JOINT CIRCULAR No. 04/1999/TTLT/BCN-BTC GUIDING THE HANDOVER AND REPAYMENT OF CAPITAL FOR RURAL MEDIUM-VOLTAGE POWER DISTRIBUTION NETWORKS

CIRCULAR

JOINT CIRCULAR OF THE MINISTRY OF INDUSTRY AND THE MINISTRY OF FINANCE
NO. 04/1999/TTLT/BCN-BTC AUGUST 27, 1999
GUIDELINES FOR HANDOVER AND REPAYMENT OF CAPITAL
FOR RURAL MEDIUM-VOLTAGE POWER NETWORKS

To implement Decision No. 22/1999/QĐ-TTg dated February 13, 1999 of the Prime Minister, the Ministry of Industry and the Ministry of Finance provide guidelines for handover, valuation, and capital repayment of rural medium-voltage power networks (hereinafter referred to as medium-voltage power networks in rural areas) as follows:

I. SCOPE OF RESPONSIBILITY FOR HANDOVER OF ASSETS

LMEDIUM-VOLTAGE POWER NETWORKS IN RURAL AREAS

1. Scope of handover:

1.1. Medium-voltage power networks in rural areas include medium-voltage transmission lines with voltages of 6, 10, 15, 22, 35 kV and transformer stations with voltages of 6 - 35/0.4 kV supplying electricity to villages and communes, which are assets managed by rural electricity management organizations and will be transferred to the Vietnam Electricity Corporation (abbreviated as EVN) based on agreements between EVN and localities.

1.2. Low-voltage power networks at 0.4 kV from the transformer station's outgoing line to households are not within the scope of this Circular. The People's Committee of provinces and centrally governed cities (referred to as provincial People's Committees) shall stipulate the transfer and management of low-voltage power networks between rural electricity management organizations established by localities.

2. Responsibilities of the Transferor and Transferee:

2.1. The Transferor: is the representative of the owner of the medium-voltage power network assets (such as the People's Committee of Communes, Cooperatives, Companies, Water and Electricity Enterprises, etc.). In cases where the owner of the medium-voltage power network assets cannot be determined, the Chairman of the Provincial People's Committee shall designate an appropriate organization to act as the Transferor.

The Transferor is responsible for preparing complete original documents according to point 1, Section II of this Circular, organizing the inventory and assessment of the remaining value of the medium-voltage power network assets, handing over, and facilitating the acceptance process for the Transferee. The Transferor must publicly announce the portion of capital borrowed from the people that will be repaid and promptly return the money to the people in accordance with the regulations of the Provincial People's Committee.

2.2. The Transferee: is a Power Company under the Vietnam Electricity Corporation or a Power Company authorized by the Power Company.

The Transferee is responsible for accepting all original documents of the medium-voltage power network assets, participating in the inventory and determination of the remaining value with the Transferor, accounting for the increase in assets in accordance with the regulations of the Ministry of Finance, managing and operating the medium-voltage power network, and formulating plans for capital repayment in accordance with Section III of this Circular.

II. DOCUMENTATION FOR HANDOVER AND METHODS FOR DETERMINING THE VALUE OF MEDIUM-VOLTAGE POWER NETWORK ASSETS IN RURAL AREAS
DURING HANDOVER

1. Documentation for handover:

1.1. Original documentation includes:

a) Feasibility study reports or economic and technical justification documents approved;

b) Agreed route documents and land allocation documents;

c) Approved technical design and budget, investment decision, completion report, and approved final account report;

d) Financial accounting records related to determining the original cost and remaining value of the medium-voltage power network assets, and the structure of investment capital sources;

e) Loan agreements (loan contracts) and debt reconciliation statements confirmed by banks or lenders at the time of handover;

f) Debt certificates issued to the people based on commitments made by the Transferor at the time of construction and other relevant documents (if any).

1.2. Where original documentation is incomplete, both the Transferor and Transferee must jointly:

- Evaluate the actual condition regarding quality, determine the real value of the assets, and base the determination of the real value on point 2, Section II of this Circular.

- Establish right-of-way for transmission lines and transformer station sites, with confirmation of land allocation by the Provincial People's Committee.

1.3. Documentation prepared at the time of handover:

a) Current layout diagram of the medium-voltage power network

b) Single-line diagram of the current medium-voltage power network

c) List of quantities, types, and quality of equipment and materials for medium-voltage lines and transformer stations.

d) Record of the remaining value of the medium-voltage power network assets handed over, reviewed by the Rural Medium-Voltage Power Network Asset Valuation Council (abbreviated as the Asset Valuation Council) (according to the model uniformly prescribed in this Circular).

e) Record of handover of the medium-voltage power network in rural areas (according to the model uniformly prescribed in this Circular).

2. Methods for determining the remaining value of assets handed over:

Based on the actual management situation of fixed assets (Tangible Fixed Assets - TFA) of the Transferor, the remaining value of the medium-voltage power network assets handed over shall be determined using one of the following two methods:

2.1. Accounting book method: Applied to assets currently managed under the usage and depreciation system for Tangible Fixed Assets as stipulated in Decision No. 1062 TC/QĐ/CSTC dated November 14, 1996 of the Minister of Finance, and recorded under the accounting system applicable to enterprises as stipulated in Decision No. 1141 TC/CĐKT dated November 1, 1995 of the Minister of Finance, or the accounting system applicable to small and medium-sized enterprises as stipulated in Decision No. 1177TC/QĐ/CĐKT dated December 23, 1996.

2.2. Actual remaining value evaluation method: Applied to assets not managed under the Tangible Fixed Assets management system of the Ministry of Finance, as specified in point 2.1, item 2, Section II above. The remaining value of the assets handed over shall be determined as follows:

- The Transferor and Transferee, based on the actual quantity, quality of each component, years of use, degree of technological obsolescence... jointly assess the percentage of remaining value compared to the new construction value to determine the actual remaining value of the entire project, and submit it for review by the Rural Medium-Voltage Power Network Asset Valuation Council according to the provisions in point 4 below.

- Unit prices for each component project serve as the basis for determining the actual value of the medium-voltage power network assets in rural areas, applied according to unit prices prescribed by the Ministry of Industry.

The actual remaining value of the asset is determined as follows:

3. Determination of sources of construction capital:

3.1. Based on accounting books and original documents related to the project to determine the total investment capital according to the following sources:

a) Central government budget and the electricity sector:

b) Local budget.

c) Additional electricity charges.

d) Agricultural cooperative investment.

e) Direct mobilization and exempted agricultural tax for investment in electrical construction projects.

f) The remaining debt to banks and other entities based on loan agreements, and confirmed by the bank or lender, and the debt owed by the people based on commitment documents issued by the People's Committee of the commune, cooperatives, etc., up to the time of transfer to serve as the basis for handling capital as stipulated in Section III below.

3.2. After determining the value of the project and identifying the sources of investment for the project, they must be compiled into a summary table attached as Appendix (Table 1) to this Circular.

4. Rural medium voltage power grid asset valuation council:

4.1. The valuation of rural medium voltage power grid assets shall be determined by the rural power grid asset valuation council of the provincial Department of Finance and Prices. The council shall be established by the Chairman of the Provincial People's Committee, with the leader of the Department of Finance and Prices serving as chairman; the representative of the Power Company or the provincial power company authorized by the company serving as a permanent member; representatives from the Department of Industry, local enterprise financial management agencies, the Department of Planning and Investment, the Department of Construction, and the representative of the asset transferor serving as members. In addition to the main members, based on the specific circumstances of each locality, the Council Chair may invite additional organizations, technical experts, economic and financial accountants necessary for assessing the quality and residual value of the medium voltage power grid.

4.2. The rural power grid asset valuation council has the following responsibilities:

a) Organizing the assessment of the actual residual value of the medium voltage power grid. The assessment results must be recorded in a protocol signed by all official members. The asset valuation council is responsible for the legal validity of the Transfer-Receipt Asset Documents between the two parties transferring and receiving, serving as the basis for repayment and forming the foundation for the Ministry of Finance to issue a decision to increase capital for Vietnam Electricity Corporation.

b) Monthly compiling and reporting on the implementation of the transfer and receipt of rural medium voltage power grids to the provincial People's Committee, the Ministry of Finance, the Ministry of Industry, and Vietnam Electricity Corporation.

5. Costs for the transfer and receipt of rural medium voltage power grid assets:

Costs used to support the activities of the rural medium voltage power grid asset valuation council related to the handover process shall be submitted by the local finance agency to the provincial People's Committee for approval of the cost level. Based on the approved cost level, the relevant agencies must bear the costs for their personnel participating in this work.

III. PRINCIPLES FOR CAPITAL REPAYMENT AND HANDLING OF REPAID CAPITAL IN THE TRANSFER AND RECEIPT OF RURAL MEDIUM VOLTAGE POWER GRIDS
MEDIUM VOLTAGE RURAL POWER GRIDS

1. Principles for handling and repayment.

For the portion of the value of the rural medium voltage power grid project transferred and confirmed for repayment by the asset valuation council, it shall be handled as follows:

1.1. For projects funded by central government budgets, Vietnam Electricity Corporation capital, local government budgets, additional electricity charges, agricultural cooperative investments, mobilized funds, and unverified sources of funding, the actual residual value of the assets shall be used to increase the budget capital for Vietnam Electricity Corporation.

1.2. For projects funded by loans from individuals, banks, or other economic organizations with repayment commitments, both parties transferring and receiving must verify and clarify the original documentation regarding the total loan amount from each creditor, the amount already repaid by the locality, and the remaining amount to be repaid at the time of transfer. The receiving party shall increase the asset value (based on the residual value) and repay the entire remaining debt to creditors (excluding the amount already repaid by the locality) within three years from the date the Ministry of Finance issues a decision to increase or decrease assets for the receiving and transferring parties of the rural medium voltage power grid.

1.3. The time point for determining the projects to be transferred and repaid is based on the effective date of Decision No. 22/1999/QĐ-TTg dated February 13, 1999, of the Prime Minister approving the rural electrification program. Specifically, these are projects that have been invested in since February 28, 1999, or earlier.

2. Sources of Repayment Capital

Part I on the capital to be repaid as stipulated in Item 1.2 Point 1 Section III of this Circular shall be sourced from the following.

2.1. The annual depreciation deduction of the entire rural medium voltage power grid assets received for handover.

2.2. In cases where the annual depreciation deduction source mentioned above is insufficient to repay the loan capital of the rural medium voltage power grid, it is permissible for EVNNPC to increase the depreciation rate compared to the asset's regime, sufficient to repay the debt within three years. Annually, EVNNPC must register the increased depreciation deduction with the Ministry of Finance before implementation.

2.3. In cases where the annual increased depreciation deduction source is still insufficient to repay the received assets, it is permissible for EVNNPC to retain the portion of revenue usage capital for the value of assets belonging to the State budget that have been received for the rural medium voltage power grid until completion of repayment. The specific level regarding retaining the portion of revenue usage capital, EVNNPC must proceed with procedures through the State budget after obtaining the consent of the Ministry of Finance annually.

3. Priority order for capital repayment:

3.1. Capital repayment shall follow the priority order as follows:

a) Repaying loans to individuals first.

b) Repaying to poor communes according to Decision 135/1998/QĐ-TTg dated July 31, 1997 of the Prime Minister.

c) Repaying to communes in Region III and Region II.

d) Repaying to communes.

đ) Repaying to banks and other remaining units.

Based on the plan for repayment capital sources, the Electricity Company or Provincial Electricity Company shall prepare a list of communes and creditor units according to the aforementioned priority order and submit it to the People's Committee of the province for approval before proceeding with repayment.

3.2. Method of repayment:

Based on the approved list by the People's Committee of the province, EVNNPC shall authorize the Electricity Companies to directly repay to the People's Committee of the province through the Department of Finance and Price, and repay to individuals and other units.

IV. ORGANIZATION OF HANDOVER, MANAGEMENT AND CAPITAL REPAYMENT

FOR RURAL MEDIUM-VOLTAGE POWER NETWORKS

1. The handover of the rural medium voltage power grid includes two stages:

Handover - Management Operation and Capital Repayment.

1.1. Stage of handover management operation: The Receiving Party will take over the management operation after completing the handover and adjusting assets between both parties.

1.2. Stage of capital repayment: The capital repayment will be completed according to the provisions in Item 3.2 Point 3 Section III above and organized to repay to individuals and lenders.

2. Procedure for handover and capital repayment:

2.1. Each year, the Electricity Companies shall prepare plans for receiving the rural medium voltage power grid and submit them to EVNNPC for approval after obtaining the agreement of the People's Committee of the province.

2.2. The Delivering Party shall compile the files as stipulated in Point 1 Section II of this Circular.

2.3. Both the Delivering and Receiving Parties shall jointly conduct an inventory of the quantity, assess the remaining quality of each electrical facility asset, review original documents, and prepare a handover document for submission to the Provincial Asset Valuation Council.

2.4. The Provincial Asset Valuation Council shall organize reviews, consolidate, and submit through the People's Committee of the province to the Ministry of Finance to process the capital increase for EVNNPC.

2.5. Within fifteen days from the date the Ministry of Finance receives the approval document as stipulated in Item 2.4 Point 2 Section IV, the Ministry of Finance shall issue a Decision for EVNNPC as the basis for increasing assets.

2.6. EVNNPC shall instruct the Electricity Companies to transfer the capital to be repaid according to the plan to the People's Committee of the province to direct the implementation of capital repayment.

3. Disputes between the Delivering and Receiving Parties shall be examined and resolved by the Provincial Asset Valuation Council. In cases of unresolved disputes, the People's Committee of the province and EVNNPC shall examine and decide; if still unresolved, the People's Committee of the province and EVNNPC shall report to the relevant Ministries: Ministry of Industry and Ministry of Finance for final examination and decision.

V. IMPLEMENTATION

1. Provinces and centrally-administered cities shall assign a member of the People's Committee of the Province to lead the functional agencies of the province and city and the Asset Valuation Council to implement the handover of the rural medium voltage power grid.

2. EVNNPC shall instruct the Electricity Companies and Provincial Electricity Companies to create favorable conditions for the Asset Valuation Council to perform its tasks, organize the reception and management of the rural medium voltage power grid.

3. This Circular shall take effect fifteen days from the date of signature. All previous regulations on handover, asset valuation, and capital repayment of the rural medium voltage power grid that conflict with this Circular are hereby abolished. Any difficulties encountered during implementation should be reported to the Ministry of Industry and the Ministry of Finance for timely study and amendment.