NainlPwrTasisoUoprto NainPwrTransmission Efficencyarojec Loan Agreement No. 8417-VN Financial statements Hfor the year ended 31 December 2018 U U U U National Power Transmission Corporation Transmission Efficiency Project Established under the Loan Agreement No. 8417-VN between the International Bank for Reconstruction and Development and the Government of the Socialist Republic of Vietnam U CONTENTS Pages PART I FINANCIAL STATEMENTS 1-16 Statement of the Management 2-3 Independent auditor's report 4-5 Balance sheet 6 Statement of sources and uses of funds 7 Statement of designated account 8 Statement of withdrawals 9 Notes to the financial statements 10-16 PARTII INDEPENDENT ASSURANCE REPORT ON THE EFFECTIVENESS OF INTERNAL CONTROL 17-19 PART III INDEPENDENT ASSURANCE REPORT ON COMPLIANCE 20-22 APPENDIX I MANAGEMENT LETTER 1-4 APPENDIX II PROJECT IMPLEMENTATION PROGRESS AND WITHDRAWAL PROGRESS I U U W II II W PATU FIACAUSAEET U U W U U1 PATW W National Power Transmission Corporation Transmission Efficiency Project Established under the Loan Agreement No. 8417-VN between the International Bank for Reconstruction and Development and the Government of the Socialist Republic of Vietnam STATEMENT OF THE MANAGEMENT The Management of National Power Transmission Corporation ("the Corporation") presents this report together with the financial statements of Transmission Efficiency Project - Loan Agreement No. 8417- VN implemented by the Corporation ("the Project") as at 31 December 2018 and for the year then ended. The Management El The members of the Management during the year and at the date of this report are as follows: Mr. Nguyen Tuan Tung General Director Appointed on 1 June 2018 Mr. Vu Ngoc Minh General Director Retired on 1 June 2018 Mr. Vu Tran Nguyen Deputy General Director Mr. Pham Le Phu Deputy General Director Mr. Luu Viet Tien Deputy General Director Appointed on 10 September 2018 Mr. Bui Van Kien Deputy General Director Appointed on 1 October 2018 The Management's responsibility in respect of the financial statements The 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, the statement of designated account and statement of withdrawals 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 and its receipts, disbursements and expenditures for the year then ended, in accordance with the accounting policies set out in Note 3 to the financial statements and the Project Financial Management Manual. In preparing these financial statements, the Management is required to: select suitable accounting policies and then apply them consistently; make judgements 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 minimize errors and frauds; and take responsibility for its assertion as to the effectiveness of such internal control. 2 W National Power Transmission Corporation Transmission Efficiency Project Established under the Loan Agreement No. 8417- VN between the International Bank for Reconstruction and Development and the Government of the Socialist Republic of Vietnam STATEMENT OF THE MANAGEMENT (continued) Management's responsibility in respect of the financial statements (continued) The Management is also 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 to the financial statements; using the Project's funds as intended for the Project and for 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 for taking reasonable steps for the prevention and detection of frauds and other irregularities. The Management confirms that they have complied with the above requirements in preparing these financial statements. F and on behalf of the ManagementN1-- Generai'Di rector 27 June 2019 3 Ernst & Young Vietnam Limited Tel: +84 24 3831 5100 8th Floor, CornerStone Building Fax: +84 24 3831 5090 16 Phan Chu Trinh Street ey.com Building a better Kan Distct working world Hanoi, S.R. of Vietnam Reference: 61250383/20159653-WB 8417 INDEPENDENT AUDITOR'S REPORT To: The management of National Power Transmission Corporation Opinion We have audited the accompanying financial statements of Transmission Efficiency Project - Loan Agreement No. 8417-VN ("the Project"), as set out from pages 6 to page 16 which comprise the balance sheet as at 31 December 2018, the statement of sources and uses of funds, the statement of designated account and the statement of withdrawals for the year then ended and the notes thereto. The financial statements have been prepared by the management of National Power Transmission Corporation ("the Corporation") in accordance with the accounting policies as described in Note 3 to the financial statements and the Project's 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 Company 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 to the Financial Statements Management is responsible for the preparation of the financial statements in accordance with the accounting policies as described in Note 3 to the financial statements and the Project's 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. A4 U ebrfr fEnt&YugGoa iie W *EY Building a better working world U 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, but not for the purpose of expressing an opinion on the effectiveness of the Corporation's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. We communicate with the management 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. For and on behalf of Ernst & Young Vietnam Limited Bu MAnfua n Deputy General Director Audit Practising Registration Certificate No. 1067-2018-004-1 Hanoi, Vietnam 27 June 2019 5 E U 5 g National Power Transmission Corporation Transmission Efficiency Project Established under the Loan Agreement No. 8417-VN between the International Bank for Reconstruction and Development and the Government of the Socialist Republic of Vietnam BALANCE SHEET as at 31 December 2018 Currency: VND ITEMS Notes Ending balance Beginning balance ASSETS NON-CURRENT ASSETS 7,623,431,840,738 6,135,016,197,103 Project implementing expenditures 5 7,623,431,840,738 6,135,016,197,103 CURRENT ASSETS 195,777,696,185 96,749,328,704 Advance to suppliers 6 141,788,935,750 96,628,647,552 Cash 7 53,988,760,435 120,681,152 TOTAL ASSETS 7,819,209,536,923 6,231,765,525,807 RESOURCES LIABILITIES 398,119,131,170 534,864,961,506 * Short-term trade payables 8 291,636,076,276 459,949,349,453 Other payables 9 106,483,054,894 74,915,612,053 FUNDS 7,421,090,405,753 5,696,900,564,301 El IBRD fund 10 4,846,723,208,067 3,775,826,401,390 Counterpart fund 2,575,280,730,113 1,921,096,125,824 M Foreign exchange reserve (913,532,427) (21,962,913) TOTAL RESOURCES 7,819,209,536,923 6,231,765,525,807 U M Cao Thi To Uyen Nguyen Nhu Thong N y Tung * Preparer Chief Accountant General Director U 27 June 2019 6 U 2 U 6 M ■ ■ -,-,,,U：· ■ . 0 National Power Transmission Corporation Transmission Efficiency Project Established under the Loan Agreement No. 8417- VN between the International Bank for Reconstruction and Development and the Government of the Socialist Republic of Vietnam STATEMENT OF DESIGNATED ACCOUNT as at 31 December 2018 Period From I January 2018 to 31 December 2018 Account No..- 0011374234274 Depository Bank: Joint Stock Commercial Bank for Foreign Trade of Vietnam, Operations Centre Address: 31 - 33 Ngo Quyen, Hoan Kiem, Hanoi. Curreng: USD PART A - ACCOUNT ACTIVITY Amount Opening balance 5,325 Add: - Total amount deposited by IBRD for the year 41,093,245 Deduct: Total repayable amount withdrawn for the year 38,766,946 Closing balance as at 31 December 2018 2,331,624 PART B - ACCOUNT RECONCILIATION 1 . Total amount advanced by IBRD 17,000,000 2. Deduct: Total amount recovered by the IBRD 5,216,216 3. Outstanding amount advanced to designated account as at 31 December 2018 11,783,784 4. Balance as at 31 December 2018 2,331,624 5. Add: Amount claimed but not yet credited 9,452,160 6. Add: Amount withdrawn but not yet claimed - 7. Total advances to the designated account as at 31 December 2018 11,783,784 Pl Cao Thi To Uyen NguyenNhuThong -yenTu Tu ng Preparer Chief Accountant N 4ne rr 0 27 June 2019 8 � � � Qi 1 1 1 1 1 1 1 1 1 1 1 �i � � о �_ � � � исflи ш ооо�о.-о и � � г��пг v о�r�ш�-о с� о Cf� N М N О N О� М Со О е- � С1'NCO М О(90MNCO � Q б�Об� б� Гис'�OOaON 00 � б) N ОО О о (� Со 1�- N п Со (р f� � N tn й Г Г � `о -Q � � � � _ � � р � � � � ММ М МММММ� i� .� Г Г Г Г Г Г Г Г Г . � l� с �`° оо о оооооо � � Ф о � N_ N_ N N_ N_ N_ N_ N_ N_ � � . � � 1� � _и б) ° ° _о а0 б� � СЛ Ш� � �ч � � � N � � � д� � � �� � . �R � б) �- �--� �--- Г N . . � _ . _ , � ; Г � ;� ш � © � а ` с гв � иши и оаог�о.-о ш � � О 1�иГ � 0�1�СОГО � о � CpNc'') N ОNб�МС00 � V V NCO М OCf�OMNCO � р о р � Г и М 00 а0 N 00 � б) N а0 О Г б) 1� Со 1� N ■ (� п Со СО (� е- N � О о с- г �' � U �_ Ш (� � U L � О � Ш и Со и tD О СО f� о.-- О СО � U !� и�- д� О V 1� СП �--- О � � О� CflNC� N ОNб�с'�СОО � � т � п d�NCO М ОСООс'�NtO О� ° О б� � Г и М о0 о0 N 00 _ Q б� N а0 О Г б� 1� Со f� N � Ср Cf� (� � N и � С �- �- er � � � � � �' а }' С �+ 0� � ������ � С о � иии ииииии �� � � � ш �� � ������ � � о � ш �� С� Z � � � � о �а О �, а � ш � � `B Z U � � Z� � � ао М М w т со оо оо оо (� Г Г Г Г Г Г[� Г О � � � � оо о оооооо � г�,� � 0 с�с` с� с�с�с�с�с`с� � j о � _оГ м rn_й_й_йоой U �� � � М N � � � v� v � U О О � Г ор Г N � �о � � .- � . й L о � со с_Л 0- � a�i и ° � � U а� � � д � � � � 'U � о �- цч-- '1 и � р r_ - а� _ � N Ш о -�" ~? Г � --� \ � i v� > М U 3 � ���,.. 5 о о �� с о � с О. О-о с р� °' c�i � >, с � � о � � � о 1- � о � Г � � � � � Ш � � � о �!у о о ,,,, I- ` N � cI� й� ��, ш `� U �ш и О о Ш� � �д-и ш �оооГ с� 1- с`� � � П3 ��°С� Q� о .ймсл м у ��rэмммсЙм � о n � L- гл о 1- � О G�QQ Q О O.UUUUUU О �� ti Z� Ww и° т �оо о r иииииии Н U� с� � � � National Power Transmission Corporation Transmission Efficiency Project Established under the Loan Agreement No. 8417-M between the International Bank for Reconstruction and Development and the Government of the Socialist Republic of Vietnam NOTES TO THE FINANCIAL STATEMENTS as at 31 December 2018 and for the year then ended 1. GENERAL INFORMATION Transmission Efficiency Project ("the Project") operates under the Loan Agreement No. 8417- VN signed on 12 November 2014 between the Government of the Socialist Republic of Vietnam and the International Bank for Reconstruction and Development ("IBRD"). The total financing requirement for the Project is estimated at USD 731.25 million, of which USD 500 million will be funded by IBRD, the World Bank Group's lending arm for middle- income countries. The remaining USD 231.25 million will be financed by the National Power Transmission Corporation ("the Corporation"). 1H The objective of the Project is to improve the capacity, efficiency and reliability of electricity transmission in selected parts of the electricity transmission network in the territory of Vietnam. The Project is expected to be completed at 31 December 2019. The proposed Project is comprised of the following three parts as follows: Part 1: Enhancing Transmission Infrastructure This comprises investments for transmission lines and substations at voltage levels of 220 kV and 500 kV. The investments will target areas that are key to the overall economic development of Vietnam, namely Hanoi, Ho Chi Minh City, the Mekong Delta and Central Region. Investments at the 500 kV level will help increase the transport capacity of the main 500 kV trunk system while increasing its reliability. Investments at the 220 kV level are aimed at increasing the capacity of the supply points to the distribution utilities and improve the reliability of the network that serves these points. The component will roughly finance 15% of Vietnam's transmission network growth during the period 2015-2020 by targeting key investment needs in major areas of economic development and where transmission overloads are already present or will happen in the very short-term given continuous demand growth. Part 2: Developing Smart Grid Network This comprises investments for monitoring, controlling, and protecting equipment in 500 kV and 220 kV substations to improve the reliability of the interconnected power system as a whole and of some bulk-supply points in the distribution network. The project will also support the Corporation in upgrading the information system for operation and equipment management and establishing a data and metering system. Nowadays, 60 percent of the faults in substations are a consequence of faulty operations of monitoring, control, and protecting equipment. Aided by monitoring and controlling gear, protection equipment: (i) detects - among other things - the locations and intensity of faults and, based on such information, determines what equipment should be disconnected to protect the system from damage; and (ii) decides when disconnected equipment should be reconnected to ensure that interruptions in the provision of electricity services are minimized. Based on a substation modernization strategy that includes the use of recently adopted international interoperability standards and anchored to the Smart Grid roadmap approved by the Ministry of Industry and Trade, this component will help upgrade five 500 kV substations and eleven 220 kV substations. The modernization process includes replacement or upgrade of monitoring, control, protection, and other ancillary equipment such as cables, fixtures and other minor equipment inside the substations. With this intervention, the reliability of critical 500 kV and 220 kV substations will be improved contributing to the overall reliability of the 500 kV systems. 10 g National Power Transmission Corporation Transmission Efficiency Project Established under the Loan Agreement No. 8417-VN between the International Bank for Reconstruction and Development and the Government of the Socialist Republic of Vietnam NOTES TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2018 and for the year then ended 1. GENERAL INFORMATION (continued) Part 3: Capacity Building This comprises investments for the gradual development of the Corporation to become an independent transmission company with revenues from the application of performance-based regulation in the transmission sector and support the efficient implementation of the overall power sector reform. This is critical for the next phase of the power sector reform program that aims to start piloting wholesale competitive market by 2015. The Corporation's performance is not yet tracked and audited in a way that can be used to fully comply with the existing transmission pricing regulations. This component will help the Corporation establish the system needed to track performance regularly and effectively. The technical capacity building and technical assistance sub-components will be implemented as part of the Project comprises the improvement of the Corporation's Asset Management System ("AMS"). 2. BASIS OF PREPARATION The Project's financial statements, except for the statement of designated account and the statement of withdrawals, are expressed in Vietnamese Dong ("VND"). The statement of designated account and the statement of withdrawals are expressed in United States Dollars ("USD"). The Project's financial statements are prepared in accordance with the accounting policies described in Note 3 and present receipts from IBRD and Counterpart funds, disbursements made by the Corporation. U U U U1 U U * National Power Transmission Corporation Transmission Efficiency Project Established under the Loan Agreement No. 8417-VN between the International Bank for Reconstruction and Development and the Government of the Socialist Republic of Vietnam U NOTES TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2018 and for the year then ended 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies, adopted by the Management in the preparation of these financial statements are as follows: Contribution from IBRD Contribution from IBRD is recognized when IBRD fund is deposited to the Project's designated account which is managed by the Corporation. Contribution from Counterpart fund Receipts of Counterpart funds are recognized when disbursements are made through the bank accounts of the Corporation and its project management boards on behalf of the Project. Disbursements Disbursements are recognized when advances or payments are made by the Project to contractors, suppliers or beneficiaries for the Project's activities. Project implementing expenditure Project implementing expenditure is recognized for amounts paid and to be paid in the future for goods and services received, whether or not billed to the Project, and interest expenses during implementation. Cash Cash includes cash at the designated account. Advances to suppliers Advances to suppliers are carried at the disbursed amount and recognized in the balance sheet until subsequent liquidation or realization is made and approved. 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 period end. 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 into VND at the 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. U 12 U National Power Transmission Corporation Transmission Efficiency Project Established under the Loan Agreement No. 8417-VN between the International Bank for Reconstruction and Development and the Government of the Socialist Republic of Vietnam NOTES TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2018 and for the year then ended 4. DESIGNATED ACCOUNT Designated account is a deposit in USD which was opened at Joint Stock Commercial Bank for Foreign Trade of Vietnam, Transaction Centre for the implementation of the Project's activities. Payments out of the designated account are paid for Project's expenditures in accordance with the Loan Agreement No. 8417-VN and relevant regulations established by the IBRD. 5. PROJECT IMPLEMENTING EXPENDITURES Currency: VND Ending balance Beginning balance Construction expenses 3,133,028,358,267 2,707,714,247,919 Equipment 1,385,337,873,138 1,280,866,091,944 Value added tax deductible from disbursements using IBRD funds 317,786,304,992 272,651,822,077 Site clearance expenses 1,717,245,621,087 1,206,554,950,558 Other expenses (*) 1,070,033,683,254 667,229,084,605 TOTAL 7,623,431,840,738 6,135,016,197,103 (*) Other expenses mainly include expenses for survey and preparation of construction investment reports, technical design, shop drawings, front-end fee, interest expenses and project management costs. g 6. ADVANCE TO SUPPLIERS Currency: VND Ending balance Beginning balance Advance to related parties (Note 12) 11,735,759,356 5,111,641,447 Advance to other suppliers 130,053,176,394 91,517,006,105 In which: Thanh Long Group., JSC 27,606,778,779 Song Da No 11., JSC 19,947,006,557 4,765,615,729 Siemens Transformer (Guangzhou) Co., Ltd 17,880,192,000 Power Construction Installation Co., Ltd No. 2 4,929,714,871 44,357,768,326 Others 59,689,484,187 42,393,622,050 TOTAL 141,788,935,750 96,628,647,552 7. CASH Currency: VND Ending balance Beginning balance USD VND equivalent USD VND equivalent Designated account 2,331,624 53,988,760,435 5,325 120,681,152 13 U * National Power Transmission Corporation Transmission Efficiency Project Established under the Loan Agreement No. 8417-VN between the International Bank for Reconstruction and Development and the Government of the Socialist Republic of Vietnam U NOTES TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2018 and for the year then ended 8. SHORT-TERM TRADE PAYABLES Currency: VND Ending balance Beginning balance Short-term trade payables to related parties (Note 12) 21,840,945,068 12,072,631,530 Short-term trade payables to other suppliers 269,795,131,208 447,876,717,923 In which: Viettronics Corporation 20,803,388,474 77,153,854,360 Power Construction Installation Limited Company No. 4 24,174,435,764 72,334,185,768 Siemens., Ltd 85,106,756,165 12,843,080,843 Power Construction Installation Limited Company No.2 31,891,002,169 Others 107,819,548,636 285,545,596,952 TOTAL 291,636,076,276 459,949,349,453 9. OTHER PAYABLES Currency: VND Ending balance Beginning balance Accrued interest expenses 35,044,037,174 11,499,927,189 Payment on behalf (i) 71,439,017,720 63,415,684,864 TOTAL 106,483,054,894 74,915,612,053 (i) This represents payables to the Corporation for the payments made on behalf of the Project and was outstanding at balance sheet date. 10. IBRD FUND Currency: VND For the year ended 31 December 2018 Accumulated to 31 December 2018 VND VND Currency Original currency equivalent Original currency equivalent g USD 46,382,442 1,070,896,806,677 214,229,641 4,846,723,208,067 11. COMMITMENTS As at 31 December 2018, the outstanding value of contracts for consulting services, construction and procurement of materials and equipment signed with suppliers was approximately VND 1,702 billion. 14 National Power Transmission Corporation Transmission Efficiency Project Established under the Loan Agreement No. 8417-VN between the International Bank for Reconstruction and Development and the Government of the Socialist Republic of Vietnam NOTES TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2018 and for the year then ended 12. RELATED PARTY TRANSACTIONS AND BALANCES During the year, the Project entered into the following significant transactions with related parties: Currency: VND Related parties Relationship Nature Current year Previous year Power Engineering Under Design and consultant 25,602,302,489 35,287,663,526 Consulting Joint Stock common fee Company No. 1 owner Power Engineering Under Design and consultant 7,519,622,668 8,225,422,676 Consulting Joint Stock common fee Company No. 3 owner Power Engineering Under Design and consultant 7,162,949,041 1,049,401,934 Consulting Joint Stock common fee Company No. 4 owner Power Engineering Under Design and consultant 1,337,370,530 3,255,692,832 Consulting Joint Stock common fee Company No. 2 owner Dong Anh Electrical Under Purchase of materials, - 41,720,000,000 Equipment Corporation common equipment owner Outstanding balance due from and to related parties at the balance sheet dates was as follow: Currency: VND Ending Beginning Related parties Relationship Nature balance balance Advance to suppliers (Note 6) Power Engineering Under Advance for design 9,427,375,264 2,000,000,000 Consulting Joint Stock common and consultant fee Company No. 1 owner Power Engineering Under Advance for design 1,064,566,017 1,867,823,372 Consulting Joint Stock common and consultant fee Company No. 3 owner Power Engineering Under Advance for design 675,068,075 675,068,075 Consulting Joint Stock common and consultant fee Company No. 5 owner Power Engineering Under Advance for design 568,750,000 568,750,000 Consulting Joint Stock common and consultant fee Company No. 4 owner TOTAL 11,735,759,356 5,111,641,447 U 15 g National Power Transmission Corporation Transmission Efficiency Project Established under the Loan Agreement No. 8417-VN between the International Bank for Reconstruction and Development and the Government of the Socialist Republic of Vietnam NOTES TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2018 and for the year then ended 12. RELATED PARTY TRANSACTIONS AND BALANCES (continued) Outstanding balance due from and to related parties at the balance sheet dates was as follow (continued): Currency: VND Ending Beginning Related parties Relationship Nature balance balance Short-term trade payables (Note 8) Power Engineering Under common Design and consultant 16,564,858,167 7,045,681,858 Consulting Joint Stock owner fee Company No. 1 Power Engineering Under common Design and consultant 4,228,161,372 239,218,374 Consulting Joint Stock owner fee Company No. 4 Power Engineering Under common Design and consultant 819,913,745 902,177,694 Consulting Joint Stock owner fee Company No. 3 Power Engineering Under common Design and consultant 228,011,784 3,885,553,604 Consulting Joint Stock owner fee Company No. 2 TOTAL 21,840,945,068 12,072,631,530 13. EVENTS AFTER THE BALANCE SHEET DATE There is no matter or circumstance that has arisen since the balance date that requires adjustment or disclosure in the financial statements of the Project. Cao Thi To Uyen Nguyen Nhu Thong Nguyen Tu Tung Preparer Chief Accountant ctor 27 June 2019 1 U1 園 . . . & . . PART!1 繊罵 INDEPENDENTASSURANCEREPORTONTHEEFFECTIVENESSOFINTERNAL 1 . CONTROL .1 ’え . . . . & . 罵 瑠 . . 繊 . 曲 着 瑠 . . . . . . . プ7 . Ernst & Young Vietnam Lir-nited Tel: +84 24 3831 5100 8th Floor, CorncrStone Building Fax: +84 24 3831 5090 16 Phan Chu Ti inn Street ey.corrl Building a better Hoan Klein District working world Hanoi, S.R. of Vietnam Reference: 61250383/20159653-WB 8417 INDEPENDENT ASSURANCE REPORT ON THE EFFECTIVENESS OF INTERNAL CONTROL To: The management of National Power Transmission Corporation We have audited the design and operating effectiveness of the internal control of the Transmission Efficiency Project - Loan Agreement No. 8417-VN ("the Project") as operated by National Power Transmission Corporation ("the Corporation") which existed during 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 management of the Corporation. Auditor's 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 2018. 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 period 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 ("PFMM"); 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; P the significance to the financial statements where one control or several controls did not operate as designed, if any; and i - 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 PFMM, that the funds are utilized for the purposes defined in the Loan Agreement and that the Project complies with the Loan Agreement, PFMM and other laws and regulations applicable to the Project. We believe that our audit provides a reasonable basis for our opinion. 18 A mrr, L- -mof r I , c U HEY Building a better working 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 We draw attention to Appendix 1 - Management letter in which we mentioned findings from the internal control system which have no direct and material financial affect to the Project's financial statements but may lead to the risks of effectiveness of the Project's internal control system. 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. For and on behalf of Ernst & Young Vietnam Limited: Bui Anh Tuan Deputy General Director Audit Practicing Registration Certificate No. 1067-2018-004-1 Hanoi, Vietnam 27 June 2019 W W U1 U · - & - & . . . . . 쓰르끄Ll & ＊乙 ■ INDEPENDENTAssuRANcEREPoRToNco懈LIANcE ㅉ 겯 . 스 ( . 二 . . . . . . , ■ -& l■ I■ l· l& l& l■ l& I· l& I& I& l& -5 20 Ernst & Young Vietnam Limited Tel: +84 24 38315100 8th Floor, CornerStone Building Fax: +84 24 38315090 16 Phan Chu Trinh Street ey.com Building a better Hoan Kiem District working world Hanoi, S.R. of Vietnam Reference: 61250383/20159653-WB 8417 INDEPENDENT ASSURANCE REPORT ON COMPLIANCE To: The Management of National Power Transmission Corporation We have examined the compliance of the management of National Power Transmission Corporation ("the Corporation") in relation to the implementation of the Transmission Efficiency Project - Loan Agreement No. 8417-VN ("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 Bank for Reconstruction and Development ("IBRD") ("Loan Agreement") during the year ended 31 December 2018. The management of the Corporation is responsible for the compliance with the Loan Agreement, the Project's Financial Management Manual ("PFMM") and other laws and regulations applicable to the Project (collectively referred to as "the Project's regulations"). Auditor's 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") insofar 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 the 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 the Corporation's management fails to comply with one or several requirements in the Project's regulations that could have a direct and material financial effect to the financial statements. We believe that our examination provides a reasonable basis for our opinion. 21 A member firm of Ernst & Young Global Limited EY Building a better working world Opinion In our opinion, the Project 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 during the year 31 December 2018 based on the evaluating criteria above. Other matters We draw attention to Appendix 1 - Management letter in which we discussed certain departure from the Project's regulations which have no direct and material financial effect to the financial statements of the Project but may put the Project's objectives at risk. This examination involved a historic evaluation of the Project's compliance 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. For and on behalf of Ernst & Young Vietnam Limited: Deputy General Director Audit Practicing Registration Certificate No. 1067-2018-004-1 Hanoi, Vietnam 27 June 2019 22