THE ECONOMIC TIMES, Saturday, October 27, 2001
Indian lenders to take over IFCI's exposure in DPC
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THE ECONOMIC TIMES, Saturday, October 27, 2001
Enron fires finance director

Similar story also appeared in the following publication:

THE TIMES OF INDIA, Friday, October 26, 2001
Enron ousts finance officer
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THE ECONOMIC TIMES, Saturday, October 27, 2001
Reliance shelves LNG project, Anto T Joseph 
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THE ECONOMIC TIMES, Saturday, October 27, 2001
Trouble in Enron drives online energy trade to the edge, Gelu Sulugiuc 
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THE ECONOMIC TIMES, Saturday, October 27, 2001 
Petronet LNG may up enhance Dahej capacity
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THE TIMES OF INDIA, Saturday, October 27, 2001
Lenders to meet over Enron's Dabhol on Nov 3 
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THE FINANCIAL EXPRESS, Friday, October 26, 2001
Loans to DPC based on MSEB's letter of credit: Bank of America
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THE TIMES OF INDIA, Friday, October 26, 2001
Enron in talks with banks over new credit line 
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THE ECONOMIC TIMES, Saturday, October 27, 2001
Indian lenders to take over IFCI's exposure in DPC
 
IDBI-led consortium of Indian lenders to Enron's Dabhol Power Company, has agreed "in-principle" to take over IFCI's exposure in the troubled project following expiry of the deadline given by Japanese Export Credit Agency to encash the counter guarantees. "We have already in-principle agreed to provide a counter-guarantee for the loan given by any member of the consortium, if its capital adequacy ratio dives below the prescribed Reserve Bank of India's norm", senior IDBI official said. Last month, alarmed by DPC's default towards interest payments to its foreign and domestic lenders, JBIC had warned its Indian counterparts that it would be compelled to encash their guarantees after October 26, 2001, if IFCI's exposure of Rs 454 crore was not covered by other FIs. "We will communicate to JBIC that after infusion of Rs 1,000 crore by the Union government in IFCI, the FI's car will increase to 9 per cent and trigger point has not yet arrived whereby the Japanese agency could encash the guarantees," the official said. He said the issue would be discussed at length at DPC's lenders meet to be held on November 2, 2001, and three in London. "The Indian lenders will try and impress upon JBIC that IFCI is out of danger and there is no dire need for taking over its exposure in the present circumstances," he added.
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THE ECONOMIC TIMES, Saturday, October 27, 2001
Enron fires finance director

US energy major Enron has ousted its finance director amid an investigation by the American government into the company's business practices. Finance director Andrew Fastow would take a leave of absence and be replaced by Jeffrey McMahon, former treasurer, the company said. "In my continued discussions with the financial community, it became clear to me that restoring investor confidence would require us to replace Andy," said Enron chairman Kenneth Lay. Billions of dollars worth of transactions between Enron and "limited partnerships" controlled by Fastow were being examined by the Securities & Exchange Commission, a report in the Times daily said on Friday. Enron, based in Houston, has annual revenues of more than $100 billion, and is involved in a quarter of US' electricity and natural gas trades. Fastow's departure follows the abrupt resignation of Jeff Skilling as chief executive in August for "personal reasons". 
Lay, who is thought to have played a role in US President George W Bush's decision to drop the Kyoto accord on global warming, was brought out of retirement once again to lead Enron. Shares in Enron hit a six-year low on Wednesday due to the SEC investigation coupled with a $618-million third-quarter loss and $1-billion charge for failed investments.
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THE ECONOMIC TIMES, October 27, 2001
Reliance shelves LNG project, Anto T Joseph 

THE DABHOL imbroglio and the current uncertainty in the liquefied natural gas market has forced the Reliance Group to put its $5-billion LNG project on the backburner. 

The petroleum and petrochemicals major had signed an MoU in February 2001 with British Petroleum and National Iranian Oil Company, for an eight-million tonne per annum LNG project. The decision to slow down implementation of the LNG project is believed to have taken after the Reliance-BP-NIOC consortium completed a feasibility study for the proposed project. 

Reliance and BP would hold a 25 per cent stake each in the project, and the remaining stake will be with NIOC if and when the project is implemented. A Reliance spokesperson, however, said the company was going ahead with the project. The Reliance gameplan was to upgrade capacity at its Jamnagar terminal. The Jamnagar port is ideally equipped to handle LNG as there is no need for building costly breakwater and dredging facilities, which makes LNG handling much more economical and competitive. 

The proposed project is the largest so far in India and a whole network consisting of the liquefaction plant, regassification plant, LNG terminal and transportation facilities was supposed to come up. 

Sources said Reliance was finding it difficult to put in place contracts and agreements because of the lack of potential end users. 

"After Enron's Dabhol Power Company ran into a severe payment crisis, in the process exposing the unviability of LNG as an alternate fuel for base load plant, India is unlikely to see setting up of any LNG-based projects. Many LNG players i who have already executing their projects, but have suddenly found themselves saddled with many problems," said an industry source. 

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THE ECONOMIC TIMES, Saturday, October 27, 2001
Trouble in Enron drives online energy trade to the edge, Gelu Sulugiuc 

ENRON almost daily revelations of fresh troubles has prompted concerns its powerful position in online energy trading could prompt a credit crunch and rock the fast-growing industry. Though experts said yesterday that EnronOnline, Enron's Web trading platform, should survive, investors are skittish about the No 1 US natural gas and electricity marketer. 

Since last week Enron has shed more than $13 billion in market value as shares plunged, forcing it on Wednesday to replace its chief financial officer, who was linked to transactions now under investigation by government regulators. 

In the latest blow, credit rating agency Fitch yesterday placed Enron debt securities on negative credit watch, saying the erosion of investor confidence, if unabated, would impair the company's access to capital markets. 

"We put them on a list of concerns two months ago and made sure our books were balanced just as the first stage of precaution," said one energy trader active on EnronOnline. About 60 per cent of all transactions by Enron are captured through EnronOnline, and so far traders have kept faith. 

On Wednesday, EnronOnline - in which trades always involve Enron as either the buyer or seller - conducted 8,000 transactions through its site, with a notional value of $4 billion, more than daily its average of $3.5 billion. 

"People are transacting at higher levels as they prepare their portfolios for the winter and to protect themselves from price volatility," said Vance Meyer, an Enron spokesman. 

Not even Enron itself anticipated the success of EnronOnline, which enjoys the highest volume of any platform in the cut-throat field of Internet energy trade. Initially, the company set a yearly trading volume target of $30 billion to 40 billion - business it now does in 10 days alone. 

Yet traders worry Enron's spectacular fall from grace could make it a less solid counterparty in certain eyes after transactions with two limited parterships run by Andrew Fastow sparked investigations by the US Securities and Exchange Commission. Enron replaced Fastow as its CFE on Wednesday in the hope it would restore investor confidence. 

"I haven't seen any sign of them slowing down or not making a good market on EnronOnline, but until things get squared away, I will keep a tight leash on the credit issue," one trader said. "The only thing that bothers me is it takes a lot of capital to do what they're doing, and with the stock price down, I wonder how much credit they have left," he added. 

Enron said this week that it can tap a $3.35 billion credit line to support its trading and marketing business, which can experience wide swings in cash flow depending on commodity prices. 

"In the event of a 'push-comes-to-shove' liquidity crunch, we believe the company could generate substantial cash by selling a variety of other assets," said Ron Barone, an analyst at UBS Warburg. 

If EnronOnline does lose steam, the big winner will be its main rival Atlanta-based Intercontinental Exchange (ICE) - which already routinely trades more than $1 billion a day. "This (recent news) shows there may be some kinks in the armor and some people may stop using EnronOnline," said Kyle Cooper, analyst at Salomon Smith Barney. "Clearly ICE could benefit or any other alternative online platform." 

EnronOnline is still a force to be reckoned with, experts said. "Enron clearly will survive and EnronOnline will still remain a dominant force" in Internet energy trading, said Barone. Nonetheless, traders are playing it safe. (Reuters
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THE ECONOMIC TIMES, Saturday, October 27, 2001 
Petronet LNG may up enhance Dahej capacity

PETRONET LNG, a joint venture of four public sector oil and gas majors, is considering doubling the capacity of its under-construction Dahej liquefied natural gas terminal in Gujarat to 10 million tonnes. 

"We are considering a proposal of doubling the present 5 million tonnes capacity of Dahej terminal as we see tremendous demand in the future," said Suresh Mathur, chief executive officer and managing director, Petronet LNG. 

While the subject is under study, Petronet LNG will firm up plans once the Dahej terminal nears completion. A joint venture of Oil & Natural Gas Corporation, Gas Authority of India, Bharat Petroleum and IndianOil, Petronet LNG is planning another terminal of 2.5 million tonnes capacity at Kochi in Kerala. 

French gas major Gaz de France and RasGas of Qatar, which will supply LNG to the terminals for a 25-year period beginning 2003, also hold equity stake in the Petronet LNG. The Dahej project involves the construction of a regasification terminal, a liquefaction train in Qatar to be built by RasGas and two methane tankers. A consortium led by Ishikawajima-Harima Heavy Industries of Japan is executing the $317-million engineering, procurement and construction contract at Dahej. 

Work on the Dahej terminal, expected to begin operation by December 2003, was progressing on schedule and on cost, said Mathur. "Around 2,000 people have been mobilised for the construction of the jetty and storage tanks." 

The capacity enhancement would involve construction on an additional storage tank with an investment of around $70 million. While Petronet LNG has the option to acquire the 5-million-tonne capacity Dhabol LNG terminal of US energy major Enron Corporation, Mathur denied there were any such plan. 

Enron's LNG terminal at Dabhol was set up to supply regassified LNG to Dabhol Power Corporation for use in its power plant, and the remainder to other bulk users. In the wake of the tussle over power dues with Maharashtra State Electric Board, one of the partners in Dabhol Power, Enron is trying to sell off both projects. 

Indian consumption of natural gas has risen faster than any other fuel in recent years. From only 0.6 trillion cubic feet per year in 1995, natural gas use was nearly 0.8 Tcf in 1999 and is projected to reach 1.3 Tcf in 2005 and 1.8 Tcf in 2010. 

With domestic gas production far short of demand, India is encouraging projects for import of LNG. The government is of the view that the dozen or so terminal projects in the pipeline would be able to meet the needs of gas-fired electric power plants and bring down the cost of power generation. (IANS) 
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THE TIMES OF INDIA, Saturday, October 27, 2001
Lenders to meet over Enron's Dabhol on Nov 3 
 Lenders to power plant in India majority owned by Enron have called a meeting next week in London to discuss ways of reviving the beleaguered project, a banking source said on Saturday. They will examine offers that two Indian companies have put forward for buying the US energy giant's 65 per cent stake, and those of two other US firms, in Dabhol Power Company, which is building the controversial project, the source said.

The meeting of lenders, who include multinational banks such as Citibank, Bank of America, will be held on November 3, the source added. At stake is not just the fate of the $2.9 billion, 2,184 MW project, which is India's largest foreign direct investment, but also the over $600 million investment of Enron, General Electric and Bechtel. All three companies are founders of DPC, which in 1995 got permission from India's Maharashtra state government to set up the plant on its coast.

The plant's first phase of 740 MW was completed in 1999, but work on the second phase of 1,444 MW, which is 97 per cent complete, was abruptly stopped in June this year following a blazing row with cash-strapped state utility MSEB.

MSEB, which agreed in 1995 to take the plant's entire output, said it can no longer do so because Dabhol's power is too costly. Dabhol, in turn, accused MSEB of defaulting on its monthly payments and served a preliminary notice to terminate the power purchase contract.

Under this notice, both companies are given six months time to settle the matter through negotiations. If talks fail, Dabhol has the right to issue a final termination notice and take the matter to arbitration in London. That six month period expires on November 19.

Houston-based Enron, which owns 65 per cent of Dabhol, further announced that it intends to exit the project and offered to sell its equity to the Indian government.

TIME RUNNING OUT

The Business Standard newspaper reported that next week's meeting would also discuss a request by Dabhol to finally terminate the contract after November 19.

"It is one of the items on the agenda," the paper quoted a senior banker as saying. The paper said once Dabhol serves the final notice, the matter proceeds to arbitration, which would not help India. "The widespread view among the government and lenders is that in such a situation DPC will win hands down," the paper added.

A Dabhol spokesman could not be contacted immediately. The source said the meeting would review the progress made in resolving the dispute so far.

The Indian government has not responded to Enron's offer to buy its equity, but two Indian companies, BSES and Tata Power, have shown interest.  They have agreed to take over the project if the cost is reduced, and if the founders agree to sell their stake at a discount.

Local business daily, the Economic Times reported on Friday that Tata Power and BSES are willing to pay the founders $450-$600 million for the 85 per cent stake held by Enron, GE and Bechtel.

Enron has rejected the offer and is not ready to settle for anything less than $1 billion, the paper added. Officials of Tata Power and BSES were not immediately available for comment.( REUTERS )

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THE FINANCIAL EXPRESS, Friday, October 26, 2001
Loans to DPC based on MSEB's letter of credit: Bank of America
 
Bank of America (BoA), which is the onshore trustee for the secured parties of Dabhol Power Company (DPC), in an application before the Supreme Court, has said that the secured lenders in making their loans to the "distressed" 2,184 mw Dabhol project has relied on the validity of the letter of credit (L/C) established by the Maharashtra State Electricity Board (MSEB) and the non-payment under the L/C would inevitably result in non-payment of the lender's debt. The trustee submitted that "had the secured lenders known that the MSEB would seek to prevent the honouring of the L/C, they would not have made the loans to the project." 

The BoA in its application has appealed to the Supreme Court (SC) to implead it as a respondent in the special leave petition (SLP) filed by the MSEB on September 17 challenging the Mumbai High Court allowing the DPC to invoke the L/C of Rs 136 crore for the recovery of the April bill from MSEB. The BoA has prayed that the SC should dismiss the MSEB's SLP and also vacate its (Supreme Court) order of September 21 staying the Mumbai High Court order. The BoA has pooh-poohed MSEB's argument that it would suffer irreparable harm if payment under the L/C was made. "The trustee respectfully submits that harm to MSEB is not a relevant consideration to the payment by Canara Bank to the trustee under the L/C which is a separate contract made and assigned before the controversy arose between the MSEB and DPC." 

The BoA has reiterated its plea that the SC, which would hold a hearing on November 2, should dismiss MSEB's SLP and grant interim relief as it would be directly affected by any order passed by the apex court. In this case, the trustee as beneficiary has sought to draw funds (Rs 136 crore) payable to it under the irrevocable L/C dated May 12, 1999 and signed by Canara Bank, which has not disputed its obligation to pay. The Mumbai High Court in its September 14 order properly determined that under settled principles of Indian law governing L/C, no injunction can be issued absent "extraordinary circumstances that require clear proof by the beneficiary and knowledge of clear fraud by the issuing bank."
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THE TIMES OF INDIA, Friday, October 26, 2001
Enron in talks with banks over new credit line 

NEW YORK: Enron Corp, which has been seeking to curb fears that it faces a credit crunch, is talking to its banks about a new, multi-billion-dollar credit line, the Wall Street Journal online edition reported on Friday.

The report comes after Enron said on late Thursday that it had drawn on its committed lines of credit to provide more than $ 1 billion in cash liquidity. The Journal said the company had drawn down about $3 billion, the majority of its available bank credit lines.

The Journal said on Friday that the company will use most of the money drawn from its credit lines to offer to redeem about $1.85 billion of outstanding commercial paper.

Enron CFO Jef McMahon said in a statement on Thursday that the decision to draw on the credit lines was designed to alleviate concerns about the company's liquidity.

On Wednesday, Enron was forced to replace its former CFO, Andrew Fastow, who was linked to transactions now under investigation by government regulators. There have been disclosures that the company did off-the-balance sheet transactions with two limited partnerships run by Fastow in deals the SEC is now looking into for possible conflict of interest.( REUTERS )
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