LNG-fueled power generators, EVN should negotiate long-term purchase agreements: ministry

LNG-fueled power plants and state utility Vietnam Electricity (EVN) should negotiate long-term power purchase agreements (PPAs), the Ministry of Industry and Trade recommends in a draft decree.

The draft decree and other documents prepared by the ministry regarding PPAs for LNG-fired power plants focus in particular on purchase guarantees for electricity produced. The ministry plans to submit the draft decree to the government this month, aiming at August 1 as its effective date.

The decree is also part of implementing the national power development plan VIII (PDP VIII) and attracting investment for LNG-fired power. This, in turn, is part of efforts to ensure stable and diverse energy sources.

The draft mentions two options. The first one, which follows the current legal framework, has buyers and sellers themselves negotiating PPAs.

While this facilitates autonomy of both sides, negotiations between EVN and LNG-fired power investors have been slow, negatively impacting project implementation and further investments in the LNG-fired power sector.

The second option, the ministry’s preferred choice, is negotiations between power sellers and EVN. In case no agreement is reached, the government will assign EVN the task of calculating details related to the amount of purchase in the PPAs, with a focus on ensuring energy security, fairness between different energy sources, minimal impacts on electricity retail prices, and EVN’s financial status.

In the second option, the ministry highlights the financial burden on EVN, given that LNG-fired power is costly, at VND2,400-VND2,800 (9.4-11 U.S. cents) per kWh. The rate is higher than EVN’s retail electricity price, which ranges from VND1,806-VND2,167 per kWh for the first 200 kWh, and remains lower than VND2,729-3,151 per kWh for usage beyond 200 kWh.

With respect to the Nhon Trach 3 and Nhon Trach 4 power plants, the two LNG-fired facilities under construction in Dong Nai province, EVN has estimated that it would have to spend VND6,870 billion ($270 million) on purchasing 70% of their output in 2025. The utility is yet to allocate money for such purchase.

In May, the Ministry of Industry and Trade approved the base price for LNG-fired power produced by combined cycle gas turbine thermal power plants at VND0-2,590.85 per kWh, equivalent to 10.56 U.S. cents per kWh. Based on this, EVN and power producers can hold price negotiations, it said.