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PROJECT DESIGN DOCUMENT FORM (CDM-PDD) - Version 03

CDM Executive Board page: 1

CLEAN DEVELOPMENT MECHANISM

PROJECT DESIGN DOCUMENT FORM (CDM-PDD)

Version 03 - in effect as of: 28 July 2006

CONTENTS

A. General description of project activity

B. Application of a baseline and monitoring methodology

C. Duration of the project activity / crediting period

D. Environmental impacts

E. Stakeholders comments

Annexes

Annex 1: Contact information on participants in the project activity

Annex 2: Information regarding public funding

Annex 3: Baseline information

Annex 4: Monitoring plan


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SECTION A. General description of project activity

A.1. Title of the project activity:

Title: Za Hung Hydropower Project

Version: 2.4

Date: 29/11/2011

A.2. Description of the project activity:

The project activity is being developed by Za Hung Joint Stock Company. It involves the construction of

a new gird connected hydropower plant including a dam, intakes, tunnels, power house with 02 units

(each unit has a turbine and a power generator) and discharge channels located in Za Hung and Ma Cooihcommunes, Dong Giang district, Quang Nam province of Viet Nam.

Electricity in Viet Nam is generated mainly from fossil fuel sources and is solely distributed to consumers

via the unique national electricity grid.

The projects purpose is to generate hydroelectricity by installation of water turbines and generators from

a clean and renewable source (hydropower of the AVuong stream) to supply to the national grid via a

Power Purchase Agreement (PPA) signed with the Electricity of Viet Nam (EVN). The project's installed

capacity and estimated annual gross power generation is 30 MW and 122,700 MWh1, respectively. The

net electricity generated (with an estimated annual volume of 120,246 MWh2) will be supplied to the

national grid via a newly constructed 110kV transmission line which will connect the plant and the Thanh

My transformer station.

The baseline scenario of the project activity is the same as the scenario existing prior to the start of

implementation of the project activity.

The project activity will generate renewable power with negligible GHG emissions, which will displace

part of the electricity otherwise supplied by grid-connected fossil fuel fired power plants. The project

involves the construction of reservoir with area of 0.22993km

2and the power density of the diversion

reservoir of 130.54W/m

2. As the power density of reservoir is above 10 W/m

2, no GHG emissions from

the reservoirs need to be accounted in the project activity as per the methodology applied ACM0002

version 12.2.0. Thus, GHG emission reductions can be achieved via this proposed project activity. Total

expected CO2emission reduction is 485,163 tCO2e over the first crediting period of 7 years.

The projects contributions to the sustainable development of the local area as well as the host country are

as follows:

General contributions towards national sustainable development:

In recent years, Viet Nam has suffered a critical electricity shortage as a consequence from rapidly

increasing demand and insufficient supply, thereby imposing negative impacts on economic growth

as well as on daily lives of people. This project activity will be a contribution towards balancing the

supply and demand gap. By exporting electricity directly to the grid, it will help to reduce

electricity losses across the national grid and to lessen the risks of cascading national grid collapse

due to overload.

Reducing reliance on exhaustible fossil fuel based power sources and also reducing the import of

fuels for the purpose of power generation.

1Technical Design Report, Explainable Additional Volume2 The gross power generation subtracts 2% for internal use, parasitic and loss load. Technical Design Report.3Technical Design Report, Explainable Additional Volume4Please refer to Section B.6


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Modern and highly efficient turbines and generators are imported from China. The profession

technicians and engineers will train the hydropower plant staffs on the operation and maintenance

procedures before the starting operation of the project. The power transmission will also be at highvoltage to ensure low losses. The project will accelerate the deployment of renewable energy

technologies in Viet Nam.

Contributions towards local sustainable development:

a) Economic well-being

Once commissioning, this proposed project will increase the industrial share in the economic structure of

Quang Nam province a poor province in the Central of Viet Nam. This proposed project will pay annual

enterprises revenue tax and the natural resource tax5and CER tax6to the state budget.

By supplying a stable electricity output, this project will facilitate the industrialisation process of the

province and support economic development of local villages through fostering tourism, trade and

services inside the province.

b) Social well-being

This project will contribute directly to improve the low-quality infrastructure systems of the Za Hung and

Ma Cooih communes. The communes are categorised as a mountainous commune with thin population,

less developed and autarky agricultural economy. The project will upgrade roads that then will be

integrated into the traffic system of the communes. The project will construct a new 110 kV transmission

line together with a hydropower plant, which will reduce electricity losses and improve the electricity

quality supplied in the region.

The project will newly construct and upgrade roads that then will be integrated into the traffic system of

the communes. The project will construct a new 110kV transmission line to export electricity to national

grid. The volume of Za Hung hydropower plant dispatches to grid will reduce electricity losses andimprove the electricity quality supplied in the region.

The project activity could result in the employment of the local people for the construction and operation

later on. Therefore, this project activity will contribute directly to alleviate poverty in the region.

This demonstrates that the project activity will contribute positively towards sustainable

development in term of environmental well-being (off setting fossil fuel use and lowering GHG

emission), socially (upgrading infrastructure, ensuring reliable electricity supply, improving

employment), technologically (technology transfer) and economically (satisfying growing energy

demands to allow the country and region to develop and alleviate poverty). Thus the project

activity is consistent with the energy policies set by the Government of Viet Nam andit satisfies the

sustainable development criteria for CDM projects set by the DNA of Viet Nam.

A.3. Project participants:

Name of Party involved (*)

((host) indicates a host Party)

Private and/or public entity(ies)

project participants(*) (as

applicable)

Kindly indicate if the Party

involved wishes to be

considered as project

participant (Yes/No)

Viet Nam (host) Za Hung Joint Stock Company

(Private Entity)

No

Switzerland Vietnam Carbon Assets Ltd. No

5According to the Investment law and Natural resource law6According to Circular No. 58/2008/TTLT-BTC-BTN&MT issued by Ministry of Finance and Ministry of Natural Resource and

Environment on 04 July 2008


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(Private Entity)

(*) In accordance with the CDM modalities and procedures, at the time of making the PDD public at the

stage of validation, a Party involved may or may not have provided its approval. At the time of requestingregistration, the approval by the Party(ies) involved is required.

A.4. Technical description of the project activity:

A.4.1. Location of the project activity:

A.4.1.1. Host Party(ies):

Viet Nam

A.4.1.2. Region/State/Province etc.:

Quang Nam province

A.4.1.3. City/Town/Community etc.:

Za Hung and Ma Cooih communes, Dong Giang district

A.4.1.4. Details of physical location, including information allowing the

unique identification of this project activity (maximum one page):

The proposed project activity involves the construction of Za Hung powerhouse which is located on the A

Vuong stream in Za Hung and Ma Cooih communes, Dong Giang district, Quang Nam province of VietNam. The dam of project has the following coordinates:

Coordinates Dam Power House

Northern latitude 1505143 15

05135

Eastern longitude 10703915 107

03912

The site of the project is showed in Figure below:


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Figure 1: Map of the location of the project activity

A.4.2. Category(ies) of project activity:

Sectoral scope/ Category: 1: Energy industries (renewable sources)

Grid-connected electricity generation from renewable sources

A.4.3. Technology to be employed by the project activity:

Electricity in Viet Nam supplied to the national grid is generated by the operation of grid-connected

power plants and mainly firing coal, oil or gas and is solely distributed via the unique national electricity

grid. All fuel fired power plants connected to the national grid use boiler rooms, steam heating boilers and

steam turbines to generate electricity so GHGs are emitted during these processes. By contrast, hydro

power generation is a renewable electricity generation technology which does not generate significant

GHG emissions and displaces electricity supplied to the grid from fossil-fuel-fired power generationsources. Therefore the implementation of this project activity will reduce GHGs emissions.

The project activity involves the construction of a dam, intake, tunnel, power house containing two

turbines and generators with a total capacity of 30MW and a discharge channel in order to convert

potential flowing energy from A Vuong River into clean electrical energy, which will be supplied to the

national grid though 110 kV transmission line. It also involves the construction of a reservoir with a

power density of 130.5 W/m2. Accordingly, no GHG emissions from the reservoir need to be accounted

under this project activity.

At the connection point, the power meter systems will be installed. They are digital and bi-directional

type to measure the export and import electricity of Za Hung hydropower plant.

The project's installed capacity is 30 MW and the estimated annual gross and net power generation are

122,700 MWh7 and 120,246 MWh8respectively.

7Technical Design Report, Explainable Additional Volume8 The gross power generation subtracts 2% for internal use, parasitic and loss load. Technical Design Report.

Pro ects site


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Figure below shows the layout of the project.

Figure 2: Project lay-out

The main technical parameters of the Za Hung Hydropower Project are shown in Table below.

Table 1: Main technical parameters of the proposed project activity9

Main parameters Units Values

1. Turbine

Type Francis Vertical shaft

Rated net head m 66.5

Number of turbine set 02

Turbine discharge m3/s 25.76

Efficiency % 92.3

Capacity MW 15.544

Speed rpm 375

Expected lifetime10 hour 150,000

2. Generator

Number set 02

Type Synchronous, 3 phases, vertical axis

Rated voltage kV 10.5

Rated capacity MW 15.0

Efficiency at 100% load, Cos= 0.8 % 96.8

Expected lifetime11 year 30

3. Transformer

Number set 02

9The contract on supplying equipment and technical equipment document

10The default lifetime in the EB 50, Annex 1511The default lifetime in the EB 50, Annex 15


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Primary voltage kV 10.5

Secondary voltage kV 121

Expected lifetime12 year 304. Annual river flow m

3/s 34.1

The main equipment utilized in this project is imported from China via Equipment Supply Contract

No.08-ZH-TB1-CTZH dated 05 May 2007 between the Project Owner and Associate Representation

LOGITIC Company Limited. All the turbines, alternators, transformers and other equipments are state-of-

the-art technology and meeting the criteria of the tender document. The professional technicians and

engineers from the equipment supplier will train the operational staff of the Za Hung Hydropower plant

on the monitoring procedures, operation regulations, maintenance procedures, and other relevant

operational knowledge before operating the power plant. Furthermore, there will be regularly internal

training courses on monitoring and operation for the staff during the operation period. So the modern

technology would be transferred to the host country.

The baseline scenario of this project activity is identical to the existing scenario mentioned above, where

electricity is generated Vietnamese national grid system which is mainly composed of GHG intensive

fossil fuel based power station.

A.4.4. Estimated amount of emission reductions over the chosen crediting period:

The project activity will achieve GHG emission reduction by replacing part of power generated mainly by

fossil fuel fired plants connected to the national grid. The project will apply three renewable seven-

crediting-year periods. The estimated emission reductions of the first crediting period are presented in

Table below.

Table 2: Emission reduction of the proposed project during the first crediting period

Years Annual estimation of emission reductions in

tonnes of CO2 e

2012 69,309

2013 69,309

2014 69,309

2015 69,309

2016 69,309

2017 69,309

2018 69,309

Total estimated reductions

(tonnes of CO2e)485,163

Total number of crediting years 7

Annual average over the crediting period of

estimated reductions (tonnes of CO2e)

69,309

A.4.5. Public funding of the project activity:

No public funds13

from Annex I countries is involved in this project.

SECTION B. Application of a baseline and monitoring methodology

B.1. Title and reference of the approved baseline and monitoring methodology applied to the

project activity:

12The default lifetime in the EB 50 Annex 1513

The Project owner has official letter to declare no ODA fund


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Applied methodology:

Version 12.2.0 of ACM0002: Consolidated baseline methodology for grid-connected electricitygeneration from renewable sources

Related tools:

Version 02.2.1 of the Tool to calculate the emission factor for an electricity system

Version 06.0.0 of the Tool for the demonstration and assessment of additionality

Version 02 of the Tool to calculate project or leakage CO2 emission from fossil fuelconsumption

The methodology and the related tools are available on the UNFCCC website:

http://cdm.unfccc.int/methodologies/DB/C505BVV9P8VSNNV3LTK1BP3OR24Y5L

B.2. Justification of the choice of the methodology and why it is applicable to the project activity:

This proposed project is a grid-connected renewable power generation that is then eligible to apply

Version 12.2.0 of ACM0002. More details of the comparison of the projects characteristics and the

applicability criteria as specified in, Version 12.2.0 of ACM0002 is given in Table below.

Table 3: Comparison of projects characteristics and eligibility criteria of Version 12.2.0 of

ACM0002

Applicability conditions in Version 12.2.0 of

ACM0002

Characteristics of the project

activity

Applicability

criterion met?

This methodology is applicable to grid-connected

renewable power generation project activities that

(a) install a new power plant at a site where no

renewable power plant was operated prior to the

implementation of the project activity (green field

plant); (b) involve a capacity addition; (c) involve a

retrofit of (an) existing plant(s); or (d) involve a

replacement of (an) existing plant(s).

The project activity consists in

the installation of a new grid

connected renewable power

plants at a site where no

renewable power plant was

operated prior to the

implementation of the project

activity (green field plant).

Yes

The project activity is the installation, capacity

addition, retrofit or replacement of a power

plant/unit of one of the following types: hydro

power plant/unit (either with a run of river reservoiror an accumulation reservoir), wind power

plant/unit, geothermal power plant/unit, solar

power plant/unit, wave power plant/unit or tidal

power plant/unit;

The project activity involves the

installation of a new

hydropower plant.

Yes

In the case of the capacity additions, retrofits or

replacements (except for wind, solar, wave or tidal

power capacity addition projects which use Option

2: on page 11 to calculate the parameter EGPJ,y): the

existing plant started commercial operation prior to

the start of a minimum historical reference period

of five years, used for the calculation of baseline

emissions and defined in the baseline emissionsection, and no capacity expansion or retrofit of the

plant has been undertaken between the start of this

minimum historical reference period and the

The project activity is to install

a new hydro power plant.

Not applicable


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implementation of the project activity;

In case of hydro power plants, one of the following

conditions must apply:

The project activity is implemented in anexisting single or multiple reservoirs, with no

change in the volume of any of reservoirs; or

The project activity is to create

a new reservoir.Not applicable

The project activity is implemented in anexisting single or multiple reservoirs, where

the volume of any of reservoirs is increased

and the power density of each reservoir, as

per definitions given in the project emissions

section, is greater than 4 W/m2; or

The project activity is to create

a new reservoir.

Not applicable

The project activity results in new single or

multiple reservoirs and the power density ofeach reservoir, as per definitions given in the

project Emissions section, is greater than 4

W/m2.

The project activity results in a

new reservoir, with a powerdensity of 130.5 W/m

2, which is

greater than 4 W/m2.

Yes

In case of hydro power plants using multiple

reservoirs where the power density of any of the

reservoirs is lower than 4 W/m2

all the following

conditions must apply:

The project activity results in a

new reservoir, with a power

density of 130.5 W/m2, which is


Not applicable

The power density calculated for the entireproject activity using equation 5 is greater

than 4 W/m2;

Multiple reservoirs and hydro power plantslocated at the same river and where are

designed together to function as an

integrated project1 that collectively

constitute the generation capacity of the

combined power plant;

Water flow between multiple reservoirs isnot used by any other hydropower unit

which is not a part of the project activity;

Total installed capacity of the power units,which are driven using water from the

reservoirs with power density lower than 4

W/m2, is lower than 15MW;

Total installed capacity of the power units,which are driven using water from

reservoirs with power density lower than 4

W/m2, is less than 10% of the total

installed capacity of the project activity

from multiple reservoirs.

This methodology is not applicable to the

following:

Project activities that involve switchingfrom fossil fuels to renewable energy

sources at the site of the project activity,since in this case the baseline may be the

continued use of the fossil fuels at the site.

It is a renewable energy project

with no fuel-switch involved.

Yes


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Biomass fired power plants. The project activity is to installa new hydro power plant.

Yes

Hydropower plants that result in new singlereservoirs or in the increase in an existing

single reservoir where the power density of

the power plant is less than 4 W/m2.

The project activity results in anew reservoir, with a power

density of 130.5 W/m2, which is


Yes

This comparison shows clearly that Version 12.2.0 of ACM0002 is applicable to the proposed project

activity.

B.3. Description of the sources and gases included in the project boundary:

According to Version 12.2.0 of ACM0002, the spatial extent of the project boundary includes the Za

Hung hydro power plant and all power plants connected physically to the national electricity grid towhich the proposed project is also connected.

The flow diagram of the project boundary is shown in Figure below.

Figure 3: Project boundary

The GHGs and emission sources included in or excluded from the project boundary are shown in Table

below.

Table 4: Sources and gases included in or excluded from the project boundary

Source Gas Included? Justification/Explanation

Baseline

CO2 emission

from electricity

generation in

fossil fuel fired

power plants that

is displaced due

to the project

activity

CO2 Yes Main emission source

CH4 No Minor emission source

N2O No Minor emission source

GHGs Emission represent by EFCM

Viet NamNational

Electricity grid

Turbines

Generators

Transformers

Fossil fuel fired power

plants

ReservoirsGHGs Emission

Water flow

Electric Energy

Kinetic Energy


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ProjectActivity

For hydro power

plants, emissions

of CH4 from theReservoir

CO2 No Minor emission source

CH4 No Main emission source.

However, the power density of the project isgreater than 10 W/m

2 so CH4 emissions are

neglected, according to ACM0002, Version

12.2.0.

N2O No Minor emission source

B.4. Description of how the baseline scenario is identified and description of the identified baseline

scenario:

According to Version 12.2.0 of ACM0002, if the project activity is the installation of a new grid-

connected renewable power plant, the baseline scenario is the following:

Electricity delivered to the grid by the project activity would have otherwise been generated by the

operation of grid-connected power plants and by the addition of new generation sources, as reflected in

the combined margin calculations described in the Tool to calculate the emission factor for an electricity

system.

The Viet Nam national electricity grid, which is operated and monopolized by the EVN and is the unique

transmission and distribution line, to which all power plants in Viet Nam are physically connected is the

project electricity system.

Thus the baseline scenario of the proposed project is the delivery of equivalent amount of annual power

output from the Viet Nam national grid to which the proposed project is also connected. The database for

calculating the baseline is published by the DNA of Vietnam.

The analysis and description in B.6 will support the baseline scenario shown above.

B.5. Description of how the anthropogenic emissions of GHG by sources are reduced below those

that would have occurred in the absence of the registered CDM project activity (assessment and

demonstration of additionality):

According to Version 12.2.0 of ACM0002, the latest version of the Tool for the demonstration andassessment of additionality shall be used to demonstrate the additionality of this project activity. Version

06.0.0of the additionality tool includes the following steps:

Step 1: Identification of alternatives to the project activity consistent with current laws and

regulations

Sub-step 1a: Define alternatives to the project activity

Version 06.0.0 of the additionality tool states: Project activities that apply this tool in context of

approved consolidated methodology ACM0002, only need to identify that there is at least one credible

and feasible alternative that would be more attractive than the proposed project activity.

We will therefore consider the two scenarios in the following analysis:

Alternative 1: the proposed project undertaken without the CDM

Alternative 2: continuation of the current situation. In this case, the proposed project will not be

constructed and the power will be solely supplied from the Vietnam national grid.

Sub-step 1b: Consistency with mandatory laws and regulations

The alternative 2 continuation of the current situation alternative does not face with any barrier from

the current law and regulation in Vietnam because it is the do-nothing alternative. The project owner of


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a proposed project has no obligation to build or invest in the power plant to supply electricity for the local

area. Hence this alternative is consistent with mandatory laws and regulations.

The alternative 1 is consistent with mandatory laws and regulations of Vietnam14.

Step 2: Investment analysis

Sub-step 2a: Determine appropriate analysis method

The proposed project activity generates financial and economic benefits other than CER revenues, so the

simple cost analysis (Option I) is not applicable. Out of the two remaining options, Option II is also not

applicable as there are no other credible and realistic baseline scenario alternatives other than electricity

supply from the grid. Thus, the benchmark analysis (Option III) is chosen to prove additionality.

Sub-step 2b Option III: Apply benchmark analysis

In the following, Project IRR is used to demonstrate the Additionality of the project. Provided that the

proposed project is financed by both equity and loan sources, the appropriate benchmark is WACC

which represents the weighted average of the costs of various sources of financing in the financing

structure. This benchmark represents the minimal required project IRR of the project to be economically

attractive.

The WACC benchmark is indicated in Annex: Guidance on Assessment of Investment Analysis, Version

05, Annex 05, EB62, Local commercial lending rates or weighted average costs of capital (WACC) are

appropriate benchmarks for a project IRR. Thus the project participant applies the following WACC

equation to estimate the required return on capitalas a benchmark for this project IRR:

eR R (1 )d cWACC E D T = + (1)

Where:

Re : cost of equity

Rd : cost of debt

E : equity ratio

D : debt ratio

Tc : average enterprise tax rate

This WACC is the the cost of financing and required return on capital which is based on private

equity investors/fundrequired return on comparable projects as presented in Option III, Item (30)(b) ofTool for the demonstration and assessment of additionality version 06.0.0

Determine the equity ratio

Decision No 30/2006/QD-BCN issued on 31 August 2006 by the Ministry of Industry requires that the

investment capital of project owner (equity) in an IPP project must be accounted for at least 30%. So the

average industry equity ratio is determined as 30%.

E= 0.3Determine the debt ratio

Because industry projects are financed by equity and debt so D = 1-E

D= 0.7

14This project owner received the investment license for this project on 16 May 2007. This proved that this project complies withthe law and regulation in Viet Nam.


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Determine the cost of debt

The cost of debt is the interest rate for a long-term loan prevailed at the time of making the investment

decision. The project participant chooses the lowest value of the range from 12.6% to 16.2% of the

interest rates for long-term credit published in the Annual Report of the State Bank of Viet Nam in 2005.

This report is published at the website of the State Bank annually (www.sbv.gov.vn/). So the cost of debt

used for benchmark derivation is conservative and standard value.

The applied cost of debt is 12.6% at the date of making the investment decision.

Determine the cost of equity

To derive an appropriate cost of equity for electricity generation project type in Vietnam, the following

well-known CAPM15

standard formula, which describes the relationship between risk and expectedreturn, is employed:

Re = Rf+ *(Rm,- Rf) (2)

Where:

Re, cost of equity for electricity generation project type

Rf Risk free rate return

Beta of the security for electricity generation project type

Rm,- Rf, Market risk premium

Risk free rate:

The risk free rate is understood as the rate of return on an asset that is theoretically free of any risks,

therefore the rate of interest on government bonds are considered as risk free rates. Accordingly the risk

free rate has been taken from long term Vietnamese government bond rates available at the date of

making the investment decision. The data on government bond rates is published on Asia Commercial

Bank securities company website.

The risk free rate applied is 9.25% for 15 years term16

.

Beta:

Beta () indicates the sensitivity of the company to market risk factors. Beta represents the market risk for

an asset and is calculated as the statistical measure of volatility of a specific asset/investment relative to

the movement of a market group. The conventional approach for estimating beta of an investment is a

regression of returns on investment against returns on a market index. For companies that are not publicly

listed like Za Hung Joint Stock Company, the beta is determined by referring to beta values of publicly

listed companies that are engaged in similar types of business. The project activity type is power

15In finance, the Capital Asset Pricing Model (CAPM) is used to determine a theoretically appropriate required rate of returnof an asset, if that asset is to be added to an already well-diversified portfolio, given that asset's non-diversifiable risk. The model

takes into account the asset's sensitivity to non-diversifiable risk (also known as systemic risk or market risk), often represented

by the quantity beta () in the financial industry, as well as the expected return of the market and the expected return of atheoretical risk-free asset.16

http://hnx.vn/Danhsach_TCDKGD_TraiPhieu.asp?actType=1&menuup=402000&TypeGrp=1&menuid=114000&menulink=400000&menupage=Danhsach_TCDKGD_TraiPhieu.asp&stocktype=1


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generation; therefore the applied beta for this project should be based on the beta values of listed power

generation companies in Vietnam.

Due to the difference in capital structure (Debt/Equity) between these companies and Za Hung JointStock Company, the Beta applied for this CDM project has to be adjusted according to the following

steps:

Step 1 It is obtained the Levered Betas of hydropower companies published in stock market withits own capital structures;

Step 2 The Beta is Unlevered according the average capital structure of the companies; Theunlevered beta is the beta of a company without any debt. Unlevering a beta removes the financial

effects from leverage17

.

Step 3 The Unlevered Beta is levered again according to the capital structure of the Za HungHydropower project. This Levered Beta was used for calculation of cost of equity of the Za Hung

Project

Table 5: Betas of similar companies in hydro power generation18

Company nameLevered Beta

of similar

projects

D/EUnlevered

Beta

Levered

Beta for

CDM

project

Vinh Son Song Hinh

Hydropower Company

0.75 0.44 0.57 1.52

According to the source from Bloomberg19

, the average beta of electricity generation companies in from

other companies in emerging countries (which are in the process of rapid growth and industrializationhaving similar economic conditions to Viet Nam) in the year 2002, 2003, 2004, 2005 is 0.83, 0, 91, 0.97,

1.39 respectively.

So conservative, the project participant chose 0.83 as the applied beta for return on equity calculation.

Risk Premium:

The most common approach for estimating the risk premium is to base it on historical data, in the CAPM

model, the premium is estimated by looking at the difference between average return on stocks and the

risk free rate return. The average return on stocks is defined as the compounded annual return.

Table 6: Market expected return calculation.

Market index (VN Index) as on 28-

Jul-2000 100.00

Market index (VN Index) as on 17-

July-2006 506.10

No. of years 5.97

Market Expected Return 31.19%

17http://www.investopedia.com/terms/u/unleveredbeta.asp 18 At time of decision making, there was only one hydropower generation company which was listed. The betas of Vinh SonSong Hinh HPP has been calculated by the project developer based on the published daily data. The link of sources is

http://www.cophieu68.com/incomestatementq.php?id=VSH 19http://www.stern.nyu.edu/~adamodar/


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Substituting

Rf = 9.25%;

Rm = 31.19%;

= 0.83

in(2), we get the cost of equity for power generation projects in Viet Nam at the date of decision

making of the proposed projectas follows:

Re = 27.46%

This rate of the cost of equity for power generation sector meets the EB rules because it reflects a sector

specific approach. It is calculated based on similar companies operating in power generation sector in

Viet Nam therefore it reflects standard in the market, considering the specific characteristics of the

project type () as stipulated in the guidance given in the latest additionality tool under sub-step 2b(29).

Another survey by a securities company in Viet Nam recommends the range of 25% to 30% for cost of

equity for power generation companies in Vietnam market20

. Therefore, the rate of 27.46% applied as

the cost of equity for power generation projects in Viet Nam at the date of decision making of the

proposed project is the appropriate benchmark.

The table below presents key assumption to calculate the benchmark - WACC according to formula (1)

Table 7: Key assumptions to calculate the benchmark

No Parameter Symbol Unit Value

1 Average industry equity ratio E % 30

21

2 Cost of equity Re % 27.46

3 Average industry debt ratio D % 7022

5 Cost of debt Rd % 12.623

6Average enterprise revenue tax during the

lifetimeTc % 18.68

24

7Weighted Average Financial Discounting

Rate of Capital (Benchmark)WACC % 15.41

Sub-step 2c: Calculation and comparison of financial indicators

The key assumptions used to calculate the project IRR of the proposed project are presented in Table

below:

Table 8: Key assumption for investment analysis

No Parameter Unit Value Source

20The report by Anpha Securities Company has been submitted to the DOE.21Decision No. 709/QD-NLDK issued by the Ministry of Industry provides temporary guidelines for conducting the economic,financial and investment analysis and providing the purchasing-selling price frame for power generation projects.22Calculated from Equity ratio D = 1- E23The Annual Report 2005. The Annual Report 2005 is published at the website of the State Bank annually in 200624Based on Decree No 164/2003/ND-CP issued on 22 Dec 2003 by the Government


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1 Gross capacity MW 30 Technical Design Report,

Explainable Additional Volume

2Annual net electricity

generationMWh 122.246

The gross power generation subtracts

2 % for parasitic and loss load.

Technical Design Report,


3 Total investment costbillion

VND507.087



4 Total annual O&M cost % 1.5Technical Design Report,


5Preparation and

construction periodyear 4



6 Life time year 37

Tool to determine the remaining

lifetime of equipment/ Annex 15, EB50.

7Depreciation period for

constructionyear 20

Decision No. 206/2003/QD-BTC

issued on 12 December 2003by the

Ministry of Finance

8Depreciation period for

equipmentyear 10

Decision No. 206/2003/QD-BTC

issued on 12 December 2003by the

Ministry of Finance

9 Fair value 0

The project participants chose a

lifetime of 37 years to assess the cash

flows for the project IRR while a

linear depreciation over 20 yearsperiod is chosen as regulated by the

government. Full value of assets has

been completely depreciated.

No fair value remains.

10 Electricity price. VND/kWh 608

The estimation of tariff for the

proposed project is based on the

electricity price of the other

hydropower plants which are

accessible by the project owner at the

time of making the investment

decision. The project owner expected

to negotiate with EVN to get thehighest price among the prices

available. The applied electricity price

is mentioned the same value in

Explainable Additional report.

11 Resources tax % 2

The Circular No 05/2006/TT-BTC

was issued by Ministry of Finance on

19 Jan 2006 regulates that the resource

tax will be calculated as the net

electricity outputs supplied to the

national electricity grid x 2% x 700

VND.

12 Project IRR % 9.43


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This table shows that the project IRR of the project was lower than the benchmark at the time of decision

making which is defined as the date of issuing the Decision to pursue the CDM application for the

investment project by the Board of Director on 17 July 2006.All financial data are available to the DOE for Validation.

Sub-step 2d: Sensitivity analysis

A sensitivity analysis of the project activity has been conducted to test the robustness of the above

calculations. Because the O&M cost accounted less than 20% of total investment cost, thus according to

EB 62, Annex 05, paragraph 20:only variables, including the initial investment cost, that constitute more

than 20% of either total project costs or total project revenue should be subjected to reasonable variation

this parameters was ignored in the project sensitivity analysis. So the following parameters are used in the

sensitivity analysis of the project activity:

Annual amount of electricity exported to the national grid

Investment costs

Electric price set by EVN

Table below shows the impact of variations in key factors on the project IRR considering a 10%

variation in the parameters.

Table 9: Sensitivity analysis

No Parameter Variation25

Project

IRRLikelihoods to happen

1Annual amount of electricity

exported to the national grid

10.00% 10.47% Lower than the benchmark

63.26% 15.41%

The probability of a 63.26%

increase in annual export to the

national grid is very unlikely. This

is because the potential hydrology

has been surveyed in long term

basis. It is concluded that the

hydrological condition is not

possible to sustain a 63.24%

annual increase compared with the

current estimation for the entire

crediting period. This option shallbe discarded.

-10% 8.34% Lower than the benchmark

2 Investment costs 10.00% 8.54% Lower than the benchmark

25 10% is selected according to the Decision No. 709/Q NLDK issued by the Ministry of Industry, dated 13 April 2004 toprovide temporary guidelines for conducting the economic, financial and investment analysis and providing the purchasing-

selling price frame for power generation projects. It is also common-practice for sensitivity analysis for additionalitydemonstration. Furthermore, 10% is also a common practice rate for sensitivity analysis of a CDM project


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-41.06% 15.41%


decrease in the total investment

cost is not likely to happen becausethe inflation, average consumer

prices 200826

show an annual

increase of 24% respectively.

-10.00% 10.48% Lower than the benchmark

3 Electric price set by EVN

10.00% 10.50% Lower than the benchmark

61.80% 15.41%


increase in feed in tariff annually is

very unlikely because the PPA

contract will be signed with EVN

with a fixed feed in tariff for longterm. However it should be

comparable with the tariffs applied

for other hydropower projects

under fixed feed-in tariffs applied

for long-term PPAs for other

hydropower projects that are

around 602 VND/kWh27

. This

option shall be discarded.

-10.00% 8.32% Lower than the benchmark

The sensitivity analysis shows that there is unlikely to be happened the case in which the variation of a

parameter can improve the Project IRR without CDM above the benchmark.

In conclusion, the proposed CDM project activity is unlikely to be financially attractive.

Step 3: Barrier analysis

Not applied.

Step 4: Common practice analysis

Sub-step 4a: Analyse other activities similar to the proposed project activity

Government Decree No 45/2001/ND-CP on power generation and consumption, which was issued on 2

August 2001 and was entered into force 15 days after the issuance date, created a legal basis to allow

other entities to invest in and generate electricity rather than only state-owned entities as previously

regulated. Before that time, all power plants have been invested from the state budget sources and

operated by state owned companies. Hence, any hydropower projects that have started the construction

activities before August 2001 are not subject to this analysis.

26http://www.imf.org/external/pubs/ft/weo/2008/02/weodata/weoreptc.aspx?sy=1980&ey=2013&scsm=1&ssd=1&sort=country&d

s=.&br=1&c=582&s=PCPIPCH&grp=0&a=&pr1.x=77&pr1.y=10 27The statistic data of the feed-in tariffs applied for other hydropower projects is submitted to the DOE


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According to Vietnam Construction Code - TCXDVN 285:2002 "Irrigation projects - Major standards on

designing"28

hydropower projects are categorized as follows:

Table 10: Groups of hydropower projects according to Vietnam Construction Code - TCXDVN285:2002

Group Installed capacity

I equal and larger 300 MW

II equal and larger 50 MW but smaller 300 MW

III smaller 50 MW but equal and larger 5MW

IV smaller 5 MW but equal and larger 0.2MW

V up to 0.2MW

According to Table above, this proposed project activity falls into Group III which are similar scale and

take place in a comparable environment to the proposed project activity.

Table 11: Hydropower plants which belong to range (5MW to 50MW) were developed in Viet

Nam29

No NameCapacity

MW

Construction

starting year

Commissioning

year

Developed as CDM

project

1 Nam Mu 12 2002 2004 No

2 Ea Krong Rou 28 2003 2007 No

3 Suoi Sap 14.4 2004 2007 No

4 Nam Tha 6 6.0 2006 2007 Yes

5 Ngoi Xan 1 8.1 2006 2007 Yes

6 Na Loi 9.3 2000 2003 No

Because the Na Loi hydropower project started construction from 2000, it is excluded from this common

practise analysis. It is also applied to Nam Tha 6 and Ngoi Xan 1 as they are developed as CDM projects.

Thus, only 3 projects are relevant in this analysis.

The comparison of the three remaining hydropower plants and the proposed project activity is presented

in Table below.

Table 12: Hydropower plants which belong to group III (5 < Pdm30 MW) were developed in

Vietnam

No Name Capacity

MW

Elec.

outputs

103MWh

Load

factor

Construc-

tion

starting

year

Commi-

ssioning

year

Investor during the investment

and construction period

0 The

propos

ed

project

30 122.7 46.69% 2006 2009 Za Hung Joint Stock Company

(private owned company)

28Construction Code regulates the basic technical standards that are mandatory for construction activities in Viet Nam 29

List of powerplants supplied by Institute of Energy


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A. Invested and constructed by state-owned companies or joint stock companies which are either state-

owned or whose major shares held by the government

1 Nam

Mu

12 55.7 53.0 Jan.

2002

2004 Song Da Construction

Corporation - one of the largest

state-owned construction

corporation belongs to Ministry

of Construction (Nam Mu

Hydropower JSC was set up on

29 May 2003 to take over the

continuing construction and to

operate the Nam Mu plant)30

2 Ea

Krong

Rou

28 110.7 45.1 Otc.

2003

2007 Mien Trung Power Investment

and Development Joint Stock

Company (Song Da

Construction Corporation and

Power Company No.3 hold

85% of shares. Power Company

No.3 belongs to EVN)31

. In

addition, this project has

received ODA loan from

India32

B. Invested and constructed by private companies

3 Suoi

Sap

14.4 65.7 52.1 Jul. 2004 2007 Truong Thanh Construction

Company Limited

Sub-step 4b: Discuss any similar options that are occurring

The existence of these hydropower plants does not contradict the result of the benchmark analysis stating

that the proposed project is financially unattractive, because of the following reasons:

For projects from 1 - 2: As can be seen in the Table above, these projects have been invested in byeither large state-owned corporations or joint stock companies whose majority shares held by large

state-owned corporations. These projects do not face the barriers that the proposed project faces

because:

1. The state-owned corporations mentioned above are among the largest state-owned power and

construction corporations in Vietnam. They are financed by the state budget as well as theirinvestment activities. In 1990s, Song Da Construction Corporation have been assigned by

the government to construct national hydropower plants like Hoa Binh - Song Da (1920

MW), Yaly (720 MW), Tri An (400 MW), Ham Thuan (300 MW), Thac Ba (108 MW). ).

And from 2000, Song Da Corporation had been studying and investing in a series of

hydropower plants like: Ry Ninh 2, Na Loi, Can Don, Se San 3A33

Therefore, they have

substantial experiences in designing, investing, constructing and operating hydropower

plants.

2. The state-owned corporations mentioned above were established according to the PrimeMinister's Decisions No 90/TTg and 91/TTg dated on 07th March 1994. The formulation of

30 Prospectus of Nam Mu Hydropower Joint Stock Companyhttp://images1.cafef.vn/Images/Uploaded/DuLieuDownload/Ban%20Cao%20Bach/HJS_BCB.doc

31http://vincomsc.com.vn/vi/Pages/ReportFileDownload.aspx?id=8338 32 http://www.mientrungpid.com.vn/?page=13 33http://www.songda.com.vn/info/info.do?info=intro


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these corporations is to aim at developing power and construction industries in order to meet

national socio-economical development goals and strategies and to implement development

tasks assigned by their ministries and/or Prime Minister in certain development periods.Therefore, the key target of these corporations is to serve as the governmental tool for

macroeconomic interferences rather a profit making34

.

Project 3: The initial main objective of this project by the government was to invest in an irrigation

project to provide water for 700 ha commercial plantation and rice fields in order to alleviate

poverty and to develop local agriculture and rural targeted communes in Phu Yen District, Son La

Province. Then the project owner decided to synergise this objective with the construction of a

hydropower plant. According to the Government Decree No. 17/2001/N-CP, this project is givenpriorities to access ODA. Therefore, this project has borrowed ODA soft-loan from India at a very

favourable interest rate35

while the proposed project has to take loans from domestic banks without

such a favourable condition. The circumstances of this project thus clearly show that this project

has not been facing a similar barrier as the proposed project.

As can be seen from the above analysis, no similar projects facing the same barriers as the proposed

project have been developed without the aid of CDM.

Implementation timeline of the proposed project activity

The incentive from the CDM was seriously considered in the official letter to notify and request the

People Committee of Quang Nam province (the highest provincial authority) and DNA Viet Nam on 30

December 2005 by Za Hung Joint Stock Company (Project owner). Later on, the Peoples Committee

sent an official letter to the DNA Viet Nam on 05 January 2006 for verifying and supporting CDM

project development. Subsequently, the CDM development contract was signed between Project owner

and Asia Carbon International B.V on 14 April 2006. The Letter of Endorsement was issued on 05 May

2006. After that the project owner officially decided to pursue CDM implementation project on 17 July2006.

This was prior to the starting date of the project which is defined as the date of signing the contract for

construction tunnel on 28 December 2006.

CDM Consideration

CDM early consideration and the serious actions to secure the CDM status for the project are reflected in

the key milestones in the development of the project listed below:

Table 13: Major milestones in developing the investment project and CDM application

NoItem

Date NoteInvestment project

developmentCDM project development

1

Approving Environment

Protection Commitment

report by Quang Nam

People Committee

18 May 2005

2Finalizing Technical

design report20 Dec 2005

3Submitting a formal letter by

the project sponsor to notify 30 Dec 2005CDM early

consideration

34http://vi.wikipedia.org/wiki/Tng_cng_ty_9135Source: Interview with Truong Thanh Construction Company Limited and confidential documentation provided to DOE


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the CDM project activity and

to request the People

Committee for theirverification and support

evidence

4

Submitting a formal letter by

the project sponsor to notify

the CDM project activity and

to request the DNA Viet Nam

for their verification and

support

30 Dec 2005

CDM early

consideration

evidence

5

Submitting an official letter by

Provinces People Committee

to DNA to verify and support

for the CDM development

5 Jan 2006

CDM early

consideration

evidence

Signing the CDM developmentcontract with the first

consultant

14 Apr 2006CDM earlyconsideration

evidence

6Issuing the Letter of

Endorsement5 May 2006

CDM early

consideration

evidence

7

Finalizing the adjusted

design project report by the

technical consultant

20 Jun 2006

9 Issuing the Decision on CDM 17 Jul 2006

Date of

makingInvestment

Decision

10 Signing the credit contract 26 Jul 2006

11

Starting the validation

process: uploading the PDD

for global stakeholder

comment

7 Sep 2006

13 Signing the Contract forconstruction of tunnel

28 Dec 2006 Start date ofthe project

activity

14 Issuing the LoA 29 Dec 2006

15

Signing the Contract for

construction of dams and

power house

30 Dec 2006

16Signing the ERPA with the

first Buyer9 Mar 2007

17 Starting date of construction 22 Mar 2007

18

Signing the Contract for

supply of technological

equipment and technicalservices

05 May 2007

19Issuing Certificate of

Investment by Provincial16 May 2007


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Peoples Committee

20

Responding to the Draft

Validation Report from DOEby the first CDM consultant

09 April

2008

21Signing the Power Purchase

AgreementJun 2009

22

Terminating the CDM

development and registration

contract with the first CDM

consultant

29 Jun 2009

23Terminating the ERPA with

the CDM buyer29 Jun 2009

24

Signing the CDM

development and registration

contract with the new CDMconsultant (CDM

consultancy contract) -

The Project Design

Document (PDD) started to

develop again

02 Jul 2009

25

Starting the commercial

operation of the project of

unit 1 (commissioning)

28 Jul 2009

26Negotiating the ERPA with

the second Buyer22 Dec 2009

27 Signing the ERPA with thesecond Buyer 07 Jul 2010

In conclusion, the proposed project is additional.

B.6. Emission reductions:

B.6.1. Explanation of methodological choices:

The reduced emission is calculated in accordance with the approved consolidated baseline methodology

Version 12.2.0 of ACM0002.

I. Project emissions (PEy)

According to the ACM0002 Version 12.2.0, for most renewable power generation project activities, PEy

= 0. However, some project activities may involve project emissions that can be significant. These

emissions shall be accounted for as project emissions shall be accounted for as project emissions by using

the following equation:

PEy = PEFF,y + PEGP,y + PEHP,y

Where:

PEy = Project emissions in year y (tCO2e/yr)

PEFF,y = Project emissions from fossil fuel consumption in year y (tCO2/yr)

PEGP,y = Project emissions from the operation of geothermal power plants due to the


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release of non-condensable gases in year y (tCO2e/yr)

PEHP,y = Project emissions from water reservoirs of hydro power plants in yeary (tCO2e/yr)

Fossil Fuel Combustion (PEFF,y)

This proposal project is hydropower project, so the project does not use fossil fuels for electricity

generation, CO2 emissions from the combustion of fossil fuels is not relevant.

PEFF,y= 0

Emissions of non-condensable gases from the operation of geothermal power plants (PEGP,y)

This emissions only apply for geothermal project activities, so this emissions (PEGP,y) is not relevant.

Therefore, the project emissions are:

PEy= PEHP,y

Where:

PEHP,y Emission from water reservoirs (tCO2/year)

Emission from water reservoir:

For hydropower project activity that results in new single or multiple reservoirs and/or the increase of

single or multiple existing reservoirs, the power density (PD) of the project activity shall be calculated as

follows:

PJ

PJ BL

BL

Cap CapPD

A A

=

Where:

PD Power density of the project activity, in W/m2.

CapPJ Installed capacity of the hydro power plant after the implementation of the project activity (W).

CapBL Installed capacity of the hydro power plant before the implementation of the project activity (W).

For new hydro power plants, this value is zero.

APJ Area of the single or multiple reservoirs measured in the surface of the water, after the

implementation of the project activity, when the reservoir is full (m2).

ABL Area of the single or multiple reservoirs measured in the surface of the water, before the

implementation of the project activity, when the reservoir is full (m2). For new reservoirs, this value

is zero.

If thePDis greater than 4 W/m2and less than or equal to 10 W/m

2:

Re,

1000

s YHP y

EF TEGPE

=

Where:

PEy Project emissions from water reservoirs expressed as tCO2e/year

EFRes Default emission factor for emissions from reservoirs of hydropower plants in year y, and


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the default value as per EB23 is 90 Kg CO2e /MWh.

TEGy Total electricity produced by the project activity, including the electricity supplied to the

grid and the electricity supplied to internal loads, in yeary (MWh).

IfPDis greater than 10 W/m2, then:

PEHP,y = 0

II. Baseline emissions (BEy)

The project activity is the installation of a new baseline emissions include only CO2 emissions from

electricity generation from fossil fuel fired power plants that are displaced due to the project activity,

calculated as follows:

BEy= EGPJ,y. EFgrid,CM,y

Where:

BEy Baseline emissions in yeary (tCO2/yr).

EGPJ,y Quantity of net electricity generation that is produced and fed into the grid as a result

of the implementation of the CDM project activity in yeary (MWh/yr)

EFgrid,CM,y The combined margin CO2emission factor for grid connected power generation in

year y and the applied value36

Calculation of EGPJ,y

Because the project activity is the installation of a new grid-connected renewable power plant/unit at a

site where no renewable power plant was operated prior to the implementation of the project activity,

then:

EGPJ,y= EGfacility,y

Where:

EGPJ,y = Quantity of net electricity generation that is produced and fed into the grid as a result of

the implementation of the CDM project activity in year y (MWh/yr)

EGfacility,y = Quantity of net electricity generation supplied by the project plant/unit to the grid in year y

(MWh/yr)

Therefore, the baseline emissions are calculated as follows:

BEy= EGfacility,y .EFgrid,CM,y

Calculation of the emission factor (EF) of the national electricity grid

The Version 02.2.1 of Tool to calculate the emission factor for an electricity system determines the CO 2

emission factor for the displacement of electricity generated by power plants in an electricity system, by

calculating the operating margin and build margin as well as the combined margin, including 6

steps as follows:

STEP 1. Identify the relevant electric power system.

STEP 2. Choose whether to include off-grid power plants in the project electricity system (optional).

STEP 3. Select a method to determine the operating margin (OM)

36EFCM has been published by DNA Viet Nam according to the link:http://www.noccop.org.vn/Data/vbpq/Airvariable_ldoc_vnHe%20so%20phat%20thai.pdf


26/52



STEP 4. Calculate the operating margin emission factor according to the selected method.

STEP 5. Calculate the build margin (BM) emission factor.

STEP 6. Calculate the combined margin (CM) emission factor.

Step 1. Identify the relevant electricity systems

This hydropower project will be connected to the national electricity grid of Viet Nam, which is operated

and monopolized by the EVN. This national electricity grid is the unique transmission and distribution

line, to which all power plants in Viet Nam are physically connected. Hence the national electricity grid is

the project electricity system.

There are electricity imports to the national electricity grid from China - another host country, thus the

China Power Grid is the connected electricity system and the emission factor for the imported electricity

is zero tons CO2per MWh by default.

Step 2: Choose whether to include off-grid power plants in the project electricity system (optional)

There are 2 options in the tools to choose, including:

Option I: Only grid power plants are included in the calculation.

Option II: Both grid power plants and off-grid power plants are included in the calculation.

Because only the data of grid connected power plants is available, so Option I will be chosen for

calculating the grid emission factor.

Step 3. Select a method to determine the operating margin (OM)

The calculation of the operating margin emission factor (EFgrid,OM,y) is based on one of the following

methods:a) Simple OM; or

b) Simple adjusted OM; or

c) Dispatch data analysis OM; or

d) Average OM.

The method (a) can be used in the project because low-cost/must-run resources in Viet Nam is 34.77 %

that constitute less than 50% of total grid generation in average of the five most recent years (details see

the table below).

Table 14: Rate of low cost/must-run sources based on generation37

Year 2004 2005 2006 2007 2008

Total

Value for

2004-2008

Hydro Power

(MWh) 17,858,651 16,365,438 19,508,244 22,385,232 25,933,762

102,051,32

7

Total Power

(MWh) 44,974,169 50,330,468 57,160,493 66,348,589 74,689,636

293,503,35

5

Low-

cost/Must-run

Ratio 39.71% 32.52% 34.13% 33.74% 34.72% 34.77%

37Data source from DNA Viet Nam


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The data vintage which is used to calculation the Simple OM emission factor is the Ex-ante option of a 3-

year generation-weighted average (2006, 2007 and 2008) that is the most recent data available at the time

of submission of the CDM-PDD to the DOE for validation, without requirement to monitor andrecalculate the emissions factor during the crediting period.

Step 4. Calculate the OM emission factor according to the selected method

The simple OM emission factor is calculated as the generation-weighted average CO2emissions per unit

net electricity generation (tCO2/MWh) of all generating power plants serving the system, not including

low-cost/must-run power plants units.

There are two Options proposed, including:

Option A: Based on data on the net electricity generation and a CO2 emission factor of each power unit,

or

Option B: Based on the total net electricity generation of all power plants serving the system and the fueltypes and total fuel consumption of the project electricity system.

Because the data for Option A is available, Option A Calculation based on average efficiency and

electricity generation of each plant is used and then the simple OM emission factor is calculated as

follows:

, ,

, , ,

,

grid OMsimple y

m y EL m ym

m ym

EG EFEF

EG

=

Where:

EFgrid,OM,y

= Simple operating margin CO2emission factor in yeary(tCO

2/MWh)

EGm,y

= Net quantity of electricity generated and delivered to the grid by power unit

min yeary(MWh)

EFEL,m,y

= CO2emission factor of power unit min yeary(tCO

2/MWh)

m = All power plants/units serving the grid in yearyexcept low-cost/must-run

power plants/units

y Either the three most recent years for which data is available at the time of

submission of the CDM-PDD to the DOE for validation (ex ante option)

Because the data on fuel consumption and electricity generation of power unit m is available, so the

emission factor (EFEL,m,y) should be determined as Option A1:

, ,

, , , 2, ,

,

EL m y

i m y i y CO i yi

m y

FC NCV EFEF

EG

=

Where:

EFEL,m,y


2/MWh)

FCi,m,y

= Amount of fossil fuel type i consumed by power plant/unit m in year y (mass or

volume unit)

NCVi,y

= Net calorific value (energy content) of fossil fuel type iin yeary (GJ/mass or volume

unit)

EFCO2,i,y

= CO2emission factor of fossil fuel typeiin yeary(tCO

2/GJ)


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EGm,y

= Net electricity generated and delivered to the grid by all power sources serving the

system, not including low-cost/must-run power plants/units,in yeary (MWh)

i = All fossil fuel types combusted in power unit m in yeary

y = The relevant year as per the data vintage chosen in Step 3

Table 15: OM emission factor in 2008

Year Total output (MWh) Total emission (tCO2e) OM 2008 (tCO2e/MWh)

A B (B/A)

2006 37,618,199.00 25,702,918.00

2007 43,921,501.00 28,544,173.00

2008 48,719,874.00 29,963,699.00

Total 130,259,574.00 84,210,790.00 0.6465

SoEFgrid,OMsimple,y

is derived as follows:

EFgrid,OMsimple,y

= 0.6465 tCO2/MWh

Step 5. Calculate the BM emission factor

In terms of vintage of data, one of the following two options can be chosen:

Option 1:For the first crediting period, calculate the build margin emission factor ex antebased on themost recent information available on units already built for sample group m at the time of CDM-PDD

submission to the DOE for validation. For the second crediting period, the build margin emission factor

should be updated based on the most recent information available on units already built at the time of

submission of the request for renewal of the crediting period to the DOE. For the third crediting period,

the build margin emission factor calculated for the second crediting period should be used. This option

does not require monitoring the emission factor during the crediting period, or

Option 2:For the first crediting period, the build margin emission factor shall be updated annually, ex

post, including those units built up to the year of registration of the project activity or, if information up to

the year of registration is not yet available, including those units built up to the latest year for which

information is available. For the second crediting period, the build margin emissions factor shall be

calculated ex ante, as described in Option 1 above. For the third crediting period, the build marginemission factor calculated for the second crediting period should be used..

The most recent information on units already built for sample group mis available, so Option 1 shall be

chosen for the proposed project.

The sample group of power units mused to determine as per the following procedure, consistent with the

data vintage selected above:

(a) Identify the set of five power units, excluding power units registered as CDM project activities,that started to supply electricity to the grid most recently (SET5-units) and determine their annual

electricity generation (AEGSET-5-units, in MWh);

In 2008, the set of five power units that have been built most recently (SET5-units) is indicated in

Annex 3 has annual generation (AEGSET-5-units) of 7,829,812.02 MWh.

(b) Determine the annual electricity generation of the project electricity system, excluding powerunits registered as CDM project activities (AEGtotal, in MWh). Identify the set of power units,


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excluding power units registered as CDM project activities, that started to supply electricity to the

grid most recently and that comprise 20% of AEG total(if 20% falls on part of the generation of a

unit, the generation of that unit is fully included in the calculation) (SET 20%) and determine theirannual electricity generation (AEGSET-20%, in MWh);

The total output of Viet Nam electricity grid (AEGtotal) in 2008 is 74,689,635.97 MWh then 20%

of the total output of Viet Nam electricity grid in 2008 is 14,937,927.19 MWh.

Most recent-built power plants (SET20%) addition in the electricity system that comprise 20% of

the system generation in 2008 is shown in the annex 3 have annual electricity generation

(AEGSET-20%) of 16,514,761.12 MWh.

(c) From SET5-units and SET20% select the set of power units that comprises the larger annualelectricity generation (SETsample).

The comparison carried out by the project participants shows that the set of power capacity

additions in the electricity system that comprise 20% of the system generation (in MWh) that havebeen built most recently has the larger annual generation (14,937,927.19 MWh) than the set of

five power units that have been built most recently in 2008 does (7,829,812.02 MWh), and hence

it is employed and SETsample.

There is no plant in SETsampleis started to supply electricity to the grid more than 10 years ago, then use

SETsample to calculate the build margin.

The BM emissions factor is the generation-weighted average emission factor (tCO2/MWh) of all power

units m during the most recent year y for which power generation data is available. It is calculated as

follows:

, , ,

, ,

,

m y EL m y

m

grid BM y

m y

m

EG EF

EF EG

=

Where:

EFgrid,BM,y

= Build margin CO2emission factor in yeary(tCO

2/MWh)

EGm,y

= Net quantity of electricity generated and delivered to the grid by power unit min yeary

(MWh)

EFEL,m,y


2/MWh)

m = Power units included in the build margin

y = Most recent historical year for which electricity generation data is available

ThenEFgrid,BM,y

is derived as follows:

EFgrid,BM,y

= 0.5064 tCO2/MWh

Step 6. Calculate the combined margin emissions factor

According to the tool, the calculation of the combined margin (CM) emission factor (EFgrid, CM,y) is based

on one of the following methods:

(a) Weighted average CM; or

(b) Simplified CM

As the project is located in Viet Nam a developing country and having more than 10 registered projects at

starting date of validation, the PP chooses the weighted average CM method to calculate CM emissionfactor for the proposed project.

The CM emissions factor is calculated as follows:


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grid,CM,y grid,OM,y OM grid,BM,y BMEF = EF w + EF w

Where:

EFgrid,BM,y = Build margin CO2emission factor in yeary (tCO2/MWh)

EFgrid,OM,y = Operating margin CO2emission factor in yeary (tCO2/MWh)

wOM

= Weighting of OM emissions factor (%)

wBM

= Weighting of BM emissions factor (%)

For the proposed project, the following default values are used: wOM

= 0.5 and wBM

= 0.5 in the first

crediting period, and wOM

= 0.25 and wBM

= 0.75 in the second and third crediting period.

So in the first crediting period, the CM emission factor is derived as follows:

EFgrid,CM,y= 0.5 0.6465 + 0.5 0.5064 = 0.5764 tCO2/MWh

The baseline emission factor EF shall be fixed for the crediting period.

III. Leakage (LEy)

According to ACM0002, version 12.2.0, no leakage emissions are considered. These emission sources are

neglected orLEy = 0.

IV. Emission reductions (ERy)

Emission reductions are calculated as follows:

ERy = BEy - PEy- LEy

Where:

ERy Emission reductions in yeary (tCO2e/yr).

BEy Baseline emissions in yeary (tCO2e/yr)

PEy

LEy

Project emissions in yeary (tCO2/yr).

Leakage emissions in yeary (tCO2/yr).

B.6.2. Data and parameters that are available at validation:

Data / Parameter: CapBL

Data unit: MW

Description: Installed capacity of hydropower plant before the implementation of the project

activity.

Source of data used: This is a green-field project. This value does not exist prior to the

implementation of the project activity

Value applied: 0

Justification of the

choice of data or

description of

measurement methods

and procedures actuallyapplied :

The project activity constructs a new hydropower plant, so CapBLis considered

by zero according to Version 12.2.0 of ACM0002.

Any comment: Use for calculating the power density (PD)


31/52



Data / Parameter: ABL

Data unit: m2

Description: Area of the single or multiple reservoirs measured in the surface of the water,before the implementation of the project activity, when the reservoir is full. For

new reservoirs, this value is zero.

Source of data used: This is a green-field project. This value does not exist prior to the

implementation of the project activity.

Value applied: 0


choice of data or

description of

measurement methods

and procedures actually

applied :

The project activity builds a new reservoir, so ABL is considered by zero

according to Version 12.2.0 of ACM0002.

Any comment: Use for calculating the power density

Data / Parameter: EFgrid,OM,y

Data unit: tCO2/MWh

Description: Operating margin CO2emission factor for grid connected power generation

in year y calculated using the Tool to calculate the emission factor for an

electricity system

Source of data used: Data published by DNA Viet Nam

Value applied: 0.6465


choice of data or

description of

measurement methods


applied:

As per the Tool to calculate the emission factor for an electricity system

Any comment: For calculation ofEFgrid,CM,y

Data / Parameter: EFgrid,BM,y

Data unit: tCO2/MWh

Description: Build margin CO2 emission factor for grid connected power generation in

year y calculated using the Tool to calculate the emission factor for an

electricity system




choice of data or

description of

measurement methods


applied:


Any comment: For calculation ofEFgrid,CM,y


32/52



Data / Parameter: EFgrid,CM,y

Data unit: tCO2/MWh

Description: Combined margin CO2emission factor for grid connected power generation

in year y calculated using the Tool to calculate the emission factor for an

electricity system




choice of data or

description of

measurement methods


applied:


Any comment: Fixed for crediting period.

B.6.3. Ex-ante calculation of emission reductions:

Project emissions (PEy)

Emission from reservoir:

The proposed project activity involves the construction of a new hydropower plant with capacity (CapPJ)

of 30 MW and two new reservoirs with total surface (APJ) of 22.99 ha, thusABL= 0 andCapBL= 0.

The power density of the project activity is derived as follows:

2

4

6

/5.13001099.22

01030mW

AA

CapCapPD

BLPJ

BLPJ =

=

=

As power density of two reservoirs is greater than 10 W/m2, thus the project emission is zero:PEHP,y= 0

Baseline emissions (BEy)

Baseline emissions are calculated as follows:

,y facility y grid,CM,y

BE = EG EF

Where: EGfacility,y= 120,246 MWh;

EFgrid,CM,y= 0.5764 tCO2/MWh

Therefore:

BEy= 69,309 tCO2e

Leakage (LEy)

According to ACM0002, version 12.2.0, no leakage emissions are considered. These emission sources are

neglected orLEy = 0.

Reduction emissions (ERy)

Emission reductions are calculated as follows:


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ERy= BEy- PEy= 69,309 tCO2e/year

B.6.4. Summary of the ex-ante estimation of emission reductions:

The estimated emission reduction of the project activity is provided in Table below.

Table 16: Emission reduction of the project activity

Year Estimation of

project activity

emissions

(tonnes of CO2 e)

Estimation of

baseline

emissions

(tonnes of CO2e)

Estimation of

leakage

(tonnes of CO2e)

Estimation of

overall emission

reductions

(tonnes of CO2e)

2012 0 69,309 0 69,309

2013 0 69,309 0 69,3092014 0 69,309 0 69,309

2015 0 69,309 0 69,309

2016 0 69,309 0 69,309

2017 0 69,309 0 69,309

2018 0 69,309 0 69,309

Total

(tonnes of CO2e)0 485,163 0 485,163

B.7. Application of the monitoring methodology and description of the monitoring plan:

B.7.1 Data and parameters monitored:

The power densities of the proposed project are larger than 10 W/m2so it is no need to monitor the TEGy

of this proposed project.

Data / Parameter: EGy,export

Data unit: MWh/yrDescription: Electricity supplied by the proposed hydropower plant to the national grid

Source of data to be

used:

Direct measurement at the project connection point

Value of data appliedfor the purpose of

calculating expected

emission reductions in

section B.6.3.

120,246

Description of

measurement methods

and procedures to be

applied:

Two-way power meters will be installed at the grid-connected point to measure

the amount of electricity supplied by the proposed hydropower plant to the grid

in the positive direction. The electricity will be continuously measured by the

power meters and monthly recorded. Double checking by the invoice issued by

project owner to ensure the consistency. Electronic data will be archived within

the crediting period and 2 years after the end of the crediting period.

Monitoring frequency Continuous measurement and at least monthly recording

QA/QC procedures tobe applied:

The uncertainty level of this data is low. The measurement/ monitoringequipment should adopt the colligated automation system complying with

national standard and technology. These equipment and systems should be

calibrated and checked every 2 year.


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Any comment: Use for calculatingEG acility,y, = EGy, export- EGy, import

Data / Parameter: EGy, importData unit: MWh/yrDescription: Electricity imported from the grid to the proposed hydropower plant


used:Direct measurement at the project site

Value of data applied

for the purpose of



section B.6.3.

0

Description of

measurement methods


applied:

The power meters will be installed at the grid-connected point to measure the

amount of electricity supplied by the 110 kV grid to the proposed hydropower

plant. The readings of electricity meter will be monthly recorded. Double

checking by the invoice issued by EVN to ensure the consistency. Hardcopy of

invoice from EVN will be archived within the crediting period and 2 years after

the end of the crediting period.


QA/QC procedures to

be applied:

The uncertainty level of this data is low. The measurement/ monitoring

equipment should adopt the colligated automation system complying with

national standard and technology. These equipment and systems should be

calibrated and checked every 2 year.

Any comment: Use for calculatingEGfacility,y, = EGy, export- EGy, import

Data / Parameter: APJData unit: m

2

Description: Area of the single or multiple reservoirs measured in the surface of the water,

after the implementation of the project activity, when the reservoir is full.


used:

Project site.


for the purpose of



section B.6.3.

Reservoir area: 229,900

Description of

measurement methodsand procedures to be

applied:

Measured by the observation equipment

Monitoring frequency Yearly

QA/QC procedures to

be applied:

The uncertainty level of this data is low.


Data / Parameter: CapPJ

Data unit: W

Description: Installed capacity of the hydro power plant after the implementation of theproject activity.


used:

Project site


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for the purpose of

calculating expectedemission reductions in

section B.6.3.

30,000,000

Description of

measurement methods


applied:

Manufactures nameplate

Monitoring frequency Yearly

QA/QC procedures to

be applied:


Data / Parameter: EGfacility,y

Data unit: MWh/yrDescription: Net electricity supplied by the proposed hydropower plant in year y


used:Calculating from EGy, importand EGy, export


for the purpose of



section B.6

120,246

Description of

measurement methodsand procedures to be

applied:

Calculating by subtracting EGy, importfrom EGy,export. Double checking by the joint

balance sheet issued by EVN and project owner to ensure the consistency. Datawill be archived within the crediting period and 2 years after the end of the

crediting period.


QA/QC procedures to

be applied:

The data will be crosschecked with records for sold electricity.These equipment

and systems should be calibrated and checked every 2 year.

Any comment: For CERs calculation

B.7.2. Description of the monitoring plan:

According to Version 12.2.0 of ACM0002, there is no need to monitor project emissions and leakage

under this project activity.

The baseline emission factor of Vietnam National Grid (EFgrid,CM,y) is fixed ex-ante (detail in Section B.6),

the main data to be monitored isEGfacility,y. EGfacility,ywill be calculated according to this formula below:

EGfacility,y

Date post:	07-Aug-2018
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