. . . . . . . ■ ■ ■ ■ . ■ ■ _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 ■ ■ . 2019→06-2 8 ■ ■ ■ . ■ ■ . . ■ ■ . ■ SOUTHERN POWER CORPORATION Distribution Efficiency Project Financing Agreement No. Cr. 5156-VN Grant 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 16-17 INTERNAL CONTROL T1 PART III INDEPENDENT AUDITOR'S ASSURANCE REPORT ON COMPLIANCE 18 Statement of the Executive Management on Compliance 19-20 Independent Auditor's Assurance Report on Compliance PARTIV MANAGEMENT LETTER 21-22 ANNEXI PROJECT IMPLEMENTATION PROGRESS AND 23-24 WITHDRAWAL PROGRESS . , . . . , • . , • . •PARTI • 一FINANCIAL STATE閱ENTS 個日 . • . • . . 口 ■ 目 - . ■ 潤 . . . ■ . . • SOUTHERN POWER CORPORATION Distribution Efficiency Project Financing Agreement No. Cr. 5156-VN Grant Agreement No. TF013456-VN STATEMENT OF THE BOARD OF MANAGEMENT The Board of Management of Southern Power Corporation ("SPC") presents this report together with 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 the year 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 Officer Mr. Nguyen Cong Hau Executive Officer Mr. Lam Xuan Tuan Executive Officer Mr. 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 the Project, which comprise the balance sheet as at 31 December 2018, the statement of sources and uses of funds, statement of designated account, and statement of withdrawals for the year then ended and notes to the financial statements, including a summary of significant accounting policies, which give a true and fair view of the financial position of the Project and its designated account balance as at 31 December 2018 as well as 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 and the covenants contained in Financing Agreement No. Cr. 5156-VN and Grant Agreement No. TF013456-VN. In preparing these 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 material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Project will continue in operation; and design and maintain effective internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as over financial reporting for the purpose of properly preparing and presenting the financial statements so as to minimise errors and frauds; and take responsibility for its assertions as to 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 and that 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. The Board of Management is responsible for using the Project's funds as intended for the Project 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 of Management is also responsible for safeguarding the assets of the Project and hence for taking reasonable steps for the prevention and detection of frauds and other irregularities. 2 SOUTHERN POWER CORPORATION Distribution Efficiency Project Financing Agreement No. Cr. 5156-VN Grant Agreement No. TFO13456-VN REPORT OF THE BOARD OF MANAGEMENT (Continued) The Board of Management confirms that they have complied with the above requirements in preparing these financial statements. For on behalf of the Board of Management, Nguyen Phuoc Duc Chief 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, Vietnam Tel :+844 6288 3568 Fax:+844 6288 5678 www.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 - Financing Agreement No. Cr. 5156-VN and Grant Agreement No. TF013456-VN - Portion implemented by Southern 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 Project in 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 * Deloitte U INDEPENDENT AUDITORS' REPORT (Continued) In preparing the financial statements, management is responsible for assessing the Project's ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless management either intends to liquidate 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 a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor'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 on Auditing (ISAs) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain 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 for one 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 audit procedures that are appropriate in the circumstances. * Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Project's ability 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 the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates, if any, and related disclosures made by management. We communicate with the Chairman and the Board of Management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Tran Xuan Anh Pham Quynh Hoa Deputy General Director Auditor Audit Practising Registration Certificate Audit Practising Registration Certificate No. 0723-2018-001-1 No. 0910-2018-001-1 DELOITTE VIETNAM COMPANY LIMITED 26 June 2019 Hanoi, S.R. Vietnam 5 SOUTHERN POWER CORPORATION Distribution Efficiency Project Financing Agreement No. Cr. 5156-VN Financial statements Grant Agreement No. TF013456-VN For the year ended 31 December 2018 BALANCE SHEET As at 31 December 2018 Notes 31/12/2018 31/12/2017 VND 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 253,095,577,463 264,824,489,978 Payments to suppliers 6 38,428,632,351 44,399,756,391 Other receivables 758,752,227 3,321,548,670 Cash 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 2,850,212,290,913 IDA fund 8 2,219,835,500,000 2,219,835,500,000 Grant from Australian Trust Fund 9 4,196,439,866 4,196,439,866 Counterpart fund 686,930,666,855 613,818,848,005 Foreign exchange reserve 10 16,932,944,264 12,361,503,042 Current liabilities 140,674,081,403 133,458,864,625 Trade 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 ITEMS 31/12/2018 31/12/2017 Foreign currencies -USD 9,238,078 9,578,786 Cong Thi Thuy Van Thai Phong Linh Nguyen Phuoc Duc Preparer Deputy Director of Finance Chief Executive Officer and Accounting Department 26 June 2019 The accompanying notes are an integral part of these financial statements 6 6 � � и у,� � � � ы о и и v г� м�.n гs, ^ , ^ � и и С� г о �°о й гил ш v- и и м� и гч т и � ь- tr и v и гч �.,� rn а, рр и � о N . `'� о г��' �tDn � `гч° .�-� м п м '� ° N `� � �.: ,°д и �r � ° и о �r м и ° а°�-` °' � 1' и�.ci о` � ai й й ic сл rv ы � С1 С �`+ м rn м со м v и о и д' � о гл � У S] J й и rn и о � о и м ° 'й о т` � й о �°h' `r й�"� ^ .м- °� м � о м ((� н гч ш н rn.--г и'-' •-• di rn N г. ,ч N N N � U N N` L � '� °i й � � и , , и � са 'i � � � � � о � , N , , , , � , 0 О СМ N .� � � ео`� v �f� ш V � lD � lD М W V � � � Q� � Q� Q� О � i.! � � Ш � OQ �ш � г�Л С � � ... � � U L о � tD t0 , , ' ' . �а � � . 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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 Duc Preparer Deputy Director of Finance Chief Executive Officer 26 lune 2019 and Accounting Department The accompanying notes are an integral part of these financial statements � � и ор с `i °„' � г� г � � О с � L � � а� � а�., у � i , и � _ ■ � � i L а� �, _ � w_ й � � =м ° Up ш� = ш v°� � °v �� � � °� о с � п- � �'++ Ф � � и .-i � л s 7 � � .� а � о °� с о. у у � ,-� � = к � °°v а� ш w � � а� s ,_ � аэ � Е ! ' G� s L й _ �. . . . � . . 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С1 � � ,'С v � о ,° ■ т U � � > � г � а 4 __ г �j а �'�о � О и � о, н .i �р ш �{,ии � � � � °7, с� ,м-� = гсо О �о д о ° а L О с� L и и v О�. г F о v � о � � = о � и U V т � � ау�г " а... °' о � � 9- fO ,., о f0 С 3 и Ф= R ° с � > oi r�'„ Ф у � о л с ■ а с Q � г�а � о � s � � а � �-, � � ш�=� s � �� _� " Е х.а й а 3 �� F� � о �+L+ fC = •й м' го С в 1 � � йо�с� г° с л � v°а` ° ti � �� � � � SOUTHERN POWER CORPORATION Distribution Efficiency Project Financing Agreement No. Cr. 5156-VN Financial statements Grant Agreement No. TF013456-VN For the year ended 31 December 2018 NOTES TO THE FINANCIAL STATEMENTS These 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, Loan Agreement No.TF013468-VN and Grant Agreement No. TF013456-VN signed on 08 November 2012 between the Government of Socialist Republic of Vietnam and the International Development Association/International Bank for Reconstruction and Development. The objective of Distribution Efficiency Project is to improve the performance of the Recipient's power Corporations in providing quality and reliable electricity services and to reduce 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 electricity distribution 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 acquisition systems, of electricity distribution network operations of and data collection by the Power Corporations. Introduction of advanced metering infrastructure systems, including two-way communication systems, as electricity smart grid technologies for key substations and consumers of selected Power Corporations. Part C: Technical Assistance and Capacity Building Provision of technical assistance to and capacity building of the Electricity Regulatory Authority of Vietnam for improvement of efficiency in electricity tariffs, enhancement of efficiency and incorporation of smart grid technologies in the grid and distribution codes, integration of renewable energy in the grid and distribution codes, development of demand response and smart grid programs, and project management and monitoring and evaluation. Provision of technical assistance to the Power Corporations for: (i) Effective and timely Project implementation, capacity building in relation to financial modeling and planning, and carrying out of customer surveys and instuting of other such measures to improve customer satisfaction; and (ii) Implementation of advanced metering infrastructure systems carrying out of programs promoting efficient electricity use such as a customer awareness campaign and demand response programs, and project monitoring and evaluation. The Distribution Efficiency Project - Financing Agreement No. Cr. 5156-VN and Grant Agreement No. TF013456-VN - Portion implemented by Southern Power Corporation (the "Project") is implemented under Sub- loan/Sub - grant agreements signed between Southern 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 SDR 297,700,000, USD 30,000,000 and AUD 7,600,000, and counterpart fund. The IDA fund and Australian Trust Fund for portion implemented by SPC are within USD 102,000,000 and USD 300,000, respectively. The Project was completed on 31 December 2018. The Financing Agreement was closed on 30 April 2019. 10 SOUTHERN POWER CORPORATION Distribution Efficiency Project Financing Agreement No. Cr. 5156-VN Financial statements Grant Agreement No. TF013456-VN For the year ended 31 December 2018 NOTES TO THE FINANCIAL STATEMENTS (Continued) 2. ACCOUNTING CONVENTION AND FINANCIAL YEAR Accounting convention The accompanying financial statements, prepared under the historical cost convention, are expressed in Vietnam Dong (VND), except for the statement of designated account and statement of withdrawals which are expressed in original currencies. The financial statements are prepared on the going concern basis of accountings in accordance with the requirements of World Bank and the accounting policies set out in Note 3 of the Notes to financial statements which are set up in conformity with the measurement and recognition criteria of Vietnamese Accounting Standards and accounting regime applicable to enterprises. 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 the preparation 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 exchange rate ruling at the transaction date. Closing balances of assets and liabilities denominated in foreign currencies are retranslated at the rate of commercial bank at the balance she date. Foreign exchange differences are neither receipts nor disbursements. However, foreig) exchange differences are presented in a separate item on the statement of sources and uses of funds for the purpose of reconciling assets and liabilities balances in the balance sheet, 4. DESIGNATED ACCOUNTS Designated accounts are deposit accounts opened at commercial banks for implementation of the Project's activities. Under the Project Appraisal Document, the implementing unit opens two designated accounts to receive and manage funds from IDA and Australian Trust Fund. Designated accounts under Financing Agreement No. Cr. 5156-VN and Grant Agreement No. TF013456-VN are deposit accounts in USD opened at Joint Stock Commercial Bank for Foreign Trade of Vietnam - Ho Chi Minh City Branch for implementation of the Project's activities. Payments out of the designated accounts are for expenditures in accordance with the relevant covenants of Financing Agreement No. Cr. 5156-VN and Grant Agreement No. TF013456-VN and relevant regulations established by the World Bank. No transactions occurred via the designated account for Grant Agreement No. TF013456-VN during the year. 11 SOUTHERN POWER CORPORATION Distribution Efficiency Project Financing Agreement No. Cr. 5156-VN Financial statements Grant Agreement No. TF013456-VN For the year ended 31 December 2018 NOTES TO THE FINANCIAL STATEMENTS (Continued) 5. PROJECT IMPLEMENTING EXPENDITURES 2018 Accumulated to 31/12/2018 VND VND Constructions 62,676,358,074 975,255,266,811 Equipment 284,849,284 1,356,697,761,776 Training - 4,196,439,866 Other 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 31/12/2017 VND VND Can Tho Land Development Centre 15,174,890,534 14,858,746,005 VNECO9 Power Engineering JSC 5,321,343,756 5,321,343,756 Hau Giang Land Development Centre 5,205,787,956 2,441,485,945 FIS & L+G Joint Venture 3,406,173,061 3,406,173,061 Hong Truong Power Construction JSC 2,073,295,681 2,073,295,681 RTE International 1,530,943,406 1,530,943,406 Land Development Centre 853,903,670 1,816,429,167 Dong Nai Land Development Centre - Bien Hoa branch 851,623,740 2,427,442,280 Southern Electrical Testing Company 632,808,360 1,021,143,304 Dong Nai Power One-member Co., Ltd 469,567,043 469,567,043 Power Engineering Consulting ISC No. 2 188,280,231 188,280,231 VACO Auditing Co., Ltd 129,075,395 168,887,195 Southern Power Consulting One-member Co., Ltd 119,248,433 119,248,433 Power Construction One-member Co., Ltd No. 2 6,688,812 6,688,812 Kien Giang Power Company 5,297,389 5,297,389 Binh Duong Construction and Public Service JSC - 5,034,624,000 Hanoi Power Construction JSC - 1,164,120,211 Sal Gon Thang Long JSC - 59,211,000 Others 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 represent advances using the counterpart fund for constructions which were still in implementation as at 31 December 2018. SPC intends to use the counterpart fund to continue to implement these contracts. 7. CASH 31/12/2018 31/12/2017 VND 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 31/12/2018 Original 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 12 SOUTHERN POWER CORPORATION Distribution Efficiency Project Financing Agreement No. Cr. 5156-VN Financial statements Grant Agreement No. TFO13456-VN For the year ended 31 December 2018 NOTES TO THE FINANCIAL STATEMENTS (Continued) 9. GRANT FROM AUSTRALIAN TRUST FUND 2018 Accumulated to 31/12/2018 *VNDVN Currency Original currency equivalent Original currency equivalent USD - 130,000 2,893,800,000 VND - 1,302,639,866 1,302,639,866 -_ 4,196,439,866 10. FOREIGN EXCHANGE RESERVE 31/12/2018 31/12/2017 VND VND Realised foreign exchange difference 3,758,953,336 3,738,511,005 Unrealised foreign exchange difference from revaluation of cash 13,173,990,928 8,622,992,037 balance denominated in foreign currencies 16,932,944,264 12,361,503,042 11. PAYABLES TO SUPPLIERS 31/12/2018 31/12/2017 VND VND Siemens Company 51,020,468,190 59,634,240,824 FTP Information System Co., Ltd 34,175,580,829 Hanoi Power Construction JSC 12,179,127,559 1,016,987,527 Nha Trang Concrete Company 11,093,295,252 11,093,295,252 Ngoc Phuong One Member Co., Ltd 7,119,468,740 7,119,468,740 Thai Binh Duong JSC 5,132,861,968 4,884,253,758 No 2 Power Construction Company Limited. 3,658,351,615 1,166,102,798 Power Consultant Investment and Construction JSC No.5 2,837,437,267 2,837,437,267 VNECO9 Power Construction JSC 2,461,664,331 1,298,825,416 LICOGI 16 ISC 2,372,334,872 2,372,334,872 Saigon Electrical Equipment JSC 1,225,196,950 4,544 Southern Power Consulting One-member Co., Ltd 902,171,067 816,602,288 Southern Power Corporation 853,756,637 979,818,104 Resources and Environment Technology Center 277,026,201 277,026,201 HANGZHOU (QRE) 217,557,063 217,557,063 Thinh Phat Land and Cable JSC 112,614,726 112,614,726 ABB Co., Ltd 30,000,000 30,000,000 Dong Nai Land Development Centre - - 7,172,461,984 Long Thanh Branch Southern Electrical Testing Company - 2,652,655,040 Power Construction JSC No. 1 - 10,772,346 Hal Van Nam Co., Ltd - 92,400 Others 5,005,168,136 5,010,306,363 140,674,081,403 108,702,857,513 13 U SOUTHERN POWER CORPORATION Distribution Efficiency Project Financing Agreement No. Cr. 5156-VN Financial statements Grant 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 31/12/2017 VND 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 was approximately 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 by the counterpart fund. List of related parties Relationship Southern Power Corporation The Corporation Kien Giang Power Company Under SPC's management Southern Power Consulting One-member Co., Ltd Under SPC's management Southern Electrical Testing Company Under SPC's management Binh Thuan Power Company Under SPC's management Southern Grid Company Under SPC's management Tra Vinh Power Company Under SPC's management Dong Nai Power Company Under SPC's management During the year, the Project entered into the following significant transactions with related parties: Purchases of goods and service: 2018 2017 VND VND Southern Electrical Testing Company 4,464,710,867 25,957,970,706 Tra Vinh Power Company 35,821,775 1,934,293,382 Binh Thuan Power Company 4,459,665 - Binh Duong Power Company - 5,034,624,000 Southern grid Company - 661,460,065 Southern Power Consulting One-member Co., Ltd - 243,948,201 Can Tho Power Company - 69,407,228 Southern Power Corporation 53,586,720 Long An Power Company - 44,449,000 An Giang Power Company - 23,762,284 Lam Dong Power Company - 8,972,000 Ca Mau Power Company - 6,000,000 Dong Thap Power Company - 898,982 14 SOUTHERN POWER CORPORATION Distribution Efficiency Project Financing Agreement No. Cr. 5156-VN Financial statements Grant 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 suppliers 31/12/2018 31/12/2017 VND VND Southern Power Consulting One-member Co., Ltd 902,171,067 816,602,288 Southern Power Corporation 853,756,637 979,818,104 Southern Grid Company 344,771,285 129,323,872 Kien Giang Power Company 319,064,140 319,064,140 Southern Electrical Testing Company - 2,652,655,040 Tra Vinh Power Company - 613,123,716 Prepayments to suppliers 31/12/2018 31/12/2017 VND VND Southern Electrical Testing Company 632,808,360 1,021,143,304 Dong Nai Power Company 469,567,043 469,567,043 Kien Giang Power Company 246,015,800 246,015,800 Southern Power Consulting One-member Co., Ltd 119,248,433 119,248,433 Binh Thuan Power Company - 4,459,665 15. COMPARATIVE FIGURES Comparative figures are the figures in the Project's audited financial statements for the year ended 31 December 2017. Cong Thi Thuy Van Thai Phong Linh Nguyen Phuoc Duc Preparer Deputy Director of Finance Chief Executive Officer and Accounting Department 26 June 2019 15 II II II II II II U ARI IIAR I IINEEDN UIORSASRNERPR ONITENLCOTO II II Deloitte Vietnam Company Ltd. 15thFloor, Vinaconex Tower, DLo itte 34 Lang Ha Street, Lang Ha Ward, Dong Da District, Hanoi, Vietnam Tel :+84 24 6288 3568 Fax:+84 24 6288 5678 Website: www.deloitte.com/vn REPORT OF INDEPENDENT AUDITORS ON 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 financial statements of the Distribution Efficiency Project - Financing Agreement No. Cr.5156-VN and Grant 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 report thereon 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 the effectiveness of internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as of internal control over financial reporting, 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 of Management is responsible for designing and maintaining effective internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as over financial reporting for the purpose of properly preparing and presenting the financial statements so as to minimise errors and frauds; and take responsibility 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 s for Professional Accountants issued by the International Ethics Standards Board Accountants, which is founded on fundamental principles of integrity, objectivity, professio competence 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 procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Auditor's Responsibilities Our responsibility is to express an opinion on the effectiveness of internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as internal control over financial reporting based on our examination based on the evidence we have obtained. We conducted our reasonable assurance engagement 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. That standard requires that we plan and perform this engagement to obtain reasonable assurance about whether, in all material respects, the management has maintained effective internal control over compliance with the requirements that could have a direct and material financial effect 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 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. 16 W * Deloitte INDEPENDENT AUDITOR'S ASSURANCE REPORT ON INTERNAL CONTROL (Continued) Our examination included obtaining an understanding of internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as of internal control over financial reporting, testing, and evaluating the design and operating effectiveness of the internal control, and performing such other procedures as we considered necessary in the circumstances to obtain sufficient appropriate evidence on which to base our opinion. Because of inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not to be detected. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are 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 basis for our opinion. Opinion In our opinion, the Board of Management has maintained, in all material respects, effective internal control over compliance with requirements that could have a direct and material financial effect on the Project's financial statements as well as over financial reporting for the year ended 31 December 2018. Tran-Xuan Anh Pham Quynh Hoa Deputy General Director Auditor Audit Practising Registration Certificate Audit Practising Registration Certificate No. 0723-2018-001-1 No. 0910-2018-001-1 DELOITTE VIETNAM COMPANY LIMITED 26 June 2019 Hanoi, S.R. Vietnam 17 U U U U U U U U U U U * PART III U INDEPENDENT AUDITOR'S ASSURANCE REPORT * ON COMPLIANCE U U U U U * TR U U U U U U U U U U U U U U W SOUTHERN POWER CORPORATION Distribution Efficiency Project Financing Agreement No. Cr. 5156-VN Grant 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 with Financing Agreement No. Cr. 5156-VN and Grant Agreement No. TF013456-VN, laws and regulations applicable to the Project; * The Project has complied with Financing Agreement No. Cr. 5156-VN and Grant Agreement No. TF013456-VN, laws and regulations that could have a direct and material financial effect 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 31 December 2018 are in accordance with the relevant covenants of Financing Agreement No. Cr. 5156-VN and Grant Agreement No. TF013456-VN and prevailing relevant regulations established 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 and those 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 Duc Chief Executive Oficer / 26 June 2019 18 Deloitte Vietnam Company Ltd. D5thFloor, Vinaconex Tower, SD elo itte 34 Lang Ha Street, Lang Ha Ward, Dong Da District, Hanoi, Vietnam Tel :+84 24 6288 3568 Fax:+84 24 6288 5678 Website: 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 financial statements of the Distribution Efficiency Project - Financing Agreement No. Cr. 5156-VN and Grant Agreement TF013456-VN-Portion implemented by Southern Power Corporation (the "Project") for the year ended 31 December 2018 and issued the independent auditors' report thereon 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 the Project'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 the Project'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 Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality, and professional behavior. We apply International Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Auditor's Responsibilities Our responsibility is to express an opinion on Project's compliance based on the evidence we have obtained. We limited our tests of compliance to the requirements, and we did not test compliance with all laws and regulations applicable to the Project. We conducted our reasonable assurance engagement 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. That standard requires that we plan and perform this engagement to obtain reasonable assurance about whether, in all material respects, the Project has complied with the requirements. An reasonable assurance engagement in accordance with ISAE 3000 to report on the Project's compliance with the requirements involves performing procedures to obtain evidence about whether 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 compliance with the requirements. The procedures selected depend on the auditor's judgment, including the assessment of risks that the Project does not comply with the requirements and whether such noncompliance could have a direct and material financial effect on the Project's financial statements. Our procedures included testing the compliance with the requirements that we consider necessary to provide reasonable assurance that the requirements are complied by the Project. U 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 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. 19 Deloitte INDEPENDENT AUDITOR'S ASSURANCE REPORT ON COMPLIANCE (Continued) We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for 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 direct and material financial effect 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 31 December 2018 are in accordance with the relevant covenants of Financing Agreement No. Cr. 5156-VN and Grant Agreement No. TF013456-VN and prevailing relevant regulations established 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 and those 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 Hoa Deputy General Director Auditor Audit Practising Registration Certificate Audit Practising Registration Certificate No. 0723-2018-001-1 No. 0910-2018-001-1 DELOITTE VIETNAM COMPANY LIMITED 26 June 2019 Hanoi, S.R. Vietnam 20