Vietnam – Power Energy Action Plan – With Outlook on the Major Trade Agreements CPTPP, EUVNFTA and Investment Protection Agreement

1. Vietnam – Power Energy Action Plan – With Outlook on the Major Trade
Agreements CPTPP, EUVNFTA and Investment Protection Agreement
Author: Dr. Oliver Massmann
A. Overview of the Power Master Plan 8
Vietnam contains huge potential regarding the production of clean energy. It has best conditions
for developing solar power due to being one of the countries with the most sun hours during the
year and best conditions for creating wind power due to 3000km coastline. As a result, Vietnam
in general, is able to attract many Foreign Direct Investments (FDI) for developing clean energy
projects.
Therefore, the aim of the current Power Master Plan 8 (PMP8) is to develop power sources, in
which renewable energy (wind, solar, bio) will be prioritized, in order to stepwise increase the
proportion of electricity generated from renewable energy sources. Core elements are to establish
links between international and domestic companies. Thus, the international finance and
technology should be connected to the domestic banks and the expertise of domestic companies.
In addition, a market must be developed that attracts large-scale companies and small and medium
sized enterprises (SMEs) equally.
Furthermore, there will be improvements to the solar power market and the Solar Power Purchase
Agreement (PPA) model, which could apply from 1 July 2019. If the PPA is improved to meet the
standards of international and domestic banks, the cost of financing solar power plants can be
reduced. Feed-in tariffs could provide 2 billion USD in foreign investment in solar energy by 2020.
The new PPA should focus on the key areas termination payments, curtailment and failure to take
or pay by Vietnam Electricity (EVN), dispute resolution / arbitration clauses and the application
of the feed-in-tariff for 20 years the PPA for new solar projects, which reach their commercial
operation date by 30th June 2021 with a reduced feed in tariff. These improvements should equally
apply to the standard PPAs for wind power, biomass and waste to energy.
In addition, a government market-driven electricity price system should be created, which includes
a welfare state price system and thus supports low-income citizens. To make this possible, the
price for the middle class has to be raised. Furthermore, the need for government guarantees must
be reduced. In order to counteract electricity wastefulness, incentives for private sector investment

2. in distributed clean energy generation and energy efficiency with fair and transparent electricity
tariffs are necessary.
With regard to the price of electricity, there will be essentially three types of movement. First, the
daytime hourly tariff will be redesigned for commercial and industrial consumers. This is intended
to reduce the peak load of the transmission system and transmission losses. Second, regional
differences in retail tariffs are developed. Third, a market-based electricity tariff is set, which
contains flexible regulations and thus allows adjustments and increases in efficiency.
It will be important for the government to upgrade transmission and distribution. A regulator
regime is to build, which allows and encourages construction and use of bio-mass, solar, wind and
other clean sources of power generation for private and public users - office, residential,
manufacturing, communities, and industrial - small scale and large scale, and to speed up decision
making and set predicative procedures to encourage development of off shore gas, LNG,
efficiencies, and renewables.
B. Future recommendations for VL Direct Power Purchase Agreement
The Application of PPA should be extended and even used for commercial power consumers
(offices, hotels, resorts and supermarkets), hence they can reduce their electricity costs. The project
aim should be to make a major investment in clean energy generation. Guidelines could be to reach
at least 300MW of new clean energy generation in 2018/2019 and to invest about 400 Million
USD.
The Electricity Regulatory Authority of Vietnam (ERAV) and EVN must define as soon as
possible a so-called “wheeling fee”. Wheeling is the transportation of electric energy (megawatt-
hours) from within an electrical grid to an electrical load outside the grid boundaries. At least for
the first 5 years of operation the fee should be fixed. Afterwards, an increase is possible in agreed
in conjunction with business groups and WE.
C. Outlook on Major Trade Agreements TPP 11, EUVNFTA and Investment Protection
Agreement
In January 2017, US President Donald Trump decided to withdraw from the US’ participation in
the TPP. In November 2017, the remaining TPP members met at the APEC meetings and
concluded about pushing forward the now called CPTPP (TPP 11) without the USA. The provision
of the agreement specified that it enters into effect 60 days after ratification by at least 50% of the
signatories (six of the eleven participating countries). The sixth nation to ratify the deal was
Australia on 31 October 2018, therefore the agreement will finally come into force on 30 December

3. 2018. Recently, on the 12th November 2018, Vietnam has officially become the seventh member
of the CPTPP.
The CPTPP is targeting to eliminate tariff lines and custom duties among member states on certain
goods and commodities to 100%. This will make the Vietnamese market more attractive due to
technology advances, reduction of production costs and because of the high demand on renewable
energy. Sustainable environments are a primary concern of the CPTPP agreement.
An increase of trade should not mean negative influence to the environment. In contrary, due to
the increased focus on the need for energy efficiency and reduced emissions renewable energy
could experience a crucial growth. The agreement is suitable to support Public-Private-
Partnerships (PPPs), which could lead to a positive impact in development of innovative
technologies and alternative energy sources. Lower or no trade tariffs can lead to lower import
costs for the essential components of renewable energy production. This, in turn, results in lower
investment costs and lower production costs, thus increasing the cost-effectiveness of introducing
renewable energy technology.
One another notable major trade agreement is the European Union Vietnam Free Trade Agreement
(EUVNFTA). The EUVNFTA offers great opportunity to access new markets for both the EU and
Vietnam and to bring more capital into Vietnam due easier access and reduction of almost all
tariffs of 99%, as well as obligation to provide better conditions for workers, which is a key aspect
in terms of working at power plants. In addition, the EUVNFTA will boost the most economic
sectors in Vietnam. Moreover, the EUVNFTA will provide certain tax reductions to 0% for clean
technology equipment as well as equal treatment for companies. Due to easier opportunity on
making business, trade and sustainable development will be a good consequence for an even more
dynamic economy and even better investment environment in Vietnam in general and especially
in the power/energy industry.
Both agreements promise great benefits for the energy sector in Vietnam and will help the PMP8
to connect international to domestic companies. The elimination of the tariff lines and custom
duties are advantages to major companies and SMEs alike.
To enable at least some parts of the FTA to be ratified more speedily at EU level, the EU and
Vietnam agreed to take provisions on investment, for which Member State ratification is required,
out of the main agreement and put them in a separate Investment Protection Agreement (IPA).
Currently both the FTA and IPA are expected to be formally submitted to the Council in late 2018,
possibly enabling the FTA to come into force in the second half of 2019.
Furthermore, the Investor State Dispute Settlement (ISDS) will ensure highest standards of legal
certainty and enforceability and protection for investors. We alert investors to make use of these

4. standards! We can advise how to best do that! It is going to be applied under the TPP 11 and the
EUVNFTA. Under that provision, for investment related disputes, the investors have the right to
bring claims to the host country by means of international arbitration. The arbitration proceedings
shall be made public as a matter of transparency in conflict cases. In relation to the TPP, the scope
of the ISDS was reduced by removing references to “investment agreements” and “investment
authorization” as result of the discussion about the TPP’s future on the APEC meetings on 10th
and 11th November 2017.
Further securities come with the Government Procurement Agreement (GPA), which is going to
be part of the TPP 11 and the EUVNFTA. The GPA in both agreements, mainly deals with the
requirement to treat bidders or domestic bidders with investment capital and Vietnamese bidders
equally when a government buys goods or requests for a service worth over the specified threshold.
Vietnam undertakes to timely publish information on tender, allow sufficient time for bidders to
prepare for and submit bids, maintain confidentiality of tenders. The GPA in both agreements also
requires its Parties assess bids based on fair and objective principles, evaluate and award bids only
based on criteria set out in notices and tender documentation, create an effective regime for
complaints and settling disputes, etc.
This instrument will ensure a fair competition and projects of quality and efficient developing
processes.
If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann
under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane
Morris Vietnam LLC.
Thank you very much!