THE HINDU BUSINESS LINE, Thursday, November 22, 2001
Dabhol agrees to due diligence: BSES chief 
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THE ECONOMIC TIMES, Thursday, November 22, 2001
DPC sponsors meet in US next week to discuss due diligence (Carried only by the online edition)
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THE ECONOMIC TIMES, Thursday, November 22, 2001
'Enron may sell Dabhol at half price', WASHINGTON (Carried only by the online edition)
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THE ECONOMIC TIMES, Thursday, November 22, 2001
Enron crisis deepens, bankruptcy looms (Carried only by the online edition)
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THE ECONOMIC TIMES, Thursday, November 22, 2001
Enron closes a decade low at $7 
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THE FINANCIAL EXPRESS, Thursday, November 22, 2001
Unprecedented defence ties on way: Blackwill
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THE FINANCIAL EXPRESS, Thursday, November 22, 2001
Fitch thumbs down to India currency ratings

Similar story also appeared in the following publication:

THE INDIAN EXPRESS, Thursday, November 22, 2001
Fitch downgrades India's currency ratings
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THE HINDU BUSINESS LINE, Thursday, November 22, 2001
Dabhol agrees to due diligence: BSES chief 

THE Enron-promoted Dabhol Power Company (DPC) has agreed to the due diligence of its 2,184-MW project, Mr R.V. Shahi, Chairman and Managing Director, BSES Ltd, has said. The DPC management has agreed to facilitate the due diligence but has asked us (Tata Power and BSES Ltd) to enter a confidentiality agreement with the company, which is only fair, Mr Shahi told newspersons on the sidelines of a seminar here on Wednesday. He said Tata Power and BSES had received a draft of the confidentiality agreement from DPC soon after they submitted their proposal to buy the power project, at the Singapore meeting. An issue like valuation and share transfer cannot be done unless the buyers get to examine details. Due diligence is a pre-requisite for the sale process to continue, Mr Shahi said. He said the companies would sign the confidentiality clause within the next two-three weeks while the due diligence process will take about six-eight weeks. Lenders to DPC, foreign sponsors, prospective buyers, the Centre, and other interested parties had met in Singapore earlier this month to discuss the sale of the company. The DPC spokesperson declined comment on the matter. Next week, DPC officials are scheduled to meet its other offshore sponsors General Electric and Bechtel which hold 30 per cent stake each in DPC, to discuss the sale of the asset. 
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THE ECONOMIC TIMES, Thursday, November 22, 2001
DPC sponsors meet in US next week to discuss due diligence (Carried only by the online edition)

 SENIOR officials of energy major Enron Corp, Bechtel and GE, the three foreign sponsors of the troubled Dabhol Power Company, will meet in Houston next week to take a decision on whether to proceed with the proposal of due diligence to be carried out by city-based power utilities, the Tata Power Company and BSES. "The offshore sponsors of DPC have not yet given their go-ahead for potential buyers of their 85 per cent equity to commence due diligence. They are scheduled to meet before this month-end to decide their next step regarding the Dabhol project," sources close to the sponsors said here on Tuesday. When contacted, DPC spokesperson declined to confirm or deny the development. Sources said the sponsors' decision would be conveyed to the Industrial Development Bank of India-led consortium of Indian lenders by first week of December. "Contradictory to recent announcements by Indian lenders and the prospective buyers, the ability of any party to sign the confidentiality agreement and proceed with due diligence will, after all, depend on the three foreign sponsors' approval," they pointed out. Both Tatas and BSES would need their approval and cooperation to commence due diligence, sources emphasised.

Tata Power Ltd managing director Adi Engineer confirmed they were yet to commence DPC due diligence. "We are waiting to sign the confidentiality agreement with DPC sponsors after which Tata Power Ltd would take at least a few months to complete the process," Adi Engineer said. Sources termed the meet as "critical" in deciding the future course of events in resolving the issues surrounding the $3-billion power project. "Enron, GE and Bechtel had raised the issue of continuing costs of fundings during the three-day marathon Singapore meet, risen as a result of the Indian and foreign lenders' refusal to disburse additional funds," they informed. The proposed due-diligence was expected to take another two-three months, sources said, adding situation had become "more fragile" with Maharashtra State Electricity Board not drawing power since May 29 and lenders stopping disbursements to the 2,814-mw project March onwards. "This has resulted in the beleaguered DPC also being unable to meet its loan repayment commitments in September and October," they added. During the Singapore meet, the three foreign sponsors had also expressed their grave concern about bearing additional expenses as the due diligence process would take its own time and incur significant costs, only adding to deterioration of assets and their cost burden, the sources said.

Yesterday, BSES Ltd chairman and managing director R V Shahi had announced that the company was likely to complete the due diligence of the Dabhol project by January end next year. Shahi said BSES has returned the draft of confidentiality agreement with comments to DPC. BSES would appoint three separate consultants for doing technical, financial and legal due diligence along with an internal task force to do parallel ground work, he said. (PTI)
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THE ECONOMIC TIMES, Thursday, November 22, 2001
'Enron may sell Dabhol at half price', WASHINGTON (Carried only by the online edition)

EMBATTLED US power major Enron may be forced to sell its stake in the Dabhol power plant at around half a billion dollars instead of the asking price of a billion dollars, a report here said. Tata Power and BSES, the Indian bidders for Enron's stake in the 2184 mw Dhabol Power Plant were reportedly willing to pay only half of the asking price which stood over a billion dollars, the New York Times reported. If the lenders and prospective buyers adopt a take it or leave it line, Enron may have little choice but to accept their offer and swallow a huge loss on a controversial project which one gleamed with promise, it said. "It is bound to be a distress sale," one banker told the paper. Though Enron's chairman and chief executive Kenneth L Lay was earlier quoted as saying that India would have to face economic sanctions if the government did not create a favourable climate for the sale of Enron's stake, the paper said "Enron now will find little lobbying traction in either Washington or New Delhi". "The coalition-building diplomacy of the war in Afghanistan makes it unlikely that the Bush administration would agree to press India on Enron's behalf," the paper said.( PTI )
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THE ECONOMIC TIMES, Thursday, November 22, 2001
Enron crisis deepens, bankruptcy looms (Carried only by the online edition)

The crisis of confidence ravaging cash-strapped Enron deepened on Wednesday amid mounting concerns that a proposed rescue by rival Dynegy could fall through, threatening the energy giant with bankruptcy. While the Houston-based energy giant said it secured the remaining $450 million of a new $1 billion credit line and pushed back the deadline for repaying a $690 million debt, its shares fell a further 28 per cent, after falling 23 per cent on Tuesday. "If Dynegy steps away entirely from the merger, Enron's credit situation seems untenable with a bankruptcy filing highly possible," rating agency Fitch Investors said. UBS Warburg analyst Ron Barone said, "Bankruptcy would not be out of the question if the merger fell through or ran into obstacles." "We believe the odds of Enron incurring a material adverse change on its operations is soaring," Barone said in a research note, saying that Dynegy may invoke clauses allowing it to walk away from or alter the terms of the $9 billion agreement. In a statement, Enron said it was in feverish talks with its other lenders to restructure its debt obligations and reaffirmed its commitment to the Dynegy deal. "We continue to believe that this merger is in the best interests of our shareholders, employees, and lenders," Enron chairman and chief Executive Ken Lay said. JP Morgan Chase vice chairman James Lee said in the same statement that Chase believes its interests and those of Enron and its other primary lenders are aligned, and that the bank would "develop a plan to strengthen Enron's financial position up to and through its merger with Dynegy."

SHARES HIT 1989 LEVELS
Enron's shares fell $1.98, or 28 per cent, to close at $5.01. It was the most actively traded issue on the New York Stock Exchange for the second day in a row. The shares had dipped as low as $4.58 earlier in the day, rebounding slightly after Enron's announcement. Accounting for stock splits, that is the lowest Enron has been since February 1989. Dynegy shares were off $1.94, or 4.65 per cent, at $39.76. Dynegy Chairman and Chief Executive Officer Chuck Watson said he is encouraged by the new loan and debt extension. He said in a statement that Dynegy was working to "accelerate the regulatory approvals required to complete the merger". Watson said ChevronTexaco, which owns 26 per cent of Dynegy, reiterated its "full confidence" in Dynegy's ability to complete the merger. Privately, analysts were calling the odds of success lower since Enron made a filing with the Securities and Exchange Commission on Monday alerting investors to its credit crunch.

Most analysts interviewed by Reuters called the chances even, where earlier they had called odds of success at 60-70 per cent. However, one analyst said he thought emotion was driving the current stock moves, and that it comes despite three powerful factors in favor of the deal. "The bottom line, Enron needs this to happen, Dynegy wants this to happen, and ChevronTexaco is supportive of it happening," Credit Suisse First Boston analyst Curt Launer said. Goldman Sachs downgraded Enron and Dynegy to market perform, and took both off its recommended list. Goldman said the cash infusion from Dynegy -- $1.5 billion -- "appears inadequate to restore the confidence of Enron customers." Enron's trading partners, now more publicly than before, on Tuesday said they were treading carefully.
"We've been scaling back for some time, but we're still dealing with Enron. Everyday, our credit people are watching," said Al Butkus, a vice president with Kansas City-based Utilicorp United.The trading business, Enron's crown jewel and the part most coveted by Dynegy, relies on volume for profitability, and Enron has said it was possible that the lower volumes would hamper fourth-quarter earnings. One indicator of Enron's shape was the fact that its bonds are now being quoted by price, like junk bonds, rather than by how much extra yield they carry over US treasuries, like investment-grade bonds.

The company's 6.4 per cent notes maturing in 2006 and 6.75 per cent notes maturing in 2009 were respectively bid Wednesday afternoon at 62 and 60 cents on the dollar, each down from the high-60s on Tuesday. Their yields to maturity were a respective 19 and 16 per cent. Its 20-year zero-coupon convertible bonds traded Wednesday at just over 34 cents on the dollar, down from 38 cents on Tuesday.
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THE ECONOMIC TIMES, Thursday, November 22, 2001
Enron closes a decade low at $7 

THE LATEST negative disclosures from Enron on Tuesday speared its stock price, which crashed to a decade low after new debt problems and an earnings revision emerged a day earlier. Shares of Enron closed down $2.07, or 22.8 per cent, at $6.99 on the New York Stock Exchange, after touching $6.55 during the day -- a low not seen since May 1991. Enron was far and away the day's most active stock, with more than 62.8 million shares changing hands. Volume was more than double the second most active issue, Xerox Corp.

Meanwhile, credit rating agency Standard & Poor's said it may again cut the Houston company's BBB-minus rating, which could trigger those debt payoffs. But the agency said Enron's liquidity issues were unlikely to derail its merger with smaller cross-town rival Dynegy, announced November 9. "This is as high a high-wire act as I have ever seen," analyst John Olson of investment house Sanders Morris Harris said. "If this merger is to survive, equity investors will need to have a reason to buy the stock and their confidence will need to be restored, because the equity investor has been leading the way down." Enron's hellish Tuesday on the market came after the company made new disclosures in a US Securities and Exchange document, filed after the market closed on Monday. Most pressing was news that Enron has until November 26 to put up $690 million in collateral against a debt to a partnership. Otherwise, the partnership could begin liquidating assets, including a Brazilian gas company which Enron plans to sell to raise $250 million. In the SEC filing, known as a Form 10-Q, Enron said it was suffering a decrease in trading volumes, particularly in longer-term deals.

TRADING VOLUME DOWN

Since the trading business -- Enron's crown jewel and the segment most coveted by Dynegy -- is low-margin, volume drives its profitability. It is too early to tell what effect the lower volumes would have on future profitability, Enron said, but analyst Andre Meade of Commerzbank Securities said Dynegy will watch the volume drop carefully. "If it has a long-term effect, it will definitely impact the value Dynegy will put on this business," he said. Dynegy gave a limited response when asked if it was concerned about lower volumes, and whether it was aware of the $690 million debt before it made its deal to acquire Enron. "We are in due diligence and Enron's 10-Q is a part of that process," Dynegy spokesman John Sousa said.

Meade said the filing yet again showed Enron's penchant for making disclosures bit-by-bit. Of note was its latest downward revision of its third-quarter earnings, he said. "The restatements are coming out piecemeal as they find them, and my guess is they don't know the full extent. We think further revisions are likely," Meade said. One analyst who follows Enron said the SEC filing painted a darker picture of the company's cash position, given that it had $2.3 billion on hand as of Nov. 16. "It shows that the cash drain on the company looks to be very significant," said the analyst, who asked not to be identified.

Standard & Poor's said Enron currently has about $1.5 billion in cash, but that follows an infusion in recent weeks of $1.5 billion from the Dynegy merger, $550 million in loans secured by pipeline assets, and $3 billion from its revolving credit lines. Another $450 pipeline-backed loan is expected in a day or two, and Enron said it expects $500 million of private equity investment plus $800 million from asset sales. Enron owes $9.15 billion by the end of next year, and its total liability for debt and other obligations is $16.86 billion, according to the SEC filing. Its merger with Dynegy is expected to close by the third quarter of 2002, raising the possibility that an Enron without investment-grade credit might not have the liquidity to survive that long.

Enron acknowledged as much in the SEC filing, stating starkly that it would be unlikely to "to continue as a going concern," if a credit rating cut triggers the early payoff of $3.9 billion in debts to partnerships to which it belongs. Enron said that if its rating were cut, it would work out other payment arrangements. S&P said a similar effort being undertaken in the case of the $690 million debt will likely be successful "given the alignment of the interests between Enron and the banks." Enron spokesman Vance Meyer said the company had received verbal indications that the deadline on that debt was going to be extended, but it details had yet to be worked out.( REUTERS )
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THE FINANCIAL EXPRESS, Thursday, November 22, 2001
Unprecedented defence ties on way: Blackwill

US envoy Robert D Blackwill has said, "conclusive acceleration" of Indo-US defence cooperation is progressing, "in an unprecedented way". Mr Blackwill listed, "joint exercises, education, intelligence, civilian nuclear safety cooperation, a joint cyber terrorism initiative, and military to military cooperation", as areas where the two countries will be engaged in during a flurry of visits over the next 2-3 weeks. This includes chief of US Pacific command Admiral Dennis Blair and US under secretary of defence Douglas Feith. Mr Feith is the third senior-most official at the Pentagon. Mr Blackwill also made direct references to "sale of arms" and "spares", as areas which will see future cooperation. He was speaking at the Foreign Correspondents\' Club here. Even as he read out, "an ennumerative list of strategic cooperation in the months and years ahead," the envoy cautioned that won't give "a flat promise" on such matters. "Fundamentally, it is for both sides to earn each other's trust. Yes, the US has had an episodic and an ad hoc approach in the past, but then September 11 has changed our position on terrorism, as it has for the entire world. Is there any use in insisting on a historical approach lifted from the Cold War? But having said all this, I can't give a flat promise to any country. US policies are in the hands of our people, who in turn express themselves through their representatives". 

Asked if unprecedented cooperation meant that Enron was no longer 'a five letter word' jarring the Indo-US commercial dialogue, Mr Blackwill cautioned, "Enron remains a problem. We hope there will be a quick, and mutually acceptable resolution. The problem continues to pass a very dark shadow. That remains true to this day". In a reaction, Indo-American Chamber of Commerce regional president Bimal Sareen, who was in the audience, endorsed Mr Blackwill's assessment. "It is extremely critical for the (Indian) government to take a proactive stand on an expeditious solution...Enron is casting a cloud over foreign investment," Mr Sareen told The Financial Express. "Of course, expansion of commercial relations into defence, and more security cooperation will greatly help in renewal of confidence," Mr Sareen added. 

On a more general note, Mr Blackwill said the regime on high tech commerce will be allowed to flow "on the assumption of approval rather than denial". On terrorism, the envoy showed heightened understanding of what India has repeatedly complained about. "There are no exceptions in this war. We won't allow terrorism against the US. Nor will we allow terrorism against India. So, without (addressing concerns of) India, this war (against the Al Qaeda) won't be complete otherwise. US and India are in this battle together. And as secretary of defence Don Rumsfeld has said on Fox TV, there is no difference between terrorist networks....a terrorist is a terrorist is a terrorist. He can never be a freedom fighter. Also, no country will be allowed to provide a sanctuary to terrorists". On Afghanistan, Mr Blackwill said, "the US sees India as a central player in the assistance once the war is over" He talked of the forthcoming visits of US special coordinator Richard Haas, and US envoy on Afghanistan James Dobbins to India and defended the exclusion of 'moderate Taliban' elements in the forthcoming Berlin conclave, quoting US national security advisor Condoleeza Rice. In Ms Rice's view, "moderate and Taliban don't go together". 
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THE FINANCIAL EXPRESS, Thursday, November 22, 2001
Fitch thumbs down to India currency ratings (Carried only by the online edition)

International rating agency, Fitch, on Wednesday downgraded India's sovereign foreign and local currency ratings to 'BB' and 'BB+', respectively, from 'BB+' and 'BBB-' (triple B minus). However, the rating agency changed its outlook to 'stable' from 'negative' in recognition of India's continuing external strengths. Fitch said that this rating action -- presaged by a change in the outlook from 'stable' to 'negative' in May 2001 -- has been prompted by India's continued fiscal profligacy, while an unfavourable political environment is hindering economic reforms. Further, while changing its outlook to 'stable' from 'negative', Fitch cautions that \"the outlook for the local currency rating remains negative because of high and rising domestic debt and weak public finances.\" 

The rating downgrades reflect the absence of any significant improvement in India's public finances and slow progress on disinvestment. Persistent general government deficits of over 9 per cent of GDP are the highest among 'BB' Fitch-rated sovereigns. "The agency believes that fiscal consolidation envisioned for 2001 is unlikely to materialise due to revenue shortfalls arising from the current economic slowdown and the inability of the government to cut expenditures. More importantly, the composition of the fiscal deficit has deteriorated, with a sizable part of the revenue deficit attributable to rising public consumption. Interest payments constitute 50% of revenues and leave little room for social and capital spending,\" said Fitch Sovereign's director, Paul Rawkins. 

Like China, India's large domestic market and the closed nature of its economy makes it less vulnerable to external shocks. Nonetheless, it is unlikely to escape unscathed from the current global economic downturn. Declining exports have already induced a dramatic slowdown in industrial production and capital spending. Lower oil prices and sluggish non-oil imports should, however, help to contain the deterioration in current account deficit, which remains manageable at around 1 per cent of GDP. India's 'BB' foreign currency rating balances this factor plus continuing improvements in its external solvency and liquidity ratios against a prospective deterioration in the foreign investment climate (and hence non-debt creating flows) consequent upon the Enron case.