The Ministry of Industry and Trade has completed the draft Decree stipulating the development mechanism for gas-fired power projects utilizing natural gas and LNG for public consultation.

In implementation of the Prime Minister's directive in Directive No. 05/CT-TTg dated February 14, 2024, on ensuring electricity supply, as well as coal and gas provisions for power generation in the coming period, and in compliance with the Electricity Law and the Prime Minister's decisions regarding Power Development Plan VIII, the Ministry of Industry and Trade has expeditiously formulated the draft Decree on the development mechanism for power projects utilizing natural gas and LNG.

Although the Decree is being processed under an expedited procedure, the Ministry of Industry and Trade is soliciting wide-ranging feedback from affected stakeholders as well as the public. All comments should be submitted to the Ministry of Industry and Trade via the Electricity Regulatory Authority of Vietnam.

Accordingly, this Decree applies to organizations and individuals participating in investments in power plant projects utilizing natural gas and LNG, specifically as follows:

1. Power generation entities owning gas-fired power plants interconnected to the national power grid.

2. Power utility entities, including: Vietnam Electricity (EVN); Vietnam Oil and Gas Group (PVN); and the Power System Dispatch and Electricity Market Operator.

Mechanism for gas-fired power plant projects utilizing imported LNG

1. Organizations and individuals investing in LNG-to-power plant projects must proactively implement projects included in the Power Development Plan in compliance with regulations to ensure project efficacy; enterprises shall proactively negotiate, execute, and assume responsibility for commercial contracts and agreements.

2. The Government agrees in principle to a fuel price pass-through mechanism from gas prices to electricity tariffs for power plants.

3. For the period up to 2030, the Government stipulates that the minimum contracted energy volume (Qc) under long-term Power Purchase Agreements (PPAs) shall be at least 70% during the debt repayment period of the power project, but shall not exceed 7 years. This is intended to ensure investment bankability, mitigate sharp shocks to retail electricity tariffs, and guarantee fair competition with other power generation sources in the electricity market.

Mechanism for gas-fired power plants utilizing domestic natural gas

1. For key oil and gas projects that make significant contributions to economic development, ensuring national energy security, national defense, and protecting Vietnam's sovereignty, the Government agrees in principle to a gas price pass-through mechanism to electricity tariffs for power plants.

2. The Ministry of Industry and Trade shall provide guidelines on the off-take mechanism for upstream gas volumes from the Blue Whale (Ca Voi Xanh) and Block B gas fields.

Key provisions applicable to Power Purchase Agreements (PPAs)

1. Power generation entities shall execute contracts with Vietnam Electricity based on the model contract promulgated by the Ministry of Industry and Trade to participate in the competitive wholesale electricity market and sell electricity generated by the power plant on the spot market.

The power purchase costs of power plants utilizing domestically exploited natural gas and imported LNG are reasonable and valid expenditures, which shall be calculated and adjusted in the retail electricity tariff.

2. The governing language of the contract is Vietnamese. The Buyer and Seller may agree to execute an additional version in English, and the parties may agree that the English version shall prevail.

3. Governing law and dispute resolution shall comply with Vietnamese legislation. The parties may agree to apply foreign law to matters not comprehensively provided for under Vietnamese law.

4. The electricity tariff in the PPA shall be calculated in US Dollars, and payments shall be settled in Vietnamese Dong.