Payment terms, compensation costs, and early termination of contracts for BOT transportation projects.
In Decree No. 122/2026/ND-CP, the Government provides detailed regulations on the conditions for payment, principles for determining compensation costs, and early termination of BOT transportation projects.
The Government issued Decree No. 122/2026/ND-CP dated April 3, 2026, detailing the handling of obstacles in BOT transportation projects.
This Decree provides detailed regulations on handling revenue reduction issues for BOT road projects with contracts signed before January 1, 2021, as stipulated in Article 99a of the Law on Investment in Public-Private Partnerships (PPP Law); payment conditions and principles for determining compensation costs and early contract termination as stipulated in point a, clause 2a, Article 52 of the PPP Law for BOT transport projects in the operation and business phase with contracts signed before January 1, 2021.
This Decree applies to agencies, organizations, and individuals participating in or related to infrastructure investment projects under the BOT contract form signed before January 1, 2021.
Point a, Clause 2a, Article 52 of the PPP LawThe regulations stipulate that investors and PPP project enterprises are entitled to reimbursement of costs in the event of early termination of the contract as specified in points a, b, and d of Clause 2 of this Article, and the project contract identifies the responsibility for payment as belonging to the contracting authority, including:
- The project was affected by a force majeure event for which the parties had taken remedial measures, but these did not guarantee the continued implementation of the PPP project contract;
- For the national interest; to ensure national defense and security requirements, and to protect state secrets;
- In other cases, due to fundamentally changed circumstances as stipulated by civil law, the contracting parties may agree to terminate the contract.
Conditions for payment of compensation costs and early termination of BOT transportation projects.
The Decree stipulates that for BOT transportation projects in the operational and business phase with contracts signed before January 1, 2021, investors and project enterprises are entitled to compensation for early contract termination as prescribed in point a, clause 2a, Article 52 of the PPP Law when one of the following conditions is met:
1. Projects or project components that have been completed in accordance with construction laws and put into operation for at least two years, but the investor or project enterprise is not allowed to collect fees to recover capital according to the project contract.
2. Due to a decline in project revenue, the parties have calculated an adjusted financial plan based on the projected amount of state capital sharing the revenue shortfall as stipulated in Article 6 of this Decree, a reduced return on equity, and a reduced interest rate on borrowed capital as stipulated in Article 7 of this Decree. After calculation, the project has a toll collection period of up to 50 years, but the revenue is not sufficient to cover: taxes and fees payable; management, operation, and maintenance costs of the project; and principal and interest on loans according to the adjusted financial plan.
Principles for determining compensation costs and early termination of BOT transportation projects.
1. Compensation costs for early termination of a contract are determined based on the following parameters:
a) The total investment capital for the construction of the project (including interest on loans during the construction phase, excluding state capital participating in the project) is determined according to the final settlement value after deducting the value-added tax refunded to the project enterprise and deducting expenses as concluded by the inspection agency or the State Audit Office (if any);
b) The costs of managing, operating, exploiting, and maintaining the project's facilities are determined according to the confirmation of the contracting authority;
c) Taxes and fees incurred by the project enterprise after deducting value-added tax as prescribed (if any);
d) Revenue from service fees and other sources of income (if any) as confirmed by the contracting authority;
d) Independent audit fees (if any);
e) The cost of borrowing is determined according to the principles in clause 3.
2. Compensation costs for early termination of the contract are calculated as the total costs specified in points a, b, c, d, and e of clause 1 above, after deducting revenue from fees and other sources of income (if any) as specified in point d of clause 1 above.
3. The cost of borrowing stipulated in point e, clause 1 above is determined by multiplying the borrowed capital by the rate of interest P. The period for calculating the cost of borrowing is from the time the project is put into operation and business until the time the competent authority decides to terminate the contract prematurely.
In there:
Rate of return P (%/year): determined based on the results of negotiations between the investor, the project enterprise, and the credit institution (lender), but not exceeding 4%/year.
Vi: is the loan amount in year i, determined based on the actual disbursed loan value and the finalized investment value, ensuring it does not exceed the ratio stipulated in the PPP project contract. The loan amount does not include any loan capital already paid from revenue sources as specified in point d, clause 1 above (if any).
n: is the number of years, determined from the time the project is put into operation and business until the time the competent authority decides to terminate the contract prematurely. If a portion of the loan is disbursed after the project is put into operation and business, the number of years is determined from the time the loan portion is disbursed until the time the competent authority decides to terminate the contract prematurely.
4. The investor's return on equity is not included in the compensation costs for early termination of the contract.
This Decree takes effect from the date of signing (April 3, 2026)./.
