Update on new regulations in June 2024

Legal newsletter

Our Newsletter #23 would lead you on the following:

LEGAL UPDATE

I. Issuance of Circular No. 05/2024/TT-BKHDT prescribing the management and use of fees for selection of bidders and investors on the Vietnam E-Procurement System

On 19 April 2024, the Minister of Planning and Investment issued Circular No. 05/2024/TT-BKHDT prescribing the management and use of fees for selection of bidders and investors on the Vietnam E-Procurement System, which includes some notable points as follows:

1. Costs incurred during the bidders and investors selection process on Vietnam E-Procurement System

The process of selecting bidders and investors on the Vietnam E-Procurement System (“VNEPS”) may incur the following types of costs:

  1. Fee for maintaining name and capacity profile of the bidder on VNEPS;
  2. Fee for submitting bids on VNEPS;
  3. Fee paid by a winning bidder of a package applying competitive bidding, limited bidding, shopping method or online quotation method under common online bidding procedure; and
  4. Fee for connecting electronic bid security function between VNEPS and domestic credit institutions, foreign bank branches, domestic non-life insurers, and branches of foreign non-life insurers.
2. Organizations in charge of cost collection during the selection process of bidders and investors on VNEPS

The National E-Procurement Centre and enterprise executing a project of “Application of e-commerce in Government procurement” (“e-GP Project Enterprise”) are two organizations in charge of collecting, managing, and utilizing fees related to selection of bidders and investors on VNEPS, specifically:

  1. The National E-Procurement Centre shall collect fees outlined in Item I.1.(i) and I.1.(iv) above; and
  2. e-GP Project Enterprise shall collect fees outlined in Item I.1.(ii) and I.1.(iii) above.
3. The purpose of the use of revenues from costs incurred in the process of selecting bidders and investors on VNEPS

The revenues obtained from Item I.1 mentioned above are used to conduct the following tasks:

  1. Covering expenses for management, maintenance, operation, and development of VNEPS; and
  2. Covering recurrent and investment expenditures of the National E-Procurement Centre in association with management, maintenance, operation and development of VNEPS.
4. Responsibilities of bidders and investors to cover expenses incurred during the selection process on VNEPS

Bidders and investors participating in VNEPS are responsible for paying the costs as mentioned in item I.1 above within the following deadlines:

  1. Regarding fee for maintaining name and capacity profile of the bidder or investor on VNEPS:
    • This fee must be paid by April 01 each year (except for the year in which the registration is made on VNEPS). The fee paid for 2024 must be paid by 01 July 2024;
    • If a bidder or investor pays the fee to maintain their name and capacity profile on VNEPS for multiple years (up to 05 years), the fee paid will be gradually deducted each year; and
    • If a bidder is also an investor, the fee for maintaining the name and capacity profile on VNEPS shall only be paid in the name of the bidder.
  2. Regarding fee for bid submission: This fee must be paid within 14 days from the bid opening date.
  3. Regarding the fee paid by a winning bidder: This fee must be paid within 30 days from the day on which the contractor selection result is published on VNEPS. The winning bidder that refuses to sign a contract shall notify the National E-Procurement Centre and e-GP Project Enterprise within 30 days from the day on which the contractor selection result is published on VNEPS so that the e-GP Project Enterprise will return the collected fee to the bidder.

If a bidder or investor fails to pay the fee by the prescribed deadline, their account will be temporarily locked, and they shall not be allowed to conduct relevant transactions on VNEPS until they fully pay the fee as prescribed.

II. Issuance of Circular No. 07/2024/TT-BCT on the methods for determining prices for electricity generation and power purchase agreement

On 12 April 2024, the Minister of Industry and Trade issued Circular No. 07/2024/TT-BCT on methods for determining prices for electricity generation and power purchase agreement (“PPA”), which includes some notable points as follows:

1. Applicable entities under Circular No. 07/2024/TT-BCT

Circular No. 07/2024/TT-BCT applies to the following entities:

  1. Power plants operating in territory of Vietnam and connected to national electricity system; and
  2. Other relevant organizations and individuals.

Circular No. 07/2024/TT-BCT excludes the following entities from applying the electricity pricing determination method and standard PPAs:

  1. Strategic multi-purpose hydroelectricity plants;
  2. Small-scale hydroelectricity plants applying avoidable cost tariff;
  3. Independent power plants invested in Build – Operate – Transfer (BOT) model;
  4. Power plants and generator groups providing auxiliary services; and
  5. Power plants applying electricity pricing regulations under documents issued by competent authority.
2. Principles for determining electricity generation prices

Electricity generation prices of power plants are developed on the basis of:

  1. Reasonable and valid cost components for Investors throughout the project’s economic lifecycle; and
  2. Internal rate of return (IRR) on financial investment not exceeding 12%.

The electricity generation price includes the following components, as agreed upon by the Seller and the Buyer, and is determined according to the methods specified in Circular No. 07/2024/TT-BCT:

  1. Prices of PPA; and
  2. Specific connection prices (if any).

Electricity generation prices do not include VAT, water resource tax, licensing fees for water resource exploitation rights, forest environment service fees, environmental protection fees in respect of solid waste and industrial wastewater (in the case of thermal power plants), other taxes, fees, and monetary collectibles according to the regulations of competent authority (other than taxes and fees included in electricity generation solutions).

3. Methods for determining electricity generation prices for solar power plants and wind power plants that have entered into PPA with EVN and have not decided on official electricity generation prices

3.1. Applicable entities: Solar power plants that have entered into PPA with EVN before 01 January 2021, and wind power plants that have entered into PPA with EVN before 01 November 2021, but have not met the conditions for applying electricity purchase prices in accordance with Decision No. 13/2020/QD-TTg and Decision No. 39/2018/QD-TTg.

3.2. Developing electricity generation pricing for power plants

Pursuant to the principles for determining electricity generation prices outlined in Item II.2 above, the approach for determining electricity generation prices for solar and wind power plants is as follows:

  1. The base year for negotiating electricity prices is the year of commercial operation for the power plant;
  2. For the portion of the power plant without an established electricity price, the price is determined based on the input parameters for the entire power plant; and
  3. Other pricing parameters are agreed upon between the Seller and the Buyer.
4. Applying the new sample of PPA
  1. Sample PPA under Appendix III Circular No. 07/2024/TT-BCT serves as the basis for the Seller and the Buyer to negotiate. Both parties have the right to agree upon and supplement specific terms within the PPA, while ensuring compliance with Vietnamese legal regulations;
  2. The language of the contract shall be Vietnamese. The Seller and the Buyer may agree to supplement the contract using the English language; and
  3. The Seller and the Buyer shall mutually agree and are responsible for reporting to the Electricity Regulatory Authority of Vietnam for inspection of the PPA after the negotiation and signing of the abbreviated PPA.

Of note: The content of the sample PPA under Circular No. 07/2024/TT-BCT does not apply to solar power plants and wind power plants, except in cases involving participation in the competitive electricity market.

III. Issuance of Decision No. 338/QD-TTg regarding the approval of the Plan for the implementation of the National Energy Master Plan for the 2021 – 2030 period, with a vision towards 2050

On 24 April 2024, the Prime Minister issued Decision No. 338/QD-TTg approving the Plan for the implementation of the National Energy Master Plan for the 2021 – 2030 period, with a vision towards 2050, which includes some notable content as follows:

1. Sectors within the National Energy Plan

The National Energy Plan includes the following sectors: Oil and gas, coal, electricity, new and renewable energy, with tasks ranging from basic surveys, exploration, exploitation, production, storage, distribution to use and other related activities.

2. Sources of capital used in investment projects/plans within the National Energy Plan
  1. For the energy sector: All investment projects in the energy sector use sources of capital other than public investment capital; and
  2. For the electricity sector: Projects on the completion of legal policies and strengthening the capacity of the electricity sector use public investment capital (according to the National Power Development Plan for the 2021 – 2030 period, with a vision towards 2050 approved by the Prime Minister).
3. Two key points in Decision No. 338/QD-TTg on the new and renewable energy sectors

3.1. New and renewable energy sectors include the following fields: Wind energy; solar energy; biomass energy, biofuels, biogas; solid waste energy; small hydropower; other renewable energies (tidal, wave, geothermal); and new energies (hydrogen, ammonia, fuels derived from hydrogen, synthetic fuels, etc.).

3.2. Development strategy for the new and renewable energy sectors in line with the National Energy Plan

  1. Strong development of offshore wind power combined with other types of renewable energy (solar power, onshore wind power, etc.) to produce new energy (green hydrogen, ammonia, etc.) to meet domestic demand and for export; and
  2. Renewable energy power sources that produce new energy for domestic and export markets are given priority/ allowed to develop without limits, while ensuring national defense security and energy security.

The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at consult@blawyersvn.com. We would love to hear from you.

Date: 29 June 2024

Writer: BLawyers Vietnam

Legal News and Update Team

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Maybe you are interested in reading other Newsletters of BLawyers Vietnam: Legal Newsletter in Feb 2024/ Legal Newsletter in Mar 2024/ Legal Newsletter in April 2024

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