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Annex 5

Renewable Energy Development Facility ‘GET FiT’ Vietnam, BMZ-Nr. 2016 67120

Implementation Concept

1. Background

The Project concept is based on the work completed by the Feasibility Study Consultant
Frankfurt School/ Lahmeyer/Institute of Energy, in particular the following reports:
 Market Assessment Study, September 2016
 Concept Report, March 2017
 Feasibility Study Report, August 2017
The Government of Vietnam (GoV) has set ambitious targets to develop renewable energy
(development of 800 MW of wind power by 2020 and 2000 MW of wind power by 2025; the
targets for solar power are 850 MW by 2020 and 4000 MW of solar power by 2025, PDP VII
revised). GoV increasingly relies on the private sector to achieve these targets.
Although significant first steps have been taken to attract private investment in renewable
energy, including feed-in-tariffs (FiT) and standard power purchase agreements (PPA) for small
hydropower, wind power, bio-energy and solar energy, private investment in renewable energy
other than hydropower has been very limited. Amongst other reasons, levels of FiT that would
cover the cost, risk and expected return of private investors are not perceived as sufficient.
There is a gap between the current FiT and what is required to attract private investors. The
“GET FiT Facility” addresses this issue by providing an additional top-up on the official tariff.

2. Results-based subsidies for renewable energy (Top up)

As of January 2018, the Government of Viet Nam has issued the following support mechanisms
for renewable energy (wind and solar power). The support mechanisms include a results-based
payment for electricity delivered to the grid (Feed-in tariff) as follows:

Feed-in Tariff Feed-in Tariff PPA duration Legal Basis Validity

VND/kWh USDc/kWh
Wind 1,614 7.80 20 years Decision Not limited
(current) 37/2011/QD-TTg
Wind tbd 8.77 20 years tbd tbd
(proposed)
Solar 2,086 9.35 20 years Decision June 2019
11/2017/QD-TTg

Based on comprehensive assessment of the Renewable Energy (RE) market and of levelized
costs of different technologies performed by the Feasibility Study Consultant, this payment will
be supplemented by a top-up to be paid to developers and operators of renewable energy
power plants (“Developers”).

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The required top up has been estimated by the Feasibility Consultant at up to 0.73 USDc/kWh.
This is based on the assumptions that (1) the FiT for on-shore wind energy will be increased to
8.77 USDc/kWh and (2) that risk mitigation measures are implemented (such as an adequate
power purchase agreement). The top-up for wind power plants is therefore defined at a ceiling
of 0.68 EURc/kWh over a theoretical period of 20 years. Instead of disbursing the top up
payment over the whole life time and validity of the PPA, the subsidy will be disbursed over the
first 3-4 years of operation of the power plant (see section 6).

The top up ceiling for solar energy will be set an appropriate level upon proposal of the
Implementation Consultant and with ‘no objection’ by the KfW. However it will not be higher than
the maximum top-up for wind energy.

Developers that benefit from the cost support are selected in a fair, competitive and transparent
process, following the procedure below.

3. Eligibility for support under the Project

To be eligible for support under the Project, the following general minimum eligibility criteria
apply to Developers and their respective renewable energy sub-projects:

 Technology: On-shore wind power (priority) or solar photovoltaic power

 Private sector focus and additionality: The Developer and the sub-project company
(special purpose vehicle) have a consolidated maximum share of 49% or less of
Vietnamese Government ownership. The sub-project is not directly financed by Official
Development Assistance (according to OECD DAC definition) and does not benefit from
another direct subsidy scheme. Financing via a credit line programme is permissible.

 Sub-project size: Minimum of 5 MW installed capacity. Maximum of 30 MW capacity.

Larger power plants may be eligible, but the subsidy will be capped at Expected Annual
Energy of a 30 MW power plant.

 Exclusion of multiple sub-projects: One Developer may only submit applications up to a

combined capacity of a 30 MW or the Expected Annual Energy of the power plants.

 ESIA risk: Developer and sub-project must comply with KfW Sustainability Guideline,
which in the case of private developers means compliance with IFC performance
standards.

 Sub-projects have not reached financial close yet (Loan agreements for the full financing
of the sub-project are not effective yet).

 Technical viability: The Developer has to demonstrate his capacity in developing the
sub-project and that the renewable energy sub-project is technically and commercially
viable and sufficiently well developed to be put into commercial operation within the
timeframe of the GET FiT Project (see Annex: Technical selection criteria).

 Foreign and domestic investors or joint ventures thereof are equally eligible.

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4. Organisational setup and responsibilities

 Line Agency representing Government of Viet Nam: MoIT

 Project Implementing Agency (PIA): Electricity of Viet Nam (EVN).
 Financing Agency: KfW is the financing agency on behalf of the German Government
and potentially other donors.
 Implementation Consultant: Consultant firm selected in international competitive
bidding procedure and contracted by EVN with KfW no objection that supports EVN in
the implementation of the Project. The Implementation Consultant supports EVN in
preparing Call for Application Documents, evaluating Applications drafting Evaluation
Reports and Proposals for Award of Grant. Evaluation Reports and other reports / formal
documentation are always simultaneously submitted to EVN and KfW.
 Recipients: Developers / Independent power producers (IPP) meeting the eligibility
criteria and having been selected following the procedure set out below.
 Focal point established by PIA for Project implementation: GET FiT Office – a Project
Office that will be established and in charge of overall coordination, logistics,
coordination with Developers, launching, clarifying and receiving Applications as well as
dealing with complaints. The Implementation Consultant supports the GET FiT Project
Office in these tasks. The GET FiT Office will be staffed by the Implementation
Consultant and EVN.

5. Project cycle and selection procedure

a) Pre-selection phase

 Preparation of the Call for Applications (CfA): The Implementation Consultant drafts
CfA documentation including Application form, Guideline for Applicants, Detailed
eligibility criteria and table for checking compliance and finalizes Draft GET FiT Support
Agreement1.

 Before publication, EVN submits detailed eligibility criteria and the full set of CfA
documents for “no objection” by KfW including: Deadline for submission, Draft GET FiT
Support Agreement, Application form and Guideline for Applicants.

 Issuing CfA/ Receipt of Applications: CfA will be issued on relevant GoV/ MoIT/EVN
website, gtai, and via other channels (local and regional media) in order to reach
maximum number of potential applicants. Clarifications will be allowed during application
stage. Answers to clarification questions will be provided to all applicants that have
procured the Application package. The time for submission of Applications will be no
less than 90 days. The maximum top up (top up ceiling) in EURc/kWh for solar and wind
power plants will be published.

 The Application shall contain a duly signed “Declaration of Undertaking” substantially in

line with the form contained in Annex 5 of KfW’s Procurement Guidelines.

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GET FiT Support Agreement: Financing Agreement between EVN and the Developer specifying the terms and
conditions of providing and disbursing the top-up. The GET FiT Support Agreement is only valid in conjunction
with a PPA between the Developer and EVN for the same sub-project.

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 Applicants will be required to provide a bank guarantee (in order to ensure that the sub-
project is implemented). Timeline and milestones for preparation and construction is part
of GET FiT Support Agreement.

 A two envelope procedure will be used: The Application form, supporting documents and
technical documentation (Envelope 1) will be submitted separately from the Applicants
request for the top-up amount (Envelope 2).

 Application packages will be received in the GET FiT Office.

b) Selection phase

 Opening of application packages: EVN, the Implementation Consultant, KfW (as

observer) will participate at the opening of packages. Applicants are invited. Minutes are
prepared and signed by participants.

 Completeness check: The Implementation Consultant conducts a completeness check

of Application documents based on the check list (Draft see Annex ). Applications that
are considered complete will proceed to the Technical Evaluation.

 Technical evaluation of applications and compliance with eligibility and technical

minimum criteria: Implementation Consultant / in GET FiT Office (to be based on Annex
2). If required, the Implementation Consultant can conduct a site visit in order to verify
documentation.

 Approval of completeness check and eligibility: The results of the check for
completeness and technical evaluation will be summarized in in a Draft Technical
Evaluation Report to be approved by EVN. The final report requires KfW ‘no objection’.

 Submission and opening of financial envelope: For those Applicants who pass
completeness check and eligibility, the financial envelope will be opened. EVN, the
Implementation Consultant, KfW (as observer) will participate at the opening. Applicants
may be invited. Minutes are prepared and signed by participants.

 The maximum grant to be disbursed will be based on the estimated Annual Energy
supplied to the grid at p90. The applications will be ranked following a reverse auction
principle based on the top-up in EUR/kWh requested by the respective Applicant.
Applications will be selected for award up to the total budget of the Project available for
subsidy payments. [Separate Agreement Annex 3.] The Developer whose application is
ranked last, but where the requested Maximum Grant Amount is higher than the
remaining budget, will be offered a revised Maximum Grant Amount up to the remaining
budget.

 Award: The Proposal for award of subsidy is prepared by the Implementation

Consultant and submitted simultaneously to EVN and KfW. After EVN’s approval, the
Proposal requires KfW “no objection”. Developers whose applications are selected for
award will receive notification and will be invited to sign Letters of Acceptance as well as
the GET FiT Support Agreement. Sub-project names will be published (on EVN website)
to ensure transparency.

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 The GET FiT Support Agreement will contain a timetable and milestones for the
development of the respective power plant as well as Conditions Precedent to be met for
disbursement.

 In case that the Call for Applications does not result in a sufficient number of qualified
applications, EVN with support by the Implementation Consultant and in agreement with
KfW will decide whether to conduct a new selection or whether to cancel the process
and to repeat the selection process.

c) Preparation Phase

 Reaching financial close: Developers need do adhere to and will be monitored against
the timeline in order to reach financial close and construction stage. The Implementation
Consultant will support EVN in monitoring and conducting site visits (if required).

 Construction: Developers are in charge of procurement during implementation of their

renewable energy sub-projects.

 In case of severe delays against the agreed timetable, cancellation of the GET FiT
Support Agreement or withdrawal of the Developer from the Project, other Developers
may be offered to join the Project following the ranking established during the selection,
given that the eligibility criteria are still met.

d) Disbursement Phase

 Reaching Commercial Operation Date: The Implementation Consultant checks the

fulfillment of Conditions Precedent defined in the GET FiT Support Agreement including
compliance with the Environmental and Social Impact Assesssment Report and
associated documents. The fulfillment of Conditions Precedent is certified by the
Implementation Consultant (obligatory site visit).

 Start of disbursements: If conditions precedent are fulfilled, the first disbursement is

made after Commercial Operation date as certified by Consultant and acceptance report
of ERAV/EVN.

 Reporting and monitoring: IPPs are required to provide brief progress reports on a
semi-annual / annual basis during operation.

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6. Definition of Top up amount for each Developer and disbursement schedule

Definition of Maximum Top-up

The Maximum Top-up for each Developer is defined as:

𝑇
𝑠 𝑃𝑒𝑡
𝑀𝑎𝑥𝑖𝑚𝑢𝑚 𝑇𝑜𝑝 − 𝑢𝑝 = ∑
(1 + 𝑑)𝑡
𝑡=1

where

s is the requested top-up to the official power purchase price defined in the PPA
according to current legislation as stated in the Developer’s Application in EUR
cents/kWh
Pe is the Expected Annual Energy of the Developer’s power plant to be supplied to the grid
in year t in [kWh] as stated in the Developer’s Application at p902,
T is the duration of the Power Purchase Agreement in years (currently 20),
d is the discount rate and is equal to 7.4%

Indicative disbursement schedule of the results-based subsidy

Disbursements from EVN to Developers

Disbursements are made by EVN to the Developers based on two agreements:

 The Power purchase agreement (PPA) signed between EVN and the Developer and the
 Support agreement signed between EVN and the Developer

EVN disburses the funds to the developers in the following way:

 Monthly payments (PM) based on power output in the preceding month starting after
commercial operation date of the power plant
 A top-up in seven semi-annual payments (PT), starting after six months from commercial
operation date of the power plant up to the amount of the Maximum Top-up defined
above.

2
In case sub-projects > 30 MW are proposed, the Annual Energy to be supported under GET Fit is
capped at 30 MW and 32% capacity factor for wind power plants and at 30 MW and 19% capacity factor
for solar power plants.

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Disbursements from KfW to EVN

First disbursement: A payment in the amount of the semi-annual top-up (PT) if evidence is
provided that:
 PPA and GET FiT Support agreement are concluded and in force and copies of which
have been provided to KfW;
 Monthly payments based on power output (PM) have been made to the Developer in the
total amount not less than the semi-annual top-up (PT) and in line with the payment
schedule under the PPA

Following disbursements: Payments in the amount of PT if evidence is provided that the

previous period’s semi-annual top-up-payment (PT) has been disbursed to the Developer
according to the payment schedule in the in the PPA and the Support agreement

EVN will inform KfW when the actual energy delivered under the Power purchase and GET FiT
Support Agreement deviates substantially from the Expected energy as stipulated in the
agreements and adjust the semi-annual top up to the Developer as well as the funds requested
from KfW accordingly.

The Implementation Consultant will certify that the conditions above are met.

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ANNEX 1): Completeness Checklist and Minimum Selection Criteria3

Applicant (organisation and

contact person)
Applicant’s sub-project name
Sub-project size (in MW)
Location
Expected time-frame for
construction/
Expected COD
Date of application
Completeness and selection

Document
submitted Criteria met Comments/Proposed
No. Criteria
(YES/NO) Conditions Precedent
(YES/NO)

Sub-project information/General information

1.
about project/
Size (Installed capacity)
1.1.
(Minimum 5MW, will be capped at 30 MW)
Structure/Consortium Information
- SPV structure
- Letters from all participants confirming
shareholding percentage of project
sponsor(s) has been provided
1.2. - If applicable: Power of attorney for the lead
applicant / Letter of Association
- Declaration by shareholders that they
submit only one application
- Declaration of Undertaking (following in
principle the model of KfW procurement
guidelines Annex 5)
Public share
- Public sources present a minority share of
1.3. the equity (<49% of project equity)
- Other ODA-funds do not exceed 50% of
project CAPEX
2. Sub-project partners’ experience
Developer track record
Reference list of finalized infrastructure projects
during the last three (3) years
2.1. - Minimum 3 large scale infrastructure
projects already successfully developed
with total investment of at least 10m USD
value
Detailed description of available human
2.2. resources
(incl. total number of employees of the company

3
The Checklist is tailored towards a wind power sub-project. The checklist will be updated for solar PV projects by
the Implementation Consultant for EVN approval and KfW ‘no objection’.

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and breakdown by discipline highlighting the

relevant project development experience)
Financial resources
Audited financial statements of last 3 years (In
2.3. case of a consortium: financial statements of all
members).
- Sufficient financial resources demonstrated
EPC contractor track record
- Reference list of implemented projects
2.4. during the last three (3) years
Minimum 3 projects already developed in
more than one country and in successful
commercial operation
O&M contractor track record
- Reference list of projects during the last
2.5. three (3) years
Minimum 3 projects already successfully
involved
3. Financial
3.1. Breakdown of project costs
Full breakdown of sources of
3.2.
financing/financial structure
Letters of support from lenders including
3.3. amount committed to show debt financing is
arranged
3.4. Confirmation that equity is sourced
Financial model and requested top-up
Following information are included:
- Revenue (showing a split revenue line for
base FiT and top-up) and cost assumptions to be
- Contingencies submitted
3.5. - Debt/equity size and gearing as part of
- Project IRR and Equity IRR 2
nd

- NPV envelope
- Payback Period of the project
- EBITDA and EBIT
- Debt Service / repayment schedule / DSCR
- Stress-test scenarios
4. Technical
Project Schedule
(GANTT chart -Development plan and work
plan, project time schedule)
- Project implementation timeline is
4.1. appropriate and realistic
- Implementation milestones have been
identified
- Procurement method for goods and
services has been defined
Grid connection report
- Project is compliant with country grid codes
- Major risks of delay and/or of timely
4.2. interconnection with the grid are expressed
and managed
- Sensitivity of the economic viability of the
project to these risks is addressed

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Technical feasibility study

(including resource assessment and yield
production) and basic design report
- Project design (layout) is appropriate
(scope, quality and completeness)
- Quality assurance procedures and security
measures are defined
- Expected annual generation at p50 and p90
4.3. over 20 year period
- Production estimates are realistic, 3D
(CDF) calculation in case of complex
terrain, wind yield assessment by
experienced international expert / firm
- Sensitivity analysis is provided (P50, P75,
etc.)
- At least 12 months of measurements have
been performed and are documented
Technical summary data sheets of
4.4.
equipment
Statement on O&M provision and process
contains information on:
- Will the applicant also be responsible for
4.5. project O&M?
- If the O&M provider has not been selected,
which process will be used to select it?
- O&M process is appropriate and realistic
5. Environmental and Social Aspects
Developers’ Environmental and Social
Management System
5.1. Project developer describes environmental and
social management system (ESMS) and
demonstrates compliance with IFC Performance
Standards
Environmental and social impact
assessment (ESIA) and safeguard
documents
- ESIA has been approved and is in line with
IFC performance standards
5.2. - Relevant supporting documents are
provided (Environmental and social
management framework, stakeholder
engagement plan, resettlement action plan
etc) and in line with IFC performance
standards

6. Permits and authorizations

PPC Confirmation of in-principle approval
6.1.
for proposed investment
6.2. PPC approval of selected project site
Approved report on inclusion and
supplementation of the project into
6.3.
national/local power development master
plans
Statement on progress with respect to
6.4. further approvals and expected timeline for
further approvals

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Summary of selection
Reviewer
Date of review
Award (YES/NO)

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ANNEX 2): Environmental and social safeguards4

1. Legal and normative basis, applicable standards

Sub-project developers / IPP have to comply with relevant Vietnamese legislation and in
addition to that sub-projects have to comply with KfW sustainability guidelines and therewith IFC
performance standards, World Bank Group’s General Environmental and Health and Safety
(EHS) Guidelines, EHS Guidelines for Wind Energy5 and EHS Guidelines for Electric Power
Transmission and Distribution6 and other relevant international standards to which KfW
sustainability guidelines and IFC performance standards make reference.

2. Ensuring compliance during the Programme cycle

Preparation Phase / Setup of GET FiT facility
During the setup of the Project, the Implementation Consultant finalizes the application
documents including the list of documents to be provided by the Applicant to demonstrate
compliance with ESIA requirements. The Implementation Consultant will inform potential
applicants and investors at an early stage about the ESIA documentation requirements, conduct
at least one workshop for applicants where detailed requirements for the documentation are
discussed and provide some guidance on the specific requirements to investors and the PIA.
Selection Phase
During selection phase, the applicants / project developers (Developers) have to provide the
following documents:
 Description of the Applicant’s environmental and social management framework
 Screening documentation: The IPP shall provide as part of the application a brief
statement on the result of the screening the project according to both Vietnamese
regulations and IFC Performance Standards.
 Approval of Environmental protection plan and / or Environmental impact assessment (if
required) by competent Vietnamese authority (MONRE or DONRE)
 Environmental and Social Impact Assessment substantially in compliance with KfW
sustainability guidelines / IFC performance standards including all related documents
such as Environmental and social management and monitoring plan (ESMP),
Stakeholder Engagement Plan, and if applicable other documents like biodiversity action
plan, resettlement action plan / livelihood restauration plan and Indigenous Peoples
Development Plan
Only applicants that can provide satisfactory documentation will be shortlisted for further
consideration under the Programme. The Consult will support the PIA in evaluating the

4
The Checklist and the Environmental and social safeguards requirements are tailored towards a wind power sub-
project. Both will be updated for solar PV projects by the Implementation Consultant for EVN approval and KfW
‘no objection’.
5
http://www.ifc.org/wps/wcm/connect/2c410700497a7933b04cf1ef20a40540/FINAL_Aug+2015_Wind+Energy_E
HS+Guideline.pdf?MOD=AJPERES
6
http://www.ifc.org/wps/wcm/connect/66b56e00488657eeb36af36a6515bb18/Final%2B-
%2BElectric%2BTransmission%2Band%2BDistribution.pdf?MOD=AJPERES&id=1323162154847

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documents above. The Consultant will be authorized and asked to conduct site visits and cross-
check information provided by the applicants. The short list will be approved by the PIA with
KfW reserving the right to provide objections.
Successful applicants will be invited to sign a GET Support Agreement with the PIA. The
Support Agreement requires the investors to fully comply with the documentation provided
earlier and with KfW Sustainability Guidelines / IFC performance standards. The GET FiT
Support Agreement will contain provisions for penalties in case of non-compliance. In addition, it
will define Conditions Precedent for disbursement that have to be met by the IPP which can also
include specific requirements with respect to environmental and social risks identified during the
selection process.
Preparation Phase
During the preparation phase the investors develop the project from financial close to
commercial operation. The investors are responsible for ensuring that Environmental and social
management and monitoring plan (ESMP), Stakeholder Engagement Plan, and if applicable
resettlement action plan / livelihood restauration plan and Indigenous Peoples Development
Plan are fully implemented and ensure that construction companies contractors comply with the
respective requirements. The PIA with the Consultant’s support conducts site checks at least
once before start of disbursement.
Disbursement Phase
Disbursement of funds to the IPP starts after commercial operation of the power plant and if all
Conditions Precedent for disbursement are fulfilled. This includes full compliance with the
Environmental and social safeguard documents as certified by the Implementation Consultant.
KfW no objection to the Consultant’s Certification Document is required before disbursement.
Reporting and monitoring: IPPs are required to provide brief progress reports on an semi-annual
/ annual basis during operation.
The Vietnamese legal system foresees a grievance mechanism in case of complaints. In case,
there is no agreement between the parties and the project affected communities/person,
complaints and grievances shall be submitted to the local and state government justice system
according to current Law on Complaints in Vietnam. The project developers will be required to
inform the Facility about complaints, the process for handling complaints and their resolution.
On a case-by-case basis the Facility could contract independent consultants to monitor the
process.

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