Joint Circular No. 06/2001/TTLT-BCN-BTC guiding the transfer and repayment of capital for rural medium voltage power distribution networks

JOINT CIRCULAR

Guidelines for the transfer and return of capital for rural medium voltage power 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 the construction of rural medium voltage power distribution networks, the Ministry of Industry and the Ministry of Finance provide guidelines for the transfer, valuation, and return of capital for rural medium voltage power distribution networks (hereinafter referred to as rural medium voltage power distribution network - LĐTANT) as follows:

I. SCOPE OF RESPONSIBILITY FOR TRANSFERRING ASSETS OF THE RURAL MEDIUM VOLTAGE POWER DISTRIBUTION NETWORK

1. Scope of Transfer

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

b/ Low voltage distribution networks of 0.4 kV from the output of transformer substations to households are not within the scope of transfer as guided by this circular.

2. Responsibilities of the Transferring Party and Receiving Party

a/ The transferring party is the representative of the owner of the rural medium voltage power distribution network (People's Committee of Commune, Cooperative, Company, Water and Electricity Enterprise...). In cases where the owner of the rural medium voltage power distribution network cannot be identified, the Chairman of the People's Committee of the province or centrally governed 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 documentation in accordance with Clause 1, Section II of this Circular; leading the inventory and assessment of the remaining value of the rural medium voltage power distribution network; determining the list and structure of investment capital for the rural medium voltage power distribution network; transferring and facilitating the receiving party's acceptance; publicly announcing to the people the parts of borrowed capital and capital raised from the public, cooperative capital (Cooperative - HTX) that have been accepted for repayment and promptly implementing payment according to the regulations of the Provincial People's Committee.

b/ The receiving party is the Electricity Company under the Management Corporation of Vietnam Electricity or the provincial electricity company authorized by the Electricity Company.

The receiving party is responsible for accepting complete documentation of the rural medium voltage power distribution network in accordance with regulations; participating with the transferring party in conducting inventory and assessing the remaining value and structure of investment capital; accounting for increases and managing assets in accordance with the regulations of the Ministry of Finance; organizing operation and maintenance; upgrading the rural medium voltage power distribution network, and formulating plans for capital repayment in accordance with Section III of this Circular.

II. DOCUMENTATION FOR TRANSFER AND VALUATION OF ASSETS OF THE RURAL MEDIUM VOLTAGE POWER DISTRIBUTION NETWORK IN TRANSFERS

1. Documentation for Transfer

Documentation for the transfer of LĐTANT includes original documentation as prescribed or documentation replacing original documentation and documentation prepared at the time of transfer, specifically as follows:

a/ Original documentation 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 the original cost and remaining value of the power 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 of accounts with confirmation from the bank or lender regarding the settlement documents with confirmation of amounts paid and outstanding balance at the time of handover;

- Debt certificates from the public based on loan commitment documents to be repaid by the transferring party at the time of construction: Resolution of the People's Council of the commune or People's Committee of the commune or Resolution of the General Assembly of HTX members; financial accounting records reflecting the amount repaid and unpaid debt at the time of handover and other relevant documents (if any);

- Certificates showing public-raised capital and HTX capital at the time of construction such as receipts, lists, or record books.

b/ Documentation replacing original documentation in cases where original documentation is 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 remaining value of LĐTANT assets in accordance with Clause 2, Section II of this Circular.

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

For LĐTANT projects that have not yet received approval for land allocation from competent authorities, the Provincial People's Committee directs relevant departments and agencies to prepare, submit, and approve land allocation documentation in accordance with current regulations to be handed over 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 the right-of-way of transmission lines and substation land area in accordance with Decree No. 54/1999/NĐ-CP dated July 8, 1999 of the Government on the protection of high-voltage power transmission lines. This documentation is submitted to the Provincial People's Committee for confirmation, serving as a legal basis for future land allocation. The transferring party hands over to the receiving party, and the transferring party is responsible for resolving any issues until the land allocation documentation is 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 permission documentation for the right-of-way of transmission lines and substations, submit it to the Provincial People's Committee for approval instead of land allocation procedures.

- Prepare documentation to determine the structure of investment capital for LĐTANT in accordance with Clause 3, Section II of this Circular.

c/ Documentation prepared at the time of transfer

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

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

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

- Transfer and receipt certificate of LĐTANT in accordance with the model prescribed in this Circular (Annex 1a).

- The valuation report on the remaining value of assets to be transferred by the Rural Medium Voltage Power Grid Asset Valuation Council (hereinafter referred to as the Council) shall be reviewed according to the model prescribed in this Circular (Annex 1b and Annex 2).

2. Method for determining the remaining value of transferred assets

Based on the actual situation of fixed asset management (Tangible Fixed Assets - TFA) of the transferring party, the remaining value of rural medium voltage power grid assets to be transferred 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 usage and depreciation system for Tangible Fixed Assets stipulated in Decision No. 1062/TC/QĐ/CSTC dated November 14, 1996 (now Decision No. 166/1999/QĐ-BTC dated December 30, 1999) of the Minister of Finance and recorded under 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 Tangible Fixed Assets management system of the Ministry of Finance. The remaining value of transferred assets shall be determined as follows:

Where:

- The actual quantity of Tangible Fixed Assets is determined based on the actual inventory data of the transferring Rural Medium Voltage Power Grid;

- The unit price of each Tangible Fixed Asset serving as the basis for determining the remaining value of the Rural Medium Voltage Power Grid assets shall be 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 its original cost (100%). The depreciation rate of Tangible Fixed Assets (%) is calculated by multiplying the number of years used with the annual depreciation rate of 10%/year.

In cases where Rural Medium Voltage Power Grid assets have exceeded their depreciation period but are still in use, both parties shall base their assessment of the remaining value (%) of the entire project on the current status of quantity, quality of each component, degree of synchronization, level of technical obsolescence... and proceed to evaluate together, serving as the basis for settlement.

3. Determination of the structure of construction project capital sources

a/ Based on accounting books and relevant original documents of 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 electricity construction projects, and unverifiable capital sources;

- Capital of cooperatives, capital raised from the public;

- Remaining debt to banks and other units (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 documents (resolutions) of the People's Council or People's Committee of the commune or cooperative..., reconciliation statements of receivables and payables up to the transfer date.

b/ For joint investment projects including medium voltage lines, transformer stations, low voltage lines, pumping stations..., where the Rural Medium Voltage Power Grid is only one component of the project, the determination of the Rural Medium Voltage Power Grid investment capital structure shall be proportionally calculated based on the overall project investment capital structure.

c/ After determining the value of the project and the investment capital sources of 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 Grid Asset Valuation Council

a/ The Rural Medium Voltage Power Grid Asset Valuation Council of the province shall be established by the Chairman of the Provincial People's Committee, including: the leader of the Department of Finance-Price as Chairperson; the leader of the Electricity Company or the provincial Electricity Company authorized by the Company as a permanent member; representatives of the Department of Industry, local enterprise financial management agencies, the Department of Planning and Investment, the Department of Construction, the Department of Land Administration, and the representative of the transferring asset owner as members. In addition to the official members, based on the specific circumstances of each locality, the Chairperson may invite additional organizations, technical, economic, and financial accounting experts necessary for assessing the quality and determining the remaining value of the Rural Medium Voltage Power Grid.

b/ The Rural Medium Voltage Power Grid Asset Valuation Council has the following responsibilities:

- Organizing the review of the remaining value of the Rural Medium Voltage Power Grid. The review results must be documented in a record signed by all official members. The Council is responsible for the legal validity of the asset transfer documents between the two parties, confirming the investment capital structure as prescribed in Clause 3, Part 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 Grid 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 Grid

Costs used to serve the activities of the Rural Medium Voltage Power Grid Asset Valuation Council related to the transfer process shall be approved by the provincial finance department. Based on the approved cost level, the relevant departments must bear the costs for personnel from their own units participating in this work. Printing and meeting costs shall be borne by the receiving party of the Rural Medium Voltage Power Grid project.

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

1. Principles for handling and repayment of 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 sources of capital: Central budget, Vietnam Electricity Corporation (EVN) capital, local budget, surcharges from electricity fees, agricultural tax exemptions for investment in power grid construction, and unverifiable capital shall increase the state budget for EVN according to the remaining asset value.

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

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 entire outstanding loan to creditors (excluding debts already paid by the locality).

c/ For cooperatives and resident-raised capital, repayment shall be based on the remaining value of this portion of capital within the total remaining value of the project and determined as follows:

- In cases where original documentation is fully available

Based on the initial investment value and structure of capital sources, the cooperative and resident-raised capital ratios in the total remaining project value shall be determined.

- In cases where original documentation is unavailable or insufficient

The owner of the power distribution project shall prepare a list detailing the invested capital at the time of construction. For cooperative and resident-raised capital, the People's Council of the commune must confirm the number of households or individuals contributing and their contribution levels. This list serves as the basis for determining the cooperative and resident-raised capital investment ratio, which is submitted to the provincial Appraisal Council for review. The Chairman of the Provincial People's Committee approves and bears legal responsibility for the accuracy of the list. The method of repayment for cooperative and resident-raised capital is the same as when full documentation is available.

- For projects handed over and completed the transfer procedures (as per Circular 04/1999/TTLT/BCN-BTC dated August 27, 1999 of the Ministry of Industry and Finance) 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 value of cooperative and resident-raised capital repayment, which is then reviewed by the provincial Appraisal Council and approved by the People's Committee.

- For projects currently being or about to undergo transfer, during the process of preparing files and determining the remaining asset value of the rural medium voltage power grid, both parties simultaneously clarify the remaining value of cooperative and resident-raised capital and submit it to the provincial Appraisal Council for review as the basis for repayment.

d/ The time 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 Project". Specifically, projects that have been invested since February 28, 1999 or earlier. If projects are still ongoing as of February 28, 1999, the transferring party must complete them for handover to the receiving party.

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 EVN before making investment decisions to ensure smooth handover, management operation, and future repayment.

2. Sources of Repayment Capital

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

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

- If the annual BDP mentioned above is insufficient to repay the rural medium voltage power grid loan, EVN may increase its depreciation rate compared to the asset's regulations, sufficient to repay the debt within two years. Each year, EVN registers the increased depreciation amount with the Ministry of Finance for implementation.

b/ The source of capital for repaying cooperative and resident-raised capital (as stipulated in point c, Clause 1, Section III of this Circular) is balanced from the state budget and EVN's annual BDP as specified in point a of this clause.

3. Methods of Repayment and Mechanism for Using Repayment Capital

a/ Method of Repayment

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

- To repay loan recipients (point b, Clause 1, Section III), EVN authorizes power companies to directly pay to the provincial People's Committee through the Department of Finance and Price Control to repay the loan. Within 15 days of receiving the provincial People's Committee's decision, the receiving party must transfer the remaining loan repayment funds to the local Department of Finance and Price Control for payment to the transferring party.

- To repay cooperative and resident-raised capital recipients (point c, Clause 1, Section III), the Ministry of Finance transfers the state budget capital to EVN, which, together with EVN's capital, repays according to the value approved by the provincial People's Committees.

EVN authorizes power 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. EVN annually settles the repayment capital sources 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 Commune Members' Meeting or the Commune People's Council. This source of capital may not be used for other purposes. Investment shall be carried out according to the State's investment management and construction procedures.

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

IV. ORGANIZATION OF HANDOVER, MANAGEMENT AND REPAYMENT OF CAPITAL FOR RURAL MEDIUM-VOLTAGE DISTRIBUTION NETWORKS

1. The handover and management of rural medium-voltage distribution networks include two stages: handover and management operation, and capital repayment.

- Handover and management operation stage: The receiving party takes over the management and operation upon completion of the handover decision made by the Provincial People's Committee and implements asset increases and decreases between both parties.

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

2. Procedures for handover and capital repayment

a/ Electricity companies prepare plans for receiving medium-voltage distribution networks and submit them for approval by the Vietnam Electricity Corporation after obtaining agreement from the Provincial People's Committee.

b/ The transferring party compiles all required 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 of remaining assets of each electrical project, review original documents, and prepare a handover record of electrical project assets to be submitted 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, identifies the structure of investment sources and the outstanding loan amount, cooperative capital, and capital raised from the people to be repaid, and submits it for approval by the Provincial People's Committee.

đ/ Based on the decision of the Provincial People's Committee approving the repayment, the Provincial Asset Valuation Board will compile monthly reports on each source of capital repayment to the Provincial People's Committee and the Vietnam Electricity Corporation. Simultaneously, the transferring and receiving parties will adjust their accounts accordingly. Monthly, the Vietnam Electricity Corporation will report to the Ministry of Finance and the Ministry of Industry regarding the handover of assets and adjustments in capital for that month as prescribed.

3. Disputes between the transferring and receiving parties shall be examined and resolved by the Provincial Asset Valuation Board. In cases where there are unresolved disputes, the Provincial People's Committee and the Vietnam Electricity Corporation will examine and decide. If issues remain unresolved, the Provincial People's Committee and the Vietnam Electricity Corporation will report to the Joint Ministry of Industry-Finance for final examination and decision.

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 to implement the handover of rural medium-voltage distribution networks.

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

3. This Circular takes effect from the date of signing and replaces the following documents: Circular 04/1999 TTLT/BCN-BTC dated August 27, 1999, issued by the Joint Ministry of Industry-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 issues arising during implementation should be reported to the Ministry of Industry and the Ministry of Finance for timely resolution./.

Place of Receipt:

- The Prime Minister

- Deputy Prime Ministers,

- National Assembly Office

- Office of the President;

- Government Office,

- Central Party Office, Party Committees,

- Supreme People's Procuracy,

- Ministry of Planning and Investment,

- Ministry of Agriculture and Rural Development,

- Government Inspectorate,

- State Bank of Vietnam,

- Ethnic Minority Commission,

- Vietnam Farmers' Union Central Committee,

- People's Committees of provinces and centrally-administered cities,

- Vietnam Electricity Corporation,

- To be filed: Ministry of Finance, Ministry of Industry.