Offbeat majors help CEOs think outside the box
USA Today, 07/24/01
Enron not to dampen foreign investors interest
The Economic Times, 07/24/01
Payment crisis
The Economic Times, 07/24/01
India May Allow Generators to Retail Electricity, Paper Says
Bloomberg, 07/24/01

Enron Should Be Fined by California Senate, Committee Says
Bloomberg, 07/24/01

Enron contempt citation moves forward in state Senate
Associated Press Newswires, 07/24/01

Enron,s Ken Lay On Energy and Boards 
Corporate Board Member Magazine, Summer 2001



Offbeat majors help CEOs think outside the box
By Del Jones, USA TODAY, July 24, 2001 
http://www.usatoday.com/money/bcovtue.htm


Enron not to dampen foreign investors interest
Our Bureau

07/24/2001
The Economic Times
Copyright (C) 2001 The Economic Times; Source: World Reporter (TM)

THE ENRON fiasco would not dampen the interest of foreign investors who see 
India as a long term investment destination, AT Kearney vice president and 
managing director of its Global Business Policy Council Paul Laudicina has 
said. 
He felt that the fallout of the Enron controversy would not have major 
negative implications for foreign investment inflows into India.
Laudicina, who is in India on Monday to address several meetings of the 
businessmen, told ET in an interview that Enron should not be seen as an FDI 
dispute. 
"Infrastructure bottlenecks and bureaucracy are major hinderances to inflows 
on FDI into the country." He added: "Enron should be seen in the context of 
Indias need for investments in infrastructure sectors." 
Laudicina, however, cautioned that it was for the Indian government to ensure 
that the Enron controversy would not result in negative perception among 
investors who did not "know" the country. "The authorities need to address 
the issue frankly instead of putting on false positive face." 
Further the two parties involved Enron and the government should deal with 
the issue in forthright manner. 
AT Kearney had reported early February that India was one of the four hot 
destinations for FDI among the emerging nations, others being China, Brazil 
and Mexico. Laudicina felt that the turn of events in the country since then 
would not have negatively impacted the countrys attractiveness to the foreign 
investors. 
Foreign investors, he felt, were looking for large market size and potential 
when making an investment decisions. Other important factors were consistency 
of reforms process, infrastructure and availability of skilled and talented 
labour. 
He added that the government should realise that the FDI environment had 
become more competitive since the setting in of global slowdown and investors 
were increasingly more selective about their choice of destinations. 
India could continue to attract FDI inflows due to its strengths but the 
government needs to address the investor concerns, Laudicina said. 
The strengthens notwithstanding, India needs to have a clear road map if she 
want to accelerate the pace on inflows of FDI. 
Compared to $40 billion annual inflows to China and $30 billion into Brazil, 
India gets just about $3.5-4 billion annually. Brazil has seen FDI inflows 
increase from $2 billion in 1995 to $30 billion in 2000. 
He also pointed out that India could face increased competition from China in 
the coming years when the latter enters WTO. The need of the hour would be 
for the government to go out and ensure that investors understand facts about 
the country.

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


Payment crisis

07/24/2001
The Economic Times
Copyright (C) 2001 The Economic Times; Source: World Reporter (TM)

AMERICAS AES Transpower wants to be paid for the electricity that it has sold 
in Orissa. Nothing strange about that. Thats how it is in any market.
But not in India. Here consumers and state electricity boards routinely 
collude to gyp power generators of their dues. Till recently, Orissa was 
brandished as a case study of successful power reforms. 
It was one of the earliest states to attract private investment in power 
generation, a pioneer in restructuring SEBs into generation, transmission and 
distribution companies and one of the few states that had managed to get 
private investors interested in retailing electricity. Not any longer. 
A lot of that, it appears, was bunk. Today, the SEB apparently owes AES $45 
million. AES wants the money to go into an escrow account where the SEB 
cannot dip into it when it wants. 
But escrow accounts and guarantees cant be permanent solutions to the power 
crisis, which arises from three related causes political pricing of power 
which charges different consumer classes different rates; the ensuing theft 
of electricity from low priced connections; and state ownership of utilities, 
whose employees collude with miscreants. 
Its easy to get private investment in generation as long as the generating 
companies can be paid. The failing Enron project shows that bankrupt SEBs 
make bad customers. 
So, private generators now want to sell directly to paying customers through 
private distribution networks. 
But when AES begins to stumble as a private distributor and when states like 
UP fail to privatise distribution networks because bidders are scared then we 
have a bigger problem. 
That is the collapse of basic administration in states. 
What good is supplying electricity if consumers refuse to pay and local 
administrations side with the defaulters rather than the company thats being 
done out of its legitimate dues? 
A technical solution pre-paid electricity charge cards has been proposed. But 
even that will fail if the administration doesnt punish power theft. 
Only a broad reform agenda that includes administrative reforms in the states 
will work. Piecemeal solutions wont.

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


India May Allow Generators to Retail Electricity, Paper Says
2001-07-24 02:01 (New York)


     New Delhi, July 24 (Bloomberg) -- India's government may ask
parliament to pass a law allowing generators to sell power
directly to companies and big housing estates, the Business
Standard reported, citing Power Ministry officials it didn't name.
     Only state electricity boards are now allowed to retail power
that the boards buy from state and non-state generators. If
generators are allowed to retail power to large buyers, customers
would be taxed to help pay for subsidized supplies to villages and
rural consumers, the paper said.
     The Electricity Bill 2001 may be introduced during
parliament's five-week session that began yesterday, the paper
said.
     AES Corp., a U.S. power generator, said last week it wants to
pull out of a power distributor in eastern Orissa state that's
owed $45 million in past-due bills because of power thefts and
refusals to pay.
     Enron Corp., the world's biggest energy trader, and a state
electricity board in India's western state of Maharashtra have
been quarrelling for seven months over $64 million of unpaid
bills.
     At least five overseas utilities, including Electricite de
France, Europe's largest, have pulled out of Indian power projects
worth $3 billion over bureaucratic delays, slow deregulation and
payment problems.

Enron Should Be Fined by California Senate, Committee Says
2001-07-23 21:19 (New York)

Enron Should Be Fined by California Senate, Committee Says

     Sacramento, California, July 23 (Bloomberg) -- Enron Corp.,
the world's largest energy trader, should face escalating fines
levied by the California Senate until it complies with requests
for trading records, a legislative committee said.
     In a report to the full Senate, the Senate Select Committee
to Investigate Price Manipulation of the Wholesale Energy Market
suggested Enron be fined $1,000 initially. The fine should double
each day the Houston-based company fails to comply with document
requests, the committee said.
     ``Enron is and has been an active participant in the
California wholesale-energy market,'' the report said. ``The
subpoenaed documents are pertinent to the select committee's
investigation.''
     The committee is investigating allegations that power
generators and traders manipulated California's electricity market
to artificially boost prices. Enron and other companies have said
repeatedly that they acted within the law.
     ``We were rather surprised by it (the committee report),''
said Enron spokeswoman Karen Denne. ``We've been negotiating in
good faith with the committee and had made a good deal of progress
in the last week.''

                    Contempt Allegations

     The committee has twice found Enron in contempt for failing
to supply documents the committee has requested. On July 11, when
the committee voted the second time, committee Chairman Joseph
Dunn said he wouldn't deliver the contempt report to the full
Senate if the documents were turned over. Dunn, a Democrat from
Santa Ana, delivered the report Saturday.
     Enron has agreed to turn over more than 1 million documents
to the committee, Denne said. The company doesn't have an
agreement on the Senate maintaining the confidentiality of the
documents, nor on lawmakers' jurisdiction over documents not kept
in California, she said.
     Before the full Senate votes on the report, it must be taken
up by the Senate Rules Committee, said Alex Montgomery, a
consultant to Dunn. The committee is likely to take up the issue
when the Senate returns from its month-long summer recess in late
August. The report's proposed fines are intended to bring Enron
into compliance with the document requests, Montgomery said.
     ``It really is meant not to punish them, but to get them to
comply with the subpoena,'' she said. ``We would really prefer not
to be in this process.''
     On July 11, Enron sued Dunn's committee to quash the subpoena
for documents. In the lawsuit, Enron said that federal regulators
have sole jurisdiction over wholesale-energy trading and that the
committee's subpoena is too broad. Enron will continue to pursue
the suit, Denne said today.


Enron contempt citation moves forward in state Senate

07/23/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

SACRAMENTO (AP) - A contempt citation against Houston-based Enron Corp. has 
been presented to the full Senate by the committee investigating possible 
price manipulation in California's energy market. 
The Senate Select Committee to Investigate Price Manipulation of the 
Wholesale Energy Market initiated contempt proceedings after the company 
failed to turn over subpoenaed documents.
Enron sued the state July 11 in an attempt to stop the subpoena of its 
financial and electricity trading records. That suit remains unresolved. 
The committee delivered a report on the contempt charges to the Senate on 
Saturday. The Senate Rules Committee will consider the vote before the full 
Senate takes it up. 
The Senate recessed early Sunday for summer break and won't return until Aug. 
20, delaying any action until then. 
If the Senate approves the report and finds Enron in contempt,it would be the 
first such move since 1929. The Senate could impose sanctions, but here are 
no set penalties. 
The last time the Senate imposed contempt sanctions was 72 years ago, when it 
briefly jailed balky witnesses during a committee's investigation of price 
fixing and price gouging allegations involving the sale of cement to the 
state. 
The state Supreme Court eventually upheld the Senate's right to jail those 
who fail to comply with its subpoenas, but determined senators hadn't 
followed all the proper procedures in the cement sale investigation.

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

Enron,s Ken Lay On Energy and Boards 
Corporate Board Member Magazine, Summer 2001
by Ann Reilly Dowd  </contact_us/contact_form.shtml?Ann_Reilly_Dowd>

California may have asked for it, says this White House insider, but 
everybody should be part of the solution*including directors who should 
ensure their companies have an energy strategy.

When Vice President Dick Cheney sought input in formulating a national energy 
policy, one of the people he listened to most intently was Kenneth Lay, 
chairman of Enron and a longtime George W. Bush supporter. In 15 years Lay, 
57, has turned a traditional pipeline company into an aggressive trader of 
gas and electricity and a provider of broadband services. Until the deal 
bogged down, it looked last year as though video rental giant Blockbuster 
would use the Houston outfit,s network systems to deliver online movies. Lay,
s ambitions for Enron don,t stop there. He wants federal regulations removed 
so the company can build power plants and power lines, which would put it in 
direct competition with utilities. In a conversation with Corporate Board 
Member,s Ann Reilly Dowd, Lay discussed the energy crunch gripping the United 
States and what government and boardrooms need to do about it. He also 
describes how he assembled a board that enabled him to push Enron so far into 
the future. Excerpts: 
On how real the energy crisis is: We have a genuine energy crisis in 
California, which will see severe shortages or disruptions over the summer, 
and a serious energy problem in most other places. Outside of California, the 
supply/demand balance is very tight, and maybe the infrastructure is being 
pushed a little hard. But the energy situation certainly needs attention. In 
many ways, this country has underinvested in energy supply and infrastructure 
for at least 15 or 20 years. We need to start correcting for that. 
On deregulation: What led to California,s energy crisis was not deregulation 
but a very flawed command-and-control regulatory system where most consumers 
don,t have any choice. Deregulation is not where you have a fixed price on 
the retail side of the market and a floating competitive price on the 
wholesale side. It,s also not where everybody has to buy most of their supply 
on the wholesale spot market. That was very, very dangerous from day one. We 
need to give consumers the benefits of real deregulation. 
The solution for California,s problem has to be in California. Nationally, we 
need to get the rules right as quickly as possible. Part of the problem is 
that there has been uncertainty in some states and regions as to what the 
rules are. Uncertainty tends to lead to inaction. So we need to go ahead and 
finish up the deregulation process. Mainly, we need to remove barriers for 
rebuilding the infrastructure, getting the right-of-way for new transmission 
lines, and building power plants. 
We need to distinguish between deregulating the retail and the wholesale 
electricity market. On the wholesale side, the federal government, mainly the 
Federal Electricity Regulatory Commission, has a great deal of authority. One 
of our recommendations has been that we need to get larger transmission grids*
regional, not just state grids. We need those to operate independently of the 
distribution and power generation functions. And we need those larger 
regional grids to be truly open access and nondiscriminatory. We and many 
other people are convinced that would increase the carrying capacity of the 
system and help us in the interim as we expand and build out the system. 
On price caps: I don,t hear anyone arguing that price caps would either 
reduce demand or increase supply. And many people would argue just the 
opposite, that they would increase demand and reduce supply. 
Here,s one example. Enron was getting ready to build a peaking power plant in 
California last October. We already had the site approved, and the turbines. 
Then the state imposed price caps, and we had to cancel the project because 
we couldn,t justify making the investment with the price caps. At least one 
other company, CalPine, did the same thing. That means that this summer there 
will be about 1,000 megawatts less power available for the California market 
than there would have been otherwise. That,s about 20% of the estimated peak 
shortage that would have been available if there had not been price caps. 
Second, price caps tend to allow political leaders to delay making the tough 
decisions necessary to solve the problem. Price caps may camouflage the 
problem temporarily, but they don,t solve it. And to the extent that the 
right decisions and action are not taken, the problem just gets worse. 
On the public backlash against energy companies and their boards: Every time 
we,ve had an energy problem, we get this same reaction. There is always a 
discussion of conspiracy or collusion or anticompetitive behavior or excess 
profits or whatever. Each time there are investigations. 
In California, it seems the political leaders are trying to blame everybody 
but themselves. They need to face up to the fact that the rules are wrong and 
led to a drastically dangerous situation. Now we,ve got to solve it. 
First of all, we,ve got to get the prices right, so consumers realize we,ve 
got to use a lot less and suppliers realize we,ve got to produce a lot more. 
We,ve got to streamline the process to site and build power plants. We,ve got 
to do some very significant things from the point of view of reducing demand. 
And we need to open the market for competition. Then this problem will get 
solved very quickly*a lot more quickly than trying to put on artificial price 
caps. Everywhere we,ve tried price caps they have led to enormous economic 
inefficiency and distortions. 
The way we handle the criticism*and Enron,s board knows this*is by being very 
open and proactive, trying to work through solutions rather than pointing 
fingers and conjuring up conspiracies. I and others on the Enron team have 
been to California to meet with editorial boards and business and political 
leaders. We try to educate various groups on what caused the problem and what 
needs to be done to solve it. 
On the need for all companies to have an energy policy: Even before this 
recent increase, it,s been our experience that many companies have exposed 
themselves to a lot more price risk in their energy use than they realize. It,
s an area that quite often is not as actively managed as, for example, the 
balance sheet. There is a lot of attention on interest rates and the 
portfolio approach with some short-term, some medium-term, and some long-term 
debt. We usually don,t see anywhere near the same sophistication applied to 
energy, even though in many cases, companies have a lot more risk exposure in 
their energy purchases or procurement than they do in their debt portfolio. 
On what boards should push for: I think the kind of questions board members 
should be asking are: What is our policy on hedging fuel prices? Did we lock 
in any of our energy prices? If not, why not? What are we doing about the 
future? Have we looked at all of our conversion and control equipment and all 
of our policies and procedures? Are they truly &best in class?8 Are we 
getting advice from companies that are truly world-class in this area? 
On energy as a corporate asset: Enron has a major business outsourcing energy 
for large industrial and commercial companies. We go in and evaluate the 
energy activity, the equipment, the control systems, and the procurement 
policies. Even before the recent run-up in prices, we had yet to find a 
well-run business where we couldn,t reduce energy usage and costs by 5% to 
15%. 
Most companies, even fairly energy-intensive companies, are not necessarily 
world-class at managing their energy activities. It,s not a core competency. 
It,s not where the best and the brightest want to spend much time. It,s also 
not a place where many companies want to spend much capital. For all those 
reasons, quite often the energy convergence and control equipment may not be 
the latest and most efficient, and companies may not be using best practices. 
We have looked at small companies, which may not be one-tenth or even 
one-twentieth the size of Enron, that are exposing themselves to more 
energy-related risk than Enron does worldwide. Usually they don,t know that 
until they get a price spike. Then all of a sudden, it becomes a big factor 
in why they aren,t meeting their earnings and cash-flow targets. In many 
companies, energy is 10% to 20% of operating costs. If suddenly that rate 
goes up 50% or 75% and a company is operating on thin margins, the profits 
begin disappearing, 
On how to build a world-class board: At Enron, I went outside and brought in 
a few key directors with a lot of creative ideas to stimulate the board,s 
thinking. As we had turnover, I kept bringing in new people and, 
increasingly, people from other countries, who brought specific talents that 
we thought would be helpful. I also brought in a number of new executives 
from different fields and backgrounds to help us jumpstart our effort to 
build a significant business in the deregulating natural gas markets. 
It,s the old chicken and egg proposition. The top board members want to be 
with the top companies. So as you,re rebuilding the board, you,ve also got to 
rebuild the company. You have to make sure you are bringing in the management 
talent you need and developing and executing the strategy to move the company 
in different directions. It all feeds on itself. As the talent base improves 
and the company,s success is recognized, it,s easier to bring in directors. 
The better directors you have, the more success you,re going to have in 
business. 
On transforming companies: Our biggest turning point was in the late 1980s, 
when we decided to let our new deregulated business compete head-on with our 
well-established and regulated pipeline business and, in the process, maybe 
antagonize some of their customers and suppliers. Clearly we had divisions in 
the company where some of the executive team thought that was smart, and some 
thought it was dumb. We all understood it was fairly risky. The main battles 
were internal within the management team. The board was supportive of taking 
that risk. 
Today our regulated pipelines are still a good business, but certainly that 
would never give us the kind of growth and opportunity we could obtain if we 
became truly &best in class8 in operating in the deregulating energy markets. 
On the biggest lesson learned: The most important thing is quality of talent. 
That,s true both on the management team and on the board. You have to have 
good talent to attract more talent.