Power purchase agreement for Nhon Trach 3&4 Power Plant

This represents one of the most important contracts before the plant goes into commercial operation.

Present at the signing ceremony on October 4 in Hanoi were Dang Hoang An, chairman of EVN Board of Directors; representatives of the Board of Directors; the Board of General Directors; and leaders of the Group's professional departments and member units.

Le Manh Hung, chairman of the Petrovietnam Board of Directors, Le Ngoc Son, general director of Petrovietnam, representatives of the Board of Directors and the Board of Management, and heads of the Group's member units and professional departments were all in attendance on behalf of Vietnam Oil and Gas Group (Petrovietnam).

PV Power was represented by Hoang Van Quang, chairman of the Board of Directors; together with Le Nhu Linh, general director; leaders of the Executive Board; the Board of Directors; and the professional divisions.

Photo: Le Nhu Linh, general director of PV Power, and Le Khac Hung, director of EVNEPTC, sign the PPA Contract for the Nhon Trach 3&4 Power Plant.

Situated in Nhon Trach district of Dong Nai province, the Nhon Trach 3&4 Power Plant is a nationally significant project invested in by PV Power. It has a 1,624 MW capacity and a total investment of US$1.4 billion. With the most cutting-edge gas turbine technology on the market, provided by GE (USA), this represents the nation’s first LNG-fuelled power plant project, boasting the highest capacity and efficiency to date. It is anticipated that the project will supply the power grid with more than nine billion kWh of electricity yearly once it starts producing commercial electricity, thereby ensuring both national energy security and the wider socio-economic development of the country.

Ever since the project received preliminary approval, PV Power has been vigorously carrying out the various investment stages. It selected two competent and seasoned EPC contractors, namely Samsung C&T Joint Venture and Vietnam Machinery Installation Corporation (Lialama), by putting out a bid. The financial source for the project has also been established, with the latter phases of the project's GSA contract discussions coming to an end. Trial runs will soon be conducted by Lilama and Samsung C&T, who are also handling the last phases of construction and installation.

The capital arrangement for the project has also been finished. In particular, PV Power has sealed agreements with SMBC/SACE for a loan of US$200 million, Vietcombank for a loan of VND4,000 billion, and most recently a consortium of the two banks Citi & ING which is guaranteed by KSURE & SERV for a facility agreement of US$521.5 million.

PPAs are among the most significant contracts in the process of investing in a power plant project, along with long-term power purchase agreements (Qc) and setting the framework for electricity pricing. These represent critical elements for the project to go into commercial operation with both ease and efficacy.

As the first LNG power plant project in the nation, the Nhon Trach 3&4 power plant presents a unique challenge during the PPA negotiation process due to the lack of precedence. The signing PPA will therefore facilitate PV Power to negotiate a Gas Purchase Agreement (GSA) with a confirmed timeframe, annual LNG purchase volume, consistent gas delivery plan, and the most affordable gas pricing. Furthermore, it is a requirement for foreign credit organisations to think about lending to PV Power so that the project can be carried out.

Since 2019, with close guidance from the Government, the Ministry of Industry and Trade, the Committee for Management of State Capital at Enterprises (CMSC), the Vietnam Oil and Gas Group, and Vietnam Electricity (EVN), PV Power and EVNEPTC (a unit authorised by EVN) have all been negotiating a power purchase agreement based on Circular 57/2020/TT-BCT of the Ministry of Industry and Trade. As a result, this will give the project a solid base on which to operate commercially once construction is finally complete. The cornerstone of the PPA agreement that PV Power and EVNEPTC have signed therefore ensures alignment of the parties' interests with those of the national interest.