PHOTO: FILE
ISLAMABAD: AF Ferguson & Co, an audit firm handpicked by the federal cabinet, has refused to perform commercial and technical viability audit of the controversial Nandipur power project, highlighting faulty planning as the government hired the company in haste.
The country’s largest audit company was unwilling to accept the official terms of references at a time when doubts were being raised about transparency in giving the contract to AF Ferguson for the 425-megawatt Nandipur power project’s comprehensive external audit.
The government selected the audit firm allegedly in violation of the Public Procurement Regulatory Authority (PPRA) Rules of 2004.
AF Ferguson, a branch of world renowned PricewaterhouseCoopers (PwC), was interested in performing only the financial audit of the project, said sources in the Ministry of Water and Power.
Two weeks ago, Prime Minister Nawaz Sharif had ordered two separate audits of the project - one by an audit firm of international repute and the other by the Auditor General of Pakistan. The premier gave the order after reports emerged that the multibillion-rupee plant was commercially and technically unviable and its cost had increased manifold.
AF Ferguson took the decision to protect its credibility following some damage to the image due to its reports about Kabul Bank of Afghanistan and financial health of the defunct KASB Bank that was sold at a throwaway price of Rs1,000.
In 2012, a $900-million fraud surfaced in Kabul Bank that had earlier been declared to be in good health by AF Ferguson. Later, the company said KASB Bank had a negative equity while another chartered accountant firm, Ernst & Young, which was the statutory auditor of KASB Bank, reported positive equity.
It is yet to be seen how the State Bank of Pakistan (SBP) responds to the two contrasting observations and how it will handle the situation.
AF Ferguson’s version
Syed Shabbar Zaidi, a senior partner at AF Ferguson, confirmed that the company would stay away from the technical and financial viability audit of the Nandipur project. “We will be only doing the verification of cost statement of the project,” he said.
According to Zaidi, the company has suggested to the government a revised scope of work that it can undertake. However, the government has not yet formally accepted the revised terms of references.
“If we start now, we can complete the work in three weeks depending on availability of required record,” he added.
To a question, Zaidi replied that the company took the task in line with the desire of the cabinet and its fee would be finalised after the scope of audit was set again.
Govt’s views
“The federal government picked AF Ferguson from a list of audit firms notified by the SBP,” said a spokesman for the Ministry of Finance. “This did not violate the PPRA rules.”
However, sources in the central bank pointed out that the SBP’s A-category list of auditors was only meant for the audit of commercial banks. The government had its own procedures for awarding public procurement contracts, they said.
“AF Ferguson has not yet started work,” said Mohammad Mehmood, Managing Director of Nandipur power project.
Plant controversy
In May last year, Prime Minister Sharif inaugurated the first 95MW turbine, out of the total four, and announced the project would be fully commissioned by the end of the year. However, the plant has remained shut for most of the time.
Approved in 2007 at a cost of Rs23 billion, the Nandipur project was delayed for three years due to the Ministry of Law’s refusal to clear sovereign guarantees. In 2013, the cost was revised upwards to Rs58 billion.
A petition filed with the National Electric Power Regulatory Authority for determining the power tariff has put the cost at over Rs81 billion. The plant is also not technically viable, as its furnace oil treatment plant capacity is not adequate for a 425MW project.
Published in The Express Tribune, September 29th, 2015.
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