Tag Archives: wind power


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.


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’s Ministry of Industry and Trade (MoIT) released Circular 02 (effective from 28 February 2019) including final template power purchase agreements (PPA) for the wind energy sector. This Circular is issued to guide the Prime Minister’s Decision 39 to regulate new FiT for onshore and offshore wind power projects in Vietnam. Circular 02 will replace previous regulations under Circular 32 dated 2012 and Circular 06 dated 2013 of the MoIT.

Circular 02 and PPA templates are stated to be mandatory templates for wind projects. Unfortunately, little improvements have been made comparing with the old template PPA under Circular 06 / Circular 32. Would-be investors now still have serious concerns over the amount and type of risk the PPA sought to shift to investors, and the message delivered was that unless the government was willing to address some of the most glaring problems, few reputable foreign wind players and, just as importantly, few reputable financiers would be likely to sign up.

Issues include a lack of measures to compensate producers for interruption in the ability to receive power, force majeure conditions, contract suspension, lender’s step-in rights subject to EVN’s approval and settlement of disputes.

Tariff with actual foreign exchange rate

With the FiT rate of (i) 8.5 US cents / kWh applicable to onshore wind power projects, and (ii) 9.8 US cents / kWh applicable to offshore wind power projects confirmed, Decision 39 and Circular 02 confirm that the FiT is available for 20 years to projects, or parts of projects, that reach commercial operation before 1 November 2021. Circular 02 further regulates that for grid-connected wind power projects having both onshore turbines and offshore turbines, the power developer must agree with EVN / power buyers on a plan for installing meters and on how to measure and calculate the separate power output of the onshore turbines and that of the offshore turbines as the basis for applying the appropriate power trading prices.

The final PPA does not include any indexation of the FiT to the Consumer Price Index (CPI) to address inflation risks. However, in response to concerns over fluctuating exchange rates, the circular does state that the foreign exchange rate shall be the central exchange rates of the Vietnamese dong against the US dollar announced by the State Bank of Vietnam on the payment date. This is a good step to address the price fluctuation issue.

A risk still seem high?

Under Decision 39 (which also set the FiT) and the final version of the PPA appended to Circular 02, Electricity of Vietnam (EVN) is responsible for purchasing the entire power output from grid-connected projects at the stated FiT.

However, the PPA relieves EVN from payment obligations in cases where it is unable to take power due to a breakdown of the transmission or distribution grid. With many wind projects currently focused on few central locations, the capacity of existing facilities to absorb power must be a cause of some concern given the PPA’s transfer of such risk to power producers.
The PPA lacks any mechanism to compensate power producers should interruptions happen outside of their control. Not only does the PPA not provide for extension of time in case of force majeure, but if force majeure were to prevent a power producer from meeting its obligations for a year then EVN could unilaterally terminate the PPA with no compensation payable. In such circumstances, the power producer is left alone in the dark.

Such arrangements might be acceptable to projects that manage to negotiate clear ‘take or pay’ terms and/or government guarantees, but it is highly questionable whether and to what extent either of these will be possible in the current climate. As a direct consequence, it is equally questionable to what extent private finance will be prepared to bear the risk, a fact that will prompt capital to seek more favourable conditions in other markets.

Playing by Vietnam’s rules

Investors may be further discouraged by the lack of specifics in terms of an investor friendly dispute resolution. The PPA is governed by Vietnamese law and does not itself expressly include the right to agree on international arbitration to resolve disputes, a condition that would typically be considered an important requirement.

As it stands, disputes can be submitted to the Electricity Renewable Energy Department (formerly the General Directorate of Energy) for mediation. If that doesn’t work, there is the option of escalating the issue to the Electricity Regulatory Authority of Vietnam (ERAV) or pursuing litigation in Vietnam’s courts.

The PPA does allow for “another dispute resolution body to be agreed by the parties”, which potentially opens the door for sellers to negotiate with EVN on dispute resolution, including international and offshore or even domestic arbitration. But it is not clear if EVN will agree to directly amend PPAs to allow for express prior agreement on offshore arbitration or simply open the door for such a discussion at the time of a dispute. Clearly in the latter case the deck is firmly stacked in EVN’s favour.

Payment obligation

The PPA does exclude the due payment obligations of EVN / power companies from force majeure exemption and it could ensure EVN and power companies to make payments regardless force majeure events occurring.

The time for EVN making payment upon receipt of receipts is now increased from 15 days (from old template PPA) to 25 days.
Default interest rate for unpaid amount of power companies to the developer is now the average inter-bank trading interest (slightly decreased from current 1.5 times the average interbank trading interest rate for one month).

Lender’s step-in Right

The Wind PPA appears to enable the developers to transfer the PPA or provide step-in rights to lenders but subject to always written approval from EVN, provided that also it notifies EVN immediately in writing, although the drafting is unclear. This is a disappointment as the old template allows lender’s step-in right without approval from EVN.

One step forward… wait and see

The MoIT is well aware of the deficiencies in the PPA and knows that, in its current form, it will not attract the kind of investment Vietnam needs if it is to meet both its energy demands and renewable targets. They know that investors were hoping for some of the shortfalls to have been addressed, thus this Circular is the step in the right direction .
We have information from our contacts in the MOIT that the standard Solar PPA will be amended within coming months.

For more information about Vietnam’s energy sector, please contact Dr. Oliver Massmann and lawyer Thanh Tran Minh under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.