Direct Power Purchase Agreement in Vietnam – The basics

In the newly issued Power Development Plan VIII (PDP VIII), the direct power purchase agreement (DPPA) mechanism is said to be implemented on a pilot basis. The DPPA mechanism could offer an alternative for renewable energy projects to sell electric energy. However, PDP VIII stops short of providing broad strokes of what the DPPA mechanism will look like. That said, before the PDP VIII was issued, in 2022, a draft decision of the Prime Minister (Draft Decision) on a pilot scheme (Pilot Scheme) for the DPPA mechanism was circulated for public opinion collection. Such a scheme offers a look into the possible structure of the DPPA mechanism under PDP VIII. In this article, we will discuss the basic structure of the DPPA mechanism and some key points in a DPPA.

Under the Pilot Scheme, the DPPA mechanism is financial/synthetic DPPA and works as follows:

1.         the renewable energy generator will enter into a DPPA in the form of a forward contract (hợp đồng kỳ hạn) with a customer, under which the customer will guarantee a fixed price for the energy produced by the renewable energy project (see 3) and in return, the generator will transfer the “environmental attributes” created by the project to the customer;

2.         though the name DPPA suggests there is a sale of electric energy between the generator and the customer, under the DPPA mechanism, the generator won’t physically deliver electric energy to the customer; that is why it is called financial/synthetic DPPA. Instead, the generator will sell all of the generated electric energy to EVN in the wholesale electricity market under a template power purchase agreement provided in the Draft Decision. The power companies of EVN will then sell electric energy to the customer at retail prices. Such electric energy may not necessarily come from the project.

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Written by Nguyen Quang Vu On In ,

Does tender offer requirement apply to an indirect acquisition of a Vietnamese public company via acquisition of its private parent?

There is no clear answer to the question since there is no clarification of what constitutes “indirect ownership” under the Securities Law 2019. In particular, among other circumstances, according to Article 35.1(a) of the Securities Law 2019, the tender offer regulations are triggered when (emphasis added):

Any investor and its related persons (except in case the investor and its related persons are investment funds and fund management companies) intend to purchase voting shares which results in the direct or indirect ownership of 25% or more of the total outstanding voting shares of a public company.

It is not clear whether:

  • The first reference to “voting shares” refers to voting shares of the relevant public company (the target company) or could refer to voting shares of any company; and

  • Owning shares of a company which owns shares in the target company could be considered as indirect ownership of shares in the target company.

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Written by Nguyen Quang Vu On In ,

Can the Board of a joint stock company make a decision if it cannot maintain the meeting quorum at the time of voting?

Under Article 157.8 of the Enterprise Law 2020, a meeting of the Board will be conducted where three quarters (3/4) or more of the total Board directors are in attendance. However, it is not clear whether (1) this quorum only needs to be satisfied at the beginning of the meeting or (2) this quorum must be maintained from the beginning to the end of Board meeting. If interpretation (1) is adopted then a decision approved by more than half of attending Board directors at the Board meeting is still valid even when the quorum is lost during the meeting (e.g. a director leaves the meeting).

Arguments supporting interpretation (1) include:

  • Article 157.8 of the Enterprise Law 2020 could be interpreted to mean that the quorum applies only at the beginning of a Board meeting. The Enterprise Law 2020 only provides that a Board decision will be passed if it is approved by more than half of the attending Board directors. There is no specific requirement that the quorum must be satisfied at the time of the voting or throughout a Board meeting. 

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Written by Nguyen Quang Vu On In , ,