DECISION. On the mechanism to support the development of Biomass Power Projects in Vietnam

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1 THE PRIME MINISTER No. 24/2014/QD-TTg SOCIALIST REPUBLIC OF VIETNAM Independence Freedom Happiness Hanoi, March 24 th, 2014 DECISION On the mechanism to support the development of Biomass Power Projects in Vietnam Pursuant to the Law on Organization of the Government dated 25/12/2001; Pursuant to the Law on Electric Power dated 03/12/2004; the Law amending, supplementing some of the Articles of the Law on Electric Power dated 20/11/2012; Pursuant to the Law on Investment dated 29/11/2005; Pursuant to the Law on Construction dated 26/11/2003; Based on the proposal of the Minister for Industry and Trade, The Prime Minister issue the Decision on the regime to support the development of Biomass Power Projects in Vietnam. Article 1. Scope and subject of application Chapter I GENERAL REGULATIONS 1. This Decision specifies on the support regime for developing Power projects using Biomass fuel in Vietnam. 2. The Subject of Application from this Decision includes organizations, individuals participating in electric operations related to the development of Biomass Electricity Projects in Vietnam. Article 2. Terminology In this Decision, the following words shall be interpreted as follow: 1. The Buyer is EVN or an authorized member (for projects of grid connection). 2. The Seller is the organization, individual with an Electricity Operation Permit in the Industry of power generation from Biomass Power Plants. 3. Biomass energy used to generate electric power includes: byproducts, wastes in agricultural production, processing agricultural and forestry products and other trees that can be used as fuel for power generation.

2 4. Biomass Power Project is a Project on Power Plant that uses mainly Biomass energy for electricity generation. 5. Biomass Power Project connected to the Grid is a Biomass Power Project that is connected to the National Grid to partly or wholly provide electricity to the National Grid. 6. Connection point is the location where the line from the Electricity seller party is connected to the system from the buyer Party. 7. Delivery point is the location of the meter that is negotiated in the Electricity sale and purchase to calculate the power output of the Electricity Seller Party. 8. Biomass Power Project not connected to the Grid is a Biomass Power Project that is constructed to supply to household users in the area, and is not connected to the National Grid. 9. The sample Contract of Electricity Sale and Purchase for Biomass Power Project connected to the Grid is a Contract of Electricity Sale and Purchase issued by the Ministry of Industry and Trade to serve as a basis of application in electricity sale and purchase transactions from Biomass Power Project connected to the Grid between the Electricity Seller and the Buyer. 10. Avoided cost of the National Power System is the costs of producing one (01) kwh of a thermal power unit that uses imported coal in the National Power System, this cost is avoidable if the Buyer purchase one (01) kwh from a Power Plant that uses a substitute source like Biomass. 11. The Price list of Avoided costs that is applied in Biomass Power Projects is the price list calculated using all avoided costs of the National Power System with one (01) kwh generated from a Biomass Power Project being transmitted to the National Power System. 12. The main categories of a Biomass Power Project include boiler, turbine, generator and transformer. 13. A Co-generation Project of Heat Electricity is a Biomass Power Project that produces and supplies both electric power and heat. Article 3. Development Plan of Biomass Power Chapter II PLAN AND DEVELOPMENT OF BIOMASS PPOWER 1. Development Plan of Biomass Power is one of the contents of the Plan for Development and Use of Biomass Energy. The Plan for developing and using Biomass energy includes the National Plan for developing and using Biomass Energy, the provincial Plan for developing and using Biomass Energy. The Plan for developing and using Biomass energy shall serve as a basis for investment in and use of biomass energy, and is adjusted for the researches, potential evaluation in each period. 2. The National Plan for developing and using Biomass Energy and the provincial Plan for developing and using Biomass Energy was prepared for the period till 2020, with the vision up to 2030 and shall be amended, supplemented when necessary. From the following plans, the Development plan for Biomass Power shall be included in the Provincial and National Development Plan for Electric Power. Article 4. Forming, appraising, approving and publishing the Plan for developing and using Biomass Energy

3 1. The Ministry of Industry and Trade organized the forming of the national Plan for developing and using Biomass energy and submitted to the Prime Minister to approve; publish and provide guidance, monitor, inspect the implementation of the approved Plan for developing and using Biomass energy. 2. The Provincial, municipal city People s Committee (altogether the provincial People s Committee) organized the forming of the provincial Plan for developing and using Biomass energy and submitted to the Minister for Industry and Trade for approval. 3. The publishing and amending the plan is conducted under current regulations. Article 5. Expenses for forming, appraising, approving and publishing the Plan for developing and using Biomass Energy 1. The State Budget shall supply funds to form, appraise, publish and amend the Plan for developing and using Biomass. 2. Encourage the contribution of other legal funds to form the Plan for developing and using Biomass. Article 6. Investment in the construction of Biomass Power Projects connected to the Grid 1. The construction must comply with the Plan for developing and using Biomass and the Development plan for Electric Power approved by the authorities. 2. For Biomass Power Projects that are not yet in the list of the approved national Plan for developing and using Biomass and national Development Plan for Electric Power, the Investor is responsible for forming a Dossier and requesting inclusion in the Plan and send to the Ministry of Industry and Trade for approval, submitted to the Prime Minister for consideration and decision. 3. Before the Plan for developing and using Biomass is approved, the investment in Biomass Power Project must be approved by the Prime Minister. 4. The investment in constructing Biomass Power Projects must follow regulations on construction, fire prevention and firefighting, environmental protection and other related regulations. Article 7. Connecting the Biomass Power Project to the Power system, moderating the operation of Biomass Power Plan 1. The connection of Biomass Power Project to the National Grid must comply with the approved Development Plan for Electric Power. The Connection point is negotiated between the Buyer and the Seller on the basis that the Seller is responsible for the transmission line to the connection point with the nearest National Grid according to the provincial Development Plan for Electric Power. If the connection point to the National Grid is not in the Development Plan for Electric Power, the Investor needs to negotiate the connection point with the distribution party or transmission party as a basis to ass to the provincial Development Plan as per current regulations. If the connection point is not negotiated, the Seller is responsible for submitting to the Ministry of Industry and Trade for consideration and decision. 2. The Investor of the Biomass Power Project is responsible for investing, operating, maintaining the line and the transformer station (if any) from the Power Plant that belongs to the Seller to the connection point as per the connection agreement with the Buyer.

4 3. Depending on the voltage of the connection, the Distribution party or the Transmission party is responsible for investing in a transmission line that connects to the National Grid as per the approved Development Plan for Electric Power and sign a connection agreement with the Investor of the Biomass Power Project. 4. After finishing the Investment and start commercial operation, the Moderator party of the power system and market operation is responsible for the promotion of the Biomass Power Plant, prioritize the capacity and output electricity level that is suitable for the Biomass supply in the plant area. Article 8. Condition for start of Biomass power construction The Investor is only permitted to start constructing a Biomass power construction that is connected to the Grid, besides the specifications at Article 72 of the Law on Construction and related regulations, it is necessary to have: Project Investment Certificate, Document agreeing on the power purchase from the Buyer; connection agreement with the Distribution or Transmission party (for Biomass Power Project connected to the Grid); comments on the design from authorities as per requirements on managing construction Investment. Article 9. Termination of project implementation After 12 months from the date receiving the Investment Certificate, if the Investor does not start constructing the main items or after maximum 24 months from the operation date committed in the Investment Certificate, if the project has not started its operation, the Provincial People s Committee is responsible for the reconsideration to recover the Investment Certificate, and report to the authorized government body to assign the project to another Investor, unless there is a legitimate reason and the authorities agree the pause or extension of schedule. Article 10. Project Implementation reporting regime 1. Within 5 days from day the Investment Certificate is received, the Investor is responsible for sending certified copies of the Investment Certificate to the Ministry of Industry and Trade. 2. During the construction of the Biomass Power Project, before the 15 th day of the first month of the Quarter, the Investor must report on the implementation progress of the previous quarter, the plan for the next quarter. Before January 15 th of each year, the Investor must prepare a report on the project implementation of the previous year, implementation plan for the next year and send to the provincial People s Committee and Ministry of Industry and Trade to manage, monitor and send to the Buyer for cooperation. Chapter III SUPPORT MECHANISM FOR THE DEVELOPMENT OF BIOMASS POWER PROJECTS Article 11. Purchase Responsibilities from Biomass Power Project connected to the Grid 1. The Buyer is responsible for the purchase of all electric power generated from Biomass Power Plants which are connected to the Grid and located within the area.

5 2. The electricity sale and purchase must be conducted through an electricity sale and purchase contract, which is prepared using the sample Contract of Electricity Sale and Purchase for Biomass Power Projects connected to the Grid issued by the Ministry of Industry and Trade. 3. Within 6 months since the Investor of the Biomass Power Project issues a document proposing the electricity sale, the Buyer must sign a contract of Electricity Sale and Purchase with the Seller. 4. The period of an Electricity Sale and Purchase contract for Biomass Power Projects is twenty (20) years from the start of commercial operation. After 20 years, the two parties may extend the contract or sign a new contract under the current laws. Article 12. Incentives on Investment Capital and Tax 1. Capital contribution: a. The Investor may call for capital from organizations, individual from within and out of the country to implement Biomass Power Projects as per current legal requirements. b. Biomass Power Projects also offer incentives on investment credits as per current legal regulations on investment credit and export credit. 2. Import Tax: Biomass Power Projects are exempted from import tax for goods imported as fixed assets for the projects, imported goods as material, work-in-progress that cannot be produced domestically and is imported to serve the project s operation according to current legal regulations on import and export tax. 3. Corporate Income Tax: the exemption, reduction of CIT for Biomass Power Projects is conducted as investment in preferred fields according to current legal regulations on tax. Article 13. Incentives on land 1. Biomass Power Projects, electric line and transformer stations that are connected to the National Grid are exempted, or under reduction of land use fee, land rental fee under current legal regulations applied for projects of investments in preferred fields. 2. Based on the approved plan, the provincial People s Committee is responsible for arranging necessary land for the Investor to implement Biomass Power Projects. The Compensation, support for land clearance is conducted under current legal regulations on land. Article 14. Electric power selling prices of Biomass Power Projects connected to the Grid 1. For projects of cogeneration heat electricity: the Buyer is responsible for the whole purchase of excess power output from projects of cogeneration heat electricity that use Biomass energy at the price of 1,220VND/kWh (not including VAT, equivalent to 5.8 US cent/kwh). The price may be adjusted according to change in exchange rate VND/USD. 2. For other Biomass Power projects: a. Power Project using biomass to generate electricity, but is not a cogeneration project: the Electricity selling price is applied according to the avoided costs for Biomass Power projects. b. Annually, the Ministry of Industry and Trade constructs and issues a Avoided costs list to applied in Biomass Power projects.

6 3. Biomass Power Projects applying the price in Item 1 and 2 of this Article cannot apply the price subsidy for electricity output under other current legal regulations. 4. The Electricity purchase costs form Biomass Power Projects are calculated and fully disclose as input parameter for the annual plan for electricity price of EVN, which is approved by the authority. 5. The Ministry of Industry and Trade monitor, propose the amendment of electricity purchase price specified in Item 2 of this Article, and report to the Prime Minister for consideration and decision. Article 15. Incentives for Biomass Power Projects not connected to the Grid 1. Biomass Power Projects that are not connected to the Grid may still benefit from the incentives and supports specified in Article 12, 13 of this Decision. 2. The Investor forms a Electricity price proposal and identifies the total support from State Budget and submits to the Ministry of Industry and Trade for appraisal, reports to the Prime Minister for approval. The total support from the State Budget is from the Fund for Environmental Protection of Vietnam. Chapter IV ORGAANIZATION Article 16. Responsibilities of the Ministries, local government for Biomass Power Projects 1. The Ministry of Industry and Trade is responsible for a. Guiding the content, order, procedures for forming, appraising, amending and publishing the Plan for developing and using Biomass Energy. b. Organizing, guiding and cooperating with provincial People s Committees to inspect, monitor the implementation of this Decision. c. Issuing sample Contract for electricity Sales and Purchases for Biomass Power Projects connected to the Grid. d. Forming and issuing national technical standard on biomass power. e. Issuing the annual Price of avoided costs for Biomass Power Projects. 2. The Ministry of Finance is responsible for: cooperating with the Ministry of Industry and Trade, Ministry of Natural Resources and Environment to create a financial regime to support the development of Biomass Power Projects that are not connected to the Grid from the Fund for Environmental Protection of Vietnam. 3. People s Committee of provinces, municipal city are responsible for: a. Cooperating, supporting Investors in compensation, land clearance, infrastructure, labor forces to invest, implement and develop Biomass Power Projects. b. Monitoring, inspecting the implementation of Biomass Power Projects c. Fulfilling the governmental management duty related to Biomass Power in the area as per current legal regulations. d. For Biomass Power Projects not connected to the Grid, the provincial People s Committee applies incentives as specified in Article 12, 13 of this Decision and bear responsibilities for managing, monitoring to ensure biomass energy efficiency.

7 Article 17. Execution 1. This Decision is effective from May 10 th, The Minister, Head of Ministry-level organizations that is in the Government, Presidents of provincial People s Committee; Head of organizations related to the operation of Biomass Power Projects in Vietnam are responsible for the execution of this Decision.

DECISION. on support mechanism for the development of power generation projects using solid waste(s) in Vietnam

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