Vietnam: Solar Power Taking Off - PPA Breaking News- The text of the PPA is issued - How to work with it:

Vietnam: Solar Power Taking Off - PPA Breaking News- The text of the PPA is
issued - How to work with it:

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), on 12 September 2017, the Ministry of Industry and Trade
officially released Circular No. 16/2017/TT-BCT guiding Decision 11
(Circular 16). Circular 16 is aimed at providing regulations on formulation,
approval and amendment of the national as well as provincial power master
plan. In addition, the solar Power Purchase Agreement (Solar PPA), which is
of great interest for many foreign investors, is also provided in Circular
16 as a mandatory template for future on-grid and rooftop solar power
projects with only minor changes expected to be permitted during the
contract negotiations.

In essence, the Solar 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)

Circular 16 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. This FiT only applies to on-grid
projects and rooftop projects coming into commercial operation before 30
June 2019 and will remain within 20 years from the commercial operation
date. We note that while the FiT for power output from on-grid projects is
adjusted according to the fluctuation in the VND/USD exchange rate, meaning
at any time during the year, it is not the same for rooftop projects.
Instead, the mentioned FiT for excessive power output generated from rooftop
projects remains the same throughout the first year of operation, and the
new FiT for the next year will be adjusted based on the announced VND/ USD
exchange rate of the last working day of the previous year.

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 Solar PPA within 20 years.

It is noteworthy that the Circular 16 and the Solar PPA list out certain
circumstances where EVN is not obliged to purchase power as negotiated with
the seller, for example:

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;

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

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 Solar 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 Solar 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 Solar 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 Solar 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 Solar PPA is required to follow a specific template, which is not
bankable.

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

Link to Original Article:
https://www.lexology.com/library/detail.aspx?g=86c40cbb-c781-4c07-acae-97a68
588867b&utm_source=lexology+daily+newsfeed&utm_medium=html+email+-+body+-+ge
neral+section&utm_campaign=lexology+subscriber+daily+feed&utm_content=lexolo
gy+daily+newsfeed+2017-09-15&utm_term=

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com




.