Under Article 27 of Decree 80/2024 on mechanism for direct sale and purchase of renewable energy with large electricity customers, the Ministry of Industry and Trade (MOIT) will be entitled to suspend or terminate a Direct Power Purchase Agreement (DPPA) if there is an “act of taking advantage of the mechanism, policy for making profit”. For termination, the consequences of such act needs to be irremediable and the MOIT will need to obtain opinion from related authorities (presumably from the Ministry of Public Security).

Any large customer or any renewable energy producer enters into a DPPA will need to comply with (or “use”) the DPPA mechanism. In addition, obviously, the parties to a DPPA enter into the DPPA for the purpose of making profit (or saving costs). But Decree 80/2024 is not clear when the use of the DPPA mechanism would be considered as “taking advantage” (lợi dụng) of the mechanism or when an entity is deemed to make so much profit that the relevant DPPA may need to be suspended or terminated.

Parties to the DPPA usually expect that the DPPA could be a long term contract so that it could allow the parties to recoup its investment and generate stable profit. Unfortunately, this provision is drafted so broadly such that at one extreme, the authority could have a wide discretion to suspend or terminate any DPPA at any time even if the parties to such DPPA comply with Decree 80/2024.

Article 27 of Decree 80/2024 seems to reflect the concerns of the authorities about corruption risks when a new policy is issued. However, this provision introduces such a high degree of uncertainty that unless there is further clarification or guidance by the Government, prudent investors in a DPPA should consider obtaining a prior confirmation from the authority that their DPPA is not considered as act of taking advantage of the mechanism, policy for making profit.

This post is written by Nguyen Quang Vu.