Decree 100/2025 – Key features and impact on gas-fired thermal power projects in Vietnam

Introduction

This article was written in collaboration with Partner, Vu Le Trung and Associate, Vu Ha Anh of VILAF 

Decree 56/2025/ND-CP (Decree 56) came into effect in Vietnam on 3 March 2025. Among other things (and particularly from the perspective of gas-fired thermal power projects), Decree 56 sets out the principles of transferring fuel price (whether domestic gas or LNG) to the electricity price and the minimum long term contracted electricity output for gas-fired thermal power projects. 

Decree 56 has now been amended by Decree 100/2025/ND-CP (Decree 100) which came into effect on 8 May 2025. As we will see below, a key objective of Decree 100 appears to be to prioritise the use of domestic natural gas over imported LNG for gas-fired thermal power projects in Vietnam.

Pass-through of fuel price

Decree 100 does not make any amendments to Decree 56 in relation to pass-through of fuel price to the electricity price. 

As set out in Decree 56, for purposes of incorporating the fuel price into the electricity price, the fuel price supplied at the power plant would be taken into account (i.e. the cost payable under the gas supply agreements entered into by the project developer). In case the project developer signs multiple gas supply agreements, the fuel price is determined by the weighted average of the volume of the invoices under the gas supply agreements. If a gas-fired thermal power project uses port warehouse infrastructure and gas pipelines for direct import and use of LNG, then the project developer is permitted to recover reasonable and valid costs of the investment in such facilities through the electricity price to be agreed in the power purchase agreement (but such costs should not be duplicated in the fuel price paid under the gas supply agreement). If the port warehouse infrastructure and gas pipelines are shared with other projects, then for purposes of calculating the electricity price, the fuel price is calculated based on (x) the price of imported LNG to the relevant port in Vietnam and (y) the price of LNG storage, regasification, transportation and distribution services (which is to be determined by the Ministry of Industry and Trade (MOIT)). 

Minimum long term contracted capacity

The impact of Decree 100 is in relation to the minimum long term contracted electricity output for gas-fired thermal power projects that use domestic natural gas. 

Decree 56 had provided that for gas-fired power projects using domestic natural gas, the minimum long term contracted electricity output would be determined at the maximum level according to the gas supply capacity of the domestic source, meeting the binding requirements on fuel and capacity, and the available electricity generation output of the gas-fired power plant project. 

Decree 100 removes this minimum long term contracted electricity output concept for gas-fired thermal power projects that use domestic natural gas. It instead provides that gas-fired thermal power projects using domestic natural gas would be operated and mobilized at the maximum level according to gas supply capacity, meeting the requirements on fuel, capacity and available power generation output of gas-fired thermal power projects, and the needs and technical constraints of the national power system. These changes effected by Decree 100 are understood as necessary to ensure projects using domestic natural gas operate at their maximum capacity and in a stable manner, especially during the rainy season or when the power demand is low. 

This requirement would continue to apply until the gas-fired thermal power plant no longer uses domestically exploited natural gas for electricity generation. In case the ability to supply domestic natural gas cannot meet the electricity generation needs of the gas-fired thermal power plant project, the project developer and the offtaker are required to negotiate and agree on the fuel usage plan and electricity price in the electricity purchase contract according to the current regulations. This would indicate that if a gas-fired thermal power plant switches from domestic natural gas to LNG on account of domestic natural gas not being sufficient to maximum the generation capacity of the power plant, the project developer and the offtaker would be able to renegotiate the electricity price under the power purchase agreement to take into account the change in pricing of the feedstock for the power project. It is unlikely that Decree 100 would apply in a scenario where the switch from domestic natural gas to imported LNG has made voluntarily when the domestic natural gas supply is in fact adequate. 

Decree 56 provides that for a gas-fired thermal power project using imported LNG, the minimum long-term contracted electricity output shall not be lower than 65% of the “average electricity output over many years of the gas-fired power plant project”. 

The “average electricity output over many years” would be stipulated in the power purchase agreement determined in accordance with: 

• the regulations on methods for determining electricity generation service prices;
• principles for calculating electricity prices to implement electricity projects; and
• main contents of the power purchase agreement issued by the MOIT.

The minimum long-term contracted electricity output for a gas-fired thermal power project using imported LNG would only apply for a period of 10 years from the date on which the power project is put into operation for electricity generation (which as per Decree 56 is required to be prior to 1 January 2031), and the project completion needs to be accepted by the competent state agency prior to such date. Where the financing of such project carries a tenor of longer than 10 years, then following the 10 year period the lenders and the project developer would need to renegotiate the minimum contracted capacity.

Projects using domestic natural gas do not have this minimum 65% long-term contracted electricity output requirement. This may have been due to Vietnam’s objective of maximising utilisation of domestically sourced natural gas for power generation (and optimisation of the extraction of natural gas from domestic reserves) which would lead to a more predictable and stable supply of domestic natural gas based on which lenders to the power project may take a view to not require minimum contracted offtake.

Load dispatch in compliance with Decree 56

Decree 56 requires the national load dispatch unit and the electricity market transaction operator to develop plans to operate and manage competitive electricity market transactions in compliance with Decree 56, as well as coordinating with project developers and offtakers to ensure the operation, dispatch, and mobilization of gas-fired thermal power projects using domestically exploited natural gas and imported LNG in compliance with the requirements set out by the MOIT. 

This is a critical piece of the power mix - especially as it relates to gas-fired power projects - to ensure that the offtake from gas-fired power projects strikes a balance between the utilisation these projects require in order to meet their debt service and comply with covenants under their financing terms and utilisation of other sources of power which may be more cost effective. It is all the more relevant given that Vietnam has recently increased its average retail electricity price by 4.8%, which is the fourth price hike since early 2023 in an attempt to offset increasing generation costs (the new average retail electricity price is set at VND2,204.06 (approximately US$0.085) per kWh) while the maximum price for electricity generated by projects using domestic natural gas is VND3,069.38 (approx. US$0.12) per kWh or VND3.327,42 (approx. US$0.13) per kWh for electricity generated by projects using imported LNG).¹