Chương II Thông tư 57/2020/TT-BCT: Phương pháp xác định giá phát điện

MINISTRY OF INDUSTRY AND TRADE -------	SOCIALIST REPUBLIC OF VIETNAM Independence – Freedom – Happiness ----------------
No. 57/2020/TT-BCT	Hanoi, December 31, 2020

 

CIRCULAR

METHODS OF DETERMINING ELECTRICITY GENERATION PRICES AND POWER PURCHASE AGREEMENT VALUE

Pursuant to Law on Electricity dated December 3, 2004 and Law on amendments to Law on Electricity dated November 20, 2012;  

Pursuant to Decree No. 98/2017/ND-CP dated August 18, 2017 of the Government on functions, tasks, powers, and organizational structure of the Ministry of Industry and Trade;

Pursuant to Decree No. 137/2013/ND-CP dated October 21, 2013 of the Government on elaborating to Law on Electricity and Law on amendments to Law on Electricity;

At request of Director General of Electricity Regulatory Authority of Vietnam;

Minister of Industry and Trade promulgates Circular on methods of determining electricity sale prices and procedures for inspecting power purchase agreements.  

Chapter I

GENERAL PROVISIONS

Article 1. Scope and regulated entities

1. This Circular prescribes:

a) Methods of determining electricity sale prices and power purchase agreement value for various forms of power plants specified under Clause 2 of this Article.

b) Procedures for conducting self-inspection of power purchase agreements.

2. This Circular applies to:

a) Power plants connecting to national electrical grids with more than 30MW of gross installed capacity and power plants with 30MW of installed capacity or lower participating in electricity market on a voluntary basis;

b) Other relevant organizations and individuals;

c) This Circular does not apply to small hydroelectric power plants adopting schedules of avoidable costs, multi-objective strategic hydroelectric power plants independent power plants invested in form of BOT, power plants providing solely auxiliary services, biomass power plants, wind power stations, solar power plants, waste-to-energy plants and municipal solid waste-to-energy plants;

Other power plants not specified by Prime Minister and Ministry of Industry and Trade shall conform to Article 9 of this Circular.

Article 2. Term interpretation

In this Circular, terms below are construed as follows:

1. “Seller” refers to a generating entity owning power plants.

2. “Buyer” refers to Vietnam Electricity (EVN) (or representatives thereof by authorization), Northern Power Corporation, Central Power Corporation, Southern Power Corporation, Hanoi Power Corporation, Ho Chi Minh Power Corporation, primary energy consumers and other electricity traders according to regulations of power market.

3. “project developer” refers to an organization or individual directly managing, utilizing capital to invest in power plant construction projects, power line and electrical substation construction investment projects.

4. “connection costs” refer to costs for construction of power lines and electrical substations from power plants to connection points.  

5. “specific connection costs” refer to costs implemented by project developers or allocated for:

a) Constructing power lines and electrical substations from power plants to load capacity of power plants to connection points upon being assigned by competent authority to conduct construction investment.

b) Constructing power lines and electrical substations from power plants to connection points according to agreements between project developers and the Buyer.   

6. “connection point” refers to a point at which electrical equipment, electrical grids and power plants are connected to national electrical grid. Depending on electrical grid structure and connecting lines, connection points are determined to be:

- The final points of ceramic insulators holding transmission lines connecting to disconnector switches of power stations or power plants in case of overhead power lines.

- The ceramic insulators of disconnector switches of power stations or power plants in case of underground cable.

In case of connection points other than those specified above, substitute connection points shall be agreed upon by the Seller and power distributors or transmitters.

7. “delivered and received electricity” refers to electricity provided to the Buyer by the Seller to serve payment for electricity sale between the Buyer and the Seller.

8. “generating entity” refers to an organization or individual owning at least a power plant as per Vietnam laws.

9. “electrical system and national electricity market operator” (hereinafter referred to as “operator”) refers to National Load Dispatch Center or other load dispatch centers depending on level of development of electricity market.   

10. “parties” refer to the Buyer and the Seller under power purchase agreements.

11. “liquefied natural gas (LNG) storage, regasification and distribution contracts” refer to agreements between generating entities or fuel traders and entities investing, managing LNG storage to store, perform regasification, distribute and supply gas materials for powers plants signed as per applicable laws and ensuring competitive price and transparency.

12. “power purchase agreement (PPA)” refers to a contract serving power purchase of each power plant and is specified under Annex 3 of this Circular. 

13. “gas sale and purchase agreement (GSPA)” refers to a gas purchase agreement between gas seller and mine owner to purchase natural gas extracted domestically and provide to gas seller   

14. “gas sale agreement (GSA)” refers to gas sale agreement between gas seller and consumer.

15. “fuel (coal, natural gas, LGN) sale contract” refers to an agreement between a generating entity and a fuel trading entity to provide fuel for power plants, is signed according to applicable law and guarantees legitimate fuel origin, competitive price and transparency.

16. “fuel (coal, natural gas, LGN) transportation agreement” refers to an agreement between a generating entity or a fuel trading entity and a fuel transport service provider to transport fuel to power plants, is signed according to applicable law and guarantees competitive price and transparency.

17. “base year” refers to a year in which total investment or total revised project investment for calculating electricity generation price is approved.

18. “other power plants” refer to power plants not specified under Points a and c Clause 2 Article 1 hereof.

19. “new power plants” refer to power plants that have not signed first time PPA.

20. “construction commencement date” refers to the date on which the Seller is eligible for commencing construction according to Construction Law.

21. “net heat loss rate” refers to amount of heat required to produce 1 kWh of electricity at delivery point (BTU/kWh or kJ/kWh or kcal/kWh).

22. “total investment” refers to total construction investment of a project identified according to applicable laws and satisfactory to fundamental design and other details under construction investment feasibility reports. Total investment includes: compensation, assistance and relocation costs (if any); construction cost; equipment cost; project management cost; construction investment and consultancy cost; other costs; backup costs for additional workload and inflation.

23. “total revised investment” refers to total investment valid at the time of negotiating electricity price, in which total investment is revised to calculate electricity price when revising construction investment projects in following cases:

+ Natural disasters, environmental emergencies, conflicts, fire and other force majeure;

+ Appearance of factors that introduce higher effectiveness for the projects once project developers have proven the financial and socio-economic efficiency brought upon by revising the projects; 

+ Direct impact on the projects due to changes to construction planning;

+ Construction price indices publicized by Ministry of Construction, People’s Committees of provinces during project execution period exceeding construction price indices employed to calculate for inflation scenario under approved total project investment;

+ Project revision as a result of investment guideline revision.

24. “investment for settlement” refers to all legitimate costs required in investment process to bring projects into use.  Legitimate costs are all costs within the scope of approved projects, designs, estimates; construction contracts signed as per the law, including approved amendments thereto. Investment for settlement must be within total approved (or revised) investment as per the law.

25. “Circular No. 56/2014/TT-BCT” refers to Circular No. 56/2014/TT-BCT dated December 19, 2014 of Minister of Industry and Trade on methods of determining electricity generation price; procedures for inspecting power purchase agreements.

Chapter II

METHODS OF DETERMINING ELECTRICITY GENERATION PRICE

Section 1. METHODS OF DETERMINING ELECTRICITY GENERATION PRICE FOR NEW POWER PLANTS

Article 3. Principles of determining electricity generation price

1. Electricity generation price of power plants shall be developed on the basis of:

a) Legitimate costs of project developers throughout economic life of projects;

b) Internal rate of return (IRR) does not exceed 12%.

2. Electricity generation price of power plants consists:

a) PPA price: Agreed upon by both parties and developed according to Article 4 of this Circular;

b) Specific connection price: Agreed upon by both parties and determined according to Article 8 of this Circular.

3. Electricity generation price does not include VAT, water resource tax, fee for licensing rights to extract water resource, forest environmental service fee, environmental protection fee for solid waste and for industrial wastewater (applicable to thermal power plants) and other taxes, fees, monetary charges according to the Government (except for fees and charges included in electricity price solutions).

4. PPA price for comparing with price range for electricity generation in the base year

PPA price must be within price range for electricity generation in the base year of power plants issued by Minister of Industry and Trade, in which, PPA price of thermal power plants for comparing with price range for electricity generation in the base year shall be calculated on the basis of cost components corresponding to cost components serving calculation of price range for electricity generation.

Article 4. Methods of determining PPA price in the base year of power plants

PPA price, or PC, (VND/kWh) shall be determined using following formula:

PC = PCD + PBD

1. PCD (VND/kWh) refers to fixed price in the base year and is determined using following formula:

PCD = FC + FOMCb

In which:

FC: Fixed cost determined under Article 5 of this Circular (VND/kWh);

FOMCb­­: Operational and maintenance costs in the base year determined under Article 6 of this Circular (VND/kWh);

2. PBD (VND/kWh) refers to variable prices in the base year.

a) For thermal power plants, PBD shall be determined using following formula:

In which:

: Components of variable price revised according to variation of cost of primary fuel (coal, natural gas, LNG) of power plants in the base year, determined using method under Clause 1 Article 7 of this Circular (VND/kWh);

: Components of variable price revised according to variation of cost of secondary fuel (oil) of power plants in the base year, determined using method under Clause 2 Article 7 of this Circular (VND/kWh);

: Components of variable price revised according to other variations of power plants in the base year, determined using method under Clause 3 Article 7 of this Circular (VND/kWh).

: Transportation cost for primary fuel for generating electricity in the base year, determined using method under Clause 4 Article 7 of this Circular (VND/kWh).

b) For thermal power plants, regular maintenance cost in the base year is calculated in operational and maintenance cost according to major repair cost and other costs of the base year, thus, PBD equals 0.

3. Costs for experimenting, testing operation and inspecting for acceptance of power plants:

a) For costs for experimenting, testing operation and inspecting for acceptance deriving before commercial operation date (COD): payment for such costs before the COD shall be agreed upon by both parties on the basis of total approved project investment; 

b) For costs for test operation deriving during operation of power plants: Agreed upon by both parties.

Article 5. Methods of determining average fixed cost of power plants

1. Average fixed cost (FC) of power plants is determined on the basis of financial analysis of projects in Schedules 1 and 2 under Annex 2 attached to this Circular. Input indices to determined FC of power plants are determined according to Clause 2 of this Article.

2. Input indices used for calculating FC of power plants

a) Total investment:

Total investment refers to total investment valid at the time of negotiating electricity price for calculating electricity price, including all costs within investment responsibility of the Seller until the connection points of power plants which consist of:

- Power plants;

- Infrastructure, wharfs for power plants, LNG import ports (for power plants utilizing LNG), other relevant costs and costs allocated to projects (if any);

Specific connection costs shall conform to Article 8 of this Circular.

b) Economic life: Conform to Annex 1 of this Circular, unless otherwise prescribed by competent authority;

c) Electricity generated on average over multiple years at generator terminals:

- For thermal power plants: Determine according to capacity of generator terminals according to approved design and average number of hour in which power plants are operating at maximum capacity (Tmax) over several years.    Tmax of power plants is determined according to approved design but must not be lower than Tmax specified under Annex 1 hereof, unless otherwise approved by competent authority in writing. Average capacity degradation rate for economic life of power plants shall be agreed upon by both parties on the basis of technical documents of equipment manufacturers (kWh);

- For hydroelectric power plants: Determine according to approved fundamental design or written approval of competent agencies (kWh).

d) Percentage of used electricity and depreciation of step-up transformers of power plants, depreciation of power lines from step-up transformers of power plants to points of connection (if any): Is a value smaller than value determined according to approved fundamental design of power plants or according to technical documents of equipment manufacturers (%);

dd) Period in which depreciation of each primary fixed asset category is accounted for: Determined on the basis of period in which depreciation of each primary fixed asset category is accounted for based on the period regulated by Ministry of Finance from time to time or based on written permission of competent authority (if any) (year);

e) Owner’s equity rate, loan capital and investment capital phases in total investment:

Determined according to decision on approving investment projects and capital mobilization situation at the time of negotiating, conforming to regulations and law issued by competent authority. Minimum owner’s equity shall be 15% of total investment of projects;

g) Interest rate and repayment period during operation period: Based on loan agreements, documents between project developers and credit institutions, lending banks;

h) Corporate income tax rate, other taxes, fees: Determined according to relevant law provisions.

Article 6. Methods of determining operational and maintenance costs of power plants

Operational and maintenance cost in the base year FOMCb (VND/kWh) is determined using following formula:

In which:

: Operational and maintenance cost according to major repair cost and other costs of the base year, determined according to Clause 1 of this Article (VND/kWh);

: Operational and maintenance cost according to personnel cost in the base year, determined according to Clause 2 of this Article (VND/kWh).

1. Operational and maintenance cost based on major repair cost and other cost in the base year (VND/kWh) determined using following formula:

In which:

: Total major repair cost and other costs in the base year including major repair cost, secondary material costs, externally purchased material cost, other monetary cost (VND).

In case of failure to determine total major repair cost and other costs after using formula under this Clause, calculate TCscl in the base year using following formula:

TCscl =VDTXD+TB x kscl

In which:

VDTXL+TB: Total construction costs and equipment costs determined on the basis of total investment specified under Point a Clause 2 Article 5 of this Circular (VND);

kF,scl: Percentage of major repair cost and other costs (%) of power plants agreed upon by both parties and not exceeding value under Annex 1 hereof;

AGN: Average power generated over multiple years at delivery points between the Buyer and the Seller (kWH) and calculated as follows:

- For thermal power plants:

In which:

Pt: Generator terminal capacity under approved design (kW);

Tmax: Average hours in which power plants operate at maximum capacity, determined according to Point c Clause 2 Article 5 hereof (hour);

ttd: Percentage of electricity used and depreciation of step-up transformers of power plants, power line depreciation from step-up transformers to connection points with national electrical grids, determined according to Point d Clause 2 Article 5 hereof (%);

kCS: Average percentage of capacity degradation for economic life of power plants determined according to Point c Clause 2 Article 5 hereof (%).

- For hydroelectricity power plants:

In which:

Abq : Average power generated over multiple years at generator terminals, determined according to Point c Clause 2 Article 5 hereof (kWh);

ttd : Percentage of electricity used and depreciation of step-up transformers of power plants, power line depreciation from step-up transformers to connection points with national electrical grids, determined according to Point d Clause 2 Article 5 hereof (%).

2. Operational and maintenance cost based on personnel cost in the base year (VND/kWh) determined using following formula:

In which:

TCnc: Total personnel cost in the base year include cost for salary, social insurance, health insurance, union fee and other allowances (VND);

Total personnel cost TCnc of the base year is determined on the basis of total personnel cost of power plants and calculation to covert to the base year as follows:

- In case salary for calculating personnel cost of power plants equals region-based minimum wage  of the year in which electricity price is calculated: Conversion rate conforms  to region-based minimum wage;

- In case of inability to determine total personnel cost as specified above: Adopt following formula:

TCnc =VDTXL+TB x kF,nc

In which:

VDTXL+TB: Total construction cost and equipment cost determined on the basis of total investment specified under Point a Clause 2 Article 5 of this Circular (VND);

kF,nc: Percentage of personnel cost (%) of power plants agreed upon by both parties without exceeding value under Annex 1 hereof;

AGN : Average power generated over multiple years at delivery points between the Buyer and the seller and calculated according to Clause 1 of this Article (kWh);

Article 7. Methods of determining variable price of thermal power plants

Variable price, PBD, of thermal power plants in the base year (VND/kWh) is determined using following formula:

In which:

: Components of variable price revised depending on variation of primary fuel price of power plants in the base year, determined using method under Clause 1 of this Article (VND/kWh);

: Components of variable price revised depending on variation of secondary fuel price (oil) of power plants in the base year, determined using method under Clause 2 of this Article (VND/kWh);

: Components of variable price revised depending on other variations of power plants in the base year, determined using method under Clause 3 of this Article (VND/kWh).

: Transportation cost for primary fuel for generating electricity in the base year, determined using method under Clause 4 of this Article (VND/kWh).

1. is determined using following formula:

In which:

: Average net heat loss rate of primary fuel agreed upon by both parties and not greater than fundamental design/technical design corresponding to total investment for calculation of electricity price or specifications of equipment manufacturers, determined corresponding to load level under Annex 1 hereof;

: Primary fuel price in the base year is determined as follows:

Primary fuel price in the base year is calculated by weighted average of PPA or written agreements (VAT not included), unit of measurement: VND/kcal or VND/kJ or VND/BTU.

2. is determined using following formula:

In which:

: Average net heat loss rate of secondary fuel (oil) agreed upon by both parties (kg/kWh);

: Price of secondary fuel (oil) in the base year includes costs for transporting to power plants and other fees as per the law (VAT not included) (VND/kg).

3. is determined using following formula:

In which:

Cvlp: Total annual auxiliary material cost of power plants determined based on quantity and unit price of auxiliary materials used for electricity generation in the base year (VND);

Ckd: Total initiation costs include fuel costs, other costs serving initiation (VND); number of initiation sessions agreed upon by both parties on the basis of electrical grid demand and operational characteristics of power plants;

Ck: Annual regular repair and maintenance costs including regular repair and maintenance costs calculated on the basis of total construction and equipment investment of power plants, percentage of regular repair and maintenance costs agreed upon by both parties without exceeding value under Annex 1 hereof and costs for dredging port entry agreed upon by both parties (if any) (VND);

AGN­: Average electricity generated over multiple years at delivery points between the Buyer and the Seller and calculated according to Clause 1 Article 6 hereof (kWh).

4. is determined using following formula:

In which:

: Average net heat loss rate determined according to Clause 1 Article 7 hereof.

: Transportation price for primary fuel for generating electricity in the base year (VAT not included), unit of measurement: VND/kcal or VND/kJ or VND/BTU and determined as follows:

- For coal-fired thermal power plants: weighted average according to coal transportation agreements or written agreements;

- For gas-fired thermal power plants: weighted average according to fees for collecting, transporting and distributing gas approved by competent authority as per the law or according to written agreements.

- For LNG-fired thermal power plants: weighted average according to LNG transportation agreements, LNG storage, regasification and distribution contracts (if any) or other written agreements.

For fuel sale contracts in which primary fuel price, , has inlcuded transportation price for primary fuel, fees for collection, transportation, distribution, storage and regasification, repsective shall equal 0.

Article 8. Methods of determining specific connection prices of power plants

1. Specific connection prices (PDT) serve to salvage specific connection costs implemented by project developers of power plants or is allocated and agreed upon with the Buyer on the basis of specific connection costs, investment capital components, loan interest during operation period according to loan agreements, costs for managing, operating and maintaining and other factors according to agreement between both parties to ensure that project developers recover costs for constructing, managing, operating and maintaining as per the law.   Unit of measurement: VND/kWh or VND/kW or VND/month.

2. Once specific connection costs are settled, parties shall recalculate specific connection prices using method under Clause 1 of this Article.

3. Specific connection costs shall be considered legitimate costs and included in electricity purchase prices in methods of calculating average electricity retail price of EVN.   

Article 9. Methods of determining electricity generation price for other power plants

For other power plants, based on principles under Section 1 of this Chapter, the Buyer and the Seller shall develop methods of determining electricity generation price and PPA depending on practical situations of power plants, request Electricity Regulatory Authority of Vietnam and report to Ministry of Industry and Trade.

Section 2. METHODS OF DETERMINING ELECTRICITY GENERATION PRICE OF POWER PLANTS ENTERING COMMERCIAL OPERATION

Article 10. Methods of determining electricity generation price for power plants with expired PPAs and power plants with unexpired economic life  

For power plants with expired PPAs and unexpired economic life: Electricity generation price under current PPAs shall continue to apply to subsequent years until economic life expires.

Article 11. Methods of determining electricity generation price for power plants with expired economic life

1. Fixed price of power plants with expired economic life is determined in a manner that enables power plants to recover costs serving electricity production, according to period for calculation shall conform to frequency of major repair of primary equipment and according to agreement on reasonable interest.   In case competent authority approves period for calculation in writing, comply with written approval of competent authority.

2. Variable price of power plants with expired economic life is determined according to Article 7 hereof. 

3. In case a power plant with expired economic life is subject to investment and upgrade, both parties shall agree upon, negotiate PPA value of power plants based on Articles 4, 5, 6, and 7 hereof and conforming to depreciation period of primary equipment subject to upgrade.

Article 12. Methods of determining electricity generation price for power plants under renegotiation based on settled investment capital

For power plants where both parties have the rights to renegotiate electricity price based on settled investment capital according to Clause 2 Article 28 hereof: After determining settled investment capital, the Seller is responsible for sending documents related to settled investment capital to the Buyer. Both parties shall renegotiate electricity price based on following principles:

1. Methods of determining PPA value according to Article 4 hereof.

2. Indicators for calculating PPA value shall conform to Article 4 hereof and input indicators are updated at the same time settled investment capital is determined.

3. PPA value for comparing with price range for electricity generation must be within the price range of the year in which settled investment capital is approved.

4. Electricity generation price shall be applied from the commercial operation date of power plants, fixed price of each year according to Article 13 hereof; do not revise annual fixed price of years preceding the date on which parties sign contracts for revising PPA based on electricity price identified on the basis of settled investment capital. 

Section 3. METHODS OF DETERMINING POWER PURCHASE AGREEMENT VALUE BY EACH YEAR OF PPAS

Article 13. Principles of determining annual fixed price of power purchase agreements

1. Both parties have the rights to adopt weighted average fixed price agreed upon during years under contracts.

In case both parties agree on converting average fixed price to fixed price of each year, these fixed prices must be determined in a manner satisfactory to Clause 2 of this Article.

2. On the basis of practical loan capacity and financial capacity of projects, both parties shall negotiate about average fixed price of power plants and convert to annual fixed cost (FCj fixed cost of year j) as long as average fixed cost does not change compared to mutually agreed value and following principles are complied:

a) Financial discount rate when calculating annual fixed price agreed by both parties according to the IRR of power plants;

b) Projects developers shall return loans for investment and construction of power plants according to deadline for repaying loan capital.

Article 14. Principles of adjusting electricity generation price of each year under power purchase agreements

1. Component of operational and maintenance costs of power plants shall be adjusted according to following principles:

a) Components of operational and maintenance costs according to major repair costs and other costs shall be adjusted based on inflation rate of average costs under Annex 1 hereof.  Both parties shall conduct research, propose solutions for adjusting components of operational and maintenance costs according to major repair costs and other costs for items in foreign currency; 

b) Components of operational and maintenance costs according to personnel costs shall be adjusted based on variation of minimum region-based wages at the time of payment or based on CPI publicized by General Statistics Office of Vietnam without exceeding 2.5%/year.

2. On an annual basis, based on total loan in foreign currency, plans for repaying loan in foreign currency, figures on principle debt paid in practice, conversion rate agreed upon by both parties in electricity price solutions and conversion rate of the previous year, both parties shall calculate difference in rates, propose payment solutions, send to Electricity Regulatory Authority of Vietnam and request Ministry of Industry and Trade to consider approving payment solutions.

Foreign exchange rate difference (FED) is calculated using following formula:

In which:

m: Number of foreign currency in electricity solution both parties agree upon (number);

n: Number of times principle debt in foreign currency i is paid in calculating year (time);

Di,j: Number of principle debt in foreign currency paid for the jth time foreign currency i in practice in calculating year. Principle debt in foreign currency i paid in practice in calculating year must not be greater than principle debt in foreign currency i in respective year in electricity price solutions agreed upon by both parties;

λi,j: Conversion rate in the jth payment of foreign currency i in the year (.../VND);

λi,b: Base conversion rate of foreign currency i agreed upon by both parties under electricity price solutions (.../VND).

Article 15. Methods of determining power purchase agreement value of power plants at the time of payment

PPA value of power plants at the time of paying electricity bill in month t, year j: PC,j,t (VND/kWh) is determined using following formula:

In which:

FCj: Fixed costs in year j determined according to Clause 1 of this Article (VND/kWh);

FOMCj,t: Operational and maintenance costs in month t, year j determined according to Clause 2 of this Article (VND/kWh);

: Variable price in month t, year j determined according to Clause 3 of this Article (VND/kWh).

1. Fixed costs in year j: FCj is determined according to Article 13 hereof.

2. Operational and maintenance costs in month t, year j are determined using following formula:

In which:

: Components of operational and maintenance costs according to major repair costs and other costs in year j (VND/kWh);

: Components of operational and maintenance costs according to personnel costs in month t, year j (VND/kWh).

a) Components of operational and maintenance costs according to major repair costs and other costs are determined using following formula:

In which:

: Operational and maintenance costs according to major repair costs and other costs in the base year determined according to Clause 1 Article 6 hereof;

i: Inflation rate of components of operational and maintenance costs according to major repair costs and other costs specified under Annex1 hereof;

l: Order of payment year from the base year (for base year, I=1).

b) Components of operational and maintenance costs according to personnel costs in month t, year j: determined as follows:

- In case wages in electricity price solutions equal minimum region-based wages, apply following formula:

In which:

: Operational and maintenance costs according to personnel costs in the base year determined according to Clause 2 Article 6 hereof;

: Minimum region-based wages at the time of payment in month t, year j (VND/month);

: Minimum region-based wages in the base year (VND/month).

- In case total personnel costs: TCnc are calculated based on construction and equipment investment, apply following formula (VND/kWh):

In which:

: Operational and maintenance costs according to personnel costs in the base year, determined according to Clause 2 Article 6 hereof;

i1: Inflation rate of components of operational and maintenance costs according to personnel costs, determined based on consumer price index (CPI) in year (j-1) compared to year (j-2) publicized by General Statistics Office of Vietnam in December of year (j-1) without exceeding 2.5%/year;

l: Order of payment year starting from the base year (for the base year: l = 1, i1 = 0).

3. Variable prices of thermal power plants in month t, year j: (VND/kWh) are determined using following formula:

In which:

: Components of variable prices adjusted according to variation of primary fuel prices of thermal power plants in month t, year j, determined according to Point a of this Clause (VND/kWh);

: Components of variable prices adjusted according to variation of secondary fuel (oil) price of power plants in month t, year j determined according to Point b of this Clause (VND/kWh);

: Components of variable prices adjusted according to other variations of power plants in year j, determined according to Point c of this Clause (VND/kWh).

: Transportation costs for primary fuel of power plants in month t, year j, determined according to Point d of this Clause (VND/kWh).

a) Components of variable prices adjusted according to variation of primary fuel prices of power plants in month t, year j: are determined using following formula:

In which:

: Average net heat loss rate determined according to Clause 1 Article 7 hereof;

kHR: Coefficient for average net heat loss rate for actual operating coditions depending on temperature of coolant and ambient temperature agreed upon by both parties;

kHS: Percentage of capacity reduction in year j (%);

l: Year of commercial operation of power plants;

: Primary fuel price for electricity generation at the time of payment in month t, year j, determined by weighted average based on quantity of invoices under fuel sale contracts at the time of calculation.

b) Components of variable prices adjusted according to variation of secondary fuel (oil) price of power plants in month t, year j: are determined using following formula:

In which:

: Components of variable prices adjusted according to variation of secondary fuel (oil) prices of power plants in the base year, determined under Clause 2 Article 7 hereof;

kHS: Percentage of capacity reduction in year j (%);

l: Year of commercial operation of power plants;

: Secondary fuel (oil) prices for electricity generation including fees for transporting to power plants at the time of payment in month t, year j;

: Secondary fuel (oil) prices for electricity generation in the base year determined under Clause 2 Article 7 hereof.

c) Components of variable prices adjusted according to other variations of power plants in year j: determined using following formula:

In which:

: Components of variable prices adjusted according to other vairations of power plants in the base year determined under Clause 3 Article 7 hereof;

i: Inflation rates of components of variable prices adjusted according to other variations based on rates under Annex 1 hereof.

kHS: Percentage of capacity reduction in year j (%);

l: Year of commercial operation of power plants.

d) Fees for transporting primary fuel of power plants in month t, year j: (VND/kWh) are determined using following formula:

In which:

: Average net heat loss rate determined according to Clause 1 Article 7 hereof.

kHR: Coefficient for adjusting average net heat loss rate depending on practical operating conditions, coolant temperature and ambient temperature agreed upon by both parties;

kHS: Percentage of capacity reduction in year j (%);

l: Year of commercial operation of power plants;

: Fees for transporting primary fuel at the time of payment in month t, year j are determined by weighted average based on quantity of invoices according to fuel transport agreements, LNG storage, regasification and distribution contracts (if any) (VATnot included), to be sepcific:

- For coal-fired thermal power plants: weighted average according to coal transportation agreements;

- For gas-fired thermal power plants: weighted average according to fees for collecting, transporting and distributing gas;

- For LNG-fired thermal power plants: weighted average according to LNG transportation agreements, LNG storage, regasification and distribution contracts (if any).

For fuel sale contracts already including primary fuel transportation prices, components of primary fuel transportation prices shall equal 0.

4. Total costs for initiation in month t of thermal power plants (VND), are determined using following formula:

In which:

u: Machine order of power plants;

U: Number of machines of power plants;

f: Type of fuel (for primary fuel f = 1; secondary fuel f = 2);

s: Initiation status of machines;

S: Initiation status number of machines;

pu,f,s: Number of ignitions of machines u, use fuel f, in initiation status s in the month;

Mu,f,s: Amount of coal (kg) or gas (BTU) consumed for a single instance of initiation of machines u, using fuel f in initiation status s;

Du,f,s: Fuel unit price for a single instance of initiating machines u, using f, in initiation status s, determined, determined in VND/kg for coal and VND/BTU for gas;

: Total of other costs serving initiation.

Payment for initiation costs of thermal power plants shall conform to regulations on electricity market publicized by Ministry of Industry and Trade.

Chapter III

PROCEDURES FOR NEGOTIATING AND INSPECTING OF POWER PURCHASE AGREEMENTS

Article 16. Adoption of model power purchase agreements

1. For new power plants and power plants negotiating according to Article 10 hereof, on the basis of model power purchase agreements under Annex 3 hereof, the Buyer and the Seller shall negotiate and add clauses depending on practical situations of power plants (if necessary).

2. The Buyer and the Seller shall agree and be responsible for submitting reports on power purchase agreement negotiation results to Electricity Regulatory Authority of Vietnam according to Article 19 hereof.

Article 17. Procedures for negotiating power purchase agreements

1. For new power plants, power purchase agreements between parties must be signed before the construction commencement date.

2. The Seller is responsible for preparing request for power purchase agreement negotiation and sending to the Buyer for negotiation and adoption of procedures for signing power purchase agreements.

3. Within 15 working days from the date on which adequate written request from project developers is received, the Buyer is responsible for organizing power purchase agreement negotiation with the Seller. At the end of negotiation process, both parties must initial the draft power purchase agreements.  

4. After draft power purchase agreements have been initialed, the Buyer and the Seller shall agree and be responsible for reporting to Electricity Regulatory Authority of Vietnam.

Article 18. Request for power purchase agreement negotiation

1. Request for power purchase agreement negotiation applied to new power plants includes but are not limited to:

a) Official Dispatch requesting power purchase agreement negotiation;

b) Draft power purchase agreements using form under Annex 3 hereof and revisions depending on practical conditions of power plants (if any);

c) Approval of investment guidelines or Decision on investment guidelines or investment registration certificate of projects;

d) Decision on investing in construction, explanation and reports on appraisal of power plant investment projects of independent consultants, attached documents;

dd) Decision on approving total investment for the first time or revised total investment of projects valid at the time of negotiating electricity price and primary contents in fundamental design of investment projects relating to power purchase agreement negotiation, appraisal reports on fundamental design;

e) Agreements on connecting power plants to national grids together with connection solutions; agreements on SCADA/EMS and regulating information systems; agreements on protective and automatic relay systems;

g) Loan agreements or documents between project developers and creditors, plans or facts of disbursement of loans;

h) Fuel supply contracts for power plants, specifying fuel prices for electricity generation, fuel transportation costs, LNG storage, regasification and distribution costs and additional costs, fuel delivery points and deadline for fuel supply;

i) Documents on calculating capacity and electricity loss of transformers and power lines from step-up transformers to connection points with national electrical grids and documents on electricity used in power plants;

k) Documents on calculating net heat loss rates for thermal power plants;

l) Electricity solutions determined according to Section 1 and Section 3 Chapter II hereof;

m) Other relevant documents.

2. Request for power purchase agreement negotiation of power plants entering commercial operation includes but are not limited to:

a) Official Dispatch requesting power purchase agreement negotiation;

b) Draft power purchase agreements using form under Annex 3 hereof;

c) Available documents on power purchase agreements;

d) Technical dossiers of power plants, technical specifications of SCADA/EMS systems, protective and automatic relays, machine P-Q operational characteristics;  

dd) Fuel supply contracts for power plants;

e) Electricity solutions of power plants determined according to Section 1, Section 2, and Section 3 Chapter II hereof;

g) Audited financial statements of power plants of the nearest year from the date of negotiating power purchase agreements.

Article 19. Procedures for inspecting power purchase agreements

1. After negotiating power purchase agreements, both parties shall agree and be responsible for submitting reports on inspection of power purchase agreement and documents under Article 18 hereof to Electricity Regulatory Authority of Vietnam.  

2. Within 5 working days from the date on which applications for inspection of power purchase agreements are received, Electricity Regulatory Authority of Vietnam is responsible for examining legitimacy of the applications and requesting both parties to submit additional documents if necessary as per the law.  

3. Within 30 working days from the date on which adequate applications for inspection of power purchase agreements are received, Electricity Regulatory Authority of Vietnam is responsible for examining and providing feedback on power purchase agreements.  

4. Within 30 working days from the date on which feedback on power purchase agreement is provided, both parties are responsible for officially signing the power purchase agreements. In case Electricity Regulatory Authority of Vietnam fails to provide feedback on power purchase agreements before the deadline under Clause 3 of this Article, both parties may officially sign the power purchase agreements based on clauses agreed upon.    The Buyer is responsible for sending 1 copy of signed power purchase agreements to Electricity Regulatory Authority of Vietnam for storage and implementation monitor.

5. In case electricity under Clause 4 Article 3 hereof according to recommendations of the Seller exceeds price range for electricity generation publicized by Minister of Industry and Trade, both parties are responsible for reporting, explaining and proposing solutions to enable Electricity Regulatory Authority of Vietnam to consider and report to Minister of Industry and Trade.

Article 20. Revision of power purchase agreements in case of changes to regulations and policies promulgated by competent authority

1. In case changes to regulations and policies promulgated by competent authority affect legal benefits of the Buyer or the Seller in a negative manner, both parties hold the right to renegotiate electricity generation price.  

2. In case the Seller is assigned to invest in upgrade and renovation of power lines and electrical substations according to planning, both parties hold the right to negotiate additional specific connection costs to enable project developers of power plants to recover construction, management, operation and management costs as per the law.

3. In case active power plants must be invested for renovation and upgrade to meet national technical regulations on environment, the Seller and the Buyer must add these costs to electricity price of power plants.  Calculation of electricity price shall conform to method agreed upon by both parties under signed power purchase agreements, and be reported to Ministry of Industry and Trade and Electricity Regulatory Authority of Vietnam.  

4. In case solutions developed by power plants for disposing, selling ashes and slags are approved by competent authority to be satisfactory to refuse, emission and environmental protection standards, the Buyer and the Seller shall add these costs to components of costs for disposing, selling ashes and slags which are specific components of costs for disposing, selling ashes and slags under power purchase agreements following these principles: (i) Investment scope, procedures for ash and slug disposal must be approved by competent authority; (ii) Selection of entities for disposing ashes and slags of power plants must conform to regulations and law, ensure competitiveness and transparency; (iii) Both parties shall settle costs for disposing ashes and slags according to practical situations of the previous year.    Revenues generated from sale of ashes and slags of power plants shall be utilized to reimburse costs for disposing ashes and slags and reduce electricity price of power plants.

Chapter IV

IMPLEMENTATION

Article 21. Responsibilities of Ministry of Industry and Trade

1. Guiding natural gas consumption mechanisms in power purchase agreements conforming to regulations under gas sale and purchase agreements and gas sale agreements approved by competent authority.  

2. Deciding on paying for differences in rates of power plants.

Article 22. Responsibilities of Electricity Regulatory Authority of Vietnam

1. Examining and providing feedback on power purchase agreements and revisions of power purchase agreements of power plants.

2. Guiding and dealing with difficulties arising during negotiation on power purchase agreements between parties.

3. On an annual basis, consolidating feedback of entities regarding input figures for calculating power purchase agreement value specified under Annex 1 hereof and proposing to Minister of Industry and Trade for consideration, decision and revision (if any).

4. Dealing with conflicts that arise during execution of power purchase agreements in case both parties agree to settle conflicts at Electricity Regulatory Authority of Vietnam.

5. Examining, consolidating and reporting to Ministry of Industry and Trade to consider paying for difference in rates among power plants after receiving reports of EVN.

Article 23. Responsibilities of Vietnam Electricity

1. Before January 31 each year, taking charge and cooperating with the Buyer and the Seller in calculating difference in rates in execution of power purchase agreements of the previous year according to Clause 2 Article 14 hereof, and reporting to Electricity Regulatory Authority of Vietnam. 

2. On an annual basis, considering and requesting Electricity Regulatory Authority of Vietnam to revise input figures for calculating power purchase agreement value according to Annex 1 hereof and other contents in this Circular (if any).

Article 24. Responsibilities of the Buyer

1. Agreeing with the Seller on redistributing specific connection costs to project developers of power plants connecting to power lines, electrical substations and revising specific connection costs (if any) to enable the Seller to recover construction, management, operation and maintenance costs for power lines and electrical substations as per the law.  

2. Negotiating power purchase agreements with the Seller; being responsible and guaranteeing accuracy, legitimacy of provided figures and documents. Agreeing with the Seller on submitting reports on inspection of power purchase agreements to Electricity Regulatory Authority of Vietnam as per the law.

3. Before January 15 each year, taking charge and cooperating with the Seller in calculating difference in rates in execution of power purchase agreements of the previous year according to Clause 2 Article 14 hereof, providing to EVN and reporting to Electricity Regulatory Authority of Vietnam. 

Article 25. Responsibilities of the Seller

1. Negotiating with the Buyer, reporting to Electricity Regulatory Authority of Vietnam regarding inspection and signing of power purchase agreements as per the law prior to construction commencement date; being responsible and ensuring accuracy, legitimacy of provided figures and documents.

2. Developing construction investment projects for power lines and electrical substations to load capacity of power plants when assigned to implement construction investment by competent authority according to national electricity development planning and provincial planning (if any). Power lines and electrical substations must operate and load all capacity and electrical production of power plants in vicinity according to approved plans.

3. Allowing power plants within national electrical development planning or provincial planning to connect to power lines and electrical substations to send electricity to national electrical grid.

4. Agreeing with project developers of power plants on distributing and revising specific connection costs to enable project developers to recover construction, management, operation and maintenance costs for power lines and electrical substations as per the law.  

5. Being responsible for managing, operating and maintaining power lines and electrical substations within their investment and construction capacity as per the law.

6. Providing adequate information, being responsible, ensuring accuracy and legitimacy of figures and documents provided to relevant entities and agencies during power purchase agreement negotiation and inspection process.

7. The Seller is responsible for selecting fuel suppliers and/or transporters according to bidding laws, other regulations and law and legally responsible for ensuring equality, competitiveness and transparency except for following cases:

 (i) The Seller has signed mid-term or long-term fuel supply contracts with fuel suppliers;

 (ii) Natural gas supply contracts and fees for collecting, transporting and distributing natural gas conform to regulations of competent authority.

In case of inability to select fuel transporters via bidding due to special reasons (other than exceptions 7.i and 7.ii above), the Seller is responsible for negotiating with fuel suppliers or fuel transporters (depending on cases under Article 26 of this Circular) according to unit price promulgated by competent agencies; if unit price has not been promulgated by competent agencies, the Seller is responsible for negotiating with fuel suppliers or transporters (depending on cases under Article 26 of this Circular) according to unit price calculated on the basis of internal unit price of selected fuel transporters, ensuring effectiveness, competitiveness and not exceeding unit price of other transport service providers within the same means of transport (if any), price of fuel transported to warehouses of the Seller not exceeding price of the same fuel at warehouses of the Seller provided by other providers (if any).    

Prior to signing fuel transport contracts without bidding, the Seller must provide the Buyer with documents agreed upon under power purchase agreements.  Within 20 days from the date on which the Seller provide adequate documents and the Buyer has not provided feedback on selection of fuel transporters, the Seller and/or fuel transporters (depending on delivery conditions) may sign fuel transport contracts based on terms agreed upon.

The Seller is responsible for signing fuel purchase, sale and transport agreements according to applicable laws while ensuring competitive price and transparency.”

8. The Seller is responsible for all input figures for calculating power purchase agreement values and responsible for controlling and bidding for fuel supply and transport agreements while ensuring legal fuel sources, competitive price and transparency.

9. Before January 15 of each year, the Seller shall submit reports on execution of power purchase agreements of the previous year with the Buyer, difficulties that arise during execution of power purchase agreements and proposed solutions (if any) to Electricity Regulatory Authority of Vietnam.

10. Before January 15 each year, cooperating with the Buyer in calculating difference in rates in execution of power purchase agreements of the previous year according to Clause 2 Article 14 hereof, sending to EVN and reporting to Electricity Regulatory Authority of Vietnam. 

Article 26. Responsibilities of fuel suppliers and transporters

1. For gas fuel

(i) Domestic natural gas suppliers and transporters sign GSPA, GSA, gas transport agreements (GTA) as per relevant laws, in which:

- Price of domestically extracted natural gas is price of gas extracted from gas mines.

- For natural gas domestically extracted via pipelines for collecting, transporting and distributing that are exclusive in nature, fees for collecting, transporting and distributing emission must be approved by competent authority.

(ii) Fuel suppliers and transporters for fuel imported by pipes and for LNG shall provide gas according to relevant law provisions, in which:

- In case clauses of gas storage and distribution are exclusive in nature, fees for storage, regasification and distribution must be approved by competent authority.

- In case of delivery at ports for export: Price of import gas shall be price of gas at delivery points at ports for export.

- In case of delivery at gas distribution stations or LNG warehouses in Vietnam, gas price includes costs for purchasing import gas, LNG and legitimate costs related to import activities (if any) namely import tariffs, financial expenses, insurance, norm interest and other costs related to import activities of fuel suppliers.

2. For coal fuel

(i) In case of delivery at warehouses and ports of the Seller, selected coal suppliers are responsible for:

- Organize selecting coal transporters as per bidding laws and relevant law provisions on the basis of equality, competitiveness, transparency and legal responsibility.

- In case coal suppliers are unable to select coal transporters via bidding due to special causes, coal suppliers are responsible for selecting coal transporters following similar principles applied to the Seller under Clause 7 Article 25 hereof.

- Signing coal transport agreements with selected coal suppliers as per the law.  Prior to signing coal transport contracts not via bidding, selected coal suppliers are responsible for providing relevant documents to the Seller. 

(ii) In case of delivery at warehouses and ports of coal suppliers:

- The Seller shall organize selection of coal transporters according to Clause 7 Article 25 hereof.

- Coal transporters selected by the Seller shall sign coal transport agreements as per the law with the Seller.  Prior to signing coal transport contracts not via bidding, selected coal suppliers are responsible for providing relevant documents to the Seller. 

Article 27. Amendments to Circular No. 57/2014/TT-BCT dated December 19, 2014 of Minister of Industry and Trade on methods and procedures for developing and promulgating price range for electricity generation

1. Amend Clause 3 Article 6 as follows:

“3. Investment unit cost refers to investment cost for 1 kW of average net capacity of standard power plants calculated on the basis of total investment valid at the time of calculating price range for electricity generation and current foreign exchange rate. Components of investment unit cost include:

a) Construction costs include costs for constructing structures, work items; deconstructing and dismantling old architectural components; leveling construction premises; constructing temporary structures; auxiliary structures serving construction; temporary housing structures for residential and construction operation;

b) Equipment costs including costs for purchasing technology equipment, training factory operation; installing, testing, calibrating; transporting, insurance, taxes and other relevant costs;

c) Compensations for land clearance and relocation costs according to decisions of competent authority; costs for fortifying construction foundation;

d) Project management costs include costs for organizing implementation of project management affairs from project development to inspection for acceptance and use;

dd) Construction consultancy costs include costs for consulting survey, design, construction supervision, inspection consultancy and other construction consultancy costs;

e) Other costs including working capital during factory operation for acceptance, loan interests, loan costs during power plant constructions and other necessary costs;

g) Backup costs include costs for additional work load and inflation factor that occurs during construction period.”

2. Amend Point a Clause 4 Article 6 as follows:

“a) Loan interest rate rd (%) determined by weighted average of interest rates of loans in domestic and foreign currency based on following formula:

rd = DF x rd,F + DD x rd,D

In which:

DF: Percentage of loans in foreign currency in total loans under Annex 1 hereof (%);

DD: Percentage of loans in domestic currency in total loans under Annex 1 hereof (%);

rd,F: Interest rates of loans in foreign currency determined on the basis of interest rates of loans in foreign currency of power plant projects which undergo electricity price negotiation in the last 5 years from the date on which price range for electricity generation (%/year);

rd,D: Interest rates of loans in foreign currency determined on the basis of interest rates of loans in foreign currency of power plant projects which undergo electricity price negotiation in the last 5 years from the date on which price range for electricity generation (%/year).”

3. Amend Article 8 as follows:

“Variable costs of standard power plants for year in which price range is applied (VC) refer to components for recovering fuel costs, other variable costs of standard power plants with number of hour operating at maximum capacity, determined by using following formula:

VC = HR x Pnlc x (1+f)

In which:

VC: Variable costs of standard power plants (VND/kWh);

HR: Net heat loss rate calculated at load level specified under Annex 1 hereof, unit of measurement: kcal/kWh or kJ/kWh or BTU/kWh;

f: Percentage of total costs for initiation, fuel – auxiliary material costs and other variable costs for electricity generation over primary fuel costs, specified under Annex 1 hereof (%);

Pnlc: Primary fuel costs of standard power plants, excluding transport fees; for coal-fired power plants that already include depreciation, management costs, insurance (if any); in case fuel supply agreements cannot separate fuel transport costs, primary fuel costs shall equal costs under primary fuel sale and purchase agreements; unit of measurement of Pnlc: VND/kcal or VND/kJ or VND/BTU.”

4. Revise net heat loss rate and primary fuel costs under Annex 2 as follows:

Article 28. Transition clauses

1. For power purchase agreements signed before the effective date hereof, both parties shall execute signed power purchase agreements until said agreements expire.

2. For electricity projects entering into power purchase agreements using methods under Circular No. 56/2014/TT-BCT , Circular No. 51/2015/TT-BCT dated December 29, 2015 and electricity projects executed before September 19, 2017, when settled investment capital is approved, both parties hold the rights to request recalculation of electricity price according to Article 12 hereof.

3. For power plants entering into power purchase agreements, if necessary, both parties shall negotiate and add kHR according to Article 15 hereof.

4. For power plants entering into power purchase agreements, in case agreements on upstream consumption of gas are approved by competent authority, Ministry of Industry and Trade shall provide guidelines on gas consumption mechanisms for power plants and permit both parties to revise power purchase agreements.

5. For power plants whose construction has been commenced and power plants that have not concluded negotiation for power purchase agreement value before the effective date hereof, may negotiate after construction commencement date using methods under this Circular.  

Article 29. Entry into force

1. This Circular comes into force from February 22, 2021 and replaces following Circulars:

a) Circular No. 56/2014/TT-BCT ;

b) Circular No. 51/2015/TT-BCT dated December 29, 2015 of Minister of Industry and Trade on amendments to Circular No. 30/2014/TT-BCT dated October 2, 2014 of Minister of Industry and Trade on operation of competitive electricity generation market and Circular No. 56/2014/TT-BCT ;

2. Annuls Article 1 of Circular No. 13/2017/TT-BCT dated August 3, 2017 of Minister of Industry and Trade on amendments of Circular No. 56/2014/TT-BCT ; Circular No. 30/2014/TT-BCT on operation of competitive electricity generation market and Circular No. 57/2014/TT-BCT on methods and procedures for developing and issuing price range for electricity generation;

3. Annuls Article 134 and Annex 5 of Circular No. 45/2018/TT-BCT dated November 15, 2018 of Minister of Industry and Trade on operation of competitive electricity generation market and amendments to Circular No. 56/2014/TT-BCT ;

4. Difficulties that arise during the implementation of this Circular should be reported to the Ministry for consideration./.

 

 

ANNEX 1

PARAMETERS FOR THE CALCULATION OF POWER PURCHASE CONTRACT VALUE
(Attached to Circular No. 57/2020/TT-BCT dated 31 December 2020 of Minister of Industry and Trade)

 

ANNEX 2

PROJECT FINANCE ANALYSIS TABLES
(Enclosed to the Circular No. 57/2020/TT-BCT dated December 31, 2020 by Minister of Industry and Trade)

Table 1 – Business results forecast

Unit: …

Note: - Revenues generated for sale of electricity do not include VAT, water resource tax, fees for licensing water resource extraction right, forest environment fee, environment protection fee for solid wastes/industrial waste water (applicable to thermal power plants) and other taxes, fees (if any).

- Table 01 is executed from the year when incomes arise.

Table 2 – Financial accumulation flow and financial norms

Unit: …

Note: - Revenues generated for sale of electricity do not include components of operational and maintenance cost, VAT, water resource tax, fees for licensing water resource extraction right, forest environment fee, environment protection fee for solid wastes/industrial waste water (applicable to thermal power plants) and other taxes, fees (if any).

- Table 02 is executed from the year when constructional works commence.

 

ANNEX 3

SAMPLE AGREEMENT FOR PURCHASE OF POWER
(Enclosed to the Circular No. 57/2020/TT-BCT dated December 31, 2020 by Minister of Industry and Trade)

SOCIALIST REPUBLIC OF VIETNAM
Independence – Freedom – Happiness
----------------

 

POWER PURCHASE AGREEMENT

POWER PLANT OF …

 

Between

COMPANY [Name of the company]

(SELLER)

- and -

(Name of the company)

(BUYER)

 

CONTRACT NO. … /20…/HD-NMD-[Power plant’s name]

 

 

 

(location and date)

 

 

SOCIALIST REPUBLIC OF VIETNAM
Independence – Freedom – Happiness
----------------

POWER PURCHASE AGREEMENT

Pursuant to Law on Electricity dated December 3, 2004 and Law on amendments to Law on Electricity dated November 20, 2012;

Pursuant to Commercial Law dated June 14, 2005;

Pursuant to Civil Code dated November 24, 2015;

Pursuant to Decree No. 137/2013/ND-CP dated October 21, 2013 of the Government on elaborating to Law on Electricity and Law of amendments to Law on Electricity;

Pursuant to Circular No. ……………… of Minister of Industry and Trade on operation of competitive electricity sale market;

Pursuant to Circular No. ……………… of Minister of Industry and Trade on methods of determining electricity generation price and power purchase agreement price;

As per the parties' demands for sale and purchase of electricity,

As of ………………………………………………………(location and date) .

The parties include:

The Seller: …

Address: ...

Telephone: …                               Fax: …

Tax code: …

Account: …                            Bank: ...

Represented by: …

Title: …                                               under authorization of: …                                under written authorization No. …                                                dated …

The Buyer: (Name of the company)

Address: ...

Telephone: …                               Fax: …

Tax code: …

Account: …                            Bank: ...

Represented by: …

Title: …                                               under authorization of: …                                under written authorization No. …                                                dated …

The parties agree to enter the Agreement for purchase of power from …………… Power Plant on the following terms:

Article 1. Definitions

In this contract, the following phrases and words are construed as follows:

1. “The Seller” refers to …………………… [Company] that owns the Power plant of …………..

2. “The Buyer” refers to …………………………

3. “Connection point” refers to a point at which electrical equipment, electrical grids and power plants are connected to national electrical grid.

4. “The operator of national electric power system and electricity market” commands and controls the processes of generation, transmission and distribution of electricity in the national power system and manages transactions in the electricity market.

5. “National power system” consists of electric power generation equipment, power grids and ancillary equipment jointly connected and unanimously controlled on nation-wide scale.

6. “Primary measurement system” is composed of measurement equipment (meters, measurement current transformers, measurement transformers) and secondary circuits connected to the said equipment. The system is installed at the parties' agreed locations to set firm basis for the calculation of the production of electricity delivered.

7. “Backup measurement system” comprises every measurement equipment (meters, measurement current transformers, measurement transformers) and secondary circuits connected to the said equipment. The system Is installed at the parties’ agreed locations for testing and backing up the primary measurement system. It comprises equipment independent from but technically equivalent to those of the primary measurement system.

8. “Contract” refers to this power purchase agreement and its appendices and amendments.

9. “fuel (coal, natural gas, LGN) sale contract” refers to an agreement between a Seller and a fuel trading entity to provide fuel for power plants, is signed according to applicable law and guarantees legitimate fuel origin, competitive price and transparency.

10. “fuel (coal, natural gas, LGN) transportation agreement” refers to an agreement between a generating entity or a fuel trading entity and a fuel transport service provider to transport fuel to power plants, is signed according to applicable law and guarantees competitive price and transparency.

11. “liquefied natural gas (LNG) storage, regasification and distribution contracts” refer to agreements between generating entities or fuel traders and entities investing, managing LNG storage to store, perform regasification, distribute and supply gas materials for powers plants signed as per applicable laws and ensuring competitive price and transparency.

12. “Dispatching order” is an order for real-time steering and control of electric power system’s operations.

13. “Day” refers to a day in Gregorian calendar.

14. “The generator's date of commercial operation” means the date when the power plant's generator is ready to sell electricity to Buyer and satisfying relevant law provisions.

15. “The power plant’s date of commercial operation” refers to the date when the final generator enters commercial operation and satisfies relevant law provisions.  

(In case power purchase agreements are signed with power plant groups, commercial operation date shall be prescribed for each power plant).

16. “Power plant” refers to the Power plant [name of Power plant] with the maximum established output of … MW, including … generators at [power plant's location], each of which has an output of … MW.

17. “The electricity sector’s technical regulations and standards” include obligatory technical regulations issued by Vietnam's competent authorities and rules, standards and practices observed by international organizations and enforced by other nations in correspondence in line with the laws of Vietnam.

18. “Connection equipment” refers to power transmission lines, measurement equipment system, control devices, protective relay, circuit breakers, information and communication system and buildings synchronized for power plants' linkage with points of connection.

19. “Regulations of competitive electricity market” refer to regulations on operation of competitive electricity market by levels decided by competent authority.

Article 2. Effect and term of contract

1. Effect of contract

This contract comes into force upon the parties’ authorized representatives’ official signing of the contract, unless otherwise stated.

2. Term of contract

Unless the contract is extended or prematurely terminated, term of contract shall be determined from the date on which the contract enters into effect until 25 years after the power plant’s date of commercial operation.

Article 3. Sale and purchase of electricity

1. Contract price: Conform to Annex V of the contract.

2. Contract output: Conform to Annex V of the contract.

3. Electricity price: On a monthly basis, the Buyer is obliged to pay the Seller amounts specified under Annex V hereof.

The parties agree to settle payables arising owing to the adjudication of disputes according to Article 8 of the contract.

(For power plants regulating fuel price and fuel consumption rate permitted by competent authority to be added to power purchase agreements, both parties shall revise accordingly).

Article 4. Commitments

The parties undertake that:

1. Each party is legally established to operate under the laws of Vietnam and has sufficient power to enter and execute the contract and posses adequate business capacities and assets to execute its contracted duties.

2. Each party's signing and execution of the contract do not violate its corporate regulations, the laws, other agreements that it engages in, and a court's rulings or verdicts against such party.

3. The parties’ signing and execution of the contract abide by their electrical operating licenses as issued by competent authorities and relevant laws.

4. The parties are not defendants in a lawsuit, whose result may remarkably alter contract parties’ financial capacities or ability to execute their contracted duties or the validity and effect of contract, in a court, commercial arbitration or before a competent governmental authority.

5. The parties undertake to precisely execute the duties and contents in this contract.

Article 5. Seller’s duties prior to the date of commercial operation

1. Requirements on licenses and written approvals

a) Seller is responsible for going through regulated formalities for competent authorities’ issuance of licenses and written approvals necessary for the construction and operation of the power plant. Seller undertakes to maintain compliance and conditions of such licenses according to the laws during the effective term of the contract;

b) In … days’ time upon the initial date of commercial operations of the generators and power plant, Seller bears the duty to provide Buyer with valid copies of documents defined in Section II, Annex VII of the contract.

2. Reporting of time points in the project schedule

a) The Seller guarantees time points in the project schedule according to clause I, Annex VII of the contract;

b) Before the … of the first month of a quarter, the Seller bears the duty to make and send the report on the power plant's building progress with valid copies to Buyer to evidence and assess the advancement of the project as per commitments and to propose solutions on maintaining time points of the project.

3. Connection, test and operation

Prior to the date of commercial operation, the Seller bears the duty to connect, test and operate the power plant and connection equipment according to the electricity sector’s technical regulations and standards and Ministry of Industry and Trade's regulation on power transmission system. Moreover, Buyer shall be given valid copies of the test results of the power plant.

4. Date of commercial operation

a) The Seller bears the duty to realize the date of commercial operation according to the project's time points as per the parties' stipulations in Annex VII of the contract or subsequent amendments. At least … month before commercial operation date of each generator, the Seller bears the duty to inform the Buyer officially in writing regarding feasibility of reaching commercial operation date. The Seller must send notice on reaching commercial operation date to the Buyer; the Seller is considered not reaching commercial operation date if fails to send the notice to the Buyer and provide documents specified under Annex VII hereof;

b) In case of failure to reach commercial operation date for each generator, the Seller holds the right to request the Buyer in writing to adjust commercial operation date and state reasons for adjusting commercial operation date. At least … days from the date on which written request for adjusting commercial operation date of the Seller is received, the Buyer must provide a written response for the adjustment. Buyer, if rejecting the Seller’s adjustment proposal, must specify reasons.

Article 6. Responsibilities for establishing connections and electricity measurement system

1. Responsibilities for establishing connections

The Seller is responsible for:

a) Negotiating, investing, managing and operating the equipment for connection, transmission and delivery of electricity to Buyer at points of delivery according to Ministry of Industry and Trade’s regulation on power transmission system and relevant technical regulations and standards of the electricity sector;

b) Investing, installing, managing, operating and maintaining the power plant’s system equipment for collection, transmission of data, automatic control and protective relays for the power plant’s connection to SCADA/EMS system of the operator of national electric power system and electricity market. Such connection facilitates the operation of the power plant in the electricity market.

2. Measurement system

a) The Seller is responsible for investing, installing, managing, operating, maintaining and inspecting the equipment of the primary and backup measurement systems on a periodic basis according to Ministry of Industry and Trade’s regulation on electricity measurement. Competent or authorized organizations shall inspect the measurement equipment or verify the precision of such equipment. The measurement equipment must be secured with lead seal after the inspection;

b) Each party can request additional or random inspection of measurement equipment and system, if necessary. The Seller is responsible for organizing inspections at the Buyer’s request. In case variance of measuring instrument subject to irregular inspection, calibration is found to be greater than permitted limit, the Seller must pay for the irregular inspection and/or calibration. In case variance of measuring instrument subject to irregular inspection, calibration is found to be within permitted limit, entities requesting inspection and/or calibration shall pay for said inspection/calibration;

c) The Seller's duty is to inform the Buyer of the result of the inspection of measuring instrument.. The Seller's duty is to inform Buyer in advance of the inspection of measuring instrument. Buyer is responsible for assigning its witness of the process of seal removal, inspection and lead sealing of the meters;

d) If measurement equipment's deviations exceed the permissible limit according to the Ministry of Industry and Trade’s regulation on electricity measurement, the Seller is liable for adjusting or replacing such equipment. If one of the parties considers a meter damaged or not functional, it must promptly inform the other party. The Seller bears the duty of inspection and repair;

dd) The production of electricity is defined according to the method of delivery in Annex II of the contract.

If the primary measurement system does not function properly or its deviations, as found by an inspection, exceed the regulated precision level, the production of electricity traded during such events is defined by the backup measurement system. If the backup measurement system fails or generates deviations, during an inspection, higher than the permissible limit, the production of electricity traded is calculated as follows:

(i) If the primary measurement system functions but generates deviations higher than the regulated precision level, the production of electricity traded is determined by the primary measurement system and interpreted to an equivalent value of electricity at the deviation rate of 0%. According to the adjusted result of measurement agreed by the parties, the Seller bears the duty to calculate the payables that one of the parties owes to the other. Such payables arise during the measurement system’s inaccurate time.

(ii) If the primary measurement system does not function, the parties consider the problematic conditions and actual deviations of measurement systems according to the inspecting entity’s records and figures approved by the parties to unanimously consent to a method for calculating the production of electricity to be adjusted during the time of inaccurate measurement. If the parties fail to agree to a method and the production of electricity trade requires adjustment, the parties are responsible for settling disputes according to Article 13 of the contract.

e) If the measurement equipment burns or breaks down, the Seller is responsible for having it replaced or repaired in the shortest time to make the equipment abide by technical requirements and resume to work. The replacements or repaired equipment, before used, must be inspected according to regulations.

Article 7. Power plant dispatch and operation

1. The Seller is responsible for conforming to regulations on dispatch and operation of power plants within national electrical grid according to Ministry of Industry and Trade’s regulations on power transmission system, operation of competitive power generation market and power system dispatch procedures, electricity sector’s technical regulations and standards and relevant documents. The Seller bears the duty to maintain and operate the power plant’s generators according to technical specifications in Annex I and Annex III of the contract.

2. The Seller bears the duty to install, operate and maintain the equipment to synchronize the power plant with the national power grids. The Seller is responsible for conforming to the Ministry of Industry and Trade’s regulation on power transmission system, electricity sector’s technical regulations and standards and other regulations upon the synchronization of the power plant with the national power grids.

3. If the methods for operation of national power grids bring threats to the power plant's primary equipment, cause injury, fatality or equipment damages, the Seller is allowed to disconnect the generators from the national electrical grid.

Article 8. Invoicing and payment

1. Invoicing and payment for electricity

- For when power plants have not participated in competitive electricity market [...];

- For when power plants have directly participated in competitive electricity market:

The Seller shall send notice on electricity bill and payment documents of the previous month to the Buyer following procedures under Regulations on competitive electricity market.

a) Before the … of each month, the Seller sends notice on electricity bill to the Buyer together with the immediate preceding month’s payment documents.

b) Within … days from the date on which payment documents are received, the Buyer verifies the accuracy of such documents. The Buyer, if detecting errors, informs the Seller in writing for the latter's correction of payment documents. The Buyer, after inspecting the payment documents, informs the Seller in writing of the former's endorsement of such documents;

c) Before the … of each month, the Seller must issue payment invoices to the Buyer. Such payment invoices are made in conformity to the regulations by Ministry of Finance;

d) The Buyer bears the duty to transfer all amounts invoiced for the immediate preceding month’s electricity through banks, by the deadline of payments as agreed by the parties. The Buyer shall incur bank transfer fees;

dd) In case of insufficient figures for invoice preparation at the time of issuing payment invoice, the Seller holds the right to calculate electricity bill in advance on the basis of reasonable estimation of missing figures. The adjusted payables constitute deductibles for the month when official figure is available.

2. Disputes in payment

a) If the Buyer does not consent to parts or all payables invoiced, it must inform in writing of the amounts invoiced and reasons of its disapproval prior to the payment deadline. The Buyer bears the duty to settle all undisputed payables by or on the due date of payment;

b) Within 15 days from the date on which notice of payment dispute is received, the Seller must respond to the Buyer in writing. If the parties fail to resolve payment disputes, one of the parties can settle disputes according to Article 13 of the contract;

If disputes originate from the content of the payment list of the operator of national electric power system and electricity market, the parties’ actions shall be governed by the stipulations on resolutions for disputes in Ministry of Industry and Trade’s regulations on the operation of competitive electricity market.

c) If the party does not complains in writing about the payables in 30 days from the issue date of an invoice, it is deemed to waive its rights to complain about the payables invoiced.  

3. Calculation of interest

Imposition of interest:

a) The monthly payables for electricity deferred after the deadline according to Point d Clause 1 of this Article;

b) The payables arising according to a decision on dispute settlement according to Article 13 of the contract;

c) The adjusted payables for monthly electricity according to point dd, section 1 of this Article.

Interest accrues on monthly basis from the day immediately following the payment deadline to the actual date of payment fulfillment. The rate of such interest equals the average rate of 12-month deposit’s accrual interest rates for Vietnamese currency, as defined by four commercial banks including Vietcombank, Vietinbank, BIDV and Agribank or legitimate successors of such banks on the due date of the invoice, plus an annual interest margin rate of 3%.

4. Deductibles

The parties may deduct debts, disputed amounts settled, adjusted amounts and monthly interest from the monthly payables for electricity in the nearest month’s invoice.

Article 9. Events affecting the contract and legal remedies

1. The following events affect the Buyer’s execution of the contract.

a) The events related to the Seller’s dissolution or bankruptcy:

(i) The Seller is dissolved (except for pre-merger or pre-consolidation dissolution);

(ii) The Seller fails to settle due debts;

(iii) The Seller transfers or merges its entire entity with the creditors or with another entity for creditors’ benefits;

(iv) A court issues its rulings on the bankruptcy procedure against the Seller.

b) The Seller commits serious violations of its duties as stated in the contract and fails to correct such violations within 90 days upon the Buyer's notice of such violations;

c) The Seller is suspended by competent authorities’ decisions.

2. The following events affect the Seller’s execution of the contract

a) The events related to the Buyer’s dissolution or bankruptcy:

(i) The Buyer is dissolved (except for pre-merger or pre-consolidation dissolution);

(ii) The Buyer fails to settle due debts;

(iii) The Buyer transfers or merges its entire entity with the creditors or with another entity for creditors’ benefits  

(iv) A court issues its rulings on the bankruptcy procedure against the Buyer;

b) The Buyer commits serious violations of its duties as stated in the contract and fails to correct such violations within 90 days upon the Seller's notice of such violations;

c) The Buyer is suspended by competent authorities' decisions.

3. Legal remedies

a) If an event affecting the party’s execution of the contract occurs, the affected party has the right to enforce the legal remedies, as stated in Article 10 of this contract, against the perpetrating party;

b) Legal remedies in this contract do not nullify each other or obstruct other remedies.

Article 10. Contract termination

1. Termination of contract by agreement

The parties can engage in a written agreement on early termination of contract. For power plants participating in competitive electricity market satisfactory to electricity market, parties hold the rights to negotiate for premature termination of contract according to regulatory authorities’ documents to sign power purchase agreements according to new regulations.

2. Unilateral termination of contract

a) If an affecting event, as defined in Point a, Point c, Clause 1 or Point a, Point c, Clause 2, Article 9 of the contract, occurs, continues and affects one of the contract parties, the affected party is allowed to unilaterally terminate the contract 90 days after its delivery of a written notice to the other party;

b) If force majeure affects one party and continues in at least 180 days, the other party is allowed to unilaterally terminate the contract 30 days after its delivery of a written notice;

c) If an event affecting the party’s execution of the contract, as defined in point b, section 1 or point b, section 2, Article 9 of the contract, occurs, the affected party is allowed to unilaterally terminate the contract 30 days after its delivery of a written notice.

Article 11. Compensation for damage

1. The violating party is responsible for compensating the affected party for damages caused by the former's violations. Damages include losses, damages or costs that the affected party has incurred while executing its contracted rights and duties. The method for calculation of damages is governed by the Civil Code.

2. The compensated party, if claiming for damages, shall promptly inform the compensating party in writing of the nature of the events for damage claims. The compensated party's deferral of its notices shall not impinge on the compensating party’s duties of compensation, unless the compensating party suffers from actual damages due to the compensated party’s delay.

Article 12. Indemnity against responsibility

1. The violating party is exempt from liabilities in the following events:

a) An event of indemnity, as agreed by the parties, occurs;

b) One party's faults cause all of the other's violations;

c) One party commits violations when fulfilling a competent governmental authority's decisions, which the parties could not be aware of upon their signing of the contract;

d) Force majeure occur

Force majeure are unavoidable beyond one party’s control and obstruct or delay that party’s execution of its contracted duties, partly or fully, despite its implementation of rational measures, include but are not limited to:

i) A decision by a court or competent authority causing adverse effects on one party’s execution of its contracted duties;

ii) Natural disasters including fire, explosion, drought, flood, volcanic eruption, earthquake, landslide, tide, storm, tornado, hurricane or similar events;

iii) Riot, demonstration, revolt, insurgency, war activities whether war is declared or not, opposition, terrorism, sabotage, embargo, blockade, quarantine or similar events;

iv) The Seller’s power plants or assets are nationalized, deprived or seized according to competent governmental authorities' decisions;

v) The Seller is not licensed by competent authorities or fails to obtain written approvals necessary despite its fulfillment of all duties according to the laws related to the said licenses and written approvals.

2. Announcement and confirmation of indemnity

a) The violating party must inform the other in writing of exemptions and possible consequences;

b) When indemnity ends, the violating party must immediately inform the other. If the violating party fails or delays its announcements to the other party, it must compensate for damages caused;

c) The violating party bears the duty to evidence its indemnity with the affected party.

3. Indemnity and refusal to execute the contract in force majeure

a) The party committing violations due to force majeure is responsible for regularly reporting to the other party about the former’s implementation of solutions against force majeure or information reasonably requested by the other party. Such reports shall evidence the violating party's adducing of force majeure. The other party must be informed of force majeure' end time in 48 hours from the finis of such events, unless loss of communication occurs;

b) The party affected by force majeure is only excused for its non-execution or delay of contracted duties due to such events after it release notices and executes duties of recovery according to point a of this Article;

c) If force majeure obstructs one party's execution of its contracted duties in at least 180 days, one of the parties is allowed to unilaterally terminate the contract according to Point b, Clause 2, Article 10 of this contract.

Article 13. Settlement of disputes

1. If disputes between the contract parties arise, the party provoking disputes must inform the other party in writing of the contents of such disputes. The parties are responsible for discussing solutions against disputes in 60 days upon the date of the notice from the party raising such disputes. The parties are responsible for discussing disputes over payments in 15 days. The parties are allowed to negotiate and execute an extension of dispute settlement time in writing.

2. If the parties fail to settle disputes through discussions within the time limit as per section 1 of this Article, the parties shall agree to forward their disputes to the Electricity Regulatory Authority or other authorities as unanimously selected by the parties or unilaterally file lawsuits to settle disputes according to relevant laws.

Article 14. Restructuring of electricity sector and transfer of rights and duties

1. Restructuring of electricity sector and transfer of the Buyer’s rights and duties

The parties agree that the Buyer may be reorganized, restructured, dissolved or gradually deprived of its sole capacity of purchasing electricity for the conversion of the electricity sector's model to that of the competitive power market according to the pathway approved by Prime Minister or subsequent written amendments. When a competent governmental authority issues a decision on reorganizing, restructuring or dissolution, the Buyer is allowed to assign all or parts of its contracted rights and duties without the Seller's consent to one or many successors, which are defined by the competent governmental authority. Such successors are responsible for executing the Buyer’s legal rights and duties according to the laws.

The Seller must approve in writing all of the Buyer’s assignment or relegation of its rights and duties from this contract.

2. Transfer of the Seller’s rights and duties

The Seller is only allowed to assign its rights and duties from this contract to successor(s) after obtaining the Buyer’s written consent. The Buyer cannot reject the Seller’s assignment or relegation without a reason. However, the Seller can relegate or assign parts or all of its contracted rights and duties on financing or financial arrangements for the power plant without the Buyer’s agreement. The effect of this contract remains effective to continue the benefits and duties of the Seller's successors, assignees or relegated entities.

3. Transition period of competitive electricity market

If competitive electricity sale market is replaced by other models as per competent governmental authorities' decisions during the term of this contract, the parties are responsible for negotiating changes or replacements of this contract in conformity with the new electricity market structure on the condition that the parties' electricity prices from the contract remain unaffected.

Article 15. Retention of documents and provision of information

1. Retention of documents

The parties are responsible for retaining documents, data, materials or information evidencing the accuracy of invoices, prices or calculations as per the contract or proving the parties' conformity to the contract.

2. Provision of information

Each party is responsible for providing the other party with figures, materials or papers necessary at reasonable level to evince the accuracy of payment invoices, pricing formulas or calculations as per the contract or verify the parties' abidance by the contract.

Article 16. Other expenses

Each party is responsible for paying taxes and fees or settling debts arising during its execution of the contract. The parties agree that this contract is not inclusive of expenses for power transmission, power distribution or similar expenses. Each party is responsible for covering such expenses according to regulations and law.

Article 17. Authorized representative and exchange of information

1. Authorized representative

The authorized representatives of the contract parties are:

The Seller:                                                         The Buyer:

_________________________            __________________________

_________________________            __________________________

2. Exchange of information

a) Notices, invoices or essential information exchanged during the enforcement of this contract must be executed in writing. Their issue dates and relation to the contract must be clearly specified. The original of a fax must be sent by pre-paid post. Notices, invoices or information must be delivered to the following addresses:

The Seller: …

 ________________________________

The Buyer: …

         ________________________________

b) Notices, invoices or information sent as per Point a of this Clause are deemed received:

(i) when delivered by hand; or:

(ii) when proof of delivery by guarantee post is signed; or:

(iii) when a fax is actually received and the sender attains a confirmation of no fax delivery errors; or:

(iv) when a regular postage's arrival is confirmed.

Article 18. Confidentiality

Each party bears the duty to maintain confidentiality of information and documents given by the other party as per the contract. Each party shall not disclose, publicize or exploit such information and documents for any purposes save the execution of its contracted duties. Exceptions are:

1. Documents and information are publicized or exploited according to the laws.

2. Documents and information are demanded by competent authorities.

3. Documents and information are announced or publicized by entities outside the contract.

Article 19. Other stipulations

1. Contract amendments

All amendments to the contract must agree upon by both parties in writing and reported to Electricity Regulatory Authority of Vietnam.

2. Completion of contract

This contract is the final complete agreement between the parties and replaces all previous discussions, information and correspondences arising prior to the signing of this contract.

3. Third party

This contract only benefits its parties and does not constitute any benefits or duties for a third party.

4. Void of joint venture

This contract does not constitute a joint venture or association between the parties or impose any legal duty or liability related to a joint venture or association on any of the parties. None of the parties is allowed to engage in or represent the other party to engage in an agent contract or act as a representative to perform duties against the other party.

5. Waiver of rights

One party's relinquishment of its contracted duties must be executed in writing and endorsed by its authorized representative’s signature. One party's non-execution or deferral of its rights from this contract shall not be construed as its abnegation of such rights.

6. Execution of remaining duties

Termination, closure or expiration of contract does not end the parties’ execution of their remaining duties as per the contract.

7. Applicable law

The contract is interpreted and executed as per Vietnamese laws.

8. Separability of contents

If a part of the contract does not correspond with the laws or becomes void as per a competent government authority’s decision, other parts of the contract sustain effect on the condition that remaining parts constitute sufficient contents without the ineffectual part.

This contract is executed into 09 equally valid originals. Each party retains 04 originals. The Buyer is responsible for sending one original to the Electricity Regulatory Authority of Vietnam./.

 

 

Appendix I

PRIMARY PARAMETERS OF THE POWER PLANT

(Attached to Contract No. …… dated ………)

This includes description, charts and technical specifications of the power plant

(Primary specifications of the power plant shall be recalibrated after signing contracts for procurement of primary equipment of the power plant).

 

Appendix II

MEASUREMENT AND DATA COLLECTION SYSTEM

(Attached to Contract No. …… dated ………)

I. LOCATION AND FEATURES OF THE MEASUREMENT SYSTEM

1. Location for the installation of the measurement system:

2. The measurement system’s features must conform to Circular of Ministry of Industry and Trade on electrical measurement.

II. TECHNICAL REQUIREMENTS FOR THE MEASUREMENT SYSTEM

Technical requirements for measurement equipment, measurement circuit, lead seal method and meters' data gathering and reading system must abide by the regulations of Ministry of Industry and Trade on electrical measurement.

III. LOCATION FOR MEASUREMENT

The parties agree to use the power plant’s current measurement spots as follows:

Primary location for measurement:

Backup location 1 for measurement:

Backup location 2 for measurement:

Measurement location serving operation and figure reconciliation of electricity market:

IV. METHOD OF DETERMINING PRODUCTION OF ELECTRICITY DELIVERED

1. Production of electricity delivered

a) The following formula defines the production of electricity of the Buyer in a billed month:

AG =

AG:  Production of electricity that the Buyer pays to the Seller in the billed month (kWh)

b) The following formula defines the production of electricity that Seller receives from the national power grids in a billed month:

AN =

In which:

AN: Production of energy delivered from grids of measurement points in the month (kWh).

2. During competitive electricity market phase, monthly electricity delivery method must conform to regulations on electricity measurement in competitive electricity market issued by Ministry of Industry and Trade.

 

Appendix III

AGREEMENT ON OPERATIONAL CHARACTERISTICS

(Attached to Contract No. …… dated ………)

 

Appendix IV

AGREEMENT ON SCADA/EMS SYSTEM, COMMUNICATION, PROTECTIVE AND AUTOMATIC RELAYS

(Attached to Contract No. …… dated ………)

 

Appendix V

PRICE AND PAYMENT FOR ELECTRICITY

(Attached to Contract No. …… dated ………)

I. ELECTRICITY GENERATION PRICE

1. Power purchase agreement price

The following formula determines power purchase agreement price for a thermal power station at the payment time in month t, year j (PC,j,t):

In which:

FCj: Fixed price in the year j (VND/kWh);

FOMCj,t: Price for operation and maintenance in month t, year j (VND/kWh);

: Variable price in month t, year j (VND/kWh).

For hydroelectric power plant, equals 0.

1.1. Fixed price:

Average fixed price (excluding value added tax) is ……… (VND/kWh);

The following table sets the annual fixed price FCj (VND/kWh) from the initial date of commercial operation to the end of the power plant’s economic life (excluding value added tax):

1.2. Price for operation and maintenance:

The following formula defines price for operation and maintenance in month t, year j:

In which:

: Components of price for operation and maintenance by major repair cost and other expenses in year j (VND/kWh);

: Components of price for operation and maintenance by workforce cost in month t, year j (VND/kWh).

a) Components of the fixed price for operation and maintenance by major repair cost and other expenses in year j: is determined in the following formula (VND/kWh):

In which:

Components of fixed price for operation and maintenance by major repair cost and other expenses in the base year are … (VND/kWh);

i: Slippage rate of components of the price for operation and maintenance by major repair cost and other expenses according to this Circular;

l: Ordinal number of a payment year from the base year (I=1 in the base year).

b) Components of price for operation and maintenance based on personnel cost in month t, year j: is determined using following formula (VND/kWh):

- In case salary for calculation in electricity price equals minimum region-based salary:

In which:

: Components of price for operation and maintenance based on personnel cost in the base year are …… (VND/kWh);

Lmin,j,t: Minimum region-based salary at the time of payment in month t, year j (VND/month);

Lmin,b: Minimum region-based salary in the base year is ...... (VND/month).

- In case total personnel cost TCnc is calculated based on construction and equipment investment rate, components of price for operation and maintenance based on personnel cost are determined using following formula (VND/kWh):

In which:

: Components of price for operation and maintenance based on personnel cost in the base year (VND/kWh);

i1: Slippage rate of components of price for operation and maintenance based on personnel cost, determined based on consumer price index (CPI) in the year (j-1) compared to that in the year (j-2) publicized by General Statistics Office of Vietnam in December of the year (j-1) but not exceeding 2.5%/year;

l: Ordinal number of a payment year from the base year (I = 1 in the base year, i1 = 0).

1.3. Variable price:

Variable price in month t, year j: (VND/kWh) is determined using following formula:

In which:

: Components of variable price adjusted based on variation of cost of primary fuel (coal, natural gas, LNG) of power plants in month t, year j (VND/kWh);

: Components of variable price adjusted based on variation of cost of secondary fuel (oil) of power plants in month t, year j (VND/kWh);

: Components of variable price adjusted based on other variations of power plants in year j (VND/kWh).

: Transport price for primary fuel of power plant in month t, year j (VND/kWh).

a) Components of variable price adjusted based on variation of cost of primary fuel:

: Components of variable price adjusted based on variation of cost of secondary fuel (oil) of power plants in month t, year j (VND/kWh): :

In which:

: Average heat loss rate is …………. Kcal/kWh or kJ/kWh or BTU/kWh.

: price of primary fuel of billing period calculated by weighted average based on quantity of invoices according to power purchase agreements in the month (excluding value-added tax).

In case power purchase agreements cannot separate fuel transport price, price of primary fuel of billing period includes transport price for primary fuel.

kHR: adjustable coefficient for average heat loss rate depending on practical operation conditions, temperature of coolant and ambient temperature agreed upon by both parties;

 kHS: Percentage of performance attenuation in year j (%);

l: Order of commercial operation year, round up/down to the nearest year mark from the commercial operation date of the entire power plants;

In case the power plants do not import primary fuel during billing month, price of primary fuel shall equal price of primary fuel in the nearest month where primary fuel is imported;

b) Components of variable price adjusted based on variation of cost of secondary fuel:

Components of variable price adjusted based on variation of cost of secondary fuel (oil) of power plants in month t, year j (VND/kWh): :

In which:

: Components of variable price adjusted based on variation of cost of secondary fuel (oil) of power plants in the base year are ……… (VND/kWh);

kHS: Percentage of performance attenuation in year j (%);

l: Order of commercial operation year, round up/down to the nearest year mark from the commercial operation date of the entire power plants;

: Price of secondary fuel (oil) for electricity generation including fees for transport to the power plants at the time of payment in month t, year j is …… (VND/kg);

: Price of secondary fuel (oil) for power generation in the base year is …... (VND/kg).

c) Components of variable price adjusted according to other variations:

Components of variable price adjusted based on variation of cost of secondary fuel (oil) of power plants in month t, year j (VND/kWh): :

In which:

: Components of variable price adjusted based on other variations of power plants in the base year are …… (VND/kWh).

kHS: Percentage of performance attenuation in year j (%);

l: Order of commercial operation year, round up/down to the nearest year mark from the commercial operation date of the entire power plants;

i: Slippage rate of variable price adjusted based on other variations according to this Circular.

d) Transport price for primary fuel:

Transport price for primary fuel of power plants in month t, year j (VND/kWh) is determined using following formula:

In which:

: Average heat loss rate is …………. Kcal/kWh or kJ/kWh or BTU/kWh.

kHR: adjustable coefficient for average heat loss rate depending on practical operation conditions, temperature of coolant and ambient temperature agreed upon by both parties;

kHS: Percentage of performance attenuation in year j (%);

l: Order of commercial operation year of the power plants;

: Transport price for primary fuel at the time of payment in month t, year j is determined by weighted average by quantity of invoices under fuel transport agreements and contracts for storage, regasification and distribution of LNG (if any) or written agreements (excluding value-added tax), transport price for primary fuel shall be in VND/kcal or VND/kJ or VND/BTU;

In case electricity sale and purchase agreements cannot separate components of transport price, components of price for storage, regasification and distribution of LNG fuel, price of primary fuel shall include transport price for primary fuel.  In such case, transport price for primary fuel shall equal 0.

In case the power plants do not import primary fuel during billing month, transport price of primary fuel shall equal transport price of primary fuel in the nearest month where primary fuel is imported;

Unless the Seller has entered into mid-term and long-term fuel supply agreements with fuel suppliers, the Seller is responsible for organizing bidding to select fuel suppliers and/or transporters as per bidding laws and being legally responsible for ensuring equality, competitiveness and transparency.

For cases in which coal transporters cannot be selected via bidding due to special reasons. The Seller is responsible for negotiating with coal suppliers or transporters based on unit price issued by competent agencies; in case unit price has not been issued by competent agencies, the Seller is responsible for negotiating with coal suppliers or transporters based on unit price calculated on the basis of internal unit price of selected transported which must not exceed unit price of other transporters providing the same method of transport (if any).

Prior to signing fuel transport contracts without bidding, the Seller must provide the Buyer with documents.  Within 20 days from the date on which the Seller provides all documents and the Buyer has not provided feedback regarding selection of fuel transporters, the Seller may sign fuel transport agreements based on details within the Seller’s responsibilities, sign contracts for fuel sale and transport as per applicable laws while guaranteeing competitiveness and transparency.

2. Specific price:

Specific connection price PDT (excluding value-added tax) is … VND/kWh or VND/kW or VND/month.

Ash and slag disposal PTX (excluding value-added tax) is … VND/kWh.

II. ELECTRICAL PRODUCTION ACCORDING TO CONTRACT

1. Average electrical production over multiple years [at delivery point of power plants] based on contract period of power plants is [……] (million kWh).

2. Electrical production under yearly contracts, monthly contracts countersigned by the Buyer and the Seller according to Regulations on competitive electricity market.

III. ELECTRICITY PAYMENT UNDER CONTRACT

III.1. Before commercial operation date

Regarding costs for test operation and inspection for acceptance before commercial operation date: Both parties shall agree upon according to Article 4 hereof. 

III.2. After commercial operation date

1. In case power plants have not participated in competitive electricity market, power plants have indirectly participate in competitive electricity market or power plants have participated in competitive electricity market and temporarily ceased to participate in the competitive electricity market under decision of competent agencies or market intervention: 

Electricity rate (Rtt) of power plants is calculated as follow:

Rtt = Rt x (1 + VAT)

In which:

Rt: Electricity rate for month t, year j, excluding VAT (VND);

Rt = (PC,j,t x Qm,j,t + Rk + Rđt + RTh)

PC,j,t: Power sale and purchase agreement price specified under Section I of this Annex (VND/kWh);

Qm,j,t: Electrical production at point of delivery of the power plants (kWh);

Rk: Other costs (VND), including:

Costs for test machines suitable for testing schedules approved by operators of electrical grids and electrical market, determined by: (i) Measured electrical production of test machines during testing period and (ii) Variable price specified under Section I of this Annex;

Adjustable payment (if any) (VND);

Other costs agreed upon by both parties.

Rđt: Total payment of specific costs according to contracts calculated on the basis of specific connection price (PDT) and ash, slag disposal price (PTX) as specified under Section I of this Annex (VND).

RTh: Sum of taxes, fees and payables in the months according to relevant law provisions agreed upon by the Seller and the Buyer (together with appropriate documents) (VND);

VAT: Value-added tax prescribed by the Government (%).

In case power plants are under contracts signed by a Seller with multiple Buyers, electricity rate Rt (excluding VAT) shall be regulated by the Seller on a consensus basis and distributed to the Buyers based on percentage of electrical production delivered in the month (billing period) publicized by operators of electrical grid and electricity market.

2. In case the power plants have officially participated in competitive electricity market

2.1. Sum of differences according to contracts in month t determined using following formula:

In which:

: Sum of differences in electricity rate under contracts in month t (VND) excluding VAT;

D: Total number of days in month t;

d: Transaction date in month t;

I: Total transaction cycles of transaction date d;

i: Transaction cycles of transaction date d;

: Power sale and purchase agreement price specified under Section I of this Annex (VND/kWh);

FMPd,j: Full market price applied to electricity generation unit of transaction cycle i, date d in month t (VND/kWh);

: Contract production in transaction cycle i, date d in month t (kWh).

2.2. Sum of other payments according to contracts includes:

a) Costs for paying interest of late payment fine according to Article 8 of Contract;

b) Adjustable payment (if any);

c) Other costs agreed upon by both parties.

2.3. Other payments of power plants [signing power sale and purchase agreements with the Buyer] are determined as follows:

a) Difference between monthly electricity production and total electricity production measured over transaction cycles in the month according to Regulations on competitive electricity market is paid under contract price Pc,j,t specified under Section I of Annex V of the Contract; 

b) In case thermal power generators are forced to suspend or 1 boiler must be suspended to reduce capacity according to Regulations on competitive electricity market:

Payables in this case shall equal total starting costs depending on starting conditions.

Starting costs depending on starting conditions agreed upon by the Seller and the Buyer based on fuel rate, secondary materials, etc. are as follows [……].

c) In case power plants have test machines suitable for testing schedules approved by operators of electrical grid and electricity market, payables for generated electricity of power plants according to Regulations on competitive electricity market are determined as follow:

- Test machines: Equal to variable price specified under Section I Annex V of Contract;

- Non-test machines: Equal to power sale and purchase agreement price specified under Section I Annex V of Contract; 

d) In case the power plants have machines participating in AGC test or other tests at approved request of operators of electrical grid and electricity market: Payables for electrical production of power plants according to Regulations on competitive electricity market are determined according to power sale and purchase agreement price specified under Section I Annex V of Contracts;

dd) Other payables according to Regulations on competitive electricity market.

Other payables according to Regulations on competitive electricity market under Section 2.3 shall be calculated and distributed to the Buyer by the Seller based on percentage of electrical production delivered in the month (billing cycle) publicized by operators of electrical grid and electricity market.

2.4. Total payment of specific costs according to contracts calculated on the basis of specific connection price (PDT) and ash, slag disposal price (PTX) as specified under Section I of this Annex (VND).

Total payables for specific price under Section 2.4 shall be calculated and distributed to the Buyer by the Seller based on percentage of electrical production delivered in the month (billing cycle) publicized by operators of electrical grid and electricity market.

2.5. Total monthly electricity rate under Contract Rtt is determined as follow:

Rtt = (RTT,t + RC,t + RC,k,HD+ RC,k,TT + Rđt + RTh)x(1+VAT)

In which:

RTT,t: Total market payables according to monthly payment schedule provided by operators of electrical grid and national electricity market (VND);

RC,t: Total differences in electricity rate under contract in month t (VND) determined under Clause 2.1 of this Section (VND);

RC,k,HD: Total of other payables according to the Contract (VND) determined under Clause 2.2 of this Section;

RC,k,TT: Total of other electricity rates according to regulations on competitive electricity market (VND) determined under Clause 2.3 of this Section;

Rđt: Total payables for specific price in the month according to the Contract determined under Section 2.4 of this Section (VND);

RTh: Total taxes, fees, payables in the month according to relevant law provisions calculated and distributed to the Buyer by the Seller depending on percentage of electricity production delivered in the month (together with appropriate documents) (VND);

VAT: Value-added tax prescribed by the Government (%).

2.6. Foreign exchange rate difference (FED): On an annual basis, based on total loan in foreign currency, plans for repaying loan in foreign currency, figures on principle debt paid in practice, conversion rate agreed upon by both parties in electricity price solutions and conversion rate of the previous year, both parties shall calculate difference in rates, propose payment solutions, send to Electricity Regulatory Authority of Vietnam and request Ministry of Industry and Trade to consider approving payment solutions.

Foreign exchange rate difference (FED) is calculated using following formula:

In which:

m: Number of foreign currencies used in electricity price solution agreed upon by both parties (type);

n: Number of times the principle amount in foreign currency i is paid in billing year (time);

Di,j: Principle debt in foreign currency paid in practice for the jth time in billing year. Principle debt that has been paid in practice in foreign currency i in billing year shall not be greater than principle debt in foreign currency i in respective year in electricity price solution agreed upon by both parties as follow:

λi,j: Conversion rate in the jth payment of foreign currency i in the year (…/VND);

λi,b: Base exchange rate of foreign currency i agreed upon by both parties in electricity price solution (…/VND);

VAT: Value-added tax prescribed by the Government (%).

 

Appendix VI

MAIN PARAMETERS FOR PRICING OF ELECTRICITY

(Attached to Contract No. …… dated ………)

 

Appendix VII

PROJECT STAGES

(Attached to Contract No. …… dated ………)

I. PROJECT STAGES

1. Official commencement date of construction of the power plant:     […]

2. Initial date of interlock tests:          […]

3. Date of initial circuit closure:                                  […]

4. Test date:                                                  […]

5. Date of commercial operation of the generator i:                 […]

6. Date of the power plant’s commercial operation:                 […]

II. DOCUMENTS TO BE PROVIDED TO THE BUYER BY THE SELLER

The Seller bears the responsibility to provide the Buyer with valid copies of the following documents for the endorsement of the date of commercial operation: […].

 

Appendix VIII

DOCUMENTS RELATING TO NON-BIDDING FUEL TRANSPORT AGREEMENTS

(Attached to Contract No. …… dated ………)

Prior to signing fuel transport contracts without bidding, the Seller must provide the Buyer with legitimate copies of following documents: […].

 

Appendix IX

TEST PROCEDURE

(Attached to Contract No. …… dated ………)

 

Appendix X

REPORT ON ELECTRICITY BILL PAYMENT

… Quarter of the year …

(Attached to Contract No. …… dated ………)

 

 

 

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