Decree 56: New Rules on Power Planning, Gas-to-Power Projects, and Investor Auctions

09/04/2025 10:00

Decree 56: New Rules on Power Planning, Gas-to-Power Projects, and Investor Auctions

On 3 March 2025, the Government of Vietnam issued Decree 56/2025/ND-CP (Decree 56) to implement key provisions of the Electricity Law 2024. Decree 56 provides regulatory clarity on the preparation and implementation of national and provincial Power Development Plans (PDPs), the development of gas-to-power projects, and the competitive investor selection process for electricity infrastructure projects. Decree 56 also introduces legal certainty for project developers, cost recovery mechanisms for LNG projects, and a structured auction framework to enhance transparency and bankability in power project investment.

This update outlines the major features of Decree 56 and the practical considerations for developers, investors, and stakeholders involved in Vietnam's power sector.

 

1. Power Master Plan Eligibility: Clarification of Scope

Decree 56 codifies the criteria for determining whether a power project must be included in the national or provincial PDP, thereby clarifying a longstanding regulatory ambiguity.

Notably, three categories of projects are expressly excluded from the PDP requirement:

  1. Grid-connected power systems operating at a voltage level of 1 kV or below;
  2. Fully off-grid systems, designed for internal electricity consumption only (e.g. factories, farms, households); and
  3. Grid-connected systems with a “zero-export” configuration, i.e. designed to prevent electricity injection into the national grid.

This exemption aims to reduce administrative burdens for small-scale, self-consumption renewable projects — particularly rooftop solar, behind-the-meter storage, and advanced distributed energy resources — which have often faced legal uncertainty regarding PDP compliance.

However, Decree 56 maintains that all other grid-connected or sale-to-grid projects, regardless of size, must still be assessed under the applicable PDP framework.

 

2. Gas-to-Power Projects: Pass-Through Mechanism and Long-Term Purchase Obligations

Decree 56 introduces a more investor-friendly regulatory framework for gas-to-power development by establishing:

  1. A pass-through mechanism for fuel cost recovery under Power Purchase Agreements (PPAs); and
  2. Mandatory long-term power purchase obligations to enhance project bankability

2.1 Pass-Through Mechanism for Fuel Costs in PPAs

Under Decree 56, gas-to-power projects using imported liquefied natural gas (LNG) or domestic natural gas may recover fuel costs through the electricity tariff, provided that the project achieves commercial operation date (COD) before:

  1. 1 January 2031, for LNG-based projects; or
  2. 1 January 2036, for projects using domestic natural gas.

Fuel costs are to be determined and applied in PPAs according to the following principles:

  1. Multiple fuel supply contracts: The applicable fuel price is calculated based on a weighted average of the invoiced supply volumes. This reflects actual cost exposure and is intended to reduce tariff volatility.
  2. Projects with LNG import infrastructure: Investment costs in LNG import terminals may be recovered through the PPA tariff; however, these infrastructure costs must be excluded from the fuel component to avoid double counting.
  3. Projects sharing regasified LNG infrastructure: The fuel cost will include the LNG import price, storage charges, regasification fees, and intra-terminal transportation costs, all of which must comply with pricing regulations issued by the Ministry of Industry and Trade (MOIT).

This mechanism is designed to align tariff structures with actual fuel market dynamics while offering predictability to investors.

2.2 Long-Term Power Purchase Obligations for Gas Projects

To enhance bankability and support debt financing for gas-to-power projects, Decree 56 mandates long-term power purchase commitments from power purchasers (typically EVN or its subsidiaries), with distinct terms for domestic gas and LNG projects:

For domestic natural gas projects:

  1. The purchaser must dispatch electricity based on available gas supply capacity, while also considering national PDP constraints to ensure system balance.
  2. Dispatch rights are subject to fuel availability, transmission capacity, and the actual operating conditions of the power plant.

For imported LNG projects:

  1. During the loan repayment period (up to 10 years from COD), the power purchaser must commit to procuring at least 65% of the project’s multi-year average electricity output.
  2. After the loan repayment period, output levels are to be determined based on commercial negotiations between the purchaser and the generator, allowing for flexibility in response to market evolution.

These provisions aim to mitigate long-term offtake risk, which has historically hindered LNG-to-power project development in Vietnam due to uncertainties in demand, fuel pricing, and grid integration.

 

3. Investor Selection and Auction Mechanism for Power Projects

Decree 56 establishes a comprehensive legal framework governing the selection of investors for power business projects through competitive auction mechanisms, consistent with the Electricity Law 2024 and broader efforts to enhance transparency and efficiency in power sector investment.

This section applies to power projects requiring land allocation or lease by the State, or where investors must obtain an investment registration decision based on competitive procedures. It also clarifies the circumstances under which direct appointment may be permitted.

3.1 Scope of Application

Investor selection via auction is applicable to the following categories of power projects:

  1. Projects that are included in the national or provincial PDP; or
  2. Projects in which two or more investors have expressed interest.

This includes projects in renewable energy, thermal power, and LNG-to-power, as well as grid infrastructure projects developed under independent investor models.

3.2 Auction Process and Relevant Authorities

Decree 56 outlines a structured two-phase process for conducting investor selection via auction:

Phase 1 – Approval of Auction Policy

  1. The relevant authorities, including MOIT (for nationally approved PDP projects) or the relevant provincial People’s Committee (for provincial PDP projects) are responsible for determining the electricity purchaser who will enter into the PPA with the selected investor. .
  2. The auction policy must include basic project parameters such as location, scale, technology type, grid connection method, and environmental considerations.

Phase 2 – Organisation of Investor Auction

  1. Once the auction policy is approved, the relevant authority will organise an open investor selection process in accordance with the Law on Bidding, Decree 25/2020/ND-CP (as amended), and other implementing regulations.
  2. Auction documents must clearly specify:
  1. Pre-qualification and eligibility criteria;
  2. Bid evaluation methods (technical, financial, or combined scoring);
  3. Ceiling electricity tariffs, if applicable;
  4. Land or sea area use terms and conditions;
  5. Project development timeline and grid connection milestones.

3.3 Investor Rights and Obligations

The winning investor will be granted the following rights and responsibilities:

  1. The right to conduct investment procedures, including application for Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC);
  2. The right to negotiate a PPA with EVN or the authorised purchaser (in accordance with MOIT regulations); and
  3. The obligation to comply with:
  1. Environmental impact assessment and mitigation requirements;
  2. Progress commitments on land clearance, construction, and COD; and
  3. Other conditions attached to the IRC and land allocation/lease decisions.

3.4 Cases Permitting Expedited Investor Selection Procedures

  1. Projects developed to replace other projects that are behind schedule, halted, or unable to meet rising electricity demand, posing a risk of power shortages;
  2. Power generation projects assigned urgently to State-owned enterprises to ensure energy supply security;
  3. Grid projects requiring expedited implementation to replace delayed projects, mitigate overload conditions, or prevent anticipated power shortages within the next two years;
  4. Projects directly serving urgent national defence and security needs;
  5. Projects addressing urgent local socio-economic development demands, requiring implementation within less than 18 months (applicable to 110 kV grid projects).

The MOIT or the provincial People's Committees shall propose urgent power projects. Once approved by the Prime Minister as “urgent power projects”, such projects shall immediately benefit from expedited investment procedures, prioritised implementation measures, and simplified investor selection processes.

 

Conclusion and Outlook

Decree 56 marks a significant evolution in Vietnam’s regulatory architecture for the power sector. It provides the legal scaffolding to support transparent project planning, predictable power pricing for LNG-based generation, and competitive investor participation in electricity infrastructure.

The auction framework in particular represents a step-change from prior ad hoc project approvals and is expected to attract strategic investment by reducing legal uncertainty and enhancing project bankability.

Next Steps for Stakeholders:

  1. Assess PDP alignment for ongoing or upcoming projects;
  2. Review fuel procurement and tariff structures in LNG-to-power project PPAs;
  3. Monitor investor auction notices and prequalification conditions issued by MOIT or provincial authorities; and
  4. Consider partnerships or consortium arrangements where local ownership or prior experience is required.

 

Please feel free to contact our Frasers team should you require strategic or transaction-specific guidance in aligning your projects with the new framework under Decree 56.

 

Click here to download: Legal Update - New Rules on Power Planning, Gas-to-Power Projects, and Investor Auctions - April 2025.pdf 

 

This material provides only a summary of the subject matter covered, without the assumption of a duty of care by Frasers Law Company.
The summary is not intended to be nor should be relied on as a substitute for legal or other professional advice.

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