* Hanoi Power Corporation * Distribution Efficiency Project * Financing Agreement No. Cr. 5156-VN Loan Ageement No. TF013468-VN * Grant Agreement No. TF013456-VN * Audited financial statements For the year ended 31 December 2018 U 8~ U U U W U U g Hanoi Power Corporation Distribution Efficiency Project Established under the Financing Agreement No. Cr. 5156-VN, Loan Agreement No. TF013468-VN, Grant Agreement No. TF013456-VN Content Pages PART 1: FINANCIAL STATEMENTS Report of Managment 1 -2 Independent auditors' report 3-4 Balance sheet 5 Statement of sources and uses of funds 6-7 Statement of designated accounts 8-10 Statement of loan withdrawals 11 -13 Notes to the financial statements 14 -20 PART II: REPORT OF INDEPENDENT AUDITORS ON EFFECTIVENESS OF INTERNAL CONTROL 21 -22 PART III: REPORT OF INDEPENDENT AUDITORS ON THE COMPLIANCE 23 -24 ANNEX I: MANAGEMENT LETTER 25 - 26 ANNEX II: THE PROGRESS OF PROJECT IMPLEMENTION AND WITHDRAWAL 27 -28 ANNEX III: COVENANT RATIO REPORT 29 . . . . . . . ．決 州（ 驪壇 ,H •丰 . ．劍墾工1 .F-NANC瞋L sTATEMENTs . • , . - . . . . 馴 個 • . . . . . . . 跚 . Hanoi Power Corporation Distribution Efficiency Project Established under the Financing Agreement No. Cr 5156-VN, Loan Agreement No. TF013468-VN, Grant Agreement No. TF013456-VN REPORT OF MANAGEMENT Management of Hanoi Power Corporation (the "Corporation") presents this report together with the financial statements of the Distribution Efficiency Project - Financing Agreement No. Cr. 5156-VN, Loan Agreement No.TF013468-VN and Grant Agreement No.TF013456-VN - Portion implemented by the Corporation (the "Project") for the year ended 31 December 2018. MANAGEMENT Members of Management of the Corporation who held office during the year and to the date of this report are as follows: C Mr. Nguyen Anh Tuan General Director Mr. Nguyen Anh Tuan Deputy General Director Mr. Mai Chi Hung Deputy General Director Mr. Nguyen Quang Trung Deputy General Director Mr. Nguyen Danh Duyen Deputy General Director Mr. Nguyen Anh Dung Deputy General Director MANAGEMENT' STATEMENT RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS OF THE PROJECT Management is responsible for preparing the financial statements of the Project, which comprise the balance sheet as at 31 December 2018, the statement of sources and uses of funds, statement of advance accounts, statement of loan withdrawals, statement of actual disbursements and budget for the year then ended and the notes to the financial statements, which give a true and fair view of the financial position of the Project as at 31 December 2018 as well as its receipts, disbursements and expenditures for the year then ended, in accordance with the accounting policies set out in Note 3 of the notes to the financial statements and the Project Financial Management Manual. In preparing these financial statements, Management is required to: select suitable accounting policies and then apply them consistently; make judgments and estimates that are reasonable and prudent; state whether applicable accounting principles have been followed, subject to any material departures disclosed and explained in the financial statements, and design and maintain effective internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as over financial reporting for the purpose of properly preparing and presenting the financial statements so as to minimise errors and frauds; and take responsibility for its assertions as to the effectiveness of such internal control. Management is responsible for: " ensuring that proper accounting records are kept, which disclose, with reasonable accuracy at any time, the financial position of the Project and that the financial statements comply with the accounting policies set out in Note 3 of the notes to the financial statements; " using the Project's funds as intended for the Project and complying with the Project Financial Management Manual as well as laws and regulations applicable to the Project; and safeguarding the assets of the Project and hence taking reasonable steps for the prevention and detection of frauds and other irregularities. 1 M g Hanoi Power Corporation Distribution Efficiency Project Established under the Financing Agreement No. Cr. 5156-VN, Loan Agreement No. TF013468-VN, Grant Agreement No. TF013456-VN REPORT OF MANAGEMENT (continued) MANAGEMENT' STATEMENT RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS OF THE PROJECT (continued) Management confirms that they have complied with the above requirements in preparing these financial statements. For and on behalf of Management: Nguyen Anh Tuan General Director Hanoi, Viet Nam 27 June 2019 U2 U M U U U U U2 Ernt &Yong ietamLimite Te +8 4331 5-1,00 8th Flo S BI d F 84 3831 9 16 Pha-n Ch rin stl ee.o Building a better Hoan KIeM DistrICt working world Hano S.R. of Vietnam U U Reference: 61468048/20629718-HN/VVB INDEPENDENT AUDITORS' REPORT To: Management of Hanoi Power Corporation U Opinion We have audited the financial statements of the Distribution Efficiency Project - Financing Agreement No. Cr. 5156-VN, Loan Agreement No. TF013468-VN and Grant Agreement No. TF013456-VN - Portion implemented by Hanoi Power Corporation ("the Corporation") ("the Project") prepared on 27 June 2019, as set out from page 5 to page 20, which comprise the balance sheet as at 31 December 2018, the statements of sources and uses of funds, statement of advance accounts, statement of loan withdrawals, statement of actual disbursements and budget for the year ended 31 December 2018 and the notes thereto. The financial statements have been prepared by the Corporation' Management in accordance with the accounting policies as described in Note 3 to the financial statements and the Project Financial Management Manual. In our opinion, the financial statements of the Project as at 31 December 2018 and for the year then ended are prepared, in all material respects, in accordance with the accounting policies as described in Note 3 to the financial statements and the Project Financial Management Manual. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Project in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Vietnam, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter - Accounting Policies We draw attention to Note 3 to the financial statements which describe the accounting policies. Our opinion is not modified in respect of this matter. Responsibilities of Management for the Financial Statements The Corporation's Management is responsible for the preparation and fair presentation of these financial statements in accordance with the accounting policies set out in Note 3 of the notes to the financial statements and the Project Financial Management Manual and for such internal control as the Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. U U U 3 A U Building a better working world Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. U Ernst & Young Vietnam Limited Tran Phu Son Deputy General Director Audit Practising Registration Certificate No. 0637-2018-004-1 Hanoi, Viet Nam 27 June 2019 4 g Hanoi Power Corporation Distribution Efficiency Project Established under the Financing Agreement No. Cr. 5156-VN, Loan Agreement No. TF013468-VN, Grant Agreement No. TF013456-VN BALANCE SHEET as at 31 December 2018 Currency: VND Notes 31 December2018 31 December2017 ASSETS Non-current asset Project implementing expenditures 5 1580,987,576,804 1,538,294,467,798 Current assets Cash 6 86,639,071,934 18,483,138,582 Short-term advance to suppliers 7 19,110,087,441 17,912,055,759 Other receivables 6,743,805,388 9,213,985,460 Other current assets 520,000,000 956,783,500 Total current assets 113,012,964,763 46,565,963,301 TOTAL ASSETS 1,694,000,541,567 1,584,860,431,099 g RESOURCES U Funds IDA fund 8 1,315,515,323,179 1,220,626,523,179 AUSAID fund 8 5,109,736,334 5,109,736,334 CTF fund 8 104,511,400,000 88,793,600,000 Counterpart fund 8 184,210,163,078 174,176,553,537 Foreign exchange 8 21,847,644,171 20,810,152,473 Total funds 1,631,194,266,762 1,509,516,565,523 * Short-term liabilities Short-term payables to suppliers 9 56,092,017,441 65,068,178,698 Other short-term payables 6,714,257,364 10,275,686,878 Total short-term liabilities 62,806,274,805 75,343,865,576 TOTAL RESOURCES 1,694,000,541,567 1,584,860,431,099 U Pham Doan Au Dinh Thi Ky Nguyen Anh Tuan Preparer Project Chief Accountant General Director Hanoi, Viet Nam 27 June 2019 5 Hanoi Power Corporation Distribution Efficiency Project Established under the Financing Agreement No. Cr. 5156-VN, Loan Agreement No. TF013468-VN, Grant Agreement No. TF013456-VN STATEMENT OF SOURCES AND USES OF FUNDS for the year ended 31 December 2018 Currency: VND For the year ended 31 December 2018 Accumulated to 31 December 2018 IDA fund AUSAID fund CTF fund Counterpart fund Total IDA fund AUSAID fund CTF fund Counterpart fund Total Receipts IDA fund 94,888,800,000 - - - 94,888,800,000 1,315,515,323,179 - - - 1,315,515,323,179 AUSAID fund - - - - - - 5,109,736,334 - - 5,109,736,334 CTF fund - - 15,717,800,000 - 15,717,800,000 - - 104,511,400,000 - 104,511,400,000 Counterpart fund - - - 10,033,609,541 10,033,609,541 - - - 184,210,163,078 184,210,163,078 94,888,800,000 - 15,717,800,000 10,033,609,541 120,640,209,541 1,315,515,323,179 5,109,736,334 104,511,400,000 184,210,163,078 1,609,346,622,591 Disbursements Constuction 23,774,424,549 - - 3,666,037,302 27,440,461,851 591,112,874,383 - - 35,990,924,655 627,103,799,038 Equipment 4,426,029,012 - 16,523,714,946 209,184,512 21,158,928,470 659,462,493,977 - 106,867,851,764 5,352,422,121 771,682,767,862 Consultant - - 1,652,838,414 1,652,838,414 - 3,653,078,812 - 38,642,578,547 42,295,657,359 Other - - 4,932,966,556 4,932,966,556 - 1,573,075,000 - 103,304,845,016 104,877,920,016 Realized foreign exchange losses (327,954,705) - (408,128,416) - (736,083,121) (19,374,774,929) (116,417,478) (2,356,451,764) - (21,847,644,171) 27,872,498,856 - 16,115,586,530 10,461,026,784 54,449,112,170 1,231,200,693,431 5,109,736,334 104,511,400,000 183,290,770,339 1,524,112,500,104 Surplus of receipts over disbursements 67,016,301,144 - (397,786,530) (427,417,243) 66,191,097,371 84,314,729,748 - - 919,392,739 85,234,122,487 Unrealised foreign exchange loss from revaluation of cash balance denominated in foreign currencies 1,952,778,403 - (4,752,709) - 1,948,025,694 2,159,458,111 - - - 2,159,458,111 6 ■ ■ [� �ц и м ао v о v z со м и м о со ■ � �' � r о � о о� � v й о °о_ � � М н м й й пмi ■ � � � � л � со � i и со т � � ■ � � �о М н т и о v �j {а .� п�i й � о °о й t9 '� ■ а � и N V' О N k �{.. 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GENERAL INFORMATION Distribution Efficiency Project operates under Financing Agreement No. Cr. 5156-VN, Loan Agreement No. TF013468-VN and Grant Agreement No. TF013456-VN signed on 08 77 November 2012 between the Government of the Socialist Republic of Vietnam and the "I International Development Association/International Bank for Reconstruction and Ur Development. The objectives of Distribution Efficiency Project are to improve the performance of the !H Recipient's Power Corporations in providing quality and reliable electricity services, and to reduce greenhouse gas emissions through demand-side response and efficiency gains. Distribution Efficiency Project consists of the following parts: Part A: System Expansion and Reinforcement Construction and reinforcement of 110 kilovolt, medium voltage, and low voltage electricity distribution networks, including substations, of the Power Corporations. Part B: Applying Smart Grid Technology in Distribution Automation through the application of supervisory control and data-gathering systems, electricity distribution network operations and data collection of the Electricity Corporations. Applying advanced metering infrastructure system, including two-way communication system in the form of smart grid technologies for key substations and consumers of selected Electricity Corporations. Part C: Technical Assistance and Capacity Building Provision of technical assistance to and capacity building of the Electricity Regulatory Authority of Vietnam for improvement of efficiency in electricity tariffs, enhancement of efficiency and incorporation of smart grid technologies in the grid and distribution codes, development of demand response and smart grid programs, and Project management and monitoring and evaluation. Provision of technical assistance to the Power Corporation for: (i) Effective and timely Project implementation, capacity building in relation to financial modeling and planning, and carrying out of customer surveys and instituting of other such measures to improve customer satisfaction; and (ii) Implementation of advanced metering infrastructure systems, carrying out of programs promoting efficient electricity use such as a customer awareness campaign and demand response programs, and Project monitoring and evaluation. Distribution Efficiency Project - Financing Agreement No. Cr. 5156-VN, Loan Agreement No. TF13468-VN and Grant Agreement No. TF013456-VN - Portion implementation by the Corporation ("the Project") is implemented under the Sub-loan Agreement signed between the Corporation and the Ministry of Finance dated 7 February 2013. Funds of Distribution Efficiency Project include International Development Association fund ("IDA"), Clean Technology Fund ("CTF"), Australian trust fund ("AUSAID") and counterpart fund. Funds from IDA, CTF and AUSAID implemented by the Corporation are within USD67 million, USD7 million and USD300,000, respectively. As at 31 December 2018, the Project management unit is in the process of finalizing legal procedures and documents to close the project. 14 Hanoi Power Corporation Distribution Efficiency Project Established under the Financing Agreement No. Cr. 5156-VN, Loan Agreement No. TF013468-VN, Grant Agreement No. TF013456-VN NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 December 2018 2. ACCOUNTING CONVENTION AND FINANCIAL YEAR Accounting convention The Project's financial statements, prepared under the historical cost convention, are presented in Vietnam Dong (VND), except for the statement of designated account and statement of loan withdrawals which are expressed in United States Dollars (USD). The Project's financial statements are prepared in accordance with accounting policies described in Note 3. Financial year The Project's financial year begins on 1 January and ends on 31 December. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies, which have been adopted by the Management in the preparation of these financial statements, are as follows: Contribution from funds Contribution from funds are recognized when cash is deposited to the Project's designated account which is managed by the Corporation. Contribution from Counterpart funds Receipts of Counterpart funds are recognized when disbursements are made through the bank accounts of the Corporation and its project Management units on behalf of the Project. Disbursements Disbursements are recognized when advances or payments are made by the Project to contractors, suppliers or beneficiaries for relevant project activities. Project implementing expenditure The Project implementing expenditure is recognized for amounts paid and to be paid in the future for goods and services received and accepted, whether or not billed to the Project. Cash Cash includes cash at bank of the designated account. Payables Payables to suppliers represent the amounts are to be paid to suppliers for goods and service received but remain unpaid by the Project as at the year end. 5 U 15 U * Hanoi Power Corporation Distribution Efficiency Project Established under the Financing Agreement No. Cr. 5156-VN, Loan Agreement No. TF013468-VN, Grant Agreement No. TF013456-VN NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 December 2018 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Foreign currency translation Transactions in foreign currencies are translated into Vietnam Dong (VND) at the exchange rate ruling on the transaction date. Monetary items included in the fund balance, which are denominated in foreign currencies, are retranslated at the transfer rate announced by Joint Stock Commercial Bank for Foreign Trade of Vietnam at the balance sheet date. Foreign exchange differences are presented separately in the statement of sources and uses of funds for the reporting year. 4. DESIGNATED ACCOUNT Designated account under Financing Agreement No. Cr. 5156-VN, Loan Agreement No. TF013468-VN, Grant Agreement No. TF013456-VN are deposit account in USD opened at Joint Stock Commercial Bank for Foreign Trade of Vietnam - Hanoi Branch for implementation of the Project's activities. Payments out of the designated account are for expenditures in accordance with the relevant covenants Financing Agreement No. Cr. 5156- VN, Loan Agreement No. TF013468-VN, Grant Agreement No. TF013456-VN and relevant regulations established by the International Development Association. 6. PROJECT IMPLEMENTING EXPENDITURES Currency: VND 31 December 2018 31 December 2017 Construction 701,480,905,614 662,450,618,399 Equipment 741,352,814,256 741,307,228,487 Consultant 49,247,450,691 47,760,479,902 Other expenses (*) 88,906,406,243 86,776,141,010 TOTAL (**) 1,580,987,576,804 1,538,294,467,798 (*) Other expenses mainly include expenses for compensation, site clearance, interest expense, Management and survey costs for drawing map. (**) The project implementation cost as at 31 December 2018 included an expense of VND19,673,748,939 incurred before the effective date of the Agreements, paid by counterpart funds (as at 31 December 2017: VND19,673,748,939). U U U U U 16 U * Hanoi Power Corporation Distribution Efficiency Project Established under the Financing Agreement No. Cr. 5156-VN, Loan Agreement No. TF013468-VN, * Grant Agreement No. TF013456-VN NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 December 2018 U 5. PROJECT IMPLEMENTING EXPENDITURES (continued) Details by sub-project are as follows: Dan vi tinh: VND Sub-project 31 December2018 31 December2017 Renovation electricity network in the old Hanoi area - phase 2 242,616,801,657 241,821,127,657 Renovation rural electricity network in the old Hanoi area - phase 1 204,760,989,652 204,777,242,740 Renovation rural electricity network in West Hanoi area - phase 1 149,106,251,617 126,088,781,763 Renovation rural electricity network in South Hanoi area - phase 1 138,687,772,463 141,076,819,337 Equipping remote data collection and management system 113,376,840,165 111,361,943,090 Renovation electricity network in Ha Dong District and Son Tay Town 111,121,680,329 98,005,493,106 New construction of Thanh Oai 110kV substation and branch 106,177,270,399 104,710,020,860 New construction of Mai Lam AIS-TBA 110kV substation 75,964,858,340 75,250,358,840 Renovation rural electricity network in South- West Hanoi area - phase 3 75,220,839,785 72,385,703,594 Construction of the aerial transmission line and 110kV Gia Lam 2 substation 73,954,764,605 74,476,115,425 New construction of Phu Xuyen 110kV substation and 110kV power line 44,683,674,683 41,278,631,362 Additional installation of the MBA T4 E1.23 Van Tri station and renovation and additional installation of medium voltage sections project 33,580,196,462 32,055,789,922 Increase capacity of 110kV Van Quan station E1.30 31,932,311,392 31,948,563,669 Renovation a 180.181 E1.1 line in Dong Anh 30,369,737,082 29,712,195,915 Increase capacity of 110kV Thuong Tin E1.32 station 28,930,033,971 28,866,454,202 Other projects 120,503,554,202 124,479,226,316 TOTAL 1,580,987,576,804 1,538,294,467,798 1 U U1 U g Hanoi Power Corporation Distribution Efficiency Project Established under the Financing Agreement No. Cr. 5156-VN, Loan Agreement No. TF013468-VN, Grant Agreement No. TF013456-VN NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 December 2018 6. CASH 31 December 2018 31 December 2017 VND equivalent USD VND equivalent USD Designated account 86,474,187,859 3,734,586 17,907,647,551 790,102 RN Cash at bank 15,369,160 - 325,509,330 - Cash on hand 149,514,915 - 249,981,701 - TOTAL 86,639,071,934 3,734,586 18,483,138,582 790,102 7. SHORT-TERM ADVANCE TO SUPPLIERS Currency: VND 31 December 2018 31 December 2017 Advance to other parties. - Board of Site Clearance Compensation of Phu Xuyen District 4,925,175,560 4,925,175,560 - Power Engineering Construction Joint Stock Company No. I 4,006,193,050 - Thuong Tin Land fund development Branch 3,560,199,000 3,468,264,000 - A VESTOS GBMH 1,364,585,160 1,364,585,160 - Duyen Ha LLC - 5,731,818,182 - Others 5,210,097,471 2,124,613,999 Adavance to related parties (Note 10) 43,837,200 297,598,858 TOTAL 19,110,087,441 17,912,055,759 8. FUNDS 31 Dec 2018 Accumulated to 31 December 2018 VND equivalent USD VND equivalent USD IDA fund 94,888,800,000 4,200,000 1,315,515,323,179 61,364,700 AUSAID fund - 5,109,736,334 234,998 CTF fund 15,717,800,000 700,000 104,511,400,000 4,700,000 Counterpart fund 10,033,609,541 - 184,210,163,078 - Foreign exchange 1,037,491,698 - 21,847,644,171 - TOTAL 111,644,091,698 4,900,000 1,631,194,266,762 66,299,698 U 18 * Hanoi Power Corporation Distribution Efficiency Project Established under the Financing Agreement No. Cr. 5156-VN, Loan Agreement No. TF013468-VN, Grant Agreement No. TF013456-VN NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 December 2018 9. SHORT-TERM PAYABLES TO SUPPLIERS Currency: VND 31 December 2018 31 December 2017 Co Duyen Ha LLC 17,684,700,710 3,183,636,364 ST Vinacomin Electricity Equipment JSC 4,391,490,909 8,471,755,018 it Power Industry Construction JSC 2,612,363,732 2,612,363,732 Zhejiang Jiangshan Transformer Co., Ltd. 2,323,474,311 3,087,754,025 FPT Information System Co., Ltd. 563,177,608 9,794,450,359 Entec Energy Technology JSC 186,517,653 3,149,700,388 Huaguang Group - 7,907,770,949 Hanoi Power Engineering Consultant JSC - 6,817,700,000 Geophysics Technology JSC - 5,281,530,362 Power Engineering Construction Joint Stock Company No. I - 2,577,419,516 Ha Tay Electro-Mechanical Installation JSC - 1,676,368,512 Others 26,202,346,235 9,190,465,052 Due to related parties (Note 10) 2,127,946,283 1,317,264,421 TOTAL 56,092,017,441 65,068,178,698 10. TRANSACTIONS WITH RELATED PARTIES Amounts due from and due to related parties at the balance sheet date were as follows: Currency: VND 31 December 31 December Related party Relationship Transaction 2018 2017 Short-term advances to suppliers (Note 7) Hanoi Power Associate of EVN Advance for 43,837,200 297,598,858 Engineering Corporation (Parent services Consultant JSC of the Corporation) rendering (HAPEC) 43,837,200 297,598,858 Short-term payables to suppliers (Note 9) Hanoi Power Associate of EVN Services 2,127,946,283 1,317,264,421 Engineering Corporation (Parent rendered Consultant JSC of the Corporation) (HAPEC) 2,127,946,283 1,317,264,421 U 19 U g Hanoi Power Corporation Distribution Efficiency Project Established under the Financing Agreement No. Cr. 5156-VN, Loan Agreement No. TF013468-VN, Grant Agreement No. TF013456-VN NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 December 2018 11. COMMITMENTS As at 31 December 2018, the outstanding amount of contracts for construction, purchasing equipment and others signed with local and overseas suppliers was VND64.2 billion (31 December 2017: VND111.94 billion). 12. EVENTS AFTER THE BALANCE SHEET DATE On 25 April 2019, Vietnam Electricity Corporation, Hanoi Power Corporation and International Development Association/International Bank for Reconstruction and Development conducted a general meeting to conclude and end of the Effective Distribution Project. As at the reporting date, the Project Management Board is still the process of finalizing legal procedures and documents to close the Project. There is no other matter or circumstance that has arisen since the balance sheet date that may significantly affect the operations of the Project, the results of those operations or the financial position of the Project. Pham Doan Au Dinh Thi Ky Nguyen Anh Tuan Preparer Project Chief Accountant General Director Hanoi, Vietnam 27 June 2019 2 U U2 U II II Uu II II PATI PARII REOTOINDPNETAUIOSO EFETVNSSOINENA OTO II II II U II II U U U Ernst & Young Ve n Lit Tel: + 84 24 3831 5100 Sth Flcor, CorfeSton Build ] ax: +84 24 3831 5090 16 Phan Chu Trinh Street e.o UBuilding a better IGF io n Ken DitFic working world Haoi, S.R. of Vetna Reference: 61468048/20629718-HNVVB REPORT OF INDEPENDENT AUDITORS ON EFFECTIVENESS OF INTERNAL CONTROL To: Management of Hanoi Power Corporation We have audited the design and operating effectiveness of the internal control of the Distribution Efficiency Project - Financing Agreement No. Cr. 5156-VN, Loan Agreement No. TF013468-VN, Grant Agreement No. TF013456-VN - Portion implemented by Hanoi Power Corporation ("the Corporation") for ("the Project") for the year ended 31 December 2018. The internal control was set up for the purpose of managing risks to the achievement of the Project's objectives, including the reasonable prevention and detection of errors, irregularities and fraud. The internal control is the responsibility of the Corporation's Management. Auditors' Responsibility Our responsibility is to express an opinion, based on our audit, on the effectiveness of the internal control that could have a direct and material financial effect to the financial statements of the Project during the year ended 31 December 2017. We conducted our audit in accordance with the principles of International Standard on Assurance Engagements 3000 - Assurance Engagements other than Audits or Reviews of Historical Financial Information ("ISAE 3000") insofar this standard could be usefully applied in this audit and in its specific compliance context. This standard requires that we comply with ethical requirements and that we plan and perform the audit to obtain reasonable assurance about whether the internal control for the Project is adequately designed for the purpose of the Project and was operating effectively during the year covered by the audit. Our audit included obtaining a sufficient understanding of the Project and the internal control for the Project; assessing the risk that a material weakness exists that could have a direct and material financial effect to the financial statements of the Project; testing and evaluating, on a sample basis, the design and operating effectiveness of internal control based on the assessed risk; and performing such other procedures as we considered necessary in the circumstances. We considered the following criteria in evaluating the effectiveness of the internal control: the requirement for design and implementation of the internal control in the Project's Financial Management Manual ("FMM"); the appropriateness of the internal control for the Project's activities and objectives; the implementation of the internal control by the Corporation to achieve its objective of prevention and detection of errors, irregularities and fraud that could have a direct and material financial effect to the financial statements of the Project; the significance to the financial statements where one control or several controls did not operate as designed, if any; and that a weakness or a deficiency existed where a control or several controls did not reasonably prevent or detect risks that could have an adverse impact on the objectives of those internal controls which are to provide reasonable assurance that the financial statements are prepared, in all material respects, in accordance with the adopted accounting policies and FMM, that the funds are utilized for the purposes defined in the Financing Agreement and that the Project complies with the Financing Agreement, FMM and other laws and regulations applicable to the Project. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 21 Build ng a be r work ng world Opinion In our opinion, the Project's internal control which existed during the year ended 31 December 2018, in all material respects, was adequately designed for the purpose of the Project and operated in an effective manner, based on the evaluating criteria above. Other matters This audit involved a historic evaluation of the effectiveness of internal control at a specific point of time. Thus this audit does not provide assurance for future periods due to the risk that internal control may become inappropriate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. U Ernst & Young Vietnam Limited Tran PSn Deputy General Director Audit Practising Registration Certificate No. 0637-2018-004-1 Hanoi, Vietnam 27 June 2019 2 U U M U U W U U U U U 22 U U U U U PART III * REPORT OF INDEPENDENT AUDITORS ON THE COMPLIANCE II II II II II II II II II II II U 11 II II II II II II II EEnst & Yo-ung Vietnam Lmited Tel: 84 24d 3831 100 8th Floo, CornerSt ne Bu ding Fax: +84 24 3831 5090 16 Phan Chu Trinh Street ev.cor UBuilding a better lcan ie ristric working world Hanoi, S.R. of V etnam Reference: 61468048/20629718-HN/WB M REPORT OF INDEPENDENT AUDITORS ON THE COMPLIANCE To: Management of Hanoi Power Corporation We have examined the compliance of the Management of Hanoi Power Corporation ("the Corporation") in relation to the implementation of the Distribution Efficiency Project - Financing Agreement No. Cr. 5156-VN, Loan Agreement No. TF013468-VN, Grant Agreement No. TF013456-VN - Portion implemented by the Corporation ("the Project") with the applicable laws, regulations and other provisions of the Loan Agreement between the Government of the Socialist Republic of Vietnam and the International Development Association ("Financing Agreement") for the year ended 31 December 2018. The Corporation's Management is responsible for the compliance with the Financing Agreement, the Project's Financial Management Manual ("FMM") and other laws and regulations applicable to the Project (collectively referred to as "the Project's regulations"). Auditors' responsibility Our responsibility is to express an opinion, based on our examination, on the compliance of the Corporation's Management with the Project's regulations that could have a direct and material financial effect to the financial statements of the Project during the year ended 31 December 2018. We conducted our examination in accordance with the principles of International Standard on Assurance Engagements 3000 "Assurance Engagements other than Audits or Reviews of Historical Financial Information" ("ISAE 3000") in so far this standard could be usefully applied in this examination and in its specific compliance context. This standard requires that we comply with ethical requirements and that we plan and perform the examination to obtain reasonable assurance about whether the Corporation's Management complies with the Project's regulations that could have a direct and material financial effect to the financial statements during the year. Our examination included obtaining a sufficient understanding of the Project, and the Project's regulations; assessing the risk on non-compliance exists that could have a direct and material financial effect to the financial statements of the Project testing and evaluation on a sample basis, the compliance of the Corporation's Management with the Project's regulations based on the assessed risk; and performing such other procedures as we considered necessary in the circumstances. We considered the following criteria in evaluating the compliance of the Corporation's Management with the Project's regulations: the Corporation's Management awareness of the Project's regulations; the implementation of the Project's regulations by the Corporation's Management; the significance to the financial statements where Corporation's Management fails to comply with one requirement or several requirements in the Project's regulations, if any; and that a weakness or a deficiency existed where Corporation's Management fails to comply with one or several requirements in the Project regulations that could have a direct and material financial effect to the financial statements. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 23 W Bu din a better working word Opinion In our opinion, the Corporation's Management complies, in all material respects, with the Project's regulations that could have a direct and material financial effect to the financial statements of the Project for the year ended 31 December 2018 based on the evaluating criteria above. Other matters This examination involved a historic evaluation of the compliance of Corporation's Management with the Project's regulations at a specific point of time. Thus, this examination does not provide assurance for future periods due to the risk of changes in the Project's regulations, or that the degree of compliance with the Project's regulations, may deteriorate. Ernst & Young Vietnam Limited Trant Pha Son Deputy General Director Audit Practising Registration Certificate No. 0637-2018-004-1 Hanoi, Vietnam 27 June 2019 24