The Stock Exchange of Thailand yesterday sought clarification from International Engineering (IEC) on the huge consulting fees it has paid for its new business, in addition to reserves for impairment losses on assets and a provision for doubtful debts made in the third quarter.

The company is required to clarify these issues by Monday. The issues have come up following IEC's submission of its third-quarter results to the bourse.

According to the SET statement, IEC paid a  consulting fee of Bt69.85 million, mainly involving transactions of a new business. In the third quarter of 2006, the fee amounted to Bt53.88 million, which represented a significant increase compared to the previous quarter.

The SET has asked IEC to clarify concisely the details of each individual agreement, stating the extent of consultation service, names of consultants, consulting fees, date of agreement and its expiry, conditions of agreement, renewal and payment terms.

The company has also been told to provide information about the consulting firms, including their  type of business, shareholders and their proportion of shares, directors and management team.

IEC also needs to clarify the necessity and reason for hiring the consultants, and the appropriateness of the consultation fee considering the service received, compared with market price.

IEC has also made provisions for impairment losses on its investments in BNB Inter Group and Locus Telecommunications, and its deposit for the purchase of computer software totalling Bt326 million - significant factors in a loss of Bt599 million in the third quarter.

Regarding the impairment loss on investment in Locus, the SET has asked IEC to clarify the factors that caused the delay in installation and delivery of projects, necessitating the reserve for impairment loss. IEC also has to indicate how the board evaluated or forecast any potential risks at the time of investment decision as the reserve for impairment loss was made only six months after the decision to invest.

For the impairment loss on BNB of Bt75 million, the SET has asked IEC to clarify the factors causing delay in the finalisation of the new project agreement. The firm has to elaborate on the extent to which the current situation has deviated from the original projection.

 A reserve for impairment loss was set by IEC only three months after deciding on the investment. The company needs to indicate how the board evaluated or forecast any potential risks at the time of the investment decision.

Regarding the impairment on deposits of Bt50 million for the purchase of computer software, IEC has to clarify the factors causing uncertainty in net cash inflow from the computer program.

IEC was to pay Bt32 million or 40 per cent as the second instalment upon receipt of the computer program. It appeared IEC has paid only Bt26 million in the third quarter of 2006. The company has to explain why it did not make a payment at the rate of 40 per cent or Bt32 million.

A reserve for impairment loss was set by IEC only four months after the date of the decision on investment. IEC has been asked to clarify how the board evaluated or forecast any potential risks at the time of making the decision.

The last issue on which the SET has sought clarification is the provision for doubtful debts and reserve for loss from guarantee of loans totalling Bt35 million.

The SET requires IEC to clarify the factors causing uncertainty of loan repayment in the third quarter, despite IEC's repeated clarification that the management believes full repayment would be received.

Also, the company has to clarify progress made towards securing the loan repayment and withdrawal from obligation under letter of guarantee.