The Stock Exchange of Thailand yesterday ordered Power-P Plc, a construction company, to clarify by next Monday five problematic points in its 2005 financial statement that were raised by its independent auditor.

The five issues are its fourth-quarter provision for doubtful accounts, which forced the company to take a loss of Bt50 million; advance payments to an engineering company; a lawsuit in which the firm has been named as a defendant; an investment in a developer; and a debt-restructuring.

Power-P set aside Bt82.5 million for doubtful accounts in the final quarter of last year, divided into Bt29.7 million for the company's advance payments to P Prize Supplies & Construction Co Ltd, and Bt52.8 million to increase its loan exposure to Union Infratech Co Ltd, including interest receivables.

Power-P has secured Bt179 million - in the form of deposits at financial institutions - as a performance guarantee on a construction contract that was awarded to joint venture UBC Power by the Irrigation Department.

Union Infratech is the main partner in the consortium with an 88-per-cent stake. The three other partners are Power-P with 10 per cent, China International Water & Electric Corp with 1 per cent and Bangkok Motor Equipment Co Ltd with 1 per cent.

The SET wants to know specifically why Power-P took the full hit for doubtful accounts in the fourth quarter and in general its policy and principles in provisioning for doubtful accounts.

The company is required to spell out the conditions and timeframe of the loan repayment by Union Infratech, how it is going about collecting on the loan and why it extended the loan, including the importance and benefit to Power.

The firm was also ordered to describe in detail the operating projects under the control of P Prize, Union Infratech and UBC Power. It has to identify P-Prize's business, performance, shareholders, and board of directors, including the relationship between each shareholder, director, or person in control who may be associated with P-Prize and Union.

The second issue concerns a Bt12 million advance payment to Merge Engineering Co Ltd.

Power-P has to disclose the date that Merge Engineering was set up, the names of directors and shareholders of the firm as well as details about each project, such as type and value of each project and the construction period.

The third issue involves a lawsuit in which Power-P is accused of breach of contract and concealment. Plaintiff Best Condominium Co Ltd is seeking Bt192 million in damages.

Since the auditor did not express an opinion in the financial statements, Power-P is required to explain why it has been sued and details of projects that are in dispute.

The SEC also wants Power-P to explain an agreement it entered into to purchase common shares in LVC Development Co Ltd for Bt119.9 million, payable in three instalments. The first payment of Bt60 million was scheduled for October 31 of last year, followed by Bt35 million on January 31 and Bt24.9 million on October 31 this year. After Power-P paid Bt60 million, LVCD agreed to transfer 60,000 common shares and add Power-P to its shareholder list as of the date of agreement. However, LVCD has yet to revise the names and number of its directors. Power is required to explain why LVCD's list of directors has not changed in spite of already making the payment. It also has to explain if it has made the second payment.

The fifth issue is that Power informed the SET on November 25, 2005 that it was informally negotiating with banks to change the due date of loan repayments that were due the day before.

The company is required to explain the sequence of negotiations, the date that the commercial bank approved its debt restructuring and what happened after the bank approved debt restructuring.

Siriporn Chanjindamanee

The Nation