Mechanism for Calculation of Electricity Generation Price Bracket and Its Implication for Transitory Solar/Wind Energy Investors

On 3 October 2022, the Ministry of Industry and Trade (MOIT) issued Circular 15 on the mechanism for setting up an electricity generation price (EGP) bracket applicable to transitory (chuyển tiếp) solar and wind power plants (Circular 15/2022), which took effect from 25 November 2022.

Determining EGP bracket under Circular 15/2022 will cause significant impact to the selling price of the transitory solar and wind energy projects in Vietnam. To be specific:

Circular 15/2022 only applies to solar and wind power plant developers (Developers) who have entered into PPAs with Vietnam Electricity (EVN) before 1 January 2021 (for solar power Developers) or 1 November 2021 (for wind power Developers) but failed to meet the requirements to apply the preferential EGP administered by the Prime Minister under Decision 13/2020 (for solar powers) and Decision 39/2018 (for wind powers) (Transitory Projects);
Circular 15/2022 requires the Developers of the Transitory Projects to provide Feasibility Study Reports or Engineering Designs of their power projects to EVN.
Based on data submitted by the relevant power plants, EVN will calculate and build up an EGP bracket of a standard solar and wind power plant (Maximum EGP Bracket), and obtain an approval from the MOIT for such Maximum EGP Bracket. The approved Maximum EGP bracket will be published on the website of the MOIT and the Electricity Regulatory Authority. The mechanism for calculation of the Maximum EGP Bracket is illustrated in the diagrams at the end of this post. Details on this mechanism are discussed in this document.
The price for selling generated power by the Developers of Transitory Projects to EVN cannot exceed the approved Maximum EGP Bracket. Accordingly, the data provided by the Developers may affect their profit in the future.

On 7 January 2023, the MOIT already issued Decision 21 which approves the Maximum EGP Bracket calculated in accordance with the mechanism specified in Circular 15/2022 (see the bar chart below) which will serve as a basis for EVN to agree on the selling price with the Developers of Transitory Projects:

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Certain Grounds For Cancellation Or Rejection of Arbitration Awards By Vietnamese Courts In Practice

In our experience, Vietnamese court has relied on one or more of the following grounds to cancel domestic arbitration awards or reject application for recognition of foreign arbitral awards:

· Changes to the venue of hearing to a different location than the place of arbitration. In a VIAC proceeding, the Claimant initiated two claims against two arbitrators for a breach of conduct. As a result, to protect the safety of the two arbitrators, the Tribunal decided to change the venue of hearing from Hanoi to Singapore and then Japan. However, Vietnamese court decided to set aside the awards on the ground that the arbitration does not take place in Hanoi as required by the arbitration agreement;

· Applying IBA Rules on the Taking of Evidence in International Arbitration in a VIAC proceeding without express agreement by the parties;

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Comparison: Investment inside vs. outside an industrial park/industrial cluster in Vietnam

As Vietnam is on its way to become a new global manufacturing hub, many investors now consider the country as a new destination for their manufacturing business. However, finding the right location to implement the proposed project may be a vexed question.

In general, the following options are available for the investor:

Option 1: Acquisition of land inside industrial manufacturing-oriented zones, which include industrial park (IP) and industrial cluster (IC); and
Option 2: Acquisition of land outside the industrial manufacturing-oriented zones.

In this article, we discuss and compare the available options based on specific criteria and from both legal and practical perspectives to assist investors in making their best decision.

With respect to the industrial manufacturing-oriented zones, the law distinguishes between IP and IC based on certain criteria. In addition, the legal frameworks applied to investment in the IP and IC may sometimes be different. Accordingly, doing investment inside the IP and IC will be discussed separately as two potential options, where applicable.

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The Crime of Fraud And Misuse of Bond Issuance Proceeds in Vietnam

In 2022, Vietnamese authorities brought charges against two principal shareholders of Tan Hoang Minh and Van Thinh Phat for the crime of fraud (Tội lừa đảo) under Article 174 of the Penal Code 2015. Newspaper reports suggest that the relevant individuals have undertaken fraudulent activities in issuing corporate bonds and appropriate the bond issuance proceeds from bondholders. However, to prove that an individual commits a crime of fraud, the authorities would need to produce more evidence to support their cases.

Article 174 of the Penal Code 2015 imposes criminal liability to an individual who appropriates others’ properties by fraudulent means. Based on comments from reputable scholars (link 1, and link 2), the crime of fraud has the following characteristics:

Only individuals could be convicted of the crime of fraud. Companies cannot be convicted of this crime. Accordingly, the entities issuing corporate bonds in the above cases cannot be convicted of the crime of fraud;
The criminal must have the intention to appropriate properties of other persons. To appropriate a property, the criminal must obtain all three elements of ownership right including right of possession, right to use and right to dispose the property. If the criminal only obtains one or two elements of ownership right then it is not a crime of fraud. In a similar provision, the Penal Code 2015 applies criminal liabilities to a person who borrows monies from other but, among other things, does not repay when the loan is due even though such person has the capacity to repay the loan. This provision suggests that if the loan is not due yet then the act of appropriation might not have occurred. Accordingly, if the bond issued by the relevant issuing entities are not due yet then it is not clear if the bond proceeds can be treated as being appropriated by the relevant individuals;

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Vietnam Business Law