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

For the purposes of this Circular, the 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:

...

...

...

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.

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...

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 buyer (downstream consumers).

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

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.

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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.

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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), which does not exceed 12%.

2. Electricity generation price of power plants consists of:

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.

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4.² Power purchase agreement price for comparing with electricity generation price range in the base year

a) Power purchase agreement (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.

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.

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:

P_C = P^CD + P^BD

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

...

...

...

Where:

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

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

2. P^BĐ (VND/kWh) refers to variable prices in the base year.

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

Where:

: 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);

: 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);

...

...

...

: 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, P^BD 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:

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- 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 (T_max) over several years. T_max of power plants is determined according to approved design but must not be lower than T_max 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 regulatory authority (if any) (year);

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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 FOMC_b (VND/kWh) is determined using following formula:

Where:

: 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).

...

...

...

 (VND/kWh)

Where:

TC_scl: : 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, TC_scl in the base year is calculated using following formula:

TC_scl = VĐT_XD+TB x k_scl

Where:

VĐT_XD+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);

k_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;

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

...

...

...

Where:

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

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

t_td: 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 (%);

k_CS: 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:

Where:

...

...

...

t_td: 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) is determined using following formula:

(VND/kWh)

Where:

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

Total personnel cost TC_nc 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 to calculate the total personnel cost TC_nc of the base year:

TC_nc= VĐT_XD+TB x k_nc

...

...

...

VĐT_XD+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);

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

A_GN : 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, P^BD, of thermal power plants in the base year (VND/kWh) is determined using following formula:

Where:

: 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);

: Variable price adjusted 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);

...

...

...

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

1. Variable price adjusted depending on variation of primary fuel price of power plants in the base year , is determined using the following formula:

 (VND/kWh)

Where:

: 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. Variable price adjusted depending on variation of secondary fuel price of power plants in the base year , is determined using the following formula:

(VND/kWh)

Where:

...

...

...

: 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).

3.³ Variable price adjusted depending on other variations of power plants in the base year  is determined using the following formula:

 (VND/kWh)

Where:

: 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).

4. Transportation cost for primary fuel of power plants in the base year  is determined using following formula:

...

...

...

Where:

: 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, respective  shall equal 0.

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

1. Specific connection prices (P^DT) 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.

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3. Specific connection costs shall be considered legitimate costs and included in electricity purchase costs in formulating average electricity retail pricing plans 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 electricity generation pricing plans and PPA depending on practical situations of power plants, request Electricity Regulatory Authority of Vietnam and report to Ministry of Industry and Trade for consideration and decision.

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 regulatory authority approves period for calculation in writing, comply with written approval of competent regulatory authority.

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

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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 price shall conform to Article 4 hereof and input indicators are updated at the same time settled investment capital is determined.

3. PPA price 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. 

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

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

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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.

2.⁵ 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 using 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. Operational and maintenance costs of power plants shall be adjusted according to following principles:

a) 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 operational and maintenance costs according to major repair costs and other costs for items in foreign currency;  

b) 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 pricing plan 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.

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...

Where:

m: Number of foreign currency in electricity pricing plan on which both parties agree (number);

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

D_i,j: Number of principle debt in foreign currency paid for the j^th 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 the electricity pricing plan agreed upon by both parties;

 Conversion rate in the j^th payment of foreign currency i in the year (.../VND);

 Base conversion rate of foreign currency i agreed upon by both parties under the electricity pricing plan (.../VND).

Article 15. Methods of determining PPA price of power plants at the time of payment

PPA price of a power plant at the time of paying electricity bill in month t, year j: P_C,j,t (VND/kWh) is determined using following formula:

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...

Where:

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

FOMC_j,t: Operational and maintenance cost 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 cost in year j FC_j determined according to Article 13 hereof.

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

Where:

: Operational and maintenance cost according to the major repair cost and other costs in year j (VND/kWh);

...

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...

a) Operational and maintenance cost according to the major repair cost and other costs , is determined using the following formula:

Where:

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

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

 Order of payment year from the base year (for base year, =1)

b) Operational and maintenance cost according to the personnel cost in month t, year j , is determined as follows:

- In case the wage calculated in the electricity pricing plan equal the minimum region-based wage, apply the following formula:

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...

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

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

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

- In case the total personnel cost TC_nc is calculated based on construction and equipment investment, apply following formula (VND/kWh):

Where:

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

: Inflation rate of the operational and maintenance cost according to the personnel cost, 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;

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

...

...

...

Where:

 : Variable price adjusted according to variation of the primary fuel price of the thermal power plant in month t, year j, determined according to Point a of this Clause (VND/kWh);

: Variable price adjusted according to variation of the secondary fuel (oil) price of the thermal power plant in month t, year j, determined according to Point b of this Clause (VND/kWh);

: Variable price adjusted according to variation of other variations of the power plant in the base year, determined according to Point c of this Clause (VND/kWh).

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

a) Variable price adjusted according to variation of the primary fuel price of the power plant in month t, year j  , is determined using the following formula:

Where:

...

...

...

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

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

 Year of commercial operation of the power plant;

: 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) Variable price adjusted according to variation of the secondary fuel (oil) price of the power plant in month t, year j   , is determined using the following formula:

Where:

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

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

...

...

...

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

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

c)⁶ Variable cost adjusted according to other variations of the power plant in the year j , is determined using the following formula:

Where:

: Variable cost adjusted according to other variations of the power plant in the base year determined under Clause 3 Article 7 hereof;

i: Inflation rate of the variable price adjusted according to other variations based on the rate under Appendix I hereof;

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

 Year of commercial operation of the power plant (starting from commercial commencement date of the power plant). The first commercial operation year of the power plant starts from commercial commencement date of the first genset to the end of the first commercial operation year, );

...

...

...

d) Fee for transporting primary fuel of the power plant in month t, year j   (VND/kWh), is determined using following formula:

Where:

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

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

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

 Year of commercial operation of the power plant;

: Fee for transporting primary fuel at the time of payment in month t, year j, 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 specific:

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

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...

- 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, primary fuel transportation prices   shall equal 0.

4. Total cost for initiation in month t of the thermal power plant  (VND), is determined using following formula:

Where:

u: Genset order of the power plant;

U: Number of gensets of the power plant;

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

s: Initiation status of genset;

...

...

...

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

M_u,f,s: Consumption mass of coal fuel (kg) for coal-fired power or dissipated heat of gas (BTU) for gas turbines for a single instance of initiation of genset u, using fuel f in initiation status s;

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

: Total of other costs for a single instance of initiation, calculated in VND.

Payment for the initiation cost of the thermal power plant shall comply with regulations on electricity market promulgated 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 Buyers and the Sellers shall negotiate and add clauses depending on practical situations of power plants (if necessary).

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Article 17. Procedures for negotiating power purchase agreements

1. ⁷ (annulled)

2. The Sellers are responsible for preparing applications for power purchase agreement negotiation and send them to the Buyers for negotiation and adoption of procedures for signing power purchase agreements.

3. Within 15 working days from the date on which adequate written applications from project developers are received, the Buyers are responsible for organizing power purchase agreement negotiation with the Sellers.  At the end of negotiation process, both parties shall initial the draft power purchase agreements. 

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

Article 18. Applications for power purchase agreement negotiation

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

a) Official Dispatches requesting power purchase agreement negotiation;

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

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d) Decisions on investing in construction, attached explanations and reports on appraisal of power plant investment projects of independent consultants, enclosures;

dd) Decisions 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 designs of investment projects relating to power purchase agreement negotiation, appraisal reports on fundamental designs;

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 deadlines 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) Power sales pricing plans determined according to Section 1 and Section 3 Chapter II hereof;

m) Other relevant documents.

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a) Official Dispatches 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 documentation 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) Power sales pricing plans 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 agreements and documents under Article 18 hereof to Electricity Regulatory Authority of Vietnam. 

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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 agreements are 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 Buyers are responsible for sending 1 copy of signed power purchase agreements to Electricity Regulatory Authority of Vietnam for storage and implementation monitoring.

5. In case electricity prices under Clause 4 Article 3 hereof according to recommendations of the Sellers exceed the electricity generation price range promulgated 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 authorities affect legal benefits of the Buyers or the Sellers in a negative manner, both parties hold the right to renegotiate electricity generation prices. 

2. In case the Sellers are 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 Sellers and the Buyers must add these costs to electricity prices of power plants.   Calculation of electricity prices shall conform to methods 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 authorities to be satisfactory to refuse, emission and environmental protection standards, the Buyers and the Sellers shall add these costs to costs for disposing, selling ashes and slags which are specific 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 authorities; (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

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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 authorities. 

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 prices 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.

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1. Before January 31 each year, taking charge and cooperating with the Buyers and the Sellers 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 prices according to Annex 1 hereof and other contents in this Circular (if any).

Article 24. Responsibilities of the Buyers

1. Agreeing with the Sellers 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 Sellers 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 Sellers; being responsible and guaranteeing accuracy, legitimacy of provided figures and documents. Agreeing with the Sellers 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 Sellers 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 Sellers

1. Negotiating with the Buyers, reporting to Electricity Regulatory Authority of Vietnam regarding inspection and signing of power purchase agreements as per the law⁸; 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 authorities according to national electricity development plannings and provincial plannings (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.

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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 Sellers 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 Sellers have 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 authorities.

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

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

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

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9. Before January 15 of each year, the Sellers shall submit reports on execution of power purchase agreements of the previous year with the Buyers, 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 Buyers 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.

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