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■_SOUTHERN POWER CORPORATION国国 DISTRIBUTION EFFICIENCY PRO 」ECT-Financina Aareement No. Cr. 5156-VN－ し rant Agreement No. TF013456-VN
■ Auo工T印 FINANciAL sTATEMENTs,AssuRANcE
園 REPoRTs AND MANAGEMENT LETTER■ Fo『the yea『ended 31 Decembe『2018
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SOUTHERN POWER CORPORATIONDistribution Efficiency ProjectFinancing Agreement No. Cr. 5156-VNGrant Agreement No. TF013456-VN
TABLE OF CONTENTS
CONTENTS PA :ELSJ
PARTI FINANCIAL STATEMENTS
Statement of the Board of 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 10-15
PARTII INDEPENDENT AUDITOR'S ASSURANCE REPORT ON 16-17INTERNAL CONTROL
T1
PART III INDEPENDENT AUDITOR'S ASSURANCE REPORT ONCOMPLIANCE
18Statement of the Executive Management on Compliance
19-20Independent Auditor's Assurance Report on Compliance
PARTIV MANAGEMENT LETTER 21-22
ANNEXI PROJECT IMPLEMENTATION PROGRESS AND 23-24WITHDRAWAL PROGRESS
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SOUTHERN POWER CORPORATIONDistribution Efficiency ProjectFinancing Agreement No. Cr. 5156-VNGrant Agreement No. TF013456-VN
STATEMENT OF THE BOARD OF MANAGEMENT
The Board of Management of Southern Power Corporation ("SPC") presents this report togetherwith the financial statements of the Distribution Efficiency Project - Financing Agreement No.Cr. 5156-VN and Grant Agreement No. TF013456-VN - Portion implemented by SPC (the"Project") for the year ended 31 December 2018.
The Chairman and the Board of Manaciement
The Chairman and the members of the Board of Management of SPC who held office during theyear and to the date of this report are as follows:
Mr. Nguyen Van Hop Chairman
Chief Executive Officer (resigned on 01 March 2019)Mr. Nguyen Phuoc Duc Chief Executive Officer (appointed on 01 March 2019)
Executive Officer (resigned on 01 March 2019)Mr. Pham Ngoc Le Executive OfficerMr. Nguyen Cong Hau Executive OfficerMr. Lam Xuan Tuan Executive OfficerMr. Nguyen Van Ly Executive Officer (appointed on 27 December 2018)Mr. Ho Quang Ai Executive Officer (resigned on 01 August 2018)
Board of Manaciement' Statement of Responsibility
The Board of Management of SPC is responsible for preparing the financial statements of theProject, which comprise the balance sheet as at 31 December 2018, the statement of sourcesand uses of funds, statement of designated account, and statement of withdrawals for the yearthen ended and notes to the financial statements, including a summary of significantaccounting policies, which give a true and fair view of the financial position of the Project andits designated account balance as at 31 December 2018 as well as its receipts, disbursementsand expenditures, the designated account movements and fund withdrawals for the year thenended, in accordance with the accounting convention and the accounting policies set out inNote 2 and Note 3 of the notes to the financial statements and the covenants contained inFinancing Agreement No. Cr. 5156-VN and Grant Agreement No. TF013456-VN. In preparingthese financial statements, The Board of 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 materialdepartures disclosed and explained in the financial statements;prepare the financial statements on the going concern basis unless it is inappropriate topresume that the Project will continue in operation; anddesign and maintain effective internal control over compliance with requirements that couldhave a direct and material financial effect on the financial statements as well as overfinancial reporting for the purpose of properly preparing and presenting the financialstatements so as to minimise errors and frauds; and take responsibility for its assertions asto the effectiveness of such internal control.
The Board of 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 andthat the financial statements are prepared in accordance with the accounting convention andthe accounting policies set out in Note 2 and Note 3 of the Notes to the financial statements.The Board of Management is responsible for using the Project's funds as intended for theProject and for complying with Financing Agreement No. Cr. 5156-VN and Grant Agreement No.TF013456-VN as well as laws and regulations applicable to the Project. The Board ofManagement is also responsible for safeguarding the assets of the Project and hence for takingreasonable steps for the prevention and detection of frauds and other irregularities.
2
SOUTHERN POWER CORPORATIONDistribution Efficiency ProjectFinancing Agreement No. Cr. 5156-VNGrant Agreement No. TFO13456-VN
REPORT OF THE BOARD OF MANAGEMENT (Continued)
The Board of Management confirms that they have complied with the above requirements inpreparing these financial statements.
For on behalf of the Board of Management,
Nguyen Phuoc DucChief Executive Officer
26 June 2019
3
W
Deloitte Vietnam Company Ltd.12A Floor, Vinaconex Tower,
L D34 Lang Ha Street, Lang Ha Ward,Dong Da District, Hanoi, VietnamTel :+844 6288 3568Fax:+844 6288 5678www.deloitte.com/vn
No.: /VN1A-HN-BC
INDEPENDENT AUDITORS' REPORT
TI. The Chairman and the Board of Management of Southern Power Corporation
Opinion
We have audited the financial statements of the Distribution Efficiency Project - FinancingAgreement No. Cr. 5156-VN and Grant Agreement No. TF013456-VN - Portion implemented bySouthern Power Corporation (the "Project"), which comprise the balance sheet as at 31
December 2018, statement of sources and uses of funds, statement of designated account,statement of withdrawals for the year then ended, and the notes to the financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying financial statements give a true and fair view of the financial
position of the Project and its designated account balance as at 31 December 2018, and of its
receipts, disbursements and expenditures, the designated account movements and fund
withdrawals for the year then ended, in accordance with the accounting convention and the
accounting policies set out in Note 2 and Note 3 of the Notes to the financial statements.
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 Auditors' Responsibilities for
the Audit of the Financial Statements section of our report. We are independent of the Projectin accordance with the ethical requirements that are relevant to our audit of the financial
statements, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Basis of Accounting
We draw attention to Note 2 and Note 3 of the Notes to the financial statements, which
describes the accounting convention and the summary of the significant accounting policies.
The financial statements are prepared in accordance with the accounting convention and the
accounting policies set out in Note 2 and Note 3 of the Notes to the financial statements and
the requirements of the World Bank.
Other matter
The "Project implementing expenditures" item in the balance sheet as at 31 December 2018
and "Others" item under "Disbursements" section in the statement of sources and uses of funds
included some expenditures amounting to VND 25,539,288,999 incurred by the Project before
the effective date of the Financing Agreement which have been financed by the counterpart
fund (as at 31 December 2017: VND 25,539,288,999).
Responsibilities of Management and the Chairman for the Financial Statements
Management is responsible for the preparation of the financial statements in accordance with
the accounting convention and the accounting policies set out in Note 2 and Note 3 of the Notes
to the financial statements, and for such internal control as management determines is
necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee
("DTTL"), its network of member firms, and their related entities. DTTL and each of its member firms are legally
separate and independent entities. DTTL (also referred to as "Deloitte Global") does not provide services to clients.
Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.4
W
* DeloitteU
INDEPENDENT AUDITORS' REPORT (Continued)
In preparing the financial statements, management is responsible for assessing the Project'sability to continue as a going concern, disclosing, as applicable, matters relating to goingconcern and using the going concern basis of accounting unless management either intends toliquidate the Project or to cease operations, or has no realistic alternative but to do so.
The Chairman are responsible for overseeing the Project's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as awhole are free from material misstatement, whether due to fraud or error, and to issue anauditor'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 International Standards onAuditing (ISAs) will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if, individually or in the aggregate, theycould reasonably be expected to influence the economic decisions of users taken on the basis ofthese financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:
* Identify and assess the risks of material misstatement of the financial statements, whetherdue to fraud or error, design and perform audit procedures responsive to those risks, andobtain 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 forone 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 auditprocedures that are appropriate in the circumstances.
* Conclude on the appropriateness of management's use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Project'sability to continue as a going concern. If we conclude that a material uncertainty exists,we are required to draw attention in our auditor's report to the related disclosures in thefinancial statements or, if such disclosures are inadequate, to modify our opinion. Ourconclusions are based on the audit evidence obtained up to the date of our auditor'sreport.
* Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates, if any, and related disclosures made by management.
We communicate with the Chairman and the Board of Management regarding, among othermatters, the planned scope and timing of the audit and significant audit findings, including anysignificant deficiencies in internal control that we identify during our audit.
Tran Xuan Anh Pham Quynh HoaDeputy General Director AuditorAudit Practising Registration Certificate Audit Practising Registration CertificateNo. 0723-2018-001-1 No. 0910-2018-001-1
DELOITTE VIETNAM COMPANY LIMITED
26 June 2019Hanoi, S.R. Vietnam
5
SOUTHERN POWER CORPORATIONDistribution Efficiency ProjectFinancing Agreement No. Cr. 5156-VN Financial statementsGrant Agreement No. TF013456-VN For the year ended 31 December 2018
BALANCE SHEET
As at 31 December 2018
Notes 31/12/2018 31/12/2017VND VND
ASSETS
Expenditures 2,815,474,054,925 2,718,846,665,560
Project implementing expenditures 5 2,815,474,054,925 2,718,846,665,560
Current assets 253,095,577,463 264,824,489,978Payments to suppliers 6 38,428,632,351 44,399,756,391Other receivables 758,752,227 3,321,548,670Cash 7 213,908,192,885 217,103,184,917
TOTAL ASSETS 3,068,569,632,388 2,983,671,155,538
RESOURCES
Funds 2,927,895,550,985 2,850,212,290,913IDA fund 8 2,219,835,500,000 2,219,835,500,000Grant from Australian Trust Fund 9 4,196,439,866 4,196,439,866Counterpart fund 686,930,666,855 613,818,848,005Foreign exchange reserve 10 16,932,944,264 12,361,503,042
Current liabilities 140,674,081,403 133,458,864,625Trade accounts payable 11 140,674,081,403 108,702,857,513
Other short-term payables 12 - 24,756,007,112
TOTAL RESOURCES 3,068,569,632,388 2,983,671,155,538
OFF BALANCE SHEET ITEMS31/12/2018 31/12/2017
Foreign currencies
-USD 9,238,078 9,578,786
Cong Thi Thuy Van Thai Phong Linh Nguyen Phuoc DucPreparer Deputy Director of Finance Chief Executive Officer
and Accounting Department26 June 2019
The accompanying notes are an integral part of these financial statements66
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SOUTHERN POWER CORPORATIONDistribution Efficiency ProjectFinancing Agreement No. Cr. 5156-VN Financial statementsGrant A Ireement No. TF013456-VN For the year ended 31 December 2018
STATEMENT OF DESIGNATED ACCOUNT
For the period From 01 January 2018 to 31 December 2018
Account No. 007,1.37.0765338
Depository Bank Joint Stock Commercial Bank for Foreign Trade of Vietnam -Ho Chi Minh City Branch
Address No. 132 Ham Nghi, District 1, Ho Chi Minh City, Vietnam
Financing Agreement : Cr.5156-VN
Currency unit : USD
Amount
PART A: ACCOUNT ACTIVITY
Opening balance (as at 01/01/2018) 9,578,786
Add:
Total amount replenished by the World Bank to the designated account in the year -
Deduct:
Total amount withdrawn from the designated account in the year 340,708
Closing balance (as at 31/12/2018) 9,238,078
PART 13- ACCOUNT RECONCILIATION
1. Opening advance balance by the World Bank 11,530,226
2. Add: Total amount advanced by the World Bank in the year -
3. Deduct: Total amount claimed 1,951,440
4. Present outstanding amount advanced to the designated account as at 31/12/2018 9,578,786
5. Closing balance of the designated account as at 31/12/2018 9,238,078
6. Add: Amount withdrawn but not yet claimed for advance clearance 340,708
7. Total advance to the designated account accounted for as at 31/12/2018 9,578,786
Cong Thi Thuy Van Thai Aong Linh Nguyen Phuoc DucPreparer Deputy Director of Finance Chief Executive Officer
26 lune 2019 and Accounting Department
The accompanying notes are an integral part of these financial statements
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SOUTHERN POWER CORPORATIONDistribution Efficiency ProjectFinancing Agreement No. Cr. 5156-VN Financial statementsGrant Agreement No. TF013456-VN For the year ended 31 December 2018
NOTES TO THE FINANCIAL STATEMENTSThese notes are an integral part of and should be read in conjunction with the accompanying financial statements
1. GENERAL INFORMATION
Distribution Efficiency Project operates under Financing Agreement No. Cr. 5156-VN, LoanAgreement No.TF013468-VN and Grant Agreement No. TF013456-VN signed on 08November 2012 between the Government of Socialist Republic of Vietnam and theInternational Development Association/International Bank for Reconstruction andDevelopment.
The objective of Distribution Efficiency Project is to improve the performance of theRecipient's power Corporations in providing quality and reliable electricity services and toreduce greenhouse gas emissions through demand-side response and efficiency gains.
Description of the main components of Distribution Efficiency Project:
Part A: System expansion and reinforcement
Construction and reinforcement of 11OKv, medium voltage and low voltage electricitydistribution networks including substation of the Power Corporations.
Part B: Introduction of Smart Grid Technologies in Distribution
Automation including through introduction of supervisory control and data acquisitionsystems, of electricity distribution network operations of and data collection by the PowerCorporations.
Introduction of advanced metering infrastructure systems, including two-waycommunication systems, as electricity smart grid technologies for key substations andconsumers of selected Power Corporations.
Part C: Technical Assistance and Capacity Building
Provision of technical assistance to and capacity building of the Electricity RegulatoryAuthority of Vietnam for improvement of efficiency in electricity tariffs, enhancement ofefficiency and incorporation of smart grid technologies in the grid and distribution codes,integration of renewable energy in the grid and distribution codes, development ofdemand response and smart grid programs, and project management and monitoring andevaluation.
Provision of technical assistance to the Power Corporations for:
(i) Effective and timely Project implementation, capacity building in relation to financialmodeling and planning, and carrying out of customer surveys and instuting of other suchmeasures to improve customer satisfaction; and
(ii) Implementation of advanced metering infrastructure systems carrying out ofprograms promoting efficient electricity use such as a customer awareness campaign anddemand response programs, and project monitoring and evaluation.
The Distribution Efficiency Project - Financing Agreement No. Cr. 5156-VN and GrantAgreement No. TF013456-VN - Portion implemented by Southern Power Corporation (the"Project") is implemented under Sub- loan/Sub - grant agreements signed betweenSouthern Power Corporation ("SPC") and the Ministry of Finance dated 07 February 2013.
Funds of Distribution Efficiency Project includes IDA fund, loan from Clean Technology Fund
("CTF"), grant from Australian Trust Fund ("AUSAID") with the respective amounts of SDR297,700,000, USD 30,000,000 and AUD 7,600,000, and counterpart fund. The IDA fundand Australian Trust Fund for portion implemented by SPC are within USD 102,000,000and USD 300,000, respectively. The Project was completed on 31 December 2018. TheFinancing Agreement was closed on 30 April 2019.
10
SOUTHERN POWER CORPORATIONDistribution Efficiency ProjectFinancing Agreement No. Cr. 5156-VN Financial statementsGrant Agreement No. TF013456-VN For the year ended 31 December 2018NOTES TO THE FINANCIAL STATEMENTS (Continued)
2. ACCOUNTING CONVENTION AND FINANCIAL YEAR
Accounting convention
The accompanying financial statements, prepared under the historical cost convention, areexpressed in Vietnam Dong (VND), except for the statement of designated account andstatement of withdrawals which are expressed in original currencies. The financialstatements are prepared on the going concern basis of accountings in accordance with therequirements of World Bank and the accounting policies set out in Note 3 of the Notes tofinancial statements which are set up in conformity with the measurement and recognitioncriteria of Vietnamese Accounting Standards and accounting regime applicable toenterprises.
Financial year
The Project's financial year begins on 01 January and ends on 31 December.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies, which have been adopted by the management in thepreparation of these financial statements, are as follows:
Recognition of Project implementing expenditures
Project's funds and expenditures are recognized when incurred.
Foreign currency conversion
Transactions in foreign currencies are translated into Vietnam Dong (VND) at the exchangerate ruling at the transaction date. Closing balances of assets and liabilities denominated inforeign currencies are retranslated at the rate of commercial bank at the balance shedate.
Foreign exchange differences are neither receipts nor disbursements. However, foreig)exchange differences are presented in a separate item on the statement of sources anduses of funds for the purpose of reconciling assets and liabilities balances in the balancesheet,
4. DESIGNATED ACCOUNTS
Designated accounts are deposit accounts opened at commercial banks for implementationof the Project's activities. Under the Project Appraisal Document, the implementing unitopens two designated accounts to receive and manage funds from IDA and Australian TrustFund.
Designated accounts under Financing Agreement No. Cr. 5156-VN and Grant AgreementNo. TF013456-VN are deposit accounts in USD opened at Joint Stock Commercial Bank forForeign Trade of Vietnam - Ho Chi Minh City Branch for implementation of the Project'sactivities. Payments out of the designated accounts are for expenditures in accordance withthe relevant covenants of Financing Agreement No. Cr. 5156-VN and Grant Agreement No.TF013456-VN and relevant regulations established by the World Bank. No transactionsoccurred via the designated account for Grant Agreement No. TF013456-VN during theyear.
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SOUTHERN POWER CORPORATIONDistribution Efficiency ProjectFinancing Agreement No. Cr. 5156-VN Financial statementsGrant Agreement No. TF013456-VN For the year ended 31 December 2018NOTES TO THE FINANCIAL STATEMENTS (Continued)
5. PROJECT IMPLEMENTING EXPENDITURES
2018 Accumulated to31/12/2018
VND VNDConstructions 62,676,358,074 975,255,266,811Equipment 284,849,284 1,356,697,761,776Training - 4,196,439,866Other expenses 33,666,182,007 479,324,586,472
96,627,389,365 2,815,474,054,925
6. PREPAYMENTS TO SUPPLIERS
31/12/2018 31/12/2017VND VND
Can Tho Land Development Centre 15,174,890,534 14,858,746,005VNECO9 Power Engineering JSC 5,321,343,756 5,321,343,756Hau Giang Land Development Centre 5,205,787,956 2,441,485,945FIS & L+G Joint Venture 3,406,173,061 3,406,173,061Hong Truong Power Construction JSC 2,073,295,681 2,073,295,681RTE International 1,530,943,406 1,530,943,406Land Development Centre 853,903,670 1,816,429,167Dong Nai Land Development Centre - Bien Hoa branch 851,623,740 2,427,442,280
Southern Electrical Testing Company 632,808,360 1,021,143,304Dong Nai Power One-member Co., Ltd 469,567,043 469,567,043Power Engineering Consulting ISC No. 2 188,280,231 188,280,231VACO Auditing Co., Ltd 129,075,395 168,887,195Southern Power Consulting One-member Co., Ltd 119,248,433 119,248,433Power Construction One-member Co., Ltd No. 2 6,688,812 6,688,812Kien Giang Power Company 5,297,389 5,297,389Binh Duong Construction and Public Service JSC - 5,034,624,000Hanoi Power Construction JSC - 1,164,120,211Sal Gon Thang Long JSC - 59,211,000Others 2,459,704,884 2,286,829,472
38,428,632,351 44,399,756,391
The outstanding balances of advances to suppliers as at 31 December 2018 representadvances using the counterpart fund for constructions which were still in implementation asat 31 December 2018. SPC intends to use the counterpart fund to continue to implementthese contracts.
7. CASH
31/12/2018 31/12/2017VND VND
USD equivalent USD equivalent
Designated account 9,238,078 213,908,192,885 9,578,786 217,103,184,917
9,238,078 2139081 92,885 9578,786 217,103,184,917
8 IDA FUND
2018 Accumulated to 31/12/2018Original currency VND Original currency VND
(USD) equivalent (USD) equivalent
Designated account -102,000,000 2,219,835,500,000- -102,000,000 2,219,835,500,000
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SOUTHERN POWER CORPORATIONDistribution Efficiency ProjectFinancing Agreement No. Cr. 5156-VN Financial statementsGrant Agreement No. TFO13456-VN For the year ended 31 December 2018NOTES TO THE FINANCIAL STATEMENTS (Continued)
9. GRANT FROM AUSTRALIAN TRUST FUND
2018 Accumulated to 31/12/2018*VNDVN
Currency Original currency equivalent Original currency equivalentUSD - 130,000 2,893,800,000VND - 1,302,639,866 1,302,639,866
-_ 4,196,439,866
10. FOREIGN EXCHANGE RESERVE
31/12/2018 31/12/2017VND VND
Realised foreign exchange difference 3,758,953,336 3,738,511,005Unrealised foreign exchange difference from revaluation of cash 13,173,990,928 8,622,992,037balance denominated in foreign currencies
16,932,944,264 12,361,503,042
11. PAYABLES TO SUPPLIERS
31/12/2018 31/12/2017VND VND
Siemens Company 51,020,468,190 59,634,240,824FTP Information System Co., Ltd 34,175,580,829Hanoi Power Construction JSC 12,179,127,559 1,016,987,527Nha Trang Concrete Company 11,093,295,252 11,093,295,252Ngoc Phuong One Member Co., Ltd 7,119,468,740 7,119,468,740Thai Binh Duong JSC 5,132,861,968 4,884,253,758No 2 Power Construction Company Limited. 3,658,351,615 1,166,102,798Power Consultant Investment and Construction JSC No.5 2,837,437,267 2,837,437,267VNECO9 Power Construction JSC 2,461,664,331 1,298,825,416LICOGI 16 ISC 2,372,334,872 2,372,334,872Saigon Electrical Equipment JSC 1,225,196,950 4,544Southern Power Consulting One-member Co., Ltd 902,171,067 816,602,288Southern Power Corporation 853,756,637 979,818,104Resources and Environment Technology Center 277,026,201 277,026,201HANGZHOU (QRE) 217,557,063 217,557,063Thinh Phat Land and Cable JSC 112,614,726 112,614,726ABB Co., Ltd 30,000,000 30,000,000Dong Nai Land Development Centre - - 7,172,461,984Long Thanh BranchSouthern Electrical Testing Company - 2,652,655,040Power Construction JSC No. 1 - 10,772,346Hal Van Nam Co., Ltd - 92,400Others 5,005,168,136 5,010,306,363
140,674,081,403 108,702,857,513
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SOUTHERN POWER CORPORATIONDistribution Efficiency ProjectFinancing Agreement No. Cr. 5156-VN Financial statementsGrant Agreement No. TFO13456-VN For the year ended 31 December 2018
NOTES TO THE FINANCIAL STATEMENTS (Continued)
12. OTHER SHORT-TERM PAYABLES
31/12/2018 31/12/2017VND VND
Expenditures paid by counterpart fund - 24,756,007,112- 24,756,007,112
13. COMMITMENTS
The outstanding value of significant contracts signed with contractors which wasapproximately VND 126 billion as at 31 December 2018.
14. RELATED PARTY TRANSACTIONS AND BALANCES
Related party transactions and balances only related to activities which were financed bythe counterpart fund.
List of related parties RelationshipSouthern Power Corporation The CorporationKien Giang Power Company Under SPC's managementSouthern Power Consulting One-member Co., Ltd Under SPC's managementSouthern Electrical Testing Company Under SPC's managementBinh Thuan Power Company Under SPC's managementSouthern Grid Company Under SPC's managementTra Vinh Power Company Under SPC's managementDong Nai Power Company Under SPC's management
During the year, the Project entered into the following significant transactions with relatedparties:
Purchases of goods and service:
2018 2017VND VND
Southern Electrical Testing Company 4,464,710,867 25,957,970,706Tra Vinh Power Company 35,821,775 1,934,293,382Binh Thuan Power Company 4,459,665 -Binh Duong Power Company - 5,034,624,000Southern grid Company - 661,460,065Southern Power Consulting One-member Co., Ltd - 243,948,201Can Tho Power Company - 69,407,228Southern Power Corporation 53,586,720Long An Power Company - 44,449,000An Giang Power Company - 23,762,284Lam Dong Power Company - 8,972,000Ca Mau Power Company - 6,000,000Dong Thap Power Company - 898,982
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SOUTHERN POWER CORPORATIONDistribution Efficiency ProjectFinancing Agreement No. Cr. 5156-VN Financial statementsGrant Agreement No. TFO13456-VN For the year ended 31 December 2018
NOTES TO THE FINANCIAL STATEMENTS (Continued)
Significant related party balances as at the balance sheet date were as follows:
* Payables to suppliers31/12/2018 31/12/2017
VND VND
Southern Power Consulting One-member Co., Ltd 902,171,067 816,602,288Southern Power Corporation 853,756,637 979,818,104Southern Grid Company 344,771,285 129,323,872Kien Giang Power Company 319,064,140 319,064,140Southern Electrical Testing Company - 2,652,655,040Tra Vinh Power Company - 613,123,716
Prepayments to suppliers
31/12/2018 31/12/2017VND VND
Southern Electrical Testing Company 632,808,360 1,021,143,304Dong Nai Power Company 469,567,043 469,567,043Kien Giang Power Company 246,015,800 246,015,800Southern Power Consulting One-member Co., Ltd 119,248,433 119,248,433Binh Thuan Power Company - 4,459,665
15. COMPARATIVE FIGURES
Comparative figures are the figures in the Project's audited financial statements for theyear ended 31 December 2017.
Cong Thi Thuy Van Thai Phong Linh Nguyen Phuoc DucPreparer Deputy Director of Finance Chief Executive Officer
and Accounting Department26 June 2019
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Deloitte Vietnam Company Ltd.15thFloor, Vinaconex Tower,DLo itte 34 Lang Ha Street, Lang Ha Ward,Dong Da District, Hanoi, VietnamTel :+84 24 6288 3568Fax:+84 24 6288 5678Website: www.deloitte.com/vn
REPORT OF INDEPENDENT AUDITORSON INTERNAL CONTROL
To: The Chairman and the Board of Management of Southern Power Corporation
Report on internal control
We have audited, in accordance with International Standards on Auditing, the financialstatements of the Distribution Efficiency Project - Financing Agreement No. Cr.5156-VN andGrant Agreement No. TF013456-VN - Portion implemented by Southern Power Corporation (the"Project") for the year ended 31 December 2018 and issued the independent auditor's reportthereon dated 26 June 2019 expressing an unmodified opinion on those financial statements.
In connection with our audit of the Project's financial statements, we also examined theeffectiveness of internal control over compliance with requirements that could have a direct andmaterial financial effect on the financial statements as well as of internal control over financialreporting, and issue the Report of Independent Auditor on internal control.
Responsibilities of the Board of Management of the Corporation
As stated in the Statement of the Board of Management on page 2 and page 3, the Board ofManagement is responsible for designing and maintaining effective internal control overcompliance with requirements that could have a direct and material financial effect on thefinancial statements as well as over financial reporting for the purpose of properly preparingand presenting the financial statements so as to minimise errors and frauds; and takeresponsibility for its assertions as to the effectiveness of such internal control.
Our Independence and Quality Control
We have complied with the independence and other ethical requirements of the Code of Etht sfor Professional Accountants issued by the International Ethics Standards BoardAccountants, which is founded on fundamental principles of integrity, objectivity, professiocompetence and due care, confidentiality, and professional behavior.
We apply International Standard on Quality Control 1 and accordingly maintain,comprehensive system of quality control including documented policies and proceduresregarding compliance with ethical requirements, professional standards and applicable legal andregulatory requirements.
Auditor's Responsibilities
Our responsibility is to express an opinion on the effectiveness of internal control overcompliance with requirements that could have a direct and material financial effect on thefinancial statements as well as internal control over financial reporting based on ourexamination based on the evidence we have obtained. We conducted our reasonable assuranceengagement in accordance with International Standard on Assurance Engagements 3000,Assurance Engagements other than Audits and Reviews of Historical Financial Information("ISAE 3000"), issued by the International Auditing and Assurance Standards Board. Thatstandard requires that we plan and perform this engagement to obtain reasonable assuranceabout whether, in all material respects, the management has maintained effective internalcontrol over compliance with the requirements that could have a direct and material financialeffect on the financial statements as well as internal control over financial reporting.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Ltd., a UK private company limited by guarantee("DTTL"), its network of member firms, and their related entities. DTTL and each of its member firms are legallyseparate and independent entities. DTTL (also referred to as "Deloitte Global") does not provide services to clients.Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.
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* Deloitte
INDEPENDENT AUDITOR'S ASSURANCE REPORTON INTERNAL CONTROL (Continued)
Our examination included obtaining an understanding of internal control over compliance withrequirements that could have a direct and material financial effect on the financial statementsas well as of internal control over financial reporting, testing, and evaluating the design andoperating effectiveness of the internal control, and performing such other procedures as weconsidered necessary in the circumstances to obtain sufficient appropriate evidence on which tobase our opinion. Because of inherent limitations of internal control over financial reporting,including the possibility of collusion or improper management override of controls, materialmisstatements due to error or fraud may occur and not to be detected. Also, projections of anyevaluation of the effectiveness of the internal control over financial reporting to future periodsare subject to the risk that controls may become inadequate because of changes in conditions,or that the degree of compliance with the policies or procedures may deteriorate.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.
Opinion
In our opinion, the Board of Management has maintained, in all material respects, effectiveinternal control over compliance with requirements that could have a direct and materialfinancial effect on the Project's financial statements as well as over financial reporting for theyear ended 31 December 2018.
Tran-Xuan Anh Pham Quynh HoaDeputy General Director AuditorAudit Practising Registration Certificate Audit Practising Registration CertificateNo. 0723-2018-001-1 No. 0910-2018-001-1
DELOITTE VIETNAM COMPANY LIMITED
26 June 2019Hanoi, S.R. Vietnam
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UUUUUUUUUUU* PART IIIU INDEPENDENT AUDITOR'S ASSURANCE REPORT
* ON COMPLIANCE
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WSOUTHERN POWER CORPORATIONDistribution Efficiency ProjectFinancing Agreement No. Cr. 5156-VNGrant Agreement No. TF013456-VN
STATEMENT OF THE BOARD OF MANAGEMENT ON COMPLIANCE
The Board of Management is responsible for complying with Financing Agreement No. Cr. 5156-VN and Grant Agreement No. TF013456-VN, laws and regulations applicable to the Project.
The Board of Management confirms the following:
* An effective internal control has been designed and maintained over compliance withFinancing Agreement No. Cr. 5156-VN and Grant Agreement No. TF013456-VN, laws andregulations applicable to the Project;
* The Project has complied with Financing Agreement No. Cr. 5156-VN and Grant AgreementNo. TF013456-VN, laws and regulations that could have a direct and material financialeffect on the Project's financial statements for the year ended 31 December 2018;
* The Project's receipts and disbursements via the designated account for the year ended 31December 2018 are in accordance with the relevant covenants of Financing Agreement No.Cr. 5156-VN and Grant Agreement No. TF013456-VN and prevailing relevant regulationsestablished by the World Bank;
* The withdrawal applications were adequately reconciled to the statements of expenditures(SOEs) prepared by the Board of Management for the year ended 31 December 2018 andthose SOEs were adequately supported;
* The proceeds of the loan/grant were used only for the purposes of the Project;
* Southern Power Company has complied with the financial covenants of the Agreements.
Far-and on behalf of The Board of Management,
NguyesrPhuoc DucChief Executive Oficer /
26 June 2019
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Deloitte Vietnam Company Ltd.D5thFloor, Vinaconex Tower,SD elo itte 34 Lang Ha Street, Lang Ha Ward,Dong Da District, Hanoi, VietnamTel :+84 24 6288 3568Fax:+84 24 6288 5678Website: www.deloitte.com/vn
INDEPENDENT AUDITOR'S ASSURANCE REPORT ON COMPLIANCE
1O. The Chairman and the Board of Management of Southern Power Corporation
Report on compliance
We have audited, in accordance with International Standards on Auditing, the financialstatements of the Distribution Efficiency Project - Financing Agreement No. Cr. 5156-VN andGrant Agreement TF013456-VN-Portion implemented by Southern Power Corporation (the"Project") for the year ended 31 December 2018 and issued the independent auditors' reportthereon dated 26 June 2019 expressing an unmodified opinion on those financial statements.
In connection with the audit of the financial statements, we also performed procedures on theProject's compliance with Financing Agreement No. Cr.5156-VN and Grant Agreement No.TF013456-VN, laws and regulations that have a direct and material financial effect on theProject's financial statements for the year ended 31 December 2018 ("the requirements").
Responsibilities of The Board of Management
The Board of Management is responsible for complying with Financing Agreement No. Cr. 5156-VN and Grant Agreement No. TF013456-VN, laws and regulations applicable to the Project.
Our Independence and Quality Control
We have complied with the independence and other ethical requirements of the Code of Ethicsfor Professional Accountants issued by the International Ethics Standards Board forAccountants, which is founded on fundamental principles of integrity, objectivity, professionalcompetence and due care, confidentiality, and professional behavior.
We apply International Standard on Quality Control 1 and accordingly maintains acomprehensive system of quality control including documented policies and proceduresregarding compliance with ethical requirements, professional standards and applicable legal andregulatory requirements.
Auditor's Responsibilities
Our responsibility is to express an opinion on Project's compliance based on the evidence wehave obtained. We limited our tests of compliance to the requirements, and we did not testcompliance with all laws and regulations applicable to the Project. We conducted our reasonableassurance engagement in accordance with International Standard on Assurance Engagements3000, Assurance Engagements other than Audits and Reviews of Historical FinancialInformation ("ISAE 3000"), issued by the International Auditing and Assurance StandardsBoard. That standard requires that we plan and perform this engagement to obtain reasonableassurance about whether, in all material respects, the Project has complied with therequirements.
An reasonable assurance engagement in accordance with ISAE 3000 to report on the Project'scompliance with the requirements involves performing procedures to obtain evidence aboutwhether the Project's activities are free of material noncompliance with the requirements,including obtaining an understanding of the internal control relevant to the Project's compliancewith the requirements. The procedures selected depend on the auditor's judgment, includingthe assessment of risks that the Project does not comply with the requirements and whethersuch noncompliance could have a direct and material financial effect on the Project's financialstatements. Our procedures included testing the compliance with the requirements that weconsider necessary to provide reasonable assurance that the requirements are complied by theProject.
UDeloitte refers to one or more of Deloitte Touche Tohmatsu Ltd., a UK private company limited by guarantee("DTTL"), its network of member firms, and their related entities. DTTL and each of its member firms are legallyseparate and independent entities. DTTL (also referred to as "Deloitte Global") does not provide services to clients.Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.
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Deloitte
INDEPENDENT AUDITOR'S ASSURANCE REPORT ON COMPLIANCE(Continued)
We believe that the evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion, as well as our findings as presented in the Management Letter on page 23.
Opinion
In our opinion:
* The Project has complied, in all material respects, with Financing Agreement No. Cr. 5156-VN and Grant Agreement No. TF013456-VN, laws and regulations that could have a directand material financial effect on the Project's financial statements for the year ended 31December 2018;
* The Project's receipts and disbursements via the designated account for the year ended 31December 2018 are in accordance with the relevant covenants of Financing Agreement No.Cr. 5156-VN and Grant Agreement No. TF013456-VN and prevailing relevant regulationsestablished by the World Bank;
* The withdrawal applications were adequately reconciled to the statements of expenditures(SOEs) prepared by the Board of Management for the year ended 31 December 2018 andthose SOEs were adequately supported;
* The proceeds of the loan were used only for the purposes of the Project;
* Southern Power Company has complied with the financial covenants of the Agreements.
Tran Xuan Anh Pham Quynh HoaDeputy General Director AuditorAudit Practising Registration Certificate Audit Practising Registration CertificateNo. 0723-2018-001-1 No. 0910-2018-001-1
DELOITTE VIETNAM COMPANY LIMITED
26 June 2019Hanoi, S.R. Vietnam
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