The Stock Exchange of Thailand (SET) yesterday delivered a list of questions to Eastern Wire Plc (EWC) with a demand that the company provide answers and explanations before next Monday. The move came after EWC's auditor disclaimed the company's first-quarter financial statement.

EWC had submitted that statement to the SET with a disclaimer of opinion from its auditor. He found that some of the company's transactions had had a significant effect on the company's financial statements by creating "uncertainties and significant doubt" in regard to the operations and financial position of both EWC and its subsidiaries.

The auditor singled out the purchase of common shares and convertible debentures in Ua Withya Plc, valued at Bt150 million, by making part-payment to a local company instead of to its counterparty.

The SET has asked EWC to clarify the transaction by naming the counterparty seeking EWC's payment for its investment in Ua Withya's shares and debentures. Furthermore, EWC is required to identify those counterparties who ordered it to make payment to a local company, identify the local company and name directors and shareholders related to both EWC and the local company.

EWC is asked to explain whether there is a relationship between EWC, its subsidiaries and the local company that may be affected by SET rules covering connected transactions. And finally, the company is required to explain why it had to transfer money to a local company instead of to its counterparty.

EWC is also asked to explain negative goodwill of almost Bt189 million that appeared in its consolidated financial statement. The SET wants the company to identify the subsidiary relevant to the negative goodwill, explain why its auditors needed to list the amount as negative goodwill and whether a different amount would have affected EWC's financial position.

The SET said Enesol Co Ltd, a joint venture between EWC and Picnic Corp Plc, which hold 35 per cent and 65 per cent, respectively, had been unable to produce electrical power and heating energy for sale to Solsuko Group Industries, as required by contract. Penalties amounted to about Bt6.5 million.

EWC has been asked to explain the opinion of its board of directors in making the Enersol investment in February and why EWC invested further in Enersol on March 31 and April 7 and 11, despite Enersol's project having failed to start on schedule last September 1.

The SET pointed out that on the date of the investment resolution, the project was unable operate, and Enesol was paying a penalty of Bt2.65 million per month to the Solsuko Group, in accordance with their agreement.

EWC has been asked to explain the result of last month's test run of the Enersol project, the project's progress, why the project is not yet operating, when it is expected to be operating and what affects - besides penalty fees - may result if, for example, the Solsuko Group cancelled the contract.

Moreover, EWC has been asked to clarify its commitments and contingent liabilities involved in a natural-gas sale and purchase agreement with another company.

Finally, EWC must explain whether a Bt28.7-million investment in a listed company last month was in accordance with its objectives of capital increase as outlined in its filing to the SET. The company is required to identify its policies and guidance in regard to investment in securities and risk management related to this investment.

Siriporn Chanjindamanee

The Nation