Vietnam: New Circular 12/2025/TT-BCT on tariff determinations and PPAs of power projects

24 Feb 2025    2 minute read
PPA Power Prices Energy Transition Sustainability

In brief

Following the effectiveness of the new law on electricity (“New Electricity Law”) on 1 February 2025, the Ministry of Industry and Trade of Vietnam (MOIT) has issued Circular No. 12/2025/TT-BCT. This circular provides new regulations on the method for determining power generation service prices, the principles of calculating power prices, and the main contents of power purchase agreement (PPA) for power projects (“Circular No. 12/2025”). Effective on 1 February 2025, Circular No. 12/2025 has replaced Circular No. 07/2024/TT-BCT dated 12 April 2024. It affects a broad spectrum of domestic gas, imported LNG to power, other conventional power projects under private investment/IPP form, as well as various utility-scale renewable energy greenfield investment projects, implemented under the revenue model of power sales to Vietnam Electricity or its authorized subsidiaries (“EVN”).

Contents

Circular No. 12/2025 does not apply to: multi-purpose strategic hydropower plants, small renewable energy plants under the avoided cost tariff (ACT) mechanism, Build-Operate-Transfer (BOT) independent power plants, plants providing auxiliary services, or those with other electricity purchase price mechanism as per relevant authority documents.

Compared to Circular No. 07/2024/TT-BCT dated 12 April 2024, Circular No. 12/2025 has preserved a substantial portion of its contents while incorporating specific clarifications and adjustments. Noteworthy changes include the following:

  1. Regarding the power purchase agreement (PPA), Circular No. 12/2025 outlines the main contents of the PPA in its Appendix III, which serves as a basis for negotiation and signing by the power seller and the power buyer, rather a model form of PPA. Circular No. 12/2025 specifies that the power seller and the power buyer have the right to negotiate and agree upon additional terms of the PPA in accordance with Vietnamese law. Consequently, several specific contents from the previous model form of the PPA have been removed from the key terms to provide more flexibility for the parties to negotiate their PPAs on this basis.
  2. In terms of the language of the PPA, Circular No. 12/2025 specifies that the language used in the PPA must be Vietnamese. However, if the power seller includes foreign investors, the power seller and the power buyer may agree to include an English version of the PPA as well.
  3. Regarding the main input parameters used to calculate the average fixed price of power plants (FC), Circular No. 12/2025 states that the investment costs may include battery energy storage systems (if any) for renewable energy plants. However, when calculating the power output generated at the output side of the power plant (ANM), the output from any battery energy storage system is excluded based on the basic design in effect at the time of negotiation. For wind power plants, Circular No. 12/2025 specifies that both parties shall agree to determine the output according to the expected level of P50.
  4. Under Circular No. 12/2025, similar to the Circular No. 07/2024/TT-BCT, the power purchase agreement (PPA) price of a power plant is determined based on: (i) reasonable and valid expenses of the investor in the entire economic life of the project; and (ii) the financial internal rate of return (IRR) not exceeding 12%. The PPA price in the base year may not surpass the power generation price bracket issued by the Minister of the MOIT in the base year, where the PPA price for comparison with the power generation price bracket is calculated based on cost components that correspond to the cost components used in the calculation of the power generation price bracket.

Click here to read the detailed analysis of Circular No. 12/2025’s key regulations affecting on the development, construction and financing of power projects in Vietnam.

Contact Information
Oanh Nguyen
Managing Partner
Ho Chi Minh City, Hanoi
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oanh.nguyen@bakermckenzie.com
Thanh Hai Nguyen
Special Counsel
Hanoi
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thanhhai.nguyen@bakermckenzie.com

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