2018 ANNUAL REPORT ABBREVIATIONS
AGM : Annual General Meeting BOD : Board Of Directors BOM : Board Of Management CAGR : Compounded Annual Growth Rate CEO : Chief Executive Officer COD : Commercial Operation Date CG : Corporate Governance CIT : Corporate Income Tax COGS : Cost Of Goods Sold EBIT : Earnings Before Interest and Taxes EBITDA : Earnings Before Interest, Taxes, Depreciation And Amortization EGM : Extraordinary General Meeting EHSS : Enviroment - Health - Social Policy - Safety EPC : Engineering Procurement and Construction EVN : Viet Nam Electricity FiT : Feed In Tariff FS : Financial Statement GEC : Gia Lai Electricity Joint Stock Company HR : Human Resources JSC : Joint Stock Company LNG : Liquefied Natural Gas M&A : Mergers and Acquisitions MOIT : Ministry Of Industry and Trade NPAT : Net Profit After Taxes SG&A : Selling, General And Administration PATMI : Profit After Tax and Minority Interests PBT : Profit Before Tax PPA : Power Purchase Agreement R&D : Research and Development ROAA : Return On Average Assets ROAE : Return On Average Equity YOY : Year On Year
GEC's Head Office
2 2018 ANNUAL REPORT www.geccom.vn 3 TABLE OF CONTENTS
CÔNG TY CP ĐIN GIA LAI 02 ABBREVIATIONS 04 TABLE OF CONTENTS 06 REMARKABLE FIGURES
10 COMMITMENTS AND RESPONSIBILITIES
12 Vision - Mission - Core value 13 17 sustainable development goals of United Nations 18 Commitments to the truth and fairness the 2018 Annual Report 20 Interview with Chairman of the Board 24 Profile of the Board of Directors 28 Letter to Shareholders from the CEO 32 Profile of the Board of Management 36 Financial highlights of 2015-2018 40 CORPORATE GOVERNNANCE PROMOTING INVESTMENT 42 Applying ASEAN Corporate Governance Scorecard - STRENGTHENING DEVELOPMENT Efforts towards new standards 56 Code of Conducts 58 Board of Directors’ Reports and Corporate Governance activities 72 Renewable Energy trend - A view from Southeast Asia and Vietnam 84 Board of Directors’ Strategic vision 90 Report of the Independent Board Member 92 Report of the Audit Committee 96 Main risks and risk management activities 104 Compliance with Vietnam Laws, approaching international standards 110 Investor relations and Capital market activities
122 BOARD OF MANAGEMENT - YEAR IN REVIEW
124 Remarkable milestones in a year of operation 130 Project portfolio & Services 138 Positioning GEC on the Renewable Energy market 146 Business activities analysis based on Business Model 158 Investment, operation and production activities of each major Energy Segment 164 R&D activities - Optimal Energy solutions 166 Investment in technology development to increase the operation efficiency 170 Human resource and training - Lever of growth
182 SUBSTAINABLE DEVELOPMENT
184 Stakeholders engagement 190 Commitment on economic - Sustainable economic growth Started as an equitized State - Owned Enterprise, focusing 200 Commitment on environment - Sustainability from the ecosystem only on small and medium Hydroelectricity, GEC has now 206 Commitment on the community - Community and society engagement kept abreast of Renewable Energy trends with its Solar, Wind 214 Sharing from Foreign Shareholders projects, etc. With determined strategic direction from the 215 Sharing from Contractors leadership and the enthusiastic support from international 216 Sharing from Customers 218 Sharing from Employees Shareholders - IFC and Armstrong, GEC is making solid steps in 220 Contact Information for Stakeholders dynamic Renewable Energy in Vietnam, ensuring compliance with the highest environmental and social standards. 222 VIEW ON FINANCE
224 Summary on 2018 Audited Separate Financial Statements 229 2018 Audited Consolidated Financial Statements
286 MILESTONES OF DEVELOPMENT - WHO WE ARE
4 2018 ANNUAL REPORT www.geccom.vn 5 REMARKABLE FIGURES IN 2018
HYDRO, SOLAR, WIND POWER NO.1 100% SOLAR POWER Pioneer in Vietnam Market share ~ 50,000 Tons/year
Reduction of CO2 emissions 395 MW ~ 22 plants VND 350 By 2020 billion/year Revenue ~ VND 7,400 billion 818 ~ Total investment cost VND MWp 9,000 of 8 plants billion ~ 17 plants VND Total investment cost 7,400 by 2022 billion of 22 plants Investment in economically-difficult areas ~ 355,000 ~ VND 44 Solar panels ~ billion 163 Investment in technology Million kWh/year Commercial electricity ~ 310 Million tons 440 Ha Reduction of CO2 emissions 1,136 61% MW Total land area of By 2022 Gross Profit Margin 8 plants
392 MWp 117 In-operation MWp before 2020 National grid connection
6 2018 ANNUAL REPORT www.geccom.vn 7 REMARKABLE FIGURES IN 2018
MEDIUM AND SMALL - SCALE HYDROPOWER PLANTS BUSINESS PERFORMANCE & CORPORATE GOVERNANCE
VND 559 billion ~ 12,800 Net Revenue ~ 84.1 356 Beneficiaries MW Million kWh 14 plants Commercial electricity
VND 207 billion ~ Profit Before Tax 35% Shares 24% IFC, ARMSTRONG
Gia Lai 60% Market share 2018 Gross Profit Margin 35% 18% Increase of Market price of Hue GEG share 2018/2017 Market share VND 7+ billion IFC Social, Community activities Governance 14% Advisor
Lam Dong Market share PWC
Independent Auditors
8 2018 ANNUAL REPORT www.geccom.vn 9
14 Nhà máy
Thủy điện
14 Nhà máy
Ayun Ha Hydropower Plant - Gia Lai
COMMITMENTS AND RESPONSIBILITIES SOLID INTEGRATION 12 Vision - Mission - Core value 13 17 sustainable development goals of United Nations CONTRIBUTING TO THE FUTURE 18 Commitments to the truth and fairness the 2018 Annual Report 20 Interview with Chairman of the Board STARTING FROM SMALL HYDROPOWER PLANTS, AFTER 30 YEARS 24 Profile of the Board of Directors OF ENERGIZING FROM THE CENTRAL HIGHLANDS, GEC CONSTANTLY 28 Letter to Shareholders from the CEO DEVELOPING, INTEGRATING INTERNATIONALLY, WITH MULTILATERAL 32 Profile of the Board of Management 36 Financial highlights of 2015-2018 COOPERATION, FOCUSING ON INVESTMENT IN RENEWABLE ENERGY SOURCES, GETTING READY FOR CONTRIBUTION TO 01 THE FUTURE JOURNEY. SUSTAINABLE VISION - MISSION - CORE VALUE DEVELOPMENT GOALS 17 OF THE UNITED NATIONS
By 2025, GEC becomes the leading private organization in VISION Vietnam’s Renewable Energy sector.
To optimize the resources of Hydro, Solar, Wind and Biomass. MISSION To meet the Energy demand by clean Energy solutions, to serve the community and to protect the social environment.
GEC pioneers in developing sustainable Renewable Energy 17 MỤC TIÊU sources, meeting the Energy demand in all weather conditions, CORE providing a wide range of Energy types connecting to PHÁT TRIỂN BỀN VỮNG CỦA LIÊN HỢP QUỐC VALUE the national grid, and optimizing Energy solution with BASED ON 17 SUSTAINABLE DEVELOPMENT GOALS investment efficiency - quality of execution - and a commitment OF UNITED NATIONS, GEC HAS ANALYZED AND of “Trust - Responsibility”. SELECTED THE OBJECTIVES TO BE INCLUDED IN THE SUSTAINABLE DEVELOPMENT ORIENTATION UNTIL 2020 SLOGAN SYNCHRONOUSLY DEVELOPING DIFFERENT TYPES OF ENERGY
12 2018 ANNUAL REPORT www.geccom.vn 13 6. CLEAN WATER AND SANITATION
- 100% VND 120 Monitoring and supervising of the plants million water quality for each plant 17 SUSTAINABLE DEVELOPMENT 14 4 GOALS OF THE UNITED NATIONS Hydropower plants Times/year 2 Environmental management Solar power Plants system meets the requirements by Law 100% Water purifier, to ensure of the plants water quality meets sanitation standard for the employees VND 1.7 VND 30 billion million 1. NO POVERTY 190 349 Beneficiaries Supporting the campaigns Power supply for remote Beneficiaries VND 3.2 for the poor in Gia Lai, Binh Million18 kWh areas in Chu Prong District billion Thuan and Long An
7,300 7. AFFORDABLE AND CLEAN ENERGY Beneficiaries
2. ZERO HUNGER 14 small and medium Reducing CO emissions Hydropower plants 2 84.1 operating 50,000 Supporting production Supporting and donating MW Tons of CO2 VND 780 development, diversifying VND 1.6 to disadvantaged areas in million livelihoods for local people billion Gia Lai, Binh Thuan and Power generation Long An VND 1,522 Total investment cost 163 billion Million kWh/year
3. GOOD HEALTH AND WELL-BEING Vietnam’s pioneer in Annual Solar Revenue NO. 1 Solar power VND 348 billion 349 Health care and insurance are 119 Beneficiaries provided to employees Beneficiaries 2 in-operation Solar power 6 under-development Periodical health examination Labor safety training for 117 Plants 275 Solar power Plants 2 Supporting for treatment costs VND employees MWp MWp VND 14.6 Blood donation / Leisure trips 60 billion million VND 2,137 Total investment cost VND 5,276 Total investment cost 2 billion Times/year billion 4. QUALITY EDUCATION Solar panels Total investment cost of VND 354,660 8,922 22 plants 450 39 Training programs to billion Beneficiaries Training courses develop successors, internal training, outsourced training 8. DECENT WORK AND ECONOMIC GROWTH 2 VND 1.4 Net Revenue in 2018 Average income of billion VND 559 VND 14 employees billion million/month 5. GENDER EQUALITY
Direct and indirect jobs Ensuring gender equality in promotion, successor training for management positions VND 207 Profit After Tax in 2018 5,442 16% Benefits and policies for women, pregnant women, and women raising children under billion Female employees 12 months old Workers
CAGR of Revenue CAGR of Profit 23% Middle and senior manager 16% 12% Female middle Female CEO and senior level employees
14 2018 ANNUAL REPORT www.geccom.vn 15 17 SUSTAINABLE DEVELOPMENT GOALS OF 13. CLIMATE ACTION THE UNITED NATIONS (continued)
14 Improving productivity to 2/8 Using Renewable Energy - Hydropower increase Energy-use efficiency In-operation Solar power, not fossil fuels 9. INDUSTRY, INNOVATION AND INFRASTRUCTURE plants Solar power Plants Increasing the capacity Renovation cost of the Forecasting the impacts Diversifying Energy sources to VND of the plant by VND 17 21 plant in 2018-2019 of El Nino to develop the adapt to climate change billion modernization, efficiently billion 84.1 392 using natural resources and MW appropriate response plans MWp environmental friendliness Total investment of 8 Solar Increasing the capacity of Dak Pi Hao 2 plant to 9.5 MW VND 7,400 power Plants 6% Applying information technology in management to measure and reduce losses, with SCADA billion 14. LIFE BELOW WATER 10. REDUCED INEQUALITY Assessing the environmental impacts, biodiversity, protected areas, biosphere reserves, etc. Building plants in areas Phong Dien - Hue, Krong Pa - Gia 8 with difficult economic Lai, Ham Phu 1, 2 - Binh Thuan, New projects were Solar power Plants including Phong Dien, Krong Pa, Ham Phu 1, 2, Duc Hue 1, 2, Tay Son 1, 2 VND 7,400 8 implemented billion conditions, Thua Thien Plants Duc Hue 1,2 - Long An, Tay Son Hue, Gia Lai, Binh Thuan, 1,2 - Binh Dinh are operating Long An and Binh Dinh and under-construction 15. LIFE ON LAND Average income of local Solar's total capacity VND 6 employees in Thua Thien 392 million Hue, Gia Lai, Binh Thuan MWp Forest environmental service fee and Long An Assessing environmental impacts, biodiversity, protected areas, etc. VND 16 billion Using ineffective farming land to develop Solar power system, increasing land use efficiency Local employees from 500 Thua Thien Hue, Gia Lai, Employees Binh Thuan and Long An 16. PEACE AND JUSTICE, STRONG INSTITUTIONS 11. SUSTAINABLE CITIES AND COMMUNITIES Equality in work, welfare, Employees have right to 100% competition and reward 349 approach the information and Growing trees around Plants’ employees of employees Employees execute their basic rights as 16 the plants 190 regulation Plants Beneficiaries
Inspecting and handling community impacts in a timely manner Organizing workers’ conferences Excellent ranking Assessing environmental and social impacts 8% 1 Discussion on employee’s VND 3.6 Assessment of biodiversity of employees Time/year welfare and salary policy billion Protected areas Other impacts to be considered for project’s feasibility study 17. PARTNERSHIPS FOR THE GOAL
12. RESPONSIBLE CONSUMPTION AND PRODUCTION The Next Generation Industrial IFC, Armstrong - The World's 3 PV Solution - Huawei 2 prestigious organizations for Domestic and Renewable Integration: Foreign strategic sustainable development Annual water resource fee Sharp, JGC – Japan, one overseas Challenges and Technologies Shareholders VND 36 2 of the most reputable Conference on - ABB and Ministry of Industry billion Foreign contractors in the world Power and Energy and Trade contractors Guidance on environmental Accompanying with GEC’s impact assessment for Wind 2 development Hazardous waste management team monitors waste generation, storage, power projects in Vietnam - Years collection, transportation, etc. Ministry of Industry and Trade, 16 Federal Ministry for Economic Plants Selecting PCB-free oils for the transformers Cooperation and Development ~ GEC’s shares Avoiding incidents that contaminate the project area (BMZ) and GIZ 35%
Promoting the development Hydropower and Solar power Periodically collecting of environmentally friendly Plants are operating 1 hazardous waste 16 168 Time/year Renewable Power technology MW plants
16 2018 ANNUAL REPORT www.geccom.vn 17 COMMITMENT TO THE TRUTH & FAIRNESS OF THE 2018 ANNUAL REPORT
In the responsibilities of the Audit Committee, we commit that:
• The contents presented in the GEC 2018 Annual Report fully satisfy the Information Disclosure regulations In 2018, GEC officially became one of a few listed Companies on the Vietnam in accordance with Vietnamese Law: stock market to apply the advanced international corporate governance »» Circular 155/2015/TT-BTC on Information Disclosure on the stock market; model in which the Supervisory Board was replaced by Audit Committee »» Decision 606/QD-SGDHN on Information Disclosure on the Hanoi Stock Exchange. directly under the Board of Directors. One of the Audit Committee’s responsibilities is to review all information mentioned in GEC 2018 Annual • Additionally, with the spiritual responsibility of the BOD to the Related Parties, GEC tries its best to meet the Report to ensure the truth and fairness of information presented to the international standards, including: Related Parties. »» International Integrated Reporting Frameworks (IIRC); »» ASEAN Corporate Governance Scorecard; »» OECD Principles of Corporate Governance; »» GRI Standards for Sustainable Development Report.
• All of the information and data presented in the GEC 2018 Annual Report are consistent with the 2018 FS audited by PwC Vietnam.
• The Audit Committee has rigorously reviewed the Report in order to ensure the truth and fairness of information, statistics, figures which were selected and presented in the 2018 Annual Report.
In the opinion of the Audit Committee, the 2018 Annual Report of Gia Lai Electricity JSC has been presented truly and fairly, reflecting the overview of business activities, investment projects and the financial status during the fiscal year; in accordance with the objectives of GEC’s BOD to make information transparent, protect the rights of Shareholders, Investors and the other Related Parties.
AUDIT COMMITTEE HEAD OF AUDIT COMMITTEE
NGUYEN THUY VAN
18 2018 ANNUAL REPORT www.geccom.vn 19 INTERVIEW WITH CHAIRMAN OF THE BOARD
The Board of Directors also fostered long-term strategies for maximizing the value chain in Electricity, including FORECAST Waste-to-Energy, Gas-to-Energy - TOTAL CAPACITY IN 2019 395 new categories which are not easily MW deployed in Vietnam, as they require expertise, technology, experience and finance. If successful, GEC will contribute ENERGY HYDROPOWER positively to economic development, PORTPOLIO to the community and society. This will 2022 16% make GEC a leading private enterprise in Renewable Energy in Vietnam by 2025, WIND POWER SOLAR POWER as set in GEC Vision. 22% 62%
In 2018, GEC was a prominent brand with impressive initial steps on Renewable Energy categories in Grasping the Government's policy, the Vietnam. Could you share about the strategy to potential of developing Renewable Energy diversify the categories that GEC is pursuing, how did sources, along with world-renowned GEC come up with the opportunities at the first place, strategic players, GEC has boldly and and how did the journey start? confidently studied and skillfully made synergies to accelerate Renewable Energy In the current situation, the development of traditional power investment. By the end of 2019, GEC will generation sources as Thermoelectricity and Hydroelectricity own a portfolio of Energy projects with a is becoming increasingly difficult due to limited potential and total capacity of 395 MW, including 84.1 MW resources; domestic fossil fuel sources have reached the limit Hydropower and 311 MW Solar power. We and have been forecasted to decline shortly; the selling price are also structuring in GEC's portfolio so that of oil, coal, gas increased and would be mainly imported, etc. by 2022, Hydropower shall account for 16%, Climate changes due to burning fossil-based fuels, along with Wind 22% and the Solar - core business - will extreme weather phenomena, has always been in the news. be 62%. Solar power was the facilitator for GEC's initial successes in 2018. In addition, BOD also According to Electricity Industry experts, in 2010-2030, fostered long-term strategies for maximizing electricity demand in Vietnam is forecasted to grow by 10% the value chain in Electricity, including Waste- annually. However, the limited capacity in power supply to-Energy, Gas-to-Energy - new categories does not facilitate the growth rate, resulting in an imminent which are not easily deployed in Vietnam, as risk of power shortage. Since 2015, Vietnam has shifted from they require expertise, technology, experience a net exporter to a net importer with imports accounting and finance. If successful, GEC will contribute for 3% of the whole system. This rate is expected to increase positively to economic development, to the steadily to 24% by 2030. Development of more clean Energy community and society. This will make GEC a sources besides Biomass will help meet the electricity leading private enterprise in Renewable Energy demand for economic growth, projected to be 6.5-7.5% in Vietnam by 2025, as set in GEC Vision. per year. Facing existing challenges, Governments around the world, including Vietnam, have advocated Green and With the initiative and determination from Renewable Energy to ensure adequate supply for economic BOD, GEC advocates to Renewable Energy in development, minimize dependency on traditional sources, 2018 by launching the first Solar outcomes. in line with international efforts towards carbon emission By end of 2018, the Country had seen 10,000 reduction in the context of climate change. MW of Solar power being registered, 8,100 MW
Mr. Tan Xuan Hien - Chairman of the Board
20 2018 ANNUAL REPORT www.geccom.vn 21 INTERVIEW WITH CHAIRMAN OF THE BOARD (continuted)
Thus, we had to roll out the jobs at the same time, with In 2018, GEC made key decisions in increasing the attachment to the plan. scale of its operations, by doubling the charter capital, expanding the portfolio of Clean Energy On the macro level, the transmission of the national grid projects, and especially proposals of moving from in some provinces has not met the demand for capacity UPCOM to HOSE. How will these strategies support of planned Solar projects. This is also one problem realization of GEC's sustainable development? when Solar farms enters operation. However, the above difficulties have not make us falter, but made us more In 2018, the Company completed the 1: 1 Charter capital determined as one company. By now we are proud of increase to VND 1,942 billion by issuing more than 97 million the achievements, however small they may seem, which shares to current Shareholders. Increasing the capital was are encouraging and are the foundation for further a testimonial to GEC's development in scale and financial effort in 2019. resources to ensure implementation of Renewable Energy projects under the Company's strategy. It is known that GEC has the companion of two strategic players, IFC and Armstrong, both of which By doubling the size of the Company, along with the are world-renowned Financial Players and Clean successes in investing into Solar projects, BOD realized Energy Investors. Was GEC's 2018 success a synergy it was the right time to bring GEC to a new position in from act-local partners like GEC, financially-strong the financial community, both at home and abroad. as IFC and experienced like Armstrong? The BOD proposed for adoption by General Meeting of Shareholders to move the listing to HOSE. Building, The team of engineers at GEC constantly cultivates and accumulates experiences in implementing Solar power projects In 2016, IFC - World Bank Group and Armstrong South preserving and affirming the Vietnamese brand is also East Asia Clean Energy Fund, Singapore officially one of the ambitions of the BOM. became GEC's foreign strategic Shareholders with 36% The difficulties have not make us falter, operational work for us to learn from. Financially, ownership. Until now, this remains the first investment Moving to HOSE not only affirms GEC's prestige and but make us more determined as one as you know, grid-connected Solar involves in Vietnam's Energy by both organizations. Strategic potential but also serves as an opportunity to approach Company. By now we are proud of the multi-million-dollar projects. cooperation with IFC and Armstrong shows GEC's capital in a diverse and timely manner. This is also an prestige and capacity while fully meeting international important channel to promote the brand, an opportunity achievements, however small they Therefore, for the project to be successful, there requirements. In line with strategic cooperation, during for GEC to further improve CG according to international may seem, which are encouraging was a need for synergies of many factors, the the transformation, bold investment in Renewable standards, enhance publicity and transparency with and are the foundation for further consensus of strategic Investors, cooperation Energy, providing sustainable Energy sources, GEC Stakeholders, to respond to stricter standards when effort in 2019. from financial institutions as well as weighty has received support and agreement in all fields from Vietnam's stock market is expecting an upward move preparation of internal forces, especially while foreign strategic Shareholders. in ranking in 2020. Along with GEC's potentials, I believe GEC has been implementing many projects HOSE listing definitely promotes GEC's share value, of which belong to 121 projects. However, GEC is truly simultaneously. In terms of technology back Armstrong is a private investment fund from Singapore, which, in turn brings practical benefits to long-term the pioneer endeavoring in Renewable Energy, with the then, no domestic manufacturer could provide focusing on developing clean Energy in Emerging Shareholders and Investors who have been accompanied first 117 MWp being supplied to the grid, bringing the the main equipment for the Solar system. We had markets in Southeast Asia. Operated by a multinational with the Company. total generation capacity of GEC to 168 MW, 2 times the to select foreign contractors, import equipment management team with experience accumulated from capacity of 2017. and assemble the system, transfer technology development and investment in over 50 Renewable Thank you very much and wish you the best of health! for the system in stable and high performance. Energy projects around the world, Armstrong has As you mentioned, Solar Energy will be the first Therefore, considering and selecting suppliers been a bridge to help GEC approach many technology GEC's endeavor in Renewable Energy types. with full capacity and experience was crucial, partners in global Renewable Energy. Meanwhile, IFC, Operating the first 2 Solar Energy Plants in a row, which was decisive to the project success. Member of the World Bank, the global development have there been any difficulties or challenges upon In addition, our HR then did not have much organization engaging with private enterprises in deploying these projects? experiences in implementing Solar projects, so Emerging economies, supports 2,000 private enterprises it was also a big challenge. We, officials as well with capacity in finance, with its expertise and influence. The difficulty that we encountered in the development as construction workers, studied on the work Strategic cooperation with IFC is an opportunity not only of Solar projects is the pioneer's hardship. From doing requirements and managed to get out of the to access the World's capital and technology markets, research, making investment decisions, carrying out bottlenecks. The responsibility and pressure but also to leverage on IFC's of global Energy Industry construction to operation, everything was new full of that each person had to shoulder was huge expertise. This also creates multiple opportunities for risks. At the time of deployment, it was a completely while Solar project implementing time being GEC to become a role-model in Vietnam through the new field in Vietnam, so there had not been any prior much shorter than that of the Hydroelectricity. application of the Industry's best practices.
22 2018 ANNUAL REPORT www.geccom.vn 23 PROFILE OF THE BOARD OF DIRECTORS
Mr. TAN XUAN HIEN Ms. DO THU NGAN Mr. DEEPAK CHAND KHANNA Mr. ANDREW MARK AFFLECK Chairman of the Board BOD Member Non-Executive BOD Member BOD Member
Nationality: Vietnamese Nationality: Vietnamese Nationality: Indian Nationality: British Year of Birth: 1961 Year of Birth: 1971 Year of Birth: 1957 Year of Birth: 1966
Appointment history Appointment history Appointment history Appointment history Date of appointment as Chairman of the Board: January 1st, 2015 Date of appointment as BOD Member: September 18th, 2018 Date of appointment as BOD Member: November 3rd, 2016 Date of appointment as BOD Member: September 18th, 2018 Duration of service as Chairman of the Board: 3 years Duration of service as BOD Member: 4 months Duration of service as BOD Member: 2 years 1 month Duration services as BOD Member: 4 months
Qualifications Qualifications Qualifications Qualifications Electrical Engineer Master of Business Administration Master of Business Administration - George Washington University, USA Master of Business Administration - Leicester University, England Bachelor of Finance and Accounting Master of Economics - Delhi University, India Postgraduate Certificate in Education (PGCE) Climate Change and Sustainable Development - De Montfort University, England
Professional experience Professional experience Professional experience Professional experience March 2018 - Present: Chairman of the Board - Gia Lai Electricity JSC August 2018 - Present: BOD Member - Gia Lai Electricity JSC November 2016 - Present: BOD Member - Gia Lai Electricity JSC September 2018 - Present: BOD Member - Gia Lai Electricity JSC March 2017 - February 2018: Vice Chairman of the Board - Gia Lai July 2018 - Present: Permanent Deputy CEO - Thanh Thanh Cong 2005 - Present: Regional Director - Middle East and North Africa Region January 2011 - Present: Executive Director - Armstrong Asset Electricity JSC Investment JSC - IFC, Dubai Management Pte. Ltd. January 2015 - March 2017: Chairman of the Board - Gia Lai Electricity JSC June 2013 - June 2018: CFO, Senior National Sales Director 2001 - 2005: Mekong Regional Director - IFC, Vietnam October 2008 - December 2010: Executive Director cum Chairman - 1998 - 2001: Country Director - IFC, Korea December 2013 - Present: Chairman of the Board - Truong Phu - JP Morgan Chase Bank NA - Ho Chi Minh City branch Low Carbon Investors Ltd. Hydropower JSC 1987 - 1998: Investment Specialist - IFC, Washington DC 2011 - 2013: Chairwoman - NTF International Services - Financial October 2006 - September 2007: Executive Director - Infinity Energy 2010 - 2014: BOD Member, CEO - Gia Lai Electricity JSC Advisory Co., Ltd. 1998 - 2010: Director - Gia Lai Electricity Company 2010 - 2011: Permanent Deputy CEO, CFO - Saigon Thuong Tin Outstanding achievements Outstanding achievements 1992 - 1998: Deputy Director - Gia Lai Electricity Company Commercial Joint Stock Bank 2005 - 2010: CEO - Sacombank Leasing One Member Co., Ltd. With over 30 years of experience in investment and finance, as a BOD With 12-year experience in senior management and governance at Outstanding achievements Member who has been with GEC for more than 2 years, he has contributed Investment Funds, he participated in GEC with the role of consultant, Outstanding achievements to improve CG structure according to current international standards and orientation of CG in accordance with international standards, planning With nearly 30 years of management and administration experience in best practices. In addition, he also consults on the roadmap of synchronous and implementing M&A activities to expand Renewable Energy portfolio, development of GEC’s types of Renewable Energy in a reasonable and making GEC become one of the leading companies in Vietnam’s Renewable Energy sector, he plays an important role in making the right strategic With more than 15-year experience in senior management in finance, sustainable manner in accordance with the investment standards for Energy Industry. Additionally, he also plays an important role in advising the plans and gradually building GEC into one of the few companies that foster retail banking and investment banking, she joined GEC as an Independent environment, community and society proposed by IFC. development strategy and realizing the annual business and production green, clean and environmentally friendly Renewable Energy in Vietnam. BOD Member to assist the BOD in advising and supervising Governance goals of the Company. In addition, he and his staffs offered optimal solutions for rational use of and Management activities with an independent approach; to advise electricity, strived with GEC to become the leading private organization on short-term and long-term financial investment; as well as to build Current positions in organizations Current positions in organizations in Renewable Energy in Vietnam by 2025. He has accompanied with the strategies for joint ventures and associates; and to make decisions about (excepting for Parent company - Subsidiary) (excepting for Parent company - Subsidiary) development of GEC since the Company was still a State-Owned Enterprise M&A activities. She also advised the Chairman of the Board on issues that managed and operated only Ia Drang 2 Hydropower Plant with a related to planning and management of the core team as well as policies Regional Director, Middle East and North Africa - IFC, Dubai capacity of 1.2 MW. Up to now, GEC directly and indirectly owns 14 small for GEC senior management. Executive Director - Armstrong Asset Management Pte. Ltd. and medium Power Plants, 2 Solar power Plants with a total capacity of 168 MW and Chartered capital of nearly VND 2,000 billion. Ownership of voting shares at the Company Ownership of voting shares at the Company Current positions in organizations Current positions in organizations (excepting for Parent company - Subsidiary) 0% 0% (excepting for Parent company - Subsidiary) Permanent Deputy CEO - Thanh Thanh Cong Investment JSC Representative of Armstrong Asset Management Pte. Ltd.: 39,057,174 shares; Chairman of the Board - Truong Phu Hydropower JSC accounting for 20.11%
Ownership of voting shares at the Company Ownership of voting shares at the Company
536,058 shares; 0.276% 0%
24 2018 ANNUAL REPORT www.geccom.vn 25 PROFILE OF THE BOARD OF DIRECTORS (continued)
Ms. NGUYEN THUY VAN Ms. PHAM NGOC THANH MAI Independent BOD Member Non-Executive BOD Member
Nationality: Vietnamese Nationality: Vietnamese Year of Birth: 1980 Year of Birth: 1982
Appointment history Appointment history Date of appointment as BOD Member: September 18th, 2018 Date of appointment as BOD Member: September 18th, 2018 Duration of service as BOD Member: 4 months Duration of service as BOD Member: 4 months
Qualifications Qualifications Master of Business Administration Bachelor of Economics Certificate of Master of Auditing Board - Vietnam Institute of Directors Tax and Audit Practice Certificate, (CPA)
Professional experience Professional experience
September 2018 - Present: BOD Member - Gia Lai Electricity JSC, September 2018 - Present: BOD Member - Gia Lai Electricity JSC Chairwoman of Audit Committee - Gia Lai Electricity JSC March 2018 - August, 2018: Head of Supervisory Board - May 2018 - Present: Head of Audit Subcommittee - Thanh Thanh Cong Gia Lai Electricity JSC - Bien Hoa JSC May 2018 - Present: Head of Supervisory Board - Truong Phu November 2017 - Present: BOD Member - Thanh Thanh Cong Hydropower JSC - Bien Hoa JSC April 2018 - Present: Head of Supervisory Board - TTC Energy JSC 2012 - 2017: Head of Supervisory Board - Thanh Thanh Cong - Tay Ninh JSC April 2013 - Present: Member of Supervisory Board - Thanh Thanh Cong 2012 - 2015: Head of Supervisory Board - Thanh Thanh Cong Investment JSC Trading JSC 2011 - 2012: Deputy CEO - Thien Son Logistics JSC May 2011 - March 2018: Head of Internal Audit - Thanh Thanh Cong 2009 - 2011: Deputy Director - Son Tin Commodity Exchange JSC Investment JSC 2008 - 2009: Head of Derivatives Exchange Department - Tin Viet September 2008 - May 2011: Audit Assistant - Mazars Vietnam Co., Ltd. Investment JSC 2007 - 2008: Head of Investment Department at Branch - Dak Lak Outstanding achievements Rubber Company 2004 - 2007: Head of Finance Department - Vinamit JSC With over 10 years of experience in Internal Audit, as a Member of GEC’s Audit Committee, she advises on building the Company's medium and long-term Internal Audit strategy; training and organizing the Internal Outstanding achievements Audit Team to ensure effectiveness of the internal control system, applying control and auditing method according to the standards of domestic and With nearly 15 years of experience in finance, investment and especially international law. The goal that she as well as the Audit Committee aim at accounting and auditing, she is gradually improving and perfecting an is to ensure the transparency in CG, fair treatment for Shareholders and PROFESSIONAL, DYNAMIC, CREATIVE effective internal control system for GEC as an Independent BOD Member Investors, especially protecting interests of minority Shareholders. and Chairwoman of Audit Committee, to ensure the highest compliance with OECD CG standards and ASEAN SCORECARD. She 's in charge & DARING TO COPE WITH ALL CHALLENGES of protecting the rights of Stakeholders, especially Shareholders and Current positions in organizations Investors, including small Shareholders. (excepting for Parent company - Subsidiary)
Current positions in organizations • Member of Supervisory Board - Thanh Thanh Cong Trading JSC (excepting for Parent company - Subsidiary) • Head of Supervisory Board - TTC Energy JSC GEC - TAKING PRIDE • BOD Member - Thanh Thanh Cong - Bien Hoa JSC • Head of Supervisory Board - Truong Phu Hydropower JSC • Head of Audit Subcommittee - Thanh Thanh Cong - Bien Hoa JSC IN BEING THE FIRST ENTERPRISE TO OPERATE Ownership of voting shares at the Company A SOLAR POWER PLANT IN VIETNAM Ownership of voting shares at the Company 15,000 shares; 0.007% 0% Solar battery panels of TTC Krong Pa - Gia Lai
26 2018 ANNUAL REPORT www.geccom.vn 27 LETTER TO SHAREHOLDERS With continuously high economic growth These were, in fact, the signals in favor of rate in recent years which peaked at 7.08% Renewable Energy last year, and GEC - with the & INVESTORS FROM CEO in 2018 - the highest growth in recent 10 advantage in developing small and medium Hydro power plants, pro-actively caught up years, the demand of Energy for economic with this trend. Being well prepared, especially development is considered as a key with the clean land bank 4 years ago, GEC factor; average power growth reaches inaugurated the 2 first Solar power Plants in approximately 10% per year. Vietnam including Phong Dien - Hue with the capacity of 48 MWp and Krong Pa - Gia Lai with the capacity of 69 MWp in 4Q 2018; Duc Hue 1 - Long An and Ham Phu 2 - Binh Thuan Plants 2018 with the same capacity of 49 MWp are going to NET REVENUE VND 559 be put into operation in 2Q 2019. Billion The capacity of these projects meets approximately 20% of GEC’s strategic objectives for Solar and Wind power 2018 development in the coming years. Even more TOTAL ASSETS VND 4,361 remarkable than the strategic objectives are Billion the fact that the deployment - with pioneering steps - has brought various experience Dear Esteemed Shareholders and Investors, during the project implementation to the Management Board and the employees; from n 2019, we witnessed the most exciting period of meeting the Electrical legal requirements to Vietnam Energy market, especially the participation technical work, or the selection of technology I of private sector in Renewable Energy Industry. With and contractors. This is really a valuable continuously high economic growth rate in recent years experience for the GEC’s BOD to be able to go which peaked at 7.08% in 2018 - the highest growth in further in the coming years and right in 2019 - recent 10 years, the demand of Energy for economic it could “decode” the issue on how to achieve development is considered as a key factor; average power an effective investment rate when the FiT growth reaches approximately 10% per year. According would no longer be at 9.35 cents/kWh after to the VII Adjusted Power Development Master Plan to June 30th, 2019. 2020, although the Renewable Energy accounts for a small proportion in the total power capacity - the proportion of 2019 is also the 30th year of GEC’s development Renewable Energy production only accounts for 6.5%. The history since being started as an equitized Government’s incentive mechanisms for Renewable Energy State-Owned Enterprise that focused on small development effectively stimulated this Sector last year: and medium Hydropower plants, GEC is now on the trend of developing Renewable Energy • Decision No. 11/2017/QD-TTg dated April 11th, 2017 on with Solar and Wind power projects, etc. the mechanism for encouraging the development of GEC also serves as TTC’s pillar in Energy Solar power in Vietnam with the FiT of 9.35 cents/kWh; Sector - which is currently leading the market in Solar rooftop power, research and • Decision No. 39/2018/QD-TTg dated September 10th, development of Waste-to-Energy, besides 2018 on the support mechanism for the development other TTC‘s traditional Energy types such as of Wind power projects in Vietnam. The FiT was set at Biomass from bagasse. With the direction of 8.5 cents/kWh for on-shore Wind power projects and TTC Group and the support from international 9.8 cents/kWh for off-shore ones; Shareholders such as IFC and Armstrong, GEC is taking firm and solid steps in the role of an • Decision No. 02/2019/QD-TTg dated January 8th, 2019 on effective Renewable Energy development changing mechanism on trading Solar rooftop power. The unit. This can be seen through its pioneering sell side pays for the amount of electricity received at the vision, effective implementation, technical/ price in accordance with current regulations; the buy side technological strengths, legal experience shall pay for the amount of electricity transmitted to the grid in Electricity Industry, to comply with the at the selling price of grid-connected Solar power projects. highest environmental/social standards
Ms. Nguyen Thai Ha - Chief Executive Officer
28 2018 ANNUAL REPORT www.geccom.vn 29 LETTER TO SHAREHOLDERS & INVESTORS FROM CEO (continued)
GEC’s Management Board in the Industry’s planning/development direction, believes that every Members will locally transmission overload in some areas and the risk of “releasing capacity” as forecasted by authorities and gradually and effectively fulfill their experts, etc. In the enforcement role, GEC’s Management roles, Profit growth is expected to Board is quantifying the factors affecting GEC’s 5-year be growing at 40% compared to strategic objectives and annual plan. 2018, 5 Solar power Plants will be put in operation in 2019, M&A of Hydropower/Solar power Plants 1 To balance between the rapid growth and needs to be carried out, legal investment efficiency; procedures for Wind power projects need to be focused on in order to 2 To consider the shift of project development method accelerate from 2020 on. from working with international EPC general contractors to self-implementation - depending on the required conditions of each project/terrain/progress; set by IFC, etc. All of the above is incorporated in GEC’s commitment on sustainable development, with the vision 3 To harmonize project development/construction “By 2025, GEC becomes the leading private organization in with M&A in both Solar power and Hydropower; Vietnam’s Renewable Energy Sector”. 4 To seek opportunities for project development as well as to collaborate with potential partners in Laos Dear Esteemed Shareholders and Investors, and Cambodia, and even; In the implementation role, GEC’s BOM is aware of the development opportunities in Energy Industry and how 5 To streamline GEC’s Revenue from Hydropower and to grasp the opportunities to accelerate the capacity, Solar Power activities despite the impact of weather; and at the same time, how to identify the challenges in the “saga of Renewable Energy development”. Those are 6 To implement effectively O&M targets for GEC and towards services for external Solar power Plants, etc. incentive mechanisms that are intertwined with changes Successful deployment of Wind power will be one of the Board of Management's targets
Vietnam Energy market development is a colorful where GEC has been developing its projects as well as “Standard governance - Professional management - picture, provided that we are aware of the opportunities the effective coordination of the BOD. GEC is moving Responsible control” are the 3 pillars that GEC is aiming to grasp, the issues to identify for optimal solutions; forward with proactiveness and confidence, bringing at. Specifically, GEC’s BOM is identifying the objectives, GEC’s Management Board believes that every Members practical values to its Stakeholders - Shareholders - Staff - controlling project progress, promoting the functions will gradually and effectively fulfill their roles to meet Community and Society, etc. STANDARD development targets and objectives/ tasks in 2019 GOVERNANCE of every Division/Department/Committee through its optimal organizational chart, legal and regulation which will be submitted to the 2019 AGM. Profit growth is Sincerely, document system and the appropriate decentralization expected to be growing at 40% yoy, 2 Solar power Plants system, creating the optimal mechanism and boost for will be put in operation in the first half of 2019, at least 3 the leading role of each Deputy CEO in charge, etc. In Solar power Plants need to be developed in 2019, M&A addition, GEC’s Management Board also focus on how to of Hydropower/Solar power Plants needs to be carried ensure that GEC’s Governance - Management standards out, legal procedures for Wind power projects need to be approach the international practices as desired by focused on in order to accelerate from 2020 on, effective major Shareholders; ensuring the rapid growth and be coordination with local and global organizations need to compatible with the flexible of Energy market at present. Ms. Nguyen Thai Ha PROFESSIONAL RESPONSIBLE be taken care of in developing Renewable Energy, etc. MANAGEMENT CONTROL Above all, all effort is to consolidate and create a reliable Chief Executive Officer foundation for GEC’s operation, to meet Shareholder’s GEC’s Management Board sincerely appreciates the expectation and Investor’s interest as GEC is being listed interest and support from Shareholders and Investors, in the stock market, etc. From that point on, a strong who have been accompanying with GEC; the precious boost to the future for GEC could be created. guidance and support from the agencies and localities
30 2018 ANNUAL REPORT www.geccom.vn 31 INTRODUCTION OF THE BOARD OF MANAGEMENT
Ms. NGUYEN THAI HA Mr. LE THANH VINH CEO Permanent Deputy CEO
Nationality: Vietnamese Nationality: Vietnamese Year of Birth: 1980 Year of Birth: 1975
Appointment history Appointment history Date of appointment as CEO: October 10th, 2018 Date of appointment as Deputy CEO: October 3rd, 2017 Duration services as CEO: 3 months Duration services as Deputy CEO: 1 year 10 months
Qualifications Qualifications Master in Economics Master of Development Economics
Professional experience Professional experience
October 2018 - Present: CEO - Gia Lai Electricity JSC August 2017 - Present: Chairman of the Board - TTC Energy JSC April 2016 - April 2017: Head of Supervisory Board - Gia Lai Electricity JSC March 2017 - Present: Permanent Deputy CEO - Gia Lai Electricity JSC 2016 - Present: Vice Chairwoman - Thanh Thanh Cong Tourist JSC 2016 - 2017: Deputy CEO - KN Investment Group; 2012 - Present: BOD Member, Chief of the Secretariat, Deputy CEO CEO - LDG Investment JSC - Thanh Thanh Cong Investment JSC 2013 - 2015: Deputy CEO, Managing Real Estate Projects - Hoa Lam JSC 2002 - 2012: Chief of the Secretariat, Deputy Internal Auditor 2009 - 2012: Deputy CEO - Sai Gon Thuong Tin Real Estate JSC (Sacomreal) - Saigon Thuong Tin Commercial Joint Stock Bank 2007 - 2009: CEO - Lien Minh Real Estate JSC and Ingate Capital Investment Fund 2001 - 2002: Auditor - A&C Auditing & Consulting Company 2005 - 2007: Investment and Business Development Director - Phat Dat Real Estate Development JSC and NAI Vietnam Outstanding achievements 2002 - 2005: Deputy Sales Director - Nam Long Co., Ltd. 2000 - 2003: Lecturer of Finance Department - College of Finance She has had more than 18 years of experience in various fields ranging and Accounting IV - Ho Chi Minh City from administration, controlling to CG of Public and Listed Companies. Being GEC’s Head of Supervisory Board in 2016-2017, she advised the BOD on strategies of supervision, operation control, accounting and financial Outstanding achievements systems. With experience in various positions at TTC Group and good insight into the Group’s management model, development strategy, especially in With 18-year experience of management and administration in large- the Energy Industry, which is considered one of the Group’s key and strong scale enterprises from various industries including Real Estate, Finance, businesses, she was officially appointed as the first female CEO in GEC’s Energy. He participated in GEC and made important contributions to the history. In her new position, she continuously contributes to develop the implementation of Solar power projects in accordance with the direction diversification of Renewable Energy portfolio projects, including Solar and set by the BOD, especially the success in operating 2 Solar power projects Wind power projects; supporting in the successful issuance and distribution in 2018 including Phong Dien - Hue and Krong Pa - Gia Lai. Thanks of 97 million shares for the capital increase in 2018. In addition, through IR to his contributions, GEC became the pioneer of Energy Industry by activities, she becomes an important bridge between the Company and commissioning the first Solar Energy Projects in Vietnam. local/global strategic Shareholders of GEC.
GEC Board of Management Current positions in organizations Current positions in organizations (excepting for Parent company - Subsidiary) (excepting for Parent company - Subsidiary)
• Deputy Chairwoman - Thanh Thanh Cong Tourist JSC Chairman - TTC Energy JSC • BOD Member, Deputy CEO, Chief of the Secretariat - Thanh Thanh Cong Investment JSC Ownership of voting shares at the Company
Ownership of voting shares at the Company 37,300 shares; 0.019%
30,700 shares; 0.02%
32 2018 ANNUAL REPORT www.geccom.vn 33 INTRODUCTION OF THE BOARD OF MANAGEMENT (continued)
Mr. NGUYEN DINH TUAN Mr. PHAN THANH LAC Mr. HA NGUYEN HOANG Ms. TRAN THI HONG THAM Deputy CEO Deputy CEO Deputy CEO Chief Accountant
Nationality: Vietnamese Nationality: Vietnamese Nationality: Vietnamese Nationality: Vietnamese Year of Birth: 1963 Year of Birth: 1960 Year of Birth: 1983 Year of Birth: 1983
Appointment history Appointment history Appointment history Appointment history st st Date of appointment as Deputy CEO: April 1 , 2011 Date of appointment as Deputy CEO: January 1 , 2011 Date of appointment as Deputy CEO: January 2nd, 2019 Date of appointment as Chief Accountant: November 2016 Duration services as Deputy CEO: 7 years 9 months Duration services as Deputy CEO: 8 years Duration services as Chief Accountant: 2 years 2 months Qualification Qualification Qualification Master of Automation Qualification Electrical Engineer Bachelor of Economics Bachelor of Economics
Professional experience Professional experience Professional experience Professional experience
March 2016 - Present: Chairman - Thuong Lo Hydropower One 2012 - Present: Chairman - Kenh Bac - Ayun Ha Hydro Power JSC January 2019 - Present: Deputy CEO - Gia Lai Electricity JSC November 2016 - Present: Chief Accountant cum Finance Manager - Member Limited Co., Ltd. 2011 - Present: Deputy CEO - Gia Lai Electricity JSC January 2019 - Present: BOD Member - Truong Phu Hydropower JSC Gia Lai Electricity JSC December 2013 - Present: BOD Member - Truong Phu Hydropower JSC 2011 - 2017: Chairman - Tay Nguyen Electricity Investment JSC January 2019 - Present: Chairman - Gia Lai Construction & Electric May 2014 - October 2016: Chief Accountant - Gia Lai Construction & Electric Mechanical Company Limited May 2018 - December 2018: Vice Chairman - Truong Phu Hydropower JSC 1995 - 2010: Chief Accountant, Head of Planning Department Mechanical One Member Co., Ltd. August 2007 - April 2014 : Chief Accountant - Ayun Thuong JSC 2011 - Present: Deputy CEO - Gia Lai Hydropower JSC - Gia Lai Electricity Company July 2017 - Present: Director of Energy Division - Thanh Thanh Cong April 2011 - Present: BOD Member - Gia Lai Hydropower JSC Investment JSC September 2006 - July 2007: Accountant - Ayun Thuong JSC 2008 - 2011: Director - Gia Lai Hydropower JSC 2014 - Present: BOD Member - Gia Lai Hydropower JSC Outstanding achievements 2015 - June 2017: Director of Technical Division - Gia Lai Electricity JSC 2002 - 2008: Director - Gia Lai Investment and Power Development Co., Ltd. Outstanding achievements 1999 - 2001: Head of Planning Department - Gia Lai Electricity Company 2013 - 2015: Deputy Director - Director of Technology Development Center With over 23 years of experience in financial management and CG of - Gia Lai Electricity JSC 1994 - 1998: Head of Technical Department - Gia Lai Electricity Company public companies and listed companies, he is deeply involved in GEC’s With more than 12 years of working with GEC, she contributed to build and 2009 - 2013: Assistant Manager of Technical Department - development, especially in the transition of its operational model from organize a strong accounting system, suitable to the operation situation of Gia Lai Electricity JSC State- Owned Company to JSC. In addition, he is one of the BOM members the Company. She advised the BOD on changes in accounting regimes for Outstanding achievements who participated throughout the merger process of Subsidiaries as GAC, each period in line with the trend of international capital market integration, GRC into GEC in 2016, TIC into GEC in 2017 and the GEC's 1: 1 share Outstanding achievements as well as ensuring compliance with the Law. With more than 24 years of experience in investment management, issuance in 2018 to increase the Charter capital and the scale of operation, construction and operation of power plant projects, he has accompanied aiming to the long-term sustainable development goals. With many years with GEC for more than 7 years and successfully managed many projects of experience in Energy Industry, he also supported GEC in successfully With more than 10 years of experience in the field of Electrical Engineering, Current positions in organizations that bring high economic efficiency for the Company as Ayun Ha, building and developing Hydropower Projects namely Ayun Ha, H’Chan, he participated in GEC and was responsible for technical and technological (excepting for Parent company - Subsidiary) H’Chan, H’Mun and Ayun Thuong Hydropower Plants. In addition, he also H’Mun, Ayun Thuong. issues. In 2018, he played an important role in deploying the first 2 Solar contributed ideas to Energy Management Authorities to support the power projects in Vietnam in accordance with the roadmap approved by No development of investment, management and operation of power plants the BOD. According the plan of the next coming years and the valuable policies in accordance with regulation and brings the highest business Current positions in organizations experience from the Energy Market, he will be one of the important efficiency to both the Government and the Company. (excepting for Parent company - Subsidiary) members in the diversification of GEC’s Renewable Energy, including Ownership of voting shares at the Company developing Wind power Plants, as well as managing and operating the Current positions in organizations Chairman - Kenh Bac - Ayun Ha Hydropower JSC next Solar power Plants. 27,600 shares; 0.014% (excepting for Parent company - Subsidiary) Ownership of voting shares at the Company • Chairman - Thuong Lo Hydropower One Member Limited Liability Current positions in organizations Company (excepting for Parent company - Subsidiary) 366,524 shares; 0.188% • BOD Member - Truong Phu Hydropower JSC • BOD Member - Truong Phu Hydropower JSC • Deputy CEO - Gia Lai Hydropower JSC • Director - Energy Division - Thanh Thanh Cong Investment JSC
Ownership of voting shares at the Company Ownership of voting shares at the Company
187,606 shares; 0.096% 16,200 shares; 0.007%
34 2018 ANNUAL REPORT www.geccom.vn 35 FINANCIAL HIGHLIGHTS 2015-2018
KEY FINANCIAL INDEX BUSINESS PERFORMANCE ASSETS STRUCTURE
Liquidity Radios: Good Net Revenue: CAGR in 2015-2018 reached 16% Total assets: Increasing by 2.6 times yoy since GEC expanded its investment in Renewable Energy, especially Solar power projects Times VND billion 5 559 4.7 600 539 VND billion 4 4.4 4,361 3 500 5,000 2.5 2.4 2.3 431 2 2.3 2.4 400 4,000 2.3 354 NET REVENUE 1 300 3,000 0 2015 2016 2017 2018 200 2,000 1,885 1,659 1,552 VND 559 Current ratio Quick ratio 100 1,000 Billion Current ratio and Quick ratio are 2 times higher, exceeding the Industry 0 0 average at 1.7 times and 1.6 times respectively 2015 2016 2017 2018 2015 2016 2017 2018
Capital structure Ratios: Safe EBITDA: Increasing steadily over the years because many plants have Cash and cash equivalents: Making a record at the end of 2018, 2015-2018 CAGR mostly depreciated reached an impressive growth rate of 90% Times VND billion 0.80 VND billion 0.63 700 0.60 400 0.53 609 0.40 350 600 0.27 345 EBITDA 0.18 334 0.33 500 0.20 0.35 300 264 268 0.20 0.14 0 250 400 2015 2016 2017 2018 300 VND Debt/ Total assets Debt/ Equity 150 345 223 Billion 100 200 The Debt/Equity and Debt/Total assets ratios are still lower than the Industry average at 0.88 times and 0.38 times; although GEC issued bonds 89 50 100 68 and took loans in 2018 to invest in a series of Solar power projects
0 0 Profitability Ratios:Very good 2015 2016 2017 2018 2015 2016 2017 2018
Times Owner’s Equity: An increase of 83% yoy with the number of shares as of December st 75% 31 , 2018 reaching 194,182,550 80% 62% 62% 62% VND billion 56% 60% 58% 54% 51% 47% 55% 3,000 40% 44% TOTAL ASSETS 38% 44% 39% 2,500 2,408 20% 31% 33% EBITDA MARGIN 2,000 0% 1,318 2015 2016 2017 2018 1,162 1,151 VND 4,361 1,000 Billion Gross margin Net margin EBIT margin EBITDA margin 62% 500 Gross profit margin and Net profit margin have been stable for years and 0 remained higher than 50% and 30% respectively; especially these are 2015 2016 2017 2018 higher than the Industry average of 48% and 29% correspondently Source: 2015-2018 Audited Consolidated FS
36 2018 ANNUAL REPORT www.geccom.vn 37 FINANCIAL HIGHLIGHTS 2015-2018 (continued)
SUMMARY OF FINANCIAL STATEMENT 2015-2018
Increase/ Increase/ CAGR INDICATOR (VND Billion) 2015 2016 2017 2018 Decrease INDICATORS 2015 2016 2017 2018 Decrease 2015-2018 yoy yoy
BALANCE SHEET CASH FLOW ASSETS 1,885 1,552 1,659 4,361 163% 32% Cash flow from business activities - - - - - Short-term assets 484 342 486 1,230 153% 36% Earnings before tax 149 149 230 207 -10% Cash and cash equivalent assets 89 68 223 609 173% 90% Net cash flow from business activities 72 168 244 141 -42% Short-term financial investment - - 8 252 3,050% - Cash flow from investment activities - - - - - Short-term receivables 381 257 228 246 8% -14% Net cash flow from investment activities -122 91 5 -1,946 - Inventory 9 16 26 25 -5% 41% Cash flow from financial activities - - - - - Other short-term assets 5 1 1 98 9,700% 170% Long-term assets 1,401 1,210 1,173 3,131 167% 31% Net cash flow from financial activities 41 -280 -93 2,191 - Long-term receivables - 2 11 1 -91% - Net cash flow in the period -9 -21 155 387 150% Fixed assets 1,224 1,168 1,114 2,878 158% 33% Ending cash and cash equivalents 89 68 223 610 174% Long-term work-in-progress assets 135 6 18 216 1,100% 17% Long-term financial investments 1 - - - - - FUNDAMENTAL FINANCIAL RATIOS Other long-term assets 41 34 30 36 20% -4% Increase/ CAPITAL SOURCES 1,885 1,552 1,659 4,361 163% 32% FINANCIAL RATIOS UNIT 2015 2016 2017 2018 Decrease Total liabilities 723 401 341 1,953 473% 39% yoy Short-term liabilities 205 135 104 528 408% 37% LIQUIDITY RATIOS Short-term debt 103 45 6 106 1,667% 1% Current ratio Times 2.4 2.5 4.7 2.3 -51% Long-term liabilities 518 266 237 1,425 501% 40% Quick ratio Times 2.3 2.4 4.4 2.3 -48% Long-term debt 517 265 232 1,420 512% 40% Cash ratio Times 0.4 0.5 2.2 1.6 -27% Owner’s Equity 1,162 1,151 1,318 2,408 83% 27% CAPITAL STRUCTURE RATIOS
Increase/ Liabilities / Total assets Times 0.38 0.26 0.21 0.45 114% CAGR INDICATOR (VND Billion) 2015 2016 2017 2018 Decrease 2015-2018 Debt/ Total assets Times 0.33 0.20 0.14 0.35 150% yoy Liabilities / Equity Times 0.62 0.35 0.26 0.81 212% BUSINESS PERFORMANCE Debt/ Equity Times 0.53 0.27 0.18 0.63 250% Net Revenue 354 431 539 559 4% 16% Costs of goods sold 157 213 227 253 11% 17% OPERATING RATIOS Gross profit 197 218 312 306 -2% 16% Account receivable turnover Times 4.9 3.8 5.5 6.1 11% Interest expense 41 39 24 40 67% -1% Account receivable turnover Days 75 96.9 66.4 60.1 -9% Net Revenue from financial activities -8 -19 -7 -22 - - Account payables turnover Times 10.6 17.7 19.1 1.3 -93% SG&A expenses 41 51 66 77 17% 22% Profit from business activities 148 148 239 207 -13% 12% Account payables turnover Days 34.4 20.6 19.1 278.2 1,357% Other costs and income 1 1 -9 - - - PROFITABILITY RATIOS Earning before tax 149 149 230 207 -10% 12% EBITDA Margin % 75 62 62 62 0% CIT 16 15 21 20 -5% 8% Gross Profit Margin % 56 51 58 55 -5% NPAT 133 134 209 187 -11% 12% EBIT 190 188 255 247 -3% 9% EBIT Margin % 54 44 47 44 -6% EBITDA 264 268 334 345 3% 9% Operating Margin % 42 35 44 37 -16% PATMI 93 95 154 145 -6% 16% Net Profit Margin % 38 31 39 33 -15%
Source: 2015-2018 Audited Consolidated FS
38 2018 ANNUAL REPORT www.geccom.vn 39 VND8,900 BILLION TOTAL INVESTMENT OF 22 PLANTS
A view of Phong Dien Solar power Plant - Thua Thien Hue
CORPORATE GOVERNANCE
42 Applying ASEAN Corporate Governance Scorecard - Efforts towards new standards FLEXIBLE DEVELOPMENT 56 Code of Conducts 58 Board of Directors’ Reports and Corporate Governance activities WELCOMING OPPORTUNITIES 72 Renewable Energy trend - A view from Southeast Asia and Vietnam WITH A LONG-TERM STRATEGIC VISION, GEC'S LEADERS 84 Board of Directors’ Strategic vision DECIDE TO DIVERSIFY INVESTMENTS, MAKE USE OF RENEWABLE 90 Report of the Independent Board Member 92 Report of the Audit Committee SOURCES, AND EMBRACE THE TREND, AIM FOR "GREEN ENERGY"; 96 Main risks and risk management activities IN CONSISTENCY WITH THE NATIONAL SUSTAINABLE 104 Compliance with Vietnam's Laws, approaching international standards DEVELOPMENT STRATEGY. 02 110 Investor Relations and Capital Market activities APPLYING ASEAN CORPORATE GOVERNANCE SCORECARD EFFORT TOWARDS NEW STANDARDS
he ASEAN CG Scorecard was piloted in 2010 and Although GEC's stock code is GEC Improvement plan has officially applied in valuation for ASEAN stock only registered on Upcom, the (Good - Very good) exchange markets since 2011. The scorecard is a CG T Company is improving towards Number of initiative of Association of Southeast Asian Nations under Item Descriptor Questions Short- Mid- Percentage best practices on the market and term term Ratio the Master Plan by ASEAN Capital Market Forum (ACMF) Questions Ratio Ratio with the support and cooperation of Asian Development ready for being listed on HOSE in (<=1 (1-3 Percentage Bank (ADB) in order to build ASEAN image and brand as the future. year) years) an investment asset of the international capital market. I Standard questions 146 92 63% 130 89% 16 11% 79% The scorecard is expected to improve CG standards of Standard - Bonus - Penalty question by improvement plan listed companies in ASEAN region and provide Investors Short term Medium term A Rights of Shareholders 21 13 62% 20 95% 1 5% 12% a comprehensive view of businesses that will be the 100% 89% 92% Equitable treatment of direction for their investment portfolio. The set of criteria is B 15 11 73% 14 93% 1 7% 8% based on good CG principles developed by G20/OECD to Shareholders 80% 69% evaluate CG quality on 2 levels: C Role of Stakeholders 13 13 100% 13 100% 0 0% 7% 60% • The level of compliance with Vietnam's applicable legal 31% D Disclosure and transparency 32 26 81% 28 88% 4 12% 17% regulations on CG for public companies; 40% 20% 11% E Responsibilities of the BOD 65 29 45% 55 85% 10 15% 35% • The level of implementing good CG practices based on 8% G20/OECD CG principles. II Bonus questions 13 7 54% 9 69% 4 31% 7% Standard Bonus Penalty The set of criteria is not mandatory; it only encourages Source: GEC III Penalty questions 25 21 84% 23 92% 2 8% 14% companies to improve their CG practices according to Scorecard to assess their CG compliance. Although GEC's international standards towards upgrading Vietnam stock stock code is only registered on Upcom, the Company is Total 184 120 65% 162 88% 22 12% 100% market from Frontier Market to Emerging Market. Currently, improving towards best practices on the market and ready not many listed companies in Vietnam actively apply the for being listed on HOSE in the future.
Standard - Bonus - Penalty question 60 by Descriptors 55
50
40
30 28
23 20 20 19 17 15 13 14 13 14 11 10 10 8 9 9 Improvement in medium term 5 4 4 5 Improvement in short term Good 1 1 2 2 2 Very good 0 A.Rights of B. Equitable treatment to C. Roles of D. Disclosure and E.Responsibility of Bonus Penalty Shareholders Shareholders Stakeholders transparency the BOD Source: GEC
42 2018 ANNUAL REPORT www.geccom.vn 43 STANDARD QUESTIONS
Documents Item Assessment 2017 - 2018 Current Company Charter Code of CG 2018 Annual Report AGM compliance
Sort by A RIGHTS OF SHAREHOLDERS performance 62% A.2.1 Do Shareholders have the right to participate in amendment to the Company's constitution? A.2.2 The authorization for issuing additional shares? A.2.3 The transfer of all or substantially all assets, which in effect results in the sale of the Company? Do Shareholders have the opportunity to approve remuneration for the Non-Executive Members A.3.1 of the BOD? Good (13 Qs) A.3.2 Does the Company provide non-controlling Shareholders a right to nominate candidates for the BOD? A.3.3 Does the Company allow Shareholders to elect Directors individually? 5% A.3.4 Does the Company disclose the voting procedures used before the start of meeting? Does the Company disclose the voting results for all resolutions/each agenda item for the most A.3.6 Good recent AGM? Sort by improvement A.3.9 Does the Company allow voting in absence? degree A.3.10 Does the Company vote by poll for all resolutions at the most recent AGM? Does the Company make publicly available by the next working day (within 24 hours) the result of A.3.12 95% the votes taken during the most recent AGM for all resolutions? A.3.15 Does Company give opportunity for Shareholders to place items on the agenda of AGM? Short term (20 Qs) Medium term (1 Qs) In cases of mergers, acquisitions and/or takeovers requiring Shareholders’ approval, do the BOD/ A.4.1 Commissioners of the Company appoint an independent party to evaluate the fairness of the Source: GEC transaction price?
Documents
Item Code of 2018 Assessment Company Code of 2017-2018 Current Code of CG Information Website Annual Charter conducts AGM compliance Disclosure Report B EQUITABLE TREATMENT OF SHAREHOLDERS Sort by performance Where the Company has more than one class of shares, does the Company publicize the voting rights B.1.2 1 class attached to each class of shares? 73% B.2.1 Does each resolution in the most recent AGM deal with only one item? B.2.3 Are the profiles of BOD Members/Commissioners in seeking election/reelection included? B.2.5 Are the proxy documents made easily available? Good (11 Qs) Does the Company have policies and/or rules prohibiting Directors and employees to benefit from B.3.1 insider trading? B.3.2 Are the Directors required to report their dealings in Company shares within 3 business days? 7% Does the Company have a policy requiring Directors to disclose their interest in transactions and any B.4.1 other conflicts of interest? Good Sort by Does the Company have a policy requiring a Committee including Independent BOD Members to improvement B.4.2 review material Related Parties to determine whether they are in the best interests of the Company degree and Shareholders? Does the Company have a policy requiring Board Members (Directors/Commissioners) to abstain B.4.3 93% from participating in the Board discussion on a particular agenda when they are conflicted? Does the Company have policies on loans to the BOD Members and Commissioners either forbidding B.4.4 this practice or ensuring that they are being conducted at arm's length basis and at market rates? Short term (14 Qs) Medium term (1 Qs) In case of related party require approval from Shareholders, are such approval made by Shareholders Source: GEC B.5.2 without related interests?
44 2018 ANNUAL REPORT www.geccom.vn 45 STANDARD QUESTIONS
Document Item Assessment Code of conducts Website 2018 Annual Report Current compliance
C ROLE OF Stakeholders
C.1.1 Do the existence and scope of the Company's efforts to address customers’ welfare? Good
C.1.2 Any supplier/contractor selection procedures?
Do the Company's efforts ensure that its value chain is environmentally friendly or is C.1.3 consistent with promoting sustainable development? Very good 38%
Sort by C.1.4 Do the Company's efforts interact with the communities in which they operate? performance 62% C.1.5 Do the Company announce the anti-corruption programs and procedures? Good C.1.6 How creditors' rights are safeguarded?
Very Good (8 Qs) Good (5 Qs) Does the Company have a separate report/section that discusses its efforts on C.1.7 environment, economy and social issues?
Does the Company provide contact details via the Company's Website or Annual C.2.1 Report which Stakeholders can use to voice their concerns and/or complaints for possible violation of their rights? Very good
Sort by Does the Company explicitly disclose the policies and practices on health, safety, and C.3.1 improvement welfare policy for its employees? degree
Does the Company explicitly disclose the policies and practices on training and C.3.2 100% development programs for its employees?
Does the Company have a reward/compensation policy that accounts for the Short term (13 Qs) C.3.3 Good performance of the Company beyond short-term financial measures?
Does the Company have a whistle blowing policy which includes procedures for complaints by employees and other Stakeholders concerning alleged illegal and C.4.1 unethical behavior and provide contact details via the Company's Website or Annual Report? Very good
Does the Company have a policy or procedures to protect an employee/person who C.4.2 Source: GEC reveals alleged illegal/unethical behavior from retaliation?
46 2018 ANNUAL REPORT www.geccom.vn 47 STANDARD QUESTIONS
Document Item Assessment Company 2018 Current Code of CG Website 2018 FS Charter Annual Report compliance D DISCLOSURE AND TRANSPARENCY Does the information on shareholdings reveal the identity of beneficial owners, holding 5% D.1.1 Very good shareholding or more? Does the Company disclose details of the parent/holding company, Subsidiaries, associates, D.1.5 Good joint ventures and special purpose enterprises/ vehicles (SPEs)/(SPVs)? D.2.1 Annual Report: Corporate objectives
D.2.2 Annual Report: Financial performance indicators
D.2.3 Annual Report: Non-financial performance indicators Very good D.2.4 Annual Report: Dividend policy
D.2.5 Annual Report: Biographical details of all Directors/Commissioners Annual Report: Attendance details of each Director/Commissioner in all Directors/ D.2.6 Commissioners meetings held Sort by D.2.7 Total remuneration of each member of the BOD/Commissioner Good 53% performance Does the Annual Report contain a statement confirming the Company's full compliance with 28% D.2.8 the code of CG and where there is non-compliance, identify and explain reasons for each Very good such issue? Does the Company disclose its policy covering the review and approval of material D.3.1 Related Parties? Very Good (17 Qs) Good (9 Qs) Good D.3.2 Does the Company disclose the name relationship and value for each material Related Parties?
D.4.1 Does the Company disclose trading in the Company's shares by insiders?
D.5.1 Are audit and non-audit fees disclosed? Very good 12% D.5.2 Does the non-audit fees exceed the audit fees?
Sort by D.6.2 Medium of communications: Company Website improvement Good degree D.6.4 Medium of communications: Media briefings /press conferences Are the audited Annual Financial Report/ statement released within 120 days from the 88% D.7.1 financial year end? D.7.2 Is the Annual Report released within 120 days from the financial year end? Short term (28 Qs) Medium term (4 Qs) Is the true and fairness/fair representation of the annual FS affirmed by the BOD and/or the D.7.3 Very good relevant officers of the Company? D.8.1 Company Website: FSs (latest quarter)
D.8.3 Company Website: Downloadable Annual Report
D.8.4 Company Website: Notice and document of AGM and/or EGM
D.8.5 Company Website: Meeting minutes of AGM and/or EGM Good
D.8.6 Company Website: Downloadable Company Charter Investor relations: Does the Company disclose the contact details of the officer/office Source: GEC D.9.1 Very good responsible for Investor relations?
48 2018 ANNUAL REPORT www.geccom.vn 49 STANDARD QUESTIONS
Document Item Assessment Company Information Code of 2017-2018 2018 Current Code of CG Website Charter Disclosure conducts AGM Annual Report compliance E RESPONSIBILITY OF THE BOD
E.1.1 Does the Company disclose its CG policy/Board Charter?
E.1.2 Are the types of decisions requiring the BOD/Commissioners' approval disclosed? Good
E.1.3 Are the roles and responsibilities of the BOD/Commissioners clearly stated? Are all Directors/Commissioners, Senior Management and employees are required to comply with E.2.2 the code? Does the Company have a process to implements and monitors compliance with the code of E.2.3 ethics or conduct? Does the Company have any Executive Directors who serve on more than 2 Boards of listed E.2.7 No companies outside of the Group? 22% Very good E.2.18 Does the Company have an Audit Committee? Is the Audit Committee comprised entirely of Non-Executive BOD Members/Commissioners with a Sort by E.2.19 performance majority of Independent BOD Members/Commissioners? 23% E.2.20 Is the Chairman of the Audit Committee an Independent BOD Member/Commissioner? Does the Company disclose the terms of reference/governance structure/charter E.2.21 Good of the Audit Committee? E.2.22 Does at least one of the Independent BOD Members/Commissioners have accounting expertise? Very good Very Good (15 Qs) Good (14 Qs) Is the meeting attendance of the Audit Committee meetings disclosed? Did the Audit Committee E.2.23 Good meet at least 4 times during the year? Does the Audit Committee have primary responsibility for recommendation on the appointment, E.2.24 Very good and removal of the external auditor? E.3.4 Does the Company require a minimum quorum of at least 2/3 for Board decisions? 15% Does the Company secretary play a significant role in supporting the Board in discharging its E.3.7 responsibilities? Good Sort by E.3.9 Does the Company disclose the criteria used in selecting new Directors/Commissioners? improvement degree Are all the Directors/Commissioners subject to re-election at least once every 3 years, or 5 years for E.3.11 listed companies in countries whose legislation prescribes a term of 5 years each? 85% E.3.13 Is there disclosure of the fee structure for Non-Executive BOD Member and/or the Senior Executives? Very good Do the Shareholders or the BOD approve the remuneration of the Executive Directors and/or E.3.14 Good the Senior Executives? Short term (55 Qs) Medium term (10 Qs) E.3.16 Does the Company have a separate Internal Audit function?
E.3.17 Is the Head of Internal Audit identified or, if outsourced, is the name of the external firm disclosed? Very good Does the appointment and removal of the Internal Auditor require the approval of E.3.18 the Audit Committee? Does the Annual Report/CG Report disclose that the BOD has conducted a review of the Company's E.3.20 material controls and risk management systems? E.3.21 Does the Company disclose the key risks to which the Company is materially exposed to? Good Does the Annual Report/CG Report contain a statement from BOD or Audit Committee commenting E.3.22 on the adequacy of the Company's material controls and risk management systems? E.4.1 Do different persons assume the roles of Chairperson and CEO? Very good E.4.3 Is any of Directors a former CEO of the Company in the past 2 years? No
E.4.4 Are the roles and responsibilities of the Chairman disclosed? Good Source: GEC Does at least one of the Non-Executive BOD Members have expertise in the major sector that the E.4.6 Very good Company is operating
50 2018 ANNUAL REPORT www.geccom.vn 51 PENALTY SCORECARD
Document Item Assessment Company 2017-2018 2018 Current Website 2018 FS Charter AGM Annual Report compliance PENALTY Does the Company fail or neglect to offer equal treatment for share repurchases to A.1.1 No all Shareholders?
Is there evidence of barriers that prevent Shareholders from communicating or consulting A.2.1 No Very good with other Shareholders?
Does the Company include any additional and unannounced agenda item at the most recent A.3.1 No AGM for which due notice has not been given?
A.4.2 Voting cap? Good 8% A.4.3 Multiple voting rights? No
Has there been any conviction of insider trading involving Directors/Commissioners, B.1.1 No Sort by Management and employees in the past 3 years? performance Has there been any cases of non-compliance with the laws, rules and regulations pertaining B.2.1 No to significant or material related party transactions in the past 3 years?
76% Have there been any violations of any laws pertaining to labor/employment/consumer/ C.1.1 No insolvency/ commercial/competition or environmental issues? Very good (19 Qs) Good (2 Qs) Has the Company faced any sanctions by regulators for failure to make announcements C.2.1 No within the requisite time period for material events?
D.1.1 Does the Company receive a "qualified opinion" in its external audit report? No
8% D.1.2 Does the Company receive an "adverse opinion" in its external audit report? No D.1.3 Does the Company receive a "disclaimer opinion" in its external audit report? No Sort by Has the Company in the past year revised its FS for reasons other than changes improvement D.1.4 No Very good degree in accounting policies?
Is there any evidence that the Company has not complied with any listing rules and E.1.1 No 92% regulations over the past year apart from disclosure rules? Have there been any instances where Non-Executive BOD Member(s)/Commissioner(s) E.1.2 No Short term (23 Qs) Medium term (2 Qs) resigned and raised any issue of governance-related concerns? Does the Company have any Independent BOD Member/Commissioner who has served for E.2.1 No more than 9 years or 2 5-year terms in the same authority?
Did the Company fail to disclose the identity of the Independent BOD Member(s)/ E.2.2 No Commissioner(s)?
Does the Company have any Independent BOD Members/Commissioners who serve on a E.2.3 No total of more than 5 Boards of publicly-listed companies?
Is any of the BOD Members or Senior Management a former employee or partner of the E.3.1 No current external auditor in the past 2 years?
E.4.1 Has the Chairman been the Company's CEO in the last 3 years? No Source: GEC E.4.2 Do Independent Non-Executive BOD Members have the right to hold call option or ESOP? Khá
52 2018 ANNUAL REPORT www.geccom.vn 53 BONUS SCORECARD
Document
Item Code of Assessment 2018 Current Information Website 2018 FS Annual Report compliance 15% Disclosure BONUS Sort by performance Does the Company release its notice of AGM as announced to HNX, at least 28 days before 39% B.1.1 the date of the meeting? Good
Does the Company adopt an internationally recognized reporting framework for sustainable C.1.1 development (GRI, Integrated Report, SASB)? Very good Very Good (5 Qs) Good (2 Qs) Are the audited annual financial report/statement released within 60 days from the financial D.1.1 year end? Good
31% D.1.2 Does the Company disclose details of remuneration of the CEO? Sort by improvement degree E.1.1 Does the Company have at least one female Independent BOD Member/Commissioner? Very good 69% Does the Company have a policy and disclose measurable objectives for implementing its E.1.2 Board diversity and report on progress in achieving its objectives?
Good Short term (9 Qs) Medium term (4 Qs) Does the Board describe its governance process around IT issues including disruption, cyber E.5.1 security, disaster recovery, to ensure that all key risks are identified, managed and reported Source: GEC to the Board??
54 2018 ANNUAL REPORT www.geccom.vn 55 CODE OF CONDUCTS
One of the prerequisites of the Code of Conduct is to demonstrate GEC’s commitment to its employees. GEC is committed to maximize the protection of human rights, privacy, fair and equal treatment to all employees; there is no distinction in position, title or gender. Besides, the Company always respects, commits to professional cooperation; aiming at the highest benefits for Stakeholders including Government Authorities, Suppliers, Customers, etc. as well as committing to respect the interests of Shareholders, Investors and itself. Regarding Law and Society, the Company is committed to properly conduct with the Government and Social Agencies adherence to Law-abiding.
On the other hand, employees must also fulfill their ethical commitments. Accordingly, GEC employees must strictly comply with the provisions of the law and internal policies, act on the interests of GEC. This would mean that all decisions in work should be based on the highest interests of the Company, not for any personal interest or purpose; at the same time, they shall behave in an honest, objective and fair manner during work. In addition to the request that employees make public and explain to Stakeholders on the Company's policy of transparency and fairness in all transactions, information security of the Parties is also a core principle that employees must absolutely fully comply. The Code of Conduct also specifies the principles of communication and interaction between the managers and subordinates, colleagues in the same department or other departments; as well as GEC employees and Stakeholders. The youthful, dynamic and enthusiastic GEC's team Most importantly, each GEC’s Member has enough confidence ince 2014, GEC’s BOD has closely built up ethical and the right to raise their concerns, which will be addressed In 2018, with the consultancy of IFC, a Member of World Bank standards, which is considered one of the core values seriously by the competent authority, for GEC’s sustainable S to ensure integrity, transparency as well as sustainable development. While detecting the violations or signs of and GEC’s foreign strategic Shareholder; The Code of Conduct development in the organization. violation, GEC’s BOD encourages immediate reports and was issued with the goal of creating major changes in awareness, creates favorable conditions for the Internal Audit Committee attitude and behavior in relationships both internally and with In 2018, with the consultancy of IFC, a Member of World to receive and clarify the incident. In this Code of Conduct, Bank and GEC’s foreign strategic Shareholder; GEC violations are not only acts of non-compliance with laws and partners; step by step to build a highly - qualified professional amended and supplemented the Code of Conduct in regulations but also the acts of revenge which are detrimental team, as well as creating the Company's culture. accordance with good CG practices, bringing GEC’s to individuals and the organization. The Company encourages CG activities closer to the corresponding models of each employee to come into light upon committing breeches, developed countries in the region and over the world. to which cases the management shall offer a lenient hand. The Code of Conduct was issued with the goal of creating major changes in awareness, attitude and behavior in Through the promulgation of the Code of Conduct, GEC aims relationships both internally and with partners; step by at creating a work environment that complies with the culture, step to build a highly-qualified professional team, as well open communication and interaction, observes human rights as creating the Company's culture. but still meets legal requirements.
56 2018 ANNUAL REPORT www.geccom.vn 57 GDP growth and inflation in 2012-2018 FDI attraction in 2018 GDP Inflation BOARD OF DIRECTORS’ REPORTS 8% 8% 3,046 projects 6.8% Others 7.1% & CORPORATE GOVERNANCE ACTIVITIES 6.0% 6.7% 6.8% 24% 6.2% Processing and 4.7% Manufacturing
6.0% 47% 6% 4% 3.5% 10% 5.4% 5.3% 3.5%
Retail & 19% 1.8% Wholesale
0.6% Real estate 4% 0% 2012 2013 2014 2015 2016 2017 2018 Source: GEC collected Source: Foreign Investment Department As of December 31st, 2018, the population of Vietnam was 96.9 million, up by 1.5 million people compared to 95.4 million of 2017. Vietnam is home to 1.3% of the World's population and currently ranks 14th in terms of population. The population density is 313 people/km2 and 35% of the population, i.e. over 34 million people, live in rural areas. All these factors have increased the need for power with the output of both locally generated and imported electricity as well as commercial electricity increasing 10% in 2018 versus 2017. Electricity output in 2013-2019 Electricity consumption per capita in 2013-2018 100 2,500
233 98 1,990 Billion kWh 213 212 1,830 2,000 1,692 193 193 96 1,538 177 175 1,390 97 160 160 94 1,500 Endless Energy from the sun contributes to minimize negative impacts on the environment 142 144 1,259 95 128 128 94 115 92 93 1,000 91 92 90 According to the VII Adjusted Power Development Master Plan, in 500 the 2020-2030 period, the output share of Renewable Energy by 88 86 - 2020, 2025 and 2030 will be 9.9%, 12.5%, and 21.0%, respectively, 2013 2014 2015 2016 2017 2018 2019 Target 2013 2014 2015 2016 2017 2018 with a compound growth rate of 16%. The proportion of locally Generated and purchased electricity Commercial electricity Population (Million people) Consumption per capita (kWh/person) generated and imported electricity in the Renewable Energy Source: EVN is estimated to increase significantly with a compound growth According to the VII Adjusted Power Development the PPA. Other 220 projects are waiting to be added to the Master Plan, in the 2020-2030 period, the output share Master Plan. rate of 14%, accounting for 6.5%, 6.9% and 10.7% by 2020, 2025, of Renewable Energy by 2020, 2025 and 2030 will be and 2030, correspondently. 9.9%, 12.5%, and 21.0%, respectively, with a compound In 2018, although the development of Wind power growth rate of 16%. The proportion of locally generated projects could not match that of Solar power ones, the and imported electricity in the Renewable Energy is Prime Minister’s Decision 39/2018/QD-TTg, which was estimated to increase significantly with a compound applicable to projects with commercial operation starting ECONOMIC GROWTH PROMOTES THE NEED FOR POWER growth rate of 14%, accounting for 6.5%, 6.9% and 10.7% before November 1st, 2011 and adjusted the tariff for land- by 2020, 2025, and 2030, respectively. The increase in based Wind power and sea-based Wind power to 8.5 cents 2018 was a year of comprehensive success for the and Manufacturing Industry were the biggest the proportion of Renewable Energy in the structure and 9.8 cents/kWh, respectively, fueled their dramatic Vietnamese economy with all 12 socio-economic recipient of FDI with USD 16.6 billion, accounting of capacity and production in the period 2020-2030 leap. As of December 2018, there were 7 operational indicators achieving target. GDP growth in 2018 for 47% of the total volume, followed by the indicates the Government’s growing attention to the projects in with a total capacity of 300 MW and 2,000 MW reached a record 7.08%, the highest rate in the Property sector with USD 6.6 billion, making up exploitation and development of natural resources. of Wind power was incorporated into the Master Plan. The last 10 years. Inflation was successfully controlled 19%. Although newly registered capital was only With the electricity tariff of 9.35 cents/kWh, the total total power capacity from Renewable Energy by the end at 3.54%, outperforming the planned target of 99% of the volume in 2017, disbursed FDI reached capacity of Solar Energy contracted in 2018 reached of 2018 accounted for about 2.1% of the whole system. 4%. In 2018, Vietnam attracted an additional a record of USD 19 billion, up to USD 2 billion. 2,867 MW, exceeding the target of 850 MW before 2020. Accelerating the participation of Renewable Energy 3,046 projects with total new capital inflow of In order to continue attracting large investment Besides, an additional 10,000 MW of Solar power has sources in general and Wind and Solar Energy in particular USD 35.5 billion comprising of new and capital from abroad, one of the prerequisites is been subscribed by Investors. Out of this volume, 8,100 for electricity generation plays an important role not only incremental FDI as well as foreign Investors’ capital to ensure the stable availability of Energy supply, MW has been incorporated into the master plan with in meeting the demand for power but also ensures the contribution for shares purchase. The Processing especially electricity, for business operations. 121 projects, and over 100 projects have completed sustainable development of the economy.
58 2018 ANNUAL REPORT www.geccom.vn 59 BOARD OF DIRECTORS’ REPORTS & CORPORATE GOVERNANCE ACTIVITIES (continued)
The share of Renewable Energy in the power supply structure in 2020-2030 Targets of generated and imported electricity and commercial electricity Capacity Output of generated and imported electricity Generated and imported electricity Commercial electricity 25% TRANSFORMATION STEPS IN GOVERNANCE ACTIVITIES, 21% THE FOUNDATION OF SUSTAINABLE DEVELOPMENT Billion kWh 20% 572 2018 marks a remarkable milestone of GEC when we ASEAN CG Scorecard with the Committee Chairman being 506 15% successfully launched the first 2 Solar Energy projects in the only Independent female Member of the BOD. Out of 13% 400 Vietnam. With greater ambitions for 2019 and beyond, other 2 Non-Executive Members, one is an Indian-nationality 11% 352 GEC’s BOD considers it a prerequisite to leverage the representative of IFC’s stake with over 30 years of experience 10% 10% 265 235 synergy of strengths from each BOD Member to enhance in financial investment and more than 2 years of employment 7% 7% 213 233 193 212 the governance, supervision and management functions, with GEC. The structure of the Audit Committee ensures that 5% thus creating an efficient CG system. Good CG is the basis executive supervision is fully and autonomously implemented for GEC to realize our strategy, generate and maintain without conflict of interests. 0% sustainable sources of Revenue and Profit, and maximize 2020 2025 2030 2018 2019 Target 2020 Target 2025 Target 2030 Target the raising of funds from international markets. One of Source: The VII Adjusted Power Master Plan the key factors that big Investors take into account while IFC and Armstrong’s strategic making investment decision is credibility, which is reflected According to the National Power Development Master Plan over 50 MWp which are not included in the Power Development by a standardized and transparent CG system, especially participation since 2016 is approved by the Government, the Country’s installed power Master Plan must be appraised and submitted to the Prime after the 2008 global financial crisis that surprisingly sank capacity will reach 130,000 MW by 2030 compared to the Minister for approval of incorporation into the Power Development not only confined to financial current 47,000 MW. As such, about 83,000 MW of new power Master Plan. Thirdly, the MOIT approves and incorporates into an array of giants. Besides, talents on the labor market, aspects but also plays a will need to be built and put into operation from now until 2030, the Power Development Master Plan Solar Energy projects especially Senior Executives, tend to prefer employers that accompanied by transmission and distribution infrastructure. that have a capacity of less than or equal to 50 MWp and have operate a transparent and responsible CG system. significant part in improving The continuous increase in electricity demand in many years not been included in the Power Development Master Plan. In GEC’s CG performance. will pressure for further investment in the Country’s power addition, before June 30th, 2019, the Government will issue a IFC and Armstrong’s strategic participation since 2016 generation, transmission and distribution capacity. After Decision new tariff mechanism for Solar Energy. According to the draft is not only confined to financial aspects but also plays a 11/2017/QD-TTg was issued, the race for investment in Solar decision, the tariff of Solar electricity will be calculated according significant part in improving GEC’s CG performance. Since power projects has become fierce, leading to the threat of to 4 radiation zones and 4 types of production, which means a mid-2017, IFC has conducted a comprehensive assessment The fact that GEC is currently one of the very few listed grid overload, thus putting pressure on transmission capacity. complete difference from the previous undifferentiated tariff of of CG activities at GEC under a CG consultancy contract companies on the stock market that applies this international Meanwhile, the upgrading of transmission capacity can not be 9.35 cents, or nearly VND 2,086/kWh. With this differentiation, the within IFC’s Consulting Framework in the Mekong Region standard structure in Vietnam demonstrates the Company's completed in 1 or 2 years to develop the grid system. In addition, MOIT seeks to create an incentive for projects located in a low- with the aim of improving CG performance of GEC and adaptation as well as the BOD’s proactive integration into the investment in Renewable Energy development entails some radiation region, thereby relieving regions of traditionally high Subsidiaries. IFC makes appropriate recommendations, World's advanced governance standards. In 2018, there were other disadvantages such as high investment costs, low power heat radiation regions such as Binh Thuan and Ninh Thuan and proposes practical solutions to improve the quality of the 1,533 Members listed, 52% of which came from the Upcom operating hours, and the limitations to release full capacity in balancing the development of Solar Energy across the Country CG framework, and closely supports the implementation exchange. Ho Chi Minh City Stock Exchange (HOSE) is home many areas rich in this source of Energy. Besides, the demand for sake of optimal efficiency in power generation and supply. The of changes. Specifically, IFC advises on the development to the market’s quintessence with the VN30 index covering for vast areas of land, especially Solar Energy projects, is another proposal, in addition, provides that the buyer of electricity shall and fine tuning of policies, especially more stringent the leading blue chips. Among that, however, only a few big noteworthy aspect. The term “release capacity” has become a big be responsible for purchasing all power volume generated from control of Related Party transactions, about which biggest names are applying the new CG standards such as VNM, SAB, concern not only of producers but also Investors. connected Solar Energy projects under the permitted conditions Investors in the world is concerned while getting involved NVL, REE, CTD, and SBT. This list accounts for about 20% of of gird operation; and priority shall be given to the utilization in Vietnamese businesses. IFC has also accompanied GEC VN 30 and 0.38% of the entire market. These are local brands In 2019, the MOIT drafted a decision to propose the development of the entire capacity and generated power from Solar Energy to organize CG training courses according to international with market cap of tens of billion of US dollars, namely VNM of Solar Energy projects connected to the grid in 3 forms. Firstly, projects for commercial operation. However, since the buyer is practice. These courses, delivered by IFC’s experts, were (USD 10 billion), SAB (USD 7 billion) and SBT (about USD 400 sole EVN, if EVN declines to purchase for the reason “not allowed development of Solar Energy projects whose connection to the attended by Members of the BOD and BOM as well as million). They are also known for, among other things, striking by the power grid”, then this will be one of the major concerns for grid is carried out in accordance with the Power Development advisors to the BOD. the Country’s top fund-raising deals, thus attracting billion Master Plan. Secondly, Solar Energy projects with a capacity of Solar Energy developers. of USD from the international market through the private Although GEC is only listed on the unofficial Upcom exchange, placement of shares, preferred stocks, international bonds, Electricity tariff Electricity tariff Electricity tariff Electricity tariff in I Region in II Region in III Region in IV Region thanks to the of involvement of international strategic and convertible bonds. This is exactly the goal that GEC is Shareholders, GEC has always complied with Vietnam’s latest aiming for. In the annual assessment of FTSE taking place Solar power (28 provinces - (6 provinces - (23 provinces - (6 provinces - No. CG standards under Decree 71 and Circular 95 issued in 2017. in September, the Vietnamese stock market was included technology North Region) Central Region) South Region) South Region) At the end of the 3rd Quarter of 2018, GEC held an EGM to in a watch list for Membership in the Secondary Emerging VND/ UScents/ VND/ UScents/ VND/ UScents/ VND/ US cents/ change governance model following international standards, Market list when 10 out of 21 quality criteria have been met. kWh kWh kWh kWh kWh kWh kWh kWh replacing the Supervisory Board with the Audit Committee The prospects for improvement and thus the chance to meet 1 Floating Solar power 2,159 9.44 1,857 8.13 1,664 7.28 1,566 6.85 under the BOD. This move was intended to optimally these standards are probable. However, in order to achieve 2 Ground Solar power 2,102 9.20 1,809 7.91 1,620 7.09 1,525 6.67 promote the BOD’s role of independent supervision over the this goal, the Vietnam stock market in general and each Company's operations. This decision also aimed at the ultimate entity in particular need to constantly improve the CG quality Solar power with integrated 3 - - - - 1,994 8.72 1,877 8.21 goal of ensuring the interests and equitable treatment for by enhancing transparency to provide timely information, storage system Shareholders, especially minority ones. The Audit Committee’s especially bilingual imformation disclosure, to Shareholders 4 Solar rooftop 2,486 10.87 2,139 9.36 1,916 8.38 1,803 7.89 Membership structure is also best optimized and close to the and Investors. Source: The MOIT’s proposals 60 2018 ANNUAL REPORT www.geccom.vn 61 Assignment of duties for BOD Members after the transformation of the governance model
BOARD OF DIRECTORS’ REPORTS Concurrent Key functions incumbency No. Full name Designation Expertise Experience & CORPORATE GOVERNANCE ACTIVITIES (continued) and duties in Audit Committee Although there exist several differences in viewpoints and governance Electric BOD engineer 30 Strategic orientations 1 Tan Xuan Hien No culture, the presence of two Board of Director Members from a well- Chairman Finance and years Corporate re-structuring known international Financial institution and Investment fund is highlight Accounting in GEC’s governance. Consultation with the Board of Director, therefore, Independent consultancy and provide a multidimensional view on both technical and financial aspects supervision of Governance and and promote the attention to sustainable development, environmental Management Independent Consultancy on financial Business 15 protection, and social constructivism thanks to lessons learnt from 2 Do Thu Ngan BOD investment, joint ventures, No Administration years governance activities around the globe. Member partnership and M&A Consultancy on planning, management and policy for the Senior Management 100% 50% 50% 33% Consultancy on CG structure OVER 10 YEARS OF EXPERIENCE IN FEMALE NON-EXECUTIVE FOREIGN improvement ENERGY, GOVERNANCE, MEMBERS NATIONALS Non - Business FINANCE, AUDIT Execution of independent Executive Administration 30 3 Deepak Chand Khana supervision Member BOD Economic years Given a strong demand for development, in a global gender research agency, women contribute 40% Member Consultancy on itinerary for order to strengthen governance resources, of Vietnam’s GDP, nearly equal to China. GEC is operating a synchronous development of the General Meeting of Shareholders adopted clear gender equality policy in our BOD membership, the Renewable Energy an increase in the number of BOD Members fairness in career development path, no bias in recruitment, Implementation of CG following from 5 to 6. What is special about the BOD and flexible working hours for female workers. Business international standards membership is 100% of the Members have 10 Administration Planning and implementation of years of experience in the Energy, Governance, At the end of 2018, although the BOD only had 1 Independent BOD Climate 12 4 Andrew Mark Affleck M&A activities No Finance, and Auditing. 50% of BOD Members Member, in January 2019, GEC named another one, thereby Member change years ensuring the ratio of regulatory 1/3 ratio under Decree 71. Consultancy on are Non-Executive; 50% are female, 33% are Sustainable Although there exist several differences in viewpoints and development strategies Independent Members, and 33% are foreign development nationals, namely British and Indian members, governance culture, the presence of two BOD Members from a Realization of business objectives who representatives of the 2 foreign strategic well-known international Financial Institution and Investment Consultancy on CG structure players. The Chairman and one Non-Executive fund is highlight in GEC’s governance. Consultation with the improvement foreign of the BOD, who both have nearly 30 BOD, therefore, provide a multidimensional view on both technical and financial aspects and promote the attention Independent Business Execution of independent years of experience in the relevant fields, assist 15 to sustainable development, environmental protection, 5 Nguyen Thuy Van BOD Administration supervision Chairwoman the BOD with sufficient professional expertise years as well as practical experience in making and social constructivism thanks to lessons learnt from Member Auditing Leading the auditing, internal strategic decisions. governance activities around the globe. In addition, IFC’s auditing and independent knowledge of the global Energy Industry also enables GEC to auditing functions According to the latest “Women in Business” become a model Renewable Energy developer through the Consultancy on development of reported by Grant Thornton International, adoption of optimal Industry standards while contributing to the expansion of the supply of clean and reliable Energy. internal auditing strategy the proportion of businesses worldwide Non - Training and organization of 2018 that have at least 1 woman in Senior Executive Economic 10 6 Pham Ngoc Thanh Mai internal auditing team Member Management team was 87%, a yoy increase of BOD Taxation years 12%, and the proportion of senior roles held Diverse membership of the Board of Directors Member Execution of supervision and by women worldwide is 29%. In the ASEAN auditing methods following Region, the proportion of businesses with 100% standards at least 1 senior female manager is 94% and the proportion of senior roles held by women th is 28%. In particular, when it comes to the 50% 50% On October 10 , 2018, the BOD officially appointed Ms. Nguyen Thai Ha as the first female CEO in the nearly 30-year proportion of senior roles held by women, history of the Company's development and development. Globally, despite the increasing presence of women in senior 33% 33% Vietnam scores 36%, the second highest in management, gender equality in key roles remains elusive. When it comes to the position of CEO or Managing Director, Asia, higher than Singapore (33%), South only 15% of businesses in the world have women incumbents. Possessing over 15 years of experience in various fields Korea (30%), United Arab Emirates (24%), including governance, supervision and management at public and listed companies, the new CEO is expected to Japan (15%), followed by the Philippines, Over 10 Non- Female Independent Expat continue to improve and professionalize management, executive, Investor relations and Capital market functions and which scored 37%. According to an estimate years of Executive to support GEC in realize its development strategy, meeting sustainable business objectives as the BOD’s orientations. expenrience by the Global Entrepreneurship Monitor - Source: GEC
62 2018 ANNUAL REPORT www.geccom.vn 63 BOARD OF DIRECTORS’ REPORTS & CORPORATE GOVERNANCE ACTIVITIES (continued)
GENERAL MEETING In 2018, GEC introduced a new organization chart which was designed to OF SHAREHOLDERS optimize governance and management including direction - implementation - monitoring and reporting functions and to deliver the 4 core values, namely Fairness - Responsibility - Transparency - Accountability
BOARD OF DIRECTORS
BOD's Audit Committee Office
CHIEF EXECUTIVE OFFICER Internal Audit Department FAIRNESS RESPONSIBILITY TRANSPARENCY ACCOUNTABILITY
CG must protect CG must recognize the CG needs to ensure the CG needs to ensure Shareholders’ interests interests of Stakeholders timely and accurate the availability of a and ensure fair as required by law disclosure strategic orientation for Human Resources Administration System Management treatment among of information the Company Finance Division EHSS Department Shareholders, including CG encourages Department Department Department minority ones constructive cooperation CG is required to CG ensures effective between the Company disclose important supervision by the BOD and Stakeholders in issues including Accounting generating wealth financial status, CG ensures the BOD’s Department and jobs operation result, accountability to ownership and the Company and Finance and Planning Department CG supports control structure Shareholders the Company's financial viability
Solar Power and Project Development Hydropower Division Technical Division Sales Department Division Other Energy Division Small as the size of the Company is, GEC’s strategy of Region, the potential size of the green credit market developing various types of Renewable Energy entails the is estimated at USD 3,000 billion, out of which Vietnam division of the major Energy Sectors into distinct sections accounts for about 16%, second only to Indonesia at Project Development Project Project Operations & Department Management Unit Management Unit Maintenance Department with which dedicated Deputy CEOs are charged. Such 36%. These number speak volumes about how attractive
sections currently include Project Development, Solar the local Renewable market is both to local and foreign Capital Construction power and other Energy, Hydropower, and Technology. Investors. According to experience from countries that Management Branch/Plant Branch/Plant Technical Department GEG’s ambitious strategy is would not be realized without have previously leveraged this huge funding, the raising Department the Finance Division, of which one of the key tasks in of funds for Green Energy can be done via a wide variety Experiment and 2019 are to arrange sufficient cash flows for GEC to of channels and does not necessarily depend on banking Service Department develop multiple Solar Energy projects and to embark institutions. For GEC, while bank loans remain the priority, on the Wind power market. According to Ernst & Young the Company has been preparing ourselves to diversify Solutions data, the global investment inflows in global funding sources by partnering with global players, issuing Representative Office Green Energy has increased from USD 47 billion in 2004 to international bonds and convertible bonds, raising funds USD 336 billion in 2017. By 2030, as forecast says, as much from Shareholders, issuing preference shares, private as USD 90,000 billion will be needed to achieve global placement to investment funds and major Investors, and climate and sustainable development goals. In the ASEAN calling for strategic partners’ involvement.
64 2018 ANNUAL REPORT www.geccom.vn 65 BOARD OF DIRECTORS’ REPORTS & CORPORATE GOVERNANCE ACTIVITIES (continued)
GEC’s CG which were improved in 2018, established a Code of Conduct for Members of the BOD, the Audit Committee, the BOM and the Executives. The Code ensures the meeting of the 5 key criteria for the CG functions operates optimally (1) Rights of Shareholders, (2) Equitable Treatment of Shareholders, (3) Role of Stakeholders, (4) Disclosure and Transparency, and (5) Responsibilities of the Board. In 2019, GEC’s policies continued to focus on CG quality, including the strengthening Meet the criteria of Asean Scorecard of the BOD’s commitments, the election of Independent BOD Members, the restructuring Equitable Disclosure No. Key contents Detailed contents Rights of Role of Responsibilities Treatment of and and strengthening of Internal Audit functions, Shareholders Stakeholders of the Board Shareholders Transparency the continued improvement of procedures • Sequence and procedures of convening GMS for dealing with Stakeholders and avoiding • Registration for attendance conflicts of interest to ensure the full rights • Voting and vote count manner of Shareholders, the establishment of General Meeting of • GMS minutes 1 Shareholders (GMS) • Sequence and procedures of obtaining comments Committees to assist the BOD including in writing Strategy, Remuneration, and HR, the • Disclosure of GMS resolutions promotion of the BOD’s role in ensuring the • How to challenge GMS resolutions BOM’s accountability, HR planning, and • BOD membership the assurance of sustainable development • BOD membership eligibility • Nomination, candidacy, and election of BOD in each economic, environmental and Members community issue. • Removal and dismissal of BOD Members • Notice of election, removal, and dismissal of a BOD Member Ms. Do Thu Ngan - Independent Board of Director Member 2 Board of Directors • Sequence and procedures of convening BOD meetings • Conditions to conduct voting and manner of Although the application of the CG model following the 100% and 81%, respectively. In order to continue improving voting in BOD meetings • BOD Meeting minutes and Resolutions best practices in the market has only been implemented the quality of governance, GEC plans to strive to fulfill over • Audit Committee for 4 months, thanks to the proper preparation since the 88% of the criteria within 1 year and the remaining 12% will • Committees of the BOD involvement of foreign Shareholders, evaluation results be implemented in the medium term, from 1 to 3 years. In • Company Secretary are based on the ASEAN Scorecard standards have been 2018, the Company spent nearly VND 1.4 billion on non-audit • BOM membership eligibility positive although there is still a lot of room for improvement. expenses, 5 times higher than auditing cost, which was only Board of 3 • Sequence and procedures of appointment and On average, GEC performs relatively well in 65% of the total VND 300 million. These non-audit expenses, which were mainly Management removal of a BOM Member standards. The Company performs particularly well in Role of for the purpose of CG consultancy, indicating the BOD and Stakeholders and Disclosure and transparency criteria with BOM’s profound attention to the improvement of CG quality. • Responsibility of BOD Members, BOM Members and Executives to be honest and avoid conflict Prevention of conflict 4 of interest of interest Evaluation of CG quality following ASEAN Scorecard standards • Ensure the legitimate rights of persons having interests related to the Company 120% 100% Training on Corporate • BOD & BOM Members and Company Secretary 100% 5 81% 84% Governance have to attend training courses 80% 73% 63% 62% • Sequence and procedures of convening, 60% 54% announcing meetings, announcing the results of 45% 40% meetings between the BOD and the BOM Working process • Summon the BOD at the request of the CEO and 20% between the Board of other Executives of the Company 6 0% Directors and Board of • The reporting and supply of information by the Standard Rights of Equitable Role of Disclosure and Responsibilities Bonus Penalty Management CEO to the BOD score card Shareholders Treatment of Stakeholders Transparency of the Board score card score card • The coordination of control, management Shareholders and supervision activities between BOD, BOM Source: GEC Members and other Executives Evaluate of the In 2019, GEC’s policies continued to focus on CG quality, including the strengthening of the BOD’s commitments, the election rewarding and • Method of evaluating performance of BOD, BOM of Independent BOD Members, the restructuring and strengthening of Internal Audit functions, the continued improvement discipline of the Board Members and other Executives of procedures for dealing with Stakeholders and avoiding conflicts of interest to ensure the full rights of Shareholders, the 7 of Directors - Board • Performance evaluation criteria establishment of Committees to assist the BOD including Strategy, Remuneration, and HR, the promotion of the BOD’s of Management • Ranking role in ensuring the BOM’s accountability, HR planning, and the assurance of sustainable development in each economic, Members and other • Reward and discipline environmental and community issue. Executives
66 2018 ANNUAL REPORT www.geccom.vn 67 BOARD OF DIRECTORS’ REPORTS & CORPORATE GOVERNANCE ACTIVITIES (continued)
REALIZATION OF BUSINESS STRATEGIES Participation rate, income structure, time in service, and training program of the Board of Directors, Supervisory Board and Audit Committee Members. 2018 is a pivotal year when the foundation will be built for GEC to become a leading private player in Renewable Energy. During Number of Reason Remunera- the year, the BOD held a total of 40 meetings in various forms to take timely courses of action to properly commitments adopted Training No. Full name Title meetings Rate of Time Reason tion at GMS. In addition to meetings held at the required quarterly frequency, the BOD held extra meetings via online channel and program attended absence collected opinions in writing, via email, etc. 36 resolutions were issued that focused on the Company's core issues including (Million VND) Governance (58%), Finance (27%), and Project Development (15%). The BOD provided directions to the BOM in successfully I BOARD OF DIRECTORS completing the assigned tasks and exceeding the set targets. BOD Chairman Vice Chairman Chairman CG training Business trip Appointment 1 Mr. Tan Xuan Hien 39 98% Jan 1st, 2018 - Mar 26th, 2018 - 146 - IFC - BOD Vice overseas as Chairman Chairman Mar 26th, 2018 Dec 31st, 2018 Dec. 2018 Number of Topic Month Content CG training resolutions Independent BOD 2 Ms. Do Thu Ngan 12 100% Sep 18th, 2018 - Dec 31st, 2018 Appointment 33 - IFC - Member February, Dec. 2018 March, April. Approval of matters relating to GMS, collection of opinions in writing Non-Executive BOD Member May, August, st st Governance 21 Approval of CG-related matters such as the issue of the Corporate Charter, 3 Mr. Deepak C.Khanna 39 98% Personal Jan 1 , 2018 - Dec 31 , 2018 117 September, the replacement of the Supervisory Board with the Audit Committee, and the Audit Committee October, appointment of important positions such as CEO, Deputy CEO Member Mr. Andrew December 4 BOD Member 12 100% Sep 18th, 2018 - Dec 31st, 2018 Appointment 33 Mark Affleck March, April, Independent BOD May, July, Approval of the transfer of shares, borrowings, IPO, guarantee for bank loans, Member CG training Finance 10 5 Ms. Nguyen Thuy Van 12 100% Sep 18th, 2018 - Dec 31st, 2018 Appointment 33 - IFC - August, the issue of bonds, the increase of Charter capital Chairman of Audit Dec. 2018 December Committee BOD Member CG training January, Renewable Energy development strategy relating to the approval of investment Ms. Pham Ngoc Projects 5 6 12 100% Sep 18th, 2018 - Dec 31st, 2018 Appointment 33 - IFC - February, June projects and the selection EPC contractors to implement the projects Thanh Mai Audit Committee Member Mar. 2018 With decades of experience in • Structuring the CG system according to good practices in the international market; CG training 7 Mr. Thai Van Chuyen BOD Chairman 10 100% Jan 1st, 2018 - Mar 26th, 2018 Resignation 33 - IFC - Governance, diversity in various areas of • Proposing, selecting and appointing appropriate positions in the BOD and BOM; Mar. 2018 business, the equality of gender and the 8 Mr. Yasushi Ojiuka BOD Member 28 100% Jan 1st, 2018 - Sep 18th, 2018 Resignation 77 diversity of nationalities in the structure • Closely controlling and monitoring transactions with the Stakeholders; of membership, the BOD has made CG training • Participating in BOD meetings at a rate of between 98% and 100%; 9 Ms. Dao Thi Thien Thanh BOD Member 28 100% Jan 1st, 2018 - Sep 18th, 2018 Resignation 77 - IFC - quick and well-considered decisions in Mar. 2018 carrying out its duties while managing • Fully participating in IFC - held training courses for CG awareness raising and II SUPERVISORY BOARD not to miss any business opportunities. skill building; 1 Hoang Thi Mai Thuy Chief Supervisor Jan 1st, 2018 - Mar 20th, 2018 Resignation 23 With the business performing • Making policies and decisions related to Project and Finance, directing the 2 Tran Thi Nga BOS Member Jan 1st, 2018 - Mar 20th, 2018 Resignation 15 exceeding targets in 2018, total income BOM in the completion of the commercial operation targets of Phong Dien and 3 Han Phi Hai BOS Member Jan 1st, 2018 - Mar 20th, 2018 Resignation Krong Pa plants ahead of the planned schedule; of BOD, Supervisory Board and BOM Pham Ngoc Change of Refer to the 4 Chief Supervisor 4 100% Mar 20th, 2018 - Sep 18th, 2018 53 Members including salaries and other • Providing thorough directions over the Project and Finance streams to ensure the Thanh Mai CG model BOD section gross benefits was VND 8.5 billion, th CG training launching of Ham Phu and Duc Hue Solar power Plants before June 30 , 2019; Change of which was commensurate with their 5 Mai Van Nho BOS Member 4 100% Mar 20th, 2018 - Sep 18th, 2018 35 - IFC - CG model contributions as well as the ratio of • Giving appropriate directions thanks to which, the Hydropower business managed Mar. 2018 responsibility fulfillment. For the BOD, to exceed the targets of Revenue and Output in spite of weather obstacles; CG training Change of 6 Trinh Xuan Ha BOS Member 4 100% Mar 20th, 2018 - Sep 18th, 2018 35 - IFC - the remuneration paid out was VND 776 CG model million. For the BOM, the remuneration • Facilitating and supporting the BOM in properly implementing investment and Mar. 2018 structure is quite similar among seeking of potential projects in accordance with the BOD’s orientations; III AUDIT COMMITTEE Members with salary ranging between CG training • Approving the feasible issuance plan and the fund utilization purpose for the Chairwoman of Change of 86% and 93% and bonus between 7% 1 Nguyen Thuy Van Sep 18th, 2018 - Dec 31st, 2018 - IFC - initial public offering to increase Charter capital at a ratio of 1: 1, increasing the Audit Committee CG model Dec. 2018 and 14%. The CEO’s bonus was the size of the Company as a basis for the expansion Solar and Wind power; Audit Committee Change of highest with 14% in bonus and 86% in 2 Deepak C.Khanna Sep 18th, 2018 - Dec 31st, 2018 salary. The performance of the BOM is • Directing and overseeing the full compliance with IFC’s international standards Member CG model reflected in the following aspects: in sustainable development including environment, health and safety in the CG training Audit Committee Change of - IFC - implementation and operation of Solar Energy projects as well as activities of the 3 Pham Ngoc Thanh Mai Sep 18th, 2018 - Dec 31st, 2018 whole Company toward the community and society. Member CG model Mar./Dec. 2018
68 2018 ANNUAL REPORT www.geccom.vn 69 THE BOD’S EVALUATION OF THE ACTIVITIES OF THE BOARD OF MANAGEMENT BOARD OF DIRECTORS’ REPORTS AND THE AUDIT COMMITTEE IN 2018 & CORPORATE GOVERNANCE ACTIVITIES (continued) Unit Detailed Assessment • In the first 8 months of the year, the Supervisory Board properly fulfilled their duties as the watchdog of the implementation of and compliance with resolutions of the GMS as well as The Supervisory applicable Laws Board • All Supervisory Board Members appointed after the AGM fully participated in meetings • Ensuring transparency in financial activities and operations of the BOD and BOM • In March 2018, the formation of the Audit Committee was adopted by the GMS. This marked a transition from the Supervisory Board to the Audit Committee • On August 19th, 2018, the Audit Committee officially started their role instead of the Supervisory Board in the new governance model • The Audit Committee has played an active role in advising the BOD on supervision activities in an independent efficient manner • The Audit Committee quickly issued important policies including: »» By-laws on the Audit Committee »» Policy on transactions with Related Parties Audit Committee »» Development of a plan to improve CG activities »» Organization of CG training »» Monitor activities of the BOD and BOM »» Oversee the preparation of FS and transparent and timely information disclosure »» Oversee the maintenance and improvement of the internal control system as well as the independent auditing service • The Audit Committee has also worked out operation plans for 2019 for the key objectives: Improving such activities as CG, Internal Supervision, Risk management, Internal Auditing, FS according to IFRS standards, Bilingual information disclosure, Supervision of transactions with Related Parties, and the efficiency and accountability of the BOM • One Independent BOD Member, who has with 15 years of experience in finance, investment and accounting and auditing, was appointed in September 2019 • The Independent BOD Member, who at the same time serves as Chairwoman of the Audit Committee, is gradually strengthening and completing the effective internal control system, Income structure, time in service, and training courses of the Board of Management thus ensuring the highest level of compliance with the OECD Principles of CG and the ASEAN CG Scorecard - ASEAN SCORECARD • Providing the best protection of Stakeholder interests, especially those of Shareholders and Investors, Income Time Reason for Training including minority Shareholders No. Full name Title Independent Board of in service change program • Supporting the BOD in strengthening CG through the establishment and implementation of Salary Bonus Director Members independent and effective internal monitoring functions I BOARD OF MANAGEMENT • Overseeing the implementation of information disclosure according to applicable regulations Oct 10th, 2018 - Appointment on CG training - IFC - • Overseeing and providing opinions on conflicts of interest and transactions with Stakeholders 1 Nguyen Thai Ha CEO 86% 14% Dec 31st, 2018 Oct 10th, 2018 Dec. 2018 • Orientating and organizing the operations of the Audit Committee as well as internal audit Permanent Jan 1st, 2018 - CG training - IFC - activities according to current regulations and in accordance with international practices 2 Le Thanh Vinh 87% 13% Deputy CEO Dec 31st, 2018 Mar. 2018 • The remaining Independent BOD Member, appointed in January 2019, is expected to provide support to the Audit Committee in independently advising and overseeing governance and Jan 1st, 2018 - CG training - IFC - 3 Nguyen Dinh Tuan CEO 92% 8% management activities Dec 31st, 2018 Mar. 2018 • The BOD highly appreciates the capabilities and performance the BOM through the successful st Jan 1 , 2018 - CG training - IFC - commercial operation of the first two Solar power Plants in Vietnam. This achievement helped 4 Phan Thanh Lac Deputy CEO 93% 7% st Dec 31 , 2018 Mar. 2018 realize the Renewable Energy development strategy entrusted by the GMS. Appointment on • The BOM took proactive, drastic and creative steps in structuring the management model along 5 Ha Nguyen Hoang Deputy CEO Jan 2nd, 2019 Jan 2nd, 2019 the line of specialization of each type of Energy into respective dedicated business division, thereby facilitating quick and easy decision-making as well as accountability in executing the Jan 1st, 2018 - Resignation on CG training - IFC - The Board of 6 Le An Khang CEO 87% 13% BOD’s strategies Oct 10th, 2018 Oct 10th, 2018 Mar. 2018 Management • The BOM ensured financial safety by successfully negotiating credit packages with reputable local II OTHER SENIOR MANAGERS banks and successfully realizing the 1: 1 capital increase that enabled the Company to implement Chief Jan 1st, 2018 - CG training - IFC - multiple Solar power projects in 2018 for subsequent operation of another 5 projects in 2019 1 Tran Thi Hong Tham 87% 13% Accountant Dec 31st, 2018 Mar. 2018 • The BOM decently conducted business in the Hydropower business of small and medium size, thus ensuring stable cash flows and even exceeding the assigned targets regardless of unfavorable weather conditions.
70 2018 ANNUAL REPORT www.geccom.vn 71 RENEWABLE ENERGY TRENDS A VIEW FROM SOUTHEAST ASIA & VIETNAM
LARGE POTENTIAL OF RENEWABLE Energy IN SOUTHEAST ASIA Southeast Asian investment in Renewable Energy from 2006 to 2016 Philippines Thailand Singapore Indonesia Vietnam Malaysia
USD Billion
1.4 2.4 2.3 1.7 1.6 2.9 2.0 2.9 3.4 3.8 2.6 100%
80%
60%
40%
20%
0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
(Notes: Based on Power Sector asset finance data for Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam) Abundant potential for Renewable Energy in Southeast Asia Source: BNEF, 2017
In 2000-2016, the Region's Hydropower capacity increased from 16 GW to 44 GW focus on Vietnam, Laos, Cambodia and Myanmar; Geothermal projects were mainly carried out in Indonesia and the Philippines. Southeast Asian investment in Renewable Energy by Type from 2006 to 2016 ecently, some Countries in the Region Thailand has invested most heavily in Renewable Energy Solar power Small Hydropower Geothermal Wind power Bio-Energy such as Thailand and Philippines have during 2006-2016 with more than USD 10 billion; accounting USD Billion R carried out activities to seek for renewable for nearly 40% of the Region's total investment, followed sources while Vietnam, Laos or Cambodia have by Indonesia and the Philippines, with each accounting 1.4 2.4 2.3 1.7 1.6 2.9 2.0 2.9 3.4 3.8 2.6 not made significant progress. According to for about 20%. The Philippines increased its investment in 100% The Asean Post, from 2000 to 2016, Regional Solar and Wind power projects, while Malaysia and Vietnam economic growth boosted primary Energy reduced their investments in Renewable Energy in the past 80% demand by 70%. Governments of Southeast decade. Although Malaysia increased Solar power, it reduced
Asian Countries, therefore, implemented a series investment in Biomass while Vietnam reduced investment in 60% of policies to ensure that the increasing demand small Hydropower and Biomass. for Energy is met. In 2016, the Region's investment in Renewable Energy 40% In 2006-2016, Southeast Asia invested about was USD 2.6 billion (excluding large Hydropower plants), USD 27 billion in Renewable Energy. In accounting for 1% of world's investment in Renewable 20% particular, investment in 2007 increased by Energy. The Country that invested heavily into Renewable
63% yoy as a result of Thailand's Bio-Energy Energy was Thailand with USD 1.3 billion, accounting for 0% development; 2011 by 83% yoy as a result of 50%; followed by Indonesia and Singapore investing mainly Indonesia's large Geothermal projects and into Solar power at USD 577 million and USD 575 million 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Thailand's additional Bio-Energy projects; 2013 respectively. In 2000-2016, the Region's Hydropower (Notes: Based on Power Sector asset finance data for Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam) by 43% yoy as a result of Thailand's and the capacity increased from 16 GW to 44 GW focus on Vietnam, Source: BNEF,2017 Philippines' Solar and Wind projects. Laos, Cambodia and Myanmar; Geothermal projects were mainly carried out in Indonesia and the Philippines.
72 2018 ANNUAL REPORT www.geccom.vn 73 RENEWABLE ENERGY TRENDS A VIEW FROM SOUTHEAST ASIA & VIETNAM (continued)
VIETNAM ELECTRICITY MARKET - REFORMED FOR MORE APPEAL THE VALUE CHAIN OF VIETNAM'S ELECTRICITY INDUSTRY
ietnam's Electricity Industry, through nearly 80 years of establishment and development, contributed a significant Primary Energy Production Transmission Distribution Consumption part to the national socio-economic progress. The Electricity market was strongly reformed for more appeal with • Hydropower • EVN • National Power Transmission • EVN Hanoi • Industry new enterprises and investment resources, especially in electricity generation. In the coming years, the Electricity V • Coal • GENCOs Corporation (NPT) controls 500 KV, • EVN HCM • Construction Industry will continue to develop its investment, production and development plans with an annual growth rate of 9-11%. • Gas and Oil • PVN 220 KV and 110 KV transmission lines • Northern EVN • Trade • Other Renewable • TKV • Medium voltage lines from 6 KV to • Southern EVN • Service On October 8th, 2013, the Prime Minister issued Decision No. 63/2013/QD-TTg regulating the roadmap, conditions and Energy • BOT 35 KV are controlled by regional and • Central EVN • Civil structure of electricity sector for formulation and development of electricity market levels in Vietnam Accordingly, the • Others local transmission companies • Electricity companies • Agriculture and Electricity Market in Vietnam is established and promoted on 3 levels: under cities and provinces Forestry • Others
1 2 3 Source: Electricity Industry 2018 Report SUPPLY AND DEMAND OF THE ELECTRICITY MARKET
COMPETITIVE ELECTRICITY COMPETITIVE WHOLESALE COMPETITIVE RETAIL At the EVN Conference of summarizing the work in 2018 and deploying the tasks in 2019 held on January 3rd, 2019, the current GENERATION MARKET ELECTRICITY MARKETS ELECTRICITY MARKETS electricity capacity of the whole system was almost 48,000 MW. Electricity production and purchase reached 212.9 billion kWh, exceeding the plan by 2.4 billion kWh and increased by 10% yoy. Commercial electricity output reached 192.9 billion kWh, an • Pilot in 2009-2012 • Pilot in 2017-2019 • Pilot in 2021-2023 increase of 11% yoy. EVN expects 2019 power production and purchase will reach 232.5 billion kWh, increase by 9% yoy and is • In 6 years of operation 2012-2018: • Operation in 2019-2021 after • Official operation in 2023 able to meet higher electricity demand. Accordingly, the commercial electricity output is expected to be reach 211.9 billion kWh, »»Number of plants increased by 1 year of piloting up 10% yoy. 3 times • Selling electricity: Power plants • Consumers may buy electricity »»Capacity increased by 2.8 times with capacity > 30 MW, except for: from various electricity Power Output 2013 -2019 »»87 power plants, total capacity »»Solar power Generated and purchased electricity Commercial electricity Billion kWh of 23 GW »»Wind power wholesalers 250 • Selling electricity: Power plants »»Imported electricity 233 with capacity > 30 MW, except for: • Purchasing electricity: 231 212 »»BOT project 5 Corporations under EVN and 200 193 193 »»Renewable Energy except big customers in electricity market 177 175 Hydroelectricity • Industrial zones may directly buy 150 160 160 • Purchasing electricity: Only EVN electricity from the plants 142 144 100 128 128 • Equitizing EVN's generating units 115 • Private units may produce electricity and offer 50 competitive prices 0
2013 2014 2015 2016 2017 2018 Plan 2019 Source: Decision of the Prime Minister in 2013 On October 8th, 2018, MOIT held the Conference to review Power Output by Type in 2018 - 2030 the operation of Competitive Generation Market and the TOTAL EXPECTED According to EVN, electricity supply ELECTRICITY CAPACITY pilot of Competitive wholesale electricity markets from July in 2018 was more reliable than in MW Hydropower Thermalpower Oil & Gas Import Others 1st, 2017 to June 30th, 2018, in order to review and evaluate 2 IN VIETNAM 2017, in which the System Average BY END OF 2018 markets above. The number of power plants that took part 23,054 Interruption Duration Index (SAIDI) 140,000 31,857 MW in the market transactions was 87 with a total capacity of was 723 minutes, down 30% 120,000 22,946 MW, increasing by 2.8 times compared to the first compared to 2017, SAIDI per unit 12,063 1,554 operation time in July 2012 - only 31 power plants. By end operation of electricity wholesale market was continued reduced by 18-40% compared to 80,000 1,448 of 2018, it was expected that there will be 90 power plants to be carried out in 2017 and the first months of 2018. 2017. EVN's total electricity loss in 5,940 19,037 15,054 with a total capacity of 23,054 MW, accounting for 53% In particular, from January 1st, 2018, the pilot electricity 2018 was estimated at 7%, 0.3% 60,000 315 1,440 of total capacity of the system directly participates in the wholesale market moved to the stage of real payment better than planned and being 1 year 1,356 40,000 8,940 competitive electricity generation market. instead of simulating calculations in previous periods. The ahead of the 5-year plan as assigned 8,687 47,575 55,167 25,620 development of competitive electricity market increased by the Prime Minister. All Electricity 20,000 18,445 Accompanying with the promotion and development transparency and fairness in scheduling, mobilizing power Corporations performed better than 18,610 18,060 20,362 21,886 of Competitive Generation Market, the MOIT led and plants, which contributes to optimizing the entire system, their target plans. O coordinated with other agencies and units to prepare creating motivation and trust to attract more Investors. November 2018 2020 2025 2030 the Competitive Electricity Wholesale Market. The trial Source: EVN, National Load Dispatch Centre
74 2018 ANNUAL REPORT www.geccom.vn 75 RENEWABLE ENERGY TRENDS A VIEW FROM SOUTHEAST ASIA & VIETNAM (continuted)
Economic potential of Solar power RENEWABLE ENERGY IN VIETNAM - TRENDS AND CURRENT STATUS Solar Power Area Capacity Capacity Output Region Area (km2) (MW) factor (MWh/year)
Total investment: 789 USD/kWp Weighted average cost of capital: 7.8%
Binh Phuoc, Binh Duong, Tay Ninh, Ba Ria-Vung Tau, The South Dong Nai, Ho Chi Minh City, Long An, Tien Giang, Ben Tre, 2,746 137,288 0.18 216,484,730 Tra Vinh, Soc Trang, Dong Thap, An Giang, Bac Lieu
Quang Ngai, Kon Tum, Gia Lai, Dak Lak, Binh Dinh, Phu Yen, Central 1,334 66,688 0.18 105,142,432 Lam Dong, Khanh Hoa, Ninh Thuan, Binh Thuan, Dak Nong
Total investment: 950 USD/kWp Weighted average cost of capital: 8.5%
Quang Binh, Quang Tri, Thua Thien Hue, Da Nang, Quang Nam, Central Quang Ngai, Kon Tum, Gia Lai, Dak Lak, Phu Yen, Binh Dinh, 8,815 423,737 0.18 694,948,154 Dak Nong, Lam Dong, Khanh Hoa, Ninh Thuan, Binh Thuan
Binh Phuoc, Binh Duong, Tay Ninh, Ba Ria-Vung Tau, Dong Nai, Ho Chi Minh City, Long An, Tien Giang, Ben Tre, Vinh Long, A bird's eye view of Krong Pa Solar power Plant - Gia Lai with total investment of VND 1,300 billion and capacity outputs 103 million kWh/ year The South 4,302 232,096 0.18 441,607,677 Tra Vinh, Can Tho, Hau Giang, An Giang, Soc Trang, Dong Thap , Solar Energy potential is indispensable. In addition, the Government also issued Bac Lieu, Kien Giang, Ca Mau policies to boost Renewable Energy projects, supporting determined based on Solar the Renewable Energy with a promotion policy, ensuring The North Lai Chau, Dien Bien, Son La, Thanh Hoa, Nghe An 1,559 77,959 0.15 102,438,933 radiation. Vietnam has relatively national Energy security, contributing to Energy resources conservation, minimizing electricity production's large and stable annual Solar Source: MOIT/GIZ Energy Support Program, January 2018 negative environment impacts: radiation, especially in the Considering the rapid development of science and technology, the electricity generation cost from Renewable • Decision No. 11/2017/QD-TTg on the mechanism for Energy sources is decreasing rapidly and becoming more and more competitive. According to IRENA, the average Central Highlands, Central incentive of Solar power development in Vietnam with installation cost of PV Photovoltaic (Solar Photovoltaic) was reduced by 69% and Concentrated Solar Power (CSP) Coast and the South, Mekong such as: PPA, CIT reduction, import tax exemption for Technology was decreased by 27% from 2010 to 2017. Moreover, power factor of the panels increased over the years, imported goods as projects' fixed assets and deductions Delta. On average, Vietnam's with Photovoltaic Module rose to 18% from 14% and Concentrated Solar Power (CSP) Panel boosted from 27% to of land use tax; Solar radiation Energy is 34%. At the same time, as the global and regional markets for Solar Energy technology are developing, the bigger the market sizes the more opportunities for supply chain efficiency to be improved, through which required investment 4-5 kWh/sqm/day. • Decision No. 39/2018/QD-TTg amending and supplementing Decision 37/2011/QD-TTg on the support could reduce strongly. mechanism for the development of Wind power projects urrently, fossil fuels as coal, oil and gas have been in Vietnam with purchase prices up to 8.5 cents/kWh for Cost of Production of Electricity from Solar power, 2010-2017 utilized to provide for most of Vietnam's Energy onshore and 9.8 cents/kWh for offshore Wind power. Average installation cost Electricity generation cost demand. While coal prices are determined based Target Plant capacity factor C (USD/kW) (USD/kWh) on reasonable production costs and profits of coal mining Solar Energy potential is determined based on Solar companies such as Vinacomin, Northeast Corporation, radiation. Vietnam has relatively large and stable annual % Increase/ % Increase/ % Increase/ 2010 2017 2010 2017 2010 2017 Vietmindo or market gas price - 46% of FO oil price, which Solar radiation, especially in the Central Highlands, Decrease Decrease Decrease is exploited exclusively by PVN, Renewable Energy require Central Coast and the South, Mekong Delta. On average, Photovoltaic Solar Panel 4,394 1,388 -69% 14% 18% 29% 0.36 0.10 -72% no input cost. In addition, with endless supply, less Vietnam's Solar radiation Energy is 4-5 kWh/sqm/day. Concentrated Solar Power environmental pollution, no emissions of harmful gases, According to the assessment, the areas with 1,800 hours 7,583 5,564 -27% 27% 34% 26% 0.33 0.22 -33% this category secures its position among all other Energy of sunshine/year or more are considered potential. In (CSP) Panel sources. Fossil Energy resources are finite; therefore, Vietnam, many provinces meet this criterion, especially Source: Renewable Power Generation Costs in 2017, IRENA 2018 researching and using Green Energy - Renewable Energy ones in the South. (The data is based on calculation of global average data as well as top 100 Solar power and CSP projects in the period of 2010-2017) as Wind power, Solar power, Geothermal, Biomass is
76 2018 ANNUAL REPORT www.geccom.vn 77 RENEWABLE ENERGY TRENDS A VIEW FROM SOUTHEAST ASIA & VIETNAM (continuted)
Wind power Vietnam has abundant resources Being considered a Country with potential for Wind power development; however, the current data of to develop Wind power. Vietnam's potential for Wind power exploitation is According to German Agency for not fully quantified due to the lack of survey and International Cooperation (GIZ), measurement. According to World Bank forecasts, data on Wind Energy potential contains a great difference, Vietnam's technical potential of from 1,800 MW to over 9,000 MW, some even records Wind Energy is estimated at a potential of over 100,000 MW. Based on the Industry report, Vietnam's Wind power potential is mostly 27 GW. Currently, the installed concentrated in the Central Coast, the South, the capacity that has been put Central Highlands and the Islands. Until June 2018, Near-shore Wind projects also get preferential tariff from the Government into operation is approximately there were 6 projects being put into operation with a total capacity of 189.2 MW and 2,000 MW. Wind power The trend towards Renewable Energy shows that developing Renewable 200 MW, so there is still a lot of was added to the planning. Energy resources - Solar power and Wind power alike - has a great Wind power potential that has prospect and is an effective solution to achieve both Energy security and not yet been developed. commitment to reduce emission, keeping global average temperature 0 Total capacity of Wind power projects that have been installed over the years increase well below 2 C compare with the pre-industrial levels as stated reaching approximately 300 MW in the COP24 Agreement Dec, 2018.
ith an annual economic growth rate of about addition, long-term financial loans are difficult to access, 6-7% while electricity consumption also which means low interest rates and loan extensions are W increases by 10% per year, Vietnam needs desired financial solutions. It can be said that future clear a lot of alternative Energy sources in the context of and transparent policies for Vietnam's Wind power will exhausting Hydropower potential while Coal and be the key to build Investor confidence and a driving Before 2016 2017 2018 Thermal power are causing environmental pollution as force for further development. well as getting expensive due to recent increase in coal price. According to the revised VII Power Development The trend towards Renewable Energy shows that • 2012: REVN - 30 MW - Binh Thuan • Huong Linh 2 - 30 MW - Quang Tri • Trung Nam Phase 1 - 40 MW - • 2012: Cong Ly Phase 1 - 16 MW - • Dam Nai Phase 1 - 8 MW - Ninh Thuan Master Plan, Vietnam set targets of 800 MW of Wind developing Renewable Energy resources - Solar Bac Lieu Ninh Thuan • Mui Dinh - 37.6 MW - Ninh Thuan power by 2020 and 6,000 MW by 2030. The Government power and Wind power alike - has a great prospect • 2013: Cong Ly Phase 2 - 83.2 MW - • Dam Nai Phase 2 - 30 MW - issued a number of Decisions and Circulars to promote and is an effective solution to achieve both Energy Bac Lieu Ninh Thuan Wind power development. A number of provinces security and commitment to reduce emission, • 2016: Cong Ly Phu Lac - 24 MW - supplemented the Wind power plan, got approved by keeping global average temperature increase well Binh Thuan the MOIT, namely Binh Thuan (2012), Ninh Thuan (2013), below 20C compare with the pre-industrial levels as Soc Trang (2014), Quang Tri (2015), Ben Tre (2015), Bac stated in the COP24 Agreement December, 2018. This Source: MOIT Lieu (2016), Ca Mau (2016). is also the foundation for a strong transition in Energy International Cooperation (GIZ), Vietnam's technical potential of Wind power is estimated at 27 GW. Currently, the Industry and in power generation from Renewable installed capacity that has been put into operation is approximately 200 MW, so there is still a lot of Wind power potential In the context of climate change and fossil fuels Energy. The lack of traditional resources for electricity that has not yet been developed. According to IRENA, the average installation costs of onshore Wind power decreased depletion, the development of Renewable Energy generation in Vietnam can be completely offset by the by 20% and that of Offshore Wind power decreased by 2% in the period of 2010-2017. Besides, turbine power factor Industry including Wind Energy in Vietnam is an exploitation and use of Renewable Energy resources is increasing year by year, that of onshore Wind power increases by 11% and Offshore Wind power increases by 15%. inevitable trend for sustainable development, which if there are appropriate policies. There is still a lack is considered so new and not easily applicable. The of information and supporting policies to develop Cost of Electricity Production from Wind Energy, 2010-2017 biggest obstacle likely to lead to high economic risks Renewable Energy. These bottlenecks need to be Average installation cost Electricity cost for project developers and Investors is the model PPA, resolved to effectively ensure optimal combination Main Target Plant capacity factor (USD/kW) (USD/kWh) which may cause difficulty for Investors in mobilization of traditional and Renewable Energy resources. For a of capital, especially foreign Investors, as the terms Developing Country like Vietnam, accelerating power % Increase/ % Increase/ % Increase/ 2010 2017 2010 2017 2010 2017 contain imminent risks. For example, the cancellation generation from renewable sources in general - in Decrease Decrease Decrease and termination terms: in case the seller - being the particular Wind and Solar Energy - plays an important Onshore Wind power 1,843 1,477 -20% 27% 30% 11% 0.08 0.06 -25% violated party - choose to terminate the agreement, role in both meeting the power demand and assuring Offshore Wind power 4,331 4,239 -2% 34% 39% 15% 0.17 0.14 -18% EVN shall compensate for only 1 year of payment. In economic sustainable development.
Source: From Renewable Power Generation Costs in 2017, IRENA 2018 78 2018 ANNUAL REPORT (The data is based on calculation of global average data as well as top 100 onshore and offshore Wind power in the period of 2010-2017) www.geccom.vn 79 RENEWABLE ENERGY TRENDS A VIEW FROM SOUTHEAST ASIA & VIETNAM (continuted)
M&A ACTIVITIES - ENERGY PROJECTS IN THE PIPELINE TTC 01 and TTC 02 - Tay Ninh, 2 Energy Projects that TTC According to the reports at Vietnam M&A forum 2018, M&A value in the first 6 months increased by 55%, reaching cooperates with Gulf Energy USD 3.55 billion. For the whole year, the figure was forecast to reach USD 6.5-6.9 billion, equivalent to 64% in 2017. Development Public Company In the first 6 months of 2018, the Real Estate industry dominated the market at 67%, Banking and Finance accounted Limited - Thailand, were also added for 19% and Manufacturing for 10%. Vietnam's Energy Industry was also expected to present significantly in M&A to the planning and construction activities in 2019. In 2018, there was no prominent M&A project; instead there was a series of Solar power Plants in order to be operational by investment projects in Vietnam: June 30th, 2019. In addition to the above prominent projects, TTC Energy is also proud to contribute 10 Solar power projects, in which Investment Expected No. Project Location Capacity Investor (VND Billion) operation GEC became the first Company in Vietnam that successfully operates 2 Solar power Plants - Phong Dien - Hue and Krong 1 Long Son Solar power Plant Khanh Hoa 170 MWp Long Son Co., Ltd 4,900 2019 Pa - Gia Lai in 2018; the others Solar Plants, Duc Hue 1 - Long An, Ham Phu 2 - Binh Thuan, are expected to be Hoang Thai Gia Trust Investment th HCG and HTG energized before June 30 , 2019; Duc Hue 2 and Ham 2 Tay Ninh 100 MWp and Management Co., Ltd 1,600 Jun 2019 Solar power Plant Phu 1 are also expected to be grid-connected in 2019. HCG Tay Ninh Solar Power JSC Tay Son 1, 2 - Binh Dinh are expected to be in operation in 2020-2021. Besides strong domestic investments, foreign Phuoc Huu Nha Trang Bay Investment and 3 50 MW 1,425 Apr 2019 capital flow is also very active in this Sector. Solar power Plant Construction JSC Solar battery panels of Phong Dien Plant - Hue Thuan Nam 19 4 Ninh Thuan 49 MW Tasco Energy JSC 1,400 May 2019 Solar power Plant Some prominent projects are as follows: Hoang Son Trading Construction 5 My Son Solar power Plant 50 MW 1,362 2019 Investment Expected Energy Investment JSC No. Project Location Capacity Investor (VND Billion) operation 6 Vinh Hao 6 Solar power Plant Binh Thuan 50 MWp Vinh Hao 6 Energy JSC 1,361 Jun 2019 Dau Tieng 1 and Dau Xuan Cau Co., Ltd in cooperation 1 Tay Ninh 350 MW 9,100 Jun 2019 7 BP Solar 1 Solar power Plant Ninh Thuan 46 MWp BP Solar 1 JSC 1,315 Jan 2019 Tieng 2 Solar power Plant with Grimm Power Pubic - Thailand
8 Krong Pa Solar power Plant Gia Lai 69 MWp Gia Lai Electricity JSC 1,284 Dec 2018 Sao Mai Group in cooperation with Jun 2019: 2 Sao Mai Solar power Plant An Giang 210 MW 5,600 USAID - USA 104 MW
9 Phan Lam 2 Solar power Plant Binh Thuan 49 MWp Phan Lam Energy Co Ltd. 1,202 Truong Thanh Vietnam Group JSC Jun 2019 3 Hoa Hoi Solar power Plant Phu Yen 257 MWp in cooperation with Grimm Power 4,986 Dai Hai Investment and Pubic - Thailand 10 Srepok 1 Solar power Plant Dak Lak 50 MW 1,200 Development JSC CMX Re Sunseap Vietnam Solar CMX Renewable Energy 4 Ninh Thuan 168 MWp power JSC in cooperation with 4,400 11 Duc Hue 1 Solar power Plant 947 Jun 2019 Vietnam Solar power Plant Long An 49 MWp Sunseap - Singapore 12 Duc Hue 2 Solar power Plant Gia Lai Electricity JSC 947 2019 Fujiwara Binh Dinh Solar 5 Binh Dinh 100 MW Fujiwara Group - Japan 1,465 13 Tay Son 1 Solar power Plant Binh Dinh 49 MWp 936 2020-2021 power Plant Jun 2019 14 Cam Lam Solar power Plant Khanh Hoa 50 MWp Cam Lam Solar Co Ltd. 930 Jun 2019 TTC Group in cooperation with Gulf 6 TTC 01 Solar power Plant Tay Ninh 69 MWp Energy Development Public Co., 1,421 15 Ham Phu 2 Solar power Plant 927 Jun 2019 Ltd. - Thailand Binh Thuan 49 MWp 16 Ham Phu 1 Solar power Plant 925 2019 Truong Thanh Vietnam Group Joint Gia Lai Electricity JSC 7 Cat Hiep Solar power Plant Binh Dinh 49,5 MW Stock Company in cooperation with 1,140 17 Phong Dien Solar power Plant Hue 48 MWp 853 Oct 2018 Quadran International - France 18 Tay Son 2 Solar power Plant Binh Dinh 30 MWp 594 2020-2021 TTC Group in cooperation with Gulf 8 TTC 02 Solar power Plant Tay Ninh 50 MWp Energy Development Public Co., Ltd 1,103 19 Vinh Tan Solar power Plant Binh Thuan 6.2 MW Power Engineering Consulting 2 JSC 100 Jan 2019 - Thailand
Source: GEC Source: GEC
80 2018 ANNUAL REPORT www.geccom.vn 81 RENEWABLE ENERGY TRENDS A VIEW FROM SOUTHEAST ASIA & VIETNAM (continuted)
Operator hub of Krong Pa Solar power Plant - Gia Lai
By the end of December 2018, the total capacity of Solar power projects with signed PPA is 2,866.43 MW and there are 1,620.99 MW under contract negotiation.
Solar power Solar power Solar power Solar power Province/ Province/ No. capacity under capacity under No. capacity under capacity under City City signed PPA (MW) negotiations (MW) signed PPA (MW) negotiations (MW)
1 Ninh Thuan 725.80 577.40 12 Quang Tri 39.90 0.10
2 Binh Thuan 566.31 222.69 13 Quang Binh 39.92 -
3 Tay Ninh 430.00 178.00 14 Lam Dong 38.00 -
4 An Giang 264.00 - 15 Hue 35.00 40.00 Wind farms are expected to take shape along the Vietnamese coasts
5 Phu Yen 214.20 200.80 16 Long An 32.70 79.80
6 Khanh Hoa 120.00 90.00 17 Quang Ngai - 59.20 consumption and use of Energy in general and electricity TOTAL SOLAR in particular in the coming time will be enormous. In POWER CAPACITY 7 Vung Tau 96.00 56.00 18 Thanh Hoa - 30.00 order to meet that demand, from a net exporter, Vietnam UNDER SIGNED PPA 2,866.43 became an Energy importer, increasingly dependent MW 8 Dak Lak 85.30 23.70 19 Hau Giang - 23.00 on import of coal and liquefied gas. In this context, A high development in Vietnam's economy was Renewable Energy development will be indispensable to 9 Binh Dinh 80.30 40.30 recorded with 2014-2018 average GDP stable growth of diversify of supplies, lessen the dependence on imported 6% - 7%, with a peak of the last 10 years being 7.1% in coal and primary Energy resources, and similarly, utilize 10 Dak Nong 50.00 - 2018. In parallel, there is also a demand for strong foreign natural resources efficiently towards protecting the investment in Processing and Manufacturing, which 11 Gia Lai 49.00 - environment and community. This is also a necessary accounts for about 47% of the total registered capital of step to assuring national Energy security. 2,866.43 MW under signed PPA USD 16.6 billion. Therefore, it is forecast that Vietnam's Total 1,620.99 MW under negotiations
Source: EVN
82 2018 ANNUAL REPORT www.geccom.vn 83 Master Plan, the installed capacity of Hydropower is also improved day by day in BOARD OF DIRECTORS’ Hydropower plants by 2030 is around compliance with the stricter regulations of the 25,400 MW - compared to 23,182 Sectoral Authority on the operation as well as STRATEGIC VISION MW at present. During its 30 years of development, GEC's core business regulations on safety management of dams activities gained achievements in small and reservoirs. Particularly in the field of M&A, and medium Hydropower plants, GEC is actively seeking potential projects at 2019-2020 DEVELOPMENT PLAN, with 14 plants with a total capacity of a reasonable cost around VND 30 billion/MW. 2022 STRATEGIC VISION - CHALLENGES AND OPPORTUNITIES 84.1 MW, which have been operating stably and efficiently, yielding an In addition, flexible decisions of the Board allow annual average of approximately VND the Company to seek additional investment TOTAL CAPACITY OF GEC 40 billion within the last 5 years. The opportunities from the Hydro sector in Laos, electricity tariff is applied according including new construction as well as joint to avoidable cost tariff for small and ventures with developers who are building and in medium Hydropower plants, with the peak in the dry season reaching nearly need of support in PPAs from Laos to Vietnam. 2019 395 MW 7 cents/kWh, and the remaining times - depending on negotiation - total capacity of national power supply Prime Minister's Decision 11/2017 being approximately 5 cents/kWh. by the plants that are put into operation on Solar power tariff increase to 9.35 This field is also improved day by during 2018-2020 is only 8,900 MW, cents, equivalent to VND 2,086/kWh, ~ day in compliance with the stricter which fulfills about 60% of the target. effective from June 1st, 2017 to June 2022 MW 1,136 regulations of the Sectoral Authority The current available solution is still 30th, 2019, provides various incentive on the operation of Hydropower importing electricity from China at mechanisms for enterprises. By the as well as regulations on safety a relatively high tariff of VND 1,500 end of September 2018, 121 approved HYDROPOWER 184.1 MW management of dams and reservoirs. to 1,600/kWh, while EVN is buying projects were added to the National 16% electricity from domestic power and Provincial electricity plans with a Particularly in the field of M&A, plants at around VND 800-900/kWh total generating capacity of 6,100 MW GEC is actively seeking potential of negotiation prices and VND 1,000- by 2020 and 7,200 MW by 2030. In MW SOLAR POWER 701.5 projects at a reasonable cost around 1,100/kWh of the avoidable cost tariff. addition, 221 projects are waiting for 62% VND 30 billion/MW. In addition, flexible GEC has an advantage from existing approval, with a registered capacity of decisions of the Board allow the small and medium Hydropower more than 13,000 MW. Thus, the total Company to seek additional investment projects by selling electricity under this capacity of registered investment in this WIND POWER MW 250 opportunities from the Hydro sector in cost tariff, which is about VND 1,100 in type reached 26,300 MW, accounting 22% Strengthening cooperation strategic with international partners to contribute to GEC's brand value Laos, including new construction as average, equivalent to 4.7 cents. GEC for about 60% of Vietnam's total power well as joint ventures with developers could fully exploit the Hydropower capacity of 47,000 MW, far exceeding th who are building and in need of value chain and to gradually own the amended VII Power Development After June 30 , 2019, new electricity tariff will in Vietnam in 2018, connecting 2 support in PPAs from Laos to Vietnam. power plant technologies to ensure its Master Plan targets for Solar power be applied for grid-connected Solar power projects in Hue and Gia Lai to the Following MOIT's orientation to 2020, management as well as proactive, safe capacity of just 850 MW by 2020 and national grid with a total capacity of projects; GEC proactively proposed solutions electricity will be imported from and efficient operation. 4,000 MW by 2025. 117 MWp. Quick decisions from the to reduce costs so that they can be compatible Southern Laos through the existing Board and the way they realize the 220 KV lines with the highest capacity According to EVN's forecast, the power After June 30th, 2019, new electricity with new electricity tariffs. These solutions include strategy shows the determination of 1,000 MW. So far, Vietnam and Laos plants will not accumulate enough tariff will be applied for grid-connected self-developing projects instead of hiring EPC from a private economic organization have an electricity import agreement water in 2019, along with reduced Solar power projects; GEC proactively contractors with the help of its experienced staffs desiring to contribute to supply for the with 5,000 MW in total for all phases. power from gas output will cause to proposed solutions to reduce costs so demand for Energy in the context that and professional engineers. At the end of 2018, MOIT submitted high power shortage from the dry that they can be compatible with new 2019 GDP is expected to be 6.8% and to the Prime Minister a mechanism season until the end of 2019. GEC took electricity tariffs. These solutions include annual electricity demand increase is earing in mind the strategic goal of attaching economic performance for electricity purchase from power a step ahead by timely expanding self-developing projects instead of expected to be around 10%. becoming a private corporation to the common Social-Community plants in Laos. The current draft tariff its scope to Solar power with the hiring EPC contractors with the help of B in Renewable Energy, with the interests, as well as protecting the frame principle or the tariff ceiling is successful deployment of 117 MWp in its experienced staffs and professional For an output - unlike others - that is largest portfolio of projects in Vietnam environment. These are performed under consideration with 2 scenarios: 2018. The Company also speeds up to engineers. In addition, transmission dependent on one single customer by 2022, GEC constantly expands its with the commitment from 2 strategic concentrated direct importing from be able to energize 4 EPC Solar power lines and connection capacity are the namely EVN, with an exception of scale of electricity production and Partners with international prestige the plant and purchasing from several projects before June 30th, 2019 and challenges that GEC has to timely and Rooftop Solar, it is clear that the Energy trading. This is carried out on basis - IFC and Armstrong. GEC is resolute Lao electricity projects through the 2 self-implemented projects in 2019 completely overcome through different market has certain advantages and of maximizing the value chain of in expanding its scope to various transmission lines. as planned, with a total capacity of solutions, one of which is finding the characteristics. In Vietnam, operational the Power Industry, including Hydro, Renewable Energy sources. Starting 275 MWp. GEC's Solar power projects right locations to develop projects in Hydro projects account for about Solar, Wind power, Waste-to-Energy off with only 84.1 MW of Hydropower The current electricity shortage is still a create a stable source of Revenue for accordance with the guidelines that 43% of electricity. According to the , etc. GEC upholds the guidelines 3 years ago, GEC has quickly become problem that needs to be solved as the 20-year life cycle of the projects. The GEC has been following. across its activities, which aim at the pioneer in the Solar Energy market VII Adjusted Power Development
84 2018 ANNUAL REPORT www.geccom.vn 85 BOARD OF DIRECTORS’ STRATEGIC VISION (continuted)
2019-2020 DEVELOPMENT PLAN, 2019 - MAINTAINING THE POSITION OF VIETNAM'S 2022 STRATEGIC VISION - CHALLENGES AND OPPORTUNITIES (continuted) LEADING SOLAR POWER DEVELOPER
Targets of Solar power capacity in Southeast Asian Countries Main targets Operational orientation December 2018 2020 2025 Power purchase agreements and negotiation as of February 2019 (including Wind power) MW • Approaching and joining in the competitive electricity market in accordance with Vietnam 8,000 6,500 Electricity Industry's general development orientation in order to promote the efficiency of GEC 5,431 power plants: 6,000 4,000 »» Taking advantage of the PPA with avoidable cost tariff for power plants under 30 MW; 4,000 3,000 »» Taking advantage of the PPA with fixed tariff of 9.35 cents/kWh for Solar power Plants under 2,000 1,250 the Government's incentives mechanism
1,000 900 850 • Retail Hydropower in Chu Pong - Gia Lai: 190 285 140 350 358 80 117 »» Modernizing electricity retail business with automatic measuring system and consumer 0 support software; Phillipines Singapore Malaysia Thailand Indonesia Vietnam »» Continuing to carry out the task of ensuring loss rate is maintained under 5% per station in Source: International Renewable Energy Agency areas with high loss rates; It is expected that by the end of 2019, GEC's Energy market and Laos, Cambodia as well as other areas with »» Expanding consumer electricity supply network in the Region in order to increase the number portfolio will have a total capacity of 395.1 MW, which ready transmission line and flexible and effective financial of current electricity consumers; there are 200 new customers each year; is diversified with 84.1 MW from Hydropower, 392 MWp solutions are also required. The BOD gave a great attention »» Professionalizing all stages from electricity supplying to take care of electricity consumers so from Solar power, equivalent to 311 MW. By 2022, GEC 's towards Wind power development opportunities as that a solid foundation could be built for the Company to join competitive electricity market total capacity will reach 1,135.6 MW, almost 3 times that the current Wind power tariff will remain at preferential of end 2019, in which 184.1 MW is Hydropower, accounts rates of 9.8 cents/kWh for offshore and 8.5 cents/kWh • Solar power: for 16%, 701.5 MW is Solar power, accounts for 62% and for onshore projects until November 2021. However, the »» In addition to the on-going Solar power projects that will be energized as planned in 2019, 250 MW is Wind power, accounts for 22%. In order to development goes along with challenges of Wind power GEC continues to seek and approach more provinces that have ready transmission lines in successfully implement the plan, the targeted sectors will technology, requirements to get approval, etc. Business order to seize opportunities for rapid development; be Solar and Wind along with strategic steps in both local strategy »» Being flexible with new development plans in Laos and Cambodia through optimal financial GEC's Renewable Energy portfolio structure by 2022 coordination solutions between EPC and contractors as Investors have PPA but are unable to implement project • Wind power: »» Getting approval, preparing and appraising dossiers and technical designs for Wind power projects with a total capacity of about 250 MW at potential locations in the Southwest, Central Highlands, etc; 16% 22% »» Finding partners for co-development of Wind power projects, which have high investment Hydropower 184.1 MW rates of about VND 35 billion/MW for onshore projects and VND 45 billion/MW for offshore projects, creating "consumption demand" for GEC's Renewable Energy business • Expected 2019 business results: Wind 250 MW »» Electricity Revenue reaches VND 937 billion, accounting for 94% of total Revenue; in which Hydropower reaches VND 430 billion, accounting for 46%; Solar power reaches VND 507 billion, accounting for 54%; Solar 701.5 MW 62% »» Service Revenue: VND 62 billion, accounting for 6% of Net Revenue; »» Profit before tax: VND 240 billion; »» Commercial electricity: 590 million kWh, up 55% compared to 2018; in which Hydropower is 352 million kWh, accounting for 60%, Solar power is 238 million kWh, accounting for 40% Source: GEC
86 2018 ANNUAL REPORT www.geccom.vn 87 BOARD OF DIRECTORS’ STRATEGIC VISION (continuted)
Main targets Operational orientation Main targets Operational orientation • Professionalizing Capital market activities and Investor relations: • Following the motto of utilizing natural Renewable Energy sources, GEC actively seeks potential »» Enhancing GEG stock position in financial market, attracting foreign investment; projects and assesses their effectiveness for M&A plans implementation, especially opportunities for Hydropower development in Laos, Wind power projects in potential areas of Southwestern »» Building optimal capital structure towards diversifying capital mobilization channels: Issuing and Central Highlands long-term credit through direct loans for projects, issuing international bonds of about USD 50-100 million to meet investment capital demand to 2020; • According to vision to 2025, GEC and its Member Companies will become the largest private companies in Renewable Energy sector with a diversified investment portfolio including »» Calling for foreign investment cooperation regarding each project Investment and Hydropower, Solar power, Wind power and Waste-to-Energy Financial strategy • Ensuring liquidity at a leverage rate that is suitable for each period with the following goals: M&A strategy • Investment will be self-sufficient throughout all stages from searching, surveying and developing »» Minimum initial funding rate for projects at 70% of total investment; projects to complete construction and put into operation the Renewable Energy plants of GEC »» The rest will be funded with equity through retention of Revenue from reinvestment or and its Member Companies mobilization from Shareholders to meet development needs; • Based on 2018 results of investment activities in Solar power Plants, GEC strives to be fully self- »» Effective distribution of capital for projects sufficient in Solar power Plant implementation • Consolidated Revenue and Profit before tax reach nearly VND 3,000 billion and over VND 652 • It is expected that in 2019, GEC will start and implement at least 2 new Solar power Plants by itself billion respectively by 2022 beside 4 Projects that are implemented through EPC contractors • Developing a complete set of professional, modern operating procedures and regulations on the basis of acquiring experience from international units and partners in Energy Industry to • Continuing to master technology, GEC researches optimal solutions and automation solutions ensure safe and effective operation for Energy plants: • Building a team of professional technical workers that is proactive in every management and »» Research and master technology of power plants through periodic equipment testing operation activity of Renewable Energy plants and experiments; • Modernizing management and operation through automation solutions and specialized »» Pro-actively manufacturing alternative equipment to ensure stable, safe and software to improve pro-activeness as well as gradually reduce unskilled labor and errors due to continuous operation; subjective factors in operating activities at the plants »» Regularly holding meetings of Science Council of Water Infrastructures to optimize operation; • Hydropower: »» Research and manufacturing electrical and electronic equipment to serve internal needs »» Completing the operation of all GEC's power Plants and Subsidiaries through the repair and as well as step by step provide to external customers, namely electrical switchboards and renovation plans that aim at operational optimization; activation boxes, Solar panel cleaning robots at Solar power projects, grid-connected inverter for roof systems, etc »» Investing in operational efficiency improvement for Dak Pi Hao 2, Ayun Ha, Ia Meur 3, H’Mun, R&D strategy etc. Hydroelectric power Plants towards production capacity improvement; • Receiving new Renewable Energy technologies with the aim of optimizing operation of the coming plants while improving operational efficiency of existing plants: »» Gradually investing in equipment to automate plant management and operation »» Receiving technology transfer in operational management for Solar power Plants from Operation »» Increasing capacity by 5% of output to 90 MW; international contractors in existing projects; management »» Coordinating with the Science Council of Water Infrastructures to identify maintenance »» Step by step completing all the processes and manuals for plant operational management; strategy plans on the basis of cost and quality balance, following a periodic schedule to optimize the Company's operation; »» In addition to the important equipment of Solar power projects that have to be imported, one of the Subsidiaries - GCC, completed the expanded investment project in Dien Phu Industrial »» Researching to find the optimal direction to avoid retail losses at Chu Prong - Gia Lai power Park by the end of 2018 with the frame system for Solar power projects, which was certified by generation cluster Department of Science and Technology as a qualified product; • Technical Division: »» On the basis of pro-actively providing the frame system for Solar power projects, GEC shall »» Gradually increasing its contribution proportion in GEC Revenue and Profit from 2019 onwards; make investment in new construction as well as expansion of existing projects. »» Ensuring fulfilling responsibility at the highest level and key role in the deployment of self- implementing Solar power projects instead of the current coordination with EPC contractors; »» Effectively coordinating with Indian experts to develop a skilled team of O&M engineers, building a complete O&M model, ensuring centralized operation, technical coordination of repair and O&M plans, focusing on monitoring the SCADA system for data analysis and warning; »» Effective O&M activities for all GEC's Solar power Plants as well as offering services to external plants to diversify GEC's Revenue sources; »» Perfecting ERP system as planned, improving business operation efficiency as well as supervision activities
88 2018 ANNUAL REPORT www.geccom.vn 89 REPORT OF THE INDEPENDENT BOARD MEMBER
Upon supervising and EVALUATION OF THE BOM’S ACTIVITIES advising on CG activities, the Independent Member of • The BOM implemented the Company's business the BOD, along with the BOD, activities in accordance with the direction and plan of made impartial decisions the General Meeting of Shareholders and the BOD. that would not give rise to • Under BOM guidance, the Company successfully met conflicts of interest among business and financial targets in 2018: Shareholders and Investors, and especially to protect »» Deploying and effectively putting into operation the rights and interests of the first 2 Solar power projects in Vietnam; the minor Shareholders. »» Continuing to carry out the underway Solar power projects to generate electricity before June 30th, 2019; EC’s EGM in 2018 took place on »» Organizing business activities of the operational small September 18th, 2018 and arrived at and medium Hydropower and Solar power Plants ; Gan agreement to appoint Ms. Nguyen Thuy Van as an Independent Member of the »» Making quick and timely responses to BOD and Chairwoman of Audit Committee. market fluctuations. This appointment is in line with the latest CG standards issued on June 6th, 2017 according to • With the results achieved, GEC proved its position as Decree 71/2017/ND-CP with a vision to reach one of the effective companies with good profitability, international standards in CG practices, chosen solid internal strength and potential advantages in by Vietnam’s leading listed enterprises in the implementing various types of Renewable Energy, Industry to replace outdated models. which is proven through becoming the pioneer that operating Vietnam’s first Solar power projects. Although GEG - GEC’s stock code was only listed on Upcom, GEC’s Management was taking Renewable Energy ensures Sustainable development in each economic, environmental proactive actions in meeting the good standards and community issues of CG. As an Independent Member of the BOD, EVALUATION OF THE BOD’S ACTIVITIES OPERATION PLAN FOR 2019 she accompanied the BOD in supervising and Assisting the BOD in implementing effective and 1 operating the Company independently, for transparent CG by addressing issues related to • The BOD made efforts to improve CG capacity As the Independent Member of the BOD, Ms. Nguyen the interests of Shareholders and Investors in a CG standards in accordance with applicable regulations and Thuy Van shall continue to act in the role of a supervisor, context where minority Investors’ interests did not international practices. to reduce the risk of abuse of power in management and receive enough attention in the market scenario. executive positions, to contribute to the protection of 2 Monitoring the implementation of information disclosure • Within the scope of its responsibilities, the BOD issued legitimate interests of Shareholders and Investors. according to regulations resolutions and decisions related to the Company's MAIN ACTIVITIES OF THE operations in accordance with its competence, in line Simultaneously, in her responsibility as Chairwoman with the provisions of law and internal regulations of INDEPENDENT MEMBER OF Monitoring and giving inputs on conflicts of interest and of the Audit Committee, Ms. Nguyen Thuy Van shall 3 the Company. THE BOD IN 4Q 2018 transactions with Stakeholders continue to provide effective orientation and solutions • The BOD maintained regular activities in accordance with for Internal Audit activities to best promote the function Upon supervising and advising on CG activities, the the provisions of the Company's Charter, Code of CG and of supervising - consolidating - maintaining the Independent Member of the BOD, along with the Directing and organizing the activities of the Audit 4 ensured that the requirements on number of meetings effectiveness of GEC’s internal control system. She will BOD, made impartial decisions that would not give Committee and Internal Audit, considering applicable and attending Members could be met, to achieve legality ensure the promotion of Internal Audit’s role and make rise to conflicts of interest among Shareholders regulations and international practices and efficiency. Internal Audit the third line of defense in independent and Investors, and especially to protect the rights and objective monitoring, according to the standard CG and interests of the minor Shareholders. GEC’s • The BOD monitored the implementation of its Assisting the BOD in strengthening CG by establishing model that GEC is aiming at. decisions, and of the Resolutions by the General Independent Member of the BOD effectively 5 and implementing independent and effective internal fulfilled the tasks assigned by the BOD, through monitoring functions. Meeting of Shareholders. these prominent activities in 4Q 2018: • The BOD directed and supervised the implementation of the Company's important projects. 90 2018 ANNUAL REPORT www.geccom.vn 91 REPORT OF THE AUDIT COMMITTEE
With the ambition to create the ear 2018 was considered as a year of PERFORMANCE OF THE AUDIT COMMITTEE IN 2018 attraction of the value and image transformation in CG - Control - Direction of the Company, typically the change in business of the Company for domestic and Y In 2018, the Audit Committee carried out the tasks according to its functions and duties as follows: structure from Supervisory Board model to Audit foreign Investors, GEC has taken a Committee under the BOD. Accordingly, the Audit Developing Charter of the Audit 1 practical assessment on the CG in Committee gradually improves inspection, supervision, Committee to be approved 3 Developing a plan to improve Corporate Governance comparison with the ASEAN Corporate independence, comprehensiveness and its positive by the Board of Directors Governance Scorecard. image in the Shareholders and Investors’ eyes. The Charter of the Audit Committee is With an ambition to attract domestic and foreign Investors by the considered the core document regulating Company's value and image, the Company assessed the current status of the Committee’s scope of work, authority, CG on ASEAN SCORECARD. Based on that, the Company build a roadmap accountability and operation, creating to improve and create a premise to move from Upcom to HOSE. The plan a mechanism for the Committee to to improve CG was developed with the following key contents: promote its strengths and makes effective consultation to the BOD. Improvement plan Details of operation
Through the development of documents • Strengthening the BOD’s commitment on best serving Internal Audit activities, the Audit Commitment CG practices Committee reviewed and improved on Corporate the activities and skills in examining Governance • Developing a Code of Ethics the following activities: CG, Information • Updating the Code of CG Disclosure, Annual Report, FS, Internal Control, Risk Management, Internal • Increasing the number of Independent Audit, External Auditing, Transaction with BOD Members Related Parties and the efficiency and accountability of the BOD. • Establishing key Committees under the BOD
Performance of • Clarifying and promoting the obligations of The Audit Committee has efficiently supported to the Board of Directors in independent supervision the Board of Directors BOD Members Building the transaction policy On September 18th, 2018, the EGM of Shareholders officially approved the change in the Company's structure way by 2 • Strengthening BOD’s role in ensuring accountability with the Related Parties establishing the Audit Committee under the BOD, assigning the BOD to decide on the number of Members as well of the BOM and talent pool planning as organizational structure, standards, assignments of tasks and other matters related to the operation of the Audit • Ensuring full participation in environmental and Committee. The BOD agreed to appoint 3 BOD Members to be Members of the Audit Committee: The Company recognizes that transactions social issues with the Related Parties have potential Position in conflict of interests between the • Documenting all services used between the Date of No. Full name Position in the BOD the Audit Details participants and may cause suspicion Company and Subsidiaries with TTC Group appointment Committee “whether those transactions are in the best interest for the Company?“. Expecting Governance control • Restructuring and strengthening the Internal Independent BOD Please refer to the Profile of 1 Ms. Nguyen Thuy Van Chairwoman environment Audit function Member the BOD, page 26 to increase transparency, the policy on transaction with Related Parties has • Improving the Company's operation related to Non-Executive BOD September Please refer to the Profile of regulated a critical threshold - it must 2 Mr. Deepak C. Khanna Member th independent auditing Member 18 , 2018 the BOD, page 25 be reviewed and evaluated by the Audit Non-Executive BOD Please refer to the Profile of Committee and the BOD should be 3 Ms. Pham Ngoc Thanh Mai Member • Disclosing information in English Member the BOD, page 26 advised before making decisions. Before Transparency the official issuance and application, IFC and Investor • Improving information disclosure on the Website By appointing an Independent BOD Member to be the Chairwoman of the Audit Committee, it has shown and Armstrong also gave consultancy relations activities the appreciation of the independent role of the BOD. This is also a mandatory criterion for listed companies to • Developing policies and procedures on conflict of to strengthen the policies, making the interests and Related Parties transactions. increase transparency and, above all, protect the interests of Shareholders and Investors. transactions more strictly controlled.
92 2018 ANNUAL REPORT www.geccom.vn 93 REPORT OF THE AUDIT COMMITTEE (continued)
4 Trainings on 6 Monitoring the preparation of Financial Statements Corporate Governance and Information Disclosure
The Audit Committee organized a The Audit Committee supervised the Quarterly, Semi-annual and Annual 2018 training course on Corporate Secretary FS as well as advised the BOD to approve the selection of Independent Auditor. and Internal Audit in accordance with The FS monitoring results were as follows: international practices and good CG • Quarterly, Semi-annual and Annual FS were prepared in accordance with standards in December 2018. applicable Vietnamese Accounting Standards as well as relevant legal regulations; Training on CG awareness according • In 2018, there was no change in Accounting Regime and Standards, Tax to best practices for Senior policies that had a significant impact on the financial situation and the Management is expected to be published FS; carried out in the first Quarter of 2019. • There are no unusual records of Related-Party transactions; Supervising the operation of Solar power Plants • The disclosure of FS was carried out strictly in accordance with Circular TENTATIVE ACTION PLAN FOR 2019 155/2015/TT-BTC guiding the information disclosure on the stock market. GEG share is expected to be officially listed on HOSE in 2019; therefore, the Audit Committee’s functions and duties will be more focused to maintain the reliability and transparency, to fully promote its tasks which were assigned by the BOD Monitoring activities according to the Charter of the Audit Committee. 5 7 Supervising the maintenance and improvement of the Board of Directors and of Internal Control system Board of Management No. Criteria Content Following the previous monitoring At the end of 2018, Internal Audit Department began to operate. Therefore, in 2018, • Developing risk policies, criteria and risk control tools for all activities of the Company and supervision by the Supervisory the Audit Committee directly participated in the review and inspection Company’s and submitting to the BOD for approval Internal control and risk Board, the Audit Committee continued activities to assess the compliance and to propose resolutions to strengthen and 1 • Effectively reviewing and monitoring the internal control system, proposing solutions management to monitor the BOD’s activities and maintain the sustainability of the Internal Control system: for improvement recorded the following results: • The organizational structure was reviewed and simplified to ensure the • Evaluating the effectiveness and compliance of the Company's Code of Ethics compliance with the functions and duties of all departments; • Supervising Internal Audit activities to ensure full implementation of functions, duties • The Company's operations and compliance with the Charter of Audit Committee, on behalf of the BOD complied with the Company • The Company's BOM was aware of the importance of establishing the internal Charter, applicable Vietnamese laws management regulations, one of the tools for effective CG. The procedure and 2 Internal Audit • Evaluating the Internal Audit’s performance, the efficiency and independence of its and Company’s internal regulations; guidelines were reviewed regularly to ensure full updates when there was any operation by reviewing the results of any inspection, as well as feedback from the BOM change in Law, management and control methods towards efficiency; and External Auditor • The BOD activities in accordance • Monitoring the truth and fairness of the FS in accordance with the law • Proposals and warnings of the Audit Committee were considered by the BOM with its functions and duties Financial Statements and • Reviewing the compliance and consistency with Accounting standards applied by the and managers for recognition and improvement. 3 stipulated in the Company Charter; information disclosure Company and its Subsidiaries • Supervising information disclosure in accordance with Information disclosure regulations • The BOD timely directed the 8 Monitoring the independent auditing service • Reviewing and monitoring the Company's implementation and compliance of Related implementation of strategies Party transactions in accordance with the Law, Company Charter and policy on and directions for business and Monitoring transactions transactions with Related Parties investment activities as well as the 4 with Stakeholders plan to increase Charter capital, In 2018, the Company signed a contract with an Independent Auditor to audit • Reviewing transactions with important Related Parties in accordance with the Law and approved by the General Meeting Semi-annual and Annual FS. The auditor was selected among the Big 4 of World’s the Company Charter to review whether those transactions are made on an independent market and reported to the BOD on any serious issue of Shareholders; renowned auditors to increase the Investor’s confidence in the Company's business performance and financial health. • Maintaining a good relationship with the BOD through open communication tools and Effectiveness and • The BOM was required to execute through regular, straightforward dialogue The audits in 2018 were carried out by the auditor in accordance with the 5 accountability of the Board the directions in accordance with of Directors • Ensuring that the BOM is provided with information from the Audit Committee before the BOD’s resolutions. contract on the scope, object, time and method of implementation. Before making important decisions the audit report was issued and officially published, the Audit Committee had • Assisting the BOD in ensuring that CG is implemented in accordance with the Law and meetings to discuss and clarify the content of FS contents that were provided to 6 Corporate Governance the Company Charter. the auditor in order to ensure the trust of the readers.
94 2018 ANNUAL REPORT www.geccom.vn 95 MAJOR RISKS & RISK MANAGEMENT ACTIVITIES
RISK APPETITE
n the past, GEC's activities consisted of relatively simple system including periodic meetings and technology-based production and trading of electricity; therefore, the monitoring of daily activities, business issues are updated I Company's organizational structure did not involve a and resolved in real time to ensure minimum interruptions Risk Management Department. However, the Company's and impacts on GEC's business results. Based on practical Risk Management activities were still implemented through circumstances and assessment of factors that directly affect the checking points of Regulatory Document system as a the Company's operation, GEC's BOM developed a Risk tool for Risk management. In addition, through the Reporting Management process to prevent and minimize major risks:
EXTERNAL MACRO PRESSURE BUSINESS ENVIRONMENT ECONOMY OF COMPETITION ENVIRONMENT
Identifying strategic objectives, dividing them into smaller objectives and action plans for each year
Identifying risks that may affect strategic objectives
Developing specific solutions, scenarios and action plans to prevent risks
Implementing solutions and action plans after being approved by the Board of Management and the Board of Directors
One of the requirements for an organization to ensure comprehensive risk management Supervising, monitoring and adjusting action plans to achieve that meets international standard is having its strategic objectives own comprehensive Risk Policy with a focus on risk appetite statement (RAS), which provides a framework for the Company's approach to In 2018, GEC's Risk management was implemented with 2 main tools: Regulatory Document system and Reporting system, Risk management. which were recognized as effective in ensuring safety for the Company's business activities.
96 2018 ANNUAL REPORT www.geccom.vn 97 MAJOR RISKS & RISK MANAGEMENT ACTIVITIES (continued)
REPORTING SYSTEM
In 2018, the Company developed and updated Reporting system including Daily/Monthly/Quarterly/Annual to evaluate and control risks in GEC's business activities. At the same time, Company organized Weekly/Monthly/ Quarterly and Preliminary/Summary meetings to assess the accomplished and unaccomplished objectives as well as to determine the directions and solutions to achieve the remaining objectives. With Reporting system, the BOM can oversee the Company's daily operations as well as monitor and quickly detect risks to take timely and effective measures.
REGULATORY DOCUMENT SYSTEM No. Type of reports Frequency of reports GEC developed a Regulatory Document system that covers all of the Company's activities. Until end of 2018, the Company 1 Consolidated report of power output by plants had issued 220 Regulatory documents to ensure the identification, management and restriction of risks that may occur during the Company's operation, including every activity in key areas as Engineering, Accounting, Planning, Project 2 Revenue, expenditure, debt report Daily Management, etc. 3 Project report
Regulatory Documents Process Statute Rules Guide Manual Handbook Policy Charter Regulation Agreement 4 Focuses of the week report Technological development 36 5 1 1 1 Weekly Production techniques 20 5 5 Directives follow-up report
EHSS 18 6 1 6 Cash flow report for 18 months Project management 15 2 1 7 Investment portfolio report Monthly Administration 10 4 8 7 2 HR 10 6 5 1 1 1 8 Capex and major expenditure report, overhaul Chu Prong Branch 6 9 Cost report Legislation 6 1 1 Finance - Accounting 6 4 2 2 10 Industry briefing report Monthly Planning 3 1 11 Detailed FS Company Office 3 7 1 1 1 HCM Representative Office 2 12 Business results estimation Monthly - Quarterly Internal control 1 3 13 Quarterly consolidated FS Quarterly Gia Lai Electricity and GEC 1 Project development 1 14 Half year reviewed FS, annual audited FS Every 6 months
Number of documents 137 28 27 20 2 2 1 1 1 1 15 Objectives and Budget Every 6 months - Annually 16 Semi-final and final reports
98 2018 ANNUAL REPORT www.geccom.vn 99 MAJOR RISKS & RISK MANAGEMENT ACTIVITIES (continued)
RISK MANAGEMENT IN OPERATION
TYPE OF RISKS IDENTIFICATION OF RISKS SOLUTIONS
Market risk
• Legal regulations of Electricity Industry have a significant impact as businesses in the Industry are subject to Government's strict management through the MOIT, EVN and its Subsidiaries (regulatory and transmission units, etc.). The possibility to expand investment as well as electricity price and output are under the influence of existing legal and policy system • Promoting proactive and continuous improvement of the Legal Department's expertise to ensure that GEC's investment and business activities comply with the provisions of the law • The legal risks in recent years are generally not high in the context of urgency of electricity demand for the economy • Regularly updating guidance and participating in training on new legal documents Legal and policy and the Government's requirement to ensure Energy security, while the domestic supplying being still insufficient risks • In the coming years, the competitive wholesale market officially takes place, Electricity Industry's legal system will have • Assessing the impact of new legal documents, if any, and adjusting existing GEC activities according to new regulations to ensure compliance appropriate changes to regulate the Electricity Market, preferential policy, investment, taxes that will affect GEC's business with the provisions of the law • In addition, production and business activities of GEC and Members are governed by other legal and policy systems • Organizing internal training for all relevant departments to update information and capture changes of the legal document system, to make including Enterprise Law, Bidding Law, Electricity Law, Tax policies, etc. their operation effective, time-efficient and unquestionably compliant • After IPO in July 2010, GEC became a Public Company and started to operate under JSC model, so GEC is also subjected to Securities Law and other related legal documents
• Debt balance as of December 31st, 2018 was VND 1,527 billion and expected to increase rapidly when a series of • In order to ensure sustainable development, GEC does not abuse leverage but remain a reasonable balance between debt and equity, investments in Solar power projects and planning for Wind power development in 2019 and beyond take place maintain a justifiable ratio throughout its development process, ensuring solvency at all times • Although Debt to Asset ratio is 0.35 times, Debt to Equity is 0.63 times and this capital structure is within control and • The BOM regularly updates relevant economic information to facilitate assessment, decision-making and solutions on financial planning. Interest rate risk very safe in comparison to the Industry's benchmark. However, using leverage may put pressure on debt and interest • Negotiating with credit institutions to adjust financing plans in accordance with changes in the financial market payment as well as on solvency, especially when the investment or project has not entered the payback period • Expanding domestic and foreign capital market relations to diversify capital mobilization channels and avoid dependence on banks, so as • In addition, interest rate fluctuation will directly affect financial expenses as well as impact GEC's business and to limit the risk of interest rate fluctuations in: Bonds, convertible bonds, preference shares, preference convertible shares, joint venture with performance indicators foreign Investors, etc.
Operational risk
• The goal of GEC and its Subsidiaries is to ensure a balance of financial resources to be able to pay liabilities on their • Focusing on core business activities, which are production and trading of electricity, and avoid any outward investment, GEC's cash flow is due dates; to maintain solvency at an appropriate level to meet current regulations and daily business requirements kept stable for business operations and financial liability • Solvency ratios in 2018, though decreased compared to the previous year as the Company made disbursements of Solvency risk • To prevent and mitigate risks, GEC and its Subsidiaries develop periodic cash flow plans (Monthly/Quarterly/Annually) to monitor short, more than VND 1,200 billion for 2 projects: Phong Dien and Krong Pa in 4Q, still stayed at a very high level medium and long-term debts and identify Revenue and expenditure flows to balance resources for principal and interest payables • Current and Quick ratios are both greater than 2 times, with Cash Ratio is even greater than 1 time, GEC ensures there • Building a Management Reporting system to monitor daily payments and always ensure GEC to adapt for working capital and payment of projects. is no solvency risk.
100 2018 ANNUAL REPORT www.geccom.vn 101 MAJOR RISKS & RISK MANAGEMENT ACTIVITIES (continued)
TYPE OF RISKS IDENTIFICATION OF RISKS SOLUTIONS
Operational risk • Being aware of the losses if risks occur, the BOM proposes to devise specific plans to minimize the risks during production • Establishing maintenance strategies with the goal of maintaining stability and operating the plants in the safest conditions • The risks to GEC's plants are managed through the system of the World's most advanced management and technical solutions • Power plants are important construction related to National Energy Security, providing Energy for all economic sectors • Building a complete O&M model for the operating plants, the Technical Department manages maintenance plans, O&M Department focuses and social needs on monitoring SCADA system for data analysis and warning • In the context of increasing Energy demand, if the plants' operation is interrupted, production and the stability of supply • All large-scale power plants use modern technology to meet international standards and minimize risks during operation will be affected, leading to power shortage, directly affecting business activities of many enterprises in particular and the • Plant repairment and maintenance are pro-actively carried out periodically to optimize operation capacity, timely detect potential incidents National economy in general that may increase the risk level of plant operation process Operational risk • Risks involving fire, explosion and other physical losses may cause enormous damage to property. Exposure to electricity/ • Regularly organizing training courses for employees to improve their knowledge, skills and operation to ensure that plant operation is carried power also puts workers at safety risks. Therefore, workers in power plants need to be permanently fully equipped with out properly, continuously and safely expertise, experience as well as labor safety measures to minimize damage to humans • The Industry characteristics require large investment with many risks in operation; therefore, GEC focuses on buying insurance of major insurance organizations for its plants to prevent risks and minimize possible losses. Currently, most risks that may arise during operation are • Currently, GEC's power plants, which are small and medium scaled, have not accounted for a large proportion of covered by large and reputable insurance companies. Vietnam's total power output. Most operational risks shall impact on GEC's production and business activities, rather than on the Industry's Electricity supply. • The Company issued the Regulatory documents to control operational risks as: »» Hydropower plant operation and incident management process; »» Regulations on operation and incident management by SCADA system; »» Operation and incident management process for 35 KV line to 371/F7 route. 1. Legislation: • In 2018, the Legislation Department, the Company's legal hub with participation in drafting, legal appraisals, carrying out legal proceedings, etc. 1. Legal risks related to external disputes: through important documents as the Company's Charter, CG Regulation, Internal Regulations and Processes, etc., contributed to improving the • Legal risk related to contract disputes: Risks related to the lack of appraisal of partners' financial capacity and reputation; legal framework on governance, administration and basic operations of GEC and its Subsidiaries Risk of contract invalidation; Risks of loose terms in contracts; Risks of agreement on jurisdiction of dispute resolution; • Providing consultancy to the Management, the Divisions/Centers/Branches/Boards and coordinating with professional Law Firms/Offices to Risks from not understanding international business practices, etc. give advises and supports regarding many legal issues arising in management, governance and business processes • Legal risks related to non-contractual disputes: Being sued for violating intellectual property; The Company's intellectual 2. Compliance with legal and internal regulations: property rights being illegally exploited; Facing unfair competition; Disclosure of internal business information and Legal and • Along with the internal control system, the assessment of compliance risks in all activities helps GEC implement its sustainable development technology know-hows, etc. compliance risks strategy in every business and throughout the system 2. Legal risks related to disputes with state agencies: • GEC regularly assesses compliance risks in legal regulations, internal regulations, regulations to ensure benefits for employees • Legal risks related to tax obligations: Tax arrears; Administrative tax penalties, etc. • Compliance with information disclosure obligations according to the current regulations by timely giving accurate information is important to the market and Investors; and helping the Company create and enhance prestige, aiming at sustainable development on international standards • Legal risks related to social insurance obligations: Social insurance arrears; Administrative penalties for social insurance • The Company also issued the processes and regulations documents as: • Legal risks related to administrative violations: Being sanctioned for administrative violations in: Labor, environment, »» Internal control regulation; business law, etc. »» Regulations on compliance assessment and group classification; »» Internal control process.
• The transaction processes with partners, suppliers or daily activities of GEC and its Members generate information • Being aware of the importance of information security, GEC applied various measures to warn, prevent and punish as well as build an internal related to production, business, financial situation, etc. information control system Human-related • This information needs to be properly protected in order to avoid being illegally exploited and used, which may • Maintaining IT system security at the highest level to prevent data loss, protect business secrets, customers, partners and Stakeholders Risks affect GEC's operational strategy of the Company • The disclosure of business secrets, information of customer, supplier and Related Parties will affect GEC's • GEC issues its Code of Conduct and professional ethics as a basis for strict adherence to ethical rules and strict handling of violations in daily work of performance, cause distrust and possible damage to its Stakeholders, which harms GEC prestige. all levels, from Leaders to Employees, which contributes to creating a professional, safe, efficient and sustainable working environment.
The Electricity Industry is considered one of the industries with high operational risks from plants and labor safety systems. accordance with regulations. In 2018, all GEC business activities took place smoothly, there was no trouble in the operation In 2008, the risks of GEC's plants are effectively managed through the World's most advanced management and technical of 14 Hydropower plants and 2 Solar power Plants. In 2019, the Company will continue to promote, improve and enhance solutions. All GEC activities must comply with the Regulatory Document system and must be reported on schedule and in the system to minimize external and internal risks that may affect the plants' operation as well as the Company's business.
102 2018 ANNUAL REPORT www.geccom.vn 103 COMPLIANCE WITH VIETNAMESE LAW, APPROACHING TO INTERNATIONAL STANDARDS
GEC’S PROCESS OF DEVELOPING AND OPERATING AN ENERGY PROJECT STRICTLY COMPLIES ccording to the long-term WITH LEGAL PROVISIONS IN THE FOLLOWING AREAS: development strategy, GEC is A directed to become Vietnam’s leading Company in the field of Renewable Energy including small and medium plants of Hydropower, Solar power, Wind power, Waste-to-Energy, LNG, etc. Simultaneous development of a series of Energy project requires that implementation fully and strictly compliance with the Law in all related areas as electricity, construction, land, environmental protection, and investment. Aiming at Sustainable development goals Environmental Surveying and Project Acceptance, Operation and becoming a prominent organization and Social supplementing development completion and in Vietnam’s Renewable Energy Industry, Performance power planning commissioning Standards the Company is applying international standards in implementing projects and operation of power plants, especially
the Environmental and Social Activities 137 140 Standards issued by the International Issued regulatory documents in 2018 Finance Corporaion - IFC. 120 by Category 100 By the end of the year 2018, the BOD directed the BOM to build and complete 80 institutions to ensure that the Company 60 operating in accordance within the legal framework, through the issuance of 217 27 28 40 regulatory documents. In addition, the 20 regulatory documents system is also 20 1 2 2 reviewed, amended and supplemented 0 annually, ensuring that all activities are Policy Handbook Mannual Guide Regulations Code Procedure strictly controlled and in accordance with abiding-law.
In the process of developing Energy projects 50 and operating the power plants, the BOD Issued regulatory documents in 2018 pays special attention to and directs the by Adjusted field 40 Aiming at Sustainable development goals 36 compliance with regulations on Safety, Health 31 and becoming a prominent organization in and Environment. These are 25 regulatory 30 Vietnam’s Renewable Energy industry, the documents in this area developed not only on 25 22 27 Company is applying international standards the basis of Vietnamese law but also in strict 20 in implementing projects and operation of compliance with international standards, with consultancy from IFC - a member of World 13 14 11 10 power plants, especially the Environmental 8 8 8 Bank and GEC’s strategic Shareholder with the 4 4 6 and Social Activities Standards issued by the ownership of 14.68% as of December 2018. It International Finance Corporation - IFC. supports the management of Safety, Health, 0 Finance & Control Legal Technological Electricity Information Operation Accounting Projects HR, training EHSS Production Administration, Electrical and Environment from feasibility study to Planning development business Technology technical Supporting experiment investment and operation of Energy facilities.
Source: GEC
104 2018 ANNUAL REPORT www.geccom.vn 105 COMPLIANCE WITH VIETNAMESE LAW, APPROACHING TO INTERNATIONAL STANDARDS (continued)
ENVIRONMENTAL AND SOCIAL PERFORMANCE STANDARDS
2016 is a memorable milestone that marked the strategic cooperation between GEC and the World's 2 major Financial Institutions, IFC - a World Bank Member and Armstrong Clean Energy Fund - an Investment Fund specialized in the field of Renewable Energy.
Solar power Plants at GEC meet IFC's international standards
As a result, in addition to compliance with Vietnamese laws, GEC projects also work in line with the standards SURVEYING AND SUPPLEMENTING POWER PLANNING issued by IFC as well as best CG practices: GEC always ensures that the areas of selected projects comply with the following criteria: 1 Minimizing the conversion of forest land;
2 Ensuring livelihood of the people whose land is recovered; PERFORMANCE 1 2 3 STANDARD 3 Causing no negative impact on biodiversity, habitat of endemic species and protected species; Assessment and Labor and Resource efficiency and 4 Having favorable conditions for connection and transmission; management of working pollution prevention 5 In alignment with local land use planning. the Environmental and conditions Social risks and impacts No. Type Document name Amended content Issued on 7 6 5 4 I GENERAL PROVISIONS Indigenous people Biodiversity conservation Land acquisition Community health, 1 Electricity Electricity Law Electricity Dec 3rd, 2004 and sustainable and involuntary safety, and security Law management of living resettlement 2 Decision Decision 30/2006/QD-BCN Investment management of independent electricity projects Oct 21st, 2013 natural resources 3 Decree Decree 137/2013/ND-CP Guidance on Electricity Law Aug 30th, 2006 4 Circular Circular 43/2013/TT-BCT Approving adjustment and supplement of electricity planning Dec 31st, 2013 To ensure compliance with the above mentioned • Periodically carrying out internal II SOLAR POWER Environmental and Social Performance Standards, in 2016, inspection, assessment and reporting to 1 Decision Decision 11/2017/QD-TTg Mechanism for Solar power project development Nov 4th, 2017 the BOD decided to establish EHSS Department in order to the BOD about EHSS Management System approach IFC’s standards: compliance in GEC activities; Solar power project development and Standardized PPA for th 2 Circular Circular 16/2017/TT-BCT Solar power projects Sep 12 , 2017 • Advising the BOD on issuing EHSS policies in accordance • Developing and implementing annual III WIND POWER with Vietnam’s regulations and international standards; training programs at Company level that 1 Decision 37/2011/QD-TTg Wind power project development mechanism Jun 29th, 2011 proposing revisions when there are any changes in covering all EHSS aspects in construction Decision relevant Laws and Standards; and operation; Amending Decision 37/2011/QD-TTg on Wind power th 2 Decision 39/2018/QD-TTg development mechanism Sep 10 , 2018 Guidelines for financial mechanism to support electric price for • Being responsible for coordinating the developing and • Ensuring the contact point for EHSS - related 3 Circular 96/2012/TT-BCT Jun 8th, 2012 monitoring the implementation of EHSS processes and tasks and procedures implementation Wind power projects on grid tie procedures that are related to GEC activities; in, for example, occupational accident Wind power project development and Standardized PPA for 4 Circular Circular 32/2012/TT-BCT Nov 12th, 2012 investigation, environmental impact Wind power projects • Organizing the development and implementation of assessment reporting, environmental and 5 Circular 06/2013/TT-BCT Regulations on Wind power planning Mar 8th, 2013 EHSS Management System with specific action plans labor environment monitoring reporting throughout GEC activities in accordance with Vietnam’s and other related tasks suitable for IV ELECTRICITY FROM SOLID WASTE
regulations and international standards; each period. Support mechanism for the development of power generation th 1 Decision Decision 31/2014/QD-TTg projects using solid waste May 5 , 2014
Project development and model electricity sale contract applied th 2 Circular Circular 32/2015/TT-BCT to generation projects using solid wastes. Oct 8 , 2015
106 2018 ANNUAL REPORT www.geccom.vn 107 ACCEPTANCE, COMPLETION AND COMMISSIONING COMPLIANCE WITH VIETNAMESE LAW, APPROACHING TO INTERNATIONAL STANDARDS (continued) The process of acceptance and Commercial Operation Date of a power project is implemented and strictly complied with the process issued by the competent Authorities:
1 Having all technical design documents, construction drawings, construction and installation completion documents and other technical documents as prescribed;
2 Performing experiments, adjusting each part and the whole system of equipment in power generation, transmission and distribution line to ensure compliance with the standards, technical regulations and PROJECT DEVELOPMENT specifications that are specified in the approved design.
No. Type Document name Amended content Issued on During construction process, the following relevant legal provisions are applied: 1 Law Electricity Law Electricity December 3rd, 2004 2 Decree 137/2013/ND-CP Guidance on Electricity Law October 21st, 2013 1 Compliance with approved land use master plans and purposes; Decree 3 Decree 14/2014/ND-CP Regulations about electricity safety February 26th, 2014 nd 2 Compensation, support and ground clearance comply with the policies issued by competent Authorities, 4 Circular 31/2014/TT-BCT Detailed regulations on electricity safety October 2 , 2014 ensuring livelihoods for people whose land is recovered; Stipulating the procedure for dispatching of national 5 Circular Circular 40/2014/TT-BCT November 5th, 2014 power system 3 Compliance with regulations on investment project management, ensuring that projects are implemented in 6 Circular 39/2015/TT-BCT Amending and supplementing Circular 40/2014/TT-BCT November 18th, 2015 accordance with approved designs;
4 Strict supervision of safety, health, environmental protection in construction. OPERATION The process of operating a power plant, especially Hydropower plants, needs to comply with the following No. Type Document name Amended content Issued on main regulations:
I LAND 1 Compliance with the operation and troubleshooting procedures of plants and lines; 1 Law Land Law Land Nov 29th, 2013 2 Compliance with environmental protection solutions that committed in Environmental Impact Assessment Report or Environmental Protection Plan; 2 Decree 43/2014/ND-CP Detailing a number of articles of the Land Law 3 For Hydropower plants, compliance with the policy on maintaining minimum flow; Regulations on collection of land rent and water surface 3 Decree 46/2014/ND-CP 4 Ensuring safety and health for employees who are directly involved in plant operation. Decree rent May 15th, 2014 Regulations on compensation and support for No. Type Document name Amended content Issued on 4 Decree 47/2014/ND-CP land expropriation I ELECTRICITY II CONSTRUCTION 1 Law Electricity Law Electricity Dec 3rd, 2004 2 Decree 137/2013/ND-CP Guidance on Electricity Law Oct 21st, 2013 1 Law Construction Law Construction Jun 18th, 2014 Decree Stipulating in detail the implementation of electricity law 3 Decree 14/2014/ND-CP Feb 26th, 2014 2 Decree 32/2015/ND-CP Management of construction costs Mar 25th, 2015 regarding electricity safety 4 Circular 31/2014/TT-BCT Stipulating certain details of electrical safety Oct 2nd, 2014 3 Decree 37/2015/ND-CP Detailed regulations on construction contracts Apr 22nd, 2015 Stipulating the procedure for dispatching of national power Decree 5 Circular Circular 40/2014/TT-BCT Nov 5th, 2014 4 Decree 46/2015/ND-CP Quality control and maintenance of construction May 12th, 2015 system 6 Circular 39/2015/TT-BCT Amending and supplementing Circular 40/2014/TT-BCT Nov 18th, 2015 5 Decree 59/2015/ND-CP Construction project management Jun 18th, 2015 II ENVIRONMENT th 6 Circular Circular 03/2016/TT-BXD Classification of construction works Mar 10 , 2018 1 Law on water resources Water resources Jun 21st, 2012 III ENVIRONMENT Law Environmental protection 2 Environmental protection Mar 26th, 2014 Law 2014 1 Law Environmental Law Environmental protection Jun 23rd, 2014 Detailing the implementation a number of articles of the law 3 Decree 201/2013/ND-CP Nov 27th, 2013 Environmental impact assessment and environmental on water resources 2 Decree 18/2015/ND-CP protection plan th Environmental impact assessment and environmental Decree Feb 14 , 2015 4 Decree 18/2015/ND-CP Feb 14th, 2015 protection plan 3 Decree 19/2015/ND-CP Detailed guidance on environmental protection law Decree 5 Decree 19/2015/ND-CP Detailed guidance on environmental protection law Feb 14th, 2015 Guidance on preparation of environmental impact assessment Developing and managing the corridor for protection of 4 Circular Circular 27/2015/TT-BTNMT May 29th, 2015 6 Decree 43/2015/ND-CP May 6th, 2015 reports and environmental protection plans water sources th IV INVESTMENT 7 Decree 114/2018/ND-CP Dam safety and reservoir Management Sep 4 , 2018 Guidance on strategic environmental assessment, th 1 Law Investment Law Investment Nov 26 , 2014 8 Circular 27/2015/TT-BTNMT environmental impact assessment and environmental May 29th, 2015 Circular 2 Decree Decree 118/2015/ND-CP Detailed guidance on Investment Law Nov 12th, 2015 protection plan 9 Circular 47/2017/TT-BTNMT Monitoring the exploitation and use of water resources Nov 7th, 2017
108 2018 ANNUAL REPORT www.geccom.vn 109 INVESTOR RELATIONS ACTIVITIES & CAPITAL MARKET
GEC'S CHARTER CAPITAL INCREASED 7 TIMES FROM 2010 TO 2018 STABLE SHAREHOLDER STRUCTURE WITH GLOBAL BRAND NAMES AS STRATEGIC FOREIGN SHAREHOLDERS
As of December 31st, 2018, GEC had 4 major Shareholders owning 80.69% in total, including Thanh Thanh Cong September 9th, 2010 June 6th, 2012 Investment JSC with the highest percentage of 23.03%, Ben Tre Import-Export JSC with 22.87%, Armstrong Clean CHARTER CAPITAL CHARTER CAPITAL Energy Fund from Singapore - the Investment fund specializing in Renewable Energy - with 20.11% and IFC - a World Bank Member - with 14.68%. In addition, GEC also has a major individual Shareholder, Ms. Dang Huynh Uc My, VND BILLION VND BILLION 262 523 who owns 5.08%. As such, the total number of shares held by major Shareholders as of the end of December 2018 was Private placement for strategic Partners 85.77%. The strategic cooperation with 2 large Financial Institutions, IFC and Armstrong in 2016 marked an important Distributing to 4 Shareholders with step in GEC's strategic expansion into Renewable Energy, becoming a pioneer in energizing Vietnam 's first Solar VND 12,000/share CHARTER CAPITAL projects complied with international standards. INCREASED TIMES FROM7 2010 TO 2018 GEG SHAREHOLDER STRUCTURE AS OF DECEMBER 31ST, 2018
Number of Shareholders November 11th, 2015 November 8th, 2015 August 29th, 2014 No. Type of Shareholders Number of shares Percentage (%) Individual Institutional CHARTER CAPITAL CHARTER CAPITAL CHARTER CAPITAL I MAJOR SHAREHOLDERS (Owning from 5% and above) 1 4 166,546,628 85.77 VND 745 BILLION VND 722 BILLION VND 602 BILLION 1 Domestic 1 2 98,974,872 50.97 Issuing swap shares Paying dividends, Paying dividends, increasing 2 Foreign - 2 67,571,756 34.80 Distributing to 119 Shareholders increasing share capital from equity share capital from equity Distributing to 212 Shareholders Distributing to 250 II SHAREHOLDERS OWNING 1% - 5% - 2 5,170,000 2.66 Shareholders 1 Domestic - 1 2,400,000 1.23 2 Foreign - 1 2,770,000 1.43 III SHAREHOLDERS OWNING LESS THAN 1% 1,531 29 22,465,922 11.57 1 Domestic 1,516 22 20,787,876 10.71 2 Foreign 15 7 1,678,046 0.86 June 21st, 2017 November 14th, 2017 October 30th, 2018 IV TOTAL 1,532 35 194,182,550 100 CHARTER CAPITAL CHARTER CAPITAL CHARTER CAPITAL 1 Domestic 1,517 25 122,162,748 62.91 VND 894 BILLION VND 971 BILLION VND 1,942 BILLION 2 Foreign 15 10 72,019,802 37.09
Issuing shares to pay dividends Issuing swap shares Issuing for existing Shareholders Distributing to 302 Shareholders Distributing to 1,163 Shareholders Distributing to 1,533 Shareholders Structure by Major Shareholders (%) Structure by Origin of Shareholders (%) Structure by Type of Shareholders (%) 0.03 2.26 5.08 5.08 1.52 10.42 14.23 23.03 Source: GEC
14.68 37.09 62.91 34.79 45.90 On September 9th, 2010, GEC officially transformed to Gia VND 10,000/share. This is GEC's largest capital increase since 22.87 Lai Electricity JSC, with Charter capital of VND 262 billion. its establishment, which gained VND 971 billion and raised After 8 years of operation and development under JSC the Charter capital to VND 1,942 billion. This capital increase 20.11 model, GEC has increased its Charter capital 7 times, at VND initiated the Company's first steps of increase in scale to 1,942 billion by the end of 2018. In 2018, GEC successfully significantly supplement capital for Solar power project issued 97,091,275 shares to existing Shareholders on 1: 1 operation and working capital for other activities as well as TTC Investment JSC IFC Foreign Shareholders Foreign individuals Domestic institutions ratio, which means an existing Shareholder who owns 1 to prepare for Renewable Energy diversification, especially Ben Tre Import-Export JSC Other Shareholders Domestic Shareholders Major domestic individuals Foreign institutions share is entitled to buy another share at the issuing price of Solar and Wind power in 2019. AVH Pte Ltd. Dang Huynh Uc My Major domestic institutions Domestic individuals Major foreign institutions Source: GEC
110 2018 ANNUAL REPORT www.geccom.vn 111 INVESTOR RELATIONS ACTIVITIES & CAPITAL MARKET (continued)
According to a survey on Vietnam's energy listed Companies, there are about 31 enterprises that operate 1.8 MW to Among Hydropower businesses that are listed on both official and unofficial 400 MW plants; however, there are only 2 listed Companies with foreign Shareholder's ownership percentage greater than exchanges, GEG has the outstanding advantage of high percentage of foreign 5%: Can Don Hydropower JSC (SJD - HOSE) with 13.62% and Vinh Son - Song Hinh Hydropower JSC (VSH - HOSE) with 9.81%, but these foreign Shareholders are not involved in management. ownership - up to 37% - and these Shareholders are amongst the World's reputable credit organizations. The fact that IFC and Armstrong became GEC's strategic Shareholders contributed greatly to operation improvement Percentage Stock Foreign as well as realized GEC's development strategy of expanding to various types of Renewable Energy since 2016: No. Company of foreign Exchange code Shareholders Shareholders 1 AVC A Vuong Hydropower JSC 2 BHA Bac Ha Hydropower JSC MILESTONES KEY CONTENT 3 BSA Buon Don Hydropower JSC 0% 4 DNH Da Nhim - Ham Thuan - Da Mi Hydropower JSC Apr 2017 - 5 EAD Dak Lak Power Hydroelectric JSC Professional training and Corporate Governance practices training Dec 2018 6 EIC EVN International JSC • IFC: World Bank 7 GEG Gia Lai Electricity JSC 34.79% 1 Holding courses on international good CG practices, training by IFC experts • Armstrong: Singapore 2 Participants: the BOD, BOM, Head of Department, Division, etc. 8 GSM Huong Son Hydro Power JSC 3 Informing on international CG trends 9 SBM Bac Minh Development Investment JSC UPCOM 4 Gradually building GEC as Vietnam's exemplary Energy enterprise 10 HNA Hua Na Hydropower JSC 11 HPD Dak Doa Hydropower JSC 12 ISH Idico Scrok Phu Mieng Hydro Power JSC Oct 2017 Establishment of Environment, Health, Social Policy, Safety 13 NED North - West Electric Investment and Development JSC 0% 14 SBH Song Ba Ha Hydropower JSC 1 Coordinating, implementing and monitoring activities related to EHSS 15 SP2 Su Pan 2 Hydropower JSC 2 Ensuring compliance with Vietnam's EHSS standards and 16 SVH Song Vang Hydropower JSC international practices 17 TDB Dinh Binh Hydropower JSC Vinaconex Construction Investment and Energy 18 VCP Development JSC Jan 2018 Realizing the Renewable Energy strategy 19 HJS Nam Mu Hydropower JSC 0% HNX 20 SEB Mien Trung Power Investment & Development JSC 1 Supporting the decision-making processes for GEC's strategic direction on 21 CHP Central Hydropower JSC developing renewable Energy projects 22 S4A Se San 4A Hydropower JSC 2 Creating a pioneer in Vietnam's Solar Energy Industry 23 SBA Song Ba JSC 0% 3 Affirming GEC's prestige and brand name for local and foreign 24 DRL Hydro Power JSC – Power No.3 Financial Institutions 25 SHP Southern Hydropower JSC • Samarang Ucits - Samarang Sep 2018 Changing the Corporate Governance structure Asian Prosperity: 26 SJD Can Don Hydropower JSC 13.62% Luxembourg HOSE 1 Putting an end to Supervisory Board operation • PYN Elite Fund: Poland 2 Establishing the Audit Committee 27 TBC Thac Ba Hydropower JSC 28 TMP Thac Mo Hydropower JSC 3 Step by step getting closer to international practices, being aligned with 0% the objectives and orientation of GEC activities 29 TTE Truong Thinh Energy Investment JSC 30 VPD Vietnam Power Development JSC Samarang Ucits - Samarang 31 VSH Vinh Son - Song Hinh Hydropower JSC 9.81% Asian Prosperity: Luxembourg In 2018, GEC's Shareholder structure did not change significantly, especially there was no change in the structure of strategic foreign Shareholders. Strategic Shareholders continued to accompany the Company's development and pro-actively Source: GEC's research supported finance, governance and shared such a good experience in Renewable Energy. The stability of Shareholder’s structure is an important condition that gives the Company much time to focus on professional activities, serving the Sustainable development strategy in recent years.
112 2018 ANNUAL REPORT www.geccom.vn 113 INVESTOR RELATIONS ACTIVITIES & CAPITAL MARKET (continued)
Opening ownership Ending ownership Restricted shares Position/Relationship Reason of (October 2018 - TRANSACTION OF No. Individual/Institutional with Internal Persons Percentage Percentage increase/decrease October 2019) SHARES BY MAJOR Quantity Quantity (%) (%) (Private placement) SHAREHOLDERS, INTERNAL PERSONS AND MAJOR SHAREHOLDERS
RELATED PARTIES 1 Thanh Thanh Cong Investment JSC Major Shareholders 22,200,000 22.87 44,714,296 23.03 Increase by additional issuance Number of shares: 314,296 IN 2018 2 Ben Tre Import-Export JSC Major Shareholders 22,200,290 22.87 44,400,580 22.87 Increase by additional issuance -
Increase by additional issuance and 3 AVH PTE. LTD Major Shareholders 17,922,535 18.46 39,057,174 20.11 - additional purchases
4 IFC Major Shareholders 14,257,291 14.68 28,514,582 14.68 Increase by additional issuance -
Additional purchase, becoming 5 Ms. Dang Huynh Uc My Major Shareholders 1,369,000 1.41 9,859,996 5.08 - major Shareholder
THE BOARD OF DIRECTORS AND RELATED PARTIES
6 Mr. Tan Xuan Hien Chairman of the BOD 206,679 0.21 536,058 0.27 Increase by additional issuance Number of shares: 122,700
Related Parties - - - - -
6.1 Ho Thi Anh Ngoc Wife 331,861 0.34 663,722 0.342 Increase by additional issuance -
6.2 Tan Thi Xuan Hien Sister 23,896 0.024 - - Sold out -
6.3 Tan Xuan Hau Sister 53 0 7,505 0.004 Increase by additional issuance Number of shares: 7,400
7 Ms. Pham Ngoc Thanh Mai BOD Member - - 15,000 0.007 Increase by additional issuance Number of shares: 15,000
BOARD OF MANAGEMENT AND RELATED PARTIES
8 Ms. Nguyen Thai Ha CEO - - 30,700 0.015 Increase by additional issuance Number of shares: 30,700
9 Mr. Phan Thanh Lac Deputy CEO 331,924 0.34 366,524 0.188 Increase by additional issuance Number of shares: 34,600
Related Parties
9.1 Ms. Phan Nhat Le Daughter - - 50,000 0.02 Increase by acquiring more
10 Mr. Nguyen Dinh Tuan Deputy CEO 99,253 0.10 187,606 0.096 Increase by additional issuance Number of shares: 34,600
11 Mr. Le Thanh Vinh Deputy CEO - - 37,300 0.019 Increase by additional issuance Number of shares: 37,300
OTHER INTERNAL PERSONS
12 Ms. Tran Thi Hong Tham Chief Accountant - - 27,600 0.014 Increase by additional issuance Number of shares: 27,600
Authorized person to 13 Mr. Pham Thanh Tuan Anh - - 30,800 0.016 Increase by additional issuance Number of shares: 30,800 disclose information
Source: GEC
114 2018 ANNUAL REPORT www.geccom.vn 115 INVESTOR RELATIONS ACTIVITIES & CAPITAL MARKET (continued)
GEG SHARE’S MOVEMENT WERE POSITIVE IN 2018 GEG share price was soared significantly, at VND 15,300/share on December IN BOTH PRICE AND LIQUIDITY 28th, 2018, up 35% from VND 11,300 at the beginning of the year. Market capitalization at the end of 2018 reached VND 2,971 billion, equivalent to USD 130 million, up 171% compared to VND 1,097 billion at the early of 2018. AN INCREASE OF 160% COMPARED TO Indicator Unit Value MARCH 21st, 2017 Share price VND 15,300 Price movements of GEG and VN Index BEING TRADED ON UPCOM Number of listed shares Shares 194,182,550 Points VND Market Capitalization VND Billion 2,971 1,500 20,000 194 52 WEEKS Million of Shares in transaction Highest price VND 15,300 Lowest price VND 9,700 1,200 15,000 Average transaction volume Shares 147,931
UP 171% Average transaction value VND Billion 2.07 900 COMPARED TO 2018 FOREIGN 10,000 Foreign ownership limitation % 49 USD 600 130 Percentage of foreign ownership % 37.08 Million Market capitalization STOCK INDICATORS 5,000 EPS VND 1,121 300 P/B Times 1.2
P/E Times 13.7 0 0
Month 01 02 03 04 05 06 07 08 09 10 11 12 Source: GEC VNIndex GEG
March 21st, 2017 was the first day GEC April 2018, Vietnam ended 2018 as one of the officially traded its share GEG on the unofficial World's fastest declining markets. exchange Upcom of Hanoi Stock Exchange, GEG transaction volumes with par value of VND 10,000/share and the Against this downtrend, GEG share had Million of Shares GEG SHARE PRICE number of registered shares of 74,490,339. visible growth in both liquidity and price. 6 INCREASED IN 2018 As of December 31st, 2018, the total number GEG share price was soared significantly, at of listed shares was up to 194,182,550, an VND 15,300/share on December 28th, 2018, 5 increase of 160% from the time of listing. up 35% from VND 11,300 at the beginning of Although 2018 witnessed stable macro the year. Market capitalization at the end of 35% 4 economy, high GDP growth, business results 2018 reached VND 2,971 billion, equivalent of listed companies were estimated to grow to USD 130 million, up 171% compared to about 20% yoy, but such global factors as 3 VND 1,097 billion at the early of 2018. The 3 hikes in FED's interest rate and the escalating Energy shares were generally stable, with US-China trade war negatively affected the almost no changes compared to other 2 stock market, global capital flow, and Investor shares with quite low liquidity. However, confidence. Vietnam stock market experienced GEG share were actively traded during the 1 a year of volatility, contrary to the bright note last 6 months of 2018, the volume of stock expected by of most securities companies at transactions averaged at 267 thousand 0 the beginning of the year, despite of many shares per session, 13 times higher than Month 01 02 03 04 05 06 07 08 09 10 11 12 improved internal factors of the economy as the average of the first half - just about 20
well as the stock market. From the World's thousand shares. Source: GEC strongest growing market position in
116 2018 ANNUAL REPORT www.geccom.vn 117 INVESTOR RELATIONS ACTIVITIES & CAPITAL MARKET (continued) Dividends payment history 2014 - 2019 Cash Share
IN COMPARISON WITH OTHER SHARES FROM THE SAME INDUSTRY 20%
DIVIDEND In comparison to the small and medium sized Hydropower listed enterprises of the same 11% 10% 10% 10% scale, GEC currently has the best Market Average 10% 10% -20% capitalization and liquidity at December /Year 28th, 2018.
There are about 13 companies being listed on In comparison to the listed small and medium sized Hydropower Vietnam stock exchange that operate small and enterprises of the same scale, GEC currently has the best market 2014 2016 2017 2018 2019 medium power plants with capacities ranging capitalization and liquidity at December 28th, 2018. On the other hand, from 0.6 MW to 33 MW, which are equivalent in addition to the strengths of Hydropower projects, GEC is investing in Source: GEC to GEC's. Most Hydropower companies joined the construction and operation of Solar power Plants and also aiming at the stock market quite late compared to Wind power. GEC was initially successful in its ambitious development Diversifying financial resources to flexibly companies in other industries except Nam Mu strategy to become a pioneer in Vietnam's Solar Energy market. This meeting business needs, GEC continues to Hydropower JSC (HJS - HNX) and Mien Trung will contribute to creating added value for Shareholders and Investors, improve management capacity, capital Power Investment and Development JSC (SEB - especially when GEG prices and liquidity grow year by year. efficiency to maintain good relationship HNX) were listed before 2010, the rest were just listed in the market past few years. with local financial institutions.
Stock First day of Outstanding Capitalization Average transaction In addition to the goal of increasing working capital, No. Exchange EPS P/E code trading shares (VND Billion) volume of 52 weeks supplementing working capital to maintain and expand operations, bond issuance also supported 1 GEG Mar 21st, 2017 194,182,550 2,971 UPCOM 147,931 1,121 13.7 GEC in stabilizing the cash flow, increasing capital 2 SBM Sep 21st, 2017 39,000,000 1,170 UPCOM 7,887 2,939 10.0 efficiency and streamlining the financial structure. 3 SEB Jan 14th, 2009 31,999,969 1,014 HNX 22,715 7,443 4.2 On June 20th, 2018, GEC issued 300 bonds with the par value 4 GHC Apr 26th, 2011 20,500,000 648 UPCOM 2,968 4,640 6.9 of VND 1 billion each, for investment in Phong Dien and Krong Pa Solar power Projects. GEC has been maintaining th 5 DRL Apr 11 , 2012 9,500,000 477 HOSE 1,245 5,132 9.7 credit relationship with reputable local banks, with its 6 HJS Dec 20th, 2006 20,999,900 437 HNX 42,007 2,172 9.5 total outstanding loans by the end of December 2018 7 NED Aug 18th, 2017 40,500,000 405 30,255 964 10.0 being VND 1,527 billion. 8 TDB Jul19th, 2017 8,230,000 319 UPCOM 5,511 3,540 11.0 Outstanding loan at Credit Institutions at December 31st, 2018 9 GSM Apr 8th, 2015 28,562,000 300 10,887 190 55.0 Short term borrowings Long term borrowings 10 TTE Dec 10th, 2018 28,490,400 296 HOSE 91,044 420 23.0 VND Billion 11 SVH Dec 28th, 2017 14,820,662 197 51,519 966 13.0 1,000 941.3 12 HPD Jun 11th, 2015 8,306,590 150 UPCOM 3,224 2,184 8.2
th 13 EAD Sep 30 , 2016 2,877,800 24 67 3,995 2.0 800 Source: Vietstock, CafeF December 28th, 2018 CONTINUOUS EFFORT 600 TO PAY STABLE DIVIDEND EVERY YEAR 415.5 400 With the stable cash flow from Hydroelectricity business, GEC always does its best to ensure the interests of Shareholders and Investors by paying dividends in various form, in cash or shares, with an attractive dividend rate compared to the 200 average of other listed companies. Since 2014, GEC has paid dividends mainly in cash, at 10% on average, only once in 40.5 63.7 50.0 shares in 2016 at 20%. At the same time, most of other small and medium cap listed companies paid dividends in shares 15.3 0.1 0.6 or failed to do that. 0 Vietcombank Vietinbank Agribank Others Source: GEC
118 2018 ANNUAL REPORT www.geccom.vn 119 INVESTOR RELATIONS ACTIVITIES & CAPITAL MARKET (continued)
HIGHLIGHTS OF INVESTOR RELATIONS Approving the increase in Charter capital of Member Companies AND CAPITAL MARKET ACTIVITIES IN 2018 • Thuong Lo Hydropower One Member Limited Liability Company • Charter capital increased to VND 70 billion December Obtaining written opinions of Shareholders for approval on the transfer from Organizing the 2017 Annual General Meeting of Shareholders 2018 Upcom to HOSE • Performance of production and business activities in 2017: Revenue of VND 539 billion, • An opportunity for GEG code to continue to improve its brand image March PBT of VND 230 billion, exceeding 4% and 53% of the targets, respectively • Calling for attention from international Investors community 2018 • Paying 10% dividend in cash • Stock issuance plan to increase Charter capital to VND 1,942 billion • 2018 plan: Revenue of VND 547 billion, PBT of VND 170 billion, 6% and 14% Completing the increase of Charter capital to VND 1,942 billion respectively higher than 2017 targets • Continuing to realize the Company's development in size and stature • Expected dividend payment rate of 5% -10% • Ensuring financial resources was ready for the deployment of new projects in accordance with the strategy October Signing the credit contract of VND 870 billion for Krong Pa Solar power Project 2018 Completing 2017 dividend payment April • Cooperating with Vietnam's leading bank Vietcombank • The dividend payout ratio, to be paid in cash, was 10% • Ensuring profitability for Investors' investments 2018 • Expressing both parties' confidence in the success of the first investment in Solar power project in Gia Lai Province, the second project in Vietnam • Fully implementing commitments on benefits of Shareholders and Investors
Continuing to implement a series of Solar power Projects Issuing Resolution to approve the support for Gia Lai Hydropower Joint Stock Company • Borrowing for Ham Phu 2 Solar power Project • Agreeing to approve the investment plan for Ham Phu 1 Solar power Project, • Vietcombank Gia Lai showed their support by lending or arranging sufficient investment total investment of VND 929 billion May capital in case total investment of the project increases • Agreeing to approve the investment plan for Ham Phu 2 Solar power Project, 2018 total investment of VND 927 billion Guaranteeing and approving for Subsidiary - Gia Lai Construction and Electrical Mechanic • Agreeing to approve the investment plan for Duc Hue Solar power Project, September One Member Limited Company - to borrow short-term loans at Vietcombank Gia Lai total investment of VND 947 billion 2018 • The loan is VND 40 billion • Supplementing and compensating working capital for production and business activities
Signing a bond subscription contract between GEC and Vietcombank - Gia Lai Branch Organizing the Extraordinary General Meeting of Shareholders 2018 with the key contents June • Approving the review and elimination of businesses that limit the percentage of foreign • The total number of subscribed bonds is 300 Investors' ownership 2018 • Each bond was worth VND 1 billion • Approving on the BOD's resignation and election of additional Members of the BOD for the • Investing in Phong Dien - Hue and Krong Pa - Gia Lai Solar power Projects term 2015-2020
Signing the credit contract of VND 490 billion for Phong Dien Solar power Project Organizing the Preliminary Conference of first half and plan for second half of 2018 • Affirming the long-term and sustainable cooperation, on the basis of maximizing the • Revenue reached VND 227 billion, PBT reached VND 98 billion, completed 58% of the potentials of both Parties annual plan • Showing the support for Renewable Energy development promotion by major • Agreeing on implementation actions for H2 2018 plan, striving to exceed the targets set credit institutions July for 2018 August • Meeting the needs of production consumption and contributing to environmental protection, ensuring local and national Energy security 2018 2018 Agreeing to approve the change of investment loan for Phong Dien - Hue Solar power Project State Security Commission of Vietnam granted the Certificate of Registration of public offering • Agribank Gia Lai Branch and Agribank Thua Thien Hue Branch • The number of approved offering shares was 97,091,275 • The co-financing contract was worth VND 490 billion • This is the legal basis for implementing the Company's Charter capital increase • Ensuring financial resources to deploy business plans and investing in a series of future new projects.
120 2018 ANNUAL REPORT www.geccom.vn 121 TOTAL CAPACITY 1,136 MW TO 2022 A corner of Krong Pa Solar power Plant - Gia Lai
BOARD OF MANAGEMENT YEAR IN REVIEW PIONEER'S IMPRINT 124 Remarkable milestones in a year of operation MARKET LEADER 130 Project portfolio & Services 138 Positioning GEC on the Renewable Energy market IN THE CONTEXT OF INCREASING DEMAND FOR ELECTRICITY FROM 146 Business activities analysis based on Business Model AN AGGRESSIVE AND EMERGING ECONOMY, FOSSIL SOURCES 158 Investment, operation and production activities of each major BEING DEPLETED, GEC HAS PROVEN ITS PIONEER POSITION BY Energy segment PROACTIVELY INVESTING AND BRINGING GIA LAI ELECTRICITY TO 164 R&D activities - Optimal Energy solutions BECOME VIETNAM'S "CAPITAL" OF SOLAR ENERGY; WITH A LEADING 166 Investment in technology development to increase ROLE IN THE CLEAN ENERGY MARKET. the operation efficiency 03 170 Human resource and training - Lever of growth REMARKABLE MILESTONES IN A YEAR OF OPERATION
Summary conference of 2017 activities Signing Engineering Procurement and as well as deploying tasks and plans for Construction contract to implement JANUARY 2018 with outstanding contents related to FEBRUARY Phong Dien - Hue Solar power Project various types of Hydropower, Solar power and Wind power • The contract was signed with joint venture of SHARP Group Japan - Sharp Solution Asia Company - SSSA Thailand and NSN Construction and Engineering JSC Vietnam. • The signing of EPC contract with Sharp's JV - SSSA - NSN was an important milestone in the trend of cooperation and development, which contributed to the effectiveness of the Parties' performance and increased The Chairman of the Group (on the right) gave a souvenir to benefits for the community in the context Japanese EPC Partner of local and global climate change.
THE TOTAL OUTPUT OF COMMERCIAL ELECTRICITY WAS EXPECTED TO REACHED NEARLY 447 MILLION KWH HYDROPOWER MARCH BEING EQUIVALENT TO THE REVENUE FROM ELECTRICITY BUSINESS REACHED NEARLY VND 604 BILLION
OPTIMIZING COST CONTROL TO ENSURE PBT TARGET OF VND 195 BILLION
• Operating Phong Dien and Krong Pa Solar power Projects in Organizing 2017 Annual General Meeting to report the operation as well as to SOLAR POWER 4Q 2018 get approval for key items related to finance, capital mobilization and interests of • Continuing to complete legal procedures, which were the basis Shareholders and Investors for implementing Solar power projects in accordance with • Reporting 2017 production and business activities with Net Revenue of VND 539 billion, strategic objectives. PBT of VND 230 billion, exceeding 4% and 53% of the targets, respectively. • Paying 2017 dividend of 10% in cash and planning to issue shares to increase the Charter capital to VND 1,942 billion. • According to 2018 plan, Net Revenue was expected to be VND 547 billion, PBT of VND 170 billion, WIND POWER • Focusing on surveying and developing new feasible Wind 6% and 14% respectively, higher than 2017 targets, with expected dividend payout ratio of 5% -10%. power projects Signed the next Engineering Procurement and Construction contract with a foreign partner • The areas of interest are South Central and Mekong Delta coastal areas. • The cooperation with JGC Vietnam Co., Ltd. was to deploy Krong Pa - Gia Lai Solar power Plant, which was expected to generate electricity in 4Q 2018. • JGC Vietnam Co., Ltd. is a 100% foreign-invested company with 3 major Shareholders - JGC Corporation Japan, JGC Plant Innovation and JGC Singapore EPC Japanese partner.
124 2018 ANNUAL REPORT www.geccom.vn 125 REMARKABLE MILESTONES IN A YEAR OF OPERATION (continued)
Signing the credit contract of VND 870 Organizing the Preliminary Conference of first half and plan for second half of 2018 billion for Krong Pa Solar power Project • Evaluating and recognizing production and business activities in first half 2018 with Net APRIL • The collaboration with Vietcombank - JULY Revenue reaching VND 227 billion, PBT of VND 98 billion, fulfilling 58% of the annual plan. Vietnam's leading bank, demonstrated the • Agreeing on implementation actions for second half 2018 plan, striving to exceed the targets confidence from both Parties in the success set for 2018. of the investment in the first Solar Power Project in Gia Lai Province. • Vietcombank not only showed confidence in GEC's business performance, but also supported the development process of Solar power - Renewable Energy source, the global trend of developing new Energy towards sustainable development and environmental protection. AUGUST
Completing Phase 1 of Dak Pi Hao 2 MAY Hydropower Plant • Under the supervision and technology transfer of Indian VOITH contractor, the Project was completed on schedule. • The Project improved production efficiency, step by step modernized and automated the Plant's operations, increasing operational efficiency by more than 10%. Signing Engineering Procurement and Construction contract to implement Phong Dien - Hue Solar power Project Marking the successful cooperation between EVN, Electric Power Trading Company, and GEC for the first time in Solar Power Industry. Signing a credit contract of VND 490 billion with Agribank Gia Lai Branch, Agribank Thua Thien Hue Branch for Phong Dien Solar power Project • Affirming the long-term and sustainable cooperation, on the basis of maximizing the potentials of both Parties. Celebrating the 29th anniversary of GEC's establishment and development • Major credit institutions showed their support for Renewable Energy development, which not only meets the needs of production but also contributes to environmental protection and • From a small State-Owned Enterprise that owned and operated only Ia Drang 2 Hydropower ensures local and national Energy security. JUNE Plant with a capacity of 1.2 MW; GEC has become a leading enterprise of small and medium Hydroelectric plants as well as Solar power Plants in Vietnam. State Securities Commission of Vietnam granted GEC the Certificate of Registration of Shares Offering to the Public • GEC's current project portfolio has more than 14 Hydropower plants with a capacity of 84.1 MW; 2 Solar power projects expected to be completed in 2018, elevating generation capacity GEC got the approval for 97,091,275 offered shares, which was the legal basis to deploy the plan to to 182 MW. increase the Company's Charter capital, ensuring financial resources to implement business plans and investment in a series of coming projects.
126 2018 ANNUAL REPORT www.geccom.vn 127 REMARKABLE MILESTONES IN A YEAR OF OPERATION (continued)
Organizing the 2018 Extraordinary General Meeting SEPTEMBER of Shareholders DECEMBER The most important contents included reviewing and removal of business lines that were subject to a limit in the percentage of foreign Investors ownership, removing and electing additional BOD Members for the term 2015-2020. Signing the next Power Purchase Agreement This was GEC's second Solar Power Purchase Agreement for Krong Pa - Gia Lai Solar power Project, which was scheduled to generate electricity officially in October 2018.
Power generation of the 2nd Solar power Plant - Krong Pa - Gia Lai
Krong Pa Solar power Plant with a capacity of 69 MWp officially on COD; becoming the first Solar power Plant in Gia Lai Province and the Solar power Plant of biggest capacity in Vietnam to date. OCTOBER
Putting Phong Dien - Hue Solar power Plant into operation, officially The 48 MWp plant became the first Solar power Plant in Vietnam to officially on COD; which affirmed GEC's milestone as the first Company to own an operational Solar power Plant. Appointment of Ms. Nguyen Thai Ha as Chief Executive Officer She became the first female CEO of GEC in its 29 years of history. In the position of a CEO, she 2018 customer appreciation Program at TTC Chu Prong Branch - the only Branch to continued to improve and professionalize the management, governance, Investor relations and deploy electricity retail Capital market; supporting the Company to meet its objectives and development strategies in the near future. The Program is held annually in December to express gratitude to customers who trust and choose GEC's consumer electricity, as well as to tighten the relationship between the Company Completing the increase of Charter capital to VND 1,942 billion and the local people. Continuing to realize the Company's development in size and scale, as well as to ensure financial Getting Shareholder's opinion in writing resources to prepare for the implementation of investment projects under the Company's strategy. Proposal for transferring from Upcom to HOSE; which demanded the Company to meet strict Completing dividend payment for 2017 criteria of transparency, prestige and efficiency in operation. This is an opportunity for GEG to The dividend payout ratio to be paid in cash is 10%, which ensures profitability of investment for continue to promote its brand as well as to attract the international Investors community. Investors and also fulfills commitments on benefits for Shareholders and Investors.
128 2018 ANNUAL REPORT www.geccom.vn 129 PROJECT PORTFOLIO & SERVICES LIST OF POWER PLANTS
Hydropower
PLANT CAPACITY With nearly 30 years of development since establishment, profound experience in investment, management and exploitation of various power types; GEC directly 14 84.1 MW and indirectly has owned 14 potential small and medium sized Hydropower plants with a total capacity of 84.1 MW in the Central and Central Highlands HANOI 1 H’Mun 16.2 MW regions, which operate with stable cash flow and effective financial indicators. 2 Ayun Thuong 12 MW 3 H’Chan 12 MW 4 Dak Pi Hao 2 9 MW 5 Da Khai 8.1 MW 6 Ia Puch 3 6.6 MW 7 Thuong Lo 6 MW 8 Dak Pi Hao 1 5 MW 9 Ayun Ha 3 MW
HOANG SA ISLAND 10 Ia Meur 3 1.8 MW
THUA THIEN HUE 11 Ia Drang 3 1.6 MW 12 Ia Drang 2 1.2 MW 13 Kenh Bac 1 MW 14 Ia Drang 1 0.6 MW POWER POWER SERVICE BINH DINH
Solar POWER GIA LAI
Solar power Experiment PLANT CAPACITY
8 392 MWp Hydropower Mechanical installation
LAM DONG 1 Phong Dien 48 MWp BINH THUAN
LONG AN 2 Krong Pa 69 MWp
Power consulting HCMC 3 Ham Phu 2 49 MWp PHU QUOC ISLAND 4 Duc Hue 1 49 MWp
TRUONG SA ISLAND 5 Ham Phu 1 49 MWp 6 Duc Hue 2 49 MWp 7 Tay Son 1 49 MWp 8 Tay Son 2 30 MWp
130 2018 ANNUAL REPORT www.geccom.vn 131 PROJECT PORTFOLIO & SERVICES (continued)
HYDROPOWER PLANTS AVERAGE HYDROPOWER PLANT SYSTEM IN CENTRAL, HIGHLAND CAPACITY/YEAR 14 369Million kWh
Commercial Plant Reservoir Efficiency Average Capacity Water use No. Plant Region Position operation Area capacity (Hour/ output Highlights of the Plant (MW) and Water flow date (m2) (Million m3) Year) (GWh/Year) • Largest capacity in GEC's Hydropower plant system, being built in an area with good water flow and high uptime. Bar Maih Commune, 1 H'Mun 2010 18,158 16.2 In the Auyn River basin 0.868 4,100 66.4 • Being categorized as in the small and medium scale, so its contracts are signed on an avoidable cost tariff basis Chu Se District, Gia Lai Province • Preferential tariff for Renewable Energy Ayun Lo Pang Commune, Mang Yang District, 2 2011 642,696 12 In the Auyn River basin 4.54 4,200 50.4 • Second largest capacity in GEC's Hydropower plant system, being built in areas with good water flow and high Thuong Gia Lai Province uptime. De Ar Commune, Mang Yang District, • Being categorized as in the small and medium scale, so its contracts are signed on an avoidable cost basis 3 H'Chan 2006 14,181 12 In the Auyn River basin 0.768 4,700 56.4 Gia Lai Province • Preferential tariff for Renewable Energy Highland Dak Pi Hao Spring: Level I Branch • Stable water flow in dry season Cho Long Commune, Kong Chro District, 4 Dak Pi Hao 2 2008 106,183 9 of Ba River 0,195 4,161 36.9 • Being categorized as in the small and medium scale, so its contracts are signed on an avoidable cost basis Gia Lai Province Average annual flow of 4.45 3m /s • Preferential tariff for Renewable Energy • The only plan in the system that has a reservoir with large useful capacity, convenient for maximizing efficiency in avoidable cost Dar Sa-Da Nhim Commune, In the Da Nhim River basin 5 Da Khai 2010 32,000 8.1 9.95 4,568 37.0 • Da Khai Plant is the highest efficiency in the system, considering the investment on MW. Lac Duong District, Lam Dong Province Average annual flow of 2.77 3m /s • Being categorized as in the small and medium scale, so its contracts are signed on an avoidable cost basis • Preferential tariff for Renewable Energy • Being connected to a retail grid with a relatively high electricity price of about VND 1,700/kW and a wholesale Ia O Commune, Chu Prong District, 6 Ia Puch 3 2009 147,148 6.6 Puch Spring 0.117 4,638 30.6 price of VND 792/kW Gia Lai Province • The only private enterprise's Plant cluster in Vietnam that is allowed to sell directly to consumers • Making the most out of water flow into electricity generation during peak hours to increase Revenue efficiency North Thuong Lo Commune, Nam Dong District, Ba Ran River 7 Thuong Lo 2015 44,284 6 4.03 3,000 18.0 • Being categorized as in the small and medium scale, so its contracts are signed on an avoidable cost basis Central Thua Thien Hue Province Average annual flow of 12.9 3m /s • Preferential tariff for Renewable Energy Kon Chieng Commune, • Stable water flow in dry season Mang Yang District, Gia Lai Province Đak Pi Hao Spring 8 Dak Pi Hao 1 2014 66,082 5 - 4,200 21.0 • Being categorized as in the small and medium scale, so its contracts are signed on an avoidable cost basis Cho Long Commune, Average annual flow of 3.16m3/s • Preferential tariff for Renewable Energy Kong Chro District, Gia Lai Province • Utilizing water from Ayun Ha hydroelectric dam to generate electricity, so water is available all year round Ayun Ha Commune, Phu Thien District, Ayun River • This is 1 of the 2 plants of highest efficiency in the system with the longest operating hours. 9 Ayun Ha 2001 6,069 3 253 6,600 20.0 Gia Lai Province Flow rate through turbine 23.4 m3/s • Being categorized as in the small and medium scale, so its contracts are signed on an avoidable cost basis • Preferential tariff for Renewable Energy Ia Boong Commune, Chu Prong District, 10 Ia Meur 3 2005 63,888 1.8 Ia Meur Spring 0.021 4,333 7.8 Gia Lai Province • Being connected to a retail grid with a relatively high electricity price of about VND 1,700/kW and a wholesale Ia Boong Commune, Chu Prong District, 11 Ia Drang 3 Highland 2005 24,690 1.6 Ia Drang Spring 0.4 5,800 8.8 price of VND 792/kW Gia Lai Province • This is the only private enterprise's plant cluster in Vietnam that is allowed to sell directly to consumers Ia Drang Commune, Chu Prong District, 12 Ia Drang 2 2002 66,082 1.2 Ia Drang Spring 0.012 5,416 6.5 Gia Lai Province • Utilizing water from Ayun Ha hydroelectric dam to generate electricity, so water is available all year round Ayun Ha irrigation canal • This is 1 of the 2 plants of highest efficiency in the system with the highest uptime 13 Kenh Bac Phu Thien District, Gia Lai Province 2010 3,481 1 - 6,000 6.0 Flow rate through turbine of 10.8m3/s • Being categorized as in the small and medium scale, so its contracts are signed on an avoidable cost tariff basis - Preferential tariff for Renewable Energy
• Being connected to a retail grid with a relatively high electricity price of about VND 1,700 kW and a wholesale price Thang Hung Commune, 14 Ia Drang 1 2003 41,929 0.6 Ia Drang Spring 0.05 5,500 3.4 of VND 792 kW Chu Prong District, Gia Lai Province • Being located in a GEC sole cluster, the only private Enterprise in Vietnam allowed to carry out direct sales to consumers
Total Gia Lai, Lam Dong, Hue 2001-2014 NA 84.1 NA NA NA 369.3 NA
132 2018 ANNUAL REPORT www.geccom.vn 133 PROJECT PORTFOLIO & SERVICES (continued)
SOLAR POWER PLANT SYSTEM
• GEC is gradually becoming one of the leading private companies in developing green, clean and environmentally- • In addition, GEC and its Subsidiaries are also in the process of The general contractors are friendly Renewable Energy in Vietnam. implementing 4 more Solar power Plants with a total capacity of from Japan, accompanied 177 MWp. • In 2018, GEC put into commercial operation of Phong Dien - Hue 48 MWp and Krong Pa - Gia Lai 69 MWp by high technology that Solar power Plants. The preferential price of electricity at the time of delivery was 9.35 cents/kWh, which shall be • GEC's Solar power Plants - both in operation and under meeting Japanese and applied in 20 years of commercial operation. construction - are all carried out in the EPC format. The general European standards. contractors are from Japan, with modern technologies, meeting • Currently, 2 Subsidiaries are implementing 2 Solar power Plants with a total capacity of 98 MWp, which are Japanese and European standards. expected to be put into operation by June 2019, to benefit from the Government's preferential mechanism for Solar power projects.
Commercial Number of The potential Average Plant Area Capacity No. Plant Region Position operation sunny hours of Solar power/ output Technology Highlights of the Plant (Ha) (MWp) date (Hours/Year) radiation (GWh/Year)
I IN OPERATION • The most favorable construction • Polycrystalline Technology conditions among the ongoing projects North My Hoa Village, Dien Loc Commune, 4.6 • 2 Solar power plants of 1 Phong Dien October 2018 44.80 48 1,700 - 2,000 59.7 • Capacity of 330 Wp • Lowest investment rate Central Phong Dien, Thua Thien Hue kWh/sqm/day largest scale in Vietnam • Produced by SHARP, Japan • Exemption from land lease for the first at the time of grid 15 years connection • Polycrystalline battery by Astronergy • Positioning in areas of the best radiation • Fully enjoying preferential Chu Gu Commune, Krong Pa District, 4.8 - 5.2 • Inverter by Tmeic with the function of Maximum Power in Vietnam 2 Krong Pa Highland December 2018 70.23 69 1,900 - 2,200 103 policies for Solar power Gia Lai Province kWh/sqm/day Point Tracking (MPPT), adjusting P, Q (cos φ from -0.85 • Exempting from land lease throughout to 0.85) the Project's life cycles II UNDER CONSTRUCTION
• Polycrystalline technology with a capacity of 330 Wp by South Ham Phu Commune, Ham Thuan Bac District, Expected in 5.3 • Positioning in areas of the best radiation in Vietnam 3 Ham Phu 2 54.20 49 2,520 77 SHARP, Japan Central Binh Thuan Province June, 2019 kWh/sqm/day • Exempting from land lease for the first 15 years • Central Inverter
• Photovoltaic - Polycrystal line silicon: Polycrystalline Solar My Thanh Bac Commune, Duc Hue District, Expected in 4.93 4 Duc Hue 1 South East 58.00 49 2,445 73 panels - 72 cells 330Wp (PV module) • Exempting from all land lease throughout the Project's life cycle Long An Province June, 2019 kWh/sqm/day • Provided by Solargiga with technology by SHARP, Japan III PLANTS UNDER LEGAL PROCEDURE COMPLETION • Monocrystalline or polycrystalline technology with a South Ham Phu Commune, Ham Thuan Bac District, Expected in 5.3 capacity> = 330 Wp from advanced countries of G7 • Positioning in areas of the best radiation in Vietnam 5 Ham Phu 1 54.20 49 2,520 78 Central Binh Thuan Province 2019 kWh/sqm/day • Central inverter with a capacity of > = 2x2550kW from • Exempting from land lease for the first 15 years advanced countries of G7 • Photovoltaic - Polycrystal line silicon: Polycrystalline Solar My Thanh Bac Commune, Duc Hue District, Expected in 4.93 • The land was identified and agreed by the People's Committee of Long 6 Duc Hue 2 South East 58.00 49 2,445 72.7 panels - 72 cells 330Wp (PV module) Long An Province 2019 kWh/sqm/day An Province for transfer of land use purpose to Energy structures • Provided by Solargiga with technology by SHARP, Japan Tay Thuan Commune, Tay Son District, 5.18 7 Tay Son 1 62.00 49 2,627 75 South Binh Dinh Province Expected in kWh/sqm/day • Polycrystalline technology with capacity of 325 Wp • The location with good radiation Central Tay Thuan Commune, Tay Son District, 2020-2021 5.21 • Produced by SHARP, Japan 8 Tay Son 2 38.00 30 2,626 46 Binh Dinh Province kWh/sqm/day
134 2018 ANNUAL REPORT www.geccom.vn 135 PROJECT PORTFOLIO & SERVICES (continued)
GEC IS TAKING STEPS POWER SERVICE TO BECOME ONE OF THE LEADING PRIVATE UNITS TO DEVELOP GREEN, CLEAN BASIC CONSTRUCTION SERVICES & ENVIRONMENTALLY FRIENDLY TESTING SERVICE (CONSULTING, CONSTRUCTION, MECHANICAL SERVICES, ETC.) RENEWABLE ENERGY IN VIETNAM
Activities Activities
• In early 2016, VILAS laboratory was • Maximizing potential of the value chain in put into operation under ISO/IEC Power Industry. 17025-2005 standard. • Having invested in and developed 2 subordinate • Constantly investing in expanding units, GEC owns 100% working capital in and developing laboratory capital construction: capacity to meet the needs of power projects in investment »» Gia Lai Consultancy and Energy and operation. Development Co., Ltd;
Effectiveness »» Gia Lai Construction and Mechanical Co., Ltd. • The laboratory is now capable of testing on almost all machines Effectiveness and equipment of Hydropower • Being fully proactive in: and Solar power Plants. »» Project development activities: Survey, • Every year, the laboratory design, plan addition, feasibility analysis, etc. manages to: »» Construction completion phase: »» Reduce cost of more than Construction, mechanical, construction VND 1.7 billion; supervision, etc.
»» Get Revenue from service »» Putting into operation. provision to customers of more than VND 3 billion. • In 2018, the total value of capital construction activities was VND 70 billion.
Wind power will contribute to diversify GEC's Revenue sources 136 2018 ANNUAL REPORT www.geccom.vn 137 List of projects by Status of implementation POSITIONING GEC
Hydropower ON THE RENEWABLE ENERGY MARKET 84 MW Operating Ongoing 84 MW GEC'S OPERATION NETWORK 79 MW
IN OPERATION Legal procedures 148 MW 84.1 MW 117 MWP Solar power 14 HYROPOWER 02 SOLAR POWER 311 MW PLANTS PLANTS
IN CONTRUCTION Source: GEC 02 SOLAR POWER 98 MWP PLANTS EC directly and indirectly owns 14 power plants with a total capacity of 84.1 MW mainly concentrated in the Central Highlands (93%) and North Central (7%). These include 70 MW in Gia Lai Province, accounting for 83% of GEC's total ONGOING LEGAL PROCEDURES G operating Hydropower capacity. In particular, GEC owns about 24% of small and medium Hydropower projects 04 SOLAR POWER operating in the area. In addition, 8.1 MW in Lam Dong Province and 6 MW in Hue, accounts for 10% and 7% of GEC's total 177 MWP PLANTS Hydropower capacity respectively. In Lam Dong, GEC accounts for about 14% of capacity of small and medium Hydropower.
List of operating, ongoing and prepared to operate projects List of operating, ongoing and prepared to operate projects by Location by Province Hydropower Solar power Projects Hydropower Solar power Projects PHONG DIEN: 48 MWP MW Projects MW Projects 200 16 120 16
THUONG LO: 6 MW 180 177 14 H'CHAN: 12 MW 100 98 98 160 13 AYUN THUONG: 12 MW 12 12 H'MUN: 16.2 MW 140 80 79 AYUN HẠ: 3 MW 120 70 69 DAK PI HAO 1: 5 MW 100 98 8 60 8 DAK PI HAO 2: 9 MW 48 TAY SON 1: 49 MWP 80 78,1 KENH BAC: 1 MW 69 TAY SON 2: 30 MWP 40 60 IA DRANG 1: 0.6 MW 48 4 4 4 40 IA DRANG 2: 1.2 MW KRONG PA: 69 MWP 20 2 2 IA DRANG 3: 1.6 MW 20 2 2 2 2 8.1 6 IA MEUR 3: 1.8 MW 6 1 0 0 0 0 IA PUCH 3: 6.6 MW Highland North Central South Central Southeast Gia Lai Lam Dong Hue Binh Đinh Binh Thuan Long An Source: GEC DA KHAI: 8.1 MW Capacity rate of Hydropower plant by Province Besides, GEC directly and indirectly owns 8 Solar plants 7% with 392 MWp, 2 of which are operating with 117 MWp HAM PHU 1: 49 MWP (30%), 2 will be operating by June 2019 with 98 MWp HAM PHU 2: 49 MWP 10% (25%), 2 are expected to operate in 2019 with 98 MWp (25%) and 2 are planned to be operational around 2020- 2021 with 79 MWp (20%).
Gia Lai DUC HUE 1: 49 MWP Lam Dong DUC HUE 2: 49 MWP Hue 83%
Source: GEC
Source: GEC 138 2018 ANNUAL REPORT www.geccom.vn 139 POSITIONING GEC ON THE RENEWABLE ENERGY MARKET (continued) MEDIUM AND SMALL-SCALE HYDRO PLANTS
ccording to the International According to approved plan, by As of September 2018, in Gia Lai Hydropower Association, 2018 there will be 818 Hydropower Province - the capital of GEC's Hydro A Hydropower resources from projects with a total installed projects, there are totally 55 small and 200 kV to 10 MW are referred to as capacity of 23,182 MW, of which medium sized Hydropower projects of small Hydro, from 10 MW to 100 MW (1) 385 operational plants with a 384.6 MW. In which (1) 36 projects are are known as medium Hydropower total installed capacity of 18,564 operating with a total capacity of 294.5 ones. However, in Vietnam, a Hydro MW (80%), (2) 143 plants under MW (77%); (2) 5 projects are being source up to 30 MW is considered construction with a total installed implemented with a total capacity of a small Hydropower plant, the ones capacity of 1,848 MW (8%) and (3) 290 44.7 MW (12%); (3) 14 projects with with larger capacity are called large- projects under study for investment a total capacity of 45.4 MW (11%), scale Hydro plants. Thus, in Vietnam, with a total installed capacity of included in the planning, but have the category of "Hydropower plants 2,770 MW (12%). Currently, GEC not been approved for investment of less than 30 MW" already includes accounts for about 0.45% of the policy. GEC is operating 70 MW in the medium Hydropower plants. total installed capacity of operational area, accounting for 24% of operating projects across the Country. Hydropower projects. North-South 500kV electricity transmission line
Capacity rate of Solar power Plant by Province Two operational power Plants were Phong Dien - Hue Small and medium-scale Hydropower projects in Gia Lai Province as of September 2018 with 48 MWp and Krong Pa - Gia Lai with 69 MWp in 2018, PROPORTION OF OPERATING Projects Capacity (MW) accounting for 100% capacity and leading the Solar market HYDROPOWER PROJECTS IN GIA LAI 12% 350 in North Central and Central Highlands. GEC will be deemed 18% as a pioneer in Solar power in Vietnam. Ham Phu 2 - Binh Gia Lai 300 294.5 Binh Thuan Thuan with 49 MWp, Duc Hue 1 - Long An with 49 MWp 20% 250 Long An 24% in the South Central and Southeast Regions have been added to the planning, under construction and expected 25% Binh Dinh 200 to be operational by June 30th, 2019. This is done quickly Hue PROPORTION OF OPERATING 150 to make the best of the FiT of 9.35 cents/kWh during the 25% HYDROPOWER PROJECTS IN LAM DONG 20-year project life cycle. Up to now, Vinh Tan Solar Project 100 Source: GEC in Binh Thuan of Construction Consultancy 2 JSC - EVN's 70 50 44.7 45.4 Subsidiary has been put into operation in January 2019 and Duc Hue 2, each with 49 MWp in 2019. Aiming for 36 10 14 with limited capacity of about 6.2 MW. Long An has not the development strategic target to 2022, GEC continues 14% 0 5 seen any operational Solar factory. to establish its Subsidiaries to build and manage In operation GEC - in operation Under construction Under consideration for investment policy 2 Solar Plants - Tay Son 1 with 49 MWp and Tay Son 2 with Source: Gia Lai Provincial Information Portal If GEC carries out the plan as expected, GEC will remain the 30 MWp in Binh Dinh. These are expected to operate in the In Lam Dong, the power source Small and medium-scale Hydropower projects in Lam Dong Province as of July 2018 market leader in these 2 Regions. GEC is also completing South Central Region around 2020-2021. This area has not is mainly supplied by 9 small and legal procedures to operate 2 more factories of Ham Phu 1 seen any operational Solar projects. Projects Capacity (MW) medium Hydropower plants with a 120 total installed capacity of 57.3 MW and 12 large capacity Hydropower 100 97.1 CRITERIA TTC PHONG ĐIEN - HUE TTC KRONG PA - GIA LAI plants with a total installed capacity of 1,404 MW. Besides, (1) 9 small 80 Commercial operation date October 2018 December 2018 and medium Hydropower projects Installed capacity 48 MWp ~ 35 MW 69 MWp ~ 49 MW are under construction with a total 57.3 62.7 60 54.5 capacity of 97.1 MW, (2) 4 projects are Total invested capital VND 853 billion VND 1,284 billion under investment preparation with 40 Estimated average output ~ 60 million kWh/year 103 million kWh/year a total capacity of 54.5 MW and (3) 9 Number of Solar cells 145,560 panels 209,100 panels projects are under consideration for 20 Estimated Revenue VND 128 billion/year VND 220 billion/year investment policy with a capacity 9 8.1 9 9 of 62.7 MW. At present, with 1 Da 1 4 FIT for 20 years VND 2,086/KWh VND 2,086 /kWh 0 Khai Plant operating at 8.1 MW, In operation GEC - in operation Under construction Under investment Under consideration Land area 44.80 ha 70.23 ha GEC accounts for 14% of the total preparation for investment policy small and medium-scale capacity Source: Planning of Electricity development in Lam Dong Province, period of 2016-2025, with a view to 2035 Reduction of CO2 emissions 20,503 tons/year 29,000 tons/year Source: GEC Hydropower plants in Lam Dong. 140 2018 ANNUAL REPORT www.geccom.vn 141 POSITIONING GEC ON THE RENEWABLE ENERGY MARKET (continued)
According to data from Hydropower projects in Thua Thien Hue Province as of June 2018 SOLAR POWER Vietnam Clean Energy, Thua Projects Capacity (MW) Thien Hue has 21 Hydropower 350 projects with a total capacity of fter the Decision No. 11/2017/QD-TTg dated April 11th, 2017 on the mechanism of encouraging the development of 314.5 459.5 MW. In particular, (1) Huong River 300 Solar projects in Vietnam, the FiT of 9.35 cents/kWh has witnessed a series of Solar projects added to the planning. lader Hydropower planning included 4 A According to EVN, as of December 2018, PPAs were signed for 2,866.5 MW, exceeding the target of 850 MW by 2020, projects with a total capacity of about 250 according to the amended VII Power Development Master Plan. As statistics were recorded of projects with PPAs, GEC 314.5 MW; (2) the Ministry of Industry's accounts for nearly 3% of the total capacity. However, if compared with the target under amended VII Power Development National Small Hydro Plan approved 200 Master Plan, GEC already accounts for about 10%; with Phong Dien of 35 MW (equivalent to 48 MWp) and Krong Pa of 49 (now MOIT) consists of 5 projects with MW (equivalent to 69 MWp). a total capacity of 33.2 MW; (3) Small 150 Status of implementing the Solar projects as of December 2018 Hydropower planning approved by the 111.8 Provincial People's Committee, which 100 Capacity under PPA Capacity under negotiated contract (MW) consists of 12 projects with a total 800 50 capacity of 111.8 MW. GEC is operating 33.2 700 Thuong Lo Hydropower Plant with a 6 5 12 600 0 4 1 capacity of 6 MW, accounting for 18% 500 Huong River lader GEC - in operation MOIT's approval Provincial People's Committee' of small hydro, contributing to the Hydropower Small Hydropower 400 Province's development. 300 Source: Vietnam clean Energy 200 100 0
Quang Quang Hue Quang Gia Dak Dak Binh Phu Khanh Ninh Binh Lam Long Vung Tay An Hau Thanh Binh Tri Ngai Lai Lak Nong Dinh Yen Hoa Thuan Thuan Dong An Tau Ninh Giang Giang Hoa Source: EVN
According to the Vietnam Energy Portal, Status of implementing the Solar projects in Gia Lai Province as of October 2018 Gia Lai Provincial People's Committee Projects Capacity (MWp) has agreed to allow 23 enterprises to 4.000 survey and invest in 33 Solar projects in the Province, with a total capacity about 3,968 MWp. In particular, (1) 2 projects have been approved for additional 3,195 planning, under investment and 3.000 construction with a total capacity of 98 MWp and total investment of VND 2,672 billion; (2) 11 projects have been submitted by the Provincial 2.000 People's Committee to competent authorities for consideration and approval for additional planning, with
a total capacity of 675 MWp; (3) 20 1.000 projects have been under FS before 675 filing for additional planning, with an expected capacity of 3,195 MWp. GEC is currently the only Enterprise that has 2 98 1 69 11 20 generated electricity in Gia Lai, with 0 Approved for GEC - in operation Submitted Under surveying The process of connecting to the national electricity grid in plants a capacity of 69 MWp from Krong Pa additional for additional planning planning plant. Its total investment capital is VND approval 1,284 billion and land area of 70.23 ha. Source: Vietnam Energy Portal
142 2018 ANNUAL REPORT www.geccom.vn 143 POSITIONING GEC ON THE RENEWABLE ENERGY MARKET (continued)
Equally, within Binh Thuan Province as Status of implementing the Solar projects in Binh Thuan Province as of October 2018 The above report also mentions Status of implementing the Solar projects in Binh Dinh Province as of June 2018 of October 10th, 2018, there were 90 Projects Capacity (MWp) that Binh Dinh Province currently Projects Capacity (MWp) Solar projects with a total registered 4,500 has 12 Solar projects with a total 800 capacity of 5,341.1 MWp with (1) 28 capacity of 837.5 MWp. In particular, projects were approved by the MOIT 4,000 3,865.9 (1) 3 projects were approved for 700 688 in the additional planning of national 3,500 additional planning with a total 600 and provincial electricity, with a total capacity of 149.5 MWp, and (2) 9 3,000 capacity of 1,475.18 MWp, in which projects are being submitted for 500 23 projects have been granted 2,500 additional planning with a total investment policy decisions by the capacity of 688 MWp. According to 400 Provincial People's Committee with 2,000 the development strategy to 2022, 300 a total capacity of 1,115.2 MWp; (2) 1,500 1,475.2 GEC is also urgently completing 62 projects are being submitted 1,115 procedures for commissioning 200 for Additional Planning with a total 1,000 Tay Son 1 and Tay Son 2 Projects 149.5 capacity of 3,865.9 MWp. GEC is 500 around 2020-2021. These are with 100 79 98 also catching up with the trend - 2 62 a total capacity of 79 MWp and 9 0 28 23 0 3 2 rushing to complete construction investment of VND 1,530 billion on Approved for Granted investment policy GEC - operation Submitted for Approved for Submitted for GEC - submitted for and commissioning of Ham Phu 2 additional planning by the Provincial People's in 2019 additional planning an area of 100 ha. additional planning additional planning additional planning Project before June 2019 - to enjoy the Committee Source: No. 4614/BCT-ĐL Report on the status of Solar power development preferential FIT of 9.35 cents/kWh, and Source: Vietnam Energy Portal is completing procedures for Ham In Hue, 4 Solar projects are being Status of implementing the Solar projects in Thua Thien Hue Province as of June 2018 Phu 1 Project, expected to connect to GEC is also catching up with the trend - rushing implemented with a total capacity the national grid in 2019. Each project Projects Capacity (MWp) to complete construction and commissioning of of 154.3 MWp. In particular, (1) 2 has a capacity of 49 MWp, hence a 100 projects were approved for additional total capacity of 98 MWp and a total Ham Phu 2 Project before June 2019 - to enjoy the planning with a total capacity of 85 85 investment of VND 1,852 billion, on an preferential FiT of 9.35 cents/kWh, and is completing MWp, and (2) 2 projects were being 80 area of approximately 109 ha. procedures for Ham Phu 1 Project, expected to submitted for additional planning 69.3 connect to the national grid in 2019. with a total capacity of 69.3 MWp. In 60 October 2018, GEC officially became a pioneer in Solar power in Hue and 48 According to MOIT's Solar Status of implementing the Solar projects in Long An Province as of June 2018 particularly the North Central Region 40 development report to the Prime Projects Capacity (MWp) in general, when GEC commissioned th 29.5 Minister on June 11 , 2018, in Long Phong Dien plant with a capacity of 500 An Province there are 11 projects 20 444.5 48 MWp. On top of that, GEC was with a total capacity of 584.5 MWp also completing legal procedures for requesting additional planning. In 400 additional planning of Phong Dien 2 2 1 0 2 1 which, there were (1) 3 projects were Project with a capacity of 29.5 MWp, approved for additional planning 300 Approved for GEC - operating Submitted for GEC - submitted for with total capital of VND 575 billion additional planning additional planning additional planning with a total capacity of 140 MWp and 200 on an area of 35 ha. Source: No. 4614/BCT-ĐL Report on the status of Solar power development (2) 8 projects with a total capacity of 140 444.5 MWp was awaiting approval. 100 98 GEC is also fulfilling Duc Hue Project 8 With a goal in mind to become a leading private enterprise in Renewable Energy 1 for commissioning by June 2019, 0 3 2 and is finalizing the procedures for Approved for GEC - operation Submitted for in Vietnam, and to diversify activities nationwide, GEC has been incessantly commissioning Duc Hue 2 no later additional planning in 2019 additional planning implementing projects as planned; simultaneously expanding the portfolio than end of 2019. The total 2 projects Source: No. 4614/BCT-ĐL Report on the status of Solar power development through M&A, seeking opportunities to develop Energy projects, to contribute to have a capacity of 98 MWp and a total investment of VND 1,894 billion, on an the Nation's economic development. area of approximately 116 ha.
144 2018 ANNUAL REPORT www.geccom.vn 145 BUSINESS ACTIVITIES ANALYSIS
BASED ON BUSINESS MODEL GROWTH OF RETAIL SALES THANKS TO CUSTOMER GROWTH
Chu Prong Branch is operating Ia Puch 3, Ia Meur 3, Ia Drang 3, The total output of Hydropower Ia Drang 2 and Ia Drang 1 Hydropower plants, which together plants that distribute electricity make up the only privately owned plant cluster in Vietnam permitted to sell electricity directly to consumer. Electricity directly to EVN was 344 million tariffs for consumers are issued by the MOIT and currently kWh, 4% higher than the planned stay at a relatively high level of VND 1,700/kWh. This plant target. Electricity sales reached cluster sells electricity via 2 channels, i.e. distribution to VND 414 billion, 8% higher than then retail customers, which is prioritized, and distribution to assigned target. EVN at agreed tariffs.
In 2018, GEC acquired an additional 314 retail customers, Chu Prong Branch’s electricity output and 6% of the total bringing the total number of customers of Chu Prong commercial electricity output, a yoy increase of 6%. Retail Branch to 7,318, an increase of 5% compared to 2017. Revenue reached almost VND 33 billion, accounting for The output of retail commercial electricity reached 46% of Chu Prong Branch’s electricity sales and 8% of total approximately 19 million kWh, accounting for 31% of commercial electricity sales, up 10% over the same period.
Revenue and Output of retail electricity in 2015-2018 Electricity output structure Retail electricity output Retail electricity Revenue
Million kWh Billion VND Chu Prong Branch
18.8 33 19% 32.6 18.6 18.6 18.5 18.5 32 18.4
18.2 31.2 81% Other Branches 31 18 30.5 Revenue structure 17.8 GEC partly contributes to stabilization of National Energy Security 30 Chu Prong Branch 17.6 29.6 17.5 17.4 29 DEBUT OF SOLAR ENERGY 17.2 NEW DEVELOPMENTS IN BUSINESS OPERATIONS 17 28 84% 2015 2016 2017 2018 Other Branches GEC currently owns a variety of small and medium Revenue in 2018 mainly came from the core business Source: GEC Source: GEC Hydropower, Solar Energy and Wind power projects which was the generation and supply of electricity by with a total designed capacity of 184.1 MW, 668 MWp 14 power plants in Gia Lai, Lam Dong and Hue with a and 250 MW, respectively, from both operational and total designed capacity of 84.1 MW and an amount of HYDROPOWER PLANTS THAT DISTRIBUTE ELECTRICITY ongoing ones. GEC’s stable business performance was VND 446 billion, accounting for 80% of the total Revenue DIRECTLY TO EVN EXCEEDED THEIR SALES TARGETS evidenced by the Net Revenue of VND 560 billion by structure. Besides, since they were just put into operation the end of 2018, up 4% compared to 2017, from core in October and December, 2018, respectively, the 2 Electricity sales of GEC’s Hydropower plants comes from to EVN was 344 million kWh, 4% higher than the plan. business activities including electricity sale and supply Solar Energy Plants, Phong Dien - Hue and Krong Pa - the direct distribution to EVN. Electricity tariffs are fixed Electricity sales reached VND 414 billion, 8% higher than of services and construction, accounting for 95% of Gia Lai, with a total designed capacity of 117 MWp only as per the avoidable cost tariff. In 2018, the total output then assigned target. the total Revenue. Financial and other Revenue only contributed over VND 37 billion, accounting for 7% of of Hydropower plants that distribute electricity directly contributed at modest level 5% to the total income. the total Revenue.
146 2018 ANNUAL REPORT www.geccom.vn 147 BUSINESS ACTIVITIES ANALYSIS BASED ON BUSINESS MODEL (continued) BUSINESS ACTIVITIES OF SOLAR POWER PLANTS A NEW SOURCE OF REVENUE IN 2018 GEC, with over 30 years of experience in Hydropower, forecasted the situation and set for 2018 Revenue and Output targets that were lower than those in 2017. In the face of increasingly complex Electricity output structure 2018 Net Revenue structure 2018 Besides, since GEC regulated the optimal water supply, ensured continuous climate change, GEC proactively diversifies its Revenue sources operation, and minimized time to handle incidents; the business performance of Solar power Construction services by expanding into new types of 5% 10% 14 power plants in 2018 even exceeded expectations. Energy. The Company conducted Services 3% providers 7% research and prepared itself for the development of Solar Energy Solar power Revenue and Output of electricity sold to EVN in 2015-2018 several years ago. In 2018, GEC In 2018, the favorable weather in the VND Billion Revenue of electricity sold Output of electricicty sold Million kWh reaped the first fruits from Solar 2Q with a large amount of rainfall Energy while commissioning the 95% Hydropower 80% Hydropower 500 450 provided sufficient water for GEC’s 14 first 2 plants in the Country, namely 455 Hydropower plants. The first months 450 430 48 MWp Phong Dien - Hue and 400 and the last 2 months of the year, 414 69 MWp Krong Pa - Gia Lai. The however, were a bit challenging due Electricity Revenue structure 2018 400 average power output of the 2 Net Revenue structure 2017 384 344 350 to the drought-caused decrease in plants is estimated at 163 million 326 330 water flow. GEC, with over 30 years of 350 303 kWh per year. Due to a short period Solar power 300 experience in Hydropower, forecasted Services 309 of operation, the 2 Plants only 8% providers and 10% 300 the situation and set for 2018 Revenue Construction produced approximately 18 million services 259 250 and Output targets that were lower kWh. In 2018, Solar Energy output 250 than those in 2017. Besides, since GEC only accounted for about 5% of the 200 regulated the optimal water supply, 200 total commercial electricity output, ensured continuous operation, and but Revenue therefrom contributed 150 minimized time to handle incidents; 92% Hydropower 90% 150 about VND 38 billion, equivalent to Hydropower the business performance of 8% of the electricity sales and 7% of 100 14 power plants in 2018 even 100 the Net Revenue. exceeded expectations. Source: GEC 50 50 REVENUE FROM SERVICES PROVIDERS 0 0 2015 2016 2017 Target 2018 Actual 2018 OUTPERFORMED FINANCIAL INCOME Source: GEC Other income came from financial activities and supply of service provision. In 2018, the average operating hours of Hydropower plants was 4,310. The total electricity output reached 380 million Revenue from other services In 2018, realized Financial income reached kWh, equaling 103% of the target. Out of this, Hydroelectricity Output contributed 362 million kWh, which was 3% higher Revenue from services Ratio compared to Net Revenue VND 20 billion, 8% higher than 2017. than the assigned target. Hydropower Revenue therefore reached VND 447 billion, equal to 106% of the assigned target of VND Billion 20% Revenue from financial activities mainly VND 421 billion. 80 75 76 came from savings deposits and lending 17% from pending disbursements for new Electricity Output of Hydropower plants 15% 60 projects. Apart from the major income 2016 2017 2018 55 13% Million kWh from electricity distribution, Revenue 40 10% from services increased 38% over the 10 10% same period, reaching VND 76 billion and 8 accounting for 13% of the Net revenue 20 5% 5% 15 in 2018. Service Revenue growth mainly 6 came from the services providers for 4 0 0% external Hydropower projects such as EPC 2015 2016 2017 2018 general contractor, project management 2 consultancy, experiment, supply of Source: GEC 0 electrical panels, etc.
H’Mun H’Chan Ayun Thuong Dak Pi Hao 2 Da Khai Ia Puch 3 Ayun Ha Dak Pi Hao 1 Thuong Lo Ia Drang 3 Ia Meur 3 Ia Drang 2 Kenh Bac Ia Drang 1
Source: GEC
148 2018 ANNUAL REPORT www.geccom.vn 149 BUSINESS ACTIVITIES ANALYSIS BASED ON BUSINESS MODEL (continued)
Net Revenue and Profit in 2015-2018 GEC’s cost structure in 2015-2018 Net Revenue Profit before tax Profit after tax COGS Financial expenses Others THE GROSS PROFIT MARGIN WAS HIGHER THAN THE INDUSTRY AVERAGE Selling expenses General and Administration expenses AND HAS STABILIZED OVER YEARS VND Billion CAGR: Net Revenue 16%, PBT 12%, PAT 12% VND Billion 559 600 % 2018 Actual % 2018/2017 400 Indicators (VND Billion) 2017 2018 Target 2018 Actual 539 /2018 Target Actual
Revenue from electricity 485 462 483 105% 100% 354 431 300 400 Revenue from Revenue 55 75 76 101% 138% service supply 200
230 187 Total Revenue 540 537 559 104% 104% 209 207 254 200 134 227 149 132 149 213 Electricity distribution 184 195 195 100% 106% 100
Cost of Services providers 44 61 59 97% 134% 157 goods sold Total cost of 0 0 227 256 254 99% 112% 2015 2016 2017 2018 2015 2016 2017 2018 goods sold Source: GEC Electricity distribution 301 267 288 108% 96% Gross profit Service supply 11 14 17 122% 155% Total gross profit 312 281 305 109% 98% FUND RAISING AND CAPITAL Electricity distribution 62% 58% 60% 103% 97% Gross profit STRUCTURE INDICATORS Service supply 20% 19% 22% 116% 110% margin Total 58% 52% 55% 106% 95% In 2018, with the completion and operation of 2 Solar Energy billion, an increase of 174% compared to the beginning of the projects and the implementation of 2 more in Binh Thuan and year; due to additional funding from capital increase and a rise Source: GEC Long An, GEC’s Total assets increased significantly to VND 4,361 in assets form Solar Energy projects, Long-term assets increased billion, 2.6 times the number in 2017. Fixed assets were VND 2.7 times to VND 3,131 billion. With cash and cash equivalents 2,878 billion, also a 2.6-time increase. The compound growth being 6 times higher than short-term loans and finance lease GROSS PROFIT MARGIN COGS was controlled better compared to the same period of 2017. In particular, rate of Total assets and Fixed assets between 2015 and 2018 was liabilities, which are about VND 106 billion, GEC is totally capable ELECTRICITY DISTRIBUTION in services providers, COGS was 3% lower than target, which enabled the total high at about 33%. Cash and cash equivalents were VND 610 of meeting payment obligations. COGS to be 1% lower than plan. The Gross Profit Margin in 2018 was 55%, which exceeded the plan of 106%. For electricity distribution activities, COGS that met the target while Revenue exceeding 5%, enabling the Gross Profit Margin to reach 60%, Total assets and Equity in 2015-2018 Fixed assets versus Total assets in 2015-2018 60% Total assets Equity higher than the target of 58%. For services providers, with 30 years of experience Fixed assets Total assets VND Billion GROSS PROFIT in Hydroelectricity, GEC managed to keep COGS at 3% lower than plan while VND Billion achieving a 1% increase in Revenue compared to the set target. This helped the 4,600 4,361 5,000 Gross Profit Margin reach 22%, higher than the target of 19%. 4,100 4,500 4,361 3,600 4,000 109% Thanks to the guaranteed availability of buyers, it did not cost GEC much for selling 3,100 CAGR: Total assets 33%, Equity 28% CAGR: Fixed assets 33% COMPARED TO TARGET 3,500 2,878 expenses. In 2018, the Company's selling expenses even fell by 40% and stayed at 2,600 3,000 1,885 VND 588 million. Reasonable and stable cost management over a long period is 2,100 1,659 2,500 PROFIT BEFORE TAX 1,885 1,552 1,318 2,408 2,000 1,552 1,659 also an advantage of GEC. Although the Company implemented the first 2 Solar 1,600 1,151 1,162 1,500 1,224 1,169 1,114 Energy projects in Vietnam, the ratio of corporate management expenses to Net 1,100 revenue only slight increased from 12% to 14%. Pre-tax and after-tax Profit in 2018 1,000 600 500 122% recorded VND 207 billion and VND 187 billion respectively. PBT even exceeded the 100 0 COMPARED TO TARGET target by 22%. 2015 2016 2017 2018 2015 2016 2017 2018 Source: GEC
150 2018 ANNUAL REPORT www.geccom.vn 151 BUSINESS ACTIVITIES ANALYSIS BASED ON BUSINESS MODEL (continued)
PROPER CONTROL OF LIQUIDTY
GEC’s Debt structure in 2015-2018 AS INDICATED BY SOLVENCY RATIOS
Solvency ratios In 2017, in order to prepare financial resources for new Solar DEBT/TOTAL ASSETS VND Billion Current ratio Quick ratio Cash ratio projects, GEC restructured all Hydropower projects. This 1,600 resulted in a significant decrease in short-term and long-term 1,424 1,420 Times loans. Therefore, the Company's Liquidity ratios improved 0.35 1,400 sharply compared to the 2015-2016 period. In 2018, in order Times 5 1,200 4.7 to develop new Solar Energy projects, in addition to loans DEBT/EQUITY 4 from credit institutions that were secured by new projects, 1,000 4.4 GEC also issued VND 300 billion bonds to secure additional 3 funding. Liquidity ratios in 2018, though lower than the 800 2.4 2.5 2.3 same period, remained at a very high level. Current and 2 2.4 2.3 0.63 600 2.3 2.2 Times 528 Quick ratios were both greater than 2 times, staying at 2.3 518 518 1.6 1 times much higher than the Industry average of 1.7 and 400 0.4 0.5 1.6 times, respectively. The Cash ratio was even maintained Short-term debt 265 266 232 237 0 205 106 Short-term liabilities 200 103 135 103 2015 2016 2017 2018 at 1.6 times, higher than the Industry average of 0.5 times. Long-term debt 45 6 This helps make sure there is no liquidity risk. Thanks to Long-term liabilities 0 Source: GEC the characteristics of business operations, Inventory only 2015 2016 2017 2018 plays a small part in the Total assets. Therefore, there was Source: GEC no significant difference between the Current ratio and the Quick one. In order to implement Solar Energy projects, GEC has approached credit institutions to Capital structure ratios in 2015-2018 negotiate and select preferential funding for Debt/ Total assets (times) Debt/ Equity (times) investment in clean Energy projects. Thanks to our reputation, GEC has won high trust from 0.63 OPERATING RATIOS - LOW DEBTS, Current and Quick ratios were financial institutions such as Vietcombank 0.53 INSIGNIFICANT INVENTORIES both greater than 2 times, staying and Agribank, both of which have approved at 2.3 times much higher than funding for GEC’s Solar Energy projects. A bank the Industry average of 1.7 and loan and together with a bond package of over Operating ratios VND 1,200 billion is responsible for an increase 0.27 1.6 times, respectively. 0.33 Receivables turnover Payables turnover of liabilities in the capital structure. This ratio, 0.18 0.35 Inventory turnover however, remains well within the Industry For electricity retailing, despite the large number of customers, standard as well as under GEC’s control. The 0.20 Times an electricity sale policy that was applied according to EVN’s 0.14 Debt to Asset ratio and the Debt to Equity ratio 25 regulations making sure customer make payments properly. are 0.35 and 0.63 times, respectively. Although Regarding the sale of electricity to EVN, the only corporate 2015 2016 2017 2018 this represented a sharp yoy increase, these 20 17.7 19.1 customer of GEC, well-defined terms on payment under Source: GEC Ratios remained below the respective Industry 15 sale contracts ensure no payments were delayed and no 13.2 16.5 averages of 0.38 and 0.88 times. 10,7 10.0 provisions must be made for them. For services providers, 10 in order to ensure the sustainable development, GEC does not over GEC’s major customers were all financially sound and are 10.6 5.5 6.1 In addition, in the fourth quarter, GEG completed use this tool. We have instead chosen to strike a balance between 5 3.8 capable of making payments timely. the issue of over 97 million shares to increase Debt and Equity by maintaining an appropriate ratio throughout the 1.3 0 4.9 its Charter Capital to nearly VND 1,942 billion. development process. In addition, the increase in Debt ratio within As a characteristic of the Power Industry, Inventories were 2015 2016 2017 2018 This move is intended to raise funds for other the control of liquidity has helped the Company to optimally utilize limited and mostly comprised of contingency tools and Renewable Energy projects according to the financial leverage to create the impetus for future growth. At GEG, Source: GEC equipments. The Inventory turnover, as a result, was always Company's strategy until 2022. Equity also with the participation of 2 strategic Shareholders, IFC and Armstrong, high and stable between 2015 and 2018, namely 10 times. increased 1.8 times compared to 2017, reaching GEC’s Management considers sustainable development the top priority. The Payables turnover ratio decreased significantly by 93% in VND 2,408 billion. The 2015-2018 CAGR was We do not prefer over-heated and inefficient development. Over the In 2018, Receivables turnover increased by 11% compared 2018. Most of payables were debts to be paid to contractors of thus 28%. Although the use of financial leverage past several years, debts have shown a downtrend and an increase in to 2017, recording 6.1 times, which means the number Solar Energy projects. These were payables under previously in business expansion is a generally applied liabilities is only seen when projects are implemented. On the contrary, of receivable days was only 60 days compared to 66 days signed contracts and GEC always honors promised by paying practice, it will cause pressure of repayment and a stronger rise in Equity has been recorded. Until now, the first and only in 2017. This is typical of the electricity trading business. debts on time. liquidity, especially when a project or investment 2 Solar Energy projects in Vietnam that could generate power in 2018 has not entered a stabilization period. Therefore, both belong to GEC.
152 2018 ANNUAL REPORT www.geccom.vn 153 BUSINESS ACTIVITIES ANALYSIS BASED ON BUSINESS MODEL (continued)
STABLE BUSINESS PERFORMANCE IN MANY YEARS THROUGH PROFITABLITY RATIOS BUSINESS ORIENTATIONS FOR 2019
Apart from the trend of green, clean and sustainable development, It is worth noting that all 14 GEG’s power plants have entered A system of 14 small and medium sized Hydropower plants one of the factors that makes the Renewable Energy business stable operation. Several of them have been almost fully with a total capacity of 84.1 MW and 2 Solar power Plants with appealing to local and international Investors is, a decent level depreciated and will contribute further to the improvement a capacity of 117 MWp are enabling GEC to generate stable of profitability. In the past 4 years, GEC’s Gross and Net Profit of these Ratios in the future. For ROAA and ROAE Ratios, annual cash flows. With the aim of fulfilling the strategic Margin have always been maintained at above 50% and 30%, despite a slight adjustment in 2018 due to the delay from the objectives of 2022, the Company’ management has set a respectively. The Gross and Net Profit Margin of 2017 were 55% profitability of new loans and capital contributions, remained development orientation of focusing on Renewable Energy and 33%, both higher than the Industry average of 48% and 29%. at a positive ratio of 6% and 10%, respectively. In addition, a sources in order to increase the scale of power generation, Electricity Revenue make up the bulk of the total Income with a capital increase and the commissioning of new Solar Energy Besides, the Company is to focus optimizing the operations of Gross Profit Margin of 60%. Together with service providers and projects that have yet to contribute significantly to Revenue existing plants by streamlining the structure and controlling construction, this was the supporter of GEC’ Gross Profit Margin. and Profit in 2018 was partly responsible. It is expected that costs so as to enhance operating efficiency and fulfill the profit Effective cost control helped the Company maintain the EBITDA after more plants have been put into operation, these ratios plan. In 2019, GEC plans to start operating 2 more Solar Energy Margin at a high and stable levels over the years at 62%, higher will see significant improvement in 2019. plants in Long An and Binh Thuan before June 30th, 2019 to than the Industry average of 61%. The EBIT Margin in 2018 saw take advantage of the preferential electricity selling price for a slight yoy decline but still achieved an impressive 44%, higher 20 years of 9.35 cents/kWh, thus ensuring stable cash flows than the Industry average of 42%. and high profitability. The total capacity of these 2 projects will be 98 MWp. In addition, in 2019, GEC will continue to commission 4 more Solar Energy projects with a total capacity Profitability ratios of 177 MWp. In total, GEG currently owns a portfolio of 22 75% projects with 14 operating Hydropower plants, 2 operating 62% 62% 62% 56% 58% Solar power Plants, and 6 Solar power Plants which under 54% 51% 55% implementation and will enter operation in 2019. The total capacity of the entire GEC portfolio will include 84.1 MW of 44% 47% 44% 33% 38% 39% Hydropower and up to 392 MW of Solar power. Renewable Energy is gradually replacing Fossil sources 31%
2015 2016 2017 2018 2015 2016 2017 2018 Given the limited performance of the Hydropower business in the first months of the year, the profit from this business line GEC’s portfolio of projects in 2019 EBITDA Margin EBIT Margin Net Profit Margin Gross profit Margin is forecast to decrease in 2019. Newly developed Solar Energy Source: GEC plants, however, are expected to make up for the decline in Revenue from Hydropower. Although the Revenue target CONTRIBUTION TO NATIONAL ECONOMIC DEVELOPMENT THROUGH PAYMENTS TO is set at 86% higher than the 2018 target, the pre-tax profit 14 operating Hydropower 148 MW 84 MW THE STATE BUDGET target for 2019 is lower since in the first year of operation, the 2 operating Solar power Plants new projects are not likely to contribute significantly to overall 2 Solar power Plants will enter Every year, GEC and its Member Companies fulfill our obligations to the State budget through various taxes including but not profit. From the second year onwards, the profit from Solar operation before June 2019 limited to CIT, Value added tax, Natural resource tax and Personal income tax. In 2018, along with a strong development in electricity Energy projects will contribute significantly due to decreasing 4 Solar power Plants distribution and new project investment, the magnitude of contribution to the State budget recorded a significant rise. The total financial costs and because the control of costs will be carried will enter operation in 2019 value of contribution to the budget in 2018 reached VND 228 billion, which is 209% of the number in the same period of 2017. out according to plan. 84 MW Value-added tax saw a sudden 3-fold increase compared to 2017 mainly due to the development of multiple Energy projects. 82 MW Tax payment structure in 2015-2018 Tax payment structure in 2018 Resource tax CIT Value added tax Source: GEC Personal income tax Others VND billion 3% Revenue and Profit estimates for 2019 3% 11% 250 Value added tax 14% % Increase % Increase 200 CIT Indicator (VND Billion) 2018 Target 2018 Actual 2019 Target 2019 Target 2019 Target 150 Others /2018 Actual /2018 Target 157 100 Personal income tax Total Revenue 546 581 1,014 75% 86% 50 PBT 170 207 240 16% 42% 50 38 Resource tax 20 69% 0 Source: GEC 2015 2016 2017 2018 Source: GEC
154 2018 ANNUAL REPORT www.geccom.vn 155 BUSINESS ACTIVITIES ANALYSIS BASED ON BUSINESS MODEL (continued)
Detailed solutions
No. Major activities 2018 Execution 2019 Plan • Implementing the regular maintenance and repairing of Hydropower plants based on the optimization of cost while ensuring the schedule and plan • Reviewing the operating efficiency of Hydropower • Output: 590 million kWh, up 55% Electricity plants, developing plans to increase their efficiency against 2018 1 distribution via improvement and upgrading plans: Dak Pi Hao • Revenue: VND 937 billion, up 94% 2, Ayun Ha, Ia Meur 3, H’Mun against 2018 • Acquiring technology to operate Solar Energy projects through EPC contractors and international experts to optimize the Renewable Energy resources • Renewable Energy market research THE MOTTO FOR OPERATIONS • Customer demand assessment through various stages: IN 2019 WILL BE »» Investment research: Supply of consultancy service »» Implementation of construction: Supply of project STREAMLINED STRUCTURE management and EPC contractor services COST CONTROL »» Operation management: Supply of operation Services 2 management consultancy service • Revenue: VND 62 billion PROACTIVE OPERATION providers • Optimally exploiting existing resources based on GEC WILL OPTIMIZE OUR EXISTING experience acquired from operating Renewable RESOURCES IN ORDER TO INCREASE Energy projects and acquiring technology from THE COMPANY'S VALUE AND international contractors CONTINUE TO FULFILL THE MISSION OF • Income is to come from the services providers for SUSTAINABLE DEVELOPMENT BASED ON Renewable Energy projects, especially Solar Energy THE HARMONY OF 3 FACTORS projects SUSTAINABLE ECONOMIC GROWTH, • Securing and efficiently coordinating sufficient PROTECTION OF THE ECOSYSTEM, AND funding for Energy projects SOCIAL ENGAGEMENT. • Investor relations: Promote GEC’s brand image to • Revenue: VND 15 billion seek opportunities for efficient investment and 3 Finance cooperation • Issue of international Bonds worth USD 50-100 million • Identifying construction investment, operation management and supplying of services for Renewable Energy as the core business
Source: GEC
THE MOTTO FOR OPERATIONS IN 2019 WILL BE “STREAMLINED STRUCTURE - COST CONTROL - PROACTIVE OPERATION”. GEC WILL OPTIMIZE OUR EXISTING RESOURCES IN ORDER TO INCREASE THE COMPANY'S VALUE AND CONTINUE TO FULFILL THE MISSION OF SUSTAINABLE DEVELOPMENT BASED ON THE HARMONY OF 3 FACTORS SUSTAINABLE ECONOMIC GROWTH, PROTECTION OF THE ECOSYSTEM, AND SOCIAL ENGAGEMENT.
156 2018 ANNUAL REPORT www.geccom.vn 157 INVESTMENT, OPERATION AND PRODUCTION ACTIVITIES OF EACH MAJOR ENERGY SEGMENT
HYDROPOWER PLANT SYSTEM generating stations in the national From 2008, MOIT issued Decision there will be additional rates for excess electricity system and this cost is 18/2008/QD-BCT regulating the electricity. At the same time, different avoidable if the buyer purchases 1 kWh Avoidable cost tariff and model PPAs regions will also be subject to different With years of experience in investment, management and operation, GEC is from an alternative small Hydropower for small power plants that run on tariffs. Besides, during peak hours in the effectively operating power plants with stable Revenue and an average annual plant. Avoidable cost tariff is applied Renewable Energy sources. This decision dry season, there will be an added tariff, while meeting one of following helped businesses reduce time and cost which will be applied for all 3 regions. Revenue of approximately VND 400 billion in the last 5 years. conditions (1) Installed capacity of in case of PPA negotiation. However, Avoidable cost tariff will be calculated plants is smaller or equal to 30 MW and there were some issues during the for the whole system; when electricity all electrical Energy is produced from implementation process that required tariff does not increase and avoidable Renewable Energy or (2) The Seller has more specific guidance; Therefore, cost increases, Investors still enjoy multiple terraced Hydropower plants MOIT issued Circular No. 32/2014/TT- high selling price because it does not on the same river shall be eligible for BCT for replacement. Specifically, the depend on retail electricity tariff; on the TOTAL CAPACITY OF applying avoidable cost tariff schedule tariff of small Hydropower plants will other hand, small Hydroelectricity plant HYDROPOWER 84.1 for the terraced Hydropower group be distinguished for 3 rates: peak hours, output is not high so EVN will commit to MW when total installed capacity of these normal hours, and off-peak hours in the buy maximum output and pay off all of plants are smaller or equal to 60 MW. dry and rainy seasons. In rainy seasons, its purchases.
Avoidable cost tariff in 2018 REVENUE OF HYDROPOWER VND 446 Dry season (November-June) Rainy season (July-October) Billion Electricity tariff Normal Off-peak Normal Off-peak Excess Peak hours Peak hours (VND/kWh) hours hours hours hours electricity The North 617 618 624 617 625 632 316 GROSS PROFIT OF Central 615 617 622 615 622 630 315 HYDROPOWER VND 265 Billion The South 641 643 648 640 648 656 328 A panaromic view of Ayun Ha Plant reservoir - Gia Lai Capacity tariff (VND/kWh) 2,306 ------
fter nearly 30 years of procedures related to production and incidents at main converter station Source: Decision No. 341/QD-BCT on the Avoidable cost tariff in 2018 investment in construction activities and more than 36 and grid exit points. All plant operations Commercial electricity output and average tariffs of the plants during 2017-2018 A and operation of procedures related to electrical must strictly follow the applicable Hydroelectricity projects, GEC experiment activities. In operation, procedures to ensure continuity in the 2018 Commercial electricity 2017 Commercial electricity 2017 Average tariffs 2018 Average tariff currently directly and indirectly GEC promulgates its own operation electricity production process. Electricity output: Selling tariff: owns 14 potential small and and troubleshoot procedures based Million kWh VND/kWh medium sized power plants with on specific plant characteristics. Most small and medium sized 90 2,000 a total 84.1 MW in the Central The detailed operation procedures Hydroelectricity plants signed PPAs 80 1,800 Highlands and Northern Central. namely operation methods, how to with avoidable cost tariff - Preferential 70 1,600 With years of experience in start and stop a machine clusters, tariff for Renewable Energy sector 1,400 investment, management and operate the speed control system, According to Circular No. 32/2014/TT- 60 1,200 operation, GEC is effectivelythe excitation system, the water BCT. Avoidable cost tariff is calculated 50 1,000 operating power plants with stable inlet valve system, the converter based on costs that can be avoided by 40 800 Revenue and an average annual station, etc. In addition, each plant the national electricity system when 1 30 600 Revenue of approximately VND 400 will have its detailed methods of kWh of generation capacity from small 20 billion in the last 5 years. how to handle incidents, namely Hydropower plants is transmitted to 400 10 electrical emergency incidents, distribution grids, in which avoidable 200 In order to ensure safe and efficient electrical signals incidents, hydraulic cost refers to the cost for producing 0 0 operation, GEC has issued 27 engineering emergency incidents, 1 kWh of generation capacity by H’Mun H’Chan Ayun Dak Pi Da khai Ia Puch Ayun Dak Pi Thuong Ia Drang Ia Kenh Ia Drang Ia Drang Thuong Hao 2 3 Ha Hao 1 Lo 3 Meur 3 Bac 2 1 Source: GEC
158 2018 ANNUAL REPORT www.geccom.vn 159 INVESTMENT, OPERATION AND PRODUCTION ACTIVITIES OF EACH MAJOR ENERGY SEGMENT (continued)
Over the past years, GEC constantly checked, controlled mostly sold to EVN CPC - Central Power Corporation - at GROSS PROFIT MARGIN and repaired key equipment of the plants to increase and the purchasing and selling site at voltage level of 35 kV. OF HYDROPOWER maximize capacity as well as improve management and REVENUE OF HYDRO POWER VND Electricity retail tariff for customers, which is determined 446 by the MOIT, is relatively high at about VND 1,700/kWh operational efficiency. In 2018, GEC spent a total VND 23 Billion for average. The wholesale tariff is fixed at VND 792/kWh billion on repairment, in which VND 21 billion was used for with a 3-year cycle, then tariff for the next cycle will be 60% 14 Hydropower plants. Particularly, the power plants in TTC Chu Prong Branch, Chu negotiated. With a long history of development along Prong District, Gia Lai Province namely Ia Puch 3, Ia Meur with the power grid projects which used to be invested by Repair costs in 2018 3, Ia Drang 3, Ia Drang 2, Ia Drang 1 have 2 main electricity the state and then handed over to GEC for management, Value businesses: Retailing and selling the excess electricity to the power plant cluster in Chu Prong Province is now the Capacity Plant Key repair items (VND EVN at an agreed tariff. In rainy season, when the power only private enterprise’s cluster in Vietnam that is allowed (MW) Million) plants generate enough output, the retail electricity to sell electricity directly to consumers. accounts for a small proportion, the remaining output is MANG YANG BRANCH 40.2 6,834 The total commercial electricity output in 2018 reached Repairing the connection between H'Chan - H'Mun, repairing and 355.87 million kWh, equivalent to 85% of 2017 output. H'Chan 12 replacing cooling water tanks, cost of inspecting machinery and 2,955 The power plant cluster in Chu Prong Although commercial electricity decreased but thanks equipment, cost of stand-by fuel storage Province is now the only private to the avoidable cost tariff increased in 2018, the average Repairing the connection between H'Chan - H'Mun, installation of Enterprise’s cluster in Vietnam that selling tariff in 2018 increased by 9% yoy, which resulted H'Mun 16.2 new remote trash traps and pressure tanks, inspecting machinery and 2,862 is allowed to sell electricity directly in Hydroelectricity Revenue reaching VND 446 billion, equipment, hiring operation management and SCADA equivalent to 97% of 2017 Revenue and gross profit Purchasing mechanical electrical equipment, tools, fuel, building plant to consumers. reaching VND 265 billion, 93% yoy. Ayun Thuong 12 1,017 wall and gates LAM DONG BRANCH 8.1 5,569 Business results of the plants during 2017-2018 Construction of a water infrastructure monitoring station for the hub area, Da Khai 8.1 5,569 clearing corridors along the lines, procurement of electricity and fuel Revenue Gross profit Gross profit CHU PRONG BRANCH 11.8 5,149 Capacity (VND Billion) (VND Billion) margin No. Plant Branch (MW) Ia Puch 3 6.6 Securing piles, repairing facade , electricity and fuel purchase 2,297 2017 2018 2018/2017 2017 2018 2018/2017 2017 2018 Ia Drang 2 1.2 Buying converters, rebuilding plant gates and walls 957 1 H'Mun 16.2 92 87 94% 62 56 91% 67% 65% Digging wells, treating downstream springs, purchasing electro- Ia Drang 3 1.6 791 2 Ayun Thuong 12 Mang Yang 70 65 93% 44 41 93% 63% 63% mechanical equipment, fire protection Procurement of electromechanical equipment, fire protection, waste 3 H'Chan 12 74 69 93% 55 49 89% 74% 71% Ia Meur 3 1.8 765 storage construction, road repairs, dredging 4 Da Khai 8.1 Lam Dong 55 43 78% 35 24 69% 64% 56% Painting and repairing the plant, upgrading the foundation, pouring Ia Drang 1 0.6 339 5 Ia Puch 3 6.6 Chu Prong 25 33 132% 13 18 138% 52% 55% concrete, purchasing electrical equipment and materials 6 Dak Pi Hao 2 9 Ayun Ha 31 43 139% 19 29 153% 61% 68% AYUN HA BRANCH 18 3,513 7 Thuong Lo 6 Hue 27 16 59% 18 6 34% 67% 38% Making safety warning signs, buying and selling electro-mechanical Dak Pi Hao 2 9 1,354 8 Dak Pi Hao 1 5 28 25 89% 16 15 94% 57% 60% products Ayun Ha 9 Ayun Ha 3 22 21 96% 12 12 98% 55% 57% Kenh Bac 1 Purchasing electro-mechanical equipment 873 10 Ia Meur 3 1.8 6 8 135% 2 3 146% 34% 38% Dak Pi Hao 1 5 Procurement of electro-mechanical equipment, making warning piles 707 11 Ia Drang 3 1.6 Chu Prong 10 15 150% 3 5 167% 30% 34% Ayun Ha 3 Procurement of equipment, tools and cleaning the plant 579 12 Ia Drang 2 1.2 10 10 103% 3 4 117% 30% 40% HUE BRANCH 6 249 13 Kenh Bac 1 Ayun Ha 6 6 101% 3 3 97% 50% 50% Thuong Lo 6 Construction of concrete roads and plants, dredging canals 249 14 Ia Drang 1 0.6 Chu Prong 4 5 130% 0,831 0,897 108% 21% 18% TOTAL 84.1 21,314
Total 84.1 460 446 97% 286 265 93% 62% 60% Source: GEC Source: GEC In addition, GEC also examined and renovated the electricity grid at Chu Prong Plants with totally VND 1.2 billion in order to improve and upgrade the existing power grid, which contributed to improving power supply reliability, reducing power loss and improving power supply quality.
160 2018 ANNUAL REPORT www.geccom.vn 161 INVESTMENT, OPERATION & PRODUCTION ACTIVITIES OF EACH MAJOR ENERGY SEGMENT (continued)
SOLAR POWER PLANT SYSTEM Ltd., Sharp Group and NSN Construction and Design JSC” challenges from uneven construction ground, harsh contributed to making GEC a pioneer in Vietnam Solar weather and tight schedules. However, with experience lectricity demand tends to increase along with commercial bank exchange rate increased by 2.8% and the Power Industry by putting Phong Dien plant into operation. and professionalism, JGC Vietnam Co., Ltd, a Member of economic development in the last 10 years. free market rate increased by 3.5% compared to that of the In addition, with the experience from being an EPC general JGC Group, Japan and 3 other Contractors namely Sharp, EUnderstanding that Energy is a need, GEC is gradually beginning of the year. The cause of domestic exchange contractor of more than 700 MW capacity of Solar power SSSA and NSN managed to complete 2 projects and met becoming one leading private Company in green, clean rate increase is: projects in Japan, Japan’s JGC Group and JGC Vietnam are both quality standards as well as schedules. In addition, this responsible for implementing Krong Pa project. During the is also thanks to constant efforts of all project management, and environmentally-friendly Renewable Energy sector • In terms of international factors, the USD index rose implementation process, EPC contractors faced numerous supervisors, consultants and GEC staff. in Vietnam. By end of 2018, GEC put into commercial about 5% from the beginning of the year, up 9% from operation 48 MWp Phong Dien Solar power Plant in Thua the bottom rate of February 2018; Thien Hue and 69 MWp Krong Pa Solar power Plant in • In terms of domestic fundamental factors, the exchange Gia Lai. The preferential tariff of electricity at the time of TTC PHONG DIEN - HUE TTC KRONG PA - GIA LAI rate is still under pressure of inflation but it is positively connection was 9.35 cents/kWh, applied in 20 years of supported by the balance of foreign currency supply INVESTMENT INVESTMENT commercial operation. and demand. Installed capacity 48 MWp ~ 35 MW Installed capacity 69 MWp ~ 49 MW According to the Briefing of 2018 Financial Market As the Revenue from selling electricity is calculated by Area 45 ha Area 76 ha Overview Report by the National Financial Supervisory multiplying the set tariff in US dollars with the rate, so when Number of Solar cells 145,560 panels Number of Solar cells 209,100 panels Commission, in 2018, USD/VND rate increased slightly by the rate increases, it positively impacts GEC’s Revenue. Total investment VND 853 billion Total investment VND 1,284 billion 1.5% compared to that of the beginning of the year; the BUSINESS EFFICIENCY BUSINESS EFFICIENCY Movement of Central rate of USD/VND in 2018 22,825 Number of sunny hours per year 1,700 - 2,000 Number of sunny hours per year 1,900 - 2,200
22,800 Radiation rate 4.6 kWh/sqm/day Radiation rate 4.8-5.2 kWh/sqm/day 22,726 22,714 Estimated average yield 59.7 million kWh/year Estimated average yield 103 million kWh/year 22,650 22,750 FIT for 20 years 9.5 cents/kWh FIT for 20 years 9.35 cents/kWh
22,595 Estimated Revenue VND 128 billion/year Estimated Revenue VND 220 billion/year 22,669 22,678 22,600 ENVIRONMENTAL EFFICIENCY ENVIRONMENTAL EFFICIENCY
Reduction of CO2 emissions 20,503 tons / year Reduction of CO2 emissions 29,000 tons/year 22,463 22,539 22,441 2018 ACTIVITIES 2018 ACTIVITIES
22,458 Commercial operation October Commercial operation December 22,400 Electricity output 11.9 million kWh Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Electricity output 5.8 million kWh Revenue VND 25.4 billion Revenue VND 11.9 billion Source: State Bank of Vietnam Gross Profit VND 15.2 billion Gross Profit VND 7.4 billion As a pioneer in Solar power Plant construction and Identifying the difficult steps in implementation process, Gross Margin 60% Gross Margin 62% operation, GEC faced various challenges and difficulties GEC coordinated with functional contractors and local from design evaluation, design agreement, testing to authorities to organize meetings in order to clarify and Source: GEC acceptance, namely: solve problems to complete the work in time: In order to professionalize production and operation of Solar power projects, GEC established the O&M Department in November • Difficulties in implementing and coordinating in execution • Communicating and clarifying with the National Load 2018 with these following main functions and duties: as the current detailed regulations on acceptance and Dispatch Center A0 on the pilots after grid connection. • Monitoring the activities of GEC’s plants; testing have not been issued; On October 1st, 2018, A0 officially issued guidelines for • In Vietnam, there is no capable testing company to carry implementing pilot items at the plants; • Developing and implementing maintenance and repairing plans; out experiments of panel performance; • Working in details with the electricity trading companies, • Directing the handling and troubleshooting of incidents based on 2 options of self-implementation and outsourcing; • There are no specific regulations on tests after the plants experimenting with multiple control methods to • Developing a manual for plant operation management. are connected to the grid (after energizing of inverters); make panel performance measurement method more accurate on field level. • There are no specific instructions on how to measure panel Coordinating with Indian experts and skilled operation engineers to ensure efficiency in the operation of GEC’s Solar power performance under implementation at the plants; The EPC general contractor, who gave significant support to Plants, which are gradually being professionalized. This contributes to the operation of Solar power projects under GEC system successfully put the plants into operation, was responsible and TTC Energy sector; also aims at becoming a value-added service for external Solar power Plants operating in the future. In • There are no regulated procedures for conducting tests for the design, technology supply and construction. The addition, O&M is also coming to solutions to support the diversification of GEC’s Revenue sources in the long term, starting from and running 72-hour pilot tests, which lead to a passive EPC contractor joint venture “Sharp Solar Solution Asia Co., 2019 and especially building GEC into a strong brand in Vietnam’s Renewable Energy market. position in determining the date of commercial operation.
162 2018 ANNUAL REPORT www.geccom.vn 163 R&D ACTIVITIES OPTIMAL ENERGY SOLUTION R&D IMPLEMENTATION - SUPPORTING OPTIMAL ENERGY SOLUTIONS THROUGH YEARS
Since its establishment, GEC has invested VND 10 billion system; 35 kV grid monitoring equipment were applied. to upgrade its plants on specific purposes as replacing Owning these key technologies helps minimize production, working wheels to increase power generation efficiency, reduce business interruptions and cut down the time renovating SCADA/HMI automation system to supervise required to overcome such problems. Research and the plants’ operation at the Company's dispatch center, etc. production streamline activities were taken seriously with Researches to improve production streamline such as the many projects being applied, operating stably and meeting excitation and speed regulation systems; self-powered DC technical requirements during 2011-2018, namely:
Year Project Investment Project’s performance • Remoting collection, monitoring and control of data Developing SCADA/HMI remote • Recording and generating data reports 2011 monitoring and data collection • Forecasting and analyzing risks of possible incidents system for power plants • Multitasking, process control at the Control Center Fabricating and putting into use 2012 the 220V DC power supply system for Ayun Ha Hydropower Plant • Owning the technology • Replacing the China-origin equipment, which was outdated with Manufacturing automatic frequent breakdowns 2013 magnetic control cabinet for Ayun • Shortening required time to go over problems and incidents Ha Hydropower Plant • Ensuring continuous power generation of the plants Fabricating and applying automatic • Saving the cost of new investment R&D projects at GEC are at high feasibility 2014 speed regulators for Ayun Ha Hydroelectric Plants R&D - FROM PLANNING TO PRACTICE Manufacturing temperature and oil VND 5 level measurement equipment, flow billion For every business in any field, application of scientific and technological solutions to optimize production and business 2015 meter, 1-way pressure and 3-phase • Replacing pieces of equivalent equipment that were out of production activities plays a decisive role in productivity, performance and competitiveness. Recognizing this importance, GEC established power measurement equipment for • Proactively replacing spare supplies, meeting the monitoring of a dedicated R&D Department in 2011, which carried out regularly many different tasks: the plants continuous signals at the plants Successfully fabricating 3-phase 2016 power measurement equipment set • Running automation in operation Researching • Developing data to manage and control the entire process by computer technological solutions Researching and Recruiting and Researching • Multitasking, process control by sensors, control software, limiting the to optimize and applying new Energy Upgrading the distributed training a team of and owning high streamline production sources: Solar power, risk of incidents that may shutdown the units R&D specialists technology 2017 control system (DCS) of H'Chan R&D in order to improve LNG, Wind power and products • Digitizing data into charts, files, etc. to help query and analyze history power production and Biomass, etc. Hydropower Plant business efficiency data for the fastest data storage and troubleshooting • Streamlining operation process, optimizing production with advanced technologies USING ROBOTS • Cleaning time: 3 seconds/panel Launching the • Required amount of water for cleaning: 0.12 liters/panel movement of technical Gradually approaching innovations, taking and integrating with scientific research MANUAL CLEANING the 4.0 Industrial projects as criteria for • Cleaning time: 21 seconds/panel Revolution competition and • Required amount of water for cleaning: 1.2 liters/panel reward evaluation VND 70 million/Robot EFFICIENCY It is estimated that during the same operation duration, the use of a Fabricating and applying Solar Planning to Robot to clean 1 panel block (20,790 battery panels) helps save 104 Following the orientation of Vision - Innovation - Implementation, GEC’s R&D Department is a pioneer in applied technology 2018 panel-cleaner robots for Solar hours, 24 workers and 22.4 liters of water in one session, in comparison research, its Mechanical - Electrical - Automation Engineers are experienced in: farms, Rooftops produce 4 Robots per to the traditional cleaning method Optimizing production, lines, technological processes 1 Solar power 2019 4 Robotics plant 1 and products • The product will be registered for trade rights, TUV quality assessment to ensure legality and competitiveness for external partners 5 Energy and Energy efficiency solutions • Mass production and official operation at Krong Pa Solar power Plant 2 Information exchange, data collection (SCADA/HMI) • Completing more features to diversify the product’s functions in Application of Artificial Technology (AI), Internet of working on various types of terrain 3 Sensors and automation controls 6 Things (IoT) • Continuing to apply to Phong Dien Solar power Plant • Aiming at commercializing the product.
164 2018 ANNUAL REPORT www.geccom.vn 165 INVESTMENT IN TECHNOLOGY DEVELOPMENT TO INCREASE THE OPERATION EFFICIENCY
REPLACING PROTECTIVE RELAYS AND DISTRIBUTED CONTROL SYSTEMS INVESTMENT IN UPGRADING DAK PI HAO 2 HYDROPOWER PLANT (DCS) OF AYUN HA HYDROPOWER PLANT
TOTAL INVESTMENT VND17 TOTAL INVESTMENT VND 3.2 BILLION BILLION
PROGRESS PROGRESS 1st phase: 2nd phase: 1st phase: 2nd phase: Completed Expected to be Completed Expected to be completed in mid-2019 in 2018 completed in 2019
Inside of Dak Pi Hao 2 Hydropower Plant - Gia Lai Distributed control system at Ayun Ha Hydropower Plant - Gia Lai
Purpose of the Project Efficiency improvement after the Project being put Purpose of the Project • The DCS system was old, therefore unable to perform into operation automated control, unfocused and unable to • Increasing and maximizing power generation capacity • Meeting GEC's strategic objective of effectively centralize all the Plant's data to computers, so it could during peak hours. • Research on the Project was started in 4Q 2016: managing operations towards automation. not monitor the whole operation of the Plant, which • Increasing Revenue, reducing repair costs. »» Installation Consultancy was provided by • Minimizing risks of operational incidents. could well lead to operation incidents. • Increasing operation safety level. foreign experts; • GEC's Technology Development Center carried out the Efficiency improvement after the Project being put Current status »» Construction was carried out by a Member of GEC survey and made plans to implement the DCS system at into operation - Gia Lai Construction and Electrical Mechanic One Ayun Ha Plant. Dak Pi Hao 2 Hydropower Plant, Cho Long Commune, 1st phase: Member Limited. Kong Chro District, Gia Lai Province: • GEC shall complete the renovation and repair of Ayun • Total investment: VND 1.2 billion. • Under Dak Pi Hao Stream - Level I Branch of Ba River • The upgrade was divided into 2 phases, during each Ha Plant and then the others. 3 phase, only 1 unit was under upgrade, to avoid affecting • Focusing on replacement of the protective relay system. with an average annual flow of 4.45 m /s; Current status the Plant's production. • The project was implemented from Jan 2018 to July 2018. • Construction in 2005; • Ayun Ha Hydropower plant was built in Ayun Pa • In 2Q 2018, GEC completed 1st phase of upgrading Commune, Phu Thien District, Gia Lai Province: 2nd phase: • Completion and putting into operation in 2008 with a and successfully installed a new unit with a maximum designed capacity of 9 MW. capacity of 5 MW whereas the previous capacity was a »» Under Ayun River, with a flow rate through turbine • Total investment: VND 2 billion. mere 4.6 MW. of 23.4 m3/s; In the first years of operation, the plant produced about 37 • Focusing on renovating and replacing control million kWh annually. • 2nd phase of the upgrade was expected to begin in Feb »» Being put into operation since 2004; equipment, measuring and installing DCS system. 2019 and finished in mid-2019. In recent years, the power output decreased due to a »» Total capacity of 3 MW. • The implementation was expected to be completed by number of factors, affecting the Plant's capacity, which • After the upgrade, the Plant's total capacity may the end of 2018 or early 2019, depending on the actual • The Plant's protective relay system has been in operation reached only 8.7 MW: increase to 9.5 MW. works carried out by the Plant. for a long time, so it could no longer be reliable; some • Weather factor: drought; • According to the initial evaluation, the Project achieved functions were out of order, which might lead to the • Worn-out mechanical equipment, with frequent good results, with the new machine operating in a risk a chain of unexpected incidents. break-downs; stable manner. • The automatic control system was not in good working • GEC continues to monitor and evaluate the project order, etc. efficiency and make proposals to upgrade the other plants.
166 2018 ANNUAL REPORT www.geccom.vn 167 INVESTMENT IN TECHNOLOGY DEVELOPMENT TO INCREASE THE OPERATION EFFICIENCY (continued)
SOLAR PANEL-CLEANER ROBOTS ENTERPRISE RESOURCE PLANNING (ERP) SOFTWARE
PROGRESS
TOTAL INVESTMENT VND TOTAL INVESTMENT VND • Being under deployment MILLION/ROBOT70 1.2 • Being expected to be completed in BILLION 4 Robots are expected to be made for each Solar mid-2019 power Plant Purpose of the Project Efficiency improvement after the Project being put into operation PROGRESS • Standardizing business management process. • The selected software, Microsoft Dynamics 365 for • The sample version was completed • Applying information technology tools in management. • Robots officially entered operation Finance and Operation Enterprise Edition version: • Improving competitiveness, updating information timely in 3Q 2019 »» Meeting Armstrong Representative's requests; and accurately. Cell-cleaning robots - achievements from GEC's R&D - »» Meeting Technology orientation of TTC Group; are expected to be commercially viable in 2019 Current status »» Being implemented by FPT Software. Purpose of the Project Efficiency improvement after the Project being put • In 2018, GEC carried out the ERP Project: • Being put into operation, ERP will effectively support GEC: • GEC's Technology Development Center researched and into operation »» Maximizing use of resources including manpower, manufactured Solar panel-cleaner robots • It is estimated that during the same operation duration, material, and production resources; »» Maximizing the level of information exchange; • In addition to safe and efficient operation, keeping Solar the use of 1 Robot to clean 1 panel block (20,790 »» Analyzing and evaluating information accurately and »» Cutting down required time for data access; panels clean helps improve power generation efficiency battery panels) helps save 104 hours, 24 workers and timely with the system of information storage solutions. and minimize losses due to underperforming absorption 22.4 liters of water in one session, in comparison with »» Contributing to the standardization of GEC's activities. of surface. the traditional cleaning method. Current status • It takes 3 seconds and 0.12 liters of water to clean a panel. • In 2018, GEC became the first Enterprise in Vietnam that • Initially, the sample version of the cleaner robot is a success. put a Solar power Plant into operation • Quality verification and trademark registration are • Two of GEC's Solar power projects came into operation under preparation. with a total capacity of 117 MWp • Being expected to be applied for all GEC's projects. »» Phong Dien - Hue: 48 MWp • By the end of 2019, GEC will commercialize this Product »» Krong Pa - Gia Lai: 69 MWp for projects of GEC, TTC Group and external customers. • In 2019, GEC expects to put into operation 4 other Solar power Plants with the total capacity of 196 MWp: »» Ham Phu 2 - Binh Thuan: 49 MWp - Before June 30th, 2019 »» Duc Hue 1 - Long An: 49 MWp - Before June 30th, 2019 »» Ham Phu 1 - Binh Thuan: 49 MWp - 2019 »» Duc Hue 2 - Long An: 49 MWp - 2019.
168 2018 ANNUAL REPORT www.geccom.vn 169 HUMAN RESOURCE & TRAINING THE STAFF STRUCTURE ue to the nature of Energy industry, the proportion of female employees CHANGES TO SERVE is relatively lower than that of male workers, accounting for only 16%, but LEVER OF GROWTH SCALE EXPANSION D still higher than the rate 13% of leading Vietnam Energy industry - EVN in this aspect. Gender equality is always taken into consideration at GEC; qualified women have opportunities to develop their talents, intellect and personal experience. Especially in 2018, the proportion of female employees increased significantly, accounting for 16% of the total number of employees compared to 14% of 2017. In particular, the proportion of females in management is relatively In 2018, besides striving to achieve business and production targets of high, accounting for 23%. In addition, GEC had the first female CEO, appointed Hydropower projects, Employees structure by Gender in 2018 in October 2018.
GEC ALSO AIMED AT BECOMING 16% Total number of employees Male TOTAL NUMBER (Including seasonal employees) Female OF EMPLOYEES Total number of fulltime employees IN 2018 Emloyees Growth rate 84% 349
Total number of employees in 2014 - 2018 A PIONEER 500 16% IN VIETNAM'S SOLAR ENERGY DEVELOPMENT. 400 Distribution of management by Gender in 2018 349 The achievement has to depend heavily on highly-skilled, experienced 315 319 12% 296 296 300 281 275 and devoted personnel. The growth rate of Human resources in the last 5 263 11% 23% 249 years has been evident for GEC's continuous expansion and development. 238 200 Male 8% Female 7% 100 77% 6% 5% 0 4%
2014 2015 2016 2017 2018 Source: GEC
Employees structure by Education in 2018 Qualification of HR is one of the matters that receive special attention because the requirement for employee’s standards is increasing as GEC's portfolio is expanding 8% 4% to a variety of Renewable Energy types, namely Solar power, Wind power besides Postgraduate small and medium power plants, which is GEC's strength. In detail, Graduate and Graduate 38% Postgraduate degree account for 42%, Colleage accounts for 8%, Vocational training Colleage 42% Vocational training certificates account for 38%, and the rest 8% involves Unskilled workers. GEC's Unskilled workers personnel qualification level changed significantly in 2014-2018 when the number 8% of highly qualified employees increased to 146 in 2018 from 98 in 2014, up 50%, which met the requirement for the next development stage.
Employees by Education in 2014-2018
160 147 131 134 122 129 120 91 80
40 30 24 26 25 18 19 7 12 12 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Postgraduate Graduate College Vocational training Unskilled worker
Source: GEC
170 2018 ANNUAL REPORT www.geccom.vn 171 HUMAN RESOURCE & TRAINING LEVER OF GROWTH (continued)
With 41% of employees under 35 years old, a yoy upturn of 20%, GEC's current team was considered young, dynamic, agile and highly adaptive.
Employees structure by Age in 2018 Employees structure by Seniority in 2018
5% 18% 21%
36% 42%
15%
41% 7% 15%
GEC's Human resources is a variety of ages, genders and experiences Age from 18 to 25 Age from 35 to 45 Below 1 year From 5 to 10 years
Age from 25 to 35 Age above 45 From 1 to 3 years Above 10 years EFFECTIVE HUMAN RESOURCES DEVELOPMENT WITH SOUND POLICIES OF REMUNERATION AND BENEFITS From 3 to 5 years Source: GEC In order to develop both quality and quantity of GEC's HR as well as increase employee retention, GEC continuously added, Moreover, in terms of Seniority, more than 56% of employees who have over 5 years of loyalty and 42% have more than updated and renewed the policies related to: 10 years of loyalty. These are the strongest evidence of a professional and effective environment that has workplace well- being, which are important conditions for retaining loyal employees who have long-term dedication to GEC. 2014-2018 also witnessed a continuously rejuvenating of GEC's HR with a growth in the proportion of employees under 35 years old, Development from 67 in 2014 to 133 people in 2018, a surge by approximately 100%. Attractive salary opportunities for 1 and bonus 5 employees Distribution of employees by Age in 2014-2018
160 Appropriate and Suitable benefit proper assignment 134 132 2 6 121 regime of responsibilities, 120 functions and tasks 115 103
80 Professional Controlling external 67 3 environment factors 7 54 50 51 40
18 8 4 Connective corporate Relationships across 8 0 culture levels and colleagues 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 18 - 25 25 - 35 35 - 45 > 45 Source: GEC
172 2018 ANNUAL REPORT www.geccom.vn 173 HUMAN RESOURCE & TRAINING Through the specific and direct policies, TOTAL SAL employees' lives improved significantly, ARY LEVER OF GROWTH (continued) BU DG ET which is reflected in GEC's average salary R IS IN G has growth over the years. In the last 5 years, S T VND E 55 A BILLION D along with the increase in employees, GEC's IL 2017 Y O salary budget has also surged significantly. VND V E 60 R BILLION The total salary fund upturned steadily from T TREATING EMPLOYEES - BALANCING HUMAN VALUE 2018 H VND E 30 Y VND 30 billion in 2014 to VND 60 billion in BILLION E
A AND WORK VALUE 2014 R S 2018, growing 100% and 9% from VND 55 billion in 2017. In addition, a stable growth esides the efforts to maintain benefits is also recorded in GEC employee's average GEC was successful in attracting loyal and salary, from VND 9.6 million in 2014 to VND devoted staff, this strength will continue regime for employees in accordance with current Vietnam law and 14 million in 2018, growing 46%. to be promoted to ensure the Company's B Company regulation. In 2018, GEC also continuous operation as well as each developed some salary and bonus policies REMUNERATION AND BENEFITS Average salary (VND/person/month)
employee's performance. Salary, bonus and to encourage, motivate and promote 16 remuneration are based on performance, employee's dedication: DIRECT INDIRECT 14 competence, responsibility, position, seniority, 13 • Promulgating the policies for employees 12 professional qualifications, results, level of at Energy projects. This policy was a timely 9. 6 10 10.5 Salary accomplishing tasks and the Company's material support for employees at the Time off in-lieu 8 policies from time to time. projects, which contributed to improving 2014 2015 2016 2017 2018 their performance and speeding up the Bonus Source: GEC projects' progress; Insurrance GEC salary budget in 2014-2018 (VND Billion)
Benefit in cash 70 • The policy of performance-based Occupational 60 safety 60 55 HUMAN RESOURCES POLICY WAS A BALANCE rewards for laboratory bidding packages 42 encourages employees to create and 50 BETWEEN TWO FACTORS Profit sharing 40 34 increase Revenue; Benefits for family 30 30 • Promulgating the reward policy for 20 Solar power and Wind power projects Other services 10 development; encouraging employees 0 to complete the projects on schedule, 2014 2015 2016 2017 2018 Human Work Source: GEC Value Value saving costs and enhancing work quality. Indirect HR cost also increases correspondingly yoy as the Company away from homes and on construction sites. • Researching and developing benefits complies fully with compulsory insurance, accident insurance, birthday This is to encourage and create the most policies to improve employee's gifts, travels policies, etc. Total indirect HR cost in 2014 was VND 8.6 favorable working conditions for them. This material and mental lives, whereby the billion, surged to VND 14.6 billion in 2018, which is a growth of 70%. also boosted the spirit of the staff who were Choosing the right person for the right job - compensation was structured into two Particularly, the costs in 2018 increased by 13% yoy. In 2018, GEC working night and day on the construction Quantifying job descriptions to fairly determine salary parts: implemented different prominent new Energy projects, 2 Solar sites to ensure in-time completion as and bonuses. power Plants commercially operated in October and December. committed with the leadership. »» Direct: Salary, bonus and benefit in There were special support and benefits for employees who worked cash such as the 13th monthly salary EQUALITY VND Billion and profit sharing; Increase/Decrease No. Year 2014 2015 2016 2017 2018 2018-2017 HUMAN WORK »» Indirect: Annual leave/time off in-lieu, insurance (health insurance, accident 1 Compulsory insurance 2,670 3,480 3,762 4,041 4,961 23% insurance), occupational safety BENEFITS FOR TALENTS QUANTIFYING JOB Health examination DESCRIPTION 2 121 127 117 226 425 88% (periodic health examination), benefit expenses for family, and other services (lunch, 3 Travel expenses 685 750 750 1,790 965 -46% SALARY STRUCTURE birthday gifts, Tet gifts, travels), etc. 4 Accident insurance 29 30 33 33 34 3% 5 Birthday gifts 24 25 55 129 195 51% 6 Other expenses 5,054 5,253 5,583 6,686 8,011 20% Total 8,583 9,665 10,300 12,905 14,591 13% Source: GEC
174 2018 ANNUAL REPORT www.geccom.vn 175 HUMAN RESOURCE & TRAINING Postgraduate LEVER OF GROWTH (continued) 42% and Graduate
450 Beneficaries 1,897 Total hours participants
Total training duration in 2018
23%
Female Leaders HUMAN SOLIDATION TO DEVELOP
176 2018 ANNUAL REPORT www.geccom.vn 177 HUMAN RESOURCE & TRAINING LEVER OF GROWTH (continued)
PAYING ATTENTION AND The Company also regularly promoted donations and DEVELOPING ACTIVITIES volunteer activities to encourage, support and reduce the burdens of people in needs and people in hardship THAT PROVIDE ADDED VALUE through various programs as White Shirts to School, Winter Clothes of Love, Blood Donation, Support for flood victims, donation and support for staff to overcome sickness, etc.
EMPLOYEE POTENTIALS A STRONG SUCCESSIVE GENERATION
The quality of HR is always considered an advantage edge to every company, which contributes greatly to maintaining and promoting sustainable development through productivity improvement.
In 2018, GEC promoted the internal and external training programs with the group of key programs based on operational needs from time to time. In order for HR Community and social engagement activities are always highly valued and promoted training and development to be effective, GEC started to develop a curriculum training frame for each position. Through this curriculum training frame, Management In order for Human resources training and Leaders at all levels can have an overview of the and development to be effective, Organization's training and HR development activities. GEC started to develop a curriculum training frame for each position. The total cost of training in 2018 was VND 1.4 billion, an increase of 14% and 115% respectively compared to 2017. In 2018, training courses for professional development The Company cooperated with Trade Union, Youth Union, accounted for 79% of the total 39 training courses at GEC Women Union to organize traditional sports festival, with 450 participants. Every year, HR Department reviews cultural exchange and create conditions for employees and records proposals from other departments to build to participate in the activities, which contributed to a strong successive generation. The appointment rate of strengthening the connection among employees and GEC's existing staff accounts for 84%. improve their mental lives. For employees on night shifts, the Company also subsidized such practical benefits as an allowance of VND 25,000/person/shift to foster their physical and mental health as well as to bring about the peace of mind for these employees at work.
Every year, the Company has invited functional agencies to tests on noise, vibration, dust, etc. in order to provide a foundation for researches and provision of additional personal protective equipment as uniforms, protective equipment for employees to minimize impacts from the work environment on workers' health and reduce harmful factors, etc.; thereby improving the work environment and introducing an allowance for working with toxics. From September 2018, HR Department proposed a plan to pay allowance for noise pollution for plant staff, which stood at VND 10,000/person/day in cash. Business development training course for GEC sales team
GEC staffs are participating in the afforestation
178 2018 ANNUAL REPORT www.geccom.vn 179 HUMAN RESOURCE & TRAINING LEVER OF GROWTH (continued) GEC BUILT ITS OWN CODE OF CONDUCT, WHICH EXPRESSES GEC CULTURE Training program implemented in 2018 AND LEADS TO A PROFESSIONAL BUT FRIENDLY WORK ENVIRONMENT Training THAT MOTIVATING EMPLOYEE'S DEVELOPMENT AND DEVOTION. GEC No. Program Group Key content Programs Target Participant Course CULTURE IS REPRESENTED IN MANY AREAS FROM 5S RULES COMPLIANCE • Occupational Safety and Hygiene Training according to the law and Meeting the law's • Electrical Safety requirements requirements on • Fire protection • Production worker 1 229 16 of standard and qualifications and • Head of operation • Professional staff 1 2 3 4 5 quality certification knowledge • Certificate of supervision organizations SHINE SET ON ORDER STANDARDIZE STRAIGHTEN SUSTAIN and bidding • Inspector • R&D: Embedded programming • Accounting profession TO BUILD A CIVILIZED, CLEAN WORK ENVIRONMENT THAT CONTRIBUTES Providing essential • Professional Professional knowledge and skills • HR profession TO IMPROVE WORKING PERFORMANCE; AS WELL AS EMPLOYEES' WORK 2 specialist 144 11 training related to specific • Tax profession ETHICS. ALL OF THESE CREATES SYNERGIES AND BUILDS UP GEC INTO AN work and expertise • Professional staff • Finance - Planning profession IDEAL DESTINATION FOR TALENTS IN THE ENERGY INDUSTRY. THESE TALENTS • Secretary profession WILL COME AND STAY, ON THE COURSE OF SUSTAINABLE DEVELOPMENT OF • IT profession THE COMPANY. • Company • TTC Group introduction introduction 3 Onboard training • Industry introduction • New recruitment 51 6 • Necessary guidance for new employees • Company introduction • Visiting and learning • Managers experiences in European at all levels • Fostering Countries 4 Foreign training knowledge • Staff of Solar 20 4 • Learning and transfer power Project • Sharing experiences equipment technology in management China team • Fostering knowledge • HR management Management and • Developing middle Leadership skills • Developing • Managers 5 management 6 2 training leadership and at all levels management skills • 2018 TTC Talent for Management • CEO levels Total 450 39 Source: GEC Beside continuing to promote a healthy, united and cooperative work environment, GEC also organized soft skills classes to develop relationships at work and ensure skilled management, effective organization at work and assignment of the right person for the right job. GEC always encourages management levels to share knowledge, experience with employees and create close relationships between supervisors and employees. Specifically, internal professional training courses were conducted by staff of different departments in 2018, such as professional knowledge training on electricity, Shareholders management, information disclosure, secretariat, assistant, along with professional activities on accounting, etc. The united and coordinated working environment at GEC
180 2018 ANNUAL REPORT www.geccom.vn 181 INVESTMENT IN ~ ECONOMICALLY-DIFFICULT AREAS VND 7,400 BILLION
~ GEC'S PROJECTS 12,800 BENEFICARIES
MangBrightening ánh sáng with về knowledge, các buôn for làng highland Tây Nguyên children, day-to-day
SUSTAINABLE DEVELOPMENT CLEAN ENERGY SOURCE 184 Stakeholders Engagement MORE GREEN TO THE COMMUNITY 190 Commitment on economic - Sustainable economic growth 200 Commitment on environment - Sustainability from the ecosystem WITH ASPIRATIONS TO CONTRIBUTE TO PROMOTE ECONOMIC DEVELOPMENT, 206 Commitment on the community - Community and society engagement 214 Sharing from Foreign Shareholders STRENGTHEN SOCIAL SECURITY IN VARIOUS LOCALITIES, ADD RENEWABLE 215 Sharing from Contractors ENERGY TO THE NATIONAL GRID; GEC JOINTLY PROTECTS THE ENVIRONMENT, 216 Sharing from Customers LENDING A HAND TO THE GLOBAL EFFORT, LIMITING THE INCREASINGLY 218 Sharing from Employees COMPLICATED GREENHOUSE EFFECT ON EARTH. 04 220 Contact Information for Stakeholders STAKEHOLDERS ENGAGEMENT
General General
GRI GRI IDENTIFYING 102-42 102-43 AND SELECTING STAKEHOLDERS STAKEHOLDER ENGAGEMENT APPROACH INTERACTION BETWEEN GEC AND STAKEHOLDERS Having developed small That is also the reason GEC boldly and strongly pioneered in investing and developing Solar power with 2 projects and medium Hydropower Reviewing successfully grid connection in Hue and Gia Lai. GEC has Prioritizing Frequency of Identifying and plants for nearly 30 years Stakeholders consultancy various Stakeholders, each acting as an important link in Stakeholders evaluating in Vietnam, GEC gets the Company's existence, operation and development. advantages from Executive Appropriate action and engagement plans are developed Identifying Stakeholders Categorizing a Developing, consulting Reviewing feedbacks Management experience, based on the degree of interaction and influence of each through their direct and Stakeholders based on plans by related and concerns of Stakeholder in the key categories. indirect interactions the degree of 2 way department managers. Stakeholders that production capability, as with GEC. influences between GEC participated in and the Stakeholders. Proposing methods consultancy. well as strong connections in Initially evaluating risks of working and Vietnam's Electricity Industry. of major issues that may Indentifying and communicating with Constantly updating and arise in the interations scoring the influence Stakeholders. improving approaches, with Stakeholders. and impact of methods and solutions Key Stakeholders with significant engagement with GEC's operation are categorized into 5 main Groups: Stakeholders. Carrying out periodic to maximize the values Defining how these and extraordinary of GEC and Stakeholders. major issues can affect activities of consulting. GEC’s operation as well Reviewing and Identifying major issues 1 State Agency and Local Authority 3 Power projects contractors as its relationships with evaluating major issues Stakeholders. that are concerned that are chosen to be by Stakeholders to improved by managers • The Government, MOIT, Ministry of Natural • EPC construction companies develop appropriate Resources and Environment, Ministry of so that they will • Consultancy firms response plans. serve GEC’s business Agriculture and Rural Development • Equipment and tools suppliers strategy and mitigate • Provincial People's Councils and People's Stakeholder’s concerns. Committees • Department of Industry and Trade, Department of Planning and Investment, Department of 3.0 Natural Resources and Environment, Department 4 Shareholders and potential Investors of Agriculture and Rural Development, Forest Protection Sub-Department • Local and international major Shareholders 2.5 • Department of Culture, Sports and Tourism, • Existing Shareholders Military Agencies (Provincial level), Public INTERACTION Employees Security (Environmental Police) • Local and international potential Investors BETWEEN GEC AND 2.0 • District Committees, District People's • Investors on the stock market STAKEHOLDERS Committees and Departments Power contractor Shareholder/potential Investor • Communal People's Councils and People's 1.5 Committees • Local communities 5 Employees 1.0 Electricity • Executive Board trading partners 2 Electricity trading partners dependencyStakeholders' on GEC • Full time staff • Electricity and Renewable Energy Authority 0.5 State Agencies/ Local Authority • Vietnam Electricity (EVN)
• Electricity Power Trading Company (EPTC) 0 • Load Dispatch Centers A0, A1, A2, A3 0 0.5 1.0 1.5 2.0 2.5 3.0 • Electricity Regulatory Authority of Vietnam (ERAV) GEC's dependency on Stakeholders • Northern, Central and Southern Power Corporations Source: GEC
184 2018 ANNUAL REPORT www.geccom.vn 185 STAKEHOLDERS ENGAGEMENT (continued) General
GRI KEY TOPICS 102-44 AND CONCERNS RAISED EVALUATION OF KEY BUSINESS SECTORS In recent years, in order to ensure transparency and efficiency of all activities, GEC strove to develop and GEC's Renewable Energy operation includes small and to the grid with 117 MWp of Solar power. Maintaining complete its engagement mechanisms with Stakeholders; thereby facilitate them in giving feedback to GEC medium Hydropower plants, Solar plants, and coming Wind continuous operations at existing plants and continuing and increase satisfaction as well as Stakeholder engagement efficiency. GEC's goal is to create a sustainable power projects in 2019. GEC operates across provinces to expand business to other types of Renewable Energy value chain by concentrating on medium and long-term interests for GEC and Stakeholders. in the Central Highlands, North Central, South Central will be the basis for GEC to increase Revenue. This is also
and Southeast. Following the current strategic plan, GEC the best solution to mitigate its dependency on only one Stakeholder Main concern Current approach Key plan continues to promote Solar projects in the Southeast (Long Energy type, which plays a critical role in ensuring the Group An), South Central (Binh Dinh, Binh Thuan) and Central Company's Sustainable development. Based on assessment • Fulfilling all corporate obligations, namely tax Highlands (Dak Nong). The Mekong Delta and Central of key concerns in the two-way interaction of GEC and its obligations, annual insurance, health safety, Highlands are under survey for Wind power projects. By Stakeholders as well as UN's Sustainable development trend, occupational safety, etc. boldly and assertively investing in Renewable Energy, GEC GEC identified a matrix of 14 key items including Economy, • Strictly complying with the regulations related to became Vietnam's first Company successfully connected Environment and Society: additional survey of electricity planning, project development, acceptance and completion of energizing, etc. • Pro-actively interacting with the Government and State Agencies, • Compliance with the law • Implementing projects based on IFC's 7 Performance Standards on Environmental and Social Sustainability as upgrading GEC's level and affirming its • Compliance with policies, well as current good governance practices brand as Vietnam's pioneer in Renewable 4.0 processes and procedures • Continuously updating policies and regulations issued Energy Industry
Matrix of High Jobs Local community Economic of the Government by Government and State Agencies. In particular, the • Focusing on updating legal documents key items Education efficiency • Compliance with social Decision 39/2018/QD-TTg on revising mechanism to related to GEC's business on a regular and Diversity and Equal opportunity and Training and environmental policies 3.5 support the development of Wind power projects in timely basis Energy Anti-corruption • Supporting policies and Vietnam or MOIT's Official Letter 4614/BCT-DL to the • Fully complying with the Law Indirect ecomomic impacts movements of Labor Prime Minister, on Solar power development • Leading and pioneering in meeting State Agencies 3.0 safety and • Participating in Government's activities in the Energy State Agencies' requirements related to Emission Solid and Employee Industry as Renewable Energy and Wind power economy, community and society Material health Water waste conferences organized by MOIT 2.5 • Joining in State Agencies' movements and programs to support the community and society though activities as: Contributing to the Gong Festival in response to Gia Lai 2.0 Provincial People's Committee's calling for contribution in promoting the unique culture of Central Highlands Average • Collaborating with local authorities by participating in 1.5 Social and Community funding activities within GEC's Impacts on Stakeholders State Agency and Local scope of operation: Authority »» Offering gratitude houses to the poors in Phong Dien - 1.0 Hue and Krong Pa - Gia Lai areas »» Giving financial support to help poors in Long An to buy breeding cattle • Pro-actively participating in and willing to support Local Community programs: 0.5 »» Sponsoring charity programs in Ha Giang, etc. Hunger eradication and poverty reduction, • Developing community development programs, health contributing to "joining hands for a • Creating jobs for care and social welfare programs as conducting ecosystem healthier life", supporting to increase the 0 the local Communities service assessment at Krong Pa Solar power Project: quality of education, etc. Low 0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 • Increasing income for »» Assessing the project's impact on husbandry and • Finding and developing Renewable Low Average High local people firewood collecting of the local Community Energy projects in areas with power • Carrying out community »» Conducting surveys, interviews and group discussions shortage, supporting clean Energy sources, activities in the localities with related individuals of impacted villages contributing to local development Impacts on Gia Lai Electricity JSC • Protecting local natural »» Identifying the project's impacts and corrective actions • Providing sustainable jobs for local environment and that could be implemented for local Communities as Communities where the projects are living environment constructing roads along the project, making repairs to developed roads with stone and rock filling, etc. • Promoting local economy • Preparing and developing environmental • Prioritizing the recruitment of local workers, organizing impact assessment programs, ECONOMY ENVIRONMENT SOCIETY training courses and internship programs to improve local implementing local environmental income and human resource capacity with 92.6% of GEG protection measures. employees are local workers • Implementing environmental protection programs: GRI 201 - Economic efficiency GRI 301 - Material GRI 401 - Jobs »» Identifying pollution sources from the project as gas GRI 203 - Indirect ecomomic impacts GRI 302 - Energy GRI 403 - Labor safety and Employee health emissions, wastewater, solid waste, noise, etc. GRI 205 - Anti-corruption GRI 305 - Emission GRI 404 - Education and Training »» Proposing solid waste, waste water and gas treatment plans GRI 306 - Solid and Water waste GRI 405 - Diversity and Equal opportunity »» Developing environmental management and GRI 413 - Local community monitoring programs
186 2018 ANNUAL REPORT www.geccom.vn 187 STAKEHOLDERS ENGAGEMENT (continued)
Stakeholder Stakeholder Main concern Current approach Key plan Main concern Current approach Key plan Group Group
• Organizing programs and events to timely provide • Working with EVN EPTC to ensure PPAs with the information to Shareholders and Investors; specially • Off-take agreements Government's tariff are signed for GEC output providing 2 foreign strategic Shareholders with • Improving and enhancing the activities of • Tariff commitment • Assigning employees to regularly contact, receive and information on strategic planning, CG, business respond to the two-way information between GEC and • Executive Board capacity activities, financial situation, etc. through AGM and Investor Relations • Complying with EPTC power trading partners, etc. in order to negotiate • Ensuring that PPAs are signed at the best tariffs • Over the years, GEC's EGM of Shareholders, obtaining written opinions • Improving the application of information contractual provisions favorable tariffs for GEC Hydroelectricity projects according to the State's incentives business results grow of Shareholders security standards according to current good • Instructions on how to • Providing enabling policies to ensure safe and steadily, fairly and practices as implementing bilingual information Electricity • Organizing regular and ad-hoc training courses • Organizing meetings with potential Investors who implement electricity for engineers at the request of A0 Dispatch Center efficient plant operation sustainably in the medium have interest in GEC and Vietnam's Power Industry disclosure, regular and transparent information trading distribution as well as and long-term updating for Shareholders and Investors in order under EVN, ensuring that GEC personnel meet the • Actively researching, developing and applying namely Bgrimm, Gulf from Thailand; Topinfra from partners other procedures related to meet international CG standards as well as system's operational requirements technology not only in the operation and • Market value of GEC shares Korea; Power China from China; Green City 3, RJC to electricity contribute to improve information disclosure monitoring of the plant system but also in reflects internal strength Energy Solution from the US, etc., in order to attract • Continuously updating information related to quality of Vietnam stock market, especially as • Supporting the access project construction and potential growth and call for investment from countries with developed Energy Industry as information related to new perceived by foreign Investors to local and global latest technologies and systems e.g. electronic measuring Shareholders • GEC's intrinsic value Renewable Energy Industry information and trends in system, SCADA connection system, etc. in order and potential is continuously and • Carrying out information disclosure in accordance with • Organizing roadshow for Shareholders, and Energy Industry to ensure the preparation and improvement of Investors sustainably growing the provisions of Circular 155, Circular 162, Circular potential Investors to update business status, operational efficiency 95, Decree 71, etc. for listed companies in Vietnam, short-term orientation, medium- and long-term • Compliance with business strategy, etc. international information ensuring Shareholders' rights and fair treatment: disclosure standards, »» Carrying out information disclosure on periodic, • Organizing meetings with analysts from • Developing plans for additional planning, basic ensuring regular, extraordinary, 24-hour, and 10-day basis at securities companies, investment funds, financial design documents, technical designs in accordance continuous, transparent specific request; institutions, etc. as well as meeting with potential • Accompanying 2 Contractors - Sharp and JGC - with the Company's plan and Vietnamese law and reliable information Investors in GEC and Vietnam Power Industry • Professional partners in the next 4 projects of GEC »» Carrying out information disclosure on capital • Cooperating with 2 prestigious international EPC • Protecting benefits and mobilization activities; • Timely handling information crisis to help and contractors with • Gathering internal resources, self-implementing contractors from Japan: Sharp for Phong Dien and ensuring fairness for Shareholders and Investors avoiding loss international brand 2 Solar power projects in Binh Thuan and Long »» Disclosure of specialized information through JGC for Krong Pa Solar power Projects Shareholders and Investors • Replying to questions via email, phone, website, and reputation An, which aims at improving staff capacity, Notes of FS, press releases updating GEC activities, etc. in a timely and accurate manner • Providing equipment and • By end of 2018, GEC put 2 Projects into commercial reducing costs and increasing profits; at the information on forums, etc. electricity operation with a total 117 MWp and tools to ensure meeting same time, ensuring quality and progress are • Replying to questions from existing and potential 17.7 million kWh output th Power projects standards and schedules met before June 30 , 2019 Shareholders and Investors via official channels contractors • Developing legal • There are 4 other Solar power projects being • Searching and approaching equipment documents that comply implemented by EPC contractors and 2 self- suppliers in Top 10 international suppliers implemented Solar power projects. The expected • Paying attention to and focusing on training, making with Vietnamese law of Renewable Energy equipment to ensure an important contribution to the development of output in 2019 will be 392 MWp for Solar power and product quality and competitive prices • Being committed to project 84.1 MW for Hydropower HR through developing training curriculum for every construction progress, • Focusing on urging and monitoring consulting position: Training in accordance with the Law and ensuring the quality of • Project construction quality, progress and firms and EPC contractors to ensure 6 projects requirements of certification organizations, Professional project on implementation performance are ensured according to the in 2019 achieve their commitments to national trainings, Integration trainings, Overseas Trainings and EPC contracts, with GEC's close monitoring grid connection Trainings on Management skills, Leadership and timely support for EPC contractors during • Professional and project implementation dynamic working • Organizing soft skills courses to develop work environment relationships, ensuring skilled management, managing work effectively, assigning right people to • Developing training programs, especially • Ensuring labor safety the right jobs international programs to improve staff capacity • Executing good • Building the code of conducts towards a professional • Implementing successors training programs remuneration and but friendly work environment that motivates benefits scheme • Developing and adding appropriate remuneration employee's development and devotion. The 5S mechanisms to attract talents, especially long- Employees • Holding appropriate principles, the Code of Conducts, employees conduct term policies, retirement policies, etc. training programs and work rules, etc. to improve staff's • Regularly conducting employees' satisfaction • Researching and developing welfare policy to knowledge and skills survey with the goal of creating a friendly, directly and indirectly improve material and mental civilized and respectful working environment • Offering career lives for employees advancement • Aiming at achieving GEC into one of Vietnam • Paying attention to and developing activities that opportunities Best Places to Work. add value namely traditional sports festival; Cultural • Training successor exchanges; Practical trainings; toxic allowance; Having generation favorable working regime for employees of Energy projects; Performance bonus for bidding packages of the Laboratory; Promulgating reward policy for Solar power and Wind power projects development; Carrying out donation, charity programs, etc. • Obtaining employees' feedbacks via email, phone and suggestion box.
188 2018 ANNUAL REPORT www.geccom.vn 189 COMMITMENT ON ECONOMIC Annual growth in Revenue, Cost and Profit VND Billion Total Revenue Total cost Profit before tax Profit after tax
SUSTAINABLE ECONOMIC GROWTH 600 581 559
500 Economy 461
400 391 GRI 312 329 300 201 243 374 ECONOMIC PERFORMANCE 230 200 209 148 149 In terms of economy, GEC is With a strategic vision to become a leading private 132 134 207 187 operating on economic aspects enterprise in the field of Renewable Energy, GEC's 100 BOD and BOM have been harmoniously combining impact, both directly and indirectly, business mission and contribution to the national 0 in line with GRI's Global Standard of economy, ensuring security, environment, creating 2015 2016 2017 2018 Sustainable Development, including added value for society, gradually meeting the Source: GEC Audited consolidated FS in 2015-2018 Direct economic value generated criteria of sustainable development of Vietnam and distributed, Impact on financial in particular and the United Nations in general. OPERATION COST Managing sustainable economic growth will be the activities, other risks and opportunities basis for GEC's BOD to enhance CG awareness, make The total cost in 2018 was VND 374 billion, including COGS, from climate change, Financial sound business decisions, thereby improve growth Finance, Sales, SG&A. The COGS was about VND 253 billion support from the Government, quality and reach beyond that, bring added value or 68% of the total. The cost for generating electricity EBIT MARGIN Indirect critical economic impact and to Shareholders, care for employees' welfare and was about VND 194 billion and the cost of service and 44% Anti-corruption. contribute to a sustainable community. construction was about VND 59 billion. SG&A expense and others in 2018 were recorded at VND 588 million, VND 77 billion and VND 2.6 billion respectively, or 0.16%, 21% and 0.7% respectively in total cost. Notably, Selling and DIRECT ECONOMIC VALUE GENERATED GRI 201-1 Other expenses decreased by 39% and 76% yoy. Besides, EBITDA MARGIN AND DISTRIBUTED 62% Financial expenses accounted for 10% of the total cost, REVENUE mostly from interest of the VND 40 billion loan, up 1.6 times compared to 2017 as GEC mobilized capital to invest in Solar GEC's total audited consolidated Revenue in 2018 projects and expand business, to increase the economic reached VND 581 billion, of which Net Revenue 2018 PROFIT 2015-2018 CAGR value for the society. Gross profit margin reached 55%, reached VND 560 billion, up 4% over the same remaining stable despite a slight yoy decrease. This margin BEFORE TAX VND 207 period. Although 2018 Net Revenue grew only has been stable in recent years at more than 50%, higher Billion slightly, but provided the CAGR in 2015-2018, with than the Industry average of 48%. EBIT and EBITDA margins an encouraging figure of 16%, ensuring a stable also achieved positive results at 44%, slightly down from TOTAL REVENUE annual growth rate. Net Revenue in 2018 resulted 14% 2017 and 62% respectively yoy. from 2 main areas of electricity for 86% and providing technical and construction services for 14%. Cost structure Operational efficiency The electricity Revenue in 2018 changed, compared TOTAL EXPENSE 16% Gross margin EBIT margin EBITDA margin to 2015-2017 when the 2 Factories - Phong Dien 0.7% 80% and Krong Pa - became operational. However, the 70% change in electricity Revenue structure in 2018 62% PROFIT 21% 62% COGS 60% was not noticeable. Since 2 factories just came into BEFORE TAX 58% 55% 12% 50% operation in the last months of 2018, Solar Energy Financial expenses 44% accounts for only about 5% of the total output, or 0.16% 40% 47% Sale expenses 8% Revenue of the electricity output structure. PBT 10.14% 30% in 2018 increased by 22% compared to the plan, PROFIT General and 20% AFTER TAX Administrative expenses but that was only 90% yoy, as the implementation 12% 68% 10% of a series of projects added up to the expenses, Others 0% but the 4-year CAGR still reached 12% . 2015 2016 2017 2018 Source: GEC Audited consolidated FS in 2015-2018
Source: GEC Audited consolidated FS in 2015-2018
190 2018 ANNUAL REPORT www.geccom.vn 191 COMMITMENT ON ECONOMIC Human resources costs (continued) Compulsory insurance Health check cost Vacation cost Accident insurance Birthday gifts Others SUSTAINABLE ECONOMIC GROWTH VND million
10,000
8,011 REMUNERATION AND EMPLOYEE BENEFITS 8,000 6,686 6,000 5,583 5,253 REVENUE FROM 2015 - 2018 4,041 OFFICIALLY-CONTRACTED 4,000 3,762 4,961 CAGR OF SALARY EMPLOYEES VND1.8 Billion 3,480 21% 1,790 2,000 965 750 750 127 30 25 117 33 55 226 33 129 425 34 195 To obtain a dynamic and professional environment in making meaningful contribution for the society. CAGR of 0 2015 2016 2017 2018 terms of quality and quantity by implementing direct employees from 2015-2018 was 9%, but the salary growth Source: GEC and indirect policies on betterment of employees' life, rate was still higher, at 21%; demonstrating the focus on GEC issued a regulation on remuneration dated May 14th, quality of HR and policies that encourage the dedication AMOUNTS PAYABLE TO THE GOVERNMENT 2018, which was applied to the Office and Production of HR to the development of GEC. With 2018 average salary Divisions. This adjustment was not only aimed at at about VND 14 million per person, up 8% over the same Contributing to meet the Energy demand from The highest CAGR comes from Value Added Tax at 99%, followed by reasonable remuneration for employees so that they period; an officially-contracted employee can generate Clean Energy, in addition to optimizing profit, CIT at 33%. can perform professional work, but also to advocate a VND 1.8 billion in 2018 total Revenue. creating jobs and improving income for the boost in labor productivity, exceeding the business plan Local Community, ensuring benefits for the Total value paid to the state budget in 2018 reached VND 228 billion, Shareholders and Stakeholders; obligations 109% yoy, or 293% compared to 2015. The structure remained to the State are also considered by GEC’s Employee Growth and Salary budget Net Revenue and Average salary of employees unchanged from previous years, with Value Added Tax accounting BOD as one important mission in sustainable for the largest proportion at VND 157 billion, or 69%, up 214% Official staff (persons) Salary budget (VND billion) Income/ Person (VND million) Average salary (VND million) growth. Fulfilling tax obligations is not merely Salary budget growth rate (%) compared to 2017. Natural resources tax recorded a slight decrease compliance with the law but also a significant of 6% yoy, but its proportion in the structure fell sharply from 31% 350 35% 2,100 contribution to development of the country to 14%. CIT recorded in the audited FS of 2018 was VND 26 billion, in general, and the localities where GEC is 319 1,889 up 53% yoy. 31% 1,821 300 296 30% 1,800 operating and providing services. 275 1,676 1,570 250 249 25% 1,500 Tax payment details in 2015-2018 CAGR of the amounts payable to the 2015 2016 2017 2018 24% Budget, from CIT, Value Added Tax, Natural (VND Billion) 200 20% 1,200 Resources Tax, Personal Income Tax and Corporate income tax 11 19 17 26 others during 2015-2018 has been increasing 150 15% 900 Value added tax 20 38 50 157 at 58%. During this period, GEC paid totally Natural resource tax 14 22 34 32 100 9% 10% 600 VND 480 billion in taxes to the State Agencies. The biggest amount was from Value Added Personal income tax 5 4 5 6 60 55 Tax at VND 264 billion, or 55%, and Natural 50 42 5% 300 Others 8 2 3 7 34 Resources Tax at VND 103 billion, or 22%. 10 10,5 13 14 0 0% 0 2015 2016 2017 2018 2015 2016 2017 2018 Total payment tax in 2015-2018 Structure of taxes payable in 2017-2018 Source: GEC 4% 4% 5% 3% 3% 15% 15% 3% 11% In addition to paying reasonable salaries, GEC was The quality of HR is always considered an advantage 14% also interested in welfare policies as insurance, health edge to every company, which contributes greatly to 22% 31% check, vacation, accident insurance, birthday gifts and maintaining and promoting sustainable development 2017 2018 expenses as well as other fees, up 13% compared to through productivity improvement. For effective HR 2017 and 2015-2018 CAGR reached 15%. Especially the training and development activities, in 2018, GEC 55% 46% strongest growth was 88% in health check. The highest began to develop a curriculum framework for each 69% amount of money spent on other expenses was more position. In 2018, training courses for professional than VND 8 billion. development accounted for 79% of total courses Corporate income tax Personal income tax Corporate income tax Personal income tax - comprising 39 courses with 450 students. The Value added tax Others Value added tax Others total cost of training in 2018 was approximately Natural resource tax Natural resource tax Source: GEC VND 1.4 billion, an increase of 14% compared to 2017, a strong increase of 115% compared to 2016. With the strategic direction of Sustainable development for many years to come, GEC will continue to contribute to the State Budget, creating a premise for the development of the communities, especially where GEC is operating.
192 2018 ANNUAL REPORT www.geccom.vn 193 COMMITMENT ON ECONOMIC SUSTAINABLE ECONOMIC GROWTH (continued)
FINANCIAL IMPLICATIONS AND OTHER RISKS GRI 201-2 AND OPPORTUNITIES DUE TO CLIMATE CHANGE
Primary Energy sources as Water, Solar and Wind are input materials of all enterprises operating in Renewable Energy, so climate change directly impacts the operation of Energy plants. Before the Solar projects came into operation, the input Energy source was primarily Water. The unfavorable weather in the early months and later months of the year led to a total of 29.8 million kWh lower in February, April, May, November and December, in comparison with corresponding average output of these months during the period of 2015-2018. On the other hand, over the total 12-month, the 356 million kWh output in commercial electricity was still 5 million kWh higher than the 2015-2017 average output of 351 million kWh. In general, it could be seen that weather changes will directly affect the overall performance of GEC Hydropower projects.
Annual correlation chart with average output 2015 2017 Average 2018 MWh THE AVERAGE OUTPUT 60,000 OF 2 SOLAR PLANTS 50,000
40,000 ~163 Million kWh/year 30,000 Small and medium Hydropower plants are one of the important Renewable Energy sources 20,000
DIVERSIFYING TYPES OF RENEWABLE ENERGY TO CREATE the first phase of the Project was 10,000 SUSTAINABLE REVENUE SOURCES, LIMIT WEATHER RISKS AND completed. Moreover, it is expected 0 EFFECTIVELY EXPLOIT NATURAL RESOURCES that upon being upgraded, the Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Factory will reduce VND 800 million/ Source: GEC year in repair and restoration costs, for GEC's Renewable Energy plants operation. Specifically, in 2018, the the next 3 years. are directly affected by weather Company invested to upgrade Dak Aiming at Renewable Energy Electricity Structure in 2018 Revenue structure in 2018 conditions. Prolonged drought, Pi Hao 2 Hydropower Plant with a Also, in 2018, GEC replaced the diversification, Revenue risk low rainfall affects water resources, total investment of VND 17 billion. protective relay system at Ayun mitigation from a sole source, as well Solar Services Construction leading to a reduction in Hydroelectric Currently, the factory has completed Ha power Plant, with a total cost of as stable Revenue growth; by the 8% Suppliers 10.1% services st 3.5% output. Conversely, prolonged upgrading 1 phase with new units VND 1.2 billion. Its main function fourth Quarter of 2018, GEC had put nd 6.7% heavy rains could cause flash floods, being successfully installed. 2 phase is to detect faulty electrical lines into operation the first 2 Solar plants Solar damaging the dam’s structures, will be completed in mid-2019, or equipment or other unusual or in Vietnam with a total capacity of causing incidents and unexpected bringing the total capacity to 9.5 MW dangerous electrical conditions, 117 MWp. The average output stood maintenance costs. Those are the compared to the current of 9 MW. The and then initiate appropriate at about 163 million kWh/year. 79.7% most imminent risk factors for GEC's positive effect is that the Plant's 2018 controls. The replacement of this 92% Hydro Although operational in the last 2 Hydro business activities. However, when the Revenue reached VND 43.2 billion, system contributes to ensure safety months of the year, the total Revenue construction investment project was up 3% yoy, or 10% in 2018 electricity in operation, minimize damage in 2018 reached VND 38 billion, or developed, the Company strictly and Revenue structure; although only to generators, transformers and 8%, of the electricity structure or 7% Source: GEC fully complied with the construction electrical loads. of the Net Revenue structure. investment management process, with standards and regulations in Dak Pi Hao 2 Dak Pi Hao 2 7% 10% In addition, to effectively exploit Southwest, Central Highlands, as drought or prolonged flood; thus design and construction of Energy natural resources, GEC has also etc. and sought potential strong diversifying Revenue sources from works, so that GEC ensures the project researched and been getting partners to join. the efficient exploitation of natural safety during adverse incidents as 2017 2018 approval, preparing and appraising Energy; reducing environmental storms or floods. dossiers and technical designs The diversification of Renewable pollution; creating stable and for Wind power projects with Energy types is a solution which is sustainable business results; In addition, GEC has built annual Remaining 93% Remaining 90% the capacity of about 250 MW carefully reviewed and assessed by contributing to the development plants plants repair and maintenance plans to at potential locations in the the BOM to minimize weather risks of the Country, community and ensure safety and efficiency in plant Source: GEC society.
194 2018 ANNUAL REPORT www.geccom.vn 195 COMMITMENT ON ECONOMIC SUSTAINABLE ECONOMIC GROWTH (continued)
Capacity Time for remaining CIT incentives No. Plants (MW) GRI 201-4 FINANCIAL SUPPORT FROM THE GOVERNMENT Tax Time I HYDROPOWER 1 H’Mun 16.2 10% 2015-2023 The Government's financial 5% 2015-2023 2 Ayun Thuong 12 support - compared to the taxes 10% 2024-2025 that GEC contributed to the 3 H’Chan 12 10% 2019-2020 2012-2018 budget - showed a balanced 4 Dak Pi Hao 2 9 10% relationship between GEC and Extension of incentives to 2020 5% 2015-2023 the Government. 5 Da Khai 8.1 10% 2024-2025 2013-2019 6 Ia Puch 3 6.6 10% Extension of incentives to 2021 0% 2016-2019 • Incentives for exemption/reduction of land lease, land 7 Thuong Lo 6 5% 2020-2028 use fees and land use tax depend on project location. 10% 2029-2020 Most GEC's Energy projects are exempted from land lease 5% 2018-2026 8 Dak Pi Hao 1 5 because they are located venues of extremely difficult 10% 2027-2028 economic conditions. The Phong Dien Solar Project is 5% 2015-2023 9 Kenh Bac 1 exempted from land lease for the first 15 years, or more 10% 2024-2025 than VND 1.4 billion. II SOLAR POWER • Incentives on CIT: Under current regulations for 0% 2019-2022 income tax of Energy projects, these are in the list 1 Krong Pa 48 5% 2023-2031 of Government's preferential investment policies. 10% 2032-2033 The tax rate is at 10% for the first 15 years, with tax 0% 2019-2022 exemption for the first 4 years and 50% tax reduction 2 Phong Dien 35 5% 2023-2031 for 9 subsequent years. 10% 2032-2033
ompared to others, the Energy Sector received »» GEC is subject to the CIT rate of 20% under Circular Source: GEC th significant support - especially financially - from the 78/2014/TT-BTC dated June 18 , 2014 of the Ministry »» In 2018, 9 out of 14 power plants were still entitled C Government upon investing in projects. In particular, of Finance; to CIT incentives from the Governmen. One factory the incentives for land lease and taxes of Hydropower and of which - Thuong Lo- enjoyed the 0% tax rate until Solar power Plants are mainly focused on: »» Particularly for investment projects, tax rates and tax 2019, accounting for 12%; 4 factories enjoyed the 5% TOTAL EXEMPTED ~ incentives shall be applied according to the investment tax incentives (Ayun Thuong, Da Khai, Dak Pi Hao 1, CORPORATE INCOME TAX IN 2018 VND 14 Billion • Incentives on import and export duties on goods preference certificates for each project. They are Kenh Bac) accounting for 44%, and 4 factories were imported to create fixed assets, raw materials, according to the provisions of Circular 78/2014/TT- entitled to 10% tax rate (H'Mun, H'Chan, Dak Pi Hao th supplies and semi-finished products which cannot BTC dated June 18 , 2014 of the Ministry of Finance 2, Ia Puch 3) accounting for 44% of all factories that still Above are Government incentives that have actively be produced domestically. guiding the implementation of Decree 218/2013/ got the CIT incentives. supported GEC's Renewable Energy projects in particular th ND-CP dated December 26 , 2013 of the Government and enterprises operating in the Energy sector in general. The main equipment in GEC's Energy projects are exempted regulating and guiding the implementation of the »» Total exempted CIT in 2018 was nearly VND 14 billion. For The Government's financial support - compared to the from import duty, for Phong Dien and Krong Pa. The Law on Enterprise Income Tax and Official Letter No. Solar projects, GEC choose to get the incentives from 2019 taxes that GEC contributed to the budget - showed a th amount of nearly VND 150 billion was refunded. 111684/BTC- TCT on September 16 , 2005 regarding onwards, so the tax rate of 20% was still applied in 2018. balanced relationship between GEC and the Government. guidance on tax transfers, specifically:
196 2018 ANNUAL REPORT www.geccom.vn 197 COMMITMENT ON ECONOMIC SUSTAINABLE ECONOMIC GROWTH (continued)
Economy Economy
GRI GRI 203 205 INDIRECT ECONOMIC IMPACT ANTI-CORRUPTION • Employees must notify GEC of possible conflict of interest that they may be entitled to through transactions with GEC's Partners, Customers or other individuals. COMMUNICATION AND TRAINING ABOUT GRI 203-2 MAJOR INDIRECT ECONOMIC IMPACT GRI 205-2 ANTI-CORRUPTION POLICIES In addition to provide specific actions, conduct rules, AND PROCEDURES guidelines, the Code of Conduct also promotes transparency and fairness in transactions. The Code is applied to all GEC Members, from the top level to every employee, or even With Code of Conduct NS/QC-08 dated January 1st, 2015 on the Stakeholders who have trade relationships with GEC. All communication, conduct, committed contents on ethics, to activities are inspected and controlled by the Internal Control The construction of ensure the highest standards of professional qualifications, Department, now known as the Internal Audit after the ethics, in all levels of activities. This is also a commitment to change in CG structure in 2018. simultaneously developed GEC's partners and customers, etc. on transparency, integrity, Solar power projects have objectivity and fairness in daily work through outstanding In addition, to officially become a Member of GEC, all created jobs for hundreds specific actions: new employees will go through the training programs for of local workers, primarily integration, to get a clear view of the Code's spirit and content; • Each employee makes his or her work decisions, then they can improve business ethics and prevent corruption. in Thua Thien Hue and considering GEC's best interests, and not for any other Therefore, until now, GEC has not seen any corruption-related Gia Lai, followed by Binh purpose or in favor of themselves and/or any other case during operation. Thuan, Long An, Dak Nong organization or individual; and Binh Dinh, as shown • Employees are not allowed to make use of the business in the roadmap of GEC's benefits of the Company for personal interest; at the same Solar power projects. time, they cannot use information obtained in their work positions for personal benefit or for the benefit of other organizations or individuals.
with a larger scale like Krong Pa or • Employees are not allowed to receive any material or projects with a short construction period spiritual benefits from the Partner, Customers in any form, of 3-4 months, the average total number with an attempt to get transactions and business from GEC. of personnel at the construction site is Nor will any material or spiritual benefit to benefit third about 700, up to 1,200 during peak hours. parties in the performance or relevance to GEC business or transactions be performed; In 2018, the construction of simultaneously developed Solar • Employees and their family members must not ask or Developing Solar power Plants at GEC contributes to promote the local economy projects have created jobs for hundreds suggest receiving material or spiritual benefits from GEC's of local workers, primarily in Thua Thien Partners and Customers that may affect GEC's business t the end of 2018, GEC officially For each Solar project with an Hue and Gia Lai, followed by Binh Thuan, decisions. Employees cannot borrow or take loans from operated in the field of Solar average installed capacity of 50 MWp, Long An, Dak Nong and Binh Dinh, as GEC's Customers, Partners if this affects or might affect A Energy. This made GEC a the construction time is about 6-7 shown in the roadmap of GEC's Solar GEC interests; pioneer and a contributor to economic months, with about 500 people at the projects. Paying an average income of development for the locality. GEC's construction site on average (including about VND 6 million/person, GEC has • Employees cannot represent GEC in transactions with Solar projects are located in areas project management unit, contractor, been contributing to promoting local organizations and individuals whose employees or family with particularly difficult economic supervision, consultant unit and economic development where GEC members have financial commitments, benefits or impacts conditions, as in Decree No. 118/2015/ construction workers). At the peak time, projects are operating, in its round-the- on decision-making in purchasing, selling, borrowing, th ND-CP dated November 12 , 2015 by up to 1,000 people could be seen at the clock production of electricity for the investing, bidding, etc. unless approved by the BOD; the Government. construction site. Particularly for projects continuous activities of the Country.
198 2018 ANNUAL REPORT www.geccom.vn 199 COMMITMENT ON ENVIRONMENT SUSTAINABILITY FROM THE ECOSYSTEM
GEC's Environment, Health and Towards this goal, in 2016, the BOD decided to According to the National Center for Meteorological and Electricity output and Water flow establish an EHSS Department committed to Hydrological Forecasting, in 2019, due to the impact of Safety (HSE) policy is being Water flow Electricity output establishing and maintaining an EHSS system to: El Nino, the weather situation would remain complicated. 3 implemented in accordance with Million m Million kWh • Be sufficient with the organizational structure It is forecasted that high drought and local water shortage 4,000 450 IFC Guidelines, one of GEC's 423 and operation of GEC; are likely to occur in the South Central and Central 400 strategic Shareholders who have Highlands. In the provinces of the Central Highlands, • Be compliant with the law and IFC's 358 350 Central and South Central regions, there is a warning of 3,000 been accompanied GEC since Environmental and Social Standards; 309 300 low rainfall from the early months of 2019, forecasting 2016. This policy is implemented 250 • Control risks that may adversely affect the rainfall would be 20-40% lower than historical average. This 2,000 200 with an aim to preventing, ensuring Local Community and GEC Employees or situation will reduce water flow, negatively affecting power 150 safety to People, Assets, and the Contractors: Preventing work accidents, 2,674 3,661 3,097 plants output. Responding this situation, GEC actively 1,000 the Environment in construction, occupational diseases, property losses, production transformed to Solar Energy to take advantage of Solar 100 ownership and operation of current losses, environmental and social impacts; sources and balance the negative impacts of drought in 50 • Making periodic evaluation and continuous the coming years. 0 0 and future GEC projects. 2016 2017 2018 improvement. Source: GEC
Environment MATERIAL SUNSHINE In addition to water for Hydro plants, the Solar Energy is another The Krong Pa Solar Plant has a larger scale with a total capacity of GRI endless source that GEC uses for Solar projects. In 4Q of 2018, 69 MWp. Locating in the Central Highlands, where Solar radiation GEC owns 14 Hydropower plants and 2 Solar 301 GEC put into operation the first 2 Solar plants in Vietnam with a is much higher at 4.8-5.2 kWh/sqm/day - the best nationwide - plants, using Renewable Sources of water from total capacity of 117 MWp. The total average power output of with 1,900-2,200 hours/year of sunshine. Operating 57 days in river basins and sunlight in all possible locations, to the 2 Plants come to about 163 million kWh/year. Phong Dien 2018, the Plant's production output reached ~ 6 million kWh produce electricity. These are 2 invaluable natural Solar Plant - with a capacity of 48 MWp - is located in Thua Thien out of a projected total annual output of 103 million kWh. Soon, resources, if properly and rationally utilized, it will Hue Province where the sun shines 1,700-2,000 hours/year, with GEC will focus on investment and development of Solar projects result to many benefits for the Company and the the radiation of 4.6 kWh/m2/day. This Plant has produced ~ 12 with 4 plants with a total capacity of 196 MWp are expected to whole society; thereby enhancing community million kWh within 97 days of operation, or an annual average operate right in 2019; 2 plants with a total capacity of 79 MWp sustainability. Water, Sun and Wind have been and output of around 60 million kWh. are expected to operate around 2020-2021. continued to be important source of Renewable Energy, used as input in GEC's business activities. The Solar Energy potential in Vietnam
River flow rate is the input to generate electricity of Hydropower plants Number of Radiation Regions GEC Projects sunshine hours/ Evaluation Evaluation (kWh/sqm/day) Year GRI 301-1 MATERIAL BY WEIGHT OR VOLUME TOTAL RESERVOIR Northeast - 1,600 - 1,750 Not potential 3.3 - 4.1 Normal CAPACITY ~ 274 3 WATER VOLUME Million m Northwest - 1,750 - 1,800 Not potential 4.1 - 4.9 Normal GEC maintains stable annual electricity production reservoir with a total reservoir capacity of ~ 274 by way of controlling and regulating water through million m3, which plays an important role in North Central Phong Dien 1,700 - 2,000 Potential 4.6 - 5.2 Good our plants in both dry and rainy seasons. The water regulating water for factories. Ham Phu 2, Ham Phu 1, in Hydropower plants is all returned to downstream South 2,200 - 2,500 Very potential 4.3 - 4.9 Very good after going through the turbines, without affecting The output of power plants is closely related to Tay Son 1, Tay Son 2 the natural flow of the basin. the water flow, the stronger the water flow, the Central Highlands, Krong Pa, Duc Hue 1, 2,000 - 2,600 4.9 - 5.7 Very good higher the output. In 2018, unfavorable weather Central Coast and South Duc Hue 2 Very potential GEC Hydropower plants are located in the conditions in the first months and drought in catchment of large rivers and streams namely Ba the last 2 months reduced the amount of water Country Average 1,700 - 2,500 Potential 4.6 Good River (Hue); Auyn River, Dak Pi Hao, Puch, Ia Meur flow to factories. Water flow decreased by 15%
and Ia Drang Stream (Gia Lai) and Da Nhim River compared to 2017, reducing the power output of Source: WorldtechSolar, GEC (Lam Dong). Each Hydropower plant has a water the corresponding power plants.
200 2018 ANNUAL REPORT www.geccom.vn 201 COMMITMENT ON ENVIRONMENT SUSTAINABILITY FROM THE ECOSYSTEM (continued)
Environment TOTAL ELECTRICITY SOLD GRI 302 To ensure Energy security and Hydroelectricity at 16%, Wind power at 22% and Solar power at 62% by 2022. ENERGY contribute to environmental This will help GEC minimize the risk from being dependent on impacts of protection, GEC contributes clean unusual weather conditions on annual electricity production. GEC is a pioneer in electricity from Renewable sources, most prominently, electricity to the national grid annually. However, due to the specific Solar Energy. GEC's business activities are associated with Renewable Total Electricity output for sale characteristics of Hydroelectricity, sources as Sunlight, Water, Wind and Non-Renewable sources as the amount of Energy produced GWh Hydropower Solar power Electricity from EVN. In this indicator, information on Energy consumption by GEC is affected by weather and 500 in the organization will be focused on. climate change factors. Over the 426 past few years, GEC has proactively 400 362 sought solutions to reduce the 321 352 300 SELF-GENERATED impact of weather, by regulating GRI 302-1 ENERGY CONSUMPTION IN ORGANIZATION ROOFTOP SOLAR POWER and optimizing production by 238 developing Solar plants to diversify 200 the sources. In 2018, GEC put into CONSUMPTION OF ENERGY 100 FROM RENEWABLE SOURCES 31,450 operation 2 Solar plants with a total MWh capacity of 117 MWp to minimize 18 0 GEC Energy consumption from sources weather impact. This helps GEC 2016 2017 2018 2019 Plan In order to be self-sufficient in internal self-use Energy stabilize and increase output in the kWh Purchase from EVN Self-generated Solar power and to achieve the goal of cost savings and to limit near future. By June 2019, GEC shall Source: GEC the use of outside Energy sources and contribute to 100,000 put into operation the Plants of Ham environmental protection, GEC installed Solar panels 80,147 Phu 2, Duc Hue 1, and expects to 80,000 on our office buildings. Operational in 2016, Rooftop operate 2 more Plants of Ham Phu 1 Solar reached 23,870 kWh, thereafter 35,010 kWh in 60,925 60,000 and Duc Hue 2 within 2019, elevating 2017 and 31,450 MWh in 2018, meeting almost 40% 48,796 total Solar output to 313 MWp. of the Company's electricity demand. In 2018, GEC's 41,012 40,000 35,010 Rooftop Solar output increased by 32% compared 31,450 23,870 It is expected that 2019 total output to 2016 - when it was newly operated. CAGR during 20,000 of Solar Energy will increase by 13.2 2016-2018 was 15%. times yoy, and the Hydropower 0 output will be similar to that in 2018. 2015 2016 2017 2018 Total electricity sold in 2016-2018 reached about 1,127 million kWh, in ENERGY CONSUMPTION FROM which Hydropower accounted for NON-RENEWABLE SOURCES 98%, and Solar for the remaining. Total Energy consumption However, it is expected that in 2019, This source comes mostly from EVN grid, to serve the proportional ratio of Energy the operation of our offices, as GEC power plants kWh output will change fundamentally are often located in remote areas, so the electricity 120,000 when Solar Energy would account is connected into EVN's grid to supply to EVN's 84,795 for 40% compared to the 2% during consumers. GEC does not provide connections 80,147 80,246 2016-2018. In addition, GEC is 80,000 from our power plants to our offices. By installing 76,022 actively researching and developing the Solar panels on building’s rooftop, GEC cut technologies and selecting suitable down electricity purchased from EVN grid in 40,000 locations for upcoming Wind power 2018 by 40% compared to 2015 - the time GEC projects, to develop synchronously had not installed Solar panels. Developing Solar power is a way to minimize the unusual impacts of weather 0 2015 2016 2017 2018 Source: GEC
202 2018 ANNUAL REPORT www.geccom.vn 203 COMMITMENT ON ENVIRONMENT Environment SUSTAINABILITY FROM THE ECOSYSTEM (continued) GRI 306 WASTE WATER AND WASTE Environment Environment protection towards sustainable development goals GRI is attracting society attention, in line with provisions of the law. 305 EMISSION Recognizing the responsibility and importance of environment protection, GEC focuses on compliance activities with domestic standards as well as international standards, making contribution to GRI 305-5 REDUCING GREENHOUSE GAS EMISSION (GHG) wonderful life for the community and society.
TOTAL WASTE BY CATEGORY For all of GEC Hydropower and GRI 306-2 Solar plants in 2018 with a total AND HANDLING METHODS power output of 380 million Complying with the Law on Environmental Protection 2014, Decree 38/2015/ND-CP on management kWh contribute to reduce of waste, GEC separates the production process into 2 categories of household waste and hazardous waste. However, as Energy generation is a specific activity, the household waste amount is not noticeable. 305,000 tons of CO2/year. Domestic solid waste at the plants is collected and burned, ensuring no impact on the environment. Hydropower and Solar plants in 2018 with a total power output of 380 million kWh contribute to HAZARDOUS WASTE
reduce 305,000 tons of CO2/year. In 2018, Solar Hazardous waste at the plant is mainly hydraulic oil, plants contributed 5% CO2 reduction compared to 95% from Hydroelectricity, as Solar plants have for lubricating the machinery. Hydraulic oil is used to Harzadous waste - Hydraulic oil lubricate generator turbine bearings and other parts. just started operating for less than 3 months. In Tons 2019, if Solar plants operate at full capacity with an To limit corrosion, periodically once a year for the expected output of 163 million kWh, Solar Power turbine bearings, and every 3 years for other parts, 20 replacement of hydraulic oil is carried out, generating will help reduce CO2 by 49,503 thousand tons, up a large amount of waste oil. 820% and 243% compared to the end of 2018. 15 14.5 It is expected that with the participation of the To ensure economic efficiency and contribute to 10.6 upcoming Solar projects, CO2 emission reduction 9.5 environmental protection, GEC keeps track of the 10 will increase 57% in 2019, contributing to protect 7.5 the environment and ecosystems. efficient use of hydraulic oil to reduce annual hazardous Replacing Fossil Energy with Renewable Energy is an inevitable trend of Sustainable development waste. Specifically, the amount of hazardous waste 5 decreased by 35% during 2016-2018. GEC has signed a contract with a unit that collects and processes 0 ll GEC's plants use Water (Hydro) and Sunlight (Solar) to CO2 EMISSION REDUCTION hazardous waste once a year. 2015 2016 2017 2018 produce electricity and absolutely do not make use of Source: GEC A Fossil energy. Therefore, electricity produced by GEC is clean, and does not generate greenhouse gases. This contributes 305,000 HOUSEHOLD WASTE Tons CO2/Year significantly to the reduction of CO2 emissions annually. Unlike Thermal and Biomass plants, electricity output from Hydropower In 2018, besides maintaining stable operation of Household waste power plants, GEC put into operation 2 Solar plants Tons and Solar Power does not only generate CO2 but also even CO2 emission reduction which increased the number of employees by 11%, to reduces CO2 emissions. Thousand tons 5 4.5 600 349 people, thus an increase in household waste of 4.2 the whole Company. 3.7 3.7 The more commercial output, the higher the rate of CO2 emission 481 4 reduction. In 2017, the large input of Water lead to a sharp increase 500 in electricity from Hydro plants, which also meant a reduction of 400 Most GEC's power plants are developed in remote areas 3 343 CO emissions by 343,000 tons. By 2018, the task of reducing CO 254 305 where public garbage collection is unavailable. Therefore, 2 2 300 emission were down by 11% due to lower output from Hydropower 220 to minimize the impact of waste, GEC have arranged 2 compared to 2017. In addition to maintain stable operation of 14 200 the storage areas in the plants according to current regulations, which shall be solved by incineration. GEC 1 power plants, in 2018, GEC operated 2 more Solar plants with 100 has burned the waste at sites far from residential areas commercial electricity output of 17.7 million kWh - resulting in 0 0 a reduction of CO2 emissions by 14,443 tons. Thus, for all of GEC and water sources, to limit the impact on safety and 2015 2016 2017 2018 Plan 2019 2015 2016 2017 2018 health of employees as well as surrounding communities. Source: GEC Source: GEC
204 2018 ANNUAL REPORT www.geccom.vn 205 COMMITMENT ON THE COMMUNITY
BENEFITS PROVIDED TO COMMUNITY & SOCIETY ENGAGEMENT GRI 401-2 FULL-TIME EMPLOYEES TOTAL REMUNERATION EXPENSES VND 15Billion Society The total remuneration expenses GEC always upholds the proper execution of remuneration policy including benefits for full-time for employees, constant improvement of workplace quality, and the adherence to employees’ legitimate rights and benefits under GRI employees, employees working “Devotion - Competency - Talent” applicable regulations. The total remuneration expenses including 401 EMPLOYMENT away from home and benefits for benefits for full-time employees, employees working away from home represents three core values of GEC’s female employees in 2018 were and benefits for female employees in 2018 were VND 15 billion, a 15% hiring policy, designed to enable VND 15 billion, a 15% increase increase against the VND 13 billion recorded in 2017. Remuneration NUMBER OF NEW HIRED EMPLOYEES expenses accounted for 3% of Revenue in 2018, up by one percentage GRI 401-1 the Company to recruit talents and AND EMPLOYEE TURNOVER against the VND 13 billion point against the 2% in 2017. GEC constantly strives to offer the best experts in the Energy sector. recorded in 2017. remuneration policy to acquire and retain talents. GEC’s employees always feel secured and satisfied since their life is well taken care of, acing the increasingly competitive labor market, the Number of employees including resignation and new hires both materially and spiritually. This has helped improve productivity acquisition and retention of high-quality HR is now a Total employees Resigned employees New hires and efficiency as well as minimized human resource risk. tough issue for employers, especially those operating F 350 in specific industries with high requirements for expertise as 319 No. Type of policy Details well as practical experience, like GEC. The Company, therefore, 300 296 275 has featured great importance to build a professional working 249 • Compulsory insurances including social security, health care and unemployment 250 Remuneration policy for environment, maintain competitive, fair and reasonable 1 • Advanced benefits: Periodical medical check, birthday gift, vacations full-time employees remuneration policy, and enable employees to develop 200 • Middle and Senior managers: BaoViet Healthcare - comprehensive health care their personal competencies to gain recognition in their 150 career path. Employees’ trust in the management’s strategic Since 2017, GEC has adopted an allowance policy for employees working away from home: orientations and their efforts have made it possible to GEC to 100 75 • Due to industry-specific conditions, GEC’s employees usually have to travel to create a corporate culture that is profoundly characterized by 68 50 37 61 different locations “Trust and Responsibility”. In order to make the best preparation 7 28 Policy toward 5 8 2 employees working • The Company provides sufficient working conditions and reasonable allowances for the expansion of operations to other forms of Energy, over 0 away from home • The maximum allowance ranges between VND 3 and 5 million per month the past several years, GEC’s HR has gradually increased with 2015 2016 2017 2018 • The maximum bonus for fulfillment of responsibilities is at least 30% for Region I and II, a yoy rise of 8% in 2018 and a CAGR of 9% from 2015 to 2018. Source: GEC 40% for Region III, and 50% for Region IV Number of resignation and new hires by gender (The determination of Regions is based on the Government’ regulations on minimum salary under Decree141/2017/ND-CP) The number of new hires in 2018 was 75, a yoy increase Male new hires Female new hires • The top priority has always been granted to GEC’s female employees on our path of 10%. In particular, the CAGR in the 2015-2018 period Male resigned employees Female resigned employees reached at very high level of 120%. The ratio of new hires to of development total workforce in 2018 was 24%, up from the figures of the 16 • GEC strictly adheres to applicable rules by not involving female employees in prohibited areas • Equality for female employees is ensured according to applicable laws in terms of most recent 3 years, i.e. 3%, 10% and 23%. The growth of Remuneration policy on HR has - as can be seen - in consistent with the expansion 3 recruitment, employment, training, salary, bonus, promotion, remuneration, working 10 45 female employees of business. Notably, the build-up reached a climax in conditions, working safety, working hours, rest hours, and other benefits 2017 and 2018, when GEC prepared staffing for the • In addition to the regulatory maternity leave, GEC offers our female employees 27 15 development of Solar Energy. 80% of new hires were male, 13 additional expenses which can be reasonably explained by GEC’s operations in • We ensure jobs for female employees after maternity leave 7 60 the development of power projects. 1 55
1 4 16 Structure of employee benefits in 2017 Structure of employee benefits in 2018 The number of resignation recorded a corresponding 2 increase in 2018 with 61 people, up by 65% against 2017. 5 12 GEC’s turnover rate in 2018 was 19%, up from the 13% 2015 2016 2017 2018 recorded for 2017. The ratio of new hires, however, was still Source: GEC much higher than the turnover rate, which is consistent Compulsory insurance Compulsory insurance 34% with the Company's situation. The turnover rate for male Other expenses 31% Other expenses employees in 2018 was high at 74% due to the Company's turnover did not have negative impacts on GEC’s business, high proportion of males in total workforce, i.e. 84%. In the rather, it created the needed screening of the workforce Medical checkup expenses 52% Medical checkup expenses 55% 2016-2018 period, GEC’s geographic expansion of business and enhanced creativity as well as efficiency. In addition, Travel expenses Travel expenses resulted in a requirement for relocation. Employees who 5 cases of maternity leave during the year, however, all Birthday gifts Birthday gifts could not meet this requirement voluntarily left the returned to work. 2% 3% 14% Company with a rate of 100%. The relatively low rate of 7% 1% 1% Source: GEC
206 2018 ANNUAL REPORT www.geccom.vn 207 COMMITMENT ON THE COMMUNITY COMMUNITY & SOCIETY ENGAGEMENT (continued)
Society Society
GRI OCCUPATIONAL HEALTH GRI 403 AND SAFETY 404 TRAINING AND EDUCATION
TYPE AND DEGREE OF INJURY, OCCUPATIONAL DISEASE, LOST MAN DAYS, ABSENCE, AVERAGE HOURS OF TRAINING PER YEAR GRI 403-2 GRI 404-1 AND NUMBER OF WORK-RELATED DEATHS PER EMPLOYEE
GEC always attaches importance to training in order Operating in a specific industry, GEC considers occupational health and safety to upskill our employees, thereby building trust and TOTAL TRAINING POPULATION one of its top concerns. GEC always prioritizes the meeting partners’ requirements long-term engagement between employees and the 450 Employees as well as requests contractors’ compliance in regards to this matter. Company. Every year, GEC develops and implements training plans for employees from staff/specialist to Management levels. Training curricula, which are based on the actual needs of GEC’s operations, mainly focus on improving employees’ knowledge TOTAL TRAINING DURATION n the 2016-2018 period, no work accidents or injuries • Implementation of workplace monitoring to identify and expertise, thereby enabling them to adapt new 1,897 Hours occurred. Prioritizing the prevention of accidents over harmful factors at work; roles with greater challenges. remedies and compensation, GEC has established I • Providing OHS training to managers and employees involved The average number of training hours per trainee EHSS Department to monitor all activities associated with In 2018, GEC spent about VND 1.4 billion on training, in 2018 was about 4.2 hours. However, the training occupational health and safety. Prevention of hazards means in disciplines with strict OHS requirements to improve awareness for semi-dedicated and dedicated personnel; a yoy increase of 14% and up by a dramatic 115% duration varied depending on the characteristics of complying with the highest standards and best practices against 2016. 39 courses were provided with a total each discipline as well as the requirements of each regarding a safe and healthy work environment. The best • Issuing OHS management procedures to control the risk of training population of 450, covering all the title course. With the importance attached to build a practices adopted at GEC comprising of the compliance occupational accidents and occupational diseases; system, namely manual workers, office workers secure workplace, ensure occupational health, and with applicable rules on occupational health and safety, and the management. The total training duration upskill employees, in 2018, 16 out of 39 courses, striving toward international standards. GEC is committed • Monitoring the execution of OHS processes, regulations in 2018 was 1,897 hours, a yoy upturn of 39% and i.e. 41%, were dedicated to such topics as OHS, to apply methods to control hazards and prevent risks by and norms regarding machinery, equipment and personal surged by an impressive 191% compared to 2016, electricity safety, fire control, operation shift leader strict management measures and processes. In 2018, GEC protective equipment; in tandem with the growth of training expenses. and supervision certification, tendering. started implementing a wide range of Occupational Health and Safety (OHS) related activities. The results achieved have • Strengthening the assessment and management of been very positive with no serious incidents such as loss of workplace OHS risk, ensuring the full implementation of Total expenses and duration for training in 2016-2018 Structure of training courses in 2018 working hours or work accidents occurring. The total cost OHS as well as disaster control procedures and regulations Total training cost Total training hour of OHS in 2018 was approximately VND 200 million and was to timely detect and neutralize all risks and violations; 10% mostly spent on: VND Million Hours Intensification of communication activities; 5% • 1,600 2,000 • Material benefits for employees working in 1,897 1,800 • Recognition of individuals and teams with good 1,400 41% hazardous environment; 1,600 performance in OHS activities. 1,200 16% 1,400 • Testing of equipment and machinery subject to strict 1,360 1,000 1,200 OHS requirements; 800 1,000 1,400 600 800 1,230 600 28% 400 651 400 200 200 72 Based on laws and Integration training 0 0 requirements of certification 2016 2017 2018 bodies for quality, standards training Management skills training
Professional training Foreign training
Source: GEC
Increased budget for training and the provision of opportunities for continuous training indicates GEC’s commitment to employee development, preserve and enrich high quality HR, and improve productivity.
208 2018 ANNUAL REPORT www.geccom.vn 209 COMMITMENT ON THE COMMUNITY COMMUNITY & SOCIETY ENGAGEMENT (continued)
Society GEC also strives to achieve an equality of gender mix in our workforce, thereby eliminating the gender gap. In 2018, the proportion of female employees saw an uptrend to 16% of the total workforce, compared with 14% in 2017, a yoy increase of around 14%. In the 2015-2018 period, the share of female employees aged between 30 and 50 stabilized GRI DIVERSITY at over 80% while the share of those aged below 30 saw a slight upturn from 7% to 13%. The proportion of male 405 employees aged between 30 and 50 reduced from 78% to 64%. Meanwhile, the structure of males aged below 30 rose AND EQUAL OPPORTUNITY to 30% in 2018 from 15% in 2015.
GRI 405-1 DIVERSITY OF GOVERNANCE BODIES AND EMPLOYEES Structure of males by age group Structure of females by age group < 30 30 -50 > 50 < 30 30 -50 > 50 120% 120%
100% 100% 7% 7% 6% 6% 9% 8% 6% 5%
80% 80%
60% 78% 73% 67% 64% 60% 84% 83% 85% 82%
40% 40%
20% 20%
15% 20% 27% 30% 0 0 7% 9% 9% 13% 2015 2016 2017 2018 2015 2016 2017 2018
Source: GEC
The proportion of female Managers in GEC’s managerial personnel structure rose to 23% in 2018 from 13% in 2015 and has seen robust growth over the past 2 years. In particular, GEC - for the first time in our development history - appointed a female CEO in October 2018. These numbers are meaningful since gender equality helps GEC properly leveraging the role and capacity of each gender, thus achieving equilibrium and improving operating efficiency.
Gender equality brings a balance to improve business efficiency Manager structure by Age and Gender EC’s employee structure varies each year and is Human resources structure by age 2015-2018 experiencing a trend of rejuvenation. Between 2015 and Person <30 30 - 50 >50 Male Female 2018, the number of employees aged between from 25 18 -25 25 -35 35 - 45 > 45 G 25 to 35 increased gradually over the years, from 30% to 36% of the 100% 22 total workforce. Those aged between 18 and 25 also increased, 21 90% 20% 17% 17% 17% 20 accounting for 6% of the total head counts in 2018, compared 19 20 19 with 0% in 2015. HR advantages play an important role in 80% 19 building GEC’s brand, improving work efficiency, and enhancing 70% competitiveness. In addition, the GEC’s constantly improved 15 remuneration has enabled the Company to retain experienced 60% 50% 48% 45% 41% 13 employees for long-term development. Between 2015 and 2018, 12 50% the number of employees aged from 35 to 45 decreased but 10 still dominated the personnel structure with a share of about 40% 41% in 2018. The diversity of policies has helped GEC attract 6 6 6 30% 5 more dynamic, enthusiastic and professionally trained young 5 36% 3 3 3 workers. At the same time, the Company has been able to retain 20% 34% 35% 30% 2 a highly experienced workforce with high assertiveness and 10% 1 the ability to make accurate decisions. These 2 components of 0 0 1% 3% 6% GEC’s workforce structure are mutually complementary and will 2015 2016 2017 2018 2015 2016 2017 2018 act as the basis for the Company to become of the exemplary Source: GEC Source: GEC developers of Renewable Energy in Vietnam.
210 2018 ANNUAL REPORT www.geccom.vn 211 COMMITMENT ON THE COMMUNITY COMMUNITY & SOCIETY ENGAGEMENT (continued) Major impacts Details
• GEC’s new projects always comply with the Company's commitments with IFC Society Social impact • Environmental and social impacts assessment (ESIA) is conducted for all projects according to IFC standards assessments, including • Local communities are an important part of the assessment since they are both directly affected by a project GRI gender impact and have special interest therein: Impacts in terms of gender, land acquisition, livelihoods or recruitment needs 413 assessment, based of a project LOCAL COMMUNITIES on community-based • The process of preparing ESIA reports will be based on community consultation (from the process of participatory processes implementing EIA Report) OPERATIONS WITH LOCAL COMMUNITY ENGAGEMENT, IMPACT ASSESSMENTS, • Developing an appropriate environmental and social management plan. GRI 413-1 AND DEVELOPMENT PROGRAMS • When EIA is carried out for a project, an environmental protection action program is also in place • GEC properly implements this Program in accordance with the authority’ approval Environmental impact • For international standards, Environmental and Social Management Plan (ESMP) has proposed measures to assessment (EIA) and mitigate environmental impacts both during construction and operation phases: continuous monitoring »» Project Management Units, in collaboration with contractors, always properly follow the proposed measures »» Monitoring is simultaneously and continuously performed in both phases.
Public disclosure of information about the • All EIA and ESIA reports are published to local authorities in accordance with applicable regulations results of environmental and social impact • The publication of information is done by sending official letters or holding meeting with local authorities. assessment
• GEC projects in each site are always have programs to support local communities: Building houses of gratitude, support the purchasing of breeding cows, etc. • The assessment of the ecosystem Service and the impact of the project on the grazing and firewood gathering of the local community was done for Krong Pa Solar Project: Local community »» GEC contracted with external consultant to conduct surveys, interviews, and group discussions with development programs Related Parties of the affected villages are based on the needs »» The consultant’s report stated the project impacts as well as the relevant corrective actions that the project of local communities could implement for the local community: Assist the building of roads along the project and the dumping rocks for road improvement • At Phong Dien Solar Project, GEC provided a hot line number for the local community to contact • These measures are entirely based on the local socio-economic characteristics as well as the capacity of Business activities cohere with local development for the community the developer.
• Separate stakeholder participatory plans are developed for GEC’s new construction projects: n addition to business to allow qualified local workers to »» Analyze the level of interest and influence of the Stakeholders development activities, GEC operate projects. Stakeholder participatory »» Give appropriate actions to these Stakeholders during the construction and operation phases of a project; attaches importance to the programs based on I »» This plan includes a mechanism to resolve complaints from local communities development of local communities On the other hand, as a strategic As an Energy - Industry stakeholder mapping where our projects are implemented. partner of several international • This is a live document that is constantly updated whenever there are changes By doing this, we contribute to the institutions such as IFC and Armstrong, core of TTC Group, • The person in charge of changing contact information of the Community Liaison Officer. improvement of local people’s living GEC considers the identification GEC always upholds the standards. Since GEC’s projects are of Stakeholders as an important Group’s sustainability motto • GEC’s new construction projects have separated complaint reception mechanisms with hot line phone usually based in less accessible aspect of project development. We “Local development for numbers at the project gate and underdeveloped regions, build various information channels • The community liaison officer is responsible for receiving complaints and informing the complainant of the community”. Procedures for official the resolution the Company always attempts to to obtain feedback, understand reception and solution facilitate local people’s involvement Stakeholders’ aspirations, and provide of complaints for the • These mechanisms, which are transparent, are referenced from contractors’ mechanism for their employees: in project activities. We do this by timely responses. As part of this effort, local communities Ensure that any complaints, whether they are related to the project or not, are received and responded to prioritizing the employment of local in 2018, GEC issued a process guiding • This mechanism, when completed, will be notified to local authorities via official letter. Provide information people for the construction stage the participation of Stakeholders channels to receive formal complaints, act as a bridge between the project and the community, help deal and publishing hiring information together with a community with depression in a timely manner to avoid further unnecessary contradiction. at the local authority’s premises claim mechanism.
212 2018 ANNUAL REPORT www.geccom.vn 213 SHARING FROM SHARING FROM FOREIGN SHAREHOLDERS CONTRACTORS MOVING AND PIONEERING PROFESSIONALISM TO BUILD THE BRAND
he year 2018 saw GEC’s major transformation EPC GENERAL CONTRACTOR OF with the expansion into Solar Energy PHONG DIEN SOLAR POWER PLANT production. GEC officially became the - THUA THIEN HUE T ® pioneer in Vietnam’s Solar Energy market as the first organization to have power generation 2 Sharp Group, Japan NSN Construction and Projects in Phong Dien - Hue and Krong Pa - Gia Lai Engineering Joint Stock Company in October and December, 2018. Since then, GEC became the leading contributor to the realization We really appreciate GEC’s work, the leading Company NSN is honored to cooperate and implement Phong of Vietnam Government’s Renewable Energy in Vietnam’s Renewable Energy Industry. In the role of Dien Solar power Plant with the capacity of 35 MW, Development Strategy. As a major Shareholder that EPC Contractor for the first grid-connected Solar power as one of three EPC contractors for GEC. From the has accompanied GEC for more than 2 years from project in Vietnam, we are pleased and proud of building beginning, all Parties understood the challenges 2016 to 2018, Armstrong is very impressed by GEC’s a high quality and efficient Solar power Plant. GEC during implementation process and discussed on current road map to expand its Energy Projects accompanied and supported us to overcome problems how to overcome them together to reach the final portfolio; as well as the constant improvement of quickly during the construction process. goal, which is completing the Project on schedule operational processes to support the Company's and with the prescribed quality. Sustainable development in the long term. We believe that GEC will continue to lead Vietnam’s Energy market in the field of Renewable Energy and During the implementation process, we have expand its market share thanks to professionalism received specific requirements and professional and experience. Sharp will certainly be a partner with supervision from GEC. We look forward to GEC, not only supporting in business cooperation, but cooperating with GEC on coming projects. also in contributing to the development of Vietnam Energy Industry. Mr. Andrew Affleck General Director cum Share Representative of Armstrong Asset Management Pte. Ltd in GEC EPC GENERAL CONTRACTOR AND SUB-CONTRACTOR OF KRONG PA SOLAR POWER PLANT - GIA LAI During the construction in the sunny and JGC Vietnam Co., Ltd. from windy Central Highlands, we encountered JGC Group, Japan many difficulties and challenges such as rough construction site, harsh weather conditions, in the context of strict requirements of extremely detailed implementation plan. However, we managed to GEC - Professionalism to build the brand complete the Project as planned thanks to GEC’s proactive cooperation and flexible support. It is truly a great honor for JGC Vietnam Co., Ltd. to be chosen by GEC - a Member of TTC Group - as their partner We appreciate the professional cooperation during of main EPC general contractor in implementing the deployment. We are also grateful for the enthusiastic construction project package for Krong Pa Solar power and thorough support from GEC that helped put Plant in Gia Lai Province. This has been one of the largest the Project into operation as committed. commercial Solar power projects in Vietnam ever. We are grateful for the opportunity to participate in this Project; We wish GEC and TTC Group will develop strongly and together with GEC, we shall make great contributions as well as implementing more successful projects all to the local community and Vietnam. over Vietnam.
214 2018 ANNUAL REPORT www.geccom.vn 215 SHARING FROM CUSTOMERS STABLE ELECTRIC QUALITY
AND BEST VALUE ADDED SERVICES RETAIL CUSTOMERS POWER OUTAGES IN 2018 7,318 TIME 90% Customers From 2,000 minutes/year in 2014 to 214 minutes/year in 2018
In the past, power quality used to be As the power management unit in very poor, it was impossible to use Chu Prong District, which is also GEC’s large-capacity electrical equipment electric user, I realized that the time such as electric stoves, air conditioners, for electrical repair is shorter, within 30 etc. Since GEC has invested in the minutes. In addition, GEC also organizes construction of the new power station, meaningful annual Customer Gratitude my family has been able to use any Programs, creating connection between electrical equipment and the living the supplier and users. standard has been greatly improved. In addition, big restaurants, agricultural Customer care is continuously irrigation stations, service suppliers improved. Annually, GEC organizes are increasingly developed thanks customer satisfaction evaluations, to the consistent stable of electricity receives comments and feedback provided by GEC. from every customer; and then makes innovation in its manner and services The Company's payment method as well as electric quality, etc. Through is also more flexible. Previously, it the process of carrying out major was only direct cash payment, now innovation in the power supply and customers can authorize the bank service, I believe that GEC has been and to pay their bills. The Company links will continue to bring practical benefits Customer appreciation Program 2018 their payment process with many to its customers. big banks as Agribank, Vietinbank, Following the motto “Customers create value n cases of scheduled electric outages, BIDV, Vietcombank, etc and expands of a company”, GEC always wants to bring the Company always gives notices in their payment linkage network. advance so that customers can take Mr. Duong Quang Phuoc qualified power and provide the best value- I Specialist of Economic Infrastructure proactive actions in production and business From 2015 to 2018, the Company added services to meet the diverse needs activities, avoiding economic losses, as well also organizes the annual Customer Department, Chu Prong District of customers such as simple power supply as taking initiative in people’s daily activities. Gratitude Program, giving gifts to procedure, quick repair, minimizing outages, Electric installation procedures are simplified customers as deep appreciation. etc. From 2015 to 2018, GEC continuously to increase convenience for customers. In the We, GEC’s Customers, have been past, customers would have to present at the and will always stand side by side improved the power grid with an investment Company from 3 to 4 times to fulfill electric with the Company's development cost of more than VND 24 billion. As a result, installation procedures, but now they can for coming years. power outages time decreased significantly complete this procedure in only one visit, then from 2,000 minutes/year in 2014 to 214 minutes/ the installation shall be done within 7 days. year in 2018, dropped by 90%. Mr. Pham Duc Tien The number of new electrical installations has Head of Hop Thang Village, been increasing rapidly thanks to the credibility Ia Drang Commune, Chu Prong District for improvements in the Company's operations and services. In 2014, there were only 3,894 retail customers, but in 2018, the number increased to 7,318, an increase of 88%; mainly in the center of Chu Prong Town, Ia Phin Commune, Ia Drang Commune and Ia Kly Commune in Chu Prong District, Gia Lai Province.
216 2018 ANNUAL REPORT www.geccom.vn 217 SHARING FROM EMPLOYEES “THERE IS A CHOICE YOU HAVE TO MAKE IN EVERYTHING YOU DO. SO KEEP IN MIND THAT IN THE END, THE CHOICE YOU MAKE, MAKES YOU” -JOHN MAXWELL- EHSS TECHNOLOGY PLANNING AND AT BRANCHES DEPARTMENT DEVELOPMENT CENTER INVESTMENT DEPARTMENT AND PLANTS
GEC is an enterprise operating in After 8 years of work, starting from Leaving my hometown to Gia Working at GEC is an important Life has countless choices but Professional, dynamic, creative the field of electricity production, a Hydropower plant operator, Lai to settle down, I joined GEC milestone in my life and my the right choice and enthusiasm and daring to cope with all distribution and retails. In addition now I am Head of Station of Ayun and had an opportunity to learn career. Here, I have an opportunity will bring us success. The choice challenges are all my impressions to selling electricity produced by Thuong Hydropower Plant. After Hydropower operation course, to work with my expertise, to of working at Technology when I joined GEC. As a young the power plants to EVN. As of a long time working for GEC, with then I was transferred to Ayun Ha receive very good support Development Center brings me employee, I feel so lucky to work December 31st, 2018, the Company continuous changes towards Hydropower Plant for working. and coordination from all the not only a friendly and creative in an experienced environment also carried out electricity retailing Sustainable development goals, At GEC, I have experienced many departments. Additionally, the working environment but also with nearly 30 years of operation to more than 7,318 customers, I am now confident to say that joys, sadness and proud moments, Company's compensation policies an opportunity to practice in the Energy Industry. I am proud including organization and GEC is leading in operational proving my maturity. I have been are very good, the salary and bonus professional skills and develop of GEC as it is the first enterprise individual with many different management of small and supported and facilitated, trusted transparency keep my mind on my thinking ability. operating the Solar power Plants uses for diversified activities from medium Hydropower plant with by the management when work. At GEC, we are facilitated to in Vietnam. For me, it is a place to production to business, etc. clear criteria: assigned tasks. develop and improve ourselves in As one of the youngest and most learn and cultivate experiences professional as well as soft skills. newly-recruited Members of the from my senior colleagues, a In the past years, the Company SAFE Beside the cheerful and friendly Company, I have not noticed the place of heartwarming moments has invested in building and OPERATION colleagues, who give me As a Member of ESSH Department, outdated, but on the contrary when I have the opportunities to improving the power grid to motivation to come to work daily; whose goal is to build GEC’s everything is very professional participate in the charity programs bring the best power quality to the most important thing is that environment, health, safety and and dynamic. Although my and share with people in difficult PROFESSIONAL customers. At the same time, the GEC cares for its employees and social management system engagement time here has not circumstances; and a place to MANAGEMENT Company paid much attention to has good remuneration policies. according to international been very long, I still believe in the express my efforts and passion. its customers, regularly organized We get health care and travel standards, this is a fairly new field potential of development in this Customer Gratitude Programs and MAXIMUM every year. After 20 years working in Vietnamese companies, which Company. That is the motivation For every journey that GEC goes presented gifts to the poor people EFFICIENCY at the plant, I am really proud of requires us to constantly update for me to try and devote to the through, each milestone is of a who live near the Company's GEC’s growth, and I believe that and improve our qualifications to Company's development. historic moment. Hopefully, in Hydropower plants. In addition, Mr. Nguyen Van Quang this is my second home for me meet the job’s requirements. I am the coming development path, I the Company also offered very Head of Station, to devote all of my talents to the confident and proud to say that can devote my strength as a small practical and meaningful gifts TTC Ayun Thuong Hydropower Plant development of GEC. my organization has been and will part to the development and the to the local community in the be gradually meet Vietnam’s and Mr. Tran Hai Au success of GEC. operation location of GEC plants international standards in the field Technical staff on New Year occasion. This activity of health and safety, environment gets very good response by the Mr. Nguyen Van Nghia and society. I look forward to customers and the Government, Shift Operation Leader, accompanying GEC to create a TTC Ayun Ha Hydropower Plant Ms. Hoac Hue Lan who show great appreciation to safer working environment for Planning and Investment Executive the Company's actions. everyone, an organization with a reputation for environmental and local community responsibilities.
Mr. Pham Van Hiep Ms. Nguyen Thi Nguyet Anh Director of TTC Chu Prong Branch EHSS Specialist
218 2018 ANNUAL REPORT www.geccom.vn 219 CONTACT INFORMATION FOR RELATED PARTIES
OPERATION NETWORK INFORMATION OF PERSON IN CHARGE
Person in charge of Information Disclosure
Contact: Mr. Pham Thanh Tuan Anh Chief of Secretariat +84 28 3999 8822 - 6012 [email protected]
Integrity Hotline
Head Office TTC Representative Office in HCMC Contact: Ms. Luu Dang My Quynh Head of Internal Audit Department 114 Truong Chinh, Phu Dong Ward, 10th floor, TTC Group Office Building, 253 Hoang Van Thu, +84 28 3997 7727 - 1106 Pleiku City, Gia Lai Province Tan Binh District, Ho Chi Minh City [email protected] +84 269 3823 604 Contact: Mr. Pham Thanh Tuan Anh +84 269 3826 365 Director of Representative Office [email protected] [email protected] www.geccom.vn +84 28 3999 8822 - 6012
Branch Address Contact Email Phone Department Contact Email Phone Thanh Thuong A Hamlet, Mr. Nguyen Duy Thuan Nguyen Anh Vu TTC Auyn Ha Ayun Ha Commune, Phu [email protected] +84 269 3855 256 Investor Relations Department [email protected] +84 28 3999 8822 - 6035 Branch Director Head of Department Thien District, Gia Lai Province Ho Qui Tri Thuc 268 Hung Vuong, Chu Prong Project Development [email protected] +84 269 3823 604 - 110 Mr. Pham Van Hiep Head of Department TTC Chu Prong Town, Chu Prong District, Gia [email protected] +84 269 6275 190 Branch Director Bui Thi Thuy Hang Lai Province Project Management [email protected] +84 269 3823 604 - 110 Deputy Manager Da Sar Commune, Lac Duong Mr. Nguyen Manh Hung TTC Lam Dong [email protected] +84 263 3615 091 Tran Hoang Thong Anh District, Lam Dong Province Branch Director EHSS [email protected] +84 28 3999 8822 - 6051 Manager Ro Village, Lo Pang Commune, Mr. Le Quang Quoc Dung TTC Mang Yang My Thach District, Gia Lai [email protected] +84 357 777 779 Trinh Vinh Thanh Branch Director Sales [email protected] +84 269 3823 604 - 123 Province Manager 189 Pham Van Dong, Mr. Truong Van Lan TTC Thua Thien Hue [email protected] +84 234 3933 913 Vy Da Ward, Hue City Branch Director
220 2018 ANNUAL REPORT www.geccom.vn 221 55% GROSS PROFIT MARGIN 2018
WindGió,Năng Năng power lượng lượng is gió expected là một totrong contribute những mục22% tiêuof GEC chủ capacity lực của GECby 2022 trong chiến lược phát triển bền vững đồng bộ các loại hình năng lượng
VIEW ON FINANCE INVESTMENT SYNERGY BRIGHTENING UP THE FUTURE
2018 MARKS THE NEW DEVELOPMENT CYCLE OF GIA LAI 224 Summary on 2018 Audited Separate Financial Statements ELECTRICITY WITH THE MISSION OF CONTRIBUTING TO ENERGY 229 2018 Audited Consolidated Financial Statements SECURITY. THIS IS ALSO A STEPPING STONE IN GATHERING ALL RESOURCES TO EXPAND INVESTMENT, SAFEGUARD OPERATION, ENSURE EFFICIENT AND TRANSPARENT BUSINESS IN ALL ACTIVITIES, GET READY FOR BREAKTHROUGHS AND 05 BOOM IN THE FUTURE. SEPARATE BALANCE SHEET as at December 31st, 2018 Form B 01 – DN
Ending balance Beginning balance Ending balance Beginning balance Code ASSETS Note Code RESOURCES Note VND VND VND VND 100 CURRENT ASSETS 966,416,078,355 294,766,082,853 300 LIABILITIES 1,741,575,548,237 201,023,735,729 110 Cash and cash equivalents 3 572,264,189,785 79,904,952,746 310 Short-term liabilities 381,118,713,750 42,606,315,734 111 Cash 15,247,093,885 40,604,952,746 311 Short-term trade accounts payable 13 315,198,040,326 9,346,271,228 112 Cash equivalents 557,017,095,900 39,300,000,000 312 Short-term advances from customers 594,400,000 594,400,000 120 Short-term investment 252,000,000,000 6,672,250,000 123 Investments held to maturity 4(a) 252,000,000,000 6,672,250,000 313 Tax and other payables to the State Budget 14 8,459,725,103 9,822,324,364 130 Short-term receivables 100,872,524,438 198,692,137,509 314 Payable to employees 1,840,797 37,499,154 131 Short-term trade accounts receivable 5 72,023,088,780 51,894,102,350 315 Short-term accrued expenses 15 3,133,443,028 1,937,790,486 132 Short-term prepayments to suppliers 6 3,964,652,165 3,486,206,480 318 Short-term unearned Revenue - 621,468,000 135 Short-term lending 7(a) 1,291,000,000 102,727,858,552 319 Other short-term payables 16 4,484,502,606 10,822,655,124 136 Other short-term receivables 8(a) 23,590,996,316 41,284,448,586 137 Provision for doubtful short-term debts - (700,478,459) 320 Short-term borrowings 17(a) 40,660,660,000 3,824,699,000 139 Shortage of assets awaiting resolution 2,787,177 - 322 Bonus and welfare fund 18 8,586,101,890 5,599,208,378 140 Inventories 9 7,897,779,840 8,965,441,721 330 Long-term liabilities 1,360,456,834,487 158,417,419,995 141 Inventories 7,897,779,840 8,965,441,721 338 Long-term borrowings 17(b) 1,356,889,164,636 154,512,494,999 150 Other current assets 33,381,584,292 531,300,877 342 Provision for long-term liabilities 19 2,994,424,750 2,994,424,750 151 Short-term prepaid expenses 10(a) 3,171,334,425 462,353,626 343 Science and technology development fund 573,245,101 910,500,246 152 Value Added Tax to be reclaimed 30,210,249,867 9,637,251 153 Tax and other receivables from the State Budget - 59,310,000 400 OWNERS’ EQUITY 2,167,807,098,521 1,166,073,979,817 200 LONG-TERM ASSETS 2,942,966,568,403 1,072,331,632,693 410 Capital and reserves 2,167,807,098,521 1,166,073,979,817 210 Long-term receivables 780,499,803 27,662,017,532 411 Owners’ capital 19, 20 1,941,825,500,000 970,912,750,000 215 Long-term lending 7(b) - 16,704,000,000 411a - Ordinary shares with voting rights 1,941,825,500,000 970,912,750,000 216 Other long-term receivables 8(b) 1,271,341,882 10,958,017,532 412 Share premium 20 28,963,735,153 28,940,687,153 219 Provision for doubtful long-term debts (490,842,079) - 220 Fixed assets 2,543,636,227,324 756,410,595,606 418 Investment and development fund 20 24,927,813,411 24,927,813,411 221 Tangible fixed assets 11(a) 2,539,816,319,252 752,398,295,819 421 Undistributed earnings 20 172,090,049,957 141,292,729,253 222 Historical cost 2,912,839,214,826 1,060,682,194,778 421a - Undistributed post-tax profits of previous years 44,201,454,253 26,869,193,074 223 Accumulated depreciation (373,022,895,574) (308,283,898,959) 421b - Post-tax profit of current year 127,888,595,704 114,423,536,179 227 Intangible fixed assets 11(b) 3,819,908,072 4,012,299,787 440 TOTAL RESOURCES 3,909,382,646,758 1,367,097,715,546 228 Historical cost 4,571,417,184 4,746,417,184 229 Accumulated amortisation (751,509,112) (734,117,397) 240 Long-term asset in progress 15,186,876,903 18,577,242,888 242 Construction in progress 12 15,186.876,903 18,577,242,888 250 Long-term investments 4(b) 364,467,860,449 256,865,646,909 251 Investments in Subsidiaries 366,935,646,909 256,865,646,909 254 Provision for long-term investments (2,467,786,460) - 260 Other long-term assets 18,895,103,924 12,816,129,758 261 Long-term prepaid expenses 10(b) 18,895,103,924 12,217,244,808 Nghiem Thi Le Quyen Tran Thi Hong Tham Nguyen Thai Ha 262 Deferred income tax assets - 598,884,950 Preparer Chief Accountant General Director
270 TOTAL ASSETS 3,909,382,646,758 1,367,097,715,546 February 28th, 2019
224 2018 ANNUAL REPORT www.geccom.vn 225 SEPARATE INCOME STATEMENT SEPARATE CASH FLOW STATEMENT for the year ended December 31st, 2018 Form B 02 – DN for the year ended December 31st, 2018 Form B 03 - DN Indirect method
Current year Previous year Current year Previous year Code Note Code Note VND VND VND VND Net Revenue from sale of goods and CASH FLOWS FROM OPERATING ACTIVITIES 10 22 314,813,574,479 284,411,855,048 services rendered 01 Net accounting profit before tax 149,087,448,045 138,376,954,059 11 Cost of goods sold and services rendered 23 138,908,459,543 131,969,974,191 Adjustments for: Gross profit from sale of goods and 20 175,905,114,936 152,441,880,857 02 Depreciation and amortisation 64,719,818,906 51,362,272,807 services rendered (20 = 10 - 11) 03 Provisions 2,613,037,364 3,340,015,925 21 Financial income 24 62,941,473,166 61,440,207,612 04 Unrealised foreign exchange losses 25 812,475,367 3,262,665 22 Financial expenses 25 35,757,646,555 17,225,748,001 05 Profits from investing activities (73,946,379,386) (54,339,738,810) 23 - Including: Interest expense 25 32,343,782,642 16,564,766,574 06 Interest expense 25 32,343,782,642 16,564,766,574 Operating profit before changes in 25 Selling expenses 588,486,215 960,049,966 08 175,630,182,938 155,307,533,220 working capital 26 General and administration expenses 26 65,322,353,098 51,438,736,310 09 Increase in receivables (43,519,026,193) (20,175,222,306) 30 Net operating profit (30 = 20 + 21 - 22 - 25 - 26) 137,178,102,234 144,257,554,192 10 (Increase)/decrease in inventories (143,155,050) 380,245,628 31 Other income 15,011,146,609 4,570,331,757 11 Decrease in payables (24,012,976,535) (3,818,317,710) 32 Other expenses 3,101,800,798 10,450,931,890 12 (Increase)/decrease in prepaid expenses (9,386,839,915) 1,980,515,753 14 Interest paid (31,086,333,528) (17,330,707,618) 40 Net other income/(expenses) (40 = 31 - 32) 27 11,909,345,811 (5,880,600,133) 15 Business income tax paid 14 (10,991,619,254) (6,656,970,724) 50 Net accounting profit before tax (50 = 30 + 40) 149,087,448,045 138,376,954,059 17 Other payments on operating activities (7,550,973,662) (7,054,444,440) 51 Business income tax - current 28 10,196,200,217 8,269,011,970 20 Net cash inflows from operating activities 48,939,258,801 102,632,631,803 52 Business income tax - deferred 28 598,884,950 (598,884,950) CASH FLOWS FROM INVESTING ACTIVITIES 60 Net profit after tax (60 = 50 - 51 - 52) 138,292,362,878 130,706,827,039 Purchases of fixed assets, construction of 21 (1,538,690,314,680) (37,292,595,627) fixed assets 22 Proceeds from disposals of fixed assets 19,600,831,000 1,523,363,636 23 Loans granted (276,400,000,000) (133,600,000,000) 24 Collection of loans 148,869,250,000 136,989,000,000 25 Investments in other entities (110,070,000,000) (33,416,000,000) 26 Proceeds from divestment in other entities - 42,944,043,659 27 Dividends and interest received 86,681,532,124 52,853,647,182 Net cash (outflows)/inflows from 30 (1,670,008,701,556) 30,001,458,850 investing activities
Nghiem Thi Le Quyen Tran Thi Hong Tham Nguyen Thai Ha Preparer Chief Accountant General Director
February 28th, 2019
226 2018 ANNUAL REPORT www.geccom.vn 227 SEPARATE CASH FLOW STATEMENT (continued) for the year ended December 31st, 2018 Form B 03 – DN Indirect method
Current year Previous year Code Note VND VND CASH FLOWS FROM FINANCING ACTIVITIES 31 Proceeds from issuance of shares 971,069,898,000 - 33 Proceeds from borrowings 1,427,594,833,806 93,571,151,173 34 Repayments of borrowings (188,566,703,169) (155,412,325,825) 36 Dividends paid (96,672,260,772) - 40 Net cash inflows/(outflows) from financing activities 2,113,425,767,865 (61,841,174,652) 50 Net increase in cash and cash equivalents 492,356,325,110 70,792,916,001 60 Cash and cash equivalents at beginning of year 3 79,904,952,746 9,115,299,410 61 Effect of foreign exchange differences 2,911,929 (3,262,665) 70 Cash and cash equivalents at end of year 3 572,264,189,785 79,904,952,746
Nghiem Thi Le Quyen Tran Thi Hong Tham Nguyen Thai Ha Preparer Chief Accountant General Director
February 28th, 2019
2018 CONSOLIDATED FINANCIAL STATEMENTS
228 2018 ANNUAL REPORT www.geccom.vn 229 CORPORATE INFORMATION
Enterprise registration No. 5900181213 dated September 9th, 2010 was initially issued by the Department of Board of Supervision Ms. Pham Ngoc Thanh Mai Chief Supervisor certificate Planning and Investment of Gia Lai Province and the 15 amendment dated October (from March 22nd, 2018 16th, 2018. to September 17th, 2018) Ms. Hoang Thi Mai Thuy Chief Supervisor Board of Directors Mr. Tan Xuan Hien Chairman (until March 20th, 2018) (from March 26th, 2018, Mr. Trinh Xuan Ha Member former Vice Chairman) (from March 20th, 2018 Mr. Thai Van Chuyen Chairman to September 17th, 2018) (until March 26th, 2018) Mr. Han Phi Hai Member Mr. Deepak Chand Khanna Member (until March 19th, 2018) Mr. Andrew Mark Affleck Member Mr. Mai Van Nho Member (from September 18th, 2018) (from March 20th, 2018 to September 17th, 2018) Mr. Yasushi Ujioka Member (until September 18th, 2018) Ms. Tran Thi Nga Member (until March 19th, 2018) Ms. Nguyen Thuy Van Member (from September 18th, 2018) Board of Management Ms. Nguyen Thai Ha General Director (from October 10th, 2018) Ms. Dao Thi Thien Thanh Member (until September 18th, 2018) Mr. Le An Khang General Director (until October 9th, 2018) Ms. Pham Ngoc Thanh Mai Member (from September 18th, 2018) Mr. Phan Thanh Lac Deputy General Director Ms. Do Thu Ngan Independent Member Mr. Nguyen Dinh Tuan Deputy General Director (from September 18th, 2018) Mr. Le Thanh Vinh Deputy General Director Audit Committee Ms. Nguyen Thuy Van Head Mr. Ha Nguyen Hoang Deputy General Director (from September 18th, 2018) (from January 2nd, 2019) Mr. Deepak Chand Khanna Member Ms. Tran Thi Kim Chi Deputy General Director (from September 18th, 2018) (until March 15th, 2018) Ms. Pham Ngoc Thanh Mai Member Legal representative Mr. Tan Xuan Hien Chairman (from September 18th, 2018, former Chief Supervisor) Registered office 114 Truong Chinh Street, Phu Dong Ward Pleiku City, Gia Lai Province, Vietnam Auditor PwC (Vietnam) Limited
230 2018 ANNUAL REPORT www.geccom.vn 231 STATEMENT OF RESPONSIBILITY OF THE BOARD OF MANAGEMENT INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF THE COMPANY IN RESPECT OF THE CONSOLIDATED OF GIA LAI ELECTRICITY JOINT STOCK COMPANY FINANCIAL STATEMENTS
The legal representative of Gia Lai Electricity Joint Stock Company (“the Company”) authorises the Board of Management of the We have audited the accompanying consolidated financial statements of Gia Lai Electricity Joint Stock Company (“the Company”) Company to be responsible for preparing consolidated financial statements of the Company and its Subsidiaries (together, “the and its Subsidiaries (together, “the Group”) which were prepared on December 31st, 2018 and approved by the Board of Management Group”) which give a true and fair view of the consolidated financial position of the Group as at December 31st, 2018, and the on February 28th, 2019. The consolidated financial statements comprise the consolidated balance sheet as at December 31st, 2018, consolidated results of its operations and its consolidated cash flows for the year then ended. In preparing these consolidated the consolidated income statement and the consolidated cash flow statement for the year then ended and explanatory notes to the financial statements, the Board of Management is required to: consolidated financial statements including significant accounting policies, as set out on pages 234 to 285. The Board of Management’s Responsibility • Select suitable accounting policies and then apply them consistently; The Board of Management of the Company is responsible for the preparation and the true and fair presentation of these • Make judgments and estimates that are reasonable and prudent; and consolidated financial statements in accordance with Vietnamese Accounting Standards, the Vietnamese Corporate Accounting System and applicable regulations on the preparation and presentation of consolidated financial statements and for such internal • Prepare the consolidated financial statements on a going concern basis unless it is inappropriate to presume that the Group will control which the Board of Management determines necessary to enable the preparation and fair presentation of consolidated continue in business. financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility The Board of Management is responsible for ensuring that proper accounting records are kept which disclose, with reasonable accuracy at any time, the consolidated financial position of the Group and which enable consolidated financial statements to Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We conducted our audit be prepared which comply with the basis of accounting set out in Note 2 to the consolidated financial statements. The Board in accordance with Vietnamese Standards on Auditing. Those standards require that we comply with ethical standards and of Management is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the requirements and plan and perform the audit in order to obtain reasonable assurance as to whether the consolidated financial prevention and detection of fraud and other irregularities. statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS financial statements. The procedures selected depend on the auditor’s judgment, including an assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, We hereby approve the accompanying consolidated financial statements as set out on pages 6 to 61 which give a true and fair the auditor considers internal control relevant to the Group’s preparation and true and fair presentation of the consolidated view of the consolidated financial position of the Group as at December 31st, 2018, and the consolidated results of its operations financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of and its consolidated cash flows for the year then ended in accordance with Vietnamese Accounting Standards, the Vietnamese expressing an opinion on the effectiveness of the Group’s internal control. An audit also includes evaluating the appropriateness Corporate Accounting System and applicable regulations on preparation and presentation of consolidated financial statements. of accounting policies used and the reasonableness of accounting estimates made by the Board of Management, as well as evaluating the overall presentation of the consolidated financial statements. On behalf of the Board of Management, We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31st, 2018, its consolidated financial performance and consolidated cash flows for the year then ended in accordance with Vietnamese Accounting Standards, the Vietnamese Corporate Accounting System and applicable regulations on the preparation and presentation of consolidated financial statements. Other Matter The independent auditor’s report is prepared in Vietnamese and English. Should there be any conflict between the Vietnamese and English copies, the Vietnamese copy shall take precedence. Nguyen Thai Ha For and on behalf of PwC (Vietnam) Limited General Director Authorised signature
Gia Lai Province, SR Vietnam February 28th, 2019
Mai Viet Hung Tran Vo Ngoc Huyen Audit Pracising License No. 0048-2018-006-1 Audit Pracising Licence No. 2610-2018-006-1 Authorised signatory
Report reference number: HCM7643 Ho Chi Minh City, February 28th, 2019
232 2018 ANNUAL REPORT www.geccom.vn 233 CONSOLIDATED BALANCE SHEET as at December 31st, 2018 Form B 01 – DN/HN
Ending balance Beginning balance Ending balance Beginning balance Code ASSETS Note Code RESOURCES Note VND VND VND VND 100 CURRENT ASSETS 1,229,872,510,447 485,811,274,611 300 LIABILITIES 1,952,623,594,905 340,592,087,280 110 Cash and cash equivalents 3 609,411,234,157 222,999,837,459 310 Short-term liabilities 528,243,118,007 103,424,656,357 111 Cash 48,669,299,897 79,499,837,459 311 Short-term trade accounts payable 15 368,213,754,992 15,864,492,583 112 Cash equivalents 560,741,934,260 143,500,000,000 312 Short-term advances from customers 1,341,163,081 3,389,115,713 120 Short-term investment 252,000,000,000 8,172,250,000 313 Tax and other payables to the State 16(b) 15,713,948,521 21,775,346,416 123 Investments held to maturity 4 252,000,000,000 8,172,250,000 314 Payable to employees 1,617,106,333 1,527,266,640 130 Short-term receivables 245,522,072,322 227,394,496,842 315 Short-term accrued expenses 4,327,202,805 2,264,261,123 131 Short-term trade accounts receivable 5 109,562,153,409 74,686,373,191 318 Short-term unearned Revenue 2,727,271 2,727,271 132 Short-term prepayments to suppliers 6 103,336,396,377 50,090,997,292 319 Other short-term payables 17 9,862,783,621 35,424,600,335 135 Short-term lending 7 - 93,843,858,552 320 Short-term borrowings 18(a) 106,374,337,883 5,917,699,000 136 Other short-term receivables 8(a) 32,849,459,242 9,562,455,993 322 Bonus and welfare fund 19 20,790,093,500 17,259,147,276 137 Provision for doubtful short-term debts 9 (228,723,883) (789,188,186) 330 Long-term liabilities 1,424,380,476,898 237,167,430,923 139 Shortage of assets awaiting resolution 2,787,177 - 331 Long-term trade account payables 96,362,637 96,362,637 140 Inventories 24,721,958,269 26,151,056,765 336 Long-term unearned Revenue - 305,280,000 141 Inventories 10 24,721,958,269 26,151,056,765 338 Long-term borrowings 18(b) 1,420,255,279,818 232,384,070,181 150 Other current assets 98,217,245,699 1,093,633,545 342 Provision for long-term liabilities 20 3,455,589,342 3,471,217,859 151 Short-term prepaid expenses 11(a) 3,810,607,152 777,057,097 343 Science and technology development fund 573,245,101 910,500,246 152 Value Added Tax to be reclaimed 94,389,457,115 19,000,942 400 OWNERS’ EQUITY 2,407,935,310,832 1,318,016,946,765 153 Tax and other receivables from the State Budget 16(a) 17,181,432 297,575,506 410 Capital and reserves 2,407,935,310,832 1,318,016,946,765 200 LONG-TERM ASSETS 3,130,686,395,290 1,172,797,759,434 411 Owners’ capital 22, 23 1,941,825,500,000 970,912,750,000 210 Long-term receivables 785,499,803 10,963,017,532 411a - Ordinary shares with voting rights 1,941,825,500,000 970,912,750,000 216 Other long-term receivables 8(b) 1,276,341,882 10,963,017,532 412 Share premium 23 28,963,735,153 28,940,687,153 219 Provision for doubtful long-term debts 9 (490,842,079) - 418 Investment and development fund 23 60,968,109,047 56,347,900,991 220 Fixed assets 2,877,671,877,869 1,113,991,123,959 421 Undistributed earnings 23 145,084,524,459 120,011,502,443 221 Tangible fixed assets 12(a) 2,871,235,092,019 1,107,437,276,265 421a - Undistributed post-tax profits of previous years 81,879,674,381 31,620,215,000 222 Historical cost 3,494,120,676,243 1,634,923,252,323 421b - Post-tax profit of current year 63,204,850,078 88,391,287,443 223 Accumulated depreciation (622,885,584,224) (527,485,976,058) 429 Non-controlling interests 23 231,093,442,173 141,804,106,178 227 Intangible fixed assets 12(b) 6,436,785,850 6,553,847,694 440 TOTAL RESOURCES 4,360,558,905,737 1,658,609,034,045 228 Historical cost 7,448,934,975 7,483,934,975 229 Accumulated amortisation (1,012,149,125) (930,087,281) 240 Long-term asset in progress 215,763,242,101 18,045,866,709 242 Construction in progress 13 215,763,242,101 18,045,866,709 260 Other long-term assets 36,465,775,517 29,797,751,234 261 Long-term prepaid expenses 11(b) 22,302,642,267 14,801,647,513 262 Deferred income tax assets 21 6,234,469,009 5,267,241,281 269 Goodwill 14 7,928,664,241 9,728,862,440 Dang Nguyen Thi Kim Loan Tran Thi Hong Tham Nguyen Thai Ha 270 TOTAL ASSETS 4,360,558,905,737 1,658,609,034,045 Preparer Chief Accountant General Director February 28th, 2019
234 2018 ANNUAL REPORT The notes on pages 240 to 285 are an integral part of these consolidated financial statements. www.geccom.vn 235 CONSOLIDATED INCOME STATEMENT for the year ended December 31st, 2018 CONSOLIDATED CASH FLOW STATEMENT Form B 02 – DN/HN Form B 03 – DN/HN for the year ended December 31st, 2018 (Indirect method)
Current year Previous year Current year Previous year Code Note Code Note VND VND VND VND 01 Revenue from sales of goods and rendering of services 559,488,474,875 539,100,132,317 CASH FLOWS FROM OPERATING ACTIVITIES Net Revenue from sales of goods and rendering 01 Net profit before tax 206,938,771,984 230,436,844,464 10 26 559,488,474,875 539,100,132,317 of services Adjustments for: 11 Cost of goods sold and services rendered 27 253,487,961,656 227,296,100,212 02 Depreciation and amortisation 97,545,316,944 79,519,881,720 Gross profit from sales of goods and rendering 20 306,000,513,219 311,804,032,105 of services (20 = 10 - 11) 03 Provisions 269,636,543 345,591,175 21 Financial income 28 19,454,754,655 17,993,340,549 04 Unrealised foreign exchange loss 812,537,808 1,899,165 22 Financial expenses 29 41,137,903,234 24,627,342,830 05 Profit from investing activities (19,126,994,659) (11,160,096,178) 23 - Including: Interest expense 29 40,157,402,594 24,380,235,807 06 Interest expense 29 40,157,402,594 24,380,235,807 25 Selling expenses 588,486,215 960,049,966 08 Operating profit before changes in working capital 326,596,671,214 323,524,356,153 26 General and administration expenses 30 76,636,113,903 65,053,894,776 09 Increase in receivables (95,208,039,030) (18,082,311,652) 30 Net operating profit (30 = 20 + 21 - 22 - 25 - 26) 207,092,764,522 239,156,085,082 10 Decrease/(increase) in inventories 831,702,675 (9,969,916,861) 31 Other income 2,423,137,964 2,185,526,529 11 Increase in payables 7,666,461,734 3,130,994,556 32 Other expenses 2,577,130,502 10,904,767,147 12 (Increase)/decrease in prepaid expenses (10,534,544,809) 4,315,132,594 40 Net other expenses (40 = 31 - 32) 31 (153,992,538) (8,719,240,618) 14 Interest paid (50,130,091,792) (31,347,224,014) 50 Net accounting profit before tax (50 = 30 + 40) 206,938,771,984 230,436,844,464 15 Business income tax paid 16(b) (25,814,715,713) (16,866,164,374) 51 Business income tax - current 32 20,639,269,039 21,417,063,799 17 Other payments on operating activities (12,291,611,514) (10,902,029,679) 52 Business income tax - deferred 32 (967,227,728) (281,412,530) 20 Net cash inflows from operating activities 141,115,832,765 243,802,836,723 60 Net profit after tax (60 = 50 - 51 - 52) 187,266,730,673 209,301,193,195 CASH FLOWS FROM INVESTING ACTIVITIES Attributable to: 21 Purchases of fixed assets and construction in progress (1,810,021,007,097) (46,836,522,441) 61 Shareholders of the parent company 144,693,225,170 153,768,995,113 22 Proceeds from disposals of fixed assets 216,363,636 2,665,051,209 62 Non-controlling interests 42,573,505,503 55,532,198,082 23 Loans granted (273,800,000,000) (158,000,000,000) 70 Basic earnings per share 24(a) 1,078 1,726 24 Collection of loans 123,816,108,552 130,500,000,000 71 Diluted earnings per share 24(b) 1,078 1,726 26 Proceeds from divestment in other entities - 54,927,297,373 27 Dividends and interest received 13,904,056,547 21,360,128,900 30 Net cash (outflows)/inflows from investing activities (1,945,884,478,362) 4,615,955,041
Dang Nguyen Thi Kim Loan Tran Thi Hong Tham Nguyen Thai Ha Preparer Chief Accountant General Director
February 28th, 2019
236 2018 ANNUAL REPORT The notes on pages 240 to 285 are an integral part of these consolidated financial statements. www.geccom.vn 237 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) CONSOLIDATED CASH FLOW STATEMENT for the year ended December 31st, 2018 for the year ended December 31st, 2018 Form B 03 – DN/HN Form B 09 – DN/HN Indirect method
1 GENERAL INFORMATION Current year Previous year Code Note VND VND Gia Lai Electricity Joint Stock Company (“the Company”) is a joint stock company established from the equitisation of CASH FLOWS FROM FINANCING ACTIVITIES Gia Lai Electricity Company pursuant to Decision No. 821/QD-UBND dated June 1st, 2010 of the People’s Committee of Gia Lai Province and operated pursuant to the Enterprise registration certificate No. 5900181213 issued by the 31 Proceeds from issuance of shares 1,049,815,798,000 1,000,000,000 Department of Planning and Investment of Gia Lai Province on September 9th, 2010. The latest amendment was issued Proceeds from short-term and long-term dated October 16th, 2018. 33 1,489,392,404,794 97,718,611,173 borrowings On March 21st, 2017, the Company's shares were listed and traded on the Unlisted Public Company Market (“Upcom”) 34 Repayments of borrowings (197,374,556,274) (162,629,325,825) pursuant to Announcement No. 309/TB-SGDHN dated March 14th, 2017 and Decision No. 155/QD-SGDHN dated March th 36 Dividends paid (150,656,453,713) (29,508,840,780) 7 , 2017 issued by the Hanoi Stock Exchange.
Net cash inflows/(outflows) The principal activities of the Company and its Subsidiaries (together, “the Group”) are to produce, transmit and distribute 40 2,191,177,192,807 (93,419,555,432) from financing activities electricity; install electrical systems, construct industrial works, hydroelectric power plants, dykes, embankments and other projects; consult, survey, design, construct and supervise of small and medium hydroelectric power plants, lines 50 Net increase in cash and cash equivalents 386,408,547,210 154,999,236,332 and transformer stations (with voltage of 110 KV or less); sell machinery, equipment and other machine parts; and provide 60 Cash and cash equivalents at beginning of year 3 222,999,837,459 68,003,863,792 construction services, technical consulting services and financial investments.
61 Effect of foreign exchange differences 2,849,488 (3,262,665) The normal business cycle of the Group is 12 months. 70 Cash and cash equivalents at end of year 3 609,411,234,157 222,999,837,459 As at end of year, the Group has 529 employees (as at beginning of year: 439 employees).
The Company's head office is located at 114 Truong Chinh Street, Phu Dong Ward, Pleiku City, Gia Lai Province, Vietnam. As at end of year, the Company has five branches and two representative offices (as at beginning of year: five branches and one representative office) which are presented as below:
• TTC Lam Dong Branch: at Village 1, Da Sar Commune, Lac Duong District, Lam Dong Province, Vietnam;
• TTC Chu Prong Branch: at 268 Hung Vuong Street, Chu Prong Town, Chu Prong District, Gia Lai Province, Vietnam;
• TTC Mang Yang Branch: at Ro Village, Lo Pang Commune, Mang Yang District, Gia Lai Province, Vietnam;
• TTC Ayun Ha Branch: at National Road 25, Thanh Thuong A Village, Ayun Ha Commune, Phu Thien District, Gia Lai Dang Nguyen Thi Kim Loan Tran Thi Hong Tham Nguyen Thai Ha Province, Vietnam; Preparer Chief Accountant General Director • TTC Thua Thien Hue Branch: at 189 Pham Van Dong Street, Vy Da Ward, Hue City, Thua Thien Hue Province, Vietnam; and February 28th, 2019 • Representative office of TTC Ho Chi Minh: at 253 Hoang Van Thu Street, Ward 2, Binh Thanh Districit , Ho Chi Minh City, Vietnam; and
• Representative office of TTC Ha Noi: at House No. 09, Lane 310, Alley 22, Road Nghi Tam, Ward Tu Lien, Tay Ho District, Hanoi City, Vietnam.
238 2018 ANNUAL REPORT The notes on pages 240 to 285 are an integral part of these consolidated financial statements. www.geccom.vn 239 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
1 GENERAL INFORMATION (continued) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
As at December 31st, 2018, the Company has 9 Subsidiaries (as at December 31st, 2017: 9 Subsidiaries) which are presented 2.1 Basis of preparation of consolidated financial statements as below: The consolidated financial statements have been prepared in accordance with Vietnamese Accounting Standards, the Vietnamese Corporate Accounting System and applicable regulations on preparation and presentation of consolidated financial statements. The consolidated financial statements have been prepared under the historical cost convention. Percentage of Location Status Business activities interest (%) The accompanying consolidated financial statements are not intended to present the consolidated financial position and At At end consolidated results of operations and consolidated cash flows in accordance with accounting principles and practices begining of year generally accepted in countries and jurisdictions other than Vietnam. The accounting principles and practices utilised in of year Vietnam may differ from those generally accepted in countries and jurisdictions other than Vietnam. Gia Lai Gia Lai Hydropower Joint Produce, transmit and distribute Province, Operating 58.1 58.1 The consolidated financial statements in Vietnamese language are the official statutory consolidated financial statements Stock Company (“GHC”) electricity Vietnam of the Group. The consolidated financial statements in English language have been translated from the Vietnamese language consolidated financial statements. Thuong Lo Hydropower Thua Thien - Produce, transmit and distribute One - Member Limited Hue Province, Operating 100.0 100.0 electricity 2.2 Fiscal year Company (“GTLC”) (*) Vietnam
Construction of small and medium st st Gia Lai Construction and Gia Lai The Company's fiscal year is from January 1 to December 31 . Hydropower projects; produce Electrical Mechanic One - Province, Operating 100.0 100.0 concrete and other products from Member Limited Company Vietnam 2.3 Currency cement and gypsum Kenh Bac - Ayun Ha Gia Lai The consolidated financial statements are measured and presented in Vietnamese Dong (“VND”). Produce, transmit and distribute Hydropower Joint Stock Province, Operating 65.3 65.3 electricity Company Vietnam Transactions arising in foreign currencies are translated at exchange rates ruling at the transaction dates. Foreign exchange TTC Tay Son - Binh Dinh Binh Dinh differences arising from these transactions are recognised in the consolidated income statement. Produce, transmit and distribute Solar Power Joint Stock Province, Operating 100.0 100.0 electricity Company Vietnam Monetary assets and liabilities denominated in foreign currencies at the consolidated balance sheet date are translated at the transfer rate at the consolidated balance sheet date of the commercial bank where the Group regularly trades. The TTC Tay Son - Binh Dinh Binh Dinh Produce, transmit and distribute transfer rate is average transfer rate of the commercial bank. Foreign exchange differences arising from these translations Electricity Joint Stock Province, Operating 100.0 100.0 electricity are recognised in the consolidated income statement. Comapny Vietnam TTC Duc Hue - Long An Long An 2.4 Basis of consolidation Produce, transmit and distribute Solar Power Joint Stock Province, Operating 83.6 83.6 electricity Company Vietnam Subsidiaries TTC Duc Hue - Long An Long An Electricity Joint Stock Produce, transmit and distribute Subsidiaries are entities over which the Group has the power to govern the financial and operating policies Province, Operating 51.0 83.6 Company (“DIEN DH-LA”) electricity generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of Vietnam (*) potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to Gia Lai Consultancy and Gia Lai Operate in architecture and consult on the Group. They are de-consolidated from the date that control ceases. Energy Development One - Province, Operating 100.0 100.0 related electrical engineering Member Limited Company Vietnam
(*) During the year, the Company increased its contributed capital in GTLC and DIEN DH-LA with additional investment amounts of VND 30 billion and VND 80.1 billion, respectively.
240 2018 ANNUAL REPORT www.geccom.vn 241 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.4 Basis of consolidation (continued) 2.6 Cash and cash equivalents
Subsidiaries (continued) Cash and cash equivalents comprise cash on hand, cash at bank, demand deposits and other short-term investments with an original maturity of three months or less. The purchase method of accounting is used to account for the acquisition of Subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or 2.7 Trade receivables assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at Trade receivables are carried at the original invoice amount less an estimate made for doubtful receivables based on a the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition review by the Board of Management of all outstanding amounts at the year end. Bad debts are written off when identified. over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly 2.8 Inventories in the consolidated income statement. Inventories are stated at the lower of cost and net realisable value. Cost is determined by the weighted average method and Inter-company transactions, balances and unrealised gains and losses on transactions between group companies are includes all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Net eliminated. Accounting policies of Subsidiaries have been changed where necessary to ensure consistency with the realisable value is the estimated selling price in the normal course of business, less the estimated costs of completion and policies adopted by the Group. selling expenses. Provision is made, where necessary, for obsolete, slow-moving and defective inventory items.
Non-controlling transactions and interests 2.9 Investments
The Group applies a policy for transactions with non-controlling interests (“NCI”) as transactions with external parties to (a) Investments held-to-maturity the Group. Investments held-to-maturity are investments which the Group’s Board of Management has positive intention and ability NCI are measured at their proportionate share of the acquiree’s identifiable net assets at date of acquisition. to hold until maturity.
The divestment of Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with Investments held-to-maturity include term deposits, loans held-to-maturity for interest earning and other held-to- owners. The difference between the change in the Group’s share of net assets of the subsidiary and any consideration paid maturity investments. Those investments are accounted for at cost less provision. or received of divestment of Group’s interest in a subsidiary is recorded directly in the undistributed earnings under equity. Provision for diminution in value of investments held-to-maturity is made when there is evidence that part or the whole 2.5 Goodwill of the investment is uncollectible.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable (b) Investments in other entities assets of the acquired subsidiary/associate at the date of acquisition as accordance with current accounting requirements. Goodwill on acquisitions of Subsidiaries is recognised as an asset and is amortised on the straight-line basis over its Investments in other entities are investments in equity instruments of other entities without controlling rights or co-controlling estimated period of benefit but not exceed 10 years. rights, or without significant influence over the investees. These investments are initially recorded at cost. Provision for diminution in value of these investments is made when the entities make losses, except when the loss was anticipated in their On disposal of the investments in Subsidiaries or associates, the attributable amount of unamortised goodwill is included business plan before the date of investment. in the determination of the profit or loss on the disposal.
Goodwill is tested annually for impairment and carried at cost less accumulated amortisation less accumulated impairment losses. If there is evidence that the impairment during the year is higher than the annual goodwill charge, the Group records the impairment immediately in the accounting period.
242 2018 ANNUAL REPORT www.geccom.vn 243 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.10 Fixed assets 2.12 Prepaid expenses
Tangible and intangible fixed assets Prepaid expenses include short-term and long-term prepayments on the consolidated balance sheet. Prepaid expenses are recorded at historical cost and allocated using the straight-line method over estimated useful lives. Fixed assets are stated at historical cost less accumulated depreciation/amortisation. Historical cost includes expenditure that is directly attributable to the acquisition of the fixed assets. 2.13 Payables
Depreciation and amortisation Classifications of payables are based on their nature as follows:
Fixed assets are depreciated and amortised using the straight-line method over their estimated useful lives as follows: • Trade accounts payable are trade payables arising from purchase of goods and services.
Buildings and structures 5 - 48 years • Other payables are non-trade payables, and not relating to purchase of goods and services.
Machinery and equipment 5 - 20 years Payables are classified into long-term and short-term payables on the consolidated balance sheet based on remaining period from the balance sheet date to the maturity date. Motor vehicles, transmissions 5 - 20 years 2.14 Borrowing costs Office equipment 3 - 10 years Borrowing costs that are directly attributable to the construction or production of any qualifying assets are capitalised Computer software 3 - 8 years during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are recognised in the consolidated income statement when incurred. Others 2 - 20 years 2.15 Accrued expenses Land use rights are amortised using the straight-line method over a period from 43 to 50 years in line with land use right certificate or term of project. Borrowing costs that are directly attributable to the construction or production of any qualifying assets are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs Land use rights with indefinite term are recognised at historical cost and not amortised. are recognised in the consolidated income statement when incurred.
Disposals 2.16 Provision for severance allowances
Gains or losses on disposals are determined by comparing net disposal proceeds with the carrying amount and are In accordance with Vietnamese labour laws, employees of the Group who have worked regularly for full 12 months or recognised as income or expense in the consolidated income statement. longer, are entitled to a severance allowance. The working period used for the calculation of severance allowance is the period during which the employee actually works for the Group less the period during which the employee participates Construction in progress in the unemployment insurance scheme in accordance with the labour regulations and the working period for which the employee has received severance allowance from the Group. Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, are carried at cost. Cost includes professional fees and, for qualifying assets, borrowing costs dealt with in The severance allowance is accrued at the end of the reporting period on the basis that each employee is entitled to accordance with the Group’s accounting policies. Depreciation of these assets, on the same basis as other fixed assets, half of an average monthly salary for each working year. The average monthly salary used for calculating the severance commences when the assets are ready for their intended use. allowance is the employee’s average salary for the year prior to the balance sheet date.
2.11 Operating leases This allowance will be paid as a lump sum when the employees terminate their labour contracts in accordance with current regulations. Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the term of the lease.
244 2018 ANNUAL REPORT www.geccom.vn 245 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.17 Provisions 2.21 Revenue recognition
Provisions are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is (a) Revenue from sales of goods probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provision is not recognised for future operating losses. Revenue from sales of goods is recognised in the consolidated income statement when all five (5) following conditions are satisfied: Provisions are measured at the expenditures expected to be required to settle the obligation. If the time value of money is material, provision will be measured at the present value using a pre-tax rate that reflects current market assessments • The Group has transferred to the buyer the significant risks and rewards of ownership of the goods; of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as an interest expense. • The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; 2.18 Unearned Revenue • The amount of Revenue can be measured reliably; Unearned Revenue mainly comprises the amounts that customers paid in advance for one or many accounting periods for asset leases. The Group records unearned Revenue for the future obligations that the Group has to conduct. • It is probable that the economic benefits associated with the transaction will flow to the Group; and
2.19 Share capital • The costs incurred or to be incurred in respect of the transaction can be measured reliably.
Contributed capital of the Shareholders is recorded according to actual amount contributed and is record according to No Revenue is recognised if there are significant uncertainties regarding recovery of the consideration due or the possible par value of the share. return of goods.
Share premium is the difference between the par value and the issue price of shares; and the difference between the (b) Rendering of services repurchase price and re-issuing price of treasury shares. Revenue from rendering of services is recognised in the consolidated income statement when the services are rendered, Undistributed earnings record the Group’s accumulated results after business income tax at the reporting date and after by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion deducting the funds approved by the General Meeting of Shareholders at the time of reporting. of the total services to be provided. Revenue from rendering of services is only recognised when all four (4) following conditions are satisfied: 2.20 Appropriation of net profit • The amount of Revenue can be measured reliably; Net profit after income tax could be distributed to Shareholders after approval at Annual General Meeting, and after appropriation to other funds in accordance with the Group’s charter and Vietnamese regulations. • It is probable that the economic benefits associated with the transaction will flow to the Group;
Appropriation of net profit is as follows: • The percentage of completion of the transaction at the balance sheet date can be measured reliably; and
(a) Investment and development and fund • The costs incurred for the transaction and the costs to complete the transaction can be measured reliably.
Investment and development fund is appropriated from the Group’s net profit after tax and subject to Shareholders’ (c) Construction contracts approval at the Annual General Meeting. A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that (b) Bonus and welfare fund are closely interrelated or interdependent in terms of their design, technology and functions or their ultimate purpose of use. The bonus and welfare fund is appropriated from the Group’s net profit after tax and subject to Shareholders’ approval at the Annual General Meeting. When the outcome of a contract can be estimated reliably, contract Revenue and contract costs are recognised over the completion percentage of the contract confirmed by customers. Claims and other Revenue are accounted for as Revenue (c) Dividend distribution only when agreed with customers and confirmed by customers.
Dividend is recognised as a liability in the Group’s consolidated financial statements in the period, in which the dividends When the outcome of a construction contract cannot be reliably estimated, contract Revenue is recognised to the extent are approved by the Shareholders at the Annual General Meeting. of contract costs incurred where it is probable those costs will be recoverable. Contract costs are only recognised when incurred during the year.
246 2018 ANNUAL REPORT www.geccom.vn 247 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.21 Revenue recognition (continued) 2.26 Current and deferred income tax
(d) Interest income Income taxes include all income taxes which are based on taxable profits including profits generated from production and trading activities in other countries with which the Socialist Republic of Vietnam has not signed any double taxation Interest income is recognised on an accrued basis. agreement. Income tax expense comprises current tax expense and deferred tax expense.
2.22 Cost of goods sold and services rendered Current income tax is the amount of income taxes payable or recoverable in respect of the current year taxable profits at the current year tax rates. Current and deferred tax should be recognised as an income or an expense and included in the Cost of construction contracts is recognised over the completion percentage of construction projects and estimated profit or loss of the period, except to the extent that the tax arises from a transaction or event which is recognised, in the gross margin on the principle of prudence and matching concept with Revenue. If the total cost of the contract exceeds same or a different period, directly in equity. the total Revenue of the contract, the estimated loss is recognised as a cost. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases Cost of goods sold and cost of services rendered are cost of finished goods sold or services provided during the year, and of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is not accounted for if recorded on the basis of matching with Revenue. it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of occurrence affects neither the accounting nor the taxable profit or loss. Deferred income tax is determined at the tax 2.23 Financial expenses rates that are expected to apply to the financial year when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted by the balance sheet date. Financial expenses are expenses incurred in the year for financial activities including expenses of borrowing, provision for diminution in value of investments in other entities and losses from foreign exchange differences. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. 2.24 Selling expenses 2.27 Earnings per share Selling expenses represent expenses that are incurred in the process of providing services, which mainly include staff costs and other expenses. Basic earnings per share is calculated by dividing the net profit attributable to Shareholders after deducting the bonus and welfare fund by the weighted average number of ordinary shares outstanding during the year, excluding ordinary 2.25 General and administration expenses shares repurchased by the Company and held as treasury shares. Diluted earnings per share is calculated by dividing the net profit attributable to Shareholders, which already subtracted General and administration expenses represent expenses for administrative purposes which mainly include salary the bonus and welfare fund, by the weighted average number of ordinary shares outstanding during the year and the expenses of administrative staffs, expenses of office materials, tools and supplies, depreciation of fixed assets used for ordinary shares expected to be issued. administration and other expenses. 2.28 Related Parties
Enterprises and individuals that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common control with, the Group, including holding companies, Subsidiaries and fellow Subsidiaries are Related Parties of the Group. Associates and individuals owning, directly or indirectly, an interest in the voting power of the Group that gives them significant influence over the enterprise, key management personnel, including Directors of the Group and close members of the family of these individuals and companies associated with these individuals also constitute Related Parties.
In considering the related party relationship, the Group considers the substance of the relationship not merely the legal form.
248 2018 ANNUAL REPORT www.geccom.vn 249 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 4 INVESTMENTS HELD-TO-MATURITY
2.29 Segment reporting Ending balance Beginning balance VND VND A segment is a component which can be separated by the Group engaged in providing products or services (business segment), or providing products or services within a particular economic environment (geographical segment). Each Term deposits at banks 252,000,000,000 8,172,250,000 segment is subject to risks and returns that are different from those of other segments. A reportable segment is the Group’s business segment or the Group’s geographical segment. Term deposits include deposits at commercial banks with an original maturity of more than three months and less than 1 year. Segment reporting is prepared and presented in accordance with accounting policies applied to the preparation and presentation of the Group’s consolidated financial statements in order to help users of consolidated financial statements As at end of year, a term deposit of VND 52 billion was pledged with banks for a borrowing (Note 18(a)). understand and evaluate the Group’s operations in a comprehensive way. 5 SHORT-TERM TRADE ACCOUNTS RECEIVABLE 2.30 Accounting estimates Ending balance Beginning balance The preparation of the consolidated financial statements in accordance with Vietnamese Accounting Standards requires VND VND the Board of Management to make estimates and assumptions that affect assets, liabilities and presentation on potential assets and liabilities at the date of the consolidated financial statements as well as Revenue and expenses for the reporting Third parties year. Although accounting estimates are made by all knowledge of the Board of Management, the actual amount incurred Electricity Power Trading Company 39,593,137,890 - may be different from the estimates. Others 8,373,197,694 10,513,970,814 3 CASH AND CASH EQUIVALENTS Related Parties (Note 35(b)) 61,595,817,825 64,172,402,377 109,562,153,409 74,686,373,191 Ending balance Beginning balance VND VND Cash on hand 89,945,034 2,972,771,079 As at end of year and beginning of year, the amounts of short-term trade accounts receivable that were past due were VND 375.7 million and VND 88.7 million, respectively, as presented in Note 9. Cash at bank 48,579,354,863 76,527,066,380 Cash equivalents (*) 560,741,934,260 143,500,000,000 6 SHORT-TERM PREPAYMENTS TO SUPPLIERS 609,411,234,157 222,999,837,459 Ending balance Beginning balance (*) Cash equivalents comprise term deposits at commercial banks with an original maturity of three months or less. VND VND Third parties NSN Construction and Engineering Joint Stock Company 18,684,421,015 - Hawee Industrial Construction Joint Stock Company 17,939,725,941 - Sharp Solar Solution Asia Co., Ltd. 48,143,407,904 - Others 17,330,116,517 7,090,997,292 Related Parties (Note 35(b)) 1,238,725,000 43,000,000,000 103,336,396,377 50,090,997,292
250 2018 ANNUAL REPORT www.geccom.vn 251 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
7 SHORT-TERM LENDING 8 OTHER RECEIVABLES
(a) Short-term Ending balance Beginning balance
Book value Provision Book value Provision Ending balance Beginning balance VND VND VND VND Book value Provision Book value Provision Short-term loans - - 93,843,858,552 (343,858,552) VND VND VND VND
Advances to employees 16,463,909,157 - 5,833,879,243 - Movements in short-term loans during the year are as follows: Deposits 6,025,400,697 - 260.790,000 - Interest receivables 5,981,957,931 - 815,846,709 (11,028,732) As at Increase/ Collection/ As at Others 4,378,191,457 - 2,651,940,041 - 01.01.2018 Reclassification Write-off 31.12.2018 VND VND VND VND 32,849,459,242 - 9,562,455,993 (11,028,732) Related Parties (Note 35(b)) In which: Tam Binh An Trading Production Third parties 29,192,055,980 - 7,830,127,185 (11,028,732) 38,000,000,000 20,000,000,000 (58,000,000,000) - Joint Stock Company Related Parties (Note 35(b)) 3,657,403,262 - 1,732,328,808 - Loc Tho Joint Stock Company 32,000,000,000 - (32,000,000,000) - 32,849,459,242 - 9,562,455,993 (11,028,732) Son Tin Commodity Trading 23,500,000,000 - (23,500,000,000) - Joint Stock Company (b) Long-term Mekong Wind power - 1,800,000,000 (1,800,000,000) - Joint Stock Company Ending balance Beginning balance 93,500,000,000 21,800,000,000 (115,300,000,000) - Book value Provision Book value Provision
Third party VND VND VND VND Construction and Electrical Mechanic 343,858,552 - (343,858,552) - Long-term deposits 580,158,382 - 10,266,834,032 - Joint Stock Company Others 696,183,500 (483,828,450) 696,183,500 (345,591,175) 93,843,858,552 21,800,000,000 (115,643,858,552) - 1,276,341,882 (483,828,450) 10,963,017,532 (345,591,175) In which Third parties 778,137,500 (483,828,450) 10,464,813,150 (345,591,175) Related Parties (Note 35(b)) 498,204,382 - 498,204,382 - 1,276,341,882 (483,828,450) 10,963,017,532 (345,591,175)
252 2018 ANNUAL REPORT www.geccom.vn 253 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
9 DOUBTFUL DEBTS 11 PREPAID EXPENSES
(a) Short-term Ending balance
Book value Recoverable Provision Number of Ending balance Beginning balance VND amount VND overdue years VND VND VND Tools and supplies 1,353,395,357 260,157,506 i- Receivables, lending that were past due Insurance expenses 983,770,748 78,520,195 Gia Lam Joint Stock Company 696,183,500 212,355,050 (483,828,450) Over 3 years Operating lease expenses 574,486,828 - GKC Co., Ltd. 280,028,312 140,014,156 (140,014,156) Over 2 years Others 898,954,219 438,379,396 Others 95,723,356 - (95,723,356) Over 3 years 3,810,607,152 777,057,097 1,071,935,168 352,369,206 (719,565,962)
(b) Long-term Beginning balance
Cost Recoverable Provision Number of Ending balance Beginning balance VND amount VND overdue years VND VND VND Business advantages generated from equitisation (*) 3,554,964,436 5,687,943,100 i- Receivables, lending that were past due Maintenance costs for Hydropower plants 5,649,525,788 888,063,128 Construction and Electrical Mechanic 343,858,552 - (343,858,552) Over 3 years Prepaid land rental 5,388,440,016 - Joint Stock Company Tools, supplies and office equipment 2,658,646,726 2,013,384,053 Gia Lam Joint Stock Company 696,183,500 350,592,325 (345,591,175) Over 2 years Others 5,051,065,301 6,212,257,232 Others 88,709,727 - (88,709,727) Over 3 years 22,302,642,267 14,801,647,513 ii-Fines, interests arising from overdue receivables Construction and Electrical Mechanic JSC 11,028,732 - (11,028,732) Over 3 years (*) Business advantages generated from the revaluation of Gia Lai Electricity Company for equitisation purpose in st 1,139,780,511 350,592,325 (789,188,186) accordance with the business revaluation minutes dated October 1 , 2009. Business advantages is amortised using the straight-line method over ten (10) years from the date of equitisation. 10 INVENTORIES
Ending balance Beginning balance
Cost Provision Cost Provision
VND VND VND VNĐ Work in progress 14,329,156,851 - 15,861,000,231 - Raw materials 8,039,479,372 - 8,116,833,651 - Tools and supplies 2,353,322,046 - 2,173,222,883 - 24,721,958,269 - 26,151,056,765 -
As at end of year and beginning of year, certain inventories are pledged with banks for its borrowings (Note 18).
254 2018 ANNUAL REPORT www.geccom.vn 255 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
12 FIXED ASSETS
(a) Tangible fixed assets
Machinery and Motor vehicles, Buildings and structures Office equipment Others Total equipment transmission VND VND VND VND VND VND Historical cost As at January 1st, 2018 887,332,696,943 529,547,762,731 147,912,289,478 9,216,952,573 60,913,550,598 1,634,923,252,323 New purchases 3,166,817,817 1,616,784,600 - 1,653,044,937 1,231,627,228 7,668,274,582 Transfers from construction in progress 102,111,678,139 1,577,344,236,371 667,785,764 25,544,152,954 145,796,821,262 1,851,464,674,490 Other increases - 939,582,567 - - - 939,582,567 Other decreases - (404,524,082) (470,583,637) - - (875,107,719) As at December 31st, 2018 992,611,192,899 2,109,043,842,187 148,109,491,605 36,414,150,464 207,941,999,088 3,494,120,676,243 Accumulated depreciation As at January 1st, 2018 241,993,280,668 189,113,363,143 60,506,627,859 2,778,958,358 33,093,746,030 527,485,976,058 Charge for the year 39,390,910,228 30,104,653,186 6,491,293,011 1,637,071,991 18,168,403,459 95,792,331,875 Other decreases - (92,705,550) (300,018,159) - - (392,723,709) As at December 31st, 2018 281,384,190,896 219,125,310,779 66,697,902,711 4,416,030,349 51,262,149,489 622,885,584,224 Net book value As at January 1st, 2018 645,339,416,275 340,434,399,588 87,405,661,619 6,437,994,215 27,819,804,568 1,107,437,276,265 As at December 31st, 2018 711,227,002,003 1,889,918,531,408 81,411,588,894 31,998,120,115 156,679,849,599 2,871,235,092,019
As at end of year, tangible fixed assets with a net book value of VND 2,865.1 billion (at beginning of year: VND 877.6 billion) were pledged with banks as collateral assets for the Group’s borrowings (Note 18).
Historical cost of tangible fixed assets which were fully depreciated but still in use was VND 50.9 billion as at end of year (as at beginning of year: VND 21.5 billion).
256 2018 ANNUAL REPORT www.geccom.vn 257 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
12 FIXED ASSETS (continued) 13 CONSTRUCTION IN PROGRESS
(b) Intangible fixed assets Details of construction in progress by projects are as follows:
Computer Ending balance Beginning balance Land use rights Others Total software VND VND VND VND VND VND Ham Phu 2 Solar power project 147,982,696,483 - Historical cost Duc Hue 1 - Long An electricity power project 49,861,097,907 - As at January 1st, 2018 6,454,228,000 857,967,791 171,739,184 7,483,934,975 Ham Phu 1 Solar power project 6,952,411,433 - New purchases during the year - 140,000,000 - 140,000,000 DakPihao 2 Hydropower plant efficiency improvement project 4,741,650,479 - Other decreases - (175,000,000) - (175,000,000) ERP implementation project 2,493,159,189 - As at December 31st, 2018 6,454,228,000 822,967,791 171,739,184 7,448,934,975 Modernisation project of Dien Phu mechanical factory 1,154,994,931 - Accumulated amortisation Phong Dien - Hue Solar power project - 1,021,475,172 As at January 1st, 2018 280,843,635 588,458,771 60,784,875 930,087,281 Krong Pa - Gia Lai Solar power project - 8,099,921,229 Charge for the year 111,778,584 114,786,592 30,496,668 257,061,844 Binh Thuan Solar power project - 6,781,431,865 Other decreases - (175,000,000) - (175,000,000) Others 2,577,231,679 2,143,038,443 As at December 31st, 2018 392,622,219 528,245,363 91,281,543 1,012,149,125 215,763,242,101 18,045,866,709 Net book value st As at January 1st, 2018 6,173,384,365 269,509,020 110,954,309 6,553,847,694 Total interest expense which has been capitalised for the year ended December 31 , 2018 was VND 11.4 billion. As at end of year, the cost of Ham Phu 1 Solar power project was used as collateral assets for a bank loan (Note 18). As at December 31st, 2018 6,061,605,781 294,722,428 80,457,641 6,436,785,850 14 GOODWILL Historical cost of tangible fixed assets which were fully amortised but still in use was VND 190 million as at end of year (as at beginning of year: VND 175 million). Goodwill VND As at end of year, tangible fixed assets with a net book value of VND 6.3 billion were pledged with banks as collateral assets for the Group’s borrowings (Note 18). Historical cost As at January 1st, 2018 and as at December 31st, 2018 18,002,047,989 Accumulated amortisation As at January 1st, 2018 8,273,185,549 Amortised during the year 1,800,198,199 As at December 31st, 2018 10,073,383,748 Net book value As at January 1st, 2018 9,728,862,440 As at December 31st, 2018 7,928,664,241
258 2018 ANNUAL REPORT www.geccom.vn 259 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
15 SHORT-TERM TRADE ACCOUNTS PAYABLE 17 OTHER SHORT-TERM PAYABLES
Ending balance Beginning balance Ending balance Beginning balance VND VNĐ Able-to-pay Able-to-pay Value Value amount amount Dividend payable 3,526,499,229 22,519,533,942 VND VND VND VND Forest environment protection fees 3,424,160,592 3,514,821,083 Third parties Interest expenses - 1,276,957,963 Sharp Solar Solution Asia Co., Ltd. 108,225,856,168 108,225,856,168 - - JGC Vietnam Co., Ltd. 162,923,401,169 162,923,401,169 - - Others 2,912,123,800 8,113,287,347 NSN Construction and Engineering Joint 43,224,521,800 43,224,521,800 - - 9,862,783,621 35,424,600,335 Stock Company In which: Others 39,331,747,839 39,331,747,839 10,206,210,364 10,206,210,364 Related Parties (Note 35(b)) 2,653,273 1,380,000,000 Related Parties (Note 35(b)) 14,508,228,016 14,508,228,016 5,658,282,219 5,658,282,219 Third parties 9,860,130,348 34,044,600,335 368,213,754,992 368,213,754,992 15,864,492,583 15,864,492,583
As at end of year and beginning of year, there was no balance of other short term payables past due. As at end of year and beginning of year, there was no balance of short-term trade accounts payable that was past due.
16 TAXES AND OTHER PAYABLES TO/RECEIVABLES FROM THE STATE BUDGET
Movements in tax and other payables to/receivables from the State Budget during the year are as follows:
(a) Receivables
Taxes and receivables from the State budget mainly include overpaid value added tax on imported goods.
(b) Payables
As at Payable during Payment during As at 01.01.2018 the year the year Reclassification 31.12.2018 VND VND VND VND Value added tax 5,184,282,586 159,663,174,305 (156,687,433,770) (3,648,494,421) 4,511,528,700 Business income tax 10,931,051,276 20,645,849,755 (25,814,715,713) - 5,762,185,318 Personal income tax 610,624,288 6,997,795,993 (5,928,277,127) (205,766) 1,679,937,388 Natural resource tax 3,836,318,867 30,615,964,985 (32,294,957,238) - 2,157,326,614 Others 1,213,069,399 7,137,936,708 (6,748,035,606) - 1,602,970,501 21,775,346,416 225,060,721,746 (227,473,419,454) (3,648,700,187) 15,713,948,521
260 2018 ANNUAL REPORT www.geccom.vn 261 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
18 BORROWINGS
(a) Short-term (b) Long-term
Beginning As at Ending balance Increase Decrease Reclassification As at 31.12.2018 balance Increase Decrease Classification 01.01.2018 31.12.2018 VND VND VND VND 01.01.2018 VND VND VND VND VND VND Bank borrowings (*) 232,245,575,182 947,741,544,637 - (41,284,000,000) 1,138,703,119,819 Bank borrowings (*) - 241,466,360,157 (185,523,682,274) - 55,942,677,883 Issued bonds (**) - 300,000,000,000 - (15,000,000,000) 285,000,000,000 Current portion of - - - 15,000,000,000 15.000,000,000 Bond issuance fee - (3,690,000,000) 184,500,000 - (3,505,500,000) issued bonds Other borrowings 138,494,999 - - (80,835,000) 57,659,999 Current portion of 5,917,699,000 - (11,850,874,000) 41,364,835,000 35,431.660,000 long-term borrowings 232,384,070,181 1,244,051,544,637 184,500,000 (56,364,835,000) 1,420,255,279,818 5,917,699,000 241,466,360,157 (197,374,556,274) 56,364.835,000 106,374,337,883 (*) Details of ending balance of long-term bank loans are as followst: (*) Details of short-term bank loans as at end of year are as follows:
Interest and Ending balance Ending balance Collateral Purpose Maturity collateral Purpose Maturity Interest VND VND assets assets The maximum To return on maturity period of Vietcombank - Gia Lai Joint Stock Commercial Bank 98,024,000,000 investment in To October 2022 (i) Finance each borrowing Branch for Foreign Trade of Vietnam 1,000,000 (*) Unsecured Hydropower plants working capital is 6 months from (“Vietcombank”) - Gia Lai Branch the disbursement To invest in Vietcombank - Gia Lai Ayun Thuong 1A date 56,350,000,000 To December 2021 (ii) Branch Hydropower plant The Vietnam Bank for Agriculture GHC’s 2018 Term deposits project and Rural Development 49,986,984,250 dividend To May 24th, 2019 7% (Note 4) To invest in Krong (“Agribank”) – Gia Lai Branch payment Vietcombank - Gia Lai 531,009,004,637 Pa Solar power Plant To November 2030 (iii) Branch Management project expenses of Ham Phu 2 - All related To invest in Phong Binh Thuan, Not yet assets of these Agribank - Gia Lai Branch 415,498,000,000 Dien Solar power Plant To September 2029 (iv) Vietcombank - Gia Lai Branch - - H’Mun and drawdown projects (Note project H’Chan 11(a)) Dien Phu mechanical Hydropower VietinBank - Gia Lai Branch 4,626,000,000 factory modernization To July 2022 (v) projects project Movement To invest in Kenh Bac - Vietnam Joint Stock Commercial VietinBank - Branch 1 Ho From September 2015 Finance of accounts 5,732,000,000 Ayun Ha Hydropower (vi) Bank for Industry and Trade 5,954,693,633 To January 2019 (**) Chi Minh City to June 2022 working capital receivable and plant (“VietinBank”) - Gia Lai Branch inventories To invest in Thuong VietinBank - Branch 1 Ho 55,942,677,883 62,780,115,182 Lo Hydropower plant To January 25th, 2026 (vii) Chi Minh City project (*) The interest rate is determined on each indebtedness certificate at the drawdown date based on the interest rate 1,174,019,119,819 announced by Vietcombank - Gia Lai Branch and fixed throughout the borrowing period. Current portion (35,316,000,000) (**) The interest rate is adjusted once a month based on the term deposit interest rate in Viet Nam Dong for the 12-month 1,138,703,119,819 term of ending interest payment of VietinBank - Gia Lai Branch plus funding cost and marginal rate.
262 2018 ANNUAL REPORT www.geccom.vn 263 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
18 BORROWINGS (continued)
(b) Long-term (continued)
(i) The interest rates in the first 12 months is fixed at 7.5% per annum. In the following years, the interest rate is periodically (vii) The interest rate is defined on each indebtedness certificate and periodically adjusted every 3 months based on the adjusted every 3 months based on the interest rate of 12-month term deposit in Vietnamese Dong announced by interest rate of 12-month term deposit in Vietnamese Dong announced by Vietcombank - Branch 1 Ho Chi Minh City Vietcombank - Gia Lai Branch plus a marginal rate of 2.6% per annum. plus funding cost and a marginal rate of 3% per annum.
Collateral assets include 2 operating offices of the Company, the Group’s Hydropower plants including Ayun Thuong A1, Collateral asset is Thuong Lo Hydropower plant (Note 12). Ayun Ha, Da Khai, Dak Pi Hao 1, Dak Pi Hao 2, Ia Puch 3, Ia Drang 2, Ia Drang 3, Ia Meur 3, H’Mun and H’Chan (Note 12). (**) Issued bonds (ii) The interest rate is periodically adjusted every 3 months based on the interest rate of 12-month term deposit in Vietnamese Dong announced by Vietcombank - Gia Lai Branch branch plus a marginal rate of 3% per annum. Pursuant to Decisions No. 05/2018/QĐ-HDQT dated February 5th, 2018 and No.18/2018/NQ-HDQT dated May 8th, 2018 of the Board of Directors about bond issuance to the primary market. The Group has appointed Vietcombank Securities Collateral asset is Ayun Thuong A1 Hydropower plant (Note 12). Limited Company – Gia Lai Branch as the issuance agency, registration agency and transferring management agency relating to bond issuance with the limit up to VND 900 billion which is divided into 3 phases to finance the Group’s projects. (iii) The interest rate for the first 12 months is fixed at 7.8% per annum. In the following years, the interest rate is periodically adjusted every 3 months based on the interest rate of 12-month term deposit in Vietnamese Dong announced by As at June 29th, 2018, the Group completed the first issuance phase with 300 bonds issued at fair value of VND 1 billion Vietcombank - Gia Lai branch plus a marginal rate of 2.6% per annum. per bond, the interest rate of 7.8% per annum within 10 years from the issuance date to invest in the Phong Dien and Krong Pa Solar power plants. Collateral assets include the Krong Pa Solar power project, the Group’s Hydropower plants including Ayun Thuong A1, Ayun Ha, Da Khai, Dak Pi Hao 1, Dak Pi Hao 2, Ia Puch 3, Ia Drang 2, Ia Drang 3, Ia Meur 3 (Note 12), 11,919,364 shares Collateral assets for this bond include the Krong Pa Solar power project, the Group’s Hydropower projects including invested in Gia Lai Hydropower Company and a guarantee from a Shareholder. Ayun Thuong A1, Ayun Ha, Da Khai, Dak Pi Hao 1, Dak Pi Hao 2 , Ia Puch 3, Ia Drang 2, Ia Drang 3, Ia Meur 3 (Note 12), and 11,919,364 shares invested in GHC and guarantee letter from a Shareholder. (iv) The interest rate for the term loan applied to each repayment period is calculated by the interest rate of 12-month term deposit in Vietnamese Dong announced by Agribank - Gia Lai Branch at the first day of the term repayment of 19 BONUS AND WELFARE FUND interest plus 2.7% per year (2.5% for the first year). Movements in bonus and welfare fund during the year are as follows: Collateral asset is Phong Dien Solar power project (Note 12).
Current year Previous year (v) The interest rate is fixed in the first 36 months from the first disbursement date. The interest rate is periodically VND VND adjusted every 12 months based on the interest rate of 12-month term deposit in Vietnamese Dong announced by VietinBank - Gia Lai Branch plus funding cost and a marginal rate. Beginning of year 17,259,147,276 13,609,408,324 Increase during year (Note 23) 15,520,745,606 14,690,600,847 Collateral assets are future assets and land use rights (Note 12, 13). Payment during year (11,989,799,382) (11,040,861,895) (vi) The interest rate is periodically adjusted once a month based on the interest rate of 12-month term deposit in End of year 20,790,093,500 17,259,147,276 Vietnamese Dong announced by Vietinbank plus the marginal rate. In case, the above interest rate is lower than the interest rate announced by Vietinbank, the interest rate is the one announced by Vietinbank at the announcement date of interest rate.
Collateral asset is Kenh Bac - Ayun Ha Hydropower plant (Note 12).
264 2018 ANNUAL REPORT www.geccom.vn 265 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
20 PROVISION FOR LONG-TERM LIABILITIES 22 OWNERS’ CAPITAL
Provision for long-term liabilities represents provision for severance allowance to employees. (a) Number of shares
21 DEFERRED INCOME TAX Ending balance Beginning balance Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets Number of registered shares, issued shares and shares in circulation 194,182,550 97,091,275 against current tax liabilities and when the deferred income taxes relate to the same taxation authority. The offset amounts are as follows: (b) Details of owners’ capital
Current year Previous year Ending balance Beginning balance VND VND Ordinary shares VND % Ordinary shares VND % Deferred tax assets: 6,728,026,301 5,267,241,281 Deferred tax assets to be recovered after more than 12 months Thanh Thanh Cong Investment Joint Stock 447,142,960,000 23.0 222,000,000,000 22.9 Deferred tax liabilities: (493,557,292) - Company Deferred tax liabilities to be recovered after more than 12 months Ben Tre Import Export 6,234,469,009 5,267,241,281 Joint - Stock Company (former Global Mind 444,005,800,000 22.9 222,002,900,000 22.9 Movements in the deferred income tax, taking into consideration the offsetting of balances within the same tax Viet Nam Joint Stock jurisdiction, are as follows: Company) AVH Pte. Ltd. 390,571,740,000 20.1 179,225,350,000 18.5 Current year Previous year International Finance 285,145,820,000 14.7 142,572,910,000 14.7 VND VND Corporation Beginning of year 5,267,241,281 4,985,828,751 Ms Dang Huynh Uc My 98,599,960,000 5.1 Consolidated income statement credit (Note 32) 967,227,728 281,412,530 Saigon Thuong Tin Commercial Joint Stock - - 47,609,988,000 4.9 End of year 6,234,469,009 5,267,241,281 Bank Saigon – Hanoi Securities Details of deferred tax assets and deferred tax payable are as follows: 1,325,000,000 0.1 3,312,000,000 0.3 Joint Stock Company Others 275,034,220,000 14.1 154,189,602,000 15.8 Current year Previous year VND VND 1,941,825,500,000 100.0 970,912,750,000 100.0 Severance allowance - 650,011,700 (c) Movement of share capital Movement of unrealised profit 6,234,469,009 4,617,229,581
6,234,469,009 5,267,241,281 Par value Number of shares VND The tax rate which was used to decide the value of deferred tax assets and deferred tax payables for the year ended st December 31st, 2018 and the year ended December 31st, 2017 was 20%. As at January 1 , 2017 74,490,339 744,903,390,000 Dividends paid by shares 14,897,985 148,979,850,000 Deferred income tax assets are recognised to the extent that it is probable that future taxable income will be available New shares issued 7,702,951 77,029,510,000 against which the temporary differences can be utilised. As at December 31st, 2017 97,091,275 970,912,750,000 New shares issued (Note 23) (*) 97,091,275 970,912,750,000 As at December 31st, 2018 194,182,550 1,941,825,500,000
Par value per share: VND 10,000.
The Company has no preference shares.
(*) During the year, the Company has issued additional shares to increase its charter capital in accordance with the Resolution of the Annual General Meeting of Shareholders No. 1/2018/NQ-DHDCD dated March 20th, 2018.
266 2018 ANNUAL REPORT www.geccom.vn 267 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
23 MOVEMENTS IN OWNERS’ EQUITY
Investment and Owners’ capital Share premium Undistributed earnings Non-controlling interests Total development fund VND VND VND VND VND VND
As at January 1st, 2017 744,903,390,000 1,980,358,653 49,052,343,723 168,385,738,484 186,360,782,795 1,150,682,613,655
Dividends paid by shares 148,979,850,000 - - (148,979,850,000) - -
New shares issued 77,029,510,000 26,960,328,500 - - - 103,989,838,500
Net profit for the year - - - 153,768,995,113 55,532,198,082 209,301,193,195
Appropriation to investment and development fund - - 14,690,600,847 (14,690,600,847) - -
Appropriation to bonus and welfare fund - - - (12,110,449,304) (2,441,319,327) (14,551,768,631)
Decrease due to changing ownership interest - - (7,395,043,579) (26,362,331,003) (69,138,714,592) (102,896,089,174) in Subsidiaries
Dividends declared - - - - (29,508,840,780) (29,508,840,780)
Capital contributions from non-controlling Shareholders - - - - 1,000,000,000 1,000,000,000
As at December 31st, 2017 970,912,750,000 28,940,687,153 56,347,900,991 120,011,502,443 141,804,106,178 1,318,016,946,765
New shares issued 970,912,750,000 23,048,000 - - - 970,935,798,000
Net profit for the year - - - 144,693,225,170 42,573,505,503 187,266,730,673
Appropriation to investment and development fund - - 7,752,056,298 (7,752,056,298) - -
Appropriation to bonus and welfare fund - - - (13,371,829,266) (2,128,916,340) (15,500,745,606)
Decrease due to changing ownership interest - - - (100,494) 100,494 - in Subsidiaries
Capital contributions from non-controlling Shareholders - - - - 78,880,000,000 78,880,000,000
Dividends declared - - - (97,091,275,000) (34,572,144,000) (131,663.419,000))
Other adjustments - - (3,131,848,242) (1,404,942,096) 4,536,790,338 -
As at December 31st, 2018 1,941,825,500,000 28,963,735,153 60,968,109,047 145,084,524,459 231,093,442,173 2,407,935,310,832
268 2018 ANNUAL REPORT www.geccom.vn 269 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
24 EARNINGS PER SHARE 27 COST OF GOODS SOLD AND SERVICES RENDERED
(a) Basic earnings per share Current year Previous year
VND VND Current year Previous year Cost of electricity sold 194,918,521,584 183,585,769,144 Net profit after tax attributable to the parent company (VND) 144,693,225,170 153,768,995,113 Cost of construction contracts 51,088,851,732 28,999,582,621 Less amount appropriated to bonus and welfare fund (VND) (*) (13,371,829,266) (10,582,679,714) Cost of services rendered 7,480,588,340 14,710,748,447 131,321,395,904 143,186,315,399 253,487,961,656 227,296,100,212 Weighted average number of ordinary shares in circulation (shares) 121,792,405 82,936,089 Basic earnings per share (VND) 1,078 1,726 28 FINANCIAL INCOME
(*) Estimated amounts appropriated to bonus and welfare funds are determined based on the plan for profit distribution Current year Previous year
of the Group. VND VND Interest income from deposits and lending 15,949,363,169 17,990,691,768 (b) Diluted earnings per share Interest income from advance payment 3,131,833,332 - The Company has no dilutive potential ordinary shares. Others 373,558,154 2,648,781 19,454,754,655 17,993,340,549 25 OFF BALANCE SHEET ITEMS
(a) Foreign currencies 29 FINANCIAL EXPENSES
Included in cash and cash equivalents are balances held in foreign currencies of US$25,836.3 (as at December 31st, 2017: Current year Previous year
US$1,075.6). VND VND Interest expense 40,157,402,594 24,380,235,807 (b) Operating lease assets Others 980,500,640 247,107,023 The future minimum lease payments under non-cancellable operating leases were VND 44.9 billion and VND 46.9 billion 41,137,903,234 24,627,342,830 for the year ended December 31st, 2018 and December 31st, 2017, respectively (Note 37). 30 GENERAL AND ADMINISTRATION EXPENSES 26 Net Revenue FROM SALES OF GOODS AND RENDERING OF SERVICES
Current year Previous year
Current year Previous year VND VND VND VND Staff costs 33,682,530,451 29,218,647,869 Revenue from sale of electricity 483,456,423,005 484,472,843,901 Depreciation and amortisation 3,526,114,038 2,732,533,622 Revenue from construction contracts (*) 56,675,427,818 32,823,441,537 Tools and supplies 2,139,098,670 1,016,722,943 Revenue from rendering of services 19,356,624,052 21,803,846,879 Outside service expenses 6,969,120,707 3,009,911,996 559,488,474,875 539,100,132,317 Others 30,319,250,037 29,076,078,346 (*) Accumulated Revenue from construction contracts 76,636,113,903 65,053,894,776
2018 2017
VND VND Accumulated Revenue from construction contract until the date 142,197,472,034 85,522,044,216 of consolidated financial statements
270 2018 ANNUAL REPORT www.geccom.vn 271 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
31 NET OTHER EXPENSES
Current year Previous year
VND VND • For Dak Pi Hao 1 Hydropower Plant: the Group has the obligation to pay BIT at the rate of 10% of taxable income and Other income is entitled to an exemption from BIT for four (4) years commencing from the first year in which a taxable income is Rental income 964,519,279 573,994,512 earned (from 2014 to 2017) and a 50% reduction for the following nine (9) years for the additional income earned from this project (from 2018 to 2026). Gains on disposal of fixed assets 45,798,158 750,115,899 Others 1,412,820,527 861,416,118 • For Ayun Thuong 1A Hydropower Plant: the Group has the obligation to pay BIT at the rate of 10% of taxable income 2,423,137,964 2,185,526,529 and is entitled to an exemption from BIT for four (4) years commencing from the first year in which a taxable income is earned (from 2011 to 2014) and a 50% reduction for the following nine (9) years for the additional income earned Other expenses from this project (from 2015 to 2023). Cost of rental services 901,122,047 1,819,316,835 Write-off projects - 7,504.802,919 • For Dak Pi Hao 2 Hydropower Plant: the Group has the obligation to pay BIT at the prevailing rate and is entitled to an exemption from BIT for four (4) years commencing from the first year in which a taxable income is earned (from 2008 Fines 1,297,364,174 - to 2011) and a 50% reduction for the following seven (7) years (from 2012 to 2018). The incentive period is extended Others 378,644,281 1,580,647,393 for two (2) years (from 2019 to 2020) in accordance with guidelines on conversion of incentives in Clause 2, Article 23 of Circular 78. 2,577,130,502 10,904,767,147 Net other loss (153,992,538) (8,719,240,618) • For Ia Puch 3 Hydropower Plant: the Group has the obligation to pay BIT at the incentive rate and is entitled to an exemption from BIT for four (4) years commencing from the first year in which a taxable income is earned (from 2009 32 BUSINESS INCOME TAX to 2012) and a 50% reduction for the following seven (7) years (from 2013 to 2019). The incentive period is extended for two (2) years (from 2020 to 2021) in accordance with guidelines on conversion of incentives in Clause 2, Article 23 The business income tax (“BIT”) rate applicable to the Group is 20% of taxable income. For Hydropower projects, the tax of Circular 78. incentives are applied in accordance with the Certificate of Investment Incentive and regulations of tax incentives under Article 23, Circular No. 78/2014/TT-BTC (“Circular 78”) - Guiding on the implementation of the Government’s Decree No. • For Phong Dien Solarpower Project: the Group has the obligation to pay BIT at the prevailing rate and is entitled to 218/2013/ND-CP dated December 26th, 2013, which regulate and guide the implementation of BIT Law, as follows: an exemption from BIT for four (4) years commencing from the first year in which a taxable income is earned, the Group registered tax exemption from 2019 to 2022 and a 50% reduction for the following nine (9) years for the for the Gia Lai Electricity Joint Stock Company’s projects additional income generated by the investment project (from 2023 to 2031).
• For Ia Drang 2 Hydropower Plant - 35KV transmission line 371/F7 Chu Prong - Tra Ba: the Group has the obligation to • For Krong Pa Solarpower Project: the Group has the obligation to pay BIT at the prevailing rate and is entitled to an pay BIT at the prevailing rate, and is entitled to an exemption from BIT for four (4) years commencing from the first exemption from BIT for four (4) years commencing from the first year in which a taxable income is earned, the Group year in which a taxable income is earned (from 2006 to 2009), and a 50% reduction for the following nine (9) years registered tax exemption from 2019 to 2022 and a 50% reduction for the following nine (9) years for the for the for the additional income earned from the investment project (from 2010 to 2018). This privilege is specified in the additional income generated by the investment project (from 2023 to 2031). Certificate of Investment Incentives No. 400/GCN-UB dated March 16th, 2005 issued by the People’s Committee of Gia Lai Province. Gia Lai Hydropower Joint Stock Company’s projects
• For Ia Drang 3 Hydropower Plant: the Group has the obligation to pay BIT at the rate of 15% of taxable income during the • For H’Chan Hydropower Project, the Group has the obligation to pay BIT at the rate of 10% of taxable income for fifteen incentive period (from 2005 to 2015), and is entitled to an exemption from BIT for four (4) years commencing from the (15) years since the project has been operated (2006), and is entitled to an exemption from BIT for four (4) years (from first year in which a taxable income is earned (from 2005 to 2008) and a 50% reduction for the following seven (7) years for 2006 to 2009), and a 50% reduction for the following nine (9) years (from 2010 to 2018) commencing from the first year the additional income earned from this project (from 2009 to 2015). According to the Official Letter No. 11684/BTC-TCT in which a taxable income is earned. dated September 16th, 2005 - Guiding the transfer of business income tax rates of the Ministry of Finance (“Official Letter No.11684/BTC-TCT”), the prevailing BIT rate for the project is 10%. The incentive period is extended for two (2) years (from • For H’Mun Hydropower Project, the Group is entitled to a 50% reduction for nine (9) years (from 2015 to 2023). 2016 to 2017) in accordance with guidelines on conversion of incentives in Clause 2, Article 23 of Circular 78. Kenh Bac - Ayun Ha Hydropower Joint Stock Company’s project • For Ia Meur 3 Hydropower Plant: the Group has the obligation to pay BIT at the rate of 15% of taxable income during the incentive period (from 2005 to 2015), and is entitled to an exemption from BIT for four (4) years commencing • For Kenh Bac - Ayun Ha Hydropower Plant, the Group is entitled to an incentive tax rate of 10% of taxable income for from the first year in which a taxable income is earned (from 2005 to 2008) and a 50% reduction for the following fifteen (15) years commencing since the project has operated, and is entitled to an exemption from BIT for four (4) seven (7) years for the additional income earned from this project (from 2009 to 2015). According to Official Letter years (from 2012 to 2015), and a 50% reduction for the following nine (9) years (from 2016 to 2024) commencing from No.11684/BTC-TCT, the prevailing BIT rate of the project is 10%. The incentive period is extended for two (2) years the first year in which a taxable income is earned. (from 2016 to 2017) in accordance with guidelines on conversion of incentives in Clause 2, Article 23 of Circular 78.
• For Da Khai Hydropower Plant: the Group has the obligation to pay BIT at the rate of 10% of a taxable income and is entitled to an exemption from BIT for four (4) years commencing from the first year in which a taxable income is earned (from 2011 to 2014) and a 50% reduction for the following nine (9) years for the additional income earned from this project (from 2015 to 2023).
272 2018 ANNUAL REPORT www.geccom.vn 273 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
32 BUSINESS INCOME TAX (continued) 33 COST OF OPERATION BY FACTOR
Thuong Lo Hydropower One - member Limited Company’s project Current year Previous year
• For Thuong Lo Hydropower Plant, the Group is entitled to an incentive tax rate of 10% of taxable income for fifteen VND VND (15) years commencing since the project has operated, and is entitled to an exemption from BIT for four (4) years (from 2016 to 2019), and a 50% reduction for the following nine (9) years (from 2020 to 2028) commencing from the Staff costs 77,826,358,606 70,684,740,187 first year in which a taxable income is earned. Depreciation and amortisation 95,023,979,091 79,519.881,720 Raw materials 58,129,344,917 63,575,982,900 The BIT on the Group’s profit before tax differs from the theoretical amount that would arise using the applicable tax rate of 20% as follows: Outside service expenses 26,212,093,402 17,409,334,939 Others 54,659,948,088 62,120,105,208 Current year Previous year 311,851,724,104 293,310,044,954 VND VND Net accounting profit before tax 206,938,771,984 230,436,844,464 34 ADDITIONAL INFORMATION FOR THE ITEMS OF THE CONSOLIDATED CASH FLOW STATEMENT Effect of: (a) Non-cash transactions affect the consolidated cash flow statement: Expenses not deductible for tax purposes 20,241,565,897 13,767,996,800 Income not subject to tax (7,830,563,390) - Current year Previous year
Estimated taxable income 219,349,774,491 244,204,841,264 VND VND Tax at the tax rate of 20% 22,976,435,850 31,180,522,450 Assets purchased/ in construction but have not yet paid for 342,494,918,098 - Tax at the tax rate of 10% 10,446,759,524 8,830,222,901 Tax incentives (13,911,278,688) (19,248,305,390) (b) Amount of loan actually withdrawn during the year Under provisions from previous year 160,124,625 373,211,308 Current year Previous year BIT charge (*) 19,672,041,311 21,135,651,269 VND VND Charged/(credited) to the final consolidated income statement: Proceeds from borrowings following normal borrowing contracts 1,189,207,904,794 97,718,611,173 BIT - current 20,639,269,039 21,417,063,799 Proceeds from bonds issuance 300,000,000,000 - BIT - deferred (Note 21) (**) (967,227,728) (281,412,530)
19,672,041,311 21,135,651,269 (c) Amount of loan principal actually paid during the year
(*) The BIT charge for the year is based on estimated taxable income and is subject to review and possible adjustments Current year Previous year by the tax authorities. VND VND (**) Deferred BIT expense incurred mainly temporary differences when calculating current BIT. Repayments for borrowings following normal borrowing contracts 197,374,556,274 162,629,325,825
274 2018 ANNUAL REPORT www.geccom.vn 275 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
35 RELATED PARTY DISCLOSURES
(a) Related party transactions
During the year, the significant transactions were carried out with Related Parties as follows: Current year Previous year Related party Relationship Transaction VND VND
Collection of lending 23,500,000,000 74,000,000,000 Current year Previous year Related party Relationship Transaction Interest income from advance VND VND 3,131,833,332 2,121,930,557 payments Revenue from sales of goods 1,261,913,098 - Son Tin Commodity Interest income 607,977,550 3,107,556,944 and rendering of service Other related Trading Joint Stock Advance payments - 43,000,000,000 Purchase of goods and services 39,000,670,651 3,711,873,285 party Company Revenue from sales of goods and - 3,561,023,867 Advance to purchase of goods 1,238,725,000 - rendering of services Thanh Thanh Cong Investment Shareholder Interest income Loan granted - 23,500,000,000 Joint Stock Company - 1,153,041,862 from late payment Collection of advance payments 43,000,000,000 - Purchase of fixed assets - 959,770,939 Tam Binh An Trading Loan granted 20,000,000,000 61,000,000,000 Other related Expenses paid on behalf 49,999,998 - Production Joint Stock Interest income 2,878,607,308 3,187,200,000 party Capital contribution 78,780,000,000 - Company Collections of lending 58,000,000,000 23,000,000,000 Ben Tre Import Export Joint Stock Collection of lending - 32,000,000,000 Loc Tho Joint Stock Other related Company (former Global Mind Viet Shareholder Purchase of goods and services 12,040,000 - Interest income 827,884.323 1,946,666,667 Nam Joint Stock Company) Company party Loans granted 32,000,000,000 - Sales of electricity 371,036,450,163 389,565,355,698 Thanh Thanh Cong Other related Other related Central Power Corporation Dividends declared 2,400,000,000 1,980,000,000 Tourism Joint Stock Purchase of goods and services 1,910,166,401 7,257,866,636 party party Other 2,140,363,499 - Company Loan granted - 30,000,000,000 Revenue from sales of goods and 92,454,545 10,203,254,726 Thanh Thanh Cong Packing Trading Other related Collection of lending - 30,000,000,000 TTC Energy Joint Stock Other related rendering of services - Production Joint Stock Company party Company party Purchase of goods and services 507,871,000 - Interest income - 1,844,250,001 Expenses paid on behalf 30,400,000 349,720,553 Thanh Thanh Cong Tay Revenue from sales of goods and Other related - 1,119,399,000 Ninh Sugar Joint Stock rendering of services party Company Purchase of goods and services 59,850,000 - Revenue from sales of goods and 90,545,460 97,145,460 rendering of services TTC Attapeu Cane Sugar Other related Loan granted - 500,000,000 Limited Company party Collection of lending - 500,000,000 Interest income - 4,513,889 Thuong Tin Tau Cuoc Other related Revenue from sales of goods and - 716.985.000 Joint Stock Company party rendering of service Revenue from sales of goods and 63,285,648,934 37,538,759,122 Truong Phu rendering of services Other related Hydropower Joint Stock Expenses paid on behalf 2,599,545 7,575,613 party Company Collection of lending - 500,000,000 Interest expense - 2,236,111 Thanh Thanh Cong Tourism Joint Stock Other related Purchase of goods and services 27,709,999 - Company - BenTre party Branch - Travel Center
276 2018 ANNUAL REPORT www.geccom.vn 277 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
35 RELATED PARTY DISCLOSURES (continued)
(a) Related party transactions (continued) (b) Year end balances with Related Parties
Current year Previous year Ending balance Beginning balance Related party Relationship Transaction VND VND VND VND Bien Hoa - Ninh Hoa Sugar Revenue from sales of goods Short-term trade accounts receivable (Note 5) Other related party 830,152,728 642,432,000 Joint Stock Company and rendering of services Shareholder Revenue from sales of goods 141,272,728 - Thanh Thanh Cong Investment Joint Stock Company 873,903,324 - and rendering of services Mekong Wind power Other Related Parties Other related party Loan granted 1,800,000,000 - Joint Stock Company Central Power Corporation 38,744,337,198 63,527,729,737 Interest income from lending 12,180,822 - Truong Phu Hydropower Joint Stock Company 21,381,608,303 - Collection of lending 1,800,000,000 - TTC Bien Hoa Sugar Joint Stock Company 286,440,000 - Thanh Binh Tourism Other related party Purchase of services 405,748,008 172,345,456 Joint Stock Company Bien Hoa - Ninh Hoa Sugar Joint Stock Company 181,728,000 494,672,640 Thanh Nien Printing TTC Tourism Joint Stock Company - Can Tho Branch 100,000,000 - Other related party Purchase of services 97,381,091 - Joint Stock Company Ninh Hoa Thermal Power Joint Stock Company 27,801,000 - Thanh Thanh Nam Purchase of goods and services 2,150,135,247 1,162,356,286 Thanh Thanh Cong Tourism Joint Stock Company - 150,000,000 Other related party Joint Stock Company Deposit for office rental - 498,204,382 61,595,817,825 64,172,402,377 Bien Hoa - Phan Rang Sugar Revenue from sales of goods Other related party 476,400,000 - Short-term prepayments to suppliers (Note 6) Joint Stock Company and rendering of services Shareholder TTC Bien Hoa Sugar Revenue from sales of goods Other related party - 210,242,000 Joint Stock Company and rendering of services Thanh Thanh Cong Investment Joint Stock Company 1,238,725,000 - Nuoc Trong Sugar Revenue from sales of goods Other related party Other related party 1,300,000,000 - Joint Stock Company and rendering of services Son Tin Commodity Trading Joint Stock Company - 43,000,000,000 TTC Bien Hoa - Dong Nai Sugar Revenue from sales of goods Other related party 3,171,000,000 - 1,238,725,000 43,000,000,000 One Member Limited Company and rendering of services Short-term lending (Note 7) Thanh Thanh Cong Gia Lai Revenue from sales of goods Other related party 805,000,000 - One Member Limited Company and rendering of services Other Related Parties Gia Lai Irrigation Works Operating Tam Binh An Trading Production Joint Stock Company - 38,000,000,000 Other related party Purchase of services 669,276,744 - Limited Company Loc Tho Joint Stock Company - 32,000,000,000 TTC Green Energy Investment Revenue from sales of goods Son Tin Commodity Trading Joint Stock Company - 23,500,000,000 Other related party 1,438,998,762 - Joint Stock Company and rendering of services - 93,500,000,000 Branch of Thang Loi Tourism Joint Stock Company - TTC Hotel Other related party Purchase of services 6,672,727 - Premium - Phan Thiet Ninh Hoa Thermal Electricity Revenue from sales of goods Other related party 34,360,818 - One Member Limited Company and rendering of services Branch of Thang Loi Tourism Joint Stock Company - Other related party Purchase of services 19,031,818 - TTC Palace Binh Thuan Sonadezi College of Technology Other related party Purchase of services 402,000,000 - and Management Compensation of Board of Management, Gross salaries and other benefits 8,525,863,522 9,563,379,274 Board of Supervision, and Board of Directors
278 2018 ANNUAL REPORT www.geccom.vn 279 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
35 RELATED PARTY DISCLOSURES (continued)
(b) Year end balances with Related Parties (continued)
Ending balance Beginning balance Ending balance Beginning balance VND VND VND VND Other short-term receivables (Note 8(a)) Short-term advances from customers Shareholder Shareholder Thanh Thanh Cong Investment Joint Stock Company 74,987,498 80,104,604 Thanh Thanh Cong Investment Joint Stock Company - 434,251,083 Other Related Parties Other Related Parties Central Power Corporation 3,367,615,868 - Truong Phu Hydropower Joint Stock Company - 2,360,464,630 Other individual 80,000,000 - Gia Lai Termal Power One Member Limited Company 550,000,000 550,000,000 Truong Phu Hydropower Joint Stock Company 62,509,896 55,638,122 Thanh Thanh Cong - Bien Hoa Joint Stock Company 252,868,000 - Mekong Wind power Joint Stock Company 38,850,000 - TTC Green Energy Investment Joint Stock Company 56,532,094 - TTC Energy Joint Stock Company 33,440,000 278,840,248 Bien Hoa Thanh Long Joint Stock Company 437,362,987 - Son Tin Commodity Trading Joint Stock Company - 559,412,500 1,296,763,081 3,344,715,713 Tam Binh An Trading Production Joint Stock Company - 327,222,222 Other short-term payable (Note 17) Loc Tho Joint Stock Company - 275,555,556 Other Related Parties Thanh Thanh Cong Packing Trading - Central Power Corporation - 1,380,000,000 - 155,555,556 Production Joint Stock Company Thanh Binh Tourism Joint Stock Company 1,421,273 - 3,657,403,262 1,732,328,808 Thanh Thanh Cong Investment Joint Stock Company 1,232,000 - Other long-term receivables (Note 8(b)) 2,653,273 1,380,000,000 Other related party Thanh Thanh Nam Joint Stock Company 498,204,382 498,204,382 36 SEGMENT REPORTING Other short-term payable (Note 15) The primary segment reporting format is determined to be business segments as the Group’s risks and rates of return Shareholder are affected predominantly by differences in the products and services produced. Secondary information is reported Thanh Thanh Cong Investment Joint Stock Company 12,816,612,422 4,108,569,869 geographically. The operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves Other Related Parties different markets. For management purposes, the Group is organised into business units based on their products and Truong Phu Joint Stock Company 1,379,200,000 504,000.000 services, and has reportable operating segments as follows: Thanh Thanh Cong Tourism Joint Stock Company 183,212,000 687,572,430 • Manufacturing and selling electricity: manufacture, transmit and distribute electricity; TTC Energy Joint Stock Company 65,608,994 - Thanh Binh Tourism Joint Stock Company 48,809,000 - • Construction services: construct Hydropower factories, small and medium civil projects; and Thanh Thanh Nam Joint Stock Company 14,785,600 24,889,920 • Rendering of services: consult, maintain and operate Hydropower projects. Thanh Thanh Cong Tay Ninh Sugarcane Joint Stock Company - 333,250,000 14,508,228,016 5,658,282,219
280 2018 ANNUAL REPORT www.geccom.vn 281 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
36 SEGMENT REPORTING (continued)
The Group’s business segment for the year ended December 31st, 2018 is as follows: The Group’s business segment for the year ended December 31st, 2017 is as follows:
Construction Rendering of Construction Rendering of Electricity Elimination Total Electricity Elimination Total services services services services VND VND VND VND VND VND VND VND VND VND Revenue Revenue Sales to external Sales to external 483,456,423,005 56,675,427,818 19,356,624,052 - 559,488,474,875 484,472,843,901 32,823,441,537 21,803,846,879 - 539,100,132,317 customers customers Sales to internal Sales to internal customers 1,234,407,576 2,078,366,272 10,217,854,552 (13,530,628,400) - - - 7,765,246,789 (7,765,246,789) - customers Total Revenue 485,707,251,477 34,901,807,809 32,021,701,431 (13,530,628,400) 539,100,132,317 Total Revenue 483,456,423,005 56,675,427,818 27,121,870,841 (7,765,246,789) 559,488,474,875 Result Result Segment gross profit 300,887,074,757 4,071,275,412 6,627,407,528 218,274,408 311,804,032,105 Segment gross profit 288,537,901,421 5,586,576,086 7,214,701,912 4,661,333,800 306,000,513,219 Unallocated expenses (66,013,944,742) Unallocated expenses (77,224,600,118) Financial income 17,993,340,549 Financial income 19,454,754,655 Financial expenses (24,627,342,830) Financial expenses (41,137,903,234) Other income (8,719,240,618) Other losses (153,992,538) Net profit before BIT 230,436,844,464 Net profit before BIT 206,938,771,984 BIT - current (21,417,063,799) BIT - current (20,639,269,039) BIT - deferred 281,412,530 BIT - deferred 967,227,728 Profit after BIT 209,301,193,195 Profit after BIT 187,266,730,673 Assets and liabilities Assets and liabilities as at 31.12.2017 as at 31.12.2018 Segment assets 1,145,393,736,159 30,463,467,029 77,847,136,320 - 1,253,704,339,508 Segment assets 3,355,110,731,014 51,519,293,819 92,517,646,747 - 3,499,147,671,580 Unallocated assets 404,904,694,537 Unallocated assets 861,411,234,157 Total assets 1,658,609,034,045 Total assets 4,360,558,905,737 Segment liabilities 295,795,643,771 1,674,103,505 15,255,768,352 - 312,725,515,628 Segment liabilities 1,860,749,150,049 31,868,931,820 59,429,540,664 - 1,952,047,622,533 Unallocated liabilities 27,866,571,652 Unallocated liabilities 575,972,372 Total liabilities 340,592,087,280 Total liabilities 1,952,623,594,905
282 2018 ANNUAL REPORT www.geccom.vn 283 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) Form B 09 – DN/HN for the year ended December 31st, 2018
37 COMMITMENTS UNDER OPERATING LEASES (b) Enterprises have been contributed (continued)
The future minimum lease payments under non-cancellable operating leases were as follows: (*) At the date of the consolidated balance sheet, the Group have committed to buy 8,262,000 additional shares equivalent to VND 82.620 billion of TTC Duc Hue - Long An Electricity Joint Stock Company after this company increased its share capital from VND 162 billion to VND 324 billion in accordance with the third amendment of the Enterprise Registration Ending balance Beginning balance Certificate No. 111860490 issued by the Department of Planning and Investment of Long An Province on 7 January 2019. VND VND Within one year 5,349,287,715 5,645,890,721 (**) In January 2019, the Group has fully contributed an amount of VND 80.070 billion to TTC Duc Hue - Long An Solar Between one and five years 11,316,571,460 12,496,069,803 Power Joint Stock Company. Over five years 28,232,489,513 28,839,736,430 39 CAPITAL EXPENDITURE COMMITMENTS Total minimum payments 44,898,348,688 46,981,696,954 Capital expenditure contracted for at the balance sheet date but not recognised in the consolidated financial statements 38 CAPITAL COMMITMENTS IN THE ESTABLISHMENT OF OTHER ENTERPRISES was as follows:
As at the date of the consolidated balance sheet, the Company has participated in the establishment of enterprises with Ending balance Beginning balance the committed capitals as follows: VND VND
(a) Enterprises have not been contributed yet Property, plant and equipment 1,476,949,019,264 -
40 CONTINGENT LIABILITIES Percentage of interest over charter capital TTC Nhi Ha - Ninh Thuan Electricity Joint Stock Company 51 According to Circular No. 200/2014/TT-BTC dated December 22nd, 2014 issued by the Ministry of Finance, from January st TTC Nhi Ha - Ninh Thuan Solar Power Joint Stock Company 51 1 , 2015, the Group is required to make provisions for restoration costs incurred upon the return of land and leased land in accordance with the regulations and policies applicable to the business industry of the Group. Accordingly, the Group TTC Nhi Ha - Ninh Thuan Energy Joint Stock Company 51 has the obligation to clear, restore and return the premises at the end of the lease term or the termination of the project. TTC Ham Thuan Bac - Binh Thuan Electricity Joint Stock Company 51 As the date of these consolidated financial statements, the Group has not made such provision because there was no sufficient information on the prevention of environmental degradation in the Group’s production and business activities. TTC Ham Thuan Bac - Binh Thuan Solar Power Joint Stock Company 51 TTC Bac Binh - Binh Thuan Electricity Joint Stock Company 51 The consolidated financial statements were approved by the Board of Management on February 28th, 2019. TTC Bac Binh - Binh Thuan Solar Power Joint Stock Company 51 TTC Bac Binh - Binh Thuan Energy Joint Stock Company 51
(b) Enterprises have been contributed
Registered Amount Amount Amount to be percentage committed to contributed contributed of interest contribute VND VND % VND TTC Tay Son - Binh Dinh Solar Power Dang Nguyen Thi Kim Loan Tran Thi Hong Tham Nguyen Thai Ha 51 105,570,000,000 2,550,000,000 103,020,000,000 Joint Stock Company Preparer Chief Accountant General Director TTC Tay Son - Binh Dinh Electricity 51 105,570,000,000 2,550,000,000 103,020,000,000 February 28th, 2019 Joint Stock Company TTC Duc Hue - Long An Electricity 51 82,620,000,000 82,620,000,000 - Joint Stock Company (*) TTC Duc Hue - Long An Solar Power 51 82,620,000,000 2,550,000,000 80,070,000,000 Joint Stock Company (**)
284 2018 ANNUAL REPORT www.geccom.vn 285 DEVELOPMENT HISTORY - BUSINESS LINES WHO WE ARE No. Business line 1 Manufacture of electric motors, generators, transformers and electricity distribution and control apparatus Repair of electrical equipment In detail: Repair and maintenance of electrical machinery and equipment; machinery and equipment for the operation of 2 power plants (not including repair of computers, peripherals, communication equipment, audiovisual equipment of household electronics, personal belongings and other household appliances) 3 Installation of industrial machinery and equipment 4 Electric power generation Electricity transmission and distribution 5 In detail: Electricity distribution, wholesale and retail of electricity
6 Construction of buildings
7 Construction of non-residential buildings GENERAL INFORMATION 8 Construction of roads THUA THIEN HUE 9 Construction of water supply and drainage works Solar power, Hydropower Construction of other civil engineering projects Trading name: 10 CONG TY CO PHAN DIEN GIA LAI In detail: Construction of industrial structures, Hydropower plants, construction of dams, road embankment and other works Company name in English: BINH DINH 11 Electrical installation Other specialized construction activities GIA LAI ELECTRICITY JOINT STOCK COMPANY Solar power 12 In detail: Rental of construction/ civil engineering machinery and equipment with operators Abbreviation: GEC Wholesale of other machinery and equipment Business registration certificate: In detail: GIA LAI 13 • Trading, importing and exporting electrical equipment, mechanical and electrical equipment, industrial equipment, electric No. 5900181213 issued by the Department Solar power, Hydropower of Planning and Investment of Gia Lai motors, transformers and other electrical materials. Province on September 9th, 2010, amended Head Office • Machinery and equipment for industrial, commercial, mining, construction uses and office machine and equipment for the 15th time on October 16th, 2018 Trading of own or rented property and land use rights 14 (within Clause 3, Article 11 of the Law on Real Estate Trading) Listed on: Upcom Management consultancy activities Stock code: GEG NINH THUAN 15 In detail: Business management consultation (Excluding legal consultancy, consultancy on tax, accounting, auditing, computer Solar power Number of outstanding shares: programming, advertising, market research and public opinion, labor brokers, job matching, education support services) 194,182,550 shares Architectural and engineering activities and related technical consultancy BUSINESS LINES In detail: AND LOCATIONS • Consulting on surveying, designing and executing small and medium Hydropower projects • Consulting on project planning, survey, design and construction of lines and substations (with voltage level of 110KV or less) LAM DONG 16 • Supervising construction of small and medium Hydropower projects, transmission lines and substations (with voltage level Hydropower of 110 KV or less) CHARTER CAPITAL VND • Consulting on management of construction projects (excluding technical consultancy services related to topographic, 1,942 engineering geology, hydrogeology, environmental survey, technical survey for planning urban-rural development, sector billion development planning) Technical testing and analysis BINH THUAN In detail: Solar power • Testing and calibrating electrical equipment, power plants, transmission lines and substations up to 110KV, industrial lines • Testing insulation materials, various types of insulation oil and industrial oils MARKET 17 CAPITALIZATION VND • Inspecting electrical equipment, electrical safety devices and electric cables, excluding inspection, calibration, testing of 2,971 measuring devices, measurement standards, inspection and certification of vehicles billion HO CHI MINH CITY (with an exception of inspection and certification of vehicles; except for the access to some geographical areas for national security reasons) Representative Office Other professional, scientific and technical activities n.e.c. In detail: Providing consulting services on technology namely consulting on electrical engineering, management consultancy, LONG AN 18 operation, maintenance and repair of electrical plants, electrical machinery and equipment (except for technical consultancy TOTAL ASSETS VND services) related to topographic survey, engineering geology, hydrogeology, environmental survey, technical survey for rural 4,361 Solar power urban development planning, sector development planning) billion Renting and leasing of motor vehicles 19 In detail: Motor vehicle rental without the driver
286 2018 ANNUAL REPORT www.geccom.vn 287 ESTABLISHMENT & DEVELOPMENT • Putting into operation 2 Hydropower Plants: 2010 H’Mun - 16.2 MW, Kenh Bac - 1 MW • Successful IPO of 26,143,593 shares on HOSE • Changing the name to Gia Lai Electricity JSC With a strategic vision for 2016-2022, GEC promotes the • Charter capital of VND 262 billion development of Clean Energy and continues to pilot the models of Wind and Solar power in various potential 2011 Putting into operation Ayun Thuong Hydropower Plant - 12 MW locations. The projects - once put into operation - will serve as an economic platform for the localities, boosting • Acquiring Da Khai Hydropower Plant - 8.1 MW, which had been in operation regional development and meeting the expectation of 2013 from 2010 partial replacement of others Energy provided by Thermal • Becoming a Member of TTC Group - a Multi-Industry Conglomerate plants, thus reducing greenhouse gas emissions and • GEC was defined as TTC Group’s pioneer and core unit in Energy helping to clean up the environment. 2014 Putting into operation Dak Pi Hao Hydropower Plant 1 - 5 MW
2015 Putting into operation Thuong Lo Hydropower Plant - 6 MW
1989 2001 2010 2018
1989 • Gia Lai - Kon Tum Province’s People’s • Successfully offering 97,091,275 shares to 2018 Committee decided to establish Gia Lai existing Shareholders at a ratio of 1: 1 - Kon Tum Hydropower Company under • Putting into operation the 2 first Solar power the Provincial People’s Committee Putting into operation 2 Hydropower Plants: • IFC - WB and Armstrong - South East Asia Clean 2001 2016 Plants in Vietnam: Phong Dien - Hue 48 MWp Ayun Ha - 3 MW, Ia Drang 1- 0.6 MW Energy Fund, Singapore officially became GEC’s • Working capital: VND 1.8 billion and Krong Pa - Gia Lai 69 MWp foreign strategic Shareholders: • Getting Shareholder’s opinion in writing: • Commencing the construction of the Putting into operation 2 Hydropower Plants: »» IFC: 11,881,076 shares; 15.95% Transferring from Upcom to HOSE to be first Power Plant: Ia Drang 2 – 1.2 MW 2005 Ia Drang 3 -1.6 MW, Ia Meur 3 - 1.8 MW »» Armstrong: 14,935,446 shares; 20.05% listed officially On December 22nd, 1992, the Provincial • They supported GEC to expand the Renewable • Charter capital of VND 1,942 billion 1992 Putting into operation 2006 Energy model in Vietnam Total assets of VND 4,361billion People’s Committee changed the Company H’Chan Hydropower Plant - 12 MW name to Ia Drang 2 Hydropower Enterprise • GEC owned 14 power plants with a total • Projects Portfolio: capacity of 84.1 MW »» 14 Hydropower plants - 84.1 MW th Putting into operation Dak Pi Hao 2 1994 April 20 , 1994, the name was changed to 2008 »» 8 Solar power Plants - 392 MWp Gia Lai Province Hydropower Company Hydropower Plant - 9 MW • Impressive business results: GEC officially listed on Hanoi Stock 2017 th Putting into operation Ia Puch 3 Exchange’s Upcom »» Net Revenue: VND 559 billion 1995 October 24 , 1995, the name was 2009 changed to Gia Lai Electricity Company Hydropower Plant - 6.6 MW »» PBT: VND 207 billion »» Gross profit margin: 55%
288 2018 ANNUAL REPORT www.geccom.vn 289 In order to protect the environment, GEC's 2018 Annual Report is printed on environmental-friendly paper and in a limited number of copies.
Once no longer in use, please kindly hand them over to persons who are interested in.
In addition, GEC's 2018 Annual Report is also announced in electronic version with English and Vietnamese languages, interested Readers please kindly access to: www.geccom.vn GIA LAI ELECTRICITY JOINT STOCK COMPANY
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