THE ECONOMIC TIMES
Monday, 21 MAy, 2001,http://www.economictimes.com/today/21econ02.htm
MSEB to slap yet another penalty on DPC

THE ECONOMIC TIMES
Monday, 21 MAy, 2001,http://www.economictimes.com/today/21econ04.htm
Dabhol project suffers $400-m cost overruns, Anto T Joseph 

BUSINESS STANDARD
Monday, 21 MAy, 2001,http://www.business-standard.com/today/economy7.asp?Menu=3
DPC faces fresh Rs 400-crore penalty

THE FINANCIAL EXPRESS
Monday, 21 MAy, 2001, http://www.financialexpress.com/fe20010521/top3.html
MSEB plans to dispute PTN validity ,   Sanjay Jog

THE FINANCIAL EXPRESS
Monday, 21 MAy, 2001,http://www.financialexpress.com/fe20010521/news3.html
Govt, MSEB keen to probe role of IDBI in issue of Dabhol PTN,  Sanjay Jog

THE TIMES OF INDIA
Monday, 21 MAy, 2001,http://www.timesofindia.com/today/21busi5.htm
MSEB to slap yet another Rs 400 cr penalty on DPC 

THE TIMES OF INDIA
Monday, 21 MAy, 2001,http://www.timesofindia.com/today/21busi6.htm
Maharashtra working on ways to avoid Enron penalty 

THE ASIAN AGE
Monday, 21 MAy, 2001, http://www.asianageonline.com/
MSEB PLANS RS 400-CR PENALTY ON DABHOL 

THE ASIAN AGE
Monday, May21, 2001, http://www.asianageonline.com/
Enr-off?

THE AFTERNOON
http://www.afternoondc.com/
'CENTRE SHOULD SORTOUT ENRON CRISIS' 
Bhujbal puts Suresh Prabhu on the mat 

THE ECONOMIC TIMES
Monday, 21 MAy, 2001,http://www.economictimes.com/today/21econ02.htm
MSEB to slap yet another penalty on DPC

UNDETTERED by issuance of the preliminary termination notice by Enron-promoted Dabhol Power Company, the Maharashtra State Electricity Board has decided to go ahead with its decision to slap yet another Rs 400-crore penalty on the US energy major. "PTN or no PTN. In June first week, MSEB will slap one more Rs 400-crore penalty on DPC for misdeclaration and default on the availability of power, a review for which will be taken next month," MSEB sources said here on Sunday. The proposed penalty is in wake of DPC's inability to produce power on February 12 and March 13 as per MSEB's demand in stipulated time of three hours as per the power purchase agreement, they said.                                         "In fact, we would pay the Rs 139-crore April bill on May 23 and this will be the last payment from MSEB's side, rest of the due amount should be adjusted in the penalty," the sources added. MSEB follows a four month cycle, the first instance of failure on January 28 fell in the first cycle, while the other two instances fell in the next cycle of February-May, a bill for which would be prepared and despatched to DPC in June, the sources said. (PTI)

THE ECONOMIC TIMES
Monday, 21 MAy, 2001,http://www.economictimes.com/today/21econ04.htm
Dabhol project suffers $400-m cost overruns, Anto T Joseph 

AS IF the current dispute with the Maharashtra government was not enough, the Dabhol project now has to deal with cost overruns. The Enron-promoted Dabhol Power Company has experienced a cost overruns to the tune of $400 million, taking the total project cost to $3.3 billion. DPC, which issued a preliminary termination notice to Maharashtra State Electricity Board on Saturday (May 19), is in a fix as both domestic and offshore lenders have refused to increase their exposure in the controversial power project, the largest-ever foreign direct investment, so  far, in India. After Indian lenders stopped disbursements as a fallout of a long payment crisis, DPC is believed to have scouted for foreign debt, albeit unsuccessfully, to maintain the debt-equity status quo at 70:30 ratio. DPC's issuance of PTN has compounded the problem. According to the power purchase agreement between the MSEB and Enron, issuing a PTN would mean fixing a deadline of six months for pulling the final plug on the project. "As of now, the FIs have held back $250-million debt to the project. Once the PTN is served, DPC can't expect lenders to make any more disbursements, and it has almost sealed the fate of the project," said a financial institution source. 

While the 740-mw phase I is operational, the second phase of 1,144 mw was expected to be fully operational by the year-end. One unit of 740 mw (part of the second phase) is undergoing trial-runs, and was expected to be commercially operational in June. Sources said the huge cost overruns had been a major deterrent in project completion. Worried by the mounting payment defaults, the EPC (engineering, procurement and construction) contractor of the project -- Bechtel - is  believed to have threatened to pull out of the project by  mid-June. The cost overruns stem from devaluation of the rupee vis-a-vis the dollar and an increase in equipment cost. Indian FIs are now wary of further cost overruns owing to the delay in project execution. "Indian FIs, who have contributed 40 per cent of $2.9 billion (earlier project cost), had refused to take more exposure.

DPC was forced to approach foreign lenders for raising funds to cover the cost overruns. They have also taken a negative stand," said sources. The ABN-AMRO led offshore consortium is believed to have refused to contribute any more debt to the project. The only way out for DPC is for the promoters to increase  their equity contributions. Proportionately, Enron, which holds around 65 per cent in DPC, will have to shell out a  major chunk if this were to happen. DPC's move to issue PTN has considerably irked Indian institutions. Lenders were planning to cast a confidential vote on PTN this week. However, armed with the required mandate from offshore lenders, DPC went ahead and issued the PTN.

BUSINESS STANDARD
Monday, 21 MAy, 2001,http://www.business-standard.com/today/economy7.asp?Menu=3
DPC faces fresh Rs 400-crore penalty

The Maharashtra State Electricity Board has decided to go ahead with its decision to slap yet  another Rs 400-crore penalty on the Dabhol  Power Company, undeterred by the issuance of a  preliminary termination notice (PTN) by the  latter. "PTN or no PTN, in the first week of June MSEB will slap one more Rs 400-crore penalty  on the DPC for mis-declaration and default on the availability of power, a review for which will  be taken next month," MSEB sources said here Sunday. The proposed penalty is in the wake of DPC's inability to provide power on February 12 and March 13, as per MSEB's demand in the stipulated time of three hours (according to the   power purchase agreement (PPA) guidelines), they said. "In fact, we will pay the Rs 139-crore April bill on May 23 and this will be the last payment from  MSEB's side. The rest of the due amount should be adjusted in the penalty," sources added. MSEB follows a four-month cycle, the first instance of failure on January 28 fell in the first cycle, while the other two instances fell in the next cycle of February-May, a bill for which would be prepared and despatched to the DPC in June, MSEB sources said.

Earlier, MSEB had slapped a Rs 401-crore penalty on DPC for "not generating" required power to meet the demand on January 28. DPC had yesterday issued a PTN to MSEB,  saying the loss-making board, the state  government and the Centre had failed to meet their contractual obligations and therefore it had  no choice "but to issue the notice." Meanwhile, DPC is also attending the next meeting of the Godbole panel on Wednesday.  
 
Enron India managing director Wade Cline confirmed that the power company has not  closed its doors to negotiate a satisfactory  solution. But state government officials said the onus of finding a workable solution is now with the Centre, which has to spell out its position on the  offtake of power from phase-II of the project. The Central government nominee on the Godbole  committee, AV Gokak, is to attend deliberations  for the first time this Wednesday. State officials attach great importance to his presence as he is likely to spell out Centre's view on the whole affair. A state official told Business Standard that DPC had indicated its willingness to renegotiate the tariff structure at its first presentation beforethe Godbole Committee. The sole thorn now is the offtake of power from phase-II of the project. Maharashtra Chief Minister has said on Saturday that the state cannot afford to draw power from phase-II.

So the issue is now to clear the decks for third parties to buy out power from the second part of the project. "This is an issue that is in the Centre's realm, though there have been some statements that no central utility is in a position to buy power from  Dabhol. DPC is willing to talk to lower its tariffs  but we are not in a position to buy any of it even though we are contractually bound to buy it. Sothe solution lies in allowing others to buy it," the official said. A senior MSEB official also denied the Board  was planning to issue a counter termination notice to the DPC. 

THE FINANCIAL EXPRESS
Monday, 21 MAy, 2001, http://www.financialexpress.com/fe20010521/top3.html
MSEB plans to dispute PTN validity ,   Sanjay Jog

The Maharashtra State Electricity Board (MSEB), in a bid to put up a brave front, proposes to dispute the validity of the Preliminary Termination Notice (PTN) served by the Dabhol Power Company (DPC) and take up the issue at the dispute resolution panel. Simultaneously, MSEB has denied that it has repudiated the power purchase agreement (PPA) as claimed by the DPC. MSEB has also rejected DPC's claim over its failure to meet contractual obligations. The MSEB, after consulting the state advocate general, lawyers and the state government, may serve a notice with respect to the dispute over the PTN to the DPC, as per clause 20.2 of the PPA.

According to the provisions of clause 20.2, a dispute would be referred to the dispute resolution panel comprising of one or two high-level representatives from the MSEB and the DPC. DPC had earlier served a notice with respect to disputes over the payment of arrears towards the November and December bills and interest thereon on January 25 this year. Accordingly, a dispute  resolution. MSEB plans to dispute PTN validity panel comprising Enron India managing director K Wade Cline and MSEB accounts member A Krishna Rao was set up. Although the panel had held a series of meetings, it failed to arrive at an acceptable solution. MSEB sources told The Financial Express that it cannot accept the PTN at this point of time, especially when the renegotiation process had been launched. Further, according to MSEB, it had not defaulted, neither had it avoided the payment of bills, but for certain disputes and thus, the PTN is disputed.

MSEB sources said that if the DPC rejects its claim on disputes over PTN, then it was prepared to fight it out at the arbitration. "However, it needs to be legally studied whether, at a time, how many cases could be referred to arbitration. In fact, DPC has already initiated arbitration by serving notices to the Centre on April 4 and to the Maharashtra government and the MSEB on April 10 over the non-payment of the December 2000 and January bills," these sources added. The MSEB reiterated that the outstanding amount of the December bill (Rs 102 crore) and the January bill (Rs 111 crore) is not payable. Instead, it claimed that the DPC, inter alia, is entitled to pay Rs 401.6 crore to the MSEB towards rebate charged for "misdeclaration and default on the availability of power on January 28." The disputes and differences have cropped up with regard to this payment and the same has been referred to the arbitration and the pending resolution. The MSEB said that pending the said resolution as to whether the amount is "payable" to MSEB by  the DPC, the latter cannot expect the payment of December and January bills by the MSEB.

THE FINANCIAL EXPRESS
Monday, 21 MAy, 2001,http://www.financialexpress.com/fe20010521/news3.html
Govt, MSEB keen to probe role of IDBI in issue of Dabhol PTN,  Sanjay Jog

The Maharashtra government and the  Maharashtra State Electricity Board (MSEB) are curious to know   the role played by the Indian rupee lenders' consortium leader Industrial Development Bank of India (IDBI) in the issuance of  preliminary termination notice (PTN) by the Dabhol Power Company (DPC). The sources in Mantralaya and MSEB told The Financial Express that if Industrial Development Bank of India, which has provided a guarantee of Rs 3,000 crore to dollar loans and also lent Rs 1,780 crore for Dabhol phase-I and II, along with offshore lenders has voted in favour of authorising DPC to issue PTN to MSEB, then it  must have received blessings from the BJP-led government at the  Centre. The Centre's nod is a must as IDBI is still a state-run organisation.

If Industrial Development Bank of India, which had voted against the proposal to authorise Enron India managing director K Wade Cline for issuing PTN at DPC's board meeting held in London on April 25, has opposed the PTN  decision, then it should be questioned as according to the agreement between DPC and its lenders,  the preliminary termination notice cannot be issued if a single 'secured creditor' voted against it. The sources are of the view that if IDBI has remained consistent and opposed the decision on issuance of PTN, then the validity of the issuance of PTN would be questioned on the basis of a lending agreement between various lenders and DPC. "We are keen to know whether IDBI has opposed this move," the sources said.

Further, the sources said the IDBI should have blocked the move to issue the PTN as the high stakes of Indian financial institutions and banks have been involved in the Dabhol project. However, sources of Indian Financial Institutions (IFI) have contradicted the state government and MSEB and said that offshore lenders control the decision relating to termination of the power purchase agreement (PPA) "if they hold at least 4 per cent of the total principal debt." "Overseas Private Investment Corporation, USA alone or the rest of Dabhol phase-I foreign banks group have such  requisite voting percentage. In this situation, if they issue the consent to DPC for serving preliminary termination notice, consent from other lenders including IFIs would not be necessary," sources added. The sources said that the IFIs, which have a massive exposure of Rs 5,154 crore, have no protection of the Government of India counter guarantee. However, the Dabhol phase-I offshore lenders are protected under the guarantee of the Maharashtra government and the Centre's counter guarantee.


THE TIMES OF INDIA
Monday, 21 MAy, 2001,http://www.timesofindia.com/today/21busi5.htm
MSEB to slap yet another Rs 400 cr penalty on DPC 

Undettered by issuance of the preliminary termination notice (PTN) by Enron-promoted DabholPower Company, Maharashtra State Electricity Board (MSEB) has decided to go ahead with its decision to slap yet another Rs 400 crore penalty on the US energy major. "PTN or no PTN. In June first week, MSEB will slap one more Rs 400 crore penalty on DPC for misdeclaration and default on the availability of power, a review for which will be taken next month," MSEB sources said here on Sunday. The proposed penalty is in wake of DPC's inability to produce power on February 12 and March 13 as per MSEB's demand in stipulated time of three hours as per  the Power Purchase Agreement (PPA), they said."In fact, we would pay the Rs 139 crore April bill on May 23 and this will be the last payment from MSEB's side, rest of the due amount should be adjusted in the penalty," sources added. 

MSEB follows a four-month cycle, the first instance of failure on January 28 fell in the first cycle, while the other two instances fell in the next cycle of February-May, a bill for which would be prepared and despatched to DPC in June, MSEB sources said. Earlier, MSEB had slapped a Rs 401 crore penalty on DPC for "not generating" required power for January 28 demand. The matter has been disputed since, as DPC has refused to ascertain the validity of MSEB's claim, MSEB sources said, adding the matter is now under arbitration, process for which would commence soon. MSEB sources said, contrary to the allegations made by DPC, the dispatch instructions were in line with the PPA provisions and there were no procedures previously agreed or followed about declaration of availability and delivery of dispatch instructions during the start-up of the "cold plant". 

"The instructions are revised for only those hours for which there were no instructions earlier," they said, adding in the past DPC was able to achieve the instructed capacity at the specified hour. "We also fail to understand that why DPC is not accepting the fact that its machines and technology is substandard and that the Dabhol Power Project will  never be able to reach 95 per cent capacity," the sources  said. DPC had on Saturday issued a PTN to MSEB as the loss-making board, state government and Centre had failed to meet their contractual obligations and therefore it had no choice "but to issue the notice". (PTI)

THE TIMES OF INDIA
Monday, 21 MAy, 2001,http://www.timesofindia.com/today/21busi6.htm
Maharashtra working on ways to avoid Enron penalty 

Maharashtra is working out a strategy to avoid paying huge damages to US power major Enron if its subsidiary, the Dabhol Power Company (DPC), axes its power purchase agreement with the state electricity board.Chief Minister Vilasrao Deshmukh, Nationalist Congress Party (NCP) leader Sharad Pawar and senior                                         bureaucrats have been huddled in discussions with legal experts since DPC issued a pre-termination notice on the  board on Saturday. "The governments of Maharashtra and India would face  lawsuits to the tune of Rs 170 billion," an official said. With New Delhi providing counter guarantees for the project, it threatens to be a liability for the entire country.

Maharashtra has already begun to cover its flanks by charging DPC with providing insufficient services and installing substandard equipment to prevent its facility from generating 95 percent power. A penalty of Rs 4.01 billion was slapped on the company last month for not providing power to MSEB at a notice of three hours. A notice for a similar penalty would be sent in June as well, officials here said.MSEB officials have been quoted as saying that no bills would be paid to the company after the April bill of Rs 1.39 billion. The bills for the remaining months would be adjusted against the penalty. With Enron hardening its stand, it is possible the company could stop power supply from June, they indicated.Although the DPC has issued the preliminary termination notice, the actual process of terminating the PPA could take as long as six months. "This initiates the process of terminating the power purchase agreement with the Maharashtra State  Electricity Board (MSEB)," DPC said in a statement.Simultaneously, it said it was open to "constructive" negotiations on the issue.

The DPC is demanding that the Central government participate in the negotiations between Enron and MSEB or provide credit support to purchasers of its power as a pre-condition to talks. "While a lasting and feasible solution to this issue may be possible, it can only occur if the parties contractually bound to purchase DPC power (MSEB with guarantees from state and central government) are willing to either purchase themselves or find "other" creditworthy entities," the company said. Enron also said the report of committee on renegotiating the power purchase agreement should not be the basis for discussions.

The stalemate in the $3 billion project follows the Maharashtra government disputing payments for power  purchased by the MSEB from the DPC. The government cleared its February and March outstanding of Rs 1.13 billion and Rs 1.34 billion respectively but under protest. The DPC currently produces 740 MW of power. This will go up to 2,184 MW when the second phase of the project goes on stream later this year. (IANS)

THE ASIAN AGE
Monday, 21 MAy, 2001, http://www.asianageonline.com/
MSEB PLANS RS 400-CR PENALTY ON DABHOL 

Undettered by issuance of the preliminary termination notice by the Enron-promoted Dabhol Power Company, the Maharashtra State Electricity Board has decided to go ahead with its decision to slap yet another Rs 400-crore penalty on the US energy major. "In June first week, MSEB will slap a penalty of Rs 400 crores on DPC for misdeclaration and default on availability of power, a review for which will be taken next month," MSEB sources said. The proposed penalty is in wake of DPC's inability to produce                   power on February 12 and March 13 as per MSEB's demand in stipulated time of three hours as per the power purchase agreement, sources said. "In fact, we would pay the Rs 139 crores April bill on May 23 and this will be the last payment from MSEB's side, rest of the due amount should be adjusted in the penalty," sources added. MSEB                   follows a four-month cycle, the first instance of failure on January 28 fell in the first cycle, while the other two instances fell in the next cycle of February to May, a bill for which would be preparedand despatched to DPC in June, MSEB sources said. 

Earlier, MSEB had slapped a Rs 400 crores penalty on DPC for "not generating" required power for January 28 demand. The matter has been disputed since, as DPC has refused to ascertain the validity of MSEB's claim, MSEB sources said adding the matter is now under arbitration, process for which would commence soon. MSEB sources said, contrary to the allegations made by DPC, the dispatch instructions were in line with the PPA provisions and there were no procedures previously agreed or followed about                   declaration of availability and delivery of dispatch instructions during the start-up of the 'cold plant.'"The instructions are revised for only those hours for which there were no instructions earlier," they said adding, in the past DPC was able to achieve the instructed capacity at the specified hour. "We also fail to understand that why DPC is not accepting the fact that its machines and technology is substandard and that the Dabhol Power Project will never be able to reach 95 per cent capacity," the sources said.DPC had on Saturday issued a PTN to MSEB as the loss-making board, state government and the Centre had failed to meet their contractual obligations and therefore it had no choice 'but to issue the notice.' (PTI)

THE ASIAN AGE
Monday, May21, 2001, http://www.asianageonline.com/
Enr-off?

With the Dabhol Power Company issuing a pre-termination notice, it should now be reasonably certain that Enron, the controversial power project, will wind up its operations in Maharashtra. It is indeed doubtful that the influential political lobby which ushered the US giant in amid great controversy will be able to do much this time. The series of renegotiations have failed, last minute attempts to humour Mr Sharad Pawar have failed and the lobby which had helped Enron to hype its deal has been surprisingly silent. In the short run, the state will have to pay a price for the withdrawal; in fact, Enron was hoping that precisely that will  happen and the government will develop cold feet. 

But with the Centre now washing its hands off the deal, any amount of economic "diplomacy" and bargaining is unlikely to succeed. As the curtain comes down on one of India's most  controversial deals involving a multinational corporation, it is  time that the matter is looked at afresh. This does not mean that the conscious project be reviewed. What it does mean that the experts who for various reasons opposed the project in the first place should be consulted by the state government. At the same time, Mr Deshmukh should ensure that those who have been votaries of the project do not become victims of recrimination. Six months that have been stipulated for a last-ditch attempt to save a project which promised much, can have meaning only if Enron is willing to come down from its high horse. But as reports from its parent country amply show, Enron is trying to woo US lawmakers in an era of deregulation.

Energy executives of Enron spent close to 30 minutes with Mr Dick Cheney, a privilege which essentially exemplifies the importance of being Enron. But this importance should not be overstretched, and a large section in the Indian power establishment thinks so. Enron wields no magic wand, but its leading status as a power-sector giant is not to be doubted. Be that as it may, its Indian experience has been a far from happy one. Political opportunism may have queered the Indian picture, but it's primarily the Enron strategy to first target and then control markets. Its "insurgent" strategy sometimes works. At other times, it does not. In the Indian experience, it has not quite worked. The story that the friends of Enron had deliberately circulated- that other MNCs will think twice before investing in India if Enron fails, have been proved unfounded. Enron may have registered phenomenal growth over the years, but that by itself was never any guarantee that its Indian bid would too, especially with conflicting political positions dogging its high  cost per unit power.

The end of Enron is by no means the end of the world. A few comparable examples would empirically sustain the fact that it is not impossible to live without Enron, whatever its high-profile supporters would suggest. The Maharashtra government needs Central and overall support in facing the crisis it is in, though the support may merely be a moral one. The late Rangarajan Kumaramangalam used to bemoan the  absence of a realistic and long-term policy for the power sector.The unhappy Enron example should make the Central and state governments to thrash out a cohesive, constructive policy. At the peak of summers, the absence of a genuine policy further complicates infrastructural and other constraints. That is such an elementary fact anyway.

THE AFTERNOON
http://www.afternoondc.com/
'CENTRE SHOULD SORTOUT ENRON CRISIS' 
Bhujbal puts Suresh Prabhu on the mat 

In the backdrop of the ongoing tussle between the state and the Dabhol Power Company (DPC), Mr. Madhav Godbole, chief of the renegotiating committee of the                                        government, is silent about latest  developments. "Negotiations are on at this  moment so I am not speaking to the  press," said Mr. Godbole. The committee was set up last month to find a solution to the crisis. When asked why the DPC is opposed to a Power Purchase Agreement (PPA),   he said, "It is anybody's guess." Deputy Chief Minister Chhagan Bhujbal charged the Centre with being indifferent towards the ongoing Enron imbroglio. 

In an interview to a leading news channel yesterday, Mr. Bhujbal said that the National Democratic Alliance government, especially Power Minister Suresh Prabhu, should have intervened to sort out the crisis which is putting the state on the verge of bankruptcy. "Apart from being a union minister, he has a moral responsibility to-wards Maharashtra. Moreover, the second phase of Enron was also approved by the then Shiv Sena-Bharatiya Janata Party government. So he cannot wash his hands off when the state is heading towards serious problems," said Mr. Bhujbal. 

Mr. Bhujbal, who also holds the state home portfolio, said that central government intervention had become all the more necessary as it stood as a guarantor in the agreement. Meanwhile, in a counter to the arm-twisting tactics of the DPC, the Maharashtra State Electricity Board has planned to take the  company to court in lieu of them seeking compensation for loss  incurred due to inadequate power supply.