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In brief

The Ministry of Industry and Trade of Vietnam (MOIT) recently issued Circular No. 57/20201 replacing Circular No. 56/2014,2 on the method of determining tariffs and PPA negotiation and appraisal procedures for conventional power projects (including LNG-to-power, hydropower and other thermal power). Circular No. 57 generally retains the key principles on tariff determination and negotiation of the PPA draft, and provides for, among other things, updates to the principles and method of determining tariffs and the re-introduction of re-negotiation on tariffs and the PPA based on the finalized investment capital of the project. Circular No. 57 aims to provide for a more streamlined regulation with regard to the negotiation and implementation of tariff and the PPA, which is one of the key concerns of investors/developers of conventional power projects.


Key takeaways

Circular No. 57 provides for the following key points with regard to the principles for tariff determination, as well as negotiation and appraisal of PPAs:

  • introducing specialized interconnection price as a component to determine the power-generating tariff
  • re-introducing the method for re-negotiation on tariffs and the PPA based on the finalized investment capital of the relevant project
  • making amendments and supplements to the PPA upon change in laws or policies as promulgated by the state agencies
  • principles for tendering/selection of fuel suppliers and/or fuel transporters

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1 Circular No. 57/2020/TT-BCT of the Ministry of Industry and Trade dated 31 December 2020 on the method of determining tariffs and PPA (“Circular No. 57“).
2 Circular No. 56/2014/TT-BCT of the Ministry of Industry and Trade dated 19 December 2014 on method of determining tariffs and procedures of appraising PPA (“Circular No. 56“).

Author

Frederick Burke is a member of Baker McKenzie’s Global Policy Committee, comprised of the Firm’s Managing Partners globally, responsible for driving the overall strategy of the Firm. He is also the Managing Partner of our Baker McKenzie offices in Vietnam, more particularly in Hanoi and Ho Chi Minh City. He has more than 30 years’ experience practicing in the areas of corporate law, real estate, international trade and is highly regarded for his work on foreign investment projects in Vietnam and China for key players in property development, trade, IT/C, and project finance, among other areas. Mr. Burke is the go-to advisor for big deals in Vietnam’s flourishing industries including: renewable energy, agribusiness, airlines, hotels, resorts and tourism and large scale infrastructure projects. He is currently the representative of the American Chamber of Commerce in Vietnam to the Prime Minister’s Advisory Council on Administrative Reform in Vietnam and he has been recognized by the Ministry of Justice of Vietnam for his “Outstanding contributions in the field of international legal cooperation”. Mr. Burke is consistently ranked as a Leading Lawyer in Corporate / M&A by leading legal publications in Vietnam (Legal 500 AP 2007-2018; Chambers and Partners AP 2012-2018; IFLR1000 2010-2018).

Author

Thanh Hai Nguyen is an Associate in Baker McKenzie's Hanoi office.