Possibility to amend and supplement the wind power purchase agreement

According to Vietnam’s current regulations, the power purchase agreement of a wind power project (“WPPA”) must materially comply with the Standardized Power Purchase Agreement issued under Circular 02/2019/TT-BCT (“Standardized PPA”). While applying the Standardized PPA, the investor (as the Seller) and Vietnam Electricity Corporation (EVN) (as the Buyer) are only entitled to supplement, not to revise, new terms to clarify the rights and obligations of the parties but shall not revise the basic content of such PPA. Since the current laws do not specify what should be considered the basic content of the Standardized PPA, such definition or scope of “basic content” is still ambiguous and may depend on the agreement of the parties in each specific project. In practice, making revisions to the Standardized PPA is also difficult to achieve. Therefore, investors should expect to supplement provisions to clarify the Standardized PPA instead of attempting to revise the content of such Standardized PPA.

The limited capability in amending the WPPA may deprive the parties of the flexibility in negotiating for contract amendments, especially when one party faces hardship and is looking for adjustments to the contractual commitments. However, the appropriate approach for the investor is to balance the disadvantages of this limit with the overall benefits that the investor gains from the project.

Circumstances where the Buyer is not obliged to receive electricity and make payment to the Seller

According to the Standardized PPA, the Buyer does not have the obligation to receive or pay for electricity from the Seller if one of the following situations occurs:

1. The operation and maintenance of the Seller’s power plant do not comply with the Regulation on the operation of the national electricity system and standards and technical regulations of the electricity industry;
2. During the time the Buyer installs electrical equipment, repairs, replaces or inspects the power grids and all of those activities are directly related to the connection of power plant of the Seller and comply with the Regulation on the operation of the national electricity system and standards and technical regulations of the electricity industry;
3. Power grids transmitted and/or connected in different areas have problems or the equipment directly connected to the power grids thereof have problems or their operation mechanism violates the Regulation on the operation of the national electricity system and standards and technical regulations of the electricity industry;
4. Power grids of the Buyer need recovery after incidents and comply with the Regulation on the operation of the national electricity system and standards and technical regulations of the electricity industry.

The Seller needs to comply with the regulations on the operation of the national power system and the standards and technical regulations of the electricity industry to reduce the risk of not delivering electricity and receiving payment from the Buyer as mentioned in case (1) above. The remaining above-mentioned cases, other than case (1), are beyond the Seller’s control.

Dispute settlement mechanism applicable to the WPPA

The Standardized PPA allows two forms of dispute resolution, through negotiation and dispute resolution by the competent authority.

Parties must firstly go through negotiation to resolve the dispute when it arises, if such negotiation fails, the parties “are entitled to” request the Electricity and Renewable Energy Department (under the Ministry of Industry and Trade) to assist in resolving the dispute. After that, if negotiation to resolve the dispute is still impossible, the parties can bring the dispute to the competent authority to settle the dispute following the law. The dispute settlement authority may be: (i) the Electricity Regulatory Authority (under the Ministry of Industry and Trade), (ii) a court, or (iii) an arbitration.

Among the above-mentioned dispute resolutions, arbitration is often considered the least risky option for the Seller. For a dispute arising from a WPPA to be resolved by arbitration, there must be a valid arbitration clause in the WPPA. If the parties cannot agree to add an arbitration clause to the WPPA, it will be difficult in the future to bring the dispute to arbitration. In this situation, that dispute will most likely be settled by the Electricity Regulatory Authority under the Ministry of Industry and Trade.