Region: East Asia and Pacific
Country: Vietnam
Sector: Energy and Power
Topic: Tools
Keywords: Energy and Power, Energy and Power Core, Contract
Document(s):
Document Summary:
Sample BOT Contract used in a public tender process by the Vietnamese government for the design, construction and operation of a large scale coal-fired power plant. The agreement is to be entered into between international project sponsors, the project company and the Ministry of Industry and Trade of Vietnam (“MOIT”).
Document Details:
Key features of the sample BOT Contract:
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MOIT responsibilities – the MOIT is responsible for a number of deliverables in respect of the project, including:
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procuring a land lease with the local provincial government for the project site;
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procuring a number of key regulatory approvals (e.g. investment certificate for the establishment of the project company, electricity license for the plant, import / export permits, etc);
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passports, visas and work permits for some of project company’s personnel; and
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negotiations between the project company (and sponsors) and other government departments.
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Financing – the sponsors are required to fund the construction and operation of the power plant through a combination of equity injection into the project company and loans (clause 7).
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Remittance and foreign exchange rights (clauses 16.2 and 16.3) – the project company and sponsors are given assurances by the MOIT that they have rights to make remittances according to the financing and equity documents and that they can convert amounts received in Dong (VND) into USD on a monthly basis in accordance with the financing documents. This is to address risks arising from the regulated nature of foreign exchange and overseas remittances in Vietnam (clauses 16.2 and 16.3).
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Tax Incentives (clause 17) – the project company is given a tax holiday in respect of corporate income tax for the initial part of the project (100% exemption for the first four profit making years, 50% reduction for the next nine years).
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Government Events – the project company is relieved from complying with its obligations to the extent affected by a Government Event and the MOIT must pay the project company the Capacity Charges under the power purchase agreement to the extent the project company is unable to deliver energy due to the Government Event. Government Event is defined to include a range of political and regulatory events such as civil unrest in Vietnam, nationalization, failure to obtain or maintain approvals other than due to a breach by the project company.
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Early termination payments – MOIT is required to buy the power plant and pay the project company an early termination amount in the event of early termination of the BOT Contract. Where the early termination is due to MOIT default, the amount is calculated with reference to the project company’s project debts, financing costs, equity investment and an agreed rate of return on equity. For other termination events (e.g. prolonged force majeure and project company default), the amount payable is scaled down.
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Updated: October 25, 2021