Model Power Purchase Agreement For Wind Farm Projects In Vietnam

On 15 January 2019, the Ministry of Industry and Trade (MOIT) has issued Circular 2 on wind power projects (Circular 2/2019), which will take effect from 28 February 2019. Circular 2/2019 provides the new model power purchase agreement (Wind PPA) applicable to a wind farm project in Vietnam.

In this article, we will provide our comments on the Wind PPA followed by a summary at the end. This article is contributed by Nguyen Quang Vu, Nguyen Hoang Duy and Le Thanh Nhat.

The full text of this article is available here

Key Approvals And Contracts Required For A Wind Farm Project In Vietnam

Below is a list of key approvals and contracts required for a wind farm project in Vietnam (the Project):

  • Permission by provincial People’s Committee for the Project to carry out wind measurement;

  • Report on wind measurement result to the provincial People’s Committee;

  • Approval of the Pre-Feasibility Study of the Project;

  • Approval of the basic design part of the Feasibility Study of the Project;

  • In-principle Approval of the Project under the Investment Law 2014;

When a security deposit in Vietnam can be forfeited?

Deposit (đặt cọc) is a form of security interest.  Deposit means a sum of money, precious metals, gemstones or other valuable objects delivered by one party to another party for a period of time as security for the entering into or performance of a contract. Article 328.2 of the Civil Code 2015 provides that the deposit receiver (i.e., the secured party) can own the deposit when the depositor (i.e., the securing party) “rejects” (từ chối) the performance of the contract. The word “rejection” indicates that the relevant party may need to clearly refuse to perform the contract. And the Civil Code 2015 is not clear whether a failure to perform could constitute a rejection of the performance contract. To clarify this point, a deposit agreement should specify that a failure to perform the contract is deemed to constitute a rejection of the performance of the contract.

More Measures For Enforcement Of A Share Mortgage For A Project Company In Vietnam

For a project financing or limited recourse financing in Vietnam, a mortgage over shares (or equity capital) of the project company usually forms part of the security package due to the ease of creating and perfecting a mortgage over shares. That said, when an enforcement event occurs and if the borrower or the project company does not cooperate, the lenders (usually foreign lenders), who wish to immediately taking over the mortgaged shares, may find it difficult to actually enforce the mortgage due to the need to complete various licensing procedures for the sale or transfer of the mortgaged shares.

Thanks to the flexibility offered by the Enterprises Law 2014 and the Investment Law 2014, lenders may now consider taking some extra measures to increase their ability to enforce the mortgaged over shares of a project company in Vietnam. In particular,