Brief Comments On Direct PPA Mechanism In Vietnam Under Decree 80/2024

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Decree 80/2024 outlining mechanisms for direct power purchase agreement (DPPA) between renewable energy generators and large electricity consumers (Decree 80/2024) was issued by Vietnamese Government and became effective 3 July 2024. This Decree is considered as a significant policy that aims to promote the development of renewable energy in Vietnam and enhance the competitiveness of Vietnam’s retail electricity market.

This briefing note discusses the significant highlights of DPPA mechanism to be applicable to renewable power developers, including rooftop solar power developers in Vietnam as introduced by Decree 80/2024. This post is written by Nguyen Thi Kim Anh and Ha Thanh Phuc and edited by Nguyen Quang Vu.

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Not So Fast - The new DPPA mechanism and the Anti-Corruption Campaign in Vietnam

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.

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Issues Relating To Private Bonds Marked As “Cancelled” On Hanoi Stock Exchange Website

Since 2019, Hanoi Stock Exchange (HNX) has operated a website to publish information on private corporate bonds (Private Bond Information Website). Currently, on the Private Bond Information Website, several outstanding private bonds issued under Decree 153/2020, which have reached maturity but have not been repaid by the relevant issuers, are marked as “cancelled” (bị hủy) by HNX (the Cancelled Bonds). This classification by HNX raises several issues as discussed below.

Legal status of the Cancelled Bonds

One may argue that HNX’s announcement of the Cancelled Bonds implies that the Cancelled Bonds are invalid and that bondholders can no longer claim outstanding payment from the issuer. However, Vietnamese law also contains several provisions suggesting that the Cancelled Bonds remain valid and the issuer must fulfill outstanding payments to the bondholders:

  • Under Decree 153/2020, the bondholder is entitled to “be paid on time by the issuer the full amount of principal and interest when they become due […] under the terms and conditions of the bond and the agreements with the issuer”. This suggests that even when the Cancelled Bonds have matured, the issuer must still fully pay the outstanding amount to the bondholders under the Bond terms & conditions (Bond T&C) and bond subscription agreement;

  • Under Decree 153/2020, as a condition for the new issuance of private bonds, the issuer must “have fully paid the principal and interest on the issued bonds (if any) or having fully paid out debts on maturity within three (3) years immediately preceding the issue tranche […]”. This provision suggests that the issuer must pay in full all of the debts, including outstanding bonds that have matured (e.g., Cancelled Bonds), to be eligible to issue new private bonds; and

  • Under Decree 65/2022, if the Cancelled Bonds have matured but the issuer has not paid the principal and interest of the Cancelled Bonds in full, the issuer is only allowed to negotiate with bondholders regarding changes of plan to pay the principal and interest of the Cancelled Bonds. If bondholders disagree with the proposed plan by the issuer, the issuer must fully comply with the Bond T&C and bond subscription agreement. At law, there is no provision allowing the issuer to terminate the validity of the Cancelled Bonds purely because they have matured.

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How the new Law Electronic Transactions 2023 could affect the signing of contracts by exchanging pdf copies in Vietnam?

In the modern day, signing of contracts is increasingly done through the creation and exchange of pdf copies of the agreed contract by the relevant parties instead of physically signing and exchanging hard copy documents. Previously, the Law on Electronic Transactions 2005 allows the parties to have substantial flexibility in agreeing on how contracts can be signed by way of creating and exchanging pdf copies. However, from 1 July 2024, several new provisions under the Law on Electronic Transaction 2023 (LET 2023) could affect how the parties could sign a contract via the creation and exchange of pdf copies of the agreed contract. In particular,

  • The LET 2023 appears not to allow an individual to have an e-signature which can be created from a scanned signature of such individual. Accordingly, the practice of having the signature page printed, signed, scanned and attached to the body of the contract may not be considered as signing the contract by the relevant individual.

  • The LET 2023 requires an electronic record (thông điệp dữ liệu) converted from a hard copy document to have a specific indication that it has been converted from a printed copy and the details of the person/entity conducting the conversion. Accordingly, a simple scanned pdf copy of a contract without the required information may not qualify as an electronic record of such contract.

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