American Water Approves Offer by RWE, But Transaction Is Far From Completed
The Wall Street Journal, 09/18/01
INDIA: Enron India invokes guarantees for payments row.
Reuters English News Service, 09/18/01

Fuel-cell power plant rejected; shares drop
Houston Chronicle, 09/18/01

USA: UPDATE 1-FERC judge offers plan for Northeast power RTO.
Reuters English News Service, 09/17/01



American Water Approves Offer by RWE, But Transaction Is Far From Completed
By Rebecca Smith
Staff Reporter of The Wall Street Journal

09/18/2001
The Wall Street Journal
A4
(Copyright (c) 2001, Dow Jones & Company, Inc.)

German utility RWE AG made an unsolicited offer of $46 a share for the largest publicly traded water-services company in the U.S., American Water Works Co. Under the terms of the deal, RWE will pay $4.6 billion in cash and assume $3 billion in debt. 
The performance of American Water Works of Voorhees, N.J., was one of the few bright spots in trading yesterday, its stock gaining $6.51 to $40.63, a rise of nearly 20%, at 4 p.m. in New York Stock Exchange composite trading.
Boards of both firms have approved the transaction, but it's far from completed. Because American Water Works has operations in 23 states and because water is highly regulated, the German company will have to convince utility regulators across the U.S. that it can be trusted with the stewardship of one of the most emotionally charged goods of all, drinking water. 
J. James Barr, chief executive of American Water, said his firm would do what it could to help RWE navigate the sometimes-byzantine American regulatory system. Mr. Barr said two trends are moving the water business internationally, privatization of public systems and consolidation. Both are putting RWE in a contest against larger French water companies that have been major consolidators, Vivendi Environment SA and Suez Lyonnaise. 
"Our board deliberated for a substantial time," Mr. Barr said, acknowledging it wondered about announcing the deal in present circumstances. "But what better way to send a message of confidence in American markets than this?" 
Upon completion of the transaction, RWE said it would combine its U.S. operations with Thames Water, the German firm's London-based water business that it purchased last year. 
Until recently, the water business has been regarded as a fairly unattractive investment. Returns are highly regulated and generally in the 10% to 11% range. At the same time, enormous capital investment is needed to meet rising clean-water standards, which puts unpopular pressure on rates. More than 80% of the nation's 55,000 water systems are municipally owned and there always is tension between public and private ownership of the essential good. 
American Water Works has grown into the nation's largest water utility through a patient but aggressive strategy of acquiring firms. Many analysts were surprised at the RWE transaction because they assumed that American Water Works would be one of the successful, surviving consolidators. 
"It had patriotism on its side," said utilities analyst Timothy Winter at A.G. Edwards in St. Louis. "It remains to be seen how RWE will calm fears" about foreign ownership of American Water's 25 utilities that serve eight to 10 million people. 
Other companies have badly stumbled trying to consolidate and take advantage of water-system privatizations in foreign countries. Enron Corp. recently gave up on its strategy and sold its Azurix unit to American Water for an undisclosed sum. 
RWE has 12 major operating units and annual revenue of $57 billion. In addition to water-system holdings, it also sells electricity and natural gas and provides waste-water services.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

INDIA: Enron India invokes guarantees for payments row.

09/18/2001
Reuters English News Service
(C) Reuters Limited 2001.

NEW DELHI, Sept 18 (Reuters) - U.S. energy firm Enron Corp's Dabhol Power Co (DPC) has invoked the federal government's counter-guarantee for bills not paid by a local utility, DPC said in a statement. 
DPC, 65-percent owned by Houston-based Enron Corp is engaged in a bitter payments dispute with its sole buyer, the Maharashtra State Electricity Board (MSEB).
MSEB stopped buying power from Dabhol's 740-MW first phase in May and said it would not take electricity from the second 2,144-MW phase, which was 97-percent complete when further construction was halted due to the dispute. 
DPC spokesman Jimmy Mogal said the company invoked payment guarantees given by the Maharashtra state and New Delhi to protect the company, its sponsors, lenders and fuel suppliers. 
"I confirm that with MSEB's failure to meet their contractual obligations towards monthly bills of April, May and June 2001, DPC had drawn upon the government of Maharashtra (GOM) guarantee on August 29...," he said in a statement. 
"As GOM also failed to honour their contractual obligations, DPC was forced to draw upon (New Delhi's) guarantee towards these dues on September 7," he said.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Sept. 18, 2001
Briefs: Houston and state 
Fuel-cell power plant rejected; shares drop 
DANBURY, Conn. -- FuelCell Energy's shares fell 5.3 percent Monday after a Connecticut agency's draft report rejecting the company's proposal to build a $124 million fuel-cell power plant in the state. 
Shares of FuelCell, based in Danbury, fell 66 cents to $11.83. They have fallen 72 percent in the past year. 
The Connecticut Department of Public Utility Control's draft report said some of the money for the project would have come from a state fund aimed at reducing electricity demand, not creating new plants. The FuelCell project would have supplied enough power to light about 26,000 homes. 
The project was to be funded by Houston-based Enron Corp. and the Connecticut Resources Recovery Authority. 


USA: UPDATE 1-FERC judge offers plan for Northeast power RTO.
By Chris Baltimore

09/17/2001
Reuters English News Service
(C) Reuters Limited 2001.

WASHINGTON, Sept 17 (Reuters) - An administrative law judge at the Federal Energy Regulatory Commission on Monday released a blueprint to establish a single electricity transmission system for 11 Northeastern states, possibly as early as the end of 2002, based on the existing PJM Interconnection LLC model. 
Regional transmission organizations (RTOs) are a priority for FERC, which is looking for ways to make the nation's patchwork transmission grid seamless in moving power between regions. An RTO is a combination of individual transmission operators that combine their assets under a common roof.
FERC wants to combine transmission operators into four RTOs for the Northeast, Southeast, Midwest and West. 
FERC Judge Peter Young wrote in a 27-page report that there were "difficult substantive issues" in the path of creating an RTO for the Northeast. 
In July, agency commissioners ordered the New York Independent System Operator, PJM Interconnection, PJM West and New England Independent System Operator to form a single RTO. Young has held secret talks with the parties since then to prepare a report and business plan to FERC commissioners, who are expected to issue a decision by Nov. 1. 
JUDGE NOTES DIFFICULT ISSUES 
Young said the new RTO would be modeled after the existing PJM Interconnection, which operates the grid for Pennsylvania, New Jersey and Maryland. 
The judge offered three options, reflecting the key issue of how quickly to complete planning and adoption of the new RTO. "Many difficult substantive issues must be resolved among the stakeholders in the going forward process which the (FERC) business plan contemplates," Young wrote. 
The report was the result of talks involving dozens of utilities, government officials and groups, including Consolidated Edison Inc. , the Massachusetts attorney general, Credit Suisse First Boston International, the city of New York, and the Union of Concerned Scientists. Other energy firms involved in the closed-door talks included Dominion Resources Inc. , Duke Energy Corp. , Dynegy Inc. , Enron Corp. , First Energy Corp., Reliant Energy Inc. , and Williams Cos. Inc. . 
Britain's National Grid Group Plc in August was chosen to represent asset-holders of 60 percent of the Northeast transmission network, and was named as the operator of the new grid covering 11 states. 
The fastest of the three start-up schedules has the widest support, including the backing of PJM, PJM West and TransEnergie, a U.S.-Canadian transmission concern. The two-year transition plan, which could commence as early as Nov. 1, is based on the PJM operations model, which is already up and running. 
COMPLEX SOFTWARE NEEDED 
Another option offered by the judge would delay the start of the new RTO until the fourth quarter of 2004. 
Young warned that creating an RTO for the region would be a huge and complicated undertaking. 
The software and technology needed to set up an RTO to keep electricity smoothly moving throughout the Northeast will rank second only to that used by the banking industry, he said. 
"The Northeast RTO will constitute the largest energy market in the world," he wrote. "The complexity of the technology it will take to implement and administer that market is staggering." 
Young said he supported the PJM model, but warned that region has less divested generation and a lack of a large city like New York or Boston that exacerbate shortage situations. 
Some industry-watchers have questioned whether FERC should take a one-size-fits-all approach to RTOs with PJM. 
"PJM is great for PJM. But I disagree that it is the answer for other regions," said Lawrence Oliva, a partner in the national utility practice of accounting firm Andersen and Co.. 
New FERC Chairman Pat Wood, in a Reuters interview last week, acknowledged that FERC's outspoken support of PJM may have slowed down the mediation process. 
"I think that was probably a PR (public relations) mistake we made," Wood said. "I think that all the Northeastern ISOs have something valuable." 
Governance of the Northeast RTO board is the "thorniest" issue, Young wrote. One option proposed a 13-member board of directors for the RTO, made up of three members of each ISO board, and four members appointed by the individual stakeholders. 
FERC has praised the PJM system - which serves much of Pennsylvania, New Jersey and Maryland - as a model for nationwide RTO building. The agency has also turned down New York ISO and Northeast ISO requests to maintain their status as free-standing independent system operators.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.