Decree 80/2024 finally gave Vietnam a legal pathway for corporate offtakers to buy renewable power directly from generators, but DPPA financing structures are proving far harder to bank than the FIT-backed renewables deals lenders are used to.
The core difference is simple to state and hard to underwrite: a DPPA substitutes a private corporate credit for the sovereign-linked credit of EVN, and every element of a DPPA financing structure has to be rebuilt around that fact.
1. Private-Wire Versus Grid-Connected DPPA: The Structural Choice Drives Financing
Decree 80/2024 permits two distinct models, a direct private-wire connection between generator and offtaker and a virtual, grid-connected arrangement settled through EVN’s system, and the choice between them reshapes the entire DPPA financing structure. A private-wire DPPA financing structure removes grid dependency and curtailment risk but concentrates all revenue on a single physical offtaker with no diversification, so lenders scrutinize that offtaker’s credit as closely as they would scrutinize EVN in a conventional PPA.
A grid-connected DPPA financing structure instead relies on EVN’s metering, settlement and transmission systems as an intermediary, introducing operational and billing risk that private-wire structures avoid but preserving some diversification benefit if the contract later permits multiple offtakers.
Metering and settlement mechanics differ sharply between the two models as well. In a grid-connected DPPA financing structure, EVN’s system operator remains the physical intermediary, meaning billing disputes, meter accuracy questions and curtailment instructions all pass through a state utility interface even though the commercial relationship is bilateral.
Sponsors negotiating a grid-connected DPPA financing structure should build in independent metering verification rights and a clear dispute escalation path, since the underlying commercial contract cannot fully control a settlement process that runs through EVN’s infrastructure.
2. Corporate Offtaker Credit Risk Replaces EVN Counterparty Risk
The single largest underwriting shift in any DPPA financing structure is counterparty credit. Conventional Vietnamese renewables financing has, for a decade, been underwritten against EVN’s payment obligation, which lenders treat as carrying an implicit sovereign linkage despite EVN not being a rated sovereign guarantee.
A DPPA financing structure instead depends on the standalone credit of a single corporate offtaker, frequently a foreign-invested manufacturer or export-oriented industrial tenant, whose own revenue is exposed to its export markets, its parent group’s capital allocation decisions, and its own operational continuity in Vietnam.
Lenders financing a DPPA financing structure need corporate offtaker financial covenants, parent guarantees or letters of credit sized to the debt tenor, and a realistic assessment of offtaker replacement risk if the anchor tenant relocates or ceases operations before the facility’s debt is repaid.
This is a materially different credit discipline from EVN-backed project finance, and Vietnamese and international banks are still calibrating how much additional equity cushion or debt service reserve a DPPA financing structure needs relative to a conventional FIT or negotiated PPA financing.
Curtailment allocation is a related and frequently underestimated issue.
Vietnam’s grid operator retains the right to curtail renewable generation during periods of system congestion, and a DPPA financing structure must specify, with commercial precision, whether curtailment losses are absorbed by the generator, passed through to the offtaker, or shared under a formula, because ambiguity here has historically been a major source of revenue volatility in Vietnamese renewables financings generally, and a corporate offtaker without a sovereign-linked credit profile increases the practical consequence of that volatility for lenders.
Insurance considerations also depart from the conventional playbook.
Political risk and offtaker credit insurance products, which have limited penetration in Vietnam’s project finance market generally, become significantly more relevant when the underlying revenue counterparty is a single private company rather than a state utility, and sponsors of larger transactions are increasingly exploring cover from export credit agencies or multilateral development institutions to bridge the credit gap between a corporate offtaker and the sovereign-linked profile lenders are accustomed to underwriting in Vietnam’s power sector.
3. Decree 80/2024 Compliance as a Condition Precedent
Because DPPA financing structures are so new, lenders treat regulatory compliance with Decree 80/2024 itself, not just the underlying generation license, as a hard condition precedent rather than a standard representation.
The decree sets eligibility criteria for both generators and offtakers, registration and reporting obligations, and rules on the relationship between a DPPA and any residual FIT or avoided-cost arrangement the generator may otherwise be entitled to, and a DPPA financing structure that has not cleanly resolved which pricing regime governs the project carries unpriced regulatory risk.
Sponsors should also expect lenders financing a DPPA financing structure to require confirmation that the offtaker’s own corporate approvals and, where the offtaker is foreign-invested,
its investment registration certificate permit it to enter a long-term power procurement commitment of this kind, since a defect at the offtaker level can undermine the financing as thoroughly as a defect at the generator level.
Tax treatment adds a further layer of diligence.
Depending on structure, a DPPA arrangement may alter the availability of preferential corporate income tax treatment or import duty incentives the generator previously relied on under a FIT-based project, and sponsors should confirm the tax position of the specific DPPA financing structure being adopted before finalizing pricing, since a change in effective tax rate can materially move the project’s debt service coverage ratio.
Market development so far suggests that early transactions are clustering around export-oriented manufacturing tenants with strong parent company credit, typically in electronics, textiles or industrial processing, precisely because these offtakers combine long operating horizons in Vietnam with balance sheets a lender can independently assess.
Smaller or domestically-owned offtakers, by contrast, are likely to find pure debt financing harder to secure until a track record of DPPA payment performance accumulates in the market, which may in turn support a gradual reduction in the credit premium lenders currently attach to non-EVN offtaker risk.
Documentation practice is still consolidating around a small number of law firms and lenders active in Vietnam’s early DPPA transactions, and standard-form terms have not yet emerged the way they did for FIT-era solar and wind financings.
Sponsors should expect longer negotiation cycles on offtaker guarantees, curtailment allocation and change-in-law language on their first transaction, with subsequent deals moving faster as market practice settles around a smaller number of accepted risk allocations.
4. Tenor, Termination and Change-in-Law Protection
DPPA financing structures also diverge from conventional project finance on tenor and termination mechanics. A corporate offtaker’s commercial horizon, often tied to a single manufacturing lease or investment cycle, rarely matches the fifteen-to-twenty-year tenor a lender wants for a DPPA financing structure, forcing sponsors to negotiate offtaker termination payments, replacement offtaker rights, or step-in mechanics that preserve debt service if the original corporate offtaker exits early.
Change-in-law protection is equally important, since Decree 80/2024 and its implementing guidance remain subject to further clarification, and a DPPA financing structure without an adequate change-in-law and compensation mechanism leaves both sponsor and lender exposed to regulatory drift over a multi-year facility term. Sponsors who have financed FIT-backed renewable energy projects in Vietnam should treat a DPPA financing structure as a distinct product requiring its own credit, tenor and regulatory analysis, not a variant of the financing they already know.
None of these four issues makes a DPPA financing structure unbankable, but each requires sponsors and lenders to depart from the EVN-backed financing playbook that has dominated Vietnamese renewables to date. Diligence on offtaker credit and Decree 80/2024 compliance should begin at term sheet stage, not after documentation, and sponsors should track evolving guidance through the Ministry of Industry and Trade (see the Ministry of Industry and Trade’s regulatory portal). IVLF’s project finance team advises generators, corporate offtakers and lenders on structuring bankable DPPA financing structures under Decree 80/2024.
Security and enforcement present a further complication.
5. Metering, Settlement, and Curtailment Risk Allocation
DPPA financing structures depend on accurate metering and settlement mechanics to translate physical or virtual energy delivery into the cash flows lenders are underwriting, and Vietnamese DPPA transactions have historically shown more disputes over metering and settlement mechanics than in more mature corporate PPA markets. The financing documents should require an independent, bankable metering solution with clearly defined data reconciliation procedures between the generator, the offtaker, and, in a grid-connected DPPA, the transmission or distribution utility responsible for wheeling the power.
Curtailment risk allocation is a related structuring point that deserves early attention, since Vietnamese grid operators have periodically curtailed renewable generation for grid stability reasons, and a DPPA that does not clearly allocate the economic consequences of curtailment between generator and offtaker leaves lenders exposed to a revenue shortfall outside either counterparty’s direct control. Well-structured DPPA financing documents specify a curtailment compensation mechanism, or at minimum a clear statement of which party bears the revenue loss, rather than leaving the question to be resolved after a curtailment event has already occurred. Corporate offtakers increasingly pair a DPPA with battery storage to firm up delivery and manage this exposure; see IVLF’s guide to BESS financing structures in Vietnam.
Settlement currency and payment timing also warrant careful drafting, particularly where the offtaker is a multinational corporate with its own treasury payment cycle that may not align with the generator’s debt service schedule, and financing documents should build a reserve account or working capital facility sized to bridge any structural timing mismatch between offtaker payment and lender debt service dates.
Because the offtaker is a private corporate entity rather than a state-owned utility, enforcement of payment obligations under a DPPA financing structure proceeds through ordinary commercial dispute resolution and contract enforcement mechanisms rather than the informal leverage sponsors have sometimes relied on with EVN, making a well-drafted arbitration clause, a properly sized security deposit, and a clearly triggered letter of credit mechanism considerably more important to the bankability of a DPPA financing structure than any of these tools have typically needed to be in EVN-backed financings, where payment risk has historically been treated as a secondary underwriting concern rather than a primary one.
Frequently Asked Questions
What changed with Decree 80/2024 for corporate renewable power purchases?
Decree 80/2024 gave corporate offtakers a legal pathway to buy renewable power directly from generators, but compliance with its terms functions as a condition precedent to financing, so it needs to be built into the deal timeline rather than treated as a formality.
How does offtaker credit risk differ from EVN counterparty risk in a DPPA?
A DPPA financing structure replaces the familiar EVN counterparty risk with corporate offtaker credit risk, which lenders assess differently and which can vary significantly depending on the offtaker’s own credit profile and treasury practices.
Who bears curtailment risk in a Vietnamese DPPA transaction?
Curtailment risk allocation needs early attention because Vietnamese grid operators have periodically curtailed renewable generation for grid stability reasons, and the DPPA should specify how that risk is shared between generator and offtaker.
Is a private-wire DPPA financed differently from a grid-connected one?
Yes. The private-wire versus grid-connected structural choice drives the financing approach, affecting everything from metering and settlement mechanics to how termination and change-in-law protections are drafted.
IVLF advises generators, corporate offtakers, and lenders structuring DPPA financing transactions in Vietnam, from Decree 80/2024 compliance through to metering, settlement, and curtailment risk allocation. As a project finance legal advisor Vietnam sponsors turn to for direct offtake deals, we focus on the structuring choice that drives everything else: private-wire versus grid-connected, and the tenor, termination, and change-in-law protections that follow from it. Contact IVLF to discuss your DPPA transaction and the financing structure best suited to your offtaker and generation profile.
This article is provided for general information only and does not constitute legal advice for any specific case. Regulations may change – please consult a qualified professional before acting. Should further analysis be required, please contact one of our lawyers below.
