Revenue Increase and Decrease Sharing Mechanism in PPP Projects

Mechanism for Sharing Revenue Increases and Decreases in PPP Projects (illustration)

To be specific: Article 82 of the Investment Law under the Public-Private Partnership Model 2020 stipulates the mechanism for sharing revenue increases and decreases in PPP projects in 4 contents as follows:

1. When the actual revenue exceeds 125% of the revenue level in the financial plan of the PPP project contract, the investor, PPP project enterprise shares 50% of the difference between the actual revenue and the 125% revenue level in the financial plan with the State. The sharing of increased revenue is applied after adjusting the price levels, public service fees, and contract terms of the PPP project in accordance with Articles 50, 51, and 65 of this Law, and after the increased revenue is audited by the State Audit Office.

2. When the actual revenue is less than 75% of the revenue level in the financial plan of the PPP project contract, the State shares with the investor, PPP project enterprise 50% of the difference between the 75% revenue level in the financial plan and the actual revenue. The sharing of decreased revenue is applied when the following conditions are met:

- The project applies to BOT, BTO, or BOO contracts;- Planning, policy, and relevant laws change and reduce revenue;- All measures to adjust the price levels, public service fees, and contract terms of the PPP project in accordance with Articles 50, 51, and 65 of this Law have been fully implemented but still do not ensure a minimum revenue level of 75%;- The decreased revenue is audited by the State Audit Office.

3. The mechanism for sharing decreased revenue as stipulated in Clause 2 of this Article must be identified in the investment policy decision. The cost of handling the mechanism for sharing decreased revenue is sourced from the central budget reserve for projects decided by the National Assembly, the Prime Minister, the Ministers, heads of central agencies, or other authorities, or from the local budget reserve for projects decided by the Provincial People's Council.

4. Annually, parties in the PPP project contract determine the actual revenue and send it to the competent financial authority to implement the mechanism for sharing revenue increases and decreases. The accounting of state budget revenues and expenditures when sharing revenue increases and decreases is carried out in accordance with the provisions of the law on the state budget.

More details can be found in the Investment Law under the Public-Private Partnership Model 2020 effective from January 1, 2021.

Thanh Thao

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