-----Original Message-----
From: 	Kohli, Sandeep  
Sent:	Monday, July 30, 2001 9:02 AM
To:	Kaminski, Vince J
Subject:	FW: From The Enron India Newsdesk - July 28 - 30 Newsclips

Vince,

This may interest you.  It appears that we havemade public our desire to pull out of Dabhol.

Regards,
Sandeep.

 -----Original Message-----
From: 	Varma, Nikita  
Sent:	Monday, July 30, 2001 8:29 AM
To:	Varma, Nikita
Subject:	From The Enron India Newsdesk - July 28 - 30 Newsclips


Monday, July 30, 2001, http://216.34.146.167:8000/servlet/Form
Enron wants govt to buy Dabhol stake 

THE TIMES OF INDIA
Saturday, July 28, 2001, http://timesofindia.indiatimes.com/articleshow.asp?catkey=-2128682902&art_id=2002500911&sType=1
Enron wants govt to buy its Dabhol stake 

Similar articles as above were also reported as follows:

THE HINDU
Monday, July 30, 2001, http://www.hinduonnet.com/thehindu/2001/07/28/stories/0128000d.htm
Enron wants to pull out of Dabhol project 

THE HINDU
Monday, July 30, 2001, http://www.hinduonnet.com/thehindu/2001/07/29/stories/0229000k.htm
Enron wishes to sell DPC stake , Mahesh Vijapurkar 

THE HINDU BUSINESSLINE
Monday, July 30, 2001, http://www.blonnet.com/stories/0230562a.htm
Sale of stake best option, says Enron 
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THE ECONOMIC TIMES
Monday, July 30, 2001, http://economictimes.indiatimes.com/today/30infr03.htm
FIIs okayed DPC loans as provided for Int arbitration 
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THE ASIAN AGE
Monday, July 30, 2001, http://www.asianageonline.com
DPC lenders offered loan on neutral basis
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BUSINESS STANDARD
Monday, July 30, 2001, http://www.business-standard.com/today/test2.asp?menu=4
Centre to keep off Dabhol spat 
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THE FINANCIAL EXPRESS
Monday, July 30, 2001, http://www.financialexpress.com/fe20010730/eco2.html
MSEB, FIs plan roping in Centre for picking Enron equity in DPC , Sanjay Jog
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THE TIMES OF INDIA
Saturday, July 28, 2001, http://timesofindia.indiatimes.com/articleshow.asp?catkey=-2128682902&art_id=1386716043&sType=1
'Four states not to buy power at current rates' 
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THE TIMES OF INDIA
Saturday, July 30, 2001, http://timesofindia.indiatimes.com/articleshow.asp?catkey=-2128682902&art_id=1865483429&sType=1
Maharashtra's offer unrealistic: DPC 
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THE HINDU BUSINESSLINE
Saturday, 28 July 2001, http://www.blonnet.com/2001/07/28/stories/1428564j.htm
Demand for DPC power only at `particular' price 
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THE ECONOMIC TIMES
Monday, July 30, 2001, http://economictimes.indiatimes.com/today/30infr01.htm
Maharashtra to pay Rs 788cr penalty to MSEB, Girish Kuber 
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THE ECONOMIC TIMES
Monday, July 30, 2001, http://216.34.146.167:8000/servlet/Form
Enron wants govt to buy Dabhol stake 
 
US energy group Enron on Saturday said it wanted to sell its stake in the Dabhol Power Company either to the Indian government or to the project's lenders. "As the largest investor in the DPC, Enron believes that selling its interest either to the government of India or to the project's lenders is the best approach to resolve the protracted dispute," a spokesman for its Indian unit said. This follows comments made by Enron chairman Kenneth Lay in Friday's issue of Financial Times that Enron is looking to exit from its Indian venture. The Dabhol Power Company, 65 per cent owned by the Enron, is locked in a bitter dispute with a local utility over a payments default. "We want out," said Enron's Chairman Kenneth Lay in an interview with the Financial Times. DPC which is India's biggest direct foreign investment, had signed a contract to supply power to a state-owned utility, the Maharashtra State Electricity Board, from its gas-based plant on the state's west coast. But MSEB stopped buying power in May calling it expensive and defaulted on payments jeopardising the project's future. 

"We have made it pretty clear to the government leadership we are now at a point where we would like to be taken out and we think most of our partners do," Lay said in the Financial Times. Besides Enron, the other shareholders in DPC are US group General Electric and Bechtel which own 10 per cent each and MSEB with 15 per cent. Earlier this month Lay had a meeting with India's finance minister Yashwant Sinha to try and resolve the issue but talks ended without any solution. "We have fought this once before, put it back together, fixed the contracts, but we don't want to do that again and have the same problems in a few years," Lay was quoted by the paper as saying. DPC's power plant is being built in two phases. The first phase of 740 mw is up and running and the second phase of 1,444 mw is 97 per cent complete. Some analysts say India's attempts to resolve the Enron dispute is a test case of its ability to attract more foreign investment. Last week US assistant secretary of state on South Asian affairs, Christina Rocca, said the problems surrounding India's investment climate could be summed up in a five-letter word, "Enron". "I have to emphasise that it will be difficult for international investors to view India favourably until it (Enron issue) is resolved and in a reasonable manner," she said. (Reuters
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THE TIMES OF INDIA,Monday, July 30, 2001
Enron wants govt to buy its Dabhol stake 

US energy group Enron Corp said on Saturday it wants to sell its stake in the Dabhol Power Company either to the Central government or to the project's lenders."As the largest investor in the DPC, Enron believes that selling its interest either to the government of India or to the project's lenders is the best approach to resolve the protracted dispute," a spokesman for its Indian unit told Reuters. This follows comments made by Enron chairman Kenneth Lay in Friday's issue of Financial Times that Enron is looking to exit from its Indian venture. The Dabhol Power Company (DPC), 65 percent owned by the Enron Corp, is currently locked in a bitter dispute with a local utility over a payments default. "We want out," said Enron's Chairman Kenneth Lay in an interview with the Financial Times.

DPC, which is India's biggest direct foreign investment, had signed a contract to supply power to a state-owned utility, the Maharashtra State Electricity Board (MSEB), from its gas-based plant on the state's west coast. But MSEB stopped buying power in May calling it expensive and defaulted on payments jeopardising the project's future. "We have made it pretty clear to the government leadership we are now at a point where we would like to be taken out and we think most of our partners do," Lay said in the Financial Times interview. Besides Enron, the other shareholders in DPC are U.S. group General Electric and Bechtel which own 10 percent each and MSEB with 15 percent. Earlier this month Lay had a meeting with Finance Minister Yashwant Sinha to try and resolve the issue but talks ended without any solution. "We have fought this once before, put it back together, fixed the contracts, but we don't want to do that again and have the same problems in a few years," Lay was quoted by the paper as saying.

DPC's power plant is being built in two phases. The first phase of 740 MW is up and running and the second phase of 1,444 MW is 97 percent complete. Some analysts say India's attempts to resolve the Enron dispute is a test case of its ability to attract more foreign investment. Last week U.S. assistant secretary of state on South Asian affairs, Christina Rocca, said the problems surrounding India's investment climate could be summed up in a five-letter word, "Enron". "I have to emphasise that it will be difficult for international investors to view India favourably until it (Enron issue) is resolved and in a reasonable manner," she told a meeting in New Delhi.
( REUTERS )
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THE ECONOMIC TIMES, Monday, July 30, 2001
FIIs okayed DPC loans as provided for Int arbitration 

INTERNATIONAL lenders of Enron's Dabhol Power Company, including the US government's Overseas Private Investment, have said they extended loans worth about $444 million to the project only because the PPA provided for settlement of disputes by neutral international arbitration. "Had the PPA not provided for settlement of disputes before arbitration panel in a neutral forum, we would not have disbursed loans worth about USD 444 million," DPC's 11 foreign lenders have submitted in an application seeking intervention in the energy major's petition, to be heard by the Supreme Court next week. "The PPA constitutes the project's backbone as DPC's entire revenues were to be received from Maharashtra State Electricity Board and were the basis for our decision to extend the said loans to the $3-billion project". The FIIs say that MSEB knew that the cost of developing and building the project would be obtained, in substantial part, from loans provided to DPC on a "non-recourse" basis by them and other lenders. "MSEB had expressly confirmed, agreed and acknowledged that monies due to DPC from itself would be paid directly to an account (escrow in this case) created for our benefit and security", they said. Emphasising for international arbitration in dispute resolution between DPC and MSEB, the FIIs submitted before the Supreme Court that the arbitration provision to be held in London, a neutral international location under the UNCITRAL rules, was "critical factor in their decision to fund the project". (PTI) 
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THE ASIAN AGE, Monday, July 30, 2001
DPC lenders offered loan on neutral basis

Dabhol Power Company's lenders, including the US government's Overseas Private Investment Corporation, have said that they extended loans worth about $444 million (Rs 2,088 crore) to the project only because the PPA provided for settlement of disputes by neutral international arbitration."Had the PPA not provided for settlement of disputes before the arbitration panel in a neutral forum, we would not have disbursed loans worth about $444 million," DPC's 11 foreign lenders said in an application submitted to the Supreme Court seeking intervention in the energy major's petition, to be heard by the Court next week. "The PPA constitutes the project's backbone as DPC's entire revenues were to be received from Maharashtra State Electricity Board and were the basis for our decision to extend the said loans to the $3 billion project." The FIIs say that MSEB knew that the cost of developing and building the project would be obtained, in substantial part, from loans provided to Dabhol Power Co on a "non-recourse" basis by them and other lenders. (PTI)
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BUSINESS STANDARD, Monday, July 30, 2001
Centre to keep off Dabhol spat 

The Centre is unlikely to intervene directly in the Dabhol problem despite Enron's willingness to sell its interest in the 2184 mw project to the government. Power ministry sources said the government has made its intentions very clear on this issue on several occasions that any direct intervention by the Centre was highly unlikely as it would face severe opposition from other states. "There is absolutely no change in that stance at present," said an official. The Centre was inclined to play the role of facilitator only in arriving at a solution to the problem, and the central government's representative in the re-negotiation committee set up by the Maharashtra government had already been asked to expedite the proceedings, he said. Enron in a statement on Saturday said that as the largest shareholder in Dabhol Power Company (DPC), the company believed that selling its interest either to the central government or to the project's lenders was the best approach to resolve the protracted dispute between DPC and the Maharashtra State Electricity Board (MSEB). It stressed that any sale would need to be on terms providing a complete recovery of capital costs and related expenditures. The company pointed out that the Dabhol issue was clearly having an adverse effect on the confidence of potential foreign investors to India. "Pursuing a buyout option could help resolve the dispute in a timely manner protecting India's investment climate and interests of DPC's stakeholders," said the statement. The company said that while DPC remained open to discussing other viable solutions, it had serious concerns about getting embroiled in a series of re-negotiations. It pointed out that no realistic proposal was offered to the company as yet, and no progress had been made in securing creditworthy buyers that can purchase power at a price that was reasonable for new-generation plants. The statement said that until the issue was resolved DPC intended to continue pursuing all other remedies under the PPA, such as international arbitration, to resolve the issue in a way that protected the rights of DPC sponsors, lenders, fuel suppliers and LNG ship owners. 

Pressure tactic, says lenders 
Lenders to DPC are unmoved by the company's demand that they take over the project and dubbed it as a pressure tactic. The company had said in a press release on Saturday that the best solution would be for the Union government or the lenders to take over the project. "We need to run our banks and institutions and not a power project," said one senior banker involved in the project. The lenders however accept the fact there is a sense of urgency and the government must get into the act faster. At the London meeting last week, DPC showed its willingness to run Phase II of the project on naphtha but MSEB is not willing to give its nod to commissioning of the Phase II 
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THE FINANCIAL EXPRESS, Monday, July 30, 2001
MSEB, FIs plan roping in Centre for picking Enron equity in DPC , Sanjay Jog

Maharashtra State Electricity Board (MSEB) and Indian financial institutions (IFIs) are planning to make a last ditch effort to rope in the BJP-led government at the Centre for picking up the Enron equity in the Dabhol project through its undertaking as their funds amounting to over Rs 2,500 crore in addition to a guarantee of Rs 3,900 crore to offshore lenders are involved in the project.The MSEB has contributed nearly Rs 800 crore to pick up 30 per cent equity in the Dabhol phase-I and the IFIs have collectively lent Rs 1,738 crore for both the phases plus a guarantee of Rs 3,900 crore to offshore lenders. MSEB and IFIs sources told The Financial Express that the Enron chairman Kenneth Lay's statement on Enron's desire to pull out of Dabhol project has not come as a rude shock, but as an expected one. However, these sources said that if Enron wants to be out of 2,184 mw Dabhol project, their exist should take place after "tough" negotiations with an active involvement of the Union government.

They have projected various scenarios including the Enron, General Electric and Bechtel collectively agreeing to recover about 50 to 60 per cent of the total equity of $900 million in the Dabhol project from the Industrial Development Bank of India, which is a rupee lender consortium leader. The MSEB and IFIs are aware that the Enron and other equity holders will insist on the full capital recovery and that they will be quite keen on purchase of their equity with interest at par by the new buyer.
However, MSEB and IFIs sources are of the view that due to their hard bargaining in the presence of the Centre, the Enron and other stakeholders may arrive at certain compromise so that they can recover a substantial amount blocked in the project. Secondly, in view of cut in the equity, the loan amounting to over $1.2 billion could be restructured at the lower interest of 12 per cent and that the moratorium period should be increased. Thirdly, the Centre will lend a financial support to its undertaking to pick up majority equity and take over the Dabhol project, they feel. According to MSEB and IFIs, in another scenario, the state-run Gas Authority of India Ltd (Gail) and Indian Oil Corporation (IOC) should be asked to take over the liquified natural gas (LNG) project in a serious bid to cut the tariff. The per unit tariff, which has been average at Rs 8.80, may come down to Rs 2.20 to Rs 2.40 per unit. The Dabhol Power Company is believed to have spent nearly Rs 2,500 crore on the LNG project.

Moreover, the MSEB, which is at present doubtful over the fate of its equity of Rs 800 crore, may pick up 51 per cent equity and appeal to the Mumbai based utilities Tata Power and BSES for taking up the balance equity in the Dabhol project. The MSEB and IFIs are keen that the impending issue be resolved amicably, especially to avoid the legal battle in India and arbitration in London. A section of MSEB is confident that the power purchase agreement (PPA) on the issue of misdeclaration and default on the availability of power by DPC can be proved null and void and there will be no need for the payment of any compensation to DPC. This will enable the take over of Dabhol project by an Indian entity quite possible. Lay seems using pressure tactics Mr Lay's statement on Enron pull out is being seen in the political circle as a pressure tactic, especially when the Supreme Court is hearing the DPC's petition on August 6.
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THE TIMES OF INDIA, Saturday, July 28, 2001
'Four states not to buy power at current rates' 

Maharashtra deputy chief minister Chhagan Bhujbal said on Saturday that though four states have expressed their willingness to purchase power from the Enron-promoted Dhabol power project they are not in a financial position to buy them at the prevailing tariff. "All wish to purchase power but not at the current rate", Bhujbal said after a function organised by ex-servicemen. Four states, Madhya Pradesh, Delhi, Karnataka and Punjab had agreed to buy power from Enron's troubled Dabhol Power Project at a tariff as low as Rs 1.65 to Rs 2.60 per unit during a meeting Godbole Renegotiations Committee had with prospective buyer states on July 26 here. Replying to a query regarding the US giant's desire to pull out of the power project in India, he quipped, "jinko jaana hai wo jayenge, unko koi rok nahi sakta" (those who wish to leave will leave, no one can stop them). He, however, expressed hope that the current Enron imbroglio would be settled after the Supreme Court delivers its verdict. The state government would deal with the issue depending on the verdict of the Supreme Court, Bhujbal added.( PTI )
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THE TIMES OF INDIA,Monday, July 30, 2001
Maharashtra's offer unrealistic: DPC 

US energy major Enron's Dabhol Power Company (DPC) on Friday said that price proposals made by four states to draw power from the Dabhol project "were totally unrealistic", even as Godbole renegotiations committee reported a stalemate in the talks with DPC. Referring to the offer of Karnataka, Delhi, Madhya Pradesh and Punjab to buy power at a tariff as low as Rs 1.65 and Rs 2.60, DPC said, "unfortunately these are totally unrealistic proposals, unattainable by new generation liquid plants, including those set up by the public sector". On the other hand, after meeting DPC officials on Friday morning, Madhav Godbole told reporters that currently talks with DPC had reached a stalemate with interested states quoting lower prices than the US energy major's expectation. After discussions with four states and receiving communications from Haryana and Rajasthan, he said that all these were ready to draw DPC's 1,444 mw phase-II power at an average rate of Rs 2 to Rs 2.25 per unit. "An overall demand for DPC power is at around 800 mw to 1,000 mw, but not all of these is a base load one. Moreover, it is for more than half a year, mainly non-monsoon months of November to May," Godbole said. He added that the states had informed the commission that each of them had a regulatory framework in the form of an electricity regulatory authority in place and was bound by a merit dispatch order, which did not allow them to buy costly power (like DPC's) so long as cheaper tariff was available in their own state.( PTI )
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THE HINDU BUSINESSLINE, Saturday, 28 July 2001
Demand for DPC power only at `particular' price 
 
THE Godbole panel today conveyed the power-offtake proposals of six States to Dabhol Power Company (DPC) officials. The company was told that there was combined demand for 800-1000 MW power at not more than Rs 2.50 per unit. ``One thing is abundantly clear. There is demand for (DPC) power at a particular price. If the price increases the demand may not be large'' Dr Godbole told reporters. `` We have told Enron that the need for 800 to 1000 MW DPC power is not at baseload, nor is it an all-year-round demand. The States will require this power only between the months of April to November and the demand will fall during the rainy season,'' he said. 

Karnataka, Punjab, Delhi and Madhya Pradesh made representations to the panel yesterday. Rajasthan and Haryana have presented written proposals asking for 300 and 100 MW each. While Madhya Pradesh has asked for power at Rs 1.65 per unit, other States have said they will not pay more than Rs 2.25 to Rs 2.40 per unit. According to Dr Godbole, the company officials will ``take up the matter with lenders and collaborators'' before the next meeting which is expected to be held in August. Meanwhile, according to DPC, the power purchase proposals presented by various States ``are totally unrealistic and unattainable by new generation liquid fuel plants including even those in the public sector such as NTPC's Kayamkulam''. Dr Godbole had suggested that DPC power ``at competitive rates'' could replace captive power in a number of States. He said though DPC had earlier agreed to reduce tariffs by 50 paise, this would no longer be easy as the project has seen cost escalation after stoppage of phase II work. `` Our dialogue with Enron is bogged down by two issues-- the plant load factor at which the unit is run and the price of power,'' Dr Godbole said. He said there was a need to take a `` serious look at whether demand projections in the country are realistic''. 
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THE ECONOMIC TIMES, Monday, July 30, 2001
Maharashtra to pay Rs 788cr penalty to MSEB, Girish Kuber 
 
MAHARASHTRA has decided to pay Rs 788 crore to the ailing Maharashtra State Electricity Board to compensate it for the damage it has caused the power utility through tariff concessions to various sectors. Padmasinh Patil, the state's energy minister, had wanted to give tariff concessions to farmers, which was objected to by MSEB. Even the Maharashtra Electricity Regulatory Commission asked the state's energy department to restrain its generosity. The MERC had asked the government not to offer concessions at the cost of its SEB and directed it to make a budgetary provision if it wanted to go ahead with its plan. Accordingly, Mr Patil announced last year that the state government will compensate the board. The MERC had set a deadline of October 2001 for sanctioning the compensation. The supplementary demand presented to the state assembly makes this provision. "It has been decided to give subsidy to MSEB to compensate the loss arising from supplying electricity at concessional rate to agricultural and powerloom consumers with effect from May 1, 2000," said the demand by the state's finance ministry. 

Currently, concessions of 55 per cent and 33.33 per cent in the electricity bills is given to powerloom and agricultural consumers. The total expenditure involved in the proposal is estimated to be around Rs 788 crore. The issue of offering concessions to powerloom and agriculture consumers has been hanging fire for the last couple of years. The board last year had raised the tariff for agriculture and powerloom consumers which was opposed by the state government for obvious reasons. The government announced a roll-back of the tariff hike only to be prevented by the MERC from doing so. The MSEB will now be charging Rs 600 per one horse power pump, bringing down the rate from Rs 1,400, and Rs 185 per loom down from the earlier rate of Rs 300. The government has also decided to waive 55 per cent of the Rs 110 crore unpaid dues from powerlooms. Delayed payment charges for the defaulters has also been waived and they have been granted three instalments for clearing old dues. According to MSEB's own admission, more than 118 lakh of the total 130 lakh consumers are being supplied subsidised power.