Joint Circular No. 06/2001/TTLT/BCN-BTC guides the transfer 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. 06/2001/TTLT/BCN-BTC AUGUST 23, 2001 GUIDING ON HANDOVER AND REFUND OF CAPITAL FOR RURAL MEDIUM-VOLTAGE DISTRIBUTION NETWORKS

To implement Decision No. 22/1999/QĐ-TTg dated February 13, 1999 of the Prime Minister approving the rural electrification project and Document No. 2995/VPCP-KTTH dated July 4, 2001 of the Government Office on handling investment capital for constructing medium-voltage rural distribution networks, the Ministry of Industry and the Ministry of Finance provide guidance on handover, determination of asset value, and refund of capital for rural medium-voltage distribution networks (hereinafter referred to as rural medium-voltage distribution network - LĐTANT) as follows:

I. SCOPE OF RESPONSIBILITY FOR HANDOVER OF ASSETS OF RURAL MEDIUM-VOLTAGE DISTRIBUTION NETWORKS

1. Scope of handover

a) The rural medium-voltage distribution network includes medium-voltage transmission lines with voltages of 6 - 35KV and substations with voltages of 6 - 35/0.4KV supplying electricity to villages and communes, which are assets under the management of rural electricity management organizations and will be transferred to the Vietnam Electricity Corporation (hereinafter referred to as EVNNPC) based on agreements between EVNNPC and localities.

b) Low-voltage distribution networks of 0.4KV from the substation feeder lines to households are not within the scope of handover as guided by this Circular.

2. Responsibilities of the transferring party and receiving party

a) Transferring Party: The representative of the owner of the rural medium-voltage distribution network assets (People's Committee of Commune, Cooperative, Company, Water and Electricity Enterprise...). In cases where the owner of the rural medium-voltage distribution network cannot be identified, the Chairman of the People's Committee of the province, centrally-administered city (hereinafter referred to as Provincial People's Committee) shall designate an appropriate organization to act as the Transferring Party.

The Transferring Party is responsible for preparing complete documents and certificates as stipulated in Clause 1, Section 2 of this Circular; leading the inventory and valuation of remaining assets of the rural medium-voltage distribution network; determining the list and structure of investment capital for the rural medium-voltage distribution network; handing over and facilitating the acceptance process for the Receiving Party; publicly announcing to the people the parts of borrowed capital and people's contributions that have been accepted for repayment and promptly implementing payment according to the regulations of the Provincial People's Committee.

b) Receiving Party: The Electricity Company under the Vietnam Electricity Corporation or the provincial Electricity Company authorized by the Electricity Company.

The Receiving Party is responsible for accepting complete documents of the rural medium-voltage distribution network assets as stipulated; participating with the Transferring Party in conducting inventory and valuing remaining assets and investment capital structure; accounting for increased assets and managing them in accordance with the regulations of the Ministry of Finance; organizing operation and maintenance of the medium-voltage distribution network, developing plans for capital repayment as stipulated in Section III of this Circular.

II. DOCUMENTATION FOR HANDOVER AND DETERMINATION OF ASSET VALUE OF RURAL MEDIUM-VOLTAGE DISTRIBUTION NETWORKS IN HANDOVER

1. Handover documentation

Documentation for handover of LĐTANT includes original documents as prescribed or substitute documents for original documents and documents prepared at the time of handover, specifically as follows:

a) Original documents as prescribed, including:

- Investment decision, technical design, and approved budget estimate, completion certificate of works;

- Agreement documents on route and land allocation;

- Financial accounting records related to the determination of original cost and residual value of the medium-voltage distribution network assets, investment capital structure, and approved settlement report;

- Loan contracts (loan agreements) with banks and other economic organizations (including loans from construction units) and reconciliation statements with bank or lender confirmation of outstanding debts after settlement;

- Proof of loans from the people based on loan commitment documents issued by the Transferring Party at the time of construction: Resolution of the Village People's Council or Commune People's Committee or Resolution of the Cooperative Members' Congress; financial accounting records reflecting amounts paid off and outstanding debts at the time of handover and other relevant documents (if any);

- Documents showing people's contributions and cooperative funds at the time of construction such as receipts, lists, or record books.

b) Substitute documents for original documents in cases where original documents are incomplete

The Transferring Party must cooperate with the Receiving Party to perform the following tasks:

- Prepare an evaluation report on the current status of quality and residual value of LĐTANT assets as stipulated in Clause II, Section 2 of this Circular.

- Prepare documents on right-of-way for transmission lines and substation land areas, with confirmation from the Provincial People's Committee regarding land allocation.

For LĐTANT projects that have not yet obtained land allocation approval from competent authorities, the Provincial People's Committee directs relevant departments and agencies to prepare, submit, and approve land allocation documents in accordance with current regulations to transfer to the Receiving Party. If at the time of handover, there are still incomplete land allocation documents, both parties must establish the current status of right-of-way for transmission lines and substation land areas in accordance with Decree No. 54/1999/NĐ-CP dated July 8, 1999 of the Government on the protection of high-voltage power grid safety. These documents are submitted to the Provincial People's Committee for confirmation, serving as legal basis for future land allocation. The Transferring Party transfers these documents to the Receiving Party, and the Transferring Party is responsible for resolving any issues arising until the land allocation documents are approved and handed over to the Receiving Party.

For localities that have not followed the above procedures for land allocation for LĐTANT, the Transferring Party must prepare applications for right-of-way for transmission lines and substations, submit to the Provincial People's Committee for approval instead of land allocation procedures.

- Prepare documents to determine the structure of investment capital sources for LĐTANT as stipulated in Clause 3, Section II of this Circular.

c) Documents prepared at the time of handover

- Current layout diagram of the medium-voltage distribution network.

- Current single-line diagram of the medium-voltage distribution network.

- Inventory list of quantities, types, and conditions of medium-voltage transmission line equipment and substation materials.

- Handover certificate of LĐTANT in the format prescribed in this Circular (Annex 1a).

- The record determining the residual value of the assets handed over by the Rural Medium Voltage Power Distribution Network Transfer Entity (hereinafter referred to as the Asset Valuation Council) shall be reviewed according to the model prescribed in this Circular (Annex 1b and Annex 2).

2. Method for Determining the Residual Value of Handover Assets

Based on the actual situation regarding the management of fixed assets (Tangible Fixed Assets - TFA) of the transferring party, the residual value of the rural medium voltage power distribution network assets handed over shall be determined according to one of the following two methods:

a) Evaluation method based on accounting books: applicable to assets that are managed under the regulations on the use and depreciation of tangible fixed assets stipulated in Decision No. 1062 TC/QĐ/TSCĐ dated November 14, 1996 (now Decision No. 166/1999/QĐ-BTC dated December 30, 1999) of the Minister of Finance and recorded according to the accounting system applicable to enterprises issued pursuant to Decision No. 1141 TC/CĐKT dated November 1, 1995 of the Ministry of Finance, or the accounting system applicable to small and medium-sized enterprises issued pursuant to Decision No. 1177 TC/QĐ/CĐKT dated December 23, 1996 of the Ministry of Finance.

b) Evaluation method based on actual value: applicable to assets not managed under the Ministry of Finance's regulations on Tangible Fixed Assets. The residual value of the handover assets shall be determined as follows:

Where:

- The actual quantity of Tangible Fixed Assets is determined based on the actual inventory data of the Rural Medium Voltage Power Distribution Network Transfer Entity;

- The unit price of each Tangible Fixed Asset, which serves as the basis for determining the residual value of the Rural Medium Voltage Power Distribution Network assets, is calculated according to the provisions of Decision No. 84/1999/QĐ-BCN dated November 16, 1999 of the Minister of Industry;

- The remaining quality of each Tangible Fixed Asset (%) is calculated by subtracting the depreciation rate of the Tangible Fixed Asset (%) from the original cost of the Tangible Fixed Asset (100%). The depreciation rate of the Tangible Fixed Asset (%) is calculated by multiplying the number of years used with the annual depreciation rate of 10%/year.

In cases where the Rural Medium Voltage Power Distribution Network assets have exceeded their depreciation period but are still in use, both parties involved in the transfer and receipt shall base their assessment of the residual value (%) of the entire project on the current status of the quantity and quality of each component, degree of synchronization, level of technical obsolescence... as a basis for settlement.

3. Determination of the Structure of Construction Project Capital Sources

a) Based on the accounting books and original vouchers related to the project to determine the total investment capital and classify it according to each source of capital as the basis for handling capital as prescribed in Section III of this Circular, as follows:

- State budget (central and local), industry electricity capital, electricity surcharge capital, agricultural tax exemption capital for investment in construction of power projects, and unverifiable capital sources;

- Cooperative capital, capital raised from the public;

- Remaining debt to banks and other entities (including loans from construction units), based on loan agreements (loan contracts) at the time of project construction and confirmed by the bank or lender, public loan capital based on loan commitment (resolution) repayment documents of the People's Council or People's Committee or Cooperative..., reconciliation statements of receivables and payables up to the date of handover.

b) For joint investment projects including medium voltage lines, substations, low voltage lines, pumping stations..., in which the Rural Medium Voltage Power Distribution Network is only a component of the project, the determination of the structure of investment capital for the Rural Medium Voltage Power Distribution Network shall be calculated proportionally according to the overall investment capital structure of the entire project.

c) After determining the value of the project and the sources of investment capital for the project, they must be listed in a consolidated table according to the model prescribed in Annex 1b and Annex 2 attached to this Circular.

4. Rural Medium Voltage Power Distribution Network Asset Valuation Council.

a) The Rural Medium Voltage Power Distribution Network Asset Valuation Council of the province shall be established by the Chairman of the Provincial People's Committee, wherein: the leader of the Department of Finance - Price Control serves as the Chair; the leader of the Electricity Company or the provincial Electricity Company authorized by the company serves as the permanent member; representatives of the Department of Industry, local enterprise financial management agency, Department of Planning and Investment, Department of Construction, Department of Land Administration, and the representative of the asset transferor serve as members. In addition to the official members, based on the specific circumstances of each locality, the Chair may invite additional organizations, technical, economic, and financial accounting experts necessary for assessing the quality and determining the residual value of the Rural Medium Voltage Power Distribution Network.

b) The Rural Medium Voltage Power Distribution Network Asset Valuation Council has the following responsibilities:

- Organizing the review of the residual value of the rural medium voltage power distribution network. The review results must be recorded in a protocol signed by all official members. The Asset Valuation Council is responsible for the legal validity of the asset transfer documents between the two parties, determining the structure of investment capital sources as prescribed in Clause 3, Section II, to be submitted to the Provincial People's Committee for approval as the basis for repayment and the Ministry of Finance issuing a decision to increase capital for Vietnam Electricity Corporation.

- Summarizing and reporting monthly on the implementation of asset transfer and repayment of rural medium voltage power distribution network capital in the locality to the Provincial People's Committee and Vietnam Electricity Corporation.

5. Costs for Asset Transfer Activities of the Rural Medium Voltage Power Distribution Network

Costs used to support the activities of the Rural Medium Voltage Power Distribution Network Asset Valuation Council related to the handover process shall be approved by the local finance authority and reported to the Provincial People's Committee for approval. Based on the approved cost level, relevant agencies must bear the costs for personnel from their own agencies or units participating in this work. Printing and meeting costs shall be borne by the entity receiving the Rural Medium Voltage Power Distribution Network project.

III. CAPITAL REPAYMENT AND SOURCES OF CAPITAL REPAYMENT IN THE TRANSFER OF RURAL MEDIUM VOLTAGE POWER DISTRIBUTION NETWORKS

1. Principles for Handling and Repaying Capital

Part on the value of rural medium voltage power grid projects handed over has been appraised and confirmed by the Appraisal Council for each source of capital to be repaid, as follows:

a) For the sources of capital: Central budget, Vietnam Power Corporation's capital, local budget, capital from electricity surcharges, agricultural tax exemptions for investment in power grid construction, and unverifiable capital shall increase the central budget for Vietnam Power Corporation according to the remaining asset value.

b) For loans from residents, banks, or other economic organizations (including loans from construction units) with repayment commitments, the handover party shall collect loan files and vouchers in accordance with point a, Clause 1, Section II, through the Appraisal Council's review for provincial People's Committee approval to serve as the basis for loan repayment.

To strictly comply with the Accounting and Statistics Ordinance of the State, loan repayment files must not be duplicated, altered, or erased.

The receiving party shall increase the asset value (based on the remaining value) and repay the full outstanding debt to creditors (excluding debts already paid by the locality).

c) For cooperatives' capital and community-raised capital, repayment will be based on the remaining value of these funds within the total remaining project value and determined as follows:

- In cases where original documentation is complete

Based on the initial investment value and capital structure, the cooperative's capital and community-raised capital will be proportionally determined within the remaining project value.

- In cases where original documentation is incomplete or missing

The owner of the power grid project shall prepare a list detailing the invested capital at the time of construction. Cooperative capital and community-raised capital (number of households or individuals contributing and their contribution levels) must be confirmed by the Commune People's Council. This list serves as the basis for determining the cooperative and community-raised capital investment ratio, which is reviewed by the Provincial Appraisal Council and approved by the Chairman of the Provincial People's Committee, who bears legal responsibility for its accuracy. The method for determining the cooperative and community-raised capital repayment is the same as when original documentation is available.

- For projects handed over and completed according to Circular 04/1999/TTLT/BCN-BTC dated August 27, 1999, before the issuance of this Circular, there is no need to re-establish files; both parties base their actions on the remaining value of the rural medium voltage power grid project, as appraised and approved by the Provincial Appraisal Council and the Provincial People's Committee, to determine the investment capital structure and the cooperative and community-raised capital repayment value, which is then reviewed by the Provincial Appraisal Council and approved by the Provincial People's Committee.

- For ongoing and future projects, during the process of establishing files and determining the remaining asset value of the rural medium voltage power grid, both parties simultaneously clarify the remaining cooperative and community-raised capital value, which is reviewed by the Provincial Appraisal Council and approved by the Provincial People's Committee as the basis for repayment.

The time frame for determining the projects handed over and repayment 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, projects invested from February 28, 1999, or earlier are included. If projects were still under construction by February 28, 1999, the handing-over party must continue to complete them for handover.

After February 28, 1999, localities capable of pre-funding investments in rural medium voltage power grids according to their targets should agree in writing with Vietnam Power Corporation before making investment decisions to facilitate subsequent handover, management operation, and repayment.

2. Sources of Repayment Capital.

a) The source of capital for repaying loans (as stipulated in point c, Clause 1, Section III of this Circular) comes from:

- Annual basic depreciation (BDP) of all assets received in the handover of rural medium voltage power grids.

- If the annual BDP mentioned above is insufficient to repay the rural medium voltage power grid loan, Vietnam Power Corporation may increase the depreciation rate for two years. Each year, Vietnam Power Corporation registers the increased depreciation with the Ministry of Finance for implementation.

b) The source of capital for repaying cooperative and community-raised capital (as stipulated in point c, Clause 1, Section I of this Circular) is balanced from state budget capital and Vietnam Power Corporation's annual BDP as specified in point a of this clause.

3. Repayment Method and Mechanism for Using Repayment Capital

a) Repayment Method

Based on the decision approved by the Provincial People's Committee, the repayment method for each source of capital is as follows:

- For repayment to entities from loan sources (point b, Clause 1, Section III), Vietnam Power Corporation authorizes Electricity Companies to directly pay to the Provincial People's Committee through the Department of Finance and Price Control to repay the loan recipients. Within 15 days of receiving the Provincial People's Committee's decision, the receiving party must transfer the remaining loan repayment to the local Department of Finance and Price Control for payment to the handing-over party.

- For repayment to entities from cooperative and community-raised capital sources (point c, Clause 1, Section III), the Ministry of Finance transfers state budget capital to Vietnam Power Corporation, which, together with the corporation's capital, repays according to the value approved by the provincial People's Committees.

Vietnam Power Corporation authorizes Electricity Companies to directly pay to the Provincial People's Committee through the Department of Finance and Price Control to repay to cooperatives, commune administrations, and households. Vietnam Power Corporation annually settles the repayment capital with the Ministry of Finance.

b) Mechanism for Using Repayment Capital:

- Cooperative investment capital is returned to the cooperative or commune administration (if the cooperative has dissolved) for use in investing in cooperative or communal infrastructure projects, prioritizing the expansion, renovation, and upgrading of low-voltage power grids to ensure quality and safety, reduce power losses, and lower electricity prices for households.

The specific implementation plan must be discussed democratically and publicly with the people and decided upon by the Village Members' Meeting or the Commune People's Council. This source of funds shall not be used for other purposes. Investment shall be carried out according to the procedures and management processes for investment and construction set forth by the State.

- For the portion of capital raised from the people, the People's Committee of the commune has the responsibility to directly repay to each household according to the specific list of households raising capital.

IV. ORGANIZATION OF HANDOVER AND MANAGEMENT OF CAPITAL AND REPAYMENT FOR THE MEDIUM-VOLTAGE RURAL ELECTRICITY NETWORK

1. The handover and management of the medium-voltage rural electricity network includes two stages: handover and management operation, and capital repayment.

- Handover and management operation stage: The recipient takes over the management and operation when the provincial People's Committee's decision on handover is completed, and both parties adjust assets accordingly.

- Capital repayment stage: Repayment of capital shall be conducted in accordance with Clause 3, Section III above, and the repayment to the people, cooperatives, commune People's Committees, and lending entities shall be completed by the end of 2002.

2. Procedures for handover and capital repayment.

a) Electricity companies prepare plans for receiving the medium-voltage rural electricity network, which are submitted for approval by the Vietnam Electricity Corporation after obtaining the agreement of the provincial People's Committee.

b) The transferring party collects all documents as stipulated in Clause 1, Section II of this Circular.

c) Both the transferring and receiving parties jointly conduct an inventory of the quantity and quality assessment of remaining assets of each electrical facility, review original documents, and draft a handover record of electrical facilities to submit to the Provincial Asset Valuation Board.

d) Based on the handover record and asset evaluation, the Provincial Asset Valuation Board reviews and officially determines the value of remaining assets handed over, the structure of investment sources, the amount of outstanding loans, cooperative capital, and capital raised from the people to be repaid, and submits these for approval by the provincial People's Committee.

đ) Based on the provincial People's Committee's approval decision, the Provincial Asset Valuation Board calculates the total amount of capital repaid monthly, reports to the provincial People's Committee and the Vietnam Electricity Corporation, and simultaneously, the transferring and receiving parties adjust their capital accounts accordingly. Monthly, the Vietnam Electricity Corporation reports to the Ministry of Finance and the Ministry of Industry regarding the handover of assets and capital adjustments according to regulations.

3. Disputes between the transferring and receiving parties shall be examined and resolved by the Provincial Asset Valuation Board. In cases where disputes remain unresolved, the provincial People's Committee and the Vietnam Electricity Corporation will examine and decide; if issues still persist, they will report to the Joint Ministry of Industry and Finance for final resolution.

V. IMPLEMENTATION

1. Each province and centrally-administered city assigns a leader of the provincial People's Committee to direct relevant provincial agencies and the Provincial Asset Valuation Board in implementing the handover of the medium-voltage rural electricity network.

2. The Vietnam Electricity Corporation directs electricity companies and provincial power departments to facilitate the Provincial Asset Valuation Board in performing its tasks, organizing the reception and management of the medium-voltage rural electricity network.

3. This Circular takes effect from the date of issuance and replaces the following consolidated documents: Circular 04/1999/TTLT/BCN-BTC dated August 27, 1999, issued by the Joint Ministry of Industry and Finance, document number 2299/TC-TCDN dated June 7, 2000, issued by the Minister of Finance, and document number 1465/CV-TCKT dated April 18, 2001, issued by the Ministry of Industry. Any arising difficulties during implementation should be reported to the Ministry of Industry and the Ministry of Finance for timely resolution.