Region: East Asia and Pacific
Sample Power Purchase Agreement 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 Vietnam Electricity or EVN (a utility company owned by the Vietnamese government and the operator of the Vietnamese national power system) and a project company incorporated in Vietnam. The agreement forms part of a suite of project documents which also includes a separate BOT Contract between the project sponsors and the Ministry of Industry and Trade of Vietnam. The structure of the project agreements reflects both the fact that Vietnam’s power sector continues to be dominated by state entities (the offtaker is effectively a vertically integrated state monopoly) and the fact that it is moving towards a more competitive market (the BOT Contract expressly contemplates renegotiation of the contract when a competitive electricity market is established).
Key features of the Sample Power Purchase Agreement:
Exclusivity – energy generated by the power plant must be supplied exclusively to Vietnam Electricity. Any third party offtake must be pre-approved by Electricity Vietnam (clause 3.2).
Minimum Take Liability – Vietnam Electricity is required to reimburse the project company for any take-or-pay liability incurred by the project company under its coal supply contracts, where this is due to failure by Vietnam Electricity to offtake (due to force majeure events or certain defined disruptions caused by government authorities in Vietnam).
Tariff – the tariff under the agreement includes both a fixed Capacity Charge and a variable Energy Charge (calculated by reference to actual energy output). Capacity Charges remain payable during certain defined disruption events for which Electricity Vietnam is responsible (e.g. repudiation of the PPA, interference with the project company’s operations, etc), which prevents Vietnam Electricity from taking electricity.
Liquidated Damages – these are payable by the project SPV for unavailability of power plant due to maintenance (beyond an agreed allowance) and for shortfalls in actual energy required to be delivered under the agreement.
Step-in Rights – Vietnam Electricity has certain step-in rights to operate the power plant if the project company ceases to operate the power plant for 48 consecutive hours (clause 9.6).
Term extension for force majeure – the term of the agreement is to be extended for force majeure events, as a result which the project company is unable to earn Capacity Charges under the agreement.
Find more @ Energy and Power PPPs
Updated: October 25, 2021