraisal and approval for inclusion of wind power plants into the Master plan, especially in localities with potential and advantage for wind power development but are having only a few projects and can implement quickly to supplement the power supply for the country.

3. Prepare the formulation of the National Electricity Development Planning in the 2021-2030 period, with a vision to 2045 (Electricity Planning VIII) to submit to the Prime Minister for approval before 31 October 2020.

4. Consider the matter of extending the fixed price mechanism for wind power projects until 31 December 2023. Under Decision 39/2018/TT-BCT, the current FiT rate is 8,5 UScent/kWh (excluding VAT) for onshore projects and 9,8 UScent/kWh (excluding VAT) for offshore projects. These prices are applicable to wind power projects that have part or the whole of the plant with commercial operation date before 1 November, 2021 and apply for 20 years from the date of commercial operation.

Some comments on Document 693:

This is one of the many attempts of the Vietnamese government to encourage development of wind energy, which opens up more rooms for investors looking to participate in this sector as well as allow current investors ample time to obtain key licenses and start construction and commissioning process required for their projects.

The promotion of wind power source is an effective solution to counter power shortage issue because it can takes advantage of the free, limitless wind natural resource without relying on imported fuels from abroad and is eco-friendly. Vietnam has to take into consideration environmental by-products of its economic activities from now on since this is a duty in the EU-Vietnam Free Trade Agreement, which was approved by the National Assembly on 8 June 2020.

The need to extend the deadline for current FiT rate is essential because the projects waiting to be included in the Revised PDP VIII is unlikely to have commercial operation date before November 2021 (in 16 months), because:
-The construction of wind power projects takes quiet some times. For feasibility study reports, investors must carry out wind measurement for at least 12 months. Moreover, wind turbines are mostly imported from abroad, which costs investor extra time, especially when there is unexpected delay of equipment delivery;

-The wind power projects included in the electricity development planning in the Southwestern provinces are mostly offshore or near the shore projects using technology and techniques different from those implemented for onshore turbines, hence require longer project preparation time (e.g. construction of onshore wind power projects takes around 2 years and 3 – 3.5 years for offshore ones). Not to mention, the regulations on determining sea borders, licensing for usage of the sea area are quite complicated, thus further increase project schedule time and costs associated with offshore projects.

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Please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.

VIETNAM – MOIT PROPOSES EXTENSION OF CURRENT FiT RATE FOR WIND POWER PROJECTS

On 8 May 2020, the Ministry of Industry and Trade issued Official Letter No.3299/BCT-DL (“the Letter”) on supplementation of wind power projects into the Power Development Planning.

Notable provisions of the Letter:

1. EVN records a 8,6% increase in electricity demand each year, and suspect the possibility of power shortage, especially in 2023, if the Government doesn’t immediately implement measures such as increase development in the renewable energy sector, increase electricity import from countries in the area, etc.;

2. Most thermal power sources are 1-2 years behind schedule, even some projects are delayed by 4-5 years;

3. As solutions for the possible power shortage issue, EVN suggests that the Government promote the development of renewable energy sources and increase electricity import from China;

4. MOIT is reviewing the possibility of supplementing the Power Development Planning VII adjusted to the ability to release and balance supply and demand to report to the Prime Minister;

5. MOIT is expecting to develop renewable energy centers in areas with good wind potential and are capable of releasing capacity (when new transmission capacity is added);

6. The current FiT rate expires on November 2021; MOIT proposes to extend this deadline to 31 December 2023;

7. After 2023, MOIT proposes wind energy projects to apply auction, bidding methods;

8. MOIT to assume the responsibility of calculating new FiT rate for wind power projects, applicable from 1 November 2021 to 31 December 2023 in case the Prime Minister doesn’t agree to extend the current FiT rate.

It can be seen that the Government has continuously encouraged the development of wind and solar power projects – the most recent is the issuance of Decision No.13/2020/QD-TTg that published the new, attractive FiT rate for solar power plants. In other words, there are a lot of rooms for investors looking to participate in renewable energy development

To promote the development of renewable energy sources is a feasible and effective solutions to counter power shortage issue because renewable energy projects can be constructed quickly and promptly for operation in the period of 2021-2023, while taking advantage of the country’s natural potential without relying on imported fuels and is eco-friendly.

The need to extend the deadline for current FiT rate is essential because the projects waiting to be included in the Revised PDP VIII is unlikely to have commercial operation date before November 2021, because:

1. The supplement into PDP for new wind power sources was suspended for more than 1 year (from October 2018) because there were no guidelines to implement the Planning Law;

2. The construction of wind power projects takes more time than that of solar power projects. For feasibility study reports, investors must carry out wind measurement for at least 12 months. Moreover, wind turbines are mostly imported from abroad, which costs investor extra time, especially there is unexpected delay of equipment delivery.

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Please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.

VIETNAM – SOLAR POWER – MOIT PUBLISHES DRAFT CIRCULAR ON PROJECT DEVELOPMENT AND STANDARDIZED POWER PURCHASE AGREEMENTS FOR SOLAR POWER PROJECTS

The Ministry of Industry and Trade recently published a Draft Circular on Project Development and Standardized Power Purchase Agreement for both grid-connected and rooftop solar power projects (“the Draft”). After publishing new solar power purchase prices under Decision 13/2020/QD-TTg (“Decision 13”), the Draft is another move of MOIT to replace Circular 16 that failed to address necessary changes in PPA terms. The Draft is anticipated to takes effect in June 2020, but note that there’s not yet any official announcement on this. Also, with Decision 13’s price being effective until 31 December 2020 only, this raised questions on the effectiveness of laws and regulations in Vietnam on in the long run.

Notable provisions of the Draft Circular:

v Upon specific conditions and technical requirements of each individual rooftop solar power system, the Seller and the Buyer shall decide the chronology of items and tasks implementation sequence.

v Beside the contents stipulated in the standardized PPA, the Seller and the Buyer are only allowed to supplement contents for clarification of responsibilities and power of each party. Supplementary contents must be consistent with contents of the standardized PPA.

v If grid-connected solar power projects and rooftop solar power systems have commercial operation date between, and including, 1 July 2019 and the effective date of the Draft, the Seller and the Buyer are allowed to revise and sign the PPA based on the new standardized PPA in the Draft.

v Operational plan

a) Before or on the date of performance of the PPA for grid-connected projects, the Seller provides the Buyer with the chart of annual power generation capacity at the connection point by months in line with the appraised design;

b) Before every November 30th, the Seller provides the Buyer with the power generation plan of the following year, including:

_ Monthly operational plan in the year (power output and available capacity);
_The monthly plant repair and maintenance schedule in the year (if any).

Overall, the new standardized PPA for grid-connected solar power projects does not mitigate the problems already existed in the current template under Circular 16, namely:

v The PPA does not impose a clear “take or pay” obligation on Buyer and so does not assure Seller a guaranteed revenue stream and adequate return. Buyer has the right not to purchase power in certain circumstances (Seller is in breach of the Agreement, Buyer is instructed by the regulator not to purchase power, force majeure). We note that this is not realistic in practice and note that the main issue here is curtailment, which mostly occurred due to overload of grid. Thus to alleviate this problem, Buyer and Seller need to undertake thorough grid studies to ensure the effectiveness of the project in the future.

v Electricity purchase price is the one outlined in Article 5 of Decision 13/2020/QD-CP, which is applicable to projects that obtained Decision on Investment Policy before 23 November 2019 and have COD between 1 July 2019 and 31 December 2020. With the deadline approaching by the end of this year, investors have been hurry to finalize every steps of the project as per the approved schedule with EVN, and the attractive FiT rate also attracts foreign investors to invest in Vietnam fast. However, in the past few months, regions where there’s high level of concentration of solar power projects, have experienced problems of grid-overcapacity is anticipated to be solved by 2021. This issue leads to the question whether the signing of PPA with developers at this point is beneficial if due to grid-overload, power plants will not be able to operate at full capacity which will lead to machine erosion/breakdown and financial loss to investors?

v The PPA provides simple provisions relating to Force Majeure Event and does not distinguish natural force majeure event (Non-Governmental Force Majeure Event), and force majeure event due to political issues (Governmental Force Majeure Event). As EVN is a State-owned company, there may be possibility that EVN relies on Government Event to repudiate its obligation under the PPA, especially payment obligations. Accordingly, it is recommended to distinguish these two types of force majeure events with a view to ensuring that Governmental Force Majeure Event – including change in law or tax regimes – will not be used by EVN as an excuse to its obligations.

v Regarding compensation of damages, the violating party must demonstrate damages and consequential loss, which is quiet difficult as these will mostly based on estimation. As a result, it may be preferable not to terminate the PPA in case of breach by the Buyer and instead continue to insist upon performance without triggering this cap on compensation. In that case, the Buyer would be obliged pursuant to general Vietnam law principles to compensate Seller for damages directly caused by the breach (including loss of profits). In this case, there is no specific cap and the obligation would be to compensate for actual direct losses caused. However, this obligation is not expressed in the PPA as an “indemnity” obligation, but rather a general Vietnam law obligation to compensate following breach of contract. The party claiming the breach would be obliged to prove the losses and also to mitigate losses.

v There is currently no precedent of Buyer being sued for damages under the standard form PPA. The dispute resolution terms of the PPA expressly provide for local dispute resolution and, as a matter of practice, this makes it very challenging to claim against Buyer.

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Please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.

VIETNAM – SOLAR POWER – MOIT’s PROPOSAL ON SOLAR POWER AUCTION POLICY – WHAT YOU MUST KNOW:

In Notification No. 402/TB-VPCP dated 22 November 2019, the Prime Minster concluded that rational future development of the sector necessitates introducing an auction system for solar projects. FiTs will continue to apply only for rooftop solar projects and certain already-approved ground-mounted projects. Thus, the PM had instructed the MOIT to prepare and proposal solar power auction policy for his consideration and approval.

On 19 March 2020, the MOIT has finally submitted 3 options for implementation of competitive auctions on solar power projects to the PM under its Proposal No. 1986/TTr-BCT (“Proposal“). However, MOIT has suggested the PM to implement Option 1 first in the period up to June 2021. In terms of Options 2&3, MOIT would keep working on the pilots for implementation and report the PM for approval later. The MOIT also advised the PM to consider approving addition of 21 solar power projects into the power development plan after policy for Option 1 has been adopted.

Under the Proposal, 4000 MW solar power capacity must be supplemented for the period up to 2025 and 5,600 MW solar power capacity must be supplemented for 20226 – 2030.

In brief, the key contents of three Options are as follows:

Option 1: The plan is to select solar power projects based on competitive power prices offered by the investors. Total pilot capacity for participating the auction is approx. 1600 MW of which (i) 600 MW of solar power projects which already added into the power master plan and (ii) 1000 MW solar power projects which have not yet included in the power master plan approval. The final capacity is awarded to be only 1000 MW. This plan will be conducted up to June 2021. The ceiling competitive price for auction is FIT2 i.e., 7.06 UScent for ground-mounted projects and 7.69 UScent for floating projects. The most competitive price offers will be awarded. The PPA template for 20 years from COD and auction dossier / procedure will be guided and issued by the MOIT.

Option 2: The plan is to select solar power plants based on transformers location of EVN, the preferable projects will satisfy competitive prices, technical details and locations, etc.

Option 3: the plan is to select suitable investors via auction for specific large scale solar power projects. This plan is applicable for solar power projects of 100MW or more only.

We will closely monitor to update on any further changes.

Please contact Dr. Oliver Massmann under omassmann@duanemorris.com or any other lawyer in our office list if you have questions on the topic or any other lawyer in our office listing. Dr. Oliver Massmann is the General Director of Duane Morris LLC.

The beat goes on: Vietnam’s new solar tariff documents add to the uncertainty

A flurry of recent official communications on the new solar FiT regime have only added to uncertainty about the income stream for solar projects in Vietnam after June 2019.

Following nearly two months of relative silence last draft proposed new FiTs were made public (read about them: here and here), the PM and MOIT have exchanged letters indicating that policy and decision makers are still some distance apart on a final position.

In a letter to the MOIT last week, the PM proposed that the provinces be divided into two regions with different tariffs, half the number of regions proposed by the MOIT recently,  and meaning lower overall tariffs for Northern provinces which have barely seen any solar project action since the sun rush kicked off a couple of years ago.

The MOIT responded by urging the PM to further consider the 4 region options it previously tabled in April and May.

On the other hand, the PM’s letter indicates some sympathy for projects struggling to meet the current 30 June 2019 COD deadline, intimating that they ought to be allowed to continue to enjoy the current 9.35c tariff  if their efforts to meet the COD deadline have been hamstrung by matters outside their control (e.g. – land clearance).  The MOIT response takes a  harder line on this, giving its view that the 30 June 2019 deadline should remain a bright line with no exceptions (outside of those Ninh Thuan projects already granted an extension last year).

With the MOIT now seeking further opinions from EVN, the MOF and MOJ, one imagines it is could be risky to assume that the new FiT rates will be officially promulgated prior to the existing ones expiring on 30 June.

The two regions and corresponding FiTs for different kinds of solar projects as proposed by the PM are:

Region I (all Provinces except Region II Provinces)

Floating solar power = VND1,758/ kwh = 7.69 US cents / kwh
Ground mounted solar power = VND1,620/ kwh = 7.09 US cents / kwh
Roof solar power = VND1,916/ kwh = 8.38 US cents / kwh

Region II (Phú Yên, Gia Lai, Đăk Lăk, Khánh Hòa, Ninh Thuận and Bình Thuận Provinces)

Floating solar power = VND1,655/ kwh = 7.24 US cents / kwh
Ground mounted solar power = VND1,525/ kwh = 6.67 US cents / kwh
Roof solar power = VND1,803/ kwh = 7.89 US cents / kwh

Be aware: these are far from final.  Watch this space.

For more information about Vietnam’s energy sector, please contact Giles at GTCooper@duanemorris.com or any of the lawyers in our office listing. Giles is co-General Director of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

VIETNAM – ROOFTOP SOLAR POWER PROJECTS – NEW POLICY TO ADDRESS NET-METERING ISSUE

On 8 January 2019, the Prime Minister has issued Decision No. 02/2019/QD-TTg (“Decision 02”) to amend certain articles of Decision 11/2017/QD-TTg dated 11 April 2017 of the Prime Minister on mechanism for encouragement of development of solar power in Vietnam (“Decision 11”). Decision 02, became effective on 8 January 2019, promulgates new payment scheme to address the net-metering issue of the rooftop solar power projects under Decision 11. We elaborate the above topic further as below:

In 2017, Decision 11 introduced the net-metering scheme for rooftop solar power projects. In brief, rooftop projects must be implemented in net-metering with two-way electricity meters. In a trading cycle, if the amount of electricity generated from rooftop projects is greater than the consumed amount, the surplus will be carry forward to the next trading cycle. At the end of the year or when the contract is terminated, the surplus amount of energy will be sold to EVN at the rate mentioned in the power purchase agreement signed by the seller and EVN either at the end of the relevant year or upon termination of the agreement. Circular 16/2017/TT-BCT (“Circular 16”) dated 12 September 2017 of the Ministry of Industry and Trade (“MOIT”), requires a solar power generator, as the seller, to enter into a model power purchase agreement (in the form attached to Circular 16) with EVN or its authorized subsidiary. However, in practice, the model power purchase agreement has not been applied by EVN since the MOIT and the MOF had no guidance on the finalization, payment scheme and invoicing mechanism for such net-metering purposes. Other words, EVN claimed that it is very challenging for them to calculate and invoice the power based on net-metering scheme.

In order to address the net-metering issue, Decision 02 now has introduced a new payment scheme for rooftop solar power projects. In brief, the power generated by rooftop solar power project will be metered independently and paid by EVN to the seller. The power sold by EVN or its power company to consumers being rooftop solar power investors will be metered as usual like other households / consumers.

All rooftop solar power projects having their commercial operation date (operation and metering confirmation) prior to 1 July 2019 will enjoy FIT of US$9.35 / KWh under Decision 11. The price of rooftop solar power for following years must be adjusted according to the last year exchange rate between Vietnamese Dong and USD issued by the State Bank of Vietnam.
The MOIT shall promulgate technical regulations on solar power, regulations on measurement of energy of solar power projects and provide instructions on the connection, installation of electricity meters and the calculation of rooftop solar power project.

We will keep you informed with any new guidance from the MOIT for rooftop solar power projects.

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Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Lawyer in Vietnam Dr. Oliver Massmann – RENEWABLE ENERGY AND FEED IN TARIFFS – QUO VADIS – INTERVIEW WITH MERGERMARKET

1. Dear Dr. Massmann, a government official recently stated that the MoIT probably had enough solar projects in the pipeline, explaining for that fact that such new FIT will be much more lower than the current one (as quoted by Mr. Nguyen Ninh Hai, Deputy Director of New and Renewable Energy Department, MOIT), do you agree with this statement and why? Is there any other reason that you think make sense for planning a new upcoming FiT for solar?

OM: The number of approved solar projects has gone far beyond the target capacity in the National Power Master Plan VII (as amended). The Government has to issue a new national power master plan (PDP VIII) to reflect the new target following the market status. In addition, the grid does not have enough capacity to absorb all output from solar projects at the moment and has to be upgraded. This process should take around 1-5 years. The current FiT is also very attractive to foreign investors and high compared to some other countries. For these reasons, the Government has to issue a new FIT to slow down the development of solar projects, thus having time to improve the grid and complete the legal framework.

2. With the market now anticipating the new FiT for solar, which is underway, what is the current situation of those solar projects seeking to be the last one to enjoy the 9.35 US cents feed in tariff? Do you think the anticipation for the new FiT has triggered/ or will trigger a rise in deal value for renewables in Vietnam in the meantime? Perhaps in Ninh Thuan province? If so, by roughly how much %?

OM: Solar projects seeking to be the last one to enjoy the current FIT now have to accelerate their development process so that they will come into commercial operation by 30 June 2019. If they cannot (and this is the current situation of many solar projects), the investors tend to delay the construction and wait to see what will happen after 30 June. I am aware that the new FIT is only one of the options, besides auction or a hybrid option. The Government has not yet decided on the final model. Ninh Thuan is already overloaded and investors should look for opportunities in other provinces.

3. Besides the new FiT, what changes would you like to see in the new PPA for projects coming into operation after 30 June 2019? Can you rank these changes from most needed, needed to have, and good to have for the long-term outlook of M&A deals in renewables? Can you briefly explain the reasons for the ranking as well?

OM: The bankability of the PPA is of utmost importance. Without this, the investors find it very hard obtaining financing for their projects. Another change I expect is a clear indication of whether the PPA is a take-or-pay agreement. This will help investors secure and ensure the profits and revenue of their projects. The last change but also of not less importance is a dispute resolution clause which provides international arbitration to be an option to resolve the dispute. This could be a great concern for foreign investors, especially those of large utility scale projects.

4. From talking to a market source, the current FiT rate for wind energy projects is profitable enough for investors and he himself as an investor doesn’t want the FiT rate for wind energy projects to go up any more. What would be your argument for the hike in wind FiT and how would it benefit the long-term outlook of M&A deals in wind energy projects?

OM: I believe the reason for a recent increase in the wind FiT is to improve profitability of the projects, help investors to recover the investment capital more quickly and arrange a better financing deal with the banks. I note that the PPA is only for 20 years, so if it takes too long to recover the capital, together with the high maintenance cost after that, the investors will no longer be interested in keeping the projects. The new wind FIT will make wind projects more attractive to investors for acquisitions as there is still room for further development after the projects have recovered their investment capital.

Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any lawyers in our office listing if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Vietnam Wind Power is taking off – The new Feed in Tariff – what you must know:

Decision No. 37 of the Prime Minister on supporting regime for wind power projects provides an FIT of 7.8 UScent/ kWh. This FIT applies to two current projects in operation in Binh Thuan, namely Phu Lac and Binh Thuan No. 1. For Bac Lieu near shore wind project, the FIT follows a special financial regime, being 9.8 UScent/kWh. However, with the current FIT, the Ministry of Industry and Trade (MOIT) opines that it will be difficult for these plants to recover their investment capital.

Thus, the MOIT has recently proposed the Government to increase wind FIT for inland wind power plants to 8.77 UScent/ kWh and to 9.97 UScent/kWh for near shore wind projects. This proposal is expected to attract more investors in the market as well as create incentive for current projects whose pre-feasibility reports have been approved by the MOIT to come into real operation.

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If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Thank you very much!

 

 

Vietnam – Solar Power – Breaking News Update First draft of the solar Power Purchase Agreement released by the Ministry of Industry and Trade

Following the issuance of Decision No. 11/2017/QD-TTg of the Prime Minister on mechanism for encouragement of development of solar power in Vietnam (Decision 11), the Ministry of Industry and Trade released the first draft of a Circular guiding the Decision last month (Draft Circular). The Circular is aimed at providing regulations on formulation, approval and amendment of the national as well as provincial power master plan. In addition, the draft solar Power Purchase Agreement (Draft PPA), which is of great interest for many foreign investors, is also provided in the Circular as a mandatory template for future solar power projects with only minor changes expected to be permitted during the contract negotiations.

In essence, the Draft PPA is almost the same as current applicable PPAs for renewable projects. This creates bankable issues for solar projects and a hindrance to foreign investors planning an investment in the sector.

Feed-in-Tariff (FiT)

The draft Circular repeats the solar FiT for power output from on-grid projects and excessive power output generated from rooftop projects specified in Decision 11 to be VND2,086/kWh or US 9.35 cents/kWh. However, unlike Decision 11, the Draft PPA does not require that the conversion between USD and VND be according to the exchange rate at the time of payment.

EVN’s rights and obligations as the sole off-taker

EVN is delegated to purchase all power output generated from solar power projects pursuant to terms and conditions of the draft PPA within 20 years.

It is noteworthy that the Draft Circular and the Draft PPA list out certain circumstances where EVN is not obliged to purchase power as negotiated with the seller, for example:

  1. when EVN is in the process of installing equipment, or making repairs, replacement, inspection or examination of the grid connection of the seller’s power plant;
  2. when the transmission grid or the distribution grid connected to EVN’s grid has a problem or grid equipment directly connected to EVN’s transmission grid or the distribution grid has a problem; and
  3. when EVN’s grid needs support to recover after the incident in accordance with the provisions of operation of the national power system and the standards, technical regulations of the electric industry.

Unfortunately, the current Draft PPA does not include provisions protecting the interests of the seller in the abovementioned circumstances. It is quite risky for the producer if the output is ready to be fed to the grid but the connection is not available to do so. Absent a clear indication of whether the Draft PPA is a ‘take or pay” agreement, investors will find it difficult to secure and ensure the profits and revenue of their projects.

Dispute resolution

The Draft PPA allows either party to the agreement to bring the dispute to local courts for litigation and other energy-related state bodies of Vietnam (General Directorate of Energy and the Electricity Regulatory Authority of Vietnam) for mediation and resolution.

The Draft PPA does not provide for international arbitration to be an option to resolve the dispute. This could be a great concern for foreign investors, especially those of large utility scale projects.

Other key issues of concern

  • No Government guarantee to enhance the credit of EVN as the sole off-taker;
  • No provision addressing the risks of changes in applicable laws; and
  • The Draft PPA is required to follow a specific template, which is not bankable.

While the current Draft PPA leaves certain key issues unresolved, we note that this is only the first draft. Thus, it will be subject to potential revisions before its official adoption. We believe that with lessons learnt from the PPA for other renewable projects, the Ministry of Industry and Trade will complete the Draft PPA towards a mutually beneficial agreement for both the seller and the purchaser.

How to avoid EVN – The 30 MW rule

Considering the monopoly role of EVN as well as tough negotiation of the PPA, investors could still get out of this trouble. According to Article 1.2 of Circular No. 56/2014/TT-BCT promulgating methods to determine electricity generation price and examination steps of the PPA, the important requirement to negotiate with EVN is whether it is an on-grid or off-grid project. If it is an on-grid project with capacity of more than 30 MW or under 30 MW but voluntarily participating in the power market, the investor must negotiate with EVN. This means if the project is off-grid, there will be no requirement to negotiate with EVN. Therefore, if you are new to the market, an off-grid 30MW project or less is a smart option to test the water. Once you have built up your track record, you can go for larger scale projects.

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Please do not hesitate to contact Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

 

 

Lawyer in Vietnam Oliver Massmann Solar Power Latest Updates on Draft Laws:

We have contacted the Department of Renewable Energy under the MOIT who is in charge of drafting this Decision. The Decision is still in a draft version (although it has been submitted to the Prime Minister for signature), thus can’t be published yet.

The final Decision will be issued this year but the exact timing is still uncertain.

Through our consultation with an official of the Department about the content of the Decision, for on-grid solar projects, the FIT rate will be 11.2 UScents/ kWh.

For on-grid rooftop solar projects, the rate will be 18 UScents/ kWh.

The rate in VND will be indicated in the final Decision based on the USD/VND exchange rate at that time and the MOIT will issue an Official Letter every year to adjust the rate in VND according to the fluctuation in the exchange rate.

Rooftop solar projects of less than 50kW will not have to connect to the grid. For those of more than 50kW, connection to the grid is required and an electricity operating permit must be obtained.

Please do not hesitate to contacts Oliver Massmann under omassmann@duanemorris.com if you have any questions on the above. Oliver Massmann is the General Director of Duane Morris Vietnam.

Thank you !