world bank documentdocuments.worldbank.org/curated/en/.../fy19-project...deloitte w northern power...

Deloitte

W NORTHERN POWER CORPORATION

W DISTRIBUTION EFFICIENCY PROJECTFinancing Agreement No. Cr.5156-VNLoan Agreement No. TFO13468-VNGrant Agreement No. TF013456-VN

AUDITED FINANCIAL STATEMENTS,ASSURANCE REPORTS ANDMANAGEMENT LETTER

For the year ended 31 December 2018

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NORTHERN POWER CORPORATIONDistribution Efficiency ProjectFinancing Agreement No. Cr.5156-VNLoan Agreement No. TF013468-VNGrant Agreement No. TF013456-VN

g TABLE OF CONTENTS

CONTENTS PAGE(S)

PARTI FINANCIAL STATEMENTS

Statement of the Board of Management 2

Independent Auditor's Report 3 - 4

Balance Sheet 5

Statement of Designated Accounts 6- 7

Statement of Sources and Uses of Funds 8

Statement of Withdrawals 9 -10

Notes to the Financial Statements 11-16

PART II INDEPENDENT AUDITOR'S ASSURANCE REPORT ON 17 - 18INTERNAL CONTROL

PART III INDEPENDENT AUDITOR'S ASSURANCE REPORT ON COMPLIANCE

Statement of the Board of Management on Compliance 19

Independent Auditor's Assurance Report on Compliance 20 - 21

PARTIV MANAGEMENT LETTER 22-23

ANNEXI PROJECT IMPLEMENTATION PROGRESS AND WITHDRAWAL 24-27PROGRESS

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NORTHERN POWER CORPORATION

Distribution Efficiency ProjectFinancing Agreement No. Cr.5156-VNLoan Agreement No. TF013468-VNGrant Agreement No. TF013456-VN

STATEMENT OF THE BOARD OF MANAGEMENT

The Board of Management of Northern Power Corporation ("NPC") presents this report together with thefinancial statements of the Distribution Efficiency Project - Financing Agreement No.Cr.5156-VN, LoanAgreement No. TF013468-VN and Grant Agreement No. TF013456-VN - Portion implemented by NPC (the"Project") for the year ended 31 December 2018.

The Chairman and the Board of Management

The Chairman and the members of the Board of Management of NPC who held office during the year andto the date of this report are as follows:

Mr. Thieu Kim Quynh Chairman cum General Director

Mr. Du Cao Minh Executive Officer

Ms. Do Nguyet Anh Executive Officer

Mr. Le Minh Tuan Executive Officer

Mr. Ho Manh Tuan Executive Officer

Mr. Le Quang Thai Executive Officer

Board of Management's Statement of Responsibility

The Board of Management is responsible for preparing the financial statements of the Project, whichcomprise the balance sheet as at 31 December 2018, the statements of designated accounts, statementof sources and uses of funds, statement of withdrawals for the year then ended and the Notes to thefinancial statements, including a summary of significant accounting policies, which give a true and fairview of the financial position of the Project and its designated account balances as at 31 December 2018,as well as its receipts, disbursements and expenditures, designated account movements and fundwithdrawals for the year then ended, in accordance with the accounting convention and the accountingpolicies set out in Note 2 and Note 3 of the notes to the financial statements and the covenants containedin Financing Agreement No.Cr.5156-VN, Loan Agreement No.TF013468-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 departuresdisclosed and explained in the financial statements;prepare the financial statements on the going concern basis unless it is inappropriate to presume thatthe Project will continue in operation; anddesign and maintain effective internal control over compliance with requirements that could have adirect 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 errorsand 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, whvchdisclose, with reasonable accuracy at any time, the financial position of the Project and that the financialstatements comply with the accounting convention and the accounting policies set out in Note 2 and Note3 of the notes to the financial statements. The Board of Management is responsible for using the Project'sfunds as intended for the Project and for complying with Financing Agreement No.Cr.5156-VN, LoanAgreement No. TF013468-VN and Grant Agreement No. TF013456-VN as well as laws and regulationsapplicable to the Project. The Board of Management is also responsible for safeguarding the assets of theProject and hence for taking reasonable steps for the prevention and detection of frauds and otherirregularities.

The Board of Management confirms that they have complied with the above requirements in preparingthese financial statements.

For and on behalf,of the Board of Management,

Th'eu Kim QLI*nhGeneral Viiector

Hanoi, 27 lune 2019

2

Deloitte Vietnam Company Ltd.15thFloor, Vinaconex Tower,SD l t34 Lang Ha Street, Lang Ha Ward,Dong Da District, Hanoi, VietnamTel :+84 24 6288 3568Fax:+84 24 6288 5678Website: www.deloitte.com/vn

No.: 00 /VN1A-HN-BC

INDEPENDENT AUDITOR'S REPORT

To: The Board of Management of Northern Power Corporation

Opinion

We have audited the financial statements of the Distribution Efficiency Project - Financing Agreement No.Cr.5156-VN, Loan Agreement No. TF013468-VN and Grant Agreement No. TF013456-VN - Portionimplemented by Northern Power Corporation (the "Project), which comprise the balance sheet as at 31December 2018, the statements of designated accounts, statement of sources and uses of funds,statement of withdrawals for the year then ended, and the notes to the financial statements, including asummary of significant accounting policies.

In our opinion, the accompanying financial statements give a true and fair view of the financial position ofthe Project and its designated account balances as at 31 December 2018, and of its receipts,disbursements and expenditures, the designated account movements and fund withdrawals for the yearthen ended, in accordance with the accounting convention and the accounting policies set out in Note 2and Note 3 of the Notes to the financial statements.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Ourresponsibilities under those standards are further described in the Auditor's Responsibilities for the Auditof the Financial Statements section of our report. We are independent of the Project in accordance withthe ethical requirements that are relevant to our audit of the financial statements, and we have fulfilledour other ethical responsibilities in accordance with these requirements. We believe that the auditevidence 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 theaccounting convention and the summary of the significant accounting policies. The financial statementsare prepared in accordance with the accounting convention and the accounting policies set out in Note 2and 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 for the year then endedincluded some expenditures amounting to VND 23,536,798,437 incurred by the Project before theeffective date of the Financing Agreement which have been financed by the counterpart fund (as at 31December 2017: VND 23,536,798,437).

Responsibilities of Management and the Chairman for the Financial Statements

Management is responsible for the preparation of the financial statements in accordance with theaccounting convention and the accounting policies set out in Note 2 and Note 3 of the Notes to thefinancial statements, and for such internal control as management determines is necessary to enable thepreparation of financial statements that are free from material misstatement, whether due to fraud orerror.

In preparing the financial statements, management is responsible for assessing the Project's ability tocontinue as a going concern, disclosing, as applicable, matters relating to going concern and using thegoing concern basis of accounting unless management either intends to liquidate the Project or to ceaseoperations, or has ne realistic alternative but to do so.

The Chairman are responsible for overseeing the Project's financial reporting process.

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 legallyseparate 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.

3

DeloitteINDEPENDENT AUDITOR'S REPORT (Continued)

Auditors' Responsibility for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole arefree from material misstatement, whether due to fraud or error, and to issue an auditor's report thatincludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with International Standards on Auditing (ISAs) will always detect amaterial misstatement when it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence the economicdecisions 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 professionalskepticism throughout the audit. We also:

* Identify and assess the risks of material misstatement of the financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detectinga material misstatement resulting from fraud is higher than for one resulting from error, as fraudmay involve collusion, forgery, intentional omissions, misrepresentations, or the override of internalcontrol.

* Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat 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 orconditions 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'sreport to the related disclosures in the financial statements or, if such disclosures are inadequate, tomodify our opinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However, future events or conditions may cause the Project to cease to continue asa going concern.

* Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by management.

We communicate with the Chairman and the Board of Management regarding, among other matters, theplanned scope and timing of the audit and significant audit findings, including any significant deficiencies

iniLernal contfol that we identify during our audit.

Dang ChiOung Nguyen Thanh HuongDeputy General Director AuditorAudit Practising Registration Certificate Audit Practising Registration CertificateNo. 0030-2018-001-1 No. 1415-2018-001-1

DELOITTE VIETNAM COMPANY LIMITED

27 June 2019Hanoi, S.R. Vietnam

4

NORTHERN POWER CORPORATIONDistribution Efficiency ProjectFinancing Agreement No. Cr.5156-VN Financial statementsLoan Agreement No. TF013468-VN For the year endedGrant Agreement No. TF013456-VN 31 December 2018

BALANCE SHEET

As at 31 December 2018

31/12/2018 31/12/2017

Notes VND VND

ASSETS

Expenditures 4,173,471,320,200 3,928,930,928,962

Project implementing expenditures 5 4,173,471,320,200 3,928,930,928,962

Current assets 29,445,432,221 210,385,169,049

Prepayments to suppliers 6 4,834,505,172 21,804,408,875

Cash 7 24,610,927,049 188,580,760,174

TOTAL ASSETS 4,202,916,752,421 4,139,316,098,011

RESOURCES

Funds 4,161,712,677,759 3,903,046,492,953

IDA fund 8 3,170,862,500,000 3,170,862,500,000

CTF fund 9 152,313,000,000 152,313,000,000

Counterpart fund 824,986,798,515 568,685,268,114

Foreign exchange reserve 10 13,550,379,244 11,185,724,839

Current liabilities 41,204,074,662 236,269,605,058

Payables to suppliers 11 41,204,074,662 236,269,605,058

TOTAL RESOURCES 4,202,916,752,421 4,139,316,098,011

OFF BALANCE SHEET ITEMS 31/12/2018 31/12/2017

Foreign currencies

-USD 1,062,877 8,320,351

Tong Bao Ngoc Le Trong Cuong Thieu Kim QuynhPreparer Project Chief Accountant GeneralDirector

27 June 2019

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The accompanying notes are an integral part of these financial statements

5W


STATEMENT OF DESIGNATED ACCOUNT

(IDA 5156 Fund)Period From 01/01/2018 to 31/12/2018

Account No. :0681370000230

Depository Bank : Joint Stock Commercial Bank for Foreign Trade of Vietnam - Operation Center

Address : 198 Tran Quang Khai, Hoan Kiem District, Hanoi City, Vietnam

Currency unit : USD

AmountPART A: ACCOUNT ACTIVITY

Opening balance (01/01/2018) 7,332,358Add:

- Total amount deposited by the World Bank to the designated account in the year -

Deduct:

- Total amount withdrawn in the year 6,357,817

Closing balance (as at 31/12/2018) 974,541

PART B: ACCOUNT RECONCILIATION

1. Opening advance balance by the World Bank 9,656,373

2. Add: Total amount advanced by the World Bank in the year -

3. Deduct: Total amount claimed and accepted for advance clearance 5,402,327

4. Present outstanding amount advanced to the designated accountas at 31 December 2018 4,254,046

5. Closing balance of the designated account as at 31/12/2018 974,541

6. Add: Amount withdrawn but not yet claimed for advance clearance 3,279,505

7. Present outstanding amount advanced to the designated accountas at 31 December 2018 4,254,046

Tong Bao Ngoc Le Trong Cuong Thieu Kim, QuynhPreparer Project Chief Accountant Gtnral Dfrector

27 June 2019


6

W

WNORTHERN POWER CORPORATIONDistribution Efficiency ProjectFinancing Agreement No. Cr.5156-VN Financial statementsLoan Agreement No. TF013468-VN For the year endedGrant Agreement No. TF013456-VN 31 December 2018

STATEMENT OF DESIGNATED ACCOUNT

(TF013468 Fund)

Period : From 01/01/2018 to 31/12/2018

Account No. :0681370000231

Depository Bank : Joint Stock Commercial Bank for Foreign Trade of Vietnam - Operation Center

Address : 198 Tran Quang Khai, Hoan Kiem District, Hanoi City, Vietnam

Currency unit : USD

AmountPART A: ACCOUNT ACTIVITY

Opening balance (01/01/2018) 987,993

Add:

- Total amount deposited by the World Bank to the designated account in the year -

Deduct:

- Total amount withdrawn in the year 899,657

Closing balance (as at 31/12/2018) 88,336

PART B: ACCOUNT RECONCILIATION

1. Opening advance balance by the World Bank 5,552,792

2. Add: Total amount advanced by the World Bank in the year -

3. Deduct: Total amount claimed and accepted for advance clearance 5,464,456

4. Present outstanding amount advanced to the designated accountas at 31 December 2018 88,336

5. Closing balance of the designated account as at 31/12/2018 88,336

6. Add: Amount withdrawn but not yet claimed for advance clearance -

7. Present outstanding amount advanced to the designated account 88,336as at 31 December 2018

Tong Bao Ngoc Le Trong Cuong Thieu kim QuynhPreparer Project Chief Accountant Geral Director

27 June 2019


7

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NOTES TO THE FINANCIAL STATEMENTSThese notes are an integral part of and should be read in conjunction with the accompanying financial statements

1. GENERALINFORMATION

Distribution Efficiency Project operates under Financing Agreement No.Cr.5156-VN, Loan AgreementNo.TF013468-VN and Grant Agreement No.TF013456-VN dated 08 November 2012 signed betweenthe Government of Socialist Republic of Vietnam and International DevelopmentAssociation/International Bank for Reconstruction and Development.

The objective of Distribution Efficiency Project is to improve the performance of the Recipient's PowerCorporations in providing quality and reliable electricity services and to reduce greenhouse gasemissions through demand-side response and efficiency gains.

Description of main components of Distribution Efficiency Project:

Part A: System expansion and reinforcement

Construction and reinforcement of 110KV, medium voltage and low voltage electricity distributionnetworks including substations of the Power Corporations.

Part B: Introduction of Smart Grid Technologies in Distribution

Automation, including through introduction of supervisory control and data acquisition system, ofelectricity distribution network operations of and data collection by the Power Corporations.

Introduction of advanced metering infrastructure systems, including two-way communicationsystems, as electricity smart grid technologies for key substations and consumers of selected PowerCorporations.

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 of 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, monitoring and evaluation.

Provision of technical assistance to the Power Corporations for:

(i) Effective and timely Project implementation, capacity building in relation to financial modelingand planning, and carrying out of customer surveys and instituting of other such measures toimprove customer satisfaction; and

(ii) Implementation of advanced metering infrastructure systems, carrying out of programspromoting efficient electricity use such as a customer awareness campaign and demand responseprograms, and project monitoring and evaluation.

The Distribution Efficiency Project - Financing Agreement No.Cr.5156-VN, Loan Agreement

No.TF013468-VN and Grant Agreement No.TF013456-VN - Portion implemented by Northern Power

Corporation (the "Project") implemented under sub-loan/sub-grant agreements signed between

Northern Power Corporation ("NPU) and the Ministry of Finance on 07 February 2013. Accordingly,

NPC is granted a loan and a grant with respective amounts of USD 161,000,000 and USD 300,000 to

implement the Project.

Funds of the Distribution Efficiency Project include IDA fund, Clean Technology fund ("CTF fund") and

grant from Australia Trust Fund with the respective amounts of SDR 297,700,000, USD 30,000,000

and AUD 7,600,000 and counterpart fund. The IDA loan, CTF loan and Grant from Australia Trust

Fund for the portion implemented by NPC are within USD 153,000,000, USD 8,000,000 and USD

300,000, respectively. According to the Financing Agreement No. Cr.5156-VN, the Loan Closing Date

was 31 December 2018. Disbursement deadline date of the IDA and CTF funds was 30 April 2019.

Disbursements under the counterpart fund will be made until the Project fulfils its liabilities and

obligations.

11

NORTHERN POWER CORPORATIONDistribution Efficiency ProjectFinancing Agreement No. Cr.5156-VN Financial statements

Loan Agreement No. TF013468-VN For the year ended

Grant Agreement No. TF013456-VN 31 December 2018


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 statements of designated accounts and statement of

withdrawals which are expressed in original currencies. The financial statements are prepared on the

going concern basic of accounting, in accordance with requirements of the World Bank and the

accounting policies set out in Note 3 of the notes to the 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 funds and expenditures

The Project's funds are recognised when received and expenditures are recognized when incurred.

Foreign currency translation

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 buying rate and selling rate of Joint Stock Commercial Bank for

Foreign Trade of Vietnam at the balance sheet date.

Foreign exchange differences are neither receipts nor disbursements. However, foreign exchange Gdifferences are presented in a separate item in the statement of sources and uses of funds for the X

purpose of reconciling balances of assets and liabilities 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, NPC shall open three designated accounts

to receive and manage funds from IDA, CTF and grant from Australia trust fund. Up to 31 December

2018, the three designated accounts for funds from IDA, CTF and grant from Australia trust fund

have been opened but grant from Australia trust fund have not been disbursed yet.

Designated accounts under Financing Agreement No. Cr. 5156-VN and Loan Agreement No.

TF013468-VN are deposit accounts in USD opened at Joint Stock Commercial Bank for Foreign Trade

of Vietnam - Operation Center 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 Loan Agreement No.TF013468 and relevant regulations established

by the World Bank.

On 13 May 2019, the Corporation closed the designated account to receive/manage the IDA, CTF and

grant from Australia trust fund because the Project portion using IDA, CTF and grant from Australia

trust fund was completed.

12



5. PROJECT IMPLEMENTING EXPENDITURES

Accumulated toIn 2018 31/12/2018

VND VND

Construction 135,385,488,002 1,909,887,044,249

Equipment 52,250,500,574 1,642,577,284,837

Other expenses 56,904,402,662 621,006,991,114

244,540,391,238 4,173,471,320,200

Reconcilation between Project implementing expenditures presented in the Balance sheet and theStatement of sources and uses of funds is as follow:

Closing balance In 2018 Opening balanceVND VND VND

Balance sheetProject implementing 4,173,471,320,200 244,540,391,238 3,928,930,928,962expenditures [1]

Statement of Sources and uses of FundsDisbursements [2] 4,126,410,464,312 420,792,173,492 3,705,618,290,820

Differences [3] = [1] - [2] 47,060,855,888 (176,251,782,254) 223,312,638,142

Represented by 47,060,855,888 (176,251,782,254) 223,312,638,142[4] = [6]+[7]-[5]-[8]

Balance sheets:Advances to suppliers [5] 4,834,505,172 (16,969,903,703) 21,804,408,875

Foreign exchange reserve [6] 13,550,379,244 2,364,654,405 11,185,724,839

Payables to suppliers [7] 41,204,074,662 (195,065,530,396) 236,269,605,058

Unrealised foreign exchangedifference from revaluation 2,859,092,846 520,809,966 2,338,282,880of cash balance denominated inforeign currencies at the year end [8]

6. PREPAYMENTS TO SUPPLIERS

31/12/2018 31/12/2017VND VND

Duyen Ha Co., Ltd. 3,572,000,000

Industrial Electrical Construction Joint Stock 670,705,239Company

Northern Electrical Testing One Member Company 549,358,000Limited

Installation and Electric Construction Joint Stock - 6,175,808,395Company

Hoang Tien Phat Investment and Construction JSC - 4,083,411,134

AIT Development and Application of Technology - 3,060,559,400Corporation

Cam Pha Electric Equipment Joint Stock Company - 2,882,200,000Energy Technology Join Stock Company - ENTEC - 2,019,838,000JSCOthers 42,441,933 3,582,591,946

4,834,505,172 21,804,408,875

Prepayments to suppliers as at 31 December 2018 included balances with suppliers implementingcontracts, which are financed out of counterpart fund and had not been completed as at 31December 2018. NPC planned to use the counterpart fund to continue to implement such contracts.

13


NOTES TO THE FINANCIAL STATEMENTS

7. CASH

31/12/2018 31/12/2017

VND VNDUSD Equivalent USD E q u i v a l e n t

Designated account - IDA fund 974,541 22,565,508,822 7,332,358 166,187,885,910

Designated account - CTF fund 88,336 2,045,418,227 987,993 22,392,874,264

1,062,877 24,610,927,049 8,320,351 188,580,760,174

8. IDA FUND

2018 Accumulated to 31/12/2018

OriginalOriginal currency VND currency VND

(USD) equivalent (USD) equivalent

Designated account - 147,300,000 3,170,862,500,000

- 147,300,000 3,170,862,500,000

9. CTF FUND

2018 Accumulated to 31/12/2018

OriginalOriginal currency VND currency VND

(USD) equivalent (USD) equivalent

Designated account - 6,700,000 152,313,000,000

- 6,700,000 152,313,000,000

10. FOREIGN EXCHANGE RESERVE

31/12/2018 31/12/2017VND VND

Foreign exchange difference in payment 10,691,286,398 8,979,146,743

Foreign exchange difference from revaluation ofcash balance denominated in foreign currencies at 2,859,092,846 2,338,282,880the year end

Foreign exchange difference from revaluation ofliabilities balances denominated in foreign - (131,704,784)currencies at the year end

13,550,379,244 11,185,724,839

14

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11. PAYABLES TO SUPPLIERS

31/12/2018 31/12/2017VND VND

Electronic Investment and Construction Joint Stock 4,291,098,790 6,949,469,128Company

Duyen Ha Co., Ltd. 3,715,454,410 4,698,550,109

Hoang Tien Phat Investment and Construction JSC 3,299,090,158

Cam Pha Electric Equipment Company 2,624,550,000 9,259,300,000Yen Lac Co., Ltd. 2,383,253,926

Northern Grid Company 2,007,602,705 4,065,150,108

Northern Electrical Testing One Member Company 1,987,827,654 14249487285Limited

Installation And Electric Construction Joint StockCompany1,932,970,652 2,710,213,874Company

Song Da 11 Joint Stock Company 1,811,547,839 2,957,837,526

Construction Trade 3SC - Thang Long Branch 1,796,660,130 3,895,189,514

AIT Information Technologies Application and 1,636,766,174 64,220,927,683Development Co., Ltd

Industrial Electrical Construction 3SC 1,467,124,454

LS-VINA Industrial System Co.,Ltd 1,363,837,350 5,874,497,053

Viet Nam Digital Convergence JSC 1,171,745,000

Vietnam Electricity Construction Joint Stock 1,086,784,620 1,412,219,516Corporation

Power Investigating and Designing Construction 4 1,062,143,655 2,480,589,850Co., Ltd

PNT International Auditing Limited Company 243,589,246 4,575,830,002

Huu Hong Machinery., JSC - 12,739,705,000

FPT Information System Co., Ltd. - 7,542,225,942

Informatics - Communications and Control - 6,735,200,000Technology., JSCLicogi 16., 3SC - 5,239,516,252

Others 7,322,027,899 76,663,696,216

41,204,074,662 236,269,605,058

12. COMMITMENTS

As at 31 December 2018, the outstanding value of significant contracts signed with contractorswas approximately VND 45.8 billion (as at 31 December 2017: approximately VND 163 billion).

U15

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U NOTES TO THE FINANCIAL STATEMENTS

13. RELATED PARTY TRANSACTIONS AND BALANCES

Related party transactions and balances only relate to activities which were financed by thecounterpart fund.

List of related parties:

Related parties Relationship

Northern Power Consulting One Member Company Limited Subsidiary

Northern Electrical Testing One Member Company Limited Subsidiary

Northern Grid Company Subsidiary

In the year, the Project entered into the following significant transactions with its related parties:

2018 2017VND VND

Purchases

Northern Electrical Testing One Member Company Limited 1,309,398,705 12,715,726,664

Northern Grid Company 328,884,000 9,613,206,813

Northern Power Consulting One Member Company Limited - 168,850,896

Significant related parties balances as at 31 December 2018 were as follows:

31/12/2018 31/12/2017VND VND

Payable to suppliers

Northern Electrical Testing One Member Company Limited 1,987,827,654 14,249,487,285

Northern Grid Company 2,007,602,705 4,065,150,108

Northern Power Consulting One Member Company Limited 30,865,463 70,433,215

Prepayments to suppliers

Northern Electrical Testing One Member Company Limited 549,358,000 -

Northern Grid Company - 290,134,067

14. SUBSEQUENT EVENTS

The withdrawal applications No. 21-NPC with the amount of USD 3,614,446.64 was submitted bythe Corporation on 25 April 2019 and accepted for advance clearance by the World Bank on 26April 2019.

On 13 May 2019, the Corporation made a refund of the remaining balances of designated accountto the World Bank with the amount of USD 727,935.31.

15. COMPARATIVE FIGURES

Comparative figures are figures of the Project's audited financial statements for the year ended 31December 2017.

Tong Bao Ngoc Le Trong Cuong Thieu Kim Quynh

Preparer Project Chief Accountant General Director

27 June 2019

16

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Delloitte Vietnam Company Ltd.15thFloor, Vinaconex Tower,34 Lang Ha Street, Lang Ha Ward,Dong Da District, Hanoi, VietnamTel :+84 24 6288 3568Fax:+84 24 6288 5678Website: www.deloitte.com/vn

INDEPENDENT AUDITOR'S ASSURANCE REPORT ON INTERNAL CONTROL

TO. The Board of Management of Northern 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, Loan Agreement No.TF013468-VN

and Grant Agreement No. TF013456-VN - Portion implemented by Northern Power Corporation (the

"Project") for the year ended 31 December 2018 and issued the independent auditors' report thereon

dated 27 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 Board of Management

As stated in the Statement of the Board of Management on page 2, 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 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 maintain a comprehensive system

of quality control including documented policies and procedures regarding compliance with ethical

requirements, professional standards and applicable legal and regulatory requirements. ZZ

Auditor's Responsibilities

Our responsibility is to express an opinion on the effectiveness of internal control over compliance with Mrequirements 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 ITobtained. We conducted our reasonable assurance engagement in accordance with International Standard Non 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.

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.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 legallyseparate 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.

17

W* Deloitte

INDEPENDENT AUDITOR'S ASSURANCE REPORT ON INTERNAL CONTROL (Continued)

Opinion

In our opinion, the Board of Management has maintained, in all material respects, effective internalcontrol over compliance with requirements that could have a direct and material financial effect on theProject's financial statements as well as over financial reporting for the year ended 31 December 2018.

Dag i Dung Nguyen Thanh HuongDeputy General Director AuditorAudit Practising Registration Certificate Audit Practising Registration CertificateNo. 0030-2018-001-1 No. 1415-2018-001-1


27 June 2019Hanoi, S.R. Vietnam

18

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N PART IIIU

AUDITOR'S ASSURANCE REPORT ONINDEPENDENT COMPLIANCE

UUUUUUUUU*UUUUUUUU

WNORTHERN POWER CORPORATIONDistribution Efficiency ProjectFinancing Agreement No. Cr.5156-VNLoan Agreement No. TFO13468-VNGrant 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.51516-VN, LoanAgreement No.TF013468-VN and Grant Agreement No.TF013456-VN, laws and regulations applicable tothe Project.

The Board of Management confirms the following:

* An effective internal control has been designed and maintained over compliance with FinancingAgreement No. Cr.51516-VN, Loan Agreement No.TF013468-VN and Grant Agreement No.TF013456-VN, laws and regulations applicable to the Project;

* The Project has complied with Financing Agreement No. Cr.51516-VN, Loan Agreement No.TF013468-VN and Grant Agreement No.TF013456-VN, laws and regulations that could have a direct and materialfinancial 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 December2018 are in accordance with the relevant covenants of Financing Agreement No. Cr.51516-VN, LoanAgreement No.TF013468-VN and Grant Agreement No.TF013456-VN and prevailing relevantregulations 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 wereadequately supported;

* The proceeds of the loan/grant were used only for the purposes of the Project;

* Northern Power Corporation has complied with the financial covenants of the Agreements.

For and on behalf of the Board of Management,

eu Kim QuynhGeneral Director

Hanoi, 27 June 2019

19

IDeloitte Vietnam Company Ltd.15thFloor, Vinaconex Tower,34 Lang Ha Street, Lang Ha Ward,Dong Da District, Hanoi, VietnamTel :+84 24 6288 3568Fax:+84 24 6288 5678Website: www.deloitte.com/vn

INDEPENDENT AUDITOR'S ASSURANCE REPORT ON COMPLIANCE

To: The Board of Management of Northern 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, Loan Agreement No.TF013468-VN

and Grant Agreement No. TF013456-VN - Portion implemented by Northern Power Corporation (the

"Project") for the year ended 31 December 2018 and issued the independent auditor's report thereon

dated 27 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

U compliance with Financing Agreement No. Cr.51516-VN, Loan Agreement No.TF013468-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 Board of Directors

The Board of Directors is responsible for complying with Financing Agreement No. Cr.51516-VN, Loan

Agreement No.TF013468VN 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

Sof 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.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our

opinion.

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.

20

DeloitteU

INDEPENDENT AUDITOR'S ASSURANCE REPORT ON COMPLIANCE (Continued)

IOpinion

In our opinion:

* The Project has complied, in all material respects, with Financing Agreement No. Cr.51516-VN, Loan

Agreement No.TF013468-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.51516-VN, Loan

Agreement No.TF013468-VN and Grant Agreement No.TF013456-VN and prevailing relevant

regulations established by the World Bank;

T The withdrawal applications were adequately reconciled to the statements of expenditures (SOEs)

prepared by the Executive 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 purpose(s) of the Project;

* Northern Power Corporation has complied with the financial covenants of the Agreements.

DagMh Dn Nguyen Thanh Huong

Deputy General DirectorAuioAudit Practising Registration Certificate Audit Practising Registration Certificate

No. 0030-2018-001-1 No. 1415-2018-001-1


27)lune 2019Hanoi, S.R. Vietnam

21

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