CIRCULAR

 AMENDMENTS TO CIRCULAR NO. 57/2014/TT-BCT DATED DECEMBER 19, 2014 OF THE MINISTER OF INDUSTRY AND TRADE ON METHODS AND PROCEDURES FOR DEVELOPING, PROMULGATING ELECTRICITY GENERATION PRICE RANGE AND CIRCULAR NO. 57/2020/TT-BCT DATED DECEMBER 31, 2020 OF THE MINISTER OF INDUSTRY AND TRADE ON METHODS FOR DETERMINING ELECTRICITY GENERATION PRICE AND POWER PURCHASE AGREEMENT PRICE

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

Pursuant to the Law on Electricity date December 3, 2004; the Law on amendments to the Law on Electricity dated November 20, 2012; and the Law on amendments to the Law on Electricity dated January 11, 2022;

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

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

The Minister of Industry and Trade promulgates Circular on amendments to Circular No. 57/2014/TT-BCT dated December 19, 2014 of the Minister of Industry and Trade on methods and procedures for developing, promulgating electricity generation price range and Circular No. 57/2020/TT-BCT dated December 31, 2020 of the Minister of Industry and Trade on methods for determining electricity generation price and power purchase agreement price.

Article 1. Amendment to Circular No. 57/2014/TT-BCT dated December 19, 2014 of the Minister of Industry and Trade on methods and procedures for developing, promulgating electricity generation price range

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“2. “a standard power plant” refers to a thermo-electric plant with capacity of popular assemblies determined in the national electricity development planning that represents a type of thermo-electric plant with the same electricity generation technology, used fuel and is used to calculate electricity generation price range for such power plant.”

2. Amend Clause 4 Article 2 as follows:

“4. “total investment” refers to total investment of the project determined in accordance with applicable regulations and law, fundamental design, and other contents of feasibility study of construction project.”

3. Amend Clause 2 Article 3 as follows:

“2. For thermo-electricity plant: ceiling costs mean electricity generation price of the standard power plant with the methods for determining electricity generation price of standard power plant are specified under Articles 5 through 8 hereof.”

4. Amend Clause 3 Article 6 as follows:

“3. Investment rate means the investment in 1 kW of average capacity of the standard power plant (excluding costs for port, infrastructures, storage, regasification, and transport of LNG from port warehouse to power plant) and is calculated using data in the approved feasibility study of construction project, and total investment effective at the time of calculating electricity generation price range or data negotiated under power purchase agreement (if any), and is updated based on foreign exchange rate at the time of calculation.”

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

“a) Loan interest rate rd (%) is calculated using weighted average interest rate of loans in VND and foreign currency according to the following formula:

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In which:

D_F: Percentage of loans in foreign currency in total loans as specified under Appendix I hereof (%);

D_D: Percentage of loans in VND in total loans as specified under Appendix I hereof (%);

r_d,R: Interest of loans in foreign currency determined on the basis of interest of loans in foreign currency of power plant projects where negotiation on electricity price has been carried out within 5 years prior to the date of calculating electricity generation price range (%/year);

r_d,D: Interest of loans in VND determined on the basis of interest of loans in VND of power plant projects where negotiation on electricity price has been carried out within 5 years prior to the date of calculating electricity generation price range (%/year).”

6. Amend Clause 5 Article 6 as follows:

“Annual average electricity at the point of delivery A_bq (kWh) of the Standard Power Plant is determined using the following formula:

A_bq = P_t x T_max x (1 - k_CS)

In which:

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T_max: Number of operation hours at maximum capacity (hour);

k_CS: Average power attenuation rate of the entire economic life of the power plant based on technical dossiers of manufacturers. The case where average power attenuation cannot be identified, average power attenuation rates of power plants with similar technology and install capacity (%) shall prevail.”

7. Amend Article 8 as follows:

“Article 8. Methods for determining variable cost of Standard Power Plant for the year of application of the price range

Variable cost of Standard Power Plant for the year of application of the price range (VC) is the component to recover costs of fuel and other variable costs calculated with the following formula:

VC = HR x P_nlc x (1 + f)

In which:

VC: Variable costs of Standard Power Plant (VND/kWh);

HR: Net heat rate calculated under load specified under Appendix I attached hereto, expressed as kcal/kWh, kJ/kWh or BTU/kWh;

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P_nlc: Costs of primary fuel of Standard Power Plant (VAT not included), expressed in VND/kcal, VND/kJ, or VND/BTU, and determined as follows:

- In case of a coal-fired thermal power plant, coal price already covers depreciation, operation, management, and insurance costs (if any) but does not cover transport rate. If transport rate cannot be identified in accordance with fuel supply agreement, costs of primary fuel shall be determined using fuel costs under fuel sale agreement for the primary fuel;

- In case of gas turbine combined cycle power plant using natural gas, primary fuel costs refer to gas cost at the wells without including costs for transporting the gas to power plants;

- In case of gas turbine combined cycle power plant using LNG, primary fuel costs include LNG import costs, LNG import duties (if any), costs for transporting LNG to regasification ports and do not include costs for storage, regasification, and distribution after regasification (if any).

If power plants have not entered into fuel supply agreements, data under agreements between project developers and fuel suppliers or data calculated by counseling organizations shall prevail.

8. Amend Article 10 as follows:

“Article 10. Procedures for developing and promulgating electricity generation price range

1. Within 15 working days from the date on which Feasibility study for construction investment of power plants is approved. Project developers of these power plants are responsible for providing Feasibility study for construction investment for Vietnam Electricity (EVN).

2. Before November 1 of each year, the EVN is responsible for:

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b) Propose Standard Power Plant and parameters involved in the calculation of electricity generation price for Standard Power Plant under Appendix I hereof depending on implementation of power purchase agreements and produce documents on calculation of electricity generation price range in accordance with Article 11 hereof and request Electricity Regulatory Authority of Vietnam (ERAV) to appraise:

c) Calculate ceiling costs of hydroelectricity plants using methods under Article 9 hereof.

3. Within 5 working days from the date on which documents on calculation of electricity generation price range under Point b Clause 2 of this Article are received, the ERAV is responsible for inspecting legitimacy of the documents. If necessary, the ERAV shall request the EVN to amend or clarify contents of the documents. Within 15 working days from the date on which the request for revision is received, the EVN is responsible for submitting reports explaining contents of the documents as requested.

4. Within 20 working days from the date on which legitimate documents and reports clarifying contents of the documents sent by the EVN are received, the ERAV is responsible for choosing Standard Power Plants and organize appraisal of electricity generation price range proposed by the EVN.

5. Within 15 working days from the date on which electricity generation price range is appraised, ERAV is responsible for completing documents and requesting the Minister of Industry and Trade to approve electricity generation price range for the following year and publishing on website of the ERAV. The case where electricity generation price range of the following year has not been announced, the latest valid electricity generation price range shall prevail.”

9. Amend Clause 1 Article 11 as follows:

“1. Presentation of the EVN pertaining to selection of parameters of Standard Power Plants and calculation of electricity generation price range of power plants under Point b and Point c Clause 2 Article 10 hereof.”

10. Amend net heat rate and primary fuel costs under Appendix 2 as follows:

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HR

kcal/kWh or kJ/kWh or BTU/kWh

2

Primary fuel costs

P_nlc

VND/kcal or VND/kJ or VND/BTU

Article 2. Amend Circular No. 57/2020/TT-BTC dated December 31, 2020 of the Minister of Industry and Trade on methods of determining electricity generation prices and power purchase agreement value

1. Amend Clause 4 Article 3 as follows:

“4. Power purchase agreement price for comparing with electricity generation price range in the base year

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In case the base year of a thermal power plant lacks electricity generation price range, PPA price of the thermal power plant shall be calculated on the basis of corresponding cost components in order to compare with electricity generation price range of the latest year applied to the power plant:

b) In case projects have commenced without entering into PPA before the effective date hereof:

PPA price must vary within electricity price range in the PPA negotiation year, in which PPA price of thermal power plants for the purpose of comparing with electricity generation price range shall be calculated on the basis of cost components corresponding to cost components serving calculation of electricity generation price range.”

2. Amend Clause 3 Article 7 as follows:

“3. Variable cost adjusted by other factors of power plants in the base year is determined using the following formula:

VC^k_b =

C_vlp + C_kđ + C_k

(VND/kWh)

A_GN

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C_vlp: 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); If data required for the calculation of total annual auxiliary material costs in the base year is insufficient, the costs components can be calculated using data from a year with sufficient data and converted to the base year at a rate of 2,5%/year;

C_kd: 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; If data required for the calculation of total initiation costs in the base year is insufficient, these costs can be calculated using data from a year with sufficient data and converted to the base year at a rate of 2,5%/year;

C_k: 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). If data required for the calculation of navigation channel dredging costs in the base year is insufficient, these costs can be calculated using data from a year with sufficient data and converted to the base year at a rate of 2,5%/year;

A_GN: 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).

3. Add Clause 5 Article 12 as follows:

 “5. The base year of power plants negotiating electricity price under finalized investment capital shall be the year in which the investment capital is finalized.”

4. Amend Clause 2 Article 13 as follows:

“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 (FC_j: 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 using the IRR of power plants;

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5. Amend Point c Clause 3 Article 15 as follows:

“c) Components of variable costs adjusted according to other variations of power plants in the year j VC^k_j is determined using the following formula:

VC^k_j = VC^k_b x (1 + (l - 1) x k_HS) x (1 + i)^m-1

In which:

VC^k_b: Components of variable costs adjusted according to other variations 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 Appendix I hereof.

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

l: Year of commercial operation of power plants (starting from commercial commencement date of power plants). The first commercial operation year of power plants start from commercial commencement date of the first generator groups to the end of the first commercial operation year, l = 1);

m: Order of payment year starting from the base year (in case of the base year, m = 1).”

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“6. In case a power plant has entered into PPAs, the case where the parties must negotiate in order to revise formula of variable cost components adjusted according to other variations of power plants is specified under Point c Clause 3 Article 15 hereof.”

7. Amend Point c Clause 1.3 Section I of Appendix V of the sample Power Purchase Agreement attached to the Circular as follows:

“c) Components of variable costs adjusted by other variations:

Components of variable costs adjusted according to other variations of power plants in the year j VC^k_j (VND/KWh) is determined using the following formula:

VC^k_j = VC^k_b x (1 + (l - 1) x k_HS) x (1 + i)^m-1

 In which:

VC^k_b: Components of variable costs adjusted by other variations of power plants in the base year is … (VND/kWh);

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

l: Year of commercial operation of power plants (starting from commercial commencement date of power plants). The first commercial operation year of power plants start from commercial commencement date of the first generator groups to the end of the first commercial operation year, l = 1);

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

Article 3. Entry into force

1. This Circular comes into force from December 28, 2022.

2. Annul Article 4 of Circular No. 57/2014/TT-BCT dated December 18, 2014 of the Minister of Industry and Trade.

3. Annul Article 27 of Circular No. 57/2020/TT-BCT dated December 31, 2020 of the Minister of Industry and Trade.

4. Difficulties that arise during the implementation of this Circular should be reported to the ERAV or the Ministry of Industry and Trade for consideration./.

PP. MINISTER
DEPUTY MINISTER




Dang Hoang An

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