Vietnam’s Circular 21: Regulations on method for calculation of total fixed income

This is a notable content of Circular No. 21/2015/TT-BCT of the Ministry of Industry and Trade of Vietnam regulating the pricing method for electric power system’s ancillary services and the procedures for scrutinizing a contract for provision of electric power system’s ancillary services, effective from August 07, 2015.

Thông tư 21/2015/TT-BCT:  Quy định về phương pháp xác định tổng doanh thu cố định

According to Article 5 of Circular No. 21/2015/TT-BCT of the Ministry of Industry and Trade of Vietnam, the method for calculation of total fixed income is specified as follows:

Total fixed income in the year N (Gcd,N) of the provider of ancillary services is determined by the following formula:

Gcd,N = CKH + COM,N + CLVDH + LNN

Including:

CKH:

Total fixed asset depreciation cost of the provider of ancillary services in the year N is calculated according to section 1 of this Article (VND);

COM,N:

Total fixed operational cost in the year N is ascertained according to Section 2 of this Article (VND);

CLVDH:

Total sum of interest cost and lending fees payable in the year N for the ancillary service provider's investments in assets (VND);

LNN:

Rated profit in the year N (VND).

1. Total fixed asset depreciation cost (CKH) of the provider of ancillary services in the year N is determined subject to the depreciation method and service time of fixed assets as per the Circular No. 45/2013/TT-BTC.

2. Total fixed operational cost (COM,N) of the provider of ancillary services in the year N is calculated by the following formula:

COM,N = CVLcđ + CTL + CSCL + CMN + CK

In which:

CVLcd:

Total fixed material cost in the year N (VND);

CTL:

Total salary cost in the year N (VND):

CSCL:

Total major repair cost in the year N (VND);

CMN:

Total outsourced service cost in the year N (VND);

CK:

Total sum of other costs in monetary unit in the year N (VND).

Method for calculation of total material cost, method for calculation of total salary cost, method for calculation of major repair cost, method for calculation of total outsourced service cost, method for calculating total sum of other costs in monetary unit are specified as follows:

- Method for calculation of total material cost: Total fixed material cost (CVLcd) of the provider of ancillary services in the year N is determined subject to the provider’s audited fixed material cost in the year N-2, exclusive of unusually variable costs, at the slippage rate of 2.5% per year.

- Method for calculation of total salary cost: Total salary cost in the year N (CTL) is composed of total salary cost and salary-related costs such as expenses for medical insurance, social insurance and unemployment insurance and labor union's expenditure, according to relevant laws.

- Method for calculation of major repair cost: The parties negotiate total major repair cost subject to the values approved by competent authorities. If a year's repair schedule, due to objective reasons, is delayed to the following year, the parties adjust the following year's major repair cost to have the cycle-based major repair cost unchanged or slightly changed.

- Method for calculation of total outsourced service cost: Total outsourced service cost in the year N includes all payables for outsourced entities' services on request, such as water, telephone, outsourced electricity, hiring of audit advisor and other service expenses for the ancillary service provider's managerial and operational activities in the year N. Total outsourced service cost in the year N is determined subject to the provider’s audited outsourced service cost in the year N-2, exclusive of unusually variable costs, at the slippage rate of 2.5% per year.

- Method for calculating total sum of other costs in monetary unit: Total sum of other costs in the year N (CK) includes expenses for business trips, travel on leave, meetings, guests, trainings, scientific research, initiatives, meal break, self-defense militia, guards, recovery from aftermaths of flood or storm, fire fighting, labor protection, work clothing, labor safety, industrial and environmental sanitation, water at work, material incentive for night shift, hazard allowance, first aid for work accidents, ordinary medicine, workers' physical rehabilitation, unemployment aid, recruitment, land tax, and exchange differences and other costs in monetary unit in the year N according to current regulations. Total sum of other costs in the year N (exclusive of land tax and exchange differences) is determined subject to the provider’s total sum of other audited costs in monetary unit in the year N-2 (in case the figures in the year N-1 have been audited, the data in the year N-1 is used), exclusive of unusually variable costs, at the slippage rate of 2.5% per year.

3. The interest cost and lending fees: As per the capital loan contracts or legal documents between the Investor and lending credit institutions and banks.

4. The profit in the year N (LNN) is determined by the following formula:

LNN = ROE x VCSH

In which:

ROE:

The ancillary service provider’s return on equity in the year N is determined subject to the general return rate of Vietnam Electricity Corporation in the electrical power retail plan currently in force. For the ancillary service providers capitalized prior to the effect of this Circular, the parties negotiate the return rate subject to power plants' commitments towards shareholders in the former's capitalization plan previously approved by competent authorities;

VCSH:

The equity of the provider of ancillary services is determined subject to equity investments in power plants, to the 31st of December of the year N-2, according to the audited financial statement (VND).

View more details at Circular No. 21/2015/TT-BCT of the Ministry of Industry and Trade of Vietnam, effective from August 07, 2015.

Ty Na

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