Financial Attest Audit Report on the Accounts of 2160 MW Dasu-Hydro Power Project (Stage-I), National Transmission & Despatch Company Limited (NTDCL) Islamabad for the Financial Year 2022-23 World Bank Loan # 9076-PK Auditor General of Pakistan Islamabad 韶 TABLE OF CONTENTS Page No. List of Abbreviations I Preface 2 PART-1 3 Project Overview 4 ALiditor*s Report to the Management 5 Financial Statements 6 PART-11 15 MANAGEMENT LETTER 16 EXECUTIVE SUMMARY 17 I IntrodUCtiOll 18 1 Audit objectives 18 I AUdit scope and methodology 19 4. AUDIT FINDINGS & RECOMMENDATIONS 19 4.1 Financial Management 19 4.2 PI-OCUrement and Contract Manatlernent 4. 3 Overall Assessment 23 5. CONCLUSION 24 ACKNOWLEDGEMENT 25 Abbreviations and Acronyms AGP Auditor General of Pakistan BOD Board of Directors IFY Financial Year GOP Government of Pakistan ICB International Competitive Bidding ISSAIs International Standards of Supreme Audit Institutions KV Kilovolt MTDF Medium Term Development Framework MW Megawatt NTDC National Transmission and Despatch Company PC-1 Planning Commission Pro-forma-I -4 PREFACE The Auditor-General of Pakistan conducts audit in terms of Article 169 and 170 of the Constitution of the Islamic Republic of Pakistan 1973. read with section 8 and 12 of the Auditor- Generals (Functions. Powers and Terms and Conditions of Service) Ordinance. 2001. The Audit of 2160 MW Dasu-Hydro Po\er Project (Stage-I), World Bank Loan # 9076-PK (NTDCL) was carried out accordingly. [he Directorate General, Audit Power conducted audit of the 2160 MW Dasu-Hydro Power Project (Stage-I). World Bank Loan # 9076-PK (NTDCL) during October. 2022 for the financial year 2022-23 with a view to report significant findings to stakeholders. Audit examined the economy, efficiency, and effectiveness aspects of the 2160 MW Dasu-Hydro Power Project (Stage-I). World Bank Loan # 9076-PK (NTDCL). In addition, Audit also assessed, on test check basis, whether the management complied with applicable laws. rules, and regulations in managing the 2160 MW Dasu-flydro Power Project (Stage-). World Bank Loan # 9076-PK (NTDCL). The Audit Report indicates specific actions that, if taken. will help the management to realize the objectives of the 2160 MW Dasu-Hydro Power Project (Stage-I). World Bank Loan t 9076-PK (NTDCL). The Report consists of two parts. Part-I contains Auditor's Report (Audit Opinion) and Financial Statements. Part-Il contains Management Letter, Executive Summary and Audit Findings. The Report has been prepared for submission to the World Bank in terms of Loan Agreement 9076-PK, Dated: ember, 2023 SHEIK I MUHAMMAD NA ESM AMJAD Place: Lahore DIRECTOR GENERAL AUDIT POWER, LAHORE 2 んhl. 司ふ PART-1 1. PROJECT OVERVIEW 2. AUDITOR'S REPORT TO THE MANAGEMENT 3. FINANCIAL STATEMENTS 3 4 ,M a PROJECT OVERVIEW Name of Project 2160 MW Dasu-Hydro Power Project (Stage-]). World Bank Loan # 9076-PK (NTDCL) Sponsoring Agency World Bank Executing Agency National Transmission & Despatch Company Limited (NTDCL) Loan No. 9076-PK Loan amount US$ 700 Million Date of Commencement June 30. 202 1 Loan Closing Date May 3 1 2024 Loan utilization status in F.Y 2022-23 US$ 93.024 Million Progressive Expenditure up to last F.Y 2022-2 US$ 96.974 Million Ln-utilization loan amount S$ 603.026 Million 4 ‘글 AUDITOR'S REPORT TO THE MANAGEMENT kVe have audited tile accompanying financial statements of the 2160 MW DaSLI-Hydro Power 11roject (Stage-1), financed under the World Bank Loan # 9076-PK (NTDCL) as of June 30", 2 0 2 3. Management is responsible for the preparation and fair presentation of tile financial statements in accordance with the accounting and reporting standards as applicable in Pakistan and the requirements of Companies Act, 2017 (XIX of 2017) and fOr Such internal control as nianagernent determines in necessary to enable the preparation of financial staternents that are free frorn material misstatement, whether due tO fraud or error. 'File preparation of financial statements is the responsibility of the management of National 'Fransinission & Despatch Company (NTD('L). I-lie responsibilit\ of Audit is to express an opinion on the accompanying statements based oil the audit exercise, We conducted Our examination in accordance w'ith International Standards Of Supreme Audit l1lStitUtiOnS (ISSAls). Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether, the financial statements are fi-ee of any material misstatement. Out- audit includes examining. oil a test basis, evidence SUPPOrtillO tile amounts and disclosures in the financial statements. Our audit also includes assessing the accounting principles and significant estimates made by management, as well as evaluating the overall statement presentation. We believe that Our aUdit provides a reasonable basis for Out- Opinion. NTDCL prepares the accompanying financial staternents in the format ag I t:- greed bemeen tile World Bank and the Government or Pakistan. oil cash receipts and disbursements basis in % hich cash is recognized \ hen received and expenses are recognized Mien paid, rather than \\11en incurred, Since, no imprest account is being maintained in National 1-ransinission & Despatch Conipan\ (N-l'DCL), hence. no bank reconciliation statement is being prepared bv management, In our opinion. (A) the aforementioned financial statements and appended notes fairly present in all material respects, the cash receipts and payments by the project for the year ended Oil June 30"' 2022 in accordance with Cash Basis JPSAS, Financial Reporting under the Cash Basis of ACCOUnting Standard. (B) The expenditure has been inCUrred in accordance with the Loan Agreernen . SHEIKIrIMN UHAMMAD I I LAM J A D DIRECTOR GENERAL AUDITPOWER, LAHORE Dated: jt2 5 4 FINANCIAL STATEMENTS 6 9 4 NATIONAL TRANSMISSION AND DESPATCH COMPANY LIMITED EVACUATION OF POWER FROM 2160MW DASU HYDRO POWER PROJECT LOAN NO. IBRD 90760-PK DASU HYDRO POWER STAGE-1 PROJECT STATEMENT OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED JUNE 30, 2023 2022-23 2021-22 Receipts/ Payment by Receipts/ Payment by (Payments) Third Party (Payments) Third Party Controlled Controlled by Project by Project Restated Note (Rupees in Millions) (Rupees in Millions) Receipts External Assistance 5 - 25,431882 - 381,730 Counterpart Funds 6 - . Total Receipts - 25,431.882 - 381.730 Payments Civil Works 7 - - Purchase Of plant & Equipment 8 - - - Advances 9 - 24,781.991 - Operating Expenses 10 - - - Finance Cost 11 - 649.891 - 381.730 Total Payments - 25,431.882 - 381.730 Increase (Decrease) in Cash - - -- Cash at Beginning of Year - - - Cash at End of Year 12 - - - Contingencies & Commitments 13 - 50,019.114 - The accoipaf ig notes front an integral part of these financial statements and are to be read therewith. Deputy Manager(CA) Chief Engineer/Project Director PMU-DTLP PMU-DTLP J �, ., .. д NATIONAL TRANSMISSION AND DESPATCH COMPANY LIMITED EVACUATION OF POWER FROM 2160MW DASU HYDRO POWER PROJECT LOAN NO. IBRD 90760-PK DASU HYDRO, POWER STAGE-1 PROJECT STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED JUNE 30,2023 2022-23 2021-22 Budgeted Actual Budgeted Actual Amount Amount Amount Amount Restated Rs. "Millions" Rs. "Millions" Receipts Note External Assistance 5 25,431.882 381.730 Counterpart Funds 6 Total ReceiRts 25,431.882 381.730 Payments Civil Works Purchase Of plant & Equipment - Advances 9 24,781.99 Operating Expenses - Consultancy services - - Finance Cost 11 649.89 - 381.730 Total Payments 25,500.00 25,431.882 4,000.000 381.730 Net of ReceiRts & Payments - - The accoi ipanying notesforiii att hitegral part of thesefitiawial statewetits wid are to be read therewith. Deputy Manager(CA) Chief Engineer/Project Director PMU-DTLP PMU-DTLP Islamabad Islamabad `' � г % NATIONAL TRANSMISSION AND DESPATCH COMPANY LIMITED EVACUATION OF POWER FROM 216OMW DASU HYDRO POWER PROJECT LOAN NO. IBRD 90760-PK DASU HYDRO POWER STAGE-1 PROJECT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2023 1 Reporting Entity The financial statements are for Dasu Transmission Line Project for Evacuation of 216OMW Dasu Hydro Power Project Stage-1 financed through, World Bank Loan No. IBRD 90760-PK. The financial statements encompass the reporting entity (M/S National Transmission & Despatch Co. Ltd) as defined in the financial agreement between the Govt of Islamic Republic of Pakistan and the World Bank. The financing agreement was signed on 151h October 2020 with the Closing date May 31, 2024, for an amount of USD 700,000,000/-. The primary objective of the project is to evacuate power from Dasu Hydro Power Project (Stage-1) which will be achieved by installation of 157 km long transmission line from Dasu to Islamabad and establishment of 765KV Grid at Mansehra. 2 Certification by Project Management on Application Funds The project management (office of Chief Engineer (PMU) DTLP, NTDC) is hereby certified that the funds have been applied / expenditures have been incurred for the purpose intended in the Financing Agreement. These financial statements have been prepared in accordance with Cash Basis IPSAS Financial Reporting under the Cash Basis of Accounting. The Accounting policies have been applied consistently throughout the period. 3 Significant Accounting Policies 3.1 Foreign Currency Transactions Cash receipts and payments arising from transactions in foreign currencies are recorded in Pak Rupee by applying to the foreign currency amount, the exchange rate between the Pak Rupee and Foreign Currency at the date of the receipts and payments. Exchange differences arising on settlement of these transactions are recognized in the statement of Receipts and Payments. 3.2 Reporting Currency The reporting and functional currency of these financial statements is Pakistan Rupees (PKR) as applicable to the reporting entities working within the jurisdiction of Pakistan. However, to enhance the understanding of users of the financial statements, foreign currency transactions are denominated in the relevant currency wherever required along with equivalent amounts in the reporting currency. 3.3 Revenue Recognition Revenue is recognized on the date of receipt of money by bank or clearance of cheque. Revenue is recognized on gross basis and any related costs are recorded separately. 3.4 Recognition of Expenditure Expenditure is recognized on date when payment is made or cheque is issued. Financial year to which the payment pertains is determined by the date on which cheque or payment advice is issued. 3.5 Employee Terminal benefits Service benefits of Government deputed employees are accounted for in their respective epartments. while no service terminal benefits are paid to the contractual employees. г ' � � £ 3.6 Payment by Third Party The payments made by the third parties do not constitute cash receipt or payments controlled by the Project but do benefits the Project as the Project does not receive cash (including cash equivalents) directly from, or gain control of the bank accounts or similarly facility established for its benefits by, the third parties. Payment by third parties, if any, are disclosed in the payment by third party column on the face of statement of cash Receipts and Payments and notes to the financial statements. 5 External Assistance External Assistance was received in the form of Credit (IBRD-9076-PK) from the World Bank (WB) under the financing agreement between the World Bank and Goverru-nent of Pakistan (GOP) for the The following amounts were received by the project during the period: 2022-23 2021-22 Millions Millions Note USD PKR USD PKR SOE Procedures - - - - Direct Payments 5.1 93.024 25,431.882 2.202 381.730 93.024 25,431.882 2.202 381.730 5.1 Direct Payments For the year. Type Value Date Currency Amount Amount Exchange Amount USD Rate PKR Charges 15-Mar-2023 USD 1.525 1,525 283,261 432,094 Direct Payment 17-Feb-2023 PKR 965.626 3.651 1.000 965.626 Direct Payment 06-Feb-2023 USD 1.833 1.833 275.130 504.205 Direct Payment 03-Feb-2023 USD 1 2.743 2.743 275.418 755.461 Direct Payment 06-Feb-2023 USD 7.268 7.268 275.130 1,999.645 Direct Payment 06-17eb-2M USD 24.693 24.693 275.130 6,793.897 Direct Payment 08-Feb-2023 PKR 531.056 1.923 1.000 531.056 Direct Payment 08-Feb-2023 PKR 274.248 0.993 1-000 274.248 Direct Payment 08-17eb-20z3 PKR 3,450.194 12.496 1.000 3,450.194 Direct Payment 08-Feb.-2023 CNY 1 66.091 1 9.769 1 40.556 1 2,680398 Direct Payment 02-Feb-2023 CNY 169.721 25.2071 40.226 6,827.260 Charges 15-Sep-2022 USD 0,923 . 0 9231 236-0041 217.797 93.024 25,431.882 2022-23 2021-22 Millions Millions Note USD PKR USD PKR 6 Counterpart Funds Government of Pakistan (GOP) NTDC own Sources 7 Civil Works Opening - Addition during the year - - Closing Balance - - 8 Purchase of Pant & Equipment Opening Balance - - Purchase of Plant & Equipment - - Closing Balance - - 9 Advances Advances To Contractors 9.2 90.58 24,781.99 Advances to Consultants - - 90.58 24,781.99 f& 凡 f翅 胤j 9.1 NTDC has entered into three different contracts for construction of two transmission lines from Dasu to Islamabad and grid station. Contract no. WB-DASU-TL-01/2022 for design, supply, Installation, Testing and Connuissioning of 765 KV Double Circuit Transinission Line Dasit-Mansehra-Islaniabad Lot-1 has been awarded to Sinohydro Corporation Limited on December 29, 2022 at a fixed price of CNY 848.603 million plus USD 23.062 million and PKR 30,304.368 million. Contract no. WB-DASU-TL-02/2022 for design, supply, Installation, Testing and Coninfissioning of 765 KV Double Circuit Transinission Line Dasu-Mansehra-Islantabad, Lot-2 has been awarded to Harbin Electric International Company Limited on December 22, 2022 at a fixed price of USD 123.267 million and PKR 11,070.287 million. Contract no. WB-DASU-GS-01/2022 for design, supply, installation, Testing and Conunissioning of 765/220 KV, Mansehra Substation has been awarded to Power China SEPCO1 Electric Power Construction Company Limited on December 23, 2022. The fixed contract price consists of CNY 330-455 million, USD 36.339 million and PKR 8,385.782 million. 9.2 Advance payments to contractors include: Advance to Sinohydro Corporation Limited: Advance in Exchange Total Advance Currency Total Advance Payment Date Eq. USD Rate Equivalent PXR Millions PK-R 3,450.194 08-Feb-2023 12.496 1.000 3,450.194 CNY 169.721 02-Feb-2023 25.207 40.226 6,827.260 USD 1.833 06-Feb-2023 1.833 275.130 504.205 USD 2.743 03-Feb-2023 2.743 275.418 755.4611 Sub-Total for Lot-1 42.278 11,537.120 Advance to Harbin Electric International Company Limited: Advance in Exchange Total Advance Currency Total Advance Payment Date Eq. USD as Rate Equivalent per CC PKR Millions PKR 274.248 08-Feb-2023 0.993 1.000 274.248 PKR 531.056 08-Feb-2023 1.923 1.000 531.056 USD 24.693 06-Feb-2023 24.693 275.130 6,793.897 Sub-Total for Lot-2 27.610 7,599.201 Advance to Power China SEPCO1 Electric Power Construction Company Limited: Advance in Exchange Total Advance Currency Total Advance Payment Date Eq. USD as Rate Equivalent Per CC PKR Millions PKR 965.626 17-Feb-2023 3.651 1,000 965.626 ECNY 66.091 08-Feb-2023 . . .... q- . 7 . 6 . 9 274.391 2,680.398 U USD 7.268 06-Feb-202- 275.130 1,999.645 Sub-Total for Lot-3 20.688 5,645,669 氰’ 氰乡 2022-23 2021-22 Millions Millions Note USD PKR USD PKR 10 Net Operating Expenses Restated Operating Expenses - Staff Salaries & other benefits - Travelling & Conveyance expenses - Vehicle Fuel, repair & maintenance - - - Postage, telephone & internet - - - Printing & Stationery - - - Legal & professional fees - - - Electricity & other utilities - - - Miscellaneous expenses - - - Total Operating Expenses - - - Less: Other Income - - - Net Operating Expenses - - 10.1 The finance cost were classified under operating expenses in the financial statements for the year ended June 30, 2022. However, in order to improve the understandability of the financial statements, it has now been shown as a separate note to the financial statements. Consequently the prior year figures are restated. 2022-23 2021-22 Millions Millions Note USD PKR USD PKR Restated 11 Finance Cost Mark-up on loan 2.448 649.891 2.202 381.730 11.1 The loan IBRD-9076-PK is a USD variable spread financing which has transitioned to SOFR, a daily compounding rate, effective January 01, 2022. Only spread is updated on reset date. The index is the weighted average monthly SOFR rate reset on the first day of the calendar month. The net lending rate for the year ranges from 2.68% to 5.96% per annum. 2022-23 2021-22 Millions Millions Note USD PKR USD PKR 12 Cash and Bank Cash in Hand Cash in Bank 12.1 The cash and bank balances are Nil because no amount was credited to revolving fund account and all payments doing the year were made through direct payments. The opening balance was also Nil. 13 Contingencies & Commitments Contingencies as at June 30, 2023 in respect of the project is Nil. On behalf of NTDC, World Bank has issued special commitments against letter of credits for import of plant and machinery and other construction material by the contractors for the purpose of transmission lines and grid stations. Details of the special commitments are as follows: ,,.,.... � �" и, Sr.No. Contractor LC No. Currency Amount Ex. Rate as on Amount Millions June 30, 2023 Rs. Millions 1 Sinohydro 002LC57802/2023 USD 8.160 286.5986 2,338.643 2 Sinohydro 231NSU0201-00679 CNY 594.022 39.7320 23,601.675_ 3 . Harbin Elec. .1398LCS230110 . USD 84.016. 286,5986 24,078.797 50,019.114 14 Authorization for Issue These financial statements have been authorized for issue by the Project Director on 30 June 2023. 15 General Figures have been rounded off to Million Rupees up to three decimal places. Comparative figures have been rearranged where necessary for the purpose of comparison. Deputy Manager(CA) Chief Engineer/Project Director PMU-DTLP PMU-DTLP 籰’ ＜婦 CERTIFICTION SUBJECT: NON-MAINTENANCE OF IMPREST ACCOUNT FOR IBRD 90760-PK It is certified that the project is not maintaining an imprest bank accouni for utilization of funds from Loan no. IBRD 90760-PK. DeputV manager (CA) pfVIU Dasu T/L ProjeCt NTOC, Mans@hrO 徊