JOINT CIRCULAR

GUIDELINES FOR TRANSFERRING, RECEIVING, AND RETURNING INVESTMENT CAPITAL FOR MILITARY ELECTRICITY NETWORKS TO THE ELECTRICITY SECTOR FOR MANAGEMENT

To implement the Prime Minister's directive in Document No. 373/TTg-CN dated March 27, 2007 regarding the transfer of military electricity networks under the Ministry of National Defense to Vietnam Electricity Corporation (EVN), the Joint Ministries of Finance, National Defense, and Industry and Trade provide guidelines for transferring, receiving, and returning investment capital for military electricity networks to the electricity sector for management as follows:

I. SCOPE, PRINCIPLES, AND RESPONSIBILITIES FOR TRANSFERRING AND RECEIVING MILITARY ELECTRICITY NETWORK ASSETS

1. Scope of Transfer and Reception

The military electricity network transferred to the electricity sector for management includes medium and high voltage power grids with voltages from 6 to 35 KV and substations from 6 to 35/0.4 KV supplying electricity to military units' camps, warehouses, shooting ranges, military bases..., serving living, training, combat readiness, national defense production, economic needs, etc., currently managed by military units will be transferred to EVN for management.

2. Principles of Transfer and Reception

2.1. The Ministry of National Defense transfers the entire asset in its current state, including the medium and high voltage power grid system and substations managed by military units, to the electricity sector for management and operation.

2.2. For land for power line construction and substations that are not defense lands:

a) In cases where the area of land for power line construction and substations does not have defense works, safety zones, and protected areas around defense works, military units are responsible for transferring the land area to the electricity sector for management;

b) In cases where the area of land for power line construction and substations has defense works, safety zones, and protected areas around defense works, military units do not transfer the land area with defense works, safety zones, and protected areas around defense works.

2.3. In cases where power lines and substations are within military camps on defense lands, only the power lines and substations are transferred, not the land. If it is possible to move power lines and substations close to the fence, both parties will negotiate separately after the electricity sector has taken over. In this case, when transferring, there must be an agreement between the transferring party and the receiving party regarding the safety regulations for power line corridors stipulated in Decree No. 106/2005/NĐ-CP dated August 17, 2005 of the Government detailing and guiding the implementation of certain provisions of the Electricity Law on protecting the safety of high-voltage power transmission facilities. The transferring party facilitates the work of electricity sector staff in managing, inspecting, maintaining, and servicing according to plans.

3. Responsibilities of the Transferring Party and Receiving Party

3.1. Transferor are military units directly managing the electricity network authorized by the Ministry of National Defense.

The transferring party is responsible for preparing complete files and certificates as prescribed in Clause 1, Section II of this Circular, leading together with the receiving party to inventory and determine the actual remaining value of the transferred electricity network assets; determine the structure of investment capital for the transferred electricity network; carry out the transfer of the electricity network and related files, creating favorable conditions for the receiving party to take over, manage, and operate.

After the transfer, accounting entries reducing assets and capital according to book records for the transferred assets shall be made.

3.2. Transferee are Power Companies and Provincial/City Power Companies authorized by EVN.

The receiving party is responsible for jointly with the transferring party to inventory and determine the actual remaining value of the transferred electricity network assets; determine the structure of investment capital for the transferred electricity network; carry out the reception and management of the electricity network and related files.

After receiving, accounting entries increasing assets and capital shall be made, organizing management, operation, and improvement of the electricity network in accordance with State regulations. Implement the return of capital as stipulated in Section III of this Circular after the decision of the Ministry of Finance.

3.3. Both the transferring and receiving parties must establish an inventory record confirming the actual remaining value and determining the structure of investment capital for the transferred electricity network. This record must be confirmed by the heads of subordinate units under the Ministry of National Defense and Vietnam Electricity Corporation.

II. FILES FOR TRANSFER AND RECEIPT AND DETERMINATION OF ASSET VALUES IN TRANSFERS

1. Files for Transfer and Receipt

Files for transferring the military electricity network include original files as prescribed or substitute files for original files and files established at the time of transfer, specifically as follows:

1.1. Original files as prescribed include:

a) Investment decision, technical design, and approved budget estimate, acceptance certificate of the project;

b) Agreement documents on route and land allocation;

c) Accounting records related to determining the original cost and remaining value of the electricity network assets, investment capital structure, and approved settlement reports;

d) Loan contracts with banks and other economic organizations (including loans from construction units); proof of other liabilities of the unit; reconciliation statements of receivables and payables confirmed by the bank or lender; settlement and finalization files (related to the transferred electricity network) confirming the amount paid off and outstanding balance at the time of transfer (if any).

These files must absolutely not be recreated, altered, or erased.

1.2. Substitute files for original files in cases where original files are incomplete:

The transferring party cooperates with the receiving party to perform the following tasks:

a) Establish an evaluation record of the current status regarding quality and determine the actual remaining value of the electricity network assets as prescribed in Clause 2, Section II of this Circular;

b) Establish corridor route and substation site layout files confirmed by the People's Committee of the province/city directly under the Central Government regarding land allocation (hereinafter referred to as the Provincial People's Committee).

c) For power grid projects and substations located outside military camps, at the time of transfer, if they have not been granted land for construction by the competent authority, both parties shall establish a document on the current status of the power line right-of-way and substation site according to the provisions of Decree No. 106/2005/NĐ-CP dated August 17, 2005 of the Government. The file must be submitted by the transferring party to the provincial People's Committee for confirmation as a legal basis for future land allocation. After receiving it, the receiving party is responsible for managing the power line right-of-way and substation, preparing files to request the competent authority to issue decisions on land allocation and land grant.

d) Documents to determine the structure of capital sources already invested in the power grid according to Clause 3, Section II of this Circular.

1.3 Documents are established at the time of transfer:

 a) Current layout diagram of the power grid;

 b) Current connection diagram (single line) of the power grid;

 c) Inventory record and determination of the actual remaining value of the power grid being transferred according to the model prescribed in this Circular (Annex 1);

d) Transfer and receipt record of the military power grid according to the model prescribed in this Circular (Annex 2).

2. Method for determining the remaining value of assets being transferred

Based on the quantity of fixed assets (Tangible Fixed Assets - TSCĐ) being transferred, the actual remaining value of the transferred power grid assets is determined as follows:

2.1 In the case of medium voltage power lines and substations: the remaining value based on the book value that has not yet been fully depreciated is calculated as follows:

Where:

- The actual quantity of TSCĐ is determined based on the actual inventory data of the transferred power grid.

- The unit price of each TSCĐ of the military power grid is calculated according to the actual unit price of the same type of asset at the time of transfer as stipulated in Decision No. 84/1999/QĐ-BCN dated December 16, 1999 of the Minister of Industry (now the Ministry of Industry and Trade) promulgating the Construction Cost Index for Rural Medium Voltage Power Grids. New assets constructed or purchased from 2003 onwards are valued based on the final settlement value or the actual cost incurred for construction or purchase of the asset.

- The remaining quality of each TSCĐ (%) is determined by both the transferring and receiving parties based on the depreciation rate consistent with the provisions of Decision No. 206/2003/QĐ-BTC dated December 12, 2003 of the Minister of Finance regarding the management, use, and depreciation of tangible fixed assets.

2.2 In the case where medium voltage power lines and substations have been fully depreciated, the remaining quality is determined by both parties based on the actual situation (%), but the minimum remaining value ratio should not be less than 10%.

3. Determining the structure of capital sources for construction projects

Based on the power grid documents (investment decision, technical design, approved total budget estimate, acceptance report, approved final account report, etc.) and accounting records to determine the total investment capital, classify each source of capital as a basis for handling capital and assets when transferring as follows:

3.1 Capital originating from the State budget, defense budget, and untraceable origin capital.

3.2 Borrowed capital and other payable amounts of military units.

For joint investment projects where the military power grid is only a component of the project, it is necessary to clearly determine the investment capital of the military power grid in the entire project before determining the investment capital by source.

4. Approval of the remaining value of the military power grid

After conducting an inventory and determining the actual remaining value of the transferred military power grid according to the regulations of the State and the guidance provided in this Circular, the military units and electricity companies shall submit to the Ministry of National Defense and Vietnam Electricity Corporation for review and confirmation. The Ministry of National Defense will coordinate with Vietnam Electricity Corporation to compile all transfer documents and send them to the Ministry of Finance for decisions on increasing, decreasing capital, and refunding capital for the military power grid that has been transferred.

5. Costs for the transfer and receipt activities of power grid assets

For costs related to the work associated with the transfer and receipt activities (travel expenses, accommodation, working expenses, etc.), the agencies sending staff to participate in these activities are responsible for settling according to the prescribed regulations. The costs for printing documents, meetings, etc., are the responsibility of the receiving party.

III. REFUND OF CAPITAL AND SOURCES OF REFUNDED CAPITAL IN THE TRANSFER AND RECEIPT OF MILITARY POWER GRIDS

1. Principles for handling assets and refunding capital

Part on the value of military power grid projects handed over shall be determined uniformly by the transferring and receiving parties as follows:

1.1. In cases where the power grid being transferred has been invested with funds from state budget sources, defense budget funds, and funds of unknown origin when handing over,: at the time of transfer, the receiving party shall increase assets and state budget capital according to the actual remaining value, while the transferring party shall decrease assets and capital according to the book value. Upon receipt of the formal approval decision of the Ministry of Finance, both parties shall adjust their accounting books (if there is any discrepancy).

1.2 In the case where the power grid being transferred has been invested using borrowed funds or 1.2 In cases where the power grid being transferred has been invested with borrowed funds or other payable amounts from military units investing in the power grid,: if there are sufficient documents as stipulated at Point d, Clause 1.1, Section II and has been reviewed and approved according to Clause 4, Section II of this Circular; the receiving party shall repay the outstanding loan amount to the transferring party (the maximum amount not exceeding the remaining asset value after revaluation), and simultaneously record an increase in business capital from the state budget for the difference between the revalued received asset value and the repayment amount to the transferring party (if any).

2. Source of repayment funds

The receiving party shall use the basic depreciation fund extracted from the military power grid assets to repay the transferring party. In cases where the aforementioned basic depreciation fund is insufficient to repay the loan of the transferred power grid, electricity units may increase the depreciation rate compared to the prescribed regulations for the received assets to have sufficient funds to repay the debt within two years. Each year, electricity units shall register increased depreciation with the local tax authority to implement it.

3. Method of repayment

The receiving party shall directly repay the transferring party, specifically, Electricity Companies, provincial and city Electricity Units under EVN shall directly repay capital to the military units directly transferring the power grid.

IV. ORGANIZATION OF HANDOVER AND MANAGEMENT AND REPAYMENT OF MILITARY POWER GRID CAPITAL

1. Handover and management operation of power grid and repayment of capital

The handover and management operation of power grid and repayment of capital include two stages:

1.1. Handover and management operation stage: After completing all relevant documents and finishing the remaining value determination document, the transferring and receiving parties shall agree on the time to organize the handover meeting. The handover meeting participants include:

a) Representatives of the transferring and receiving parties;

b) Members of related agencies of both parties;

c) Representatives of the witnessing agencies of both parties (Military side is the General Logistics Department, Electricity side is EVN);

d) In cases where the handover involves land for constructing the power system, representatives of local authorities and land administration agencies shall also be present.

After completing the handover, the receiving party becomes the owner managing the power system that has been received.

1.2. Capital repayment stage: the receiving party repays capital to the transferring party after receiving the decision of the Ministry of Finance.

2. Procedure for handover and repayment of capital

2.1. Electricity Companies, provincial and city Electricity Units, and military units with power grids to be transferred shall unify plans and organize the implementation of handover; report the results of handover to the Ministry of Defense and EVN.

2.2. After all units complete the handover of military power grids within the specified timeframe, the Ministry of Defense will lead and coordinate with EVN to review and compile all handover documents, submit them to the Ministry of Finance for decisions on increasing or decreasing capital for the receiving and transferring parties, and approve the repayment of capital for the transferred military power grids.

V. IMPLEMENTATION

1. The Ministry of Defense directs military units; the Vietnam Electricity Corporation directs Electricity Companies, provincial and city Electricity Units to organize the handover, management, and operation of military power grids during the period from 2007 to December 31, 2008 (for power grid projects invested before August 1, 2007).

2. For military power grid projects invested from August 1, 2007 onwards, the Ministry of Defense directs subordinate units responsible for notifying and unifying investment construction plans with local electricity units to implement handover and management after completion of investment.

3. This Circular takes effect 15 days after its publication in the Official Gazette. During implementation, if any issues arise, the transferring and receiving parties shall report to the Ministry of Finance, the Ministry of Defense, and the Ministry of Industry and Trade for timely coordination and resolution.

APPENDIX 1:

RECORD OF DETERMINATION OF THE REMAINING VALUE OF TRANSFERRED ELECTRICITY PROJECTS
(Attached to Joint Circular No. 160/2007/TTLT/BTC-BQP-BCT dated December 31, 2007 of the Ministry of Finance - Ministry of Defense - Ministry of Industry and Trade)

RECORD

INVENTORY AND DETERMINATION OF THE REMAINING VALUE AND SOURCE OF INVESTMENT FUNDS FOR TRANSFERRED ELECTRICITY PROJECTS

Project Name: ...

Location: ...

Today, the ... day of ... month of 200...

WE ARE COMPOSED OF:

TRANSFER TEAM: ...

1- Mr.: ...; Position: ...

2- Mr.: ...; Position: ...

3- Mr.: ...; Position: ...

RECEIVING TEAM: ...

1- Mr.: ...; Position: ...

2- Mr.: ...; Position: ...

3- Mr.: ...; Position: ...

We have conducted an inventory and determination of the remaining value of high and medium voltage power grids and substations of the unit:...

1. Determination of quantity and value of assets to be transferred

Total amount (in words): ...................................................

2. Determination of the source of investment funds for the transferred power grid project and the amount of capital the receiving party must repay:

................................................................................................................................................................

ANNEX 2:

RECORD OF HANDOVER OF MILITARY POWER GRID

RECORD

HANDOVER OF MILITARY POWER GRID

- Based on Decree No. 14/1998/NĐ-CP dated March 6, 1998 of the Government on the management of state assets;

- BASED ON Circular No. 373/TTg-CN dated March 27, 2007 of the Prime Minister regarding the transfer of power grids of units under the Ministry of National Defense to Vietnam Electricity Corporation;

- BASED ON Joint Circular No. 160/2007/TTLT/BTC-BQP-BCN dated December 31, 2007 of the Ministry of Finance, Ministry of Industry, and Ministry of National Defense guiding the transfer, receipt, and repayment of military power grid capital;

- BASED ON original documents as prescribed established at the time of transferring medium and high voltage transmission line projects of military units, which have been confirmed by …

Today, on …of …in 200…at …

The handover meeting of military power grids between the Electricity Company …

A- TRANSFEROR: .............................................................

1- Mr. …Position …

2- Mr. …Position …

B- TRANSFEREE: .............................................................

1- Mr. …Director of the Company

2- Mr. …Chief Accountant

3- Mr. …Head of Power Department

4- Mr. …Branch Manager

5- Mr. …Regional Power Monitoring Officer

.............

After inspecting relevant documents and the actual conditions of the existing medium and high voltage transmission lines and substations of unit …, both parties have agreed on the following contents of the handover of the power grid:

I- DOCUMENTS FOR HANDOVER OF THE POWER GRID:

1- Original Documents:

 a- Land documents: …

- .......................................................................................

b- Power system documents:

- .......................................................................................

2- Documents prepared at the time of handover:

a- Current site plan …copies.

b- Single-line diagram …copies.

c- Right-of-way for power lines and substation site plan (with confirmation from the Provincial People's Committee on land allocation if applicable) …copies.

d- Inventory and valuation record of remaining value of military power grid assets.

3- Remaining actual value and analysis of the remaining actual value at the time of handover.

- Remaining value of power grid assets is: …Million VND

Of which: + Substations …Million VND

 + Transmission lines …Million VND

4- Determination of capital and sources of investment in the project:

The total remaining value of power grid assets transferred is: …Million VND.

 Where:

- Capital from the State budget: …Million VND.

- Untraceable source capital: …Million VND.

- Borrowed or raised from other sources …Million VND

*  The capital that the transferee will repay to the military unit is: …Million VND.

II- OPINIONS OF BOTH TRANSFEROR AND TRANSFEE

........................................................................................................................

This record is made in ten copies, each party receiving five copies, to be kept and sent to the heads and related agencies of each party.