Vietnam Wind Power Purchase Agreement

In 2019, the Vietnamese government authorized a feasibility study for an offshore wind farm project in an area off the Cape of Ké Gé in Binh Thuan province, southern Vietnam. Should the project be completed, it would be the largest offshore wind farm in the world at the time of the letter, with a capacity of 3,400 MW. Enterprize Energy, a UK renewable developer, is leading the project, in collaboration with Vietnamese partners Petroleum Equipment Assembly – Metal Structure (PVC-MS) and Viét Nam-Russia Oil and Gas Jointe (“Vietsovpetro”), which is responsible for the design, construction and installation of offshore infrastructure and transmission network connection. If the project continues, the first 600 MW are expected to be commissioned in early 2023, with the remaining phases operational in 2026. The developer stated that the total investment in this project is estimated at $11.9 billion.4 Please note that this document is limited to briefly highlight the major revisions to the revised PPA model of Circular No. 02 compared to the previous PPP model for wind projects. EvN is required to purchase all of the electricity generated by a grid wind project at the prescribed rate. For offshore and onshore wind projects that reach the COD between November 1, 2018 and November 1, 2021, tariffs have been increased to VND 2.223 (or 9.8 us cents) per kWh) and to 1,928 VND (or 8.5 US cents) per kWh. Although the revised tariffs are an improvement over previous tariffs, they remain low relative to wind tariffs in other South Asian countries. The Vietnamese government has attempted to address some of these concerns by issuing Circular 02/2019/TT-BCT (“Circular 2”), which amended the wind AA model and clarified the procedure for negotiating and implementing AAEs for wind projects in Vietnam. Some of these changes have been welcomed by investors, such as the lifting of any liability restrictions on Electricity Vietnam (EVN) in the event that the AEA is terminated due to the failure of EVN. In the table below, we outline some of the key provisions of the Wind PPA model, which have been the focus of concern for both investors and lenders.

9 Renewables Now, “Japan`s Renova participates in 144 MW wind portfolio in Vietnam,” May 11, 2020. This should remain a problem for some, if not most, developers and lenders looking at the solar electricity sector in Vietnam, given that the burden of proof to prove their losses falls on the seller and whether the recovered damages will be sufficient to cover at least the amount it owes its lenders and its investment costs and expected returns. v In addition to the content defined in standardized AAEs, the seller and buyer can only complete the content to clarify the responsibilities and power of each party. Additional content must match the content of the standardized AAE. Compensation in the event of termination, commonly referred to as the “buyback amount” is the primary commercial means used by developers (and their lenders) to control the risk that, if AAEs are terminated without fail, they will not be transferred to a failed asset of a value only “of scrap” (since, without AAEs, there is no right to sell to another buyer (provided it is worth it).

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