THE FINANCIAL EXPRESS, Friday, November 23, 2001
DPC board to meet in London on Nov 30, Sanjay Jog
...expected to authorise Wade Cline to issue final termination notice to MSEB
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THE HINDU BUSINESSLINE, Friday, November 23, 2001
Arbitrators meet in Singapore on Dabhol 
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THE TIMES OF INDIA, Friday, November 23, 2001
NGO pegs DPC cost at Rs 1,500 cr 
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THE ECONOMIC TIMES, Friday, November 23, 2001
'Enron may sell Dabhol at half price' , WASHINGTON

Similar story also appeared in the following publications:

THE HINDUSTAN TIMES, Friday, November 23, 2001
Enron may sell DPC stake at half price, Washington, DC, Press Trust of India 

BUSINESS STANDARD, Friday, November 23, 2001
Enron may have to sell stake in Dabhol at half price

THE FREE PRESS JOURNAL, Friday, November 23, 2001
Enron may sell Dabhol at half price

THE HINDU BUSINESS LINE, Friday, November 23, 2001
Enron may have to sell Dabhol stake at half price

THE HINDU, Friday, November 23, 2001
Enron may sell Dabhol stake 
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THE FINANCIAL EXPRESS, Friday, November 23, 2001
SEES SOLUTION BY MID-DECEMBER; OPERATORSHIP JV OPTION THROWN UP
BG extends Panna Mukta deal with Enron, Sourav Majumdar
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THE INDIAN EXPRESS, Friday, November 23, 2001
Enron shares in quicksand as merger doubts rise, C BRYSON HULL
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THE HINDU BUSINESS LINE, Friday, November 23, 2001
EU urged to ease market access, NEW YORK  (carried only by the online edition)
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THE FINANCIAL EXPRESS, Friday, November 23, 2001
DPC board to meet in London on Nov 30, Sanjay Jog
...expected to authorise Wade Cline to issue final termination notice to MSEB

The Dabhol Power Company (DPC), which is involved in the process of selling its stakes in the distressed Dabhol project, has reconvened its board meeting on November 30 in London, for authorising Enron India managing director K Wade Cline to issue a final termination notice to Maharashtra State Electricity Board (MSEB). The MSEB and state government, which have a representation on the DPC board, are likely to skip the ensuing board meeting. The DPC, following the acquisition of Enron by Dynegy Inc and the Bombay High Court's order of November 9 restraining it from serving a final termination notice to MSEB until further order, had cancelled the board meeting originally slated for November 19 in Houston. The MSEB, which holds 30 per cent equity in the Dabhol Phase-I (740 mw), had taken a serious objection of the November 19 meeting and had asked DPC to cancel it following the Bombay High Court order. Curiously, MSEB has decided to soon send a dissent note to the DPC saying that the stage of issuing final termination notice had come mainly because of DPC's mismanagement. 

MSEB, which wants to expose DPC's default on the availability of power, in its dissent note would also ask the DPC to change the venue of the board meeting from London to India. MSEB sources told The Financial Express on Thursday that it has received an intimation from DPC on the proposed board meeting to be held in London. Sources said that it would ask DPC why it suddenly cancelled the Houston meeting and rescheduled it for November 30. MSEB is also likely to question the "wasteful expenditure" involved in the cancellation and reorganisation of the board meeting especially when DPC has been complaining about a financial crunch faced by it, following the closure of the Dabhol project after the suspension of power by MSEB on May 29. MSEB would also pointed out that though there were slippages in the payment of its power purchase bills, it has paid it with interest. Ironically, DPC, which defaulted on the availability of power, refused to accept the April bill and neither paid the rebate imposed by MSEB for material misrepresentation and default. The November 30 meeting would also take up issues related to assess preservation, 12 months preservation, financial position of DPC with regard to Dabhol Phase-I, failure in the payment of interest to lenders. The meet would also hold discussion on safeguarding the legal positions of DPC directors, opening of letter of credit of $295 million for shipping. If DPC fails to do so there is a likelihood that it may lose the ship arranged for the supply liquified natural gas. 

Mumbai, Nov 22: Dynegy Inc spokesperson John Sousa has said that Enron-owned assets especially the 2,184 mw Dabhol project would continue to be managed by Enron through the closing of merger, which is expected to be complete in the second or third quarter of 2002.  "We are currently beginning the Dynegy-Enron merger integration process. Assets currently owned by Enron will continue to be managed by Enron through the closing of our merger, which is expected in 6 to 9 months," he said.
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THE HINDU BUSINESSLINE, Friday, November 23, 2001
Arbitrators meet in Singapore on Dabhol 

OFFICIALS of the Maharashtra Government and Dabhol Power Company officials will meet on November 24 at Singapore for ``preliminary discussions'' on international arbitration proceedings initiated against the State. Officials are expected to brief the panel of arbitrators about the issues involved in the arbitration process, sources said. The preliminary meeting in Singapore will be followed by the actual arbitration process in the London Court. Enron-promoted DPC had initiated arbitration against the State Government accusing breach of contract. The company had accused the Government of not honouring its guarantees and supplemental support guarantees by refusing to pay the amount due for December and January bills issued by DPC on the MSEB after the board refused to pay the bills. Officials are expected to request the panel comprising Mr Quinton Loh (nominated by the State Government), Mr Andrew Rogers (DPC nominee) and Lord Mustell (independent arbitrator) to suspend proceedings. The officials may ask the panel to wait till the State replied the injunction order passed by the Commercial Court in London last month, on the same issue, sources said. The Commercial Court had passed an ex parte order against the State Government restraining it from taking any legal action against international arbitration initiated by DPC.
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THE TIMES OF INDIA, Friday, November 23, 2001
NGO pegs DPC cost at Rs 1,500 cr 

The Prayas Energy Group, a research-oriented NGO, has pegged the cost of the Dabhol project at Rs 1,500 crore ($320 million). This figure contrasts sharply with the estimate of Rs 3,800 crore ($800 million) reported to be under consideration by Indian financial institutions. The NGO recently evaluated the project's worth following news reports about the Dabhol Power Company selling the stake of its three MNC promoters -Enron, General Electric and Bechtel -for about $ 800 million, after a 30 per cent discounting.

According to Prayas, if Enron is not willing to settle for a reasonable figure, the Indian financial institutions may come under pressure to absorb the difference to put a full- stop to the endless rounds of controversy the project has been attracting. ``This is evident in the proposals being discussed, envisaging that the FIs would buy the equity as a warehouse and sell it later. The loss would obviously be theirs,'' says Shantanu Dixit, one of the researchers for the group. ``Based on our analysis of the renegotiation committee's report of 1995, the affidavit by the then chief minister Manohar Joshi in August 1996 in the Bombay high court, and the present financing structure of the project, it could be concluded that the fair cost of equity of the foreign promoters is not more than $320 million (Rs 1,500 crore),'' he says. This estimate is based on the assumption that DPC completes the project in the next six months, without any additional loans. Giving a break-up of the estimate, a statement released by the Prayas mentions that in the detailed project report submitted to the Central Electricity Authority in 1993, Enron has claimed a capital cost of US $ 2,828 million. Following re-negotiations in 1996, the Shiv Sena-BJP government claimed this cost had been pared down to U.S. $2,500 million. This is mentioned on Page 3 of the re-negotiation committee's report, which says that ``Enron and DPC representatives have given their written consent'' to this reduction.

But, by 1999, DPC's cumulative loans from Indian and foreign institutions were nearly $2,050 million. This implies that the total equity component of the project is only $450 million. Of this, the equity of Maharashtra State Electricity Board (MSEB) is $130 million. This brings the total equity put in by the foreign promoters to about $320 million. The report points out that on several occasions, Enron has guaranteed completion of the project within the agreed cost. ``Hence, any equity claim higher than this amount is unjustified and need not be entertained,'' it says. ``In other words, buying the foreign promoter's stake for a price more than $320 million would amount to a paying a premium to Enron and not discount,'' observes Mr Dixit.

The report notes that just before the work on the project was suspended owing to the disputes between the MSEB and the DPC, DPC had said the project cost had escalated and it would complete the project at a cost of $3,326 million. ``This astonishing cost overrun of $826 million (or 33 per cent of the project cost) is unbelievable, and has to be the result of Enron's inefficiency,'' says Mr Dixit. It further hiked this figure to $3,690 million, citing cost overruns since the project was not completed as per schedule. This, despite the fact that a few months before the suspension of work, DPC had claimed that more than 90 per cent of the project was complete. It has now claimed additional costs of $360 million, that is 14 per cent cost overrun for completion of the project.

The cumulative difference is of $1,190 million or a cost increase of Rs 5,500 crore, says the report. Now, if this difference has to be accounted for in any new power purchase agreement that may be worked out in the future, it would come in for scrutiny by the Maharashtra Electricity Regulatory Commission. ``There is every likelihood that the MERC would disallow it since it overrides the mutually agreed figure of $2,500 million,'' says Mr Dixit. In that case, the relevant party -most probably the government or the financial institutions -would willy-nilly have to absorb the additional costs claimed and incur such a needless and huge loss, he says.
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THE ECONOMIC TIMES, Friday, November 23, 2001
'Enron may sell Dabhol at half price' , WASHINGTON

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 FINANCIAL EXPRESS, Friday, November 23, 2001
SEES SOLUTION BY MID-DECEMBER; OPERATORSHIP JV OPTION THROWN UP
BG extends Panna Mukta deal with Enron, Sourav Majumdar

British Gas (BG), which has decided to acquire the 30 per cent stake held by Enron in the Panna Mukta Tapti oil and gas fields for about $388 million, has extended the deal indefinitely, pinning its hopes on getting sole operatorship rights for the fields by mid-December. The deal to buy the stake is conditional upon BG getting the operatorship rights which were with Enron, and was supposed to have been clinched by October end. BG is now hoping that the issue will be sorted out by the middle of next month. The other joint venture partners in the Panna Mukta Tapti fields are Oil and Natural Gas Corporation (ONGC) with a 40 per cent stake, and Reliance with another 30 per cent. Both ONGC and Reliance have also staked claim to the operatorship rights.But even as BG holds firm on getting sole operatorship, two other options have been thrown up. 

One option is that of setting up a joint venture operatorship company with the three joint venture partners holding stakes reflecting their ownership of the mother venture.The other option is to hand over one field each to each of the three joint venture partners. However, for BG, it's still a "sole operatorship or nothing" approach. While BG India chief Nigel Shaw was not available for comment, sources close to BG in India confirmed to The Financial Express that the deal had been extended in view of the hopes that the entire issue would be amicably resolved by the middle of December. "For BG, the stance is clear: it wants sole operatorship rights," the sources said.

They said the operatorship issue was critical to the running of the fields, and, therefore, there was no question of continuing with it unless BG got the rights. On the other hand, petroleum minister Ram Naik is of the view that merely because Enron is selling its stake to BG, it does not mean the rights can be transferred automatically to the new buyer. Mr Naik had earlier said that the right of first refusal for operatorship rights was with the other two partners in the joint venture. ONGC's unions have also backed the corporation's claim to operatorship rights, saying that it has enormous experience in the field and had also discovered the fields. Reliance, on the other hand, staked its claim citing experience and also the fact that it has got 25 blocks in NELP I,II and III.

According to sources associated with the entire issue, the joint venture operatorship company had come up as a suggested solution to the operatorship tangle from some quarters, so that all the three joint venture partners could be kept in the picture. If this was not feasible, the other suggestion was to distribute the three fields to the three partners. "That way, there would be some benchmarking possible as each partner would then operate one block," sources said. BG, however, is not willing to concede anything less than sole operatorship. The fields produce around 300 cubic metres of gas and 29,000 barrels of oil per day. Enron, which has just been taken over by Dynegy Inc., had already decided to withdraw from oil and gas in India as part of its global strategy. The US energy major was keen to move quickly on the Panna Mukta Tapti front, since it was already locked in intense deliberations on another of its major Indian assets, the troubled Dabhol Power Company (DPC). 
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THE INDIAN EXPRESS, Friday, November 23, 2001
Enron shares in quicksand as merger doubts rise, C BRYSON HULL

Enron Corporation said on Wednesday it secured the remaining $450 million of a new $1 billion credit line, but the news did little to reassure investors it can stay afloat long enough to complete its merger with rival Dynegy Inc. Shares of the Houston-based energy giant were off 26per cent, despite the announcement in which Enron also said it had pushed back the deadline for repaying a $690 million debt to mid-December from a deadline of next Tuesday. Enron's shares fell 23 per cent on Tuesday, after it raised credit concerns in a filing with the Securities and Exchange Commission. "The Dynegy deal will take a long time and a lot of things could happen over that time period. Dynegy did their homework, but if they missed anything, they have a number of exit opportunities," said Fulcrum Global Partners analyst Michael Barbis. In Wednesday's statement, Enron said it is in feverish talks with its other lenders to restructure its debt obligations and reaffirmed its commitment to the Dynegy deal, tagged at $9 billion in stock."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. Enron's shares were down $1.83, or 26 per cent, at $5.16 on Wednesday afternoon. It was the most actively traded issue on the New York Stock Exchange for the second day in a row.

Shares had dipped as low as $4.58 earlier in the day, rebounding somewhat after the announcement of the new loan. Accounting for stock splits, that is the lowest Enron has been since February 1989. Dynegy shares were off $1.95, or 4.68 per cent, at $39.75. Dynegy chairman and chief executive officer Chuck Watson said he is encouraged by the new $450 million loan and the debt extension for the $690 million. "We are continuing our confirmatory due diligence and working to accelerate the regulatory approvals required to complete the merger in accordance with the previously announced agreement," he said in a statement. Watson said Chevron Texaco, which owns 26 per cent of Dynegy, reiterated its 'full confidence in Dynegy's disciplined management approach to complete the merger and to build a new company into an industry leader.' 

Privately, analysts were calling the odds of a successful merger lower in the wake of new negative news made in a US Securities and Exchange filing. Most analysts called the chances of success even, where most had called the odds of success at 60-70 per cent earlier. Wall Street analysts said Enron is losing market share because of credit concerns from its trading partners and questions over Dynegy Inc's takeover offer. "Enron is definitely losing market share on credit concerns. Cash needs to run the business have now increased. The market perceives Enron as needing more cash," said Barbis. Goldman Sachs downgraded Enron and Dynegy to market perform on Tuesday, 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.' The bad news in Monday's filing with the SEC included the acceleration of the $690 million debt because of the credit downgrade, a new reduction in third-quarter earnings, word that Enron has only about $1.5 billion cash on hand after new infusions of $5.5 billion over the past few weeks and an admission that trading volumes had dropped. (Reuters)
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THE HINDU BUSINESS LINE, Friday, November 23, 2001
EU urged to ease market access, NEW YORK, ( carried only by the online edition)

ENRON Corp, the beleaguered energy trading company, plans to use its minority interests in power plants to secure a restructured $690 million loan agreement, a source familiar with the plan said. The Houston-based Enron, which has agreed to be bought by rival Dynegy Inc in a stock-swap merger, disclosed in regulatory filings on Monday that it needed to provide collateral for the loan by November 27 or pay it off at an accelerated rate due to a recent ratings downgrade. This week, Citigroup Inc, which arranged the original $690 million loan, worked with the nearly 20 other banks to extend the payment schedule to mid-December, the source added. Discussions on repricing the loan are continuing, but the rate is likely to be similar to the terms of a new $1 billion line of credit for Enron, details of which Enron disclosed here. Enron said it secured the remaining $450 million in credit for this previously announced $1 billion line. The loan was lead by Citibank, which is advising Enron in its merger with Dynegy through its Salomon Smith Barney brokerage, and J.P. Morgan Chase & Co, which is also advising Enron on its merger with Dynegy. 

Worries over a possible default on the $690-million loan and Enron's ability to fund payments on its looming debt are part of the reason Enron's stock skidded on Tuesday and Wednesday. Enron needs to repay about $9 billion in loans by the end of next year, according to regulatory filings. A lot of the banks were concerned, but all liquidity events can be dealt with a little patience," the source said. "I don't think there is too much risk of a default." Citibank arranged the original $690 million "special purpose vehicle" loan facility to finance Enron's investments in stakes in power businesses, both domestic and internationally. Reviewing operations in Japan: Enron Corp, which has seen its share price fall to a decade low, is reviewing its operations in Japan, including an option to sell the business to a third party, a spokeswoman at Enron's Japanese unit in Tokyo said. Japanese media said the Enron group, facing financial difficulties and frustrated by the slow progress of Japan's liberalisation of its power market, was considering withdrawing from the local market. Japanese energy companies have also been hurt by increased competition and slow demand due to the weak economy. "Enron Corp is reviewing its operations in Japan...considering every possibility including retaining the operations or selling a part of it," the spokeswoman said. The company will likely finalise its plans within five or six weeks, she said. Enron gained its first foothold in Japan in 1999, when it established affiliate E Power Corp, hoping to benefit from Japan's deregulation of the retail market.