Fast-track approach to power projects

The new government move will help shorten build-operate-transfer power projects’ pre-licencing preparations.

In light of Document 1604/TTg-KTN, build-operate-transfer (BOT) power projects are eligible to apply some sharp legal clauses.

Accordingly, BOT project developers can apply foreign laws in dispute cases using English language if differences persist in projects’ Vietnamese and English documents.

BOT power projects also enjoy corporate income tax (CIT) exemption in the first four years since they generate incomes, 5 per cent CIT tax in the following nine years and 10 per cent in BOT contracts’ remaining years.

Besides, developers benefiting from land rental exemption and have the right to mortgage the land use rights and relevant assets at credit organisations and authorised credit agents operating in Vietnam to take loans.

In case land with relevant assets is transferred, the new owners will inherit the land use rights and usage of relevant assets in contracts’ remaining time and they must not alter the land use functions.

The Vietnamese government also guarantees the power cost payment obligations of Electricity of Vietnam in power purchase agreements. The government also stands surety for payment obligations of state groups through BOT contracts for contracts using coal provided by Vinacomin and gas supplied by PetroVietnam.

Gas-fuelled power projects are set to have 20-year terms, while the duration for coal-fired projects is 25 years.

According to experts joining BOT project negotiations, presenting a general frame for BOT power project implementation would create a level playing field to developers and shorten the negotiation process.

Deputy Minister of Industry and Trade Hoang Quoc Vuong suggested developers of BOT projects under negotiation focus on power purchase agreements and BOT project contents which were recently ratified by the government, to facilitate the negotiation process.

Reality shows that the Vung Ang 2 BOT power project developed by Hong Kong-based One Energy and Vietnamese Lilama Group and REE with a capacity of 1,300 megawatts per year, reflected divergences in negotiations between the developer consortium and local ministries and branches.

Most of contract terms were yet to be finalised since many divergences exist between developers and Vietnamese competent state agencies relative to tax, foreign currency conversion, law changes, compensation methods, infrastructure sharing or water supply contracts.

“The developer gave out too many proposals having no precedents in previously licenced BOT contracts, making state agencies confused about how to negotiate,” said a member of the Ministry of Industry and Trade’s BOT power project negotiation team.

“To keep negotiations rolling on, the developer should decide on what further contents to be negotiate based on Document 1604 relative to BOT power project developer rights,” said the expert. – VIR

Tags: Vietnam energy, Vietnam energy industry, Vietnam Energy sector