The Suits Tell the Tale
Cato's Regulation, 07/27/01
Wholesale-Energy Units Lifted Profit at Reliant, Peoples Energy
Dow Jones Business News, 07/27/01
Enron Wants India to Buy Dabhol, Still Eyeing Options (Update2)
Bloomberg, 07/27/01

Godbole panel-DPC meet makes little progress
Business Standard, 07/28/01

INDIA: Enron's Dabhol rejects Indian offer on tariffs.
Reuters English News Service, 07/27/01
Unamerican Activity? California Power Probe Gets Rough
Dow Jones Energy Service, 07/27/01

India Dabhol Pwr Rejects States' Price Proposals -Report
Dow Jones Asian Equities Report, 07/27/01

Venture capital chasing next big - and little - thing in energy
Associated Press Newswires, 07/27/01

USA: Brazil moves to head off energy crunch, recession.
Reuters English News Service, 07/27/01

Talking Stocks
CNNfn: The Money Gang, 07/27/01

Buenos Aires Invents `Patacon' Currency to Pay Bills (Update1)
Bloomberg, 07/27/01


The Suits Tell the Tale
Gov. Davis deceived Californians about the energy crisis.
By Jerry Taylor & Peter VanDoren. Jerry Taylor is director of 
natural-resources studies at the Cato Institute <http://>. Peter VanDoren is 
editor of Cato,s Regulation.
July 27, 2001 8:25 a.m.
or at least nine months now, California Gov. Gray Davis has been screaming 
bloody murder about how corporate power pirates out of Houston have 
economically raped and pillaged the state of California, creating an 
artificial electricity crisis out of thin deregulated air. The story didn't 
appear to add up. But because the governor's office refused to release 
information about how much the state paid to whom for electricity over the 
past several months, who was to say? 
Lawsuits finally pried that information out of Davis last week and * lo and 
behold! * "the biggest snakes on the planet" (Davis's words) were charging 
less than the publicly owned utilities of California itself and even less 
than the price charged by his right-hand man, David Freeman, head of the L.A. 
Department of Water & Power. And Davis turns out to have known it all along.
Until Davis coughed-up the data, the Left was in hog heaven, scoring point 
after point about how socialism * at least in the electricity business * was 
far preferable to capitalism. Alan Richardson, president of the American 
Public Power Association, recently told an audience that, "California is a 
great example of municipal utilities that have ( taken care of their 
customers while investor-owned utilities have taken care of their 
shareholders ( Every customer of a private utility is seen as a profit 
center. With public power, every customer is seen as our owner and neighbor." 
Anti-utility activist Harvey Wasserman wrote in The Nation that, "dereg 
apologists are having a hard time explaining why two California power 
companies were immune to the crisis: the Los Angeles Department of Water & 
Power and the Sacramento Municipal Utility District. Both are owned by the 
public ( during the crisis, rates charged by both companies have been stable."
It turns out, however, that publicly owned utilities charged the state an 
average of $344 for a megawatt of electricity during the first three months 
of the year. Private companies were meanwhile charging less than an average 
of $250 per megawatt. And those Houston-based "snakes" * Reliant, Dynergy, 
and Enron * were charging less than the publicly owned utilities, less than 
the sainted and celebrated L.A. Department of Water & Power ($292 per 
megawatt), less than the Sacramento Municipal Utility District ($330 per 
megawatt), less than other investor-owned California-based power marketers, 
and less than the overall market average. Other more ambitious sellers 
include those municipal "good neighbors" at Seattle's City Light Department 
($634 per megawatt), BC Hydro ($498), and virtually every other socialist 
power entity that bellied up to the California wholesale power market.
But that's not to say that the municipals did anything wrong. They had an 
obligation to local taxpayers to maximize their revenues. Moreover, it turns 
out that the markups weren't all that great. The cost of producing 
electricity at the margin was so high because of the run-up of natural gas 
costs; most of the asking price reflected the cost of spinning electrons back 
at the plant. "It's insulting to ask for any money back. We weren't part of 
the problem, and we helped the state in a crisis," Peter Fletcher of the 
Sacramento Municipal Utility District told theSan Francisco Chronicle. "And 
it's not like we're doing well."
Another interesting revelation is how inept California state agents were when 
they tried to run a power system previously managed satisfactorily by the 
utilities. The state "called us and said, 'we're looking for power at $500 a 
megawatt hour for a seven-hour period,'" Kate Hora of the Modesto Irrigation 
District told the Chronicle. "There was no negotiation. We just helped them 
out at the price they named." These are the business wizards that Davis wants 
to take over the whole system?
It should go without saying that this doesn't help the governor's 
price-gouging argument. The story Hora tells of how the state behaved with 
her utility is consistent with the stories related by the private marketers. 
The state asks for power and names a price. The company agrees. And several 
weeks later, Davis & Co. scream about "the gougers." The story Fletcher tells 
* of prices mostly reflecting costs * likewise belies Davis's contention that 
greed explains all. If Sacramento's municipal utility found it hard to make 
any money even with sales of emergency power at $330 a megawatt, what makes 
anyone think it was easier for Enron et al.?
The Left's entire California story, it turns out, was built upon a 
breathtaking series of gubernatorial falsehoods and demagoguery. If Davis and 
his duplicitous henchman, David Freeman, have an ounce of credibility left, 
it's only because the nation is too riveted on the Chandra Levy matter to pay 
any attention to the bomb that went off in Sacramento last week.


Wholesale-Energy Units Lifted Profit at Reliant, Peoples Energy

07/27/2001
Dow Jones Business News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Power companies Reliant Energy Inc. and Peoples Energy Corp. on Friday 
reported higher quarterly profits and strong revenue, easily topping Wall 
Street forecasts. 
The two utilities in their reports attributed the strong performance to 
increased profitability at their wholesale-energy units. But both Reliant 
Energy and Peoples Energy said uncharacteristically warm weather during the 
period and weaker-than-expected natural-gas operations cut into profit.
Houston-based Reliant Energy (REI) said net income rose 22% to $273.7 
million, or 93 cents a diluted share, compared with $223.9 million, or 78 
cents a share, a year earlier. 
Excluding nonrecurring items, the company earned $247 million, or 84 cents a 
share, up from $236 million a year earlier. The results exceeded analysts' 
expectations of 77 cents a share, according to Thomson Financial/First Call. 
The adjusted results excluded several extraordinary items, including the 
effects from an accounting change, gains from early retirement of debt, 
losses from the disposal of discontinued operations in Latin America, and a 
noncash charge related to the spinoff of 20% of Reliant Resources Inc. 
Revenue at the utilities holding company more than doubled to $11.97 billion, 
compared with $5.76 billion a year earlier. 
Earnings at Reliant Energy's electric operations came to $342 million, up 
from $325 million, mostly due to lower expenses. The increase was partially 
offset by increased taxes and lower revenue due to milder weather and lower 
rates. The company's wholesale-energy unit posted a strong quarter, with 
earnings rising to $205 million from $173 million on higher volumes and 
margins from its trading and marketing activities. 
Reliant Energy also took small hit from the ongoing energy crisis in the 
Western U.S., where it operates primarily through Reliant Resources. Reliant 
Energy, an electricity generator, said at the end of the quarter it was owed 
$318 million from wholesale-energy buyers in California. The company also 
said its reserves had a net negative effect of $12 million due related to 
refunds ordered by the Federal Energy Regulatory Commission. 
Reliant Energy struggled with natural-gas distribution and its European 
operations. Its natural-gas segment's loss widened to $49 million from $12 
million a year earlier due to increased expenses for bad debt and changes in 
estimates of nonbilled revenue, the company said. Results from European 
energy operations fell to $9 million, compared with $24 million, because of 
lower margins from increasing competition in the Netherlands. 
Reliant Energy reiterated its expectations for 2001 growth of 10% to 12%, 
putting earnings at between $3.23 to $3.29 a share. Analysts expect earnings 
of about $3.29 a share. Last week, Reliant Resources reported a 57% increase 
in earnings but said it would be difficult to sustain that level of 
profitability as energy companies deal with new price caps in the West. 
Investment Gains Lift Peoples Energy 
Peoples Energy (PGL) reported fiscal third-quarter profit rose 6.6%, topping 
expectations, on a large jump in investment income and strong growth in its 
diversified-energy businesses. 
Net income for the quarter ended June 30 came to $11.6 million, or 33 cents a 
share, compared with $10.9 million, or 31 cents a share, a year earlier. A 
consensus of analysts expected Peoples Energy to post earnings of 28 cents a 
share, according to First Call. 
Revenue at the Chicago energy company jumped 22% to $318.5 million from 
$261.2 million in the same quarter of 2000. 
Looking ahead, Peoples Energy still expects to report full-year earnings of 
between $3.15 and $3.25 a share, and the company expects its strong 
diversified segments to account for about 20% of the total. Analysts surveyed 
by First Call expect the company to earn $3.19 in 2001. 
Peoples Energy said results reflected continued growth in its 
diversified-energy businesses, but that profit was offset by increased costs, 
short-term debt and an investment write-off. Still, the company received a 
big lift from equity-investment income, which more than tripled due in part 
to a joint venture with Enron Corp. 
The company said the largest contributions came from its midstream services, 
which include pipelines, and its oil-and-gas production businesses. Peoples 
Energy said midstream results benefited from a solid performance at Enovate, 
the venture with Enron, while oil-and-gas earnings were buoyed from 
operations recently acquired in southern Texas. 
Operating income at its midstream-services segment grew more than fourfold to 
$5.1 million from $1.1 million a year earlier. The strong quarter primarily 
was the result of equity-investment income from Enovate, as well as other 
wholesale activities. 
In the oil-and-gas segment, operating income for the current quarter more 
than doubled to $8 million, up from $3.4 million. The gains primarily were 
due to the impact of reserve acquisitions, including the recent pickup of 
working interests in South Texas, and positive results from several drilling 
programs. 
However, profit was pressured by lackluster performance at its 
gas-distribution operations. Warm weather and higher gas prices ate into 
profit, as did customer-account balances that were significantly higher than 
a year earlier. Weather during the third quarter was 14% warmer than normal, 
and 9% warmer than the same period last year. 
Operating income for the segment came to $23.2 million, compared with $26 
million for the second quarter. Also, retail-energy operations posted a 
slight $700,000 loss, which narrowed from $900,000 a year earlier. 
Copyright (c) 2001 Dow Jones & Company, Inc. 
All Rights Reserved.

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


Enron Wants India to Buy Dabhol, Still Eyeing Options (Update2)
2001-07-27 16:27 (New York)

Enron Wants India to Buy Dabhol, Still Eyeing Options (Update2)

     (Adds closing share price.)

     Houston, July 27 (Bloomberg) -- Enron Corp., the world's top
energy trader, wants the Indian government to buy out its 65
percent stake in the Dabhol Power Co. project, but it's still
looking at other options, a spokesman said.
     ``We do believe the best solution to this problem would be to
have the government or some related body buy us out of the
project,'' spokesman John Ambler said. ``We're still pursuing
other remedies, in case the buyout doesn't come through on
acceptable terms.''
     Enron and the Maharashtra State Electricity Board, Dabhol's
sole customer, are in a seven-month dispute over $64 million in
unpaid bills. The board stopped buying Dabhol's power in May,
saying it's too expensive. The move came days after Dabhol
announced it was beginning a six-month notice period to end its
contract with Maharashtra. Dabhol halted production after the
board stopped buying power.
     The Financial Times reported earlier today that Enron is
interested in selling the stake, quoting Enron Chairman Ken Lay,
who was in India earlier this month. Lay told the newspaper that
partners General Electric Capital, a unit of General Electric Co.,
and closely held Bechtel Group might also want to exit the
project.
     GE Capital spokesman Ken Koprowski said the company ``would
give serious consideration to credible offers which would enable
us to realize our financial objectives for this investment.'' In
general terms, he said, GE has a ``long-term commitment to doing
business in India.''
     Indian Prime Minister Atal Bihari Vajpayee was quoted in the
Business Standard last week saying he wants to resolve the Dabhol
dispute before he visits the U.S. in September.
     Madhav Godbole, the chief negotiator on the Indian side of
the payment dispute, said earlier today that eight Indian states
would be interested in buying power from Dabhol, but not at
``anywhere close'' to the rates the utility charged under the
Maharashtra contract. Dabhol rejected the proposal as
``unrealistic.''
     Shares of Houston-based Enron fell 74 cents to $46.10.



Godbole panel-DPC meet makes little progress
Our Corporate Bureau Mumbai

07/28/2001
Business Standard
2
Copyright (c) Business Standard

The meeting between the Madhav Godbole-headed committee and the Enron
-promoted Dabhol Power Company (DPC) made little headway today. "DPC just 
stopped short of saying that they would walk out of the project," said a 
source who attended the meeting. The immediate provocation for this was the 
price at which various state electricity boards were prepared to buy power 
from DPC. 
On Thursday, the Godbole panel had met the representatives of four state 
electricity boards. The states are Karnataka, Delhi, Madhya Pradesh and 
Punjab. They offered to buy power from DPC at Rs 1.65 to Rs 2.60 per unit.
"The Godbole panel communicated this offer to the DPC representatives who 
found it unacceptable," sources said.

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


INDIA: Enron's Dabhol rejects Indian offer on tariffs.
By Sriram Ramakrishnan

07/27/2001
Reuters English News Service
(C) Reuters Limited 2001.

BOMBAY, July 27 (Reuters) - U.S. energy giant Enron Corp's Indian unit, which 
is locked in a bitter battle with a local utility, on Friday rejected offers 
from other utilities to buy power if it lowered its tariff. 
Dabhol Power Company (DPC), which is 65 percent owned by the Houston-based 
Enron, said the new proposals put forward by four Indian states were 
"unrealistic and unattainable".
DPC had signed a contract to supply power to a state-owned utility, the 
Maharashtra State Electricity Board, from its gas-based plant on the state's 
west coast. 
But the future of the $2.9 billion project, the largest single direct 
investment in the country, turned uncertain after the utility defaulted on 
payments and stopped buying power, which it says is too expensive. Enron says 
the Board is going back on its contractual commitments. 
Several alternatives have been suggested to end the dispute. The latest one 
was suggested at a meeting on Thursday. 
Four other Indian states said they would buy power from Dabhol if it sold the 
electricity at between 1.65-2.25 rupees per unit, instead of the 7.0 rupees 
charged at some levels of utilisation. 
"These are totally unrealistic proposals, unattainable by new-generation 
liquid plants, including those set up by the public sector," a Dabhol 
spokesman told Reuters. 
"Talks with DPC have reached a stalemate, similar to a chicken-and-egg 
situation, wherein interested states had quoted lower prices than the U.S. 
energy major's expectation," M. Godbole, the chairman of a committee set up 
to resolve the dispute, told the Press Trust of India. 
TARIFF, STUMBLING BLOCK 
One of the main problems is the state's ability to buy all the power DPC can 
supply. The contract has been structured in such a way that the utility pays 
more per unit of power the less it uses. 
DPC's power plant is being built in two phases. The first phase of 740 MW is 
up and running and the second phase of 1,444 MW is 97 percent complete. 
Since the MSEB has said it cannot buy power, one alternative is to sell the 
power to other states. 
Though the four states of Madhya Pradesh, Rajasthan, Karnataka and Delhi had 
indicated interest, they also stipulated they would not be able to buy the 
entire output of 1,444 MW. "The states have made it clear there was certainly 
a demand for DPC power, but only at a particular price. The higher the price, 
the lower the demand," Godbole told the PTI. 
TEST CASE 
Some analysts say India's attempts to resolve the Enron dispute is a test 
case of its ability to attract more foreign investment. 
The power project is India's largest foreign direct investment. 
Last week U.S. assistant secretary of state on South Asian affairs, Christina 
Rocca, said the problems surrounding India's investment climate could be 
summed up in a five-letter word, "Enron". 
"I have to emphasise that it will be difficult for international investors to 
view India favourably until it (Enron issue) is resolved and in a reasonable 
manner," she told a meeting in New Delhi. 
The dispute was triggered off last year when MSEB defaulted on payments. 
This prompted Dabhol to issue a preliminary notice to cancel its contract and 
sparked a similar response from the utility, the Maharashtra State 
Electricity Board (MSEB). 
The dispute has affected India's efforts to attract more investment in the 
power sector, where analysts say more plants are needed to meet growing 
demand. 
Four foreign companies have already pulled out of the country, citing legal 
and bureaucratic hassles. 
($1=47.13 Indian rupees).

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


Unamerican Activity? California Power Probe Gets Rough
By Arden Dale
Of DOW JONES NEWSWIRES

07/27/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW YORK -(Dow Jones)- Think 1929, price fixing, cement companies. 
That was the scenario the last time California lawmakers used a weapon 
they're now wielding against a pair of Texas energy companies as part of an 
electricity market investigation.
Lawmakers are also weighing whether to take strong action against Wall Street 
firm Morgan Stanley, and they are using a method to corral witnesses that is 
so unusual it may never have been used by the California Legislature before. 
The actions -- bringing contempt charges and deposing witnesses -- are rare 
for legislatures anywhere in the U.S. They could result in large fines for 
some companies, but earlier reports that corporate executives might be jailed 
as a result of the investigation are probably overblown. 
"I wouldn't be surprised to see this go to the California Supreme Court and 
even the U.S. Supreme Court," said state Senator Joe Dunn, (D-Santa Ana), 
chairman of the California Senate Select Committee to Investigate Market 
Manipulation, which is conducting the investigation. 
In June, the committee subpoenaed electricity trading documents and financial 
records from Duke Energy Corp. (DUK), Mirant Corp. (MIR), Dynegy Inc. (DYN), 
Williams Cos. (WMB), AES Corp. (AES), NRG Energy (NRG), Enron Corp. (ENE) and 
Reliant Energy Inc. (REI). It was looking for evidence that the companies 
knew years ago they could take unfair advantage once the state deregulated 
its power markets, Dunn said. 
Enron and Reliant, two big companies headquartered in Texas, have still not 
complied with the subpoenas, though Mirant did soon after the committee 
started a contempt proceeding against it, Dunn said. 
"This is real defiance of the Legislature's power to issue subpoenas," said 
Clark Kelso, a professor of law at University of the Pacific McGeorge Law 
School in Sacramento. "When somebody openly defies the court's power it then 
has to make a decision about how best to coerce compliance." 
The committee has cited Enron and Reliant for contempt, and recommended to 
the full Senate that Enron be charged fines in increments that increase daily 
until it complies with the subpoenas. The company may be liable if the full 
Senate upholds the finding when it returns from a recess in August. 
Enron sued California this month in a federal court in an effort to stop the 
state from subpoenaing its documents. The suit is still pending. 
"This is clearly a witch hunt, it's scapegoating and demagoguery," said Mark 
Palmer, a spokesman for Enron. 
State legislatures rarely issue subpoenas, and even more infrequently find 
entities in contempt, according to Brenda Erickson, a senior research analyst 
at the National Conference of State Legislatures. Most of the time, "people 
are willing to come in and open records and talk to a committee," she said. 
Sometimes companies hesitate because of confidentiality issues, but 
legislative committees can go into a closed session to address that concern, 
she added. 
Wall Street firm Morgan Stanley, which advises some power generating 
companies, has also come under fire by Dunn for failing to give the committee 
documents it used to prepare power plant prospectuses, the senator said. The 
papers could provide evidence that companies knew certain plants would give 
them an unfair advantage in electricity markets, according to Dunn. 
"We're trying to determine what we can do about the fact that Morgan Stanley 
has destroyed documents, but a contempt finding is not an option at this 
point," Dunn said. That's because the committee didn't initially subpoena the 
documents. 
Morgan Stanley said through a spokesperson that it disposed of documents many 
years before, in accordance with the firm's document retention policy. "We 
assured the Senator that no documents had been disposed of since he issued 
his request," the spokesperson said. 
The firm has become more cooperative after a period of not communicating 
clearly with the committee, Dunn said, and added that "in the past 24 hours, 
we have had significant progress in resolving our dispute with Morgan 
Stanley." 
Enron's Palmer said Dunn's committee is putting energy companies at the mercy 
of their competitors by not providing adequate confidentiality regarding 
sensitive market data. 
"Just give us the level of protection that any court in the U.S. would give 
us," Palmer said. "We're happy to cooperate so that they can have a 
fact-finding mission instead of a witch-hunt." 
Enron also objects to the fact that some entities, including the Los Angeles 
Department of Water and Power and energy company Calpine Corp. (CPN), aren't 
part of the investigation, according to Palmer. Calpine has very lucrative 
long-term power supply contracts with the state, and LADWP has charged the 
state high prices for surplus power. Enron's profits from power sales to 
California are only a fraction of some other companies', according to Palmer. 
The California state Senate has allowed the committee to depose witnesses in 
the investigation, a move never before taken by the Legislature, according to 
Kelso and Dunn. The state can take testimony from several witnesses at once 
behind closed doors in various locations, instead of having them present all 
testimony directly to the committee, as a result. 
"From our perspective in the Legislature, it is a return to the time period 
when legislative investigations were pursued vigorously with the full tools 
available to lawmakers," said Dunn. "In the past decades, there's been a 
reluctance to move in an aggressive manner." 
- By Arden Dale, Dow Jones Newswires; 201-938-2052; arden.dale@dowjones.com

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

India Dabhol Pwr Rejects States' Price Proposals -Report

07/27/2001
Dow Jones Asian Equities Report
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW DELHI -(Dow Jones)- Dabhol Power Co., a subsidiary of the U.S. energy 
major Enron Corp. (ENE) has rejected price proposals from India's four state 
electricity boards that sought to buy electricity from the 1,444-megawatt 
Dabhol second phase power plant, Press Trust of India said in a report 
Friday. 
The report said DPC had found the proposals from the states of Karnataka, 
Delhi, Madhya Pradesh and Karnataka unrealistic.
"Unfortunately, these are totally unrealistic proposals, unattainable by new 
generation liquid plants, including those set up by the public sector," the 
report quoted DPC as saying. 
As reported, Karnataka Power Transmission Corp. had proposed the purchase of 
300 MW from Dabhol plant at 2.80 rupees ($1=INR47.1350) a unit, while the 
Punjab State Electricity Board had offered to purchase 100-150 MW at INR2.50 
a unit. 
In addition, the Madhya Pradesh State Electricity Board had expressed its 
interest in buying 200 MW at INR1.65 a unit, while Delhi Vidyut Board had 
said it was interested in buying 200 MW at no more than INR3.00 a unit. 
Enron holds a controlling 65% stake in Dabhol Power. The DPC pahse one plant 
is located in the western Indian state of Maharashtra and has a capacity of 
740 MW. Construction work on the 85% completed Dabhol phase II was stopped 
mid-June because of financial difficulties. 
-By Himendra Kumar, Dow Jones Newswires; 91-11-461-9426; 
himendra.kumar@dowjones.com

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


Venture capital chasing next big - and little - thing in energy
By JUSTIN POPE
AP Business Writer

07/27/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

BOSTON (AP) - Not so long ago, investing in the energy industry meant buying 
pieces of oil wells, hydroelectric dams and big, clunky utility companies. 
But power deregulation broadened the possibilities, and the headlines from 
the California power crisis have drawn entrepreneurs and investors into the 
sector.
While traditional energy companies are attracting most of the attention, 
there's growing interest in smaller companies in an emerging sector called 
"energy technology:" software, microturbines, Web-based electricity trading, 
and more. 
The companies and venture capitalists are after the "$300 billion jump ball" 
made possible by electricity deregulation, said Todd Klein, managing director 
of Kinetic Ventures, a Chevy Chase, Md.-based VC firm. 
Their monopolies gone, power companies are being forced to improve 
productivity. Start-ups are trying to help with a new generation of high-tech 
gadgets. 
Meanwhile, technology companies are demanding cheaper and more reliable power 
sources. Entrepreneurial talent is drifting to energy, and several 
technologies developed in government labs are now commercially viable. 
"We have been following these technologies 10 years, and they never were 
anything more than science experiments," said Jeff Miller of Boston's Beacon 
Group, which manages $1.6 billion in two energy VC funds. "Now you've got the 
demand coming from the marketplace and very serious managers with very 
focused business plans." 
Offsetting the flurry of enthusiasm is tighter funding from the VCs. 
According to research firm Venture Economics, 77 companies took in more than 
$1.2 billion in funding in the sector last year, but so far this year just 17 
companies have raised a total of $132 million. 
David Lincoln, founder of EnerTech Capital in Wayne, Pa., told entrepreneurs 
at a recent tech conference in Boston that nobody is in a hurry to make 
deals, and the conditions that VCs impose now "were virtually unheard of 18 
months ago." 
The California power crisis has grabbed the attention of the entire 
investment community - every major investment bank is now tracking a sector. 
"Everybody's backing out of the dot-coms and telecoms," said Bradley Johnson, 
president of Washington-based Pepco Technologies. "They're saying the next 
new thing is energy, but they haven't figured it out yet." 
They are chasing some minor success stories like Chatsworth, Calif.-based 
Capstone Turbine Corp., which makes freestanding microturbines that allow 
businesses to produce their own electricity. Company shares have traded as 
high as $100, but have fallen to under $20, and the company still hasn't 
turned a profit. 
The next little thing is on the minds of VCs as much as the next big one. 
That means technologies that don't necessarily revolutionize how electricity 
is produced so much as help traditional companies produce it and customers 
use it more efficiently. 
"With the events which occurred in California and which are threatening to 
occur in other parts of the company, people are focused on immediate 
solutions to those problems," Klein said. 
These solutions include systems to help companies manage their electrical use 
and flywheels that store electricity on site to guarantee a steady stream of 
power to sensitive equipment. Other companies target the power companies 
themselves, with everything from software to satellite meter-readers. 
At the venture capital level, backers tend to be looking for smaller 
investments and quicker returns. That's been an obstacle for some early-stage 
"green" companies. 
"Everybody's supply-side," lamented R.W. Cushing, an entrepreneur whose 
Austin, Texas, alternative energy marketing company got the cold shoulder 
from VCs at the Boston tech conference. "Nobody thinks in demand terms." 
But in fact, alternative energy firms raised $2 billion last year from IPOs 
and VCs, according to research firm Clean Edge, based in Oakland, Calif. 
Renewable energy requires deep pockets and patience, and tends to be backed 
by big power companies that, if they can make alternative energy work, have 
the infrastructure in place to distribute it. 
Many big power companies are ensuring that they get the needed technology by 
backing start-ups themselves. Houston-based conglomerate Enron Corp., for 
instance, has invested $90 million in 12 companies it sees as strategic 
partners. 
"I don't think there is a dearth of interest or investment in renewable 
technologies," Lincoln said. "(But)... the reason why you see such a strong 
level of interest in helping the supply-side companies is, right now, that's 
where the capital is being spent."

AP Photo NY1398 of July 23 
Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 

USA: Brazil moves to head off energy crunch, recession.
By Chris Baltimore

07/27/2001
Reuters English News Service
(C) Reuters Limited 2001.

WASHINGTON, July 27 (Reuters) - Pedro Parente, Brazil's energy czar and close 
adviser to President Fernando Henrique Cardoso, assured U.S. officials on 
Friday that South America's largest economy can still meet its growth targets 
despite the double whammy of energy shortages and a potential economic 
meltdown in Argentina. 
Brazil's gross domestic product is on track to grow at 2.7 percent in 2001 
and 3.6 percent in 2002, Parente said, speaking at a event sponsored by the 
U.S. Chamber of Commerce and the Brazil-U.S. Business Council.
The growth is partly enabled by an aggressive plan Parente instigated for 
mandatory energy usage cuts across every sector of Brazil's economy amid a 
severe energy shortage. 
Brazil is in the teeth of an energy crunch spurred by a drought that has 
crimped the nation's hydroelectric-dependent energy supply. Some 93 percent 
of Brazil's power comes from hydroelectric projects, with only 4 percent from 
thermal generation. 
"Our system is highly dependent on hydrological conditions," Parente said. 
Flows on Brazil's San Francisco River are the lowest in 30 years, he said. 
Unlike California, which is struggling with its own power crisis, Parente's 
program sets blackouts as a last resort. 
The plan requires residential users to cut demand 20 percent, industrial 
customers 20-25 percent, and commercial customers 20 percent from year-ago 
levels. 
Users pay penalties for exceeding targets and get rebates for consuming below 
them. 
PLAN ALLOWS POWER RIGHTS TRADING 
The plan also creates a "transfer of rights" trading scheme where businesses 
and residents that conserve can sell their surplus power for a profit. 
The trading program will be instrumental in staving off GDP growth 
reductions, Parente said. 
Government reports indicate Parente's plan is working. In Southeast Brazil, 
the country's most populous region, demand fell about 27 percent from May to 
July, Parente said. "For the next four to six weeks we will not need to 
resort to blackouts because residential levels are doing quite well," he 
said. 
Brazil plans to build 6,523 megawatts of new thermal generation through 2003 
and 7,803 MW of new hydro generation, and will spend about 30 billion reais 
($12 billion) in the process, Parente said. New generation will total about 
20,000 MW by 2003, including imports, cogeneration and alternative energy 
sources like wind and solar. 
Part of the growth could be through foreign joint ventures, which attracted 
many U.S. companies to Friday's presentation. AES Corp. ., Duke Energy Corp. 
, Exxon Mobil Corp. , Enron Corp. , CMS Energy Corp. , and Unocal Corp. 
attended the meeting. 
Global investors are souring on Brazil's growth prospects after a 4.5 percent 
jump in GDP in 2000. Salomon Smith Barney recently lowered its 2001 growth 
forecast to 2 percent from 2.5 percent, and 2002 growth estimates to 2 
percent from 4.5 percent because of interest rate hikes and the energy 
shortage. 
The Brazilian real currency has shed over one-fifth of its value against the 
dollar this year, mostly due to investor concerns over Argentina. Brazil is 
trying to extend a loan package from the International Monetary fund that 
expires at the end of 2001. ($1=2.50 reais.

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

Business
Talking Stocks
David Haffenreffer, Pat Kiernan

07/27/2001
CNNfn: The Money Gang
(c) Copyright eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, 
Inc.). All Rights Reserved.

DAVID HAFFENREFFER, CNNfn ANCHOR, THE MONEY GANG: Now let`s start Talking 
Stocks. 
PAT KIERNAN, CNNfn ANCHOR, THE MONEY GANG: John Eade of Argus Research is our 
guest today. You can call or e-mail your questions, the phone number 
1-800-304-fnet (3638).
HAFFENREFFER: Snail mail might take too long, but e-mail is good, address 
here is moneygang@CNNfn.com. John, welcome back to the program. 
JOHN EADE, ARGUS RESEARCH: Thank you. 
HAFFENREFFER: Market behaving in what manner? 
EADE: Day to day, it`s quite volatile and kind of frightening-- but if you go 
back and look at where we were in March and April, the NASDAQ at 1600, S&P at 
1100, we`re moving up from there and I think it`s the tentative wavering 
steps of a baby bull market. It`s where we are in the cycle. And I`m pleased 
so far that we haven`t gone back to touch those lows that we saw earlier this 
year. I don`t think we will. 
(COMMERCIAL BREAK) 
HAFFENREFFER: Time now for more Talking Stocks here on THE MONEY GANG. With 
us is John Eade of Argus Research. 
KIERNAN: You can give us a call at 1-800-304-fnet (3638); or you can e-mail 
your questions to moneygang@CNNfn.com. Let`s get back to it. We have an 
e-mail. 
HAFFENREFFER: We do have an e-mail from Moise in California with a question 
about the short and long-term outlook for Tellabs (URL: 
http://www.tellabs.com/) . 
EADE: Long term, it`s fine. Clean balance sheet, good management team, solid 
products. Short term, I`m not going to say no visibility, but estimates are 
all over the place for how this company`s going to do in the next quarter or 
so. Their customers are still working off inventory and I think it could be a 
"market performer," kind of flat at best, for the next few weeks and months. 
KIERNAN: We`ve got Larry in New York on the line. 
CALLER: How`re you doing? Thanks for taking my call. Long term: buy, sell or 
hold-- Enron (URL: http://.www.enron.com/) ? 
EADE: Enron is a I think a "long-term buy." Their chart doesn`t look good. It 
looks like it`s unable to make new highs and still heading lower. I think 
it`s about to bounce off. Maybe we`ve got a double bottom there in the month 
of July. However, the long-term outlook for the energy business, particularly 
in the generation and the trading area, which is what Enron does so well, I 
think is quite positive. Enron is the leader in that area and I think the 
long-term outlook is very good for Enron. 
KIERNAN: They got wrapped up in the broadband business there and ended up 
taking some quite a hit like anybody else in that business the last little 
bit, and I think they`re trying to steer clear of that and get back to a lot 
of what they have been successful at in the past. 
EADE: Sure, and what they`ve been successful at is a system at building a 
trading and marketplace operation, and they applied it to natural gas and 
they applied it to electricity and they applied it to broadband. Now let`s 
supply it to some other areas. 

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


Buenos Aires Invents `Patacon' Currency to Pay Bills (Update1)
2001-07-27 15:15 (New York)

Buenos Aires Invents `Patacon' Currency to Pay Bills (Update1)

     (Adds patacon to begin circulating Aug. 3 in ninth
paragraph. Adds other possible origins of word patacon to 15th
paragraph.)

     Buenos Aires, July 27 (Bloomberg) -- Buenos Aires,
Argentina's most populated province, has resorted to printing its
own currency to settle its bills.
     Governor Carlos Ruckauf has ordered the provincial mint to
print a new bill to pay part of his workers' paychecks. The $500
million of new notes will also pay interest of 7 percent when the
government redeems them in a year's time.
     For those who want to spend them ``they'll be accepted just
like pesos,'' he said.
     Not everyone shares Ruckauf's optimism. Grocery stores such
as Coto Cicsa, Argentina's No. 3 supermarket chain, and electric
utility Edenor SA said they haven't committed to accepting the
patacon, as the new currency is called.
     ``We'd like to think we'll be able to spend these,'' said
Juan Cosino, a worker at the Buenos Aires legislature who next
month will receive $500 of his $1,400 monthly wage in patacones.
``Nobody knows exactly what they'll be good for.''
     Paying its workers with patacones helps Buenos Aires comply
with a central government demand for provinces to reduce spending,
while avoiding the political cost of wage cuts. Argentina needs to
slash public spending to avoid defaulting on $153 billion in debt
that national and regional governments owe.
     The plan may also erode trust in the Argentine peso, whose
one-to-one peg to the dollar has helped maintain confidence among
international and local investors in the country for the past
decade, said economists.

                           `Quasi-Money'

     ``There are uncomfortable implications to having a new stock
of quasi-money,'' said Ernest ``Chip'' Brown, chief Latin America
economist for Banco Santander Central Hispano SA in New York.
``It's deficit spending.''
     The Patacon will begin circulating August 3, when the
province pays workers. One patacon is worth one peso, the
government said.
     Buenos Aires opted to print money as its coffers were hit by
the same realities that have squeezed the central government: a
budget deficit and a limited ability to raise new funds. The
province is projected to run a $1 billion deficit in the second
half of the year. With its bonds yielding 37 percent, few
investors are willing to lend the province fresh cash.
     ``I wish we didn't have to pay our workers this way,'' Anibal
Fernandez, Buenos Aires Labor Minister, said in an interview.
``Frankly, we didn't have a choice.''
     In creating the patacon, Buenos Aires is doing something the
Federal government cannot: Argentina's currency regime forbids the
central bank from printing pesos unless the increase in money
supply is matched by a rise in foreign currency reserves.

                            Precedents

     Buenos Aires, home to 40 percent of Argentina's 37 million
population, isn't the first Argentine province to create its own
currency. Local bonds can be used to pay at restaurants and
supermarkets in some less populated provinces, particularly in the
poverty-stricken north.
     Nor are local currencies unique to Argentina. Ithaca, New
York, issued the ``Hour'' in 1991 to help the town get through a
recession. During the Great Depression in the 1930's, hundreds of
such currencies were created in the U.S.
     By some accounts, Patacones are named after South American
Indians who resided in Argentina's desolate Southern Patagonia
region. Others say the name derives from the patacoon, a Spanish
silver coin that circulated in the 18th century. The new bills
look like pesos and come in denominations of as little as $5.
     Ruckauf said patacones will be paid to the 30 percent of
provincial workers who earn more than 740 pesos ($740) a month.
They will receive as much as 600 pesos worth of the new bills for
part of their salary that exceeds 740 pesos.

                        Limited Acceptance

     The government has limited success in persuading companies to
accept as legal tender notes that Alberto Bernal, Latin American
economist at IDEAglobal dubbed ``funny money.''
     Water utilities such as Azurix SA and Aguas Argentinas SA,
and phone companies Telefonica SA and Telecom Argentina Stet-
France Telecom SA have said they'll accept Patacones as partial
payment, though some were less than enthusiastic about the change.
     ``We'll take only as many patacones as we need to pay our
obligations to the provincial government,'' said Azurix spokesman
Gustavo Pedace.
     Carlos Serrano, a spokesman for the utility Edenor, said his
company wasn't convinced.
     ``The Governor talked about the grave situation in the
province and said the only way to avoid ceasing payments was with
this patacon bond,'' said Serrano. ``We didn't sign on. We want to
help but we need more information.''
     Since it's unclear whether the bills will be widely accepted,
analysts said some workers may sell them at a discount for pesos
or dollars.
     ``If it's hard to spend this money people will create a black
market if history is any guide,'' said Dustin Reid, a currency
strategist at UBS Warburg Llc in Stamford, Connecticut. ``They
will still want dollars under their mattresses.''