Winds May Be Shifting For Big Turbine Makers --- Renewable-Energy Use Is Poised to Spread --- But the Most Lucrative Markets Have Little Breathing Room
The Wall Street Journal Europe, 08/13/01

Bush stance on greenhouse gases prods interest in state controls
Houston Chronicle, 08/13/01
UK: Enron says still undecided on Teesside power plant.
Reuters English News Service, 08/13/01
India ONGC Offers $400M For Enron's Oilfield Stake-Report
Dow Jones International News, 08/13/01
BHP Billiton To Form Singapore Energy Trading Unit-Report
Dow Jones International News, 08/13/01
INDIA PRESS: Enron To Exit Dabhol Pwr Project From Nov 19
Dow Jones Asian Equities Report, 08/13/01
INDIA'S ONGC BIDS FOR ENRON'S 30 PCT STAKE IN PANNA-MUKTA
Asia Pulse, 08/13/01
INDIAN GOVT NOT TO ASK NTPC TO BUY ENRON STATE IN DABHOL
Asia Pulse, 08/13/01
INDIA'S TATA POWER TO BUY ENRON STAKE IN DPC 'IF IT MAKES SENSE'
Asia Pulse, 08/13/01
POWER PRIVATISATION: REFORM UNPLUGGED
India Today, 08/13/01


Winds May Be Shifting For Big Turbine Makers --- Renewable-Energy Use Is Poised to Spread --- But the Most Lucrative Markets Have Little Breathing Room
By Keith Johnson
Staff Reporter

08/13/2001
The Wall Street Journal Europe
9
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Wind energy is hardly back in the doldrums that nearly devastated the sector in the middle of the 1980s. 
Most of the world has agreed in principle to a version of the Kyoto climate accords, and the European Union has approved its long-awaited directive, albeit in a watered-down form, aiming to double the use of renewable energy. Meanwhile, growth rates in the industry continue above 20%, and even laggard countries from England to Brazil to India say they will step up investment in new wind farms.
So why isn't the outlook for Europe's big wind turbine makers rosier? 
Dresdner Kleinwort Wasserstein last week downgraded Vestas Wind Systems, the world's leading turbine maker, citing slower growth rates next year, even as Morgan Stanley Dean Witter got bullish, upgrading its recommendation on Denmark-based Vestas. 
Meanwhile, despite good first-half results for Gamesa SA, Credit Suisse First Boston trimmed the target price for the Spanish company to 28 euros from 30 euros. (The stock finished last week at 24.66 euros) Who's right? 
"They all are, in a way," says Robin Batchelor, who heads a renewable-energy fund for Merrill Lynch. A short-term slowdown looks inevitable, but "things are looking quite favorable for the group, especially with some version of Kyoto and the EU directive," he says. 
In part, the three leading turbine makers -- NEG Micon of Denmark is No. 3 -- are victims of the bursting technology bubble. Valuations that looked conservative in the middle of the technology craze now seem expensive. Vestas, at last week's closing price of 359 Danish kroner (48.24 euros), trades at a ratio of 48 times its projected earnings for 2002, more than double the average ratio of stocks included in the Euro Stoxx 50. Even Gamesa, which trades at a discount due to its lower-margin aeronautical business and more limited international presence, wields a 2002 price-to-earnings ratio of 26, higher than that of most companies included in Madrid's IBEX-35 blue-chip index. 
The stocks are paying the price, even if they have weathered the storm better than most telecommunications or technology companies. Over the past three months, shares in Vestas have slipped 3.7%, Gamesa stock is down 2.2%, and NEG Micon shares, at 353 Danish kroner (47.43 euros), are up 3.6% though they were battered in July. 
"The outlook's not negative, but it's not fantastic, either," says Adrian Coxson, a London-based analyst with Credit Suisse First Boston. "The share prices imply growth rates that simply aren't there." 
Growth rates in the industry had topped 30% annually since 1999 as wind power made a comeback, driven by a renewal of government subsidies, from its near-death experience the decade before. Vestas, which makes about 30% of all wind turbines sold world-wide, saw its sales rise fivefold between 1997 and 2001, while bottom-line profit rose 20-fold. Gamesa went public last fall with Spain's most successful initial offering in the past two years; Vestas holds 40% of its wind power division. And even Nordex, a German manufacturer, has rebounded from a dismal April debut on the Neuer Markt to post one of the year's biggest turnarounds. 
But now, it seems, the glory days may be past. Saturation in such key markets as Denmark and Germany has limited growth forecasts and prompted regulators to take a closer look at wind power's subsidies. It also has helped spur an ecological backlash -- environmental groups oppose wind power, arguing it kills migrating birds and spoils the landscape -- already familiar in England, Ireland and Spain, and compelled the industry to start building offshore wind farms, which are still unproven and more expensive than the onshore installations. 
Meanwhile, in the U.S., the world's second-biggest wind market, after Germany, question marks still surround the renewal of the Production Tax Credit for wind farms. Analysts expect wind power to take a breather next year in the U.S. after a record-setting 2001, when about 2,000 megawatts of capacity are due to be installed, as much as in the previous 20 years combined. 
Add to the mix growing competition from Enron Corp.'s wind division and hints that big electrical engineering firms like ABB and General Electric Corp. are poised to start making turbines themselves, and it is no wonder that Europe's turbine makers are desperate to find a new growth recipe. 
Analysts expect the industry to grow between 20% and 25% annually over the next five years, bringing world-wide capacity from about 17,700 megawatts at the end of 2000 to around 53,450 megawatts by 2005. But few think France, Italy or other countries newly won over to wind power will take up the slack from the coming slowdown in Spain, Germany and the U.S. 
Which puts the onus on the likes of Brazil, North Africa, India and China -- all of which need new sources of electricity. Bu unlike Western Europeans, these countries aren't prepared to offer generous subsidies to promote clean generation. 
"We're moving from environmentally driven markets to electricity-driven markets," says James Stettler, a renewables industry analyst with Dresdner Kleinwort Wasserstein in London. "That's the kind of landscape you want to see, without government subsidies." 
Those subsidies have created juicy returns (between 15% and 20%) for wind-farm operators. In large part, that spurred an excess of wind turbine installation in Germany and encouraged a storm of proposed new wind farms in Spain. But operating margins for wind power will be cut to the bone as the technology is forced to compete on equal terms with natural gas and coal-fired plants. 
And that in turn requires larger, more efficient turbines that can operate at full capacity even in areas with lower wind speeds. That's bad news for NEG Micon, once the world leader and still recovering from a bankruptcy scare that followed troubles with its products' gear boxes and a series of poorly digested acquisitions in 1999. For starters, the company won't have ready until the end of next year a turbine using pitch technology, which maximizes efficiency by adjusting blade angle depending on wind conditions. And the fastest-growing segment of the market is for turbines between 1.5 megawatts and two megawatts, which aren't NEG Micon's strong suit. 
Gamesa won't be selling a 1.75-megawatt turbine until next year, but for the windy and wide-open Spanish plains, that isn't a problem over the short term. Gamesa's biggest headache is its relationship with Vestas, which provides it with crucial technology but severely limits its international expansion. Recent contracts in Greece and China -- outside of Gamesa's original deal with Vestas -- may have been one-time deals, and analysts fear Gamesa will have trouble compensating for the industry's slowdown in Spain with aggressive international expansion unless the agreement is renegotiated. 
Vestas looks well positioned to take advantage of a move into new markets. It has been using pitch technology for 15 years, and has a two-megawatt machine in production. Last year, a quarter of its 870 million euros in sales came outside the core markets of Scandinavia, Germany, Spain, and the U.S. 
But analysts are afraid next year's dip in the U.S. market will slow sales growth at Vesta to 8% or 9%, after revenue grew an estimated 48% this year and 37% last year. And its market-leading position has given Vestas a premium valuation, which could work against the stock in the medium term.

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


Aug. 12, 2001, 10:55PM
Houston Chronicle
Bush stance on greenhouse gases prods interest in state controls 
By BILL DAWSON 
Copyright 2001 Houston Chronicle Environment Writer 
If Texas ends up with state regulations to curb emissions blamed for global warming, President Bush will be partly responsible. 
Bush's opposition to the Kyoto Protocol's international mandates for reducing carbon dioxide and other greenhouse gases is being credited with renewing interest in cutting emissions -- not just among environmentalists but also in Congress and some U.S. corporations. 
Meanwhile, a study that Bush's state appointees ordered last year, while he was governor, promises to stir debate over the need for a Texas greenhouse-gas plan. This analysis is to be completed at the Texas Natural Resource Conservation Commission in December. 
"Hopefully, we'll present meaningful options of how the state could move forward," said TNRCC Executive Director Jeff Saitas. 
The state's engagement with the issue has far-reaching implications. Oil and other fossil fuels produce carbon dioxide. Environmentalists say energy-dependent Texas would rank as the seventh-largest producer of greenhouse gases if it were an independent nation. 
Tentatively, officials working on the TNRCC study have calculated that about 80 percent of the state's greenhouse emissions come from power plants, other industrial plants and transportation activities. 
The three Bush-appointed TNRCC commissioners decided to undertake the study because Texas environmental groups petitioned them for a plan to cut greenhouse gases. The environmentalists timed the request so state law would require a response during last year's presidential campaign, when Bush's environmental record was being criticized. 
Instead of introducing a plan, however, the commissioners asked for recommendations about how Texas could help fight global warming. 
Saitas said TNRCC officials may conclude that new state actions specifically targeting greenhouse emissions are not warranted, because pollution-cutting efforts already under way are also eliminating a large volume of these gases. 
In any event, environmentalists are planning to campaign for a formal state program, complete with new regulations, to achieve extra cuts in greenhouse emissions. The Legislature authorized such rules in 1991. 
Environmentalists will team up this fall with religious and other groups to sponsor public meetings where citizens can present ideas for a Texas greenhouse-gas plan, said Tom "Smitty" Smith, state director of Public Citizen. 
"There are clearly a number of things the state could do by rules," he said, "and hopefully we want this to become an issue in the next governor's race." 
The Sierra Club's state director, Ken Kramer, said Bush's stance on the Kyoto pact, and the absence of an alternative proposal by his administration so far, appears to be backfiring. Despite U.S. opposition, the treaty was endorsed by 178 nations last month in Bonn, Germany. 
"An ironic aspect of President Bush's failure to come to grips with the global warming issue is that other people, who definitely see this is something that can't be ignored, are rising to the occasion and putting in extra effort because they can't rely on the present administration for leadership," Kramer said. 
Others see evidence that this reaction is emerging nationally -- and in some unexpected quarters. 
One is Eileen Claussen, president of the Pew Center on Global Climate Change, which sponsors a coalition of major businesses. The group, which includes Houston-based Enron as well as oil giants Shell and BP, calls the Kyoto pact "a first step" in acting against global warming. 
Claussen said she was afraid the administration's hard-line opposition to the Kyoto treaty might encourage some companies to pull out of the Pew Center's Business Environmental Leadership Council, but it seems to have had the opposite effect. 
The Bush team's stance not only helped catalyze the agreement on the treaty, but it is now inspiring wider U.S. congressional and corporate interest in limiting greenhouse gases, she said. 
"We really do have the president to thank for that," Claussen said. 
Last month, for instance, Republicans and Democrats on the Senate Foreign Relations Committee voted 19-0 for a resolution that called on Bush to develop specific ideas for a binding climate treaty when negotiators revisit the issue this fall. It said the United States should act "to ensure significant and meaningful reductions in emissions of greenhouse gases from all sectors." 
This latest chapter in the U.S. debate over global warming has again exposed the divisions among leading energy companies on the subject, many of which are based in Texas or have extensive operations here. 
"It's definitely a live issue," said Jeffrey Keeler, director of environmental strategies for Enron, a natural-gas and electric-power company that is also involved in renewable energy sources like wind power. 
The Bush administration, he said, will "have to get a plan together and really have some details." 
Natural gas produces less carbon dioxide than oil or coal, and Enron regards efforts to reduce greenhouse gases as a business opportunity. 
In contrast, Exxon Mobil's outspoken opposition to the Kyoto accord is often seen as a reflection of its self-described position as "the world's premier petroleum and petrochemical company." 
In 1997, Exxon's chairman told leaders from developing nations they should not worry too much about global warming and increase use of fossil fuels. 
But one top official said the company now believes "there is a substantial risk of climate change having adverse results, and we very much favor strong action to address those risks." 
The "most appropriate actions" are technology improvements and other energy-saving measures, like Exxon Mobil's cogeneration projects, said Frank Sprow, the company's vice president for safety, health and environment. 
While there are clearly "practical issues" at stake for different energy companies -- with some believing they can benefit from mandated cutbacks in greenhouse gases -- their differences on the issue "are more philosophical than anything else," the Pew Center's Claussen said. 
"You ask (energy industry) people off the record if the world is going to end up addressing the issue and constraining carbon," she said, "and most say yes." 
The TNRCC study will estimate the reductions in greenhouse gases that will occur because of pollution cuts Texas has already ordered. They mainly include new TNRCC rules to reduce smog in Houston, Dallas and other cities, as well as associated emission limits the Legislature set in 1999 and 2001. 
Carbon dioxide is not a smog-forming gas itself, but it can be reduced as a result of some actions taken to lessen pollutants that do form smog -- switching to fuels that emit less carbon dioxide or increasing energy efficiency. 
Texans should focus on the economic benefits of energy efficiency, said Jurgen Schmandt, director of The Woodlands-based Mitchell Center for Sustainable Development, a research organization founded by oilman and developer George Mitchell. 
Energy-saving measures will be especially important in this state if a U.S. "carbon tax" is ever enacted to reduce carbon dioxide emissions, Schmandt said. "I believe an argument can be made that a place like Houston, with its heavy concentration of refineries, needs to be better prepared than the rest of the country." 


UK: Enron says still undecided on Teesside power plant.

08/13/2001
Reuters English News Service
(C) Reuters Limited 2001.

LONDON, Aug 13 - U.S. energy company Enron said on Monday it had not yet decided when its fire-hit UK power plant at Teesside would resume electricity generation. 
The 1,875 megawatt plant in the Grangetown district of Middlesbrough, northern England was shut after an explosion on Wednesday in which three people died.
"The majority of the plant has now been handed back to operators Enron by the Health and Safety Inspectorate," the company said in a press release. 
"No decision has yet been made on when power generation will begin," it added.

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


India ONGC Offers $400M For Enron's Oilfield Stake-Report

08/13/2001
Dow Jones International News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW DELHI -(Dow Jones)- India's state-owned Oil & Natural Gas Corp. (P.ONG) has put in a $400 million bid for acquiring U.S. energy major Enron Corp.'s (ENE) 30% stake in the Panna-Mukta and Tapti oil and natural gas fields, the Press Trust of India news agency reported Monday. 
Enron is unlikely to settle for anything less than $600 million for its stake in the venture, the report said.
India's privately-owned Reliance Industries Ltd. (P.REL) had quoted about $350 million for Enron's stake in the $900 million exploration venture, the PTI quoted its sources as saying. 
The spokesmen of both Reliance Industries and ONGC said their companies had expressed interest in buying out Enron in the Panna-Mukta and Tapti oil and gas fields, but refused to give details about the price they were willing to pay, the report added. 
The U.S. energy firm Marathon Oil Co. is also keen on acquiring Enron's stake in the two oil and gas fields, the report said. 
ONGC holds 40% stake in the fields, which currently produce around 29,000 barrels of crude oil a day. The remaining 30% is owned by Reliance, the report added. 
Enron declined to comment, the PTI said. 
-By Himendra Kumar, Dow Jones Newswires; 91-11-461-9426; himendra.kumar@dowjones.com

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

BHP Billiton To Form Singapore Energy Trading Unit-Report

08/13/2001
Dow Jones International News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

LONDON -(Dow Jones)- Australia's BHP Billiton Ltd. (BHP) is setting up an energy trading business in Singapore, U.K. daily The Times reported Monday. 
The move signals BHP Billiton's commitment to its oil and gas assets, the newspaper reported, adding that the trading unit will seek to balance the company's exposure to energy markets across its oil, gas and mining businesses.
BHP Billiton's strategy is to emulate U.S. power giant Enron (ENE), which used its long position in electricity to sell hedging and derivative products to energy users, the report said. 
-By Jim Efstathiou, Dow Jones Newswires; 44-20-7842-9250; jim.efstathiou@dowjones.com

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


INDIA PRESS: Enron To Exit Dabhol Pwr Project From Nov 19

08/13/2001
Dow Jones Asian Equities Report
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW DELHI -(Dow Jones)- U.S. energy company Enron Corp. (ENE) may formally exit the Indian market from Nov. 19, and serve a termination notice to the Maharashtra State Electricity Board if a buyer isn't found for the $2.9 billion power project in the western Indian state of Maharashtra, reports the Business Standard. 
"We are not in the business of litigation but of selling energy worldwide. Nov. 19 is our exit path..." the newspaper quoted Enron India Managing Director K. Wade Cline as saying.
Cline said that after terminating its power purchase agreement with MSEB, Dabhol will take the arbitration route to realize $48 million owed by MSEB for electricity it supplied. 
"My options are very clear - either the center (federal government) finds a buyer for the project or we renegotiate or terminate the PPA," Cline said. 
As reported, Dabhol, the operator of a 740-megawatt power plant, is embroiled in a long-standing payment dispute with its sole buyer, the MSEB. MSEB stopped drawing power from the naphtha-fired DPC plant May 29, saying the "DPC tariffs were unaffordable." The DPC-MSEB dispute is in court. 
Dabhol Power Co. is the single largest foreign investment in India to date. 
Web site: www.business-standard.com 
-By Himendra Kumar; Dow Jones Newswires; 91-11-461-9426; himendra.kumar@dowjones.com

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

INDIA'S ONGC BIDS FOR ENRON'S 30 PCT STAKE IN PANNA-MUKTA

08/13/2001
Asia Pulse
(c) Copyright 2001 Asia Pulse PTE Ltd.

NEW DELHI, Aug 13 Asia Pulse - Oil and Natural Gas Corporation (ONGC) has put in a US$400 million price bid for acquiring Enron's 30 per cent stake in Panna-Mukta and Tapti oil and gas fields even as the US company is believed to have decided not to settle for anything less than US$600 million. 
Reliance Industries has quoted about US$350 million for Enron's stake in the US$900 million venture, sources familiar with the divestiture said.
When contacted both Reliance Industries and ONGC spokespersons said their companies expressed interest in buying out Enron in Panna-Mukta and Tapti oil and gas fields, but refused to give details about the price they were willing to pay. 
Besides ONGC and RIL, who are partners with Enron in Panna-Mukta and Tapti fields, US energy giant Marathon Oil is the other company in running for acquiring Enron's stake. 
ONGC holds 40 per cent stake in the fields, which produce around 300 million cubic meters of gas and 29,000 barrels of oil per day, while the remaining 30 per cent is with Reliance. 
Enron officials are tight-lipped about the whole process saying "it is not the company's policy to comment on divestiture proceedings." 
Earlier, state-owned Indian Oil Corporation and Hindustan Petroleum Corporation Ltd also expressed interest in stepping into Enron's shoes but their bids were rejected by the Huston-based company during the preliminary round itself, sources said. 
(PTI) 13-08 2015

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

INDIAN GOVT NOT TO ASK NTPC TO BUY ENRON STATE IN DABHOL

08/13/2001
Asia Pulse
(c) Copyright 2001 Asia Pulse PTE Ltd.

NEW DELHI, Aug 13 Asia Pulse - Centreon Sunday said that it would not ask National Thermal Power Corporation (NTPC) to buy stake of US energy major Enron in the US$3 billion Dabhol power project, which is in the midst of a legal battle over cost of power and payment of bills. 
The Centre's rejection comes within a day of Tata Power Chairman Ratan Tata evincing interest in the Enron's stake, reported to be around US$1 billion.
"NTPC's hands are full. It has its own commitments of adding 20,000 mw capacity by 2012. We are now asking it to hike the target to 30,000 mw," Power Ministry Suresh Prabhu told PTI when asked about Enron's offer to the Centre. 
"There are reports of some private companies showing interest in Dabhol project. Other foreign companies could also come forward," Prabhu said while terming Enron's offer as part of its 'global strategy'. 
Prabhu emphasised that the Enron imbroglio did not demonstrate disenchantment of foreign investors with India and said "only Enron has decided to withdraw from India. Even AES which wants to opt out of its tie-up in Orissa is keen to enter distribution and privatisation process in the country." 
Besides, the government would offer transmission projects totalling upto four billion dollar for private participation at a transmission conference to be held in Mumbai next week. 
(PTI) 
13-08 1604

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

INDIA'S TATA POWER TO BUY ENRON STAKE IN DPC 'IF IT MAKES SENSE'

08/13/2001
Asia Pulse
(c) Copyright 2001 Asia Pulse PTE Ltd.

MUMBAI, Aug 13 Asia Pulse - City-based power utility Tata Power Company (TPC) (BSE:TTPW) said Saturday it will be interested in buying US energy major Enron's stake in the US$3 billion Dabhol Power Company (DPC) 'if it makes sense for the company to buy'. 
"We are watching Dabhol developments very closely and will concievably think of buying it, if it makes sense for us", chairman Ratan Tata informed the shareholders at TPC's 82nd annual general meeting here on Friday.
He said DPC's 2,184 mw was a liquified natural gas based with costly tariff and that somebody had to buy the project, if its promoters were getting out of it. 
Tata was answering shareholders' persistent queries and suggestions that TPC should take up the energy major's US$1 billion 'at cost' offer and buy out the power plant which was ideally located near Mumbai. 
Later, while speaking to reporters TPC managing director Adi Engineer said the power utility was "waiting in the wings" for a proper opportunity after which the company "will definitely look into buying the Enron stake in DPC". 
He said TPC would involve itself in this matter only afte the imbroglio over payment of USD 48 million between DPC and its estranged partner Maharashtra State Electricity Board were sorted out. 
"DPC's asset is good. It is in fact a national asset which cannot be wished away", Engineer said. 
(PTI) 13-08 1029

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

BUSINESS
POWER PRIVATISATION: REFORM UNPLUGGED
RUBEN BANERJEE

08/13/2001
India Today
42
Copyright 2001 Living Media India Ltd

All's not well and it is going to get worse. The much-admired power reforms in Orissa have come unstuck barely six years after they were hailed as a beacon for the rest of the country. Instead of bringing light and prosperity, the reforms have spelt gloom, bitterness and uncertainty. Privatisation was supposed to end the subsidy regime and stem transmission losses. So far it has resulted only in heavy losses, unhappy consumers and acrimony among the players. 
Matters came to a head last week when AES Corporation, the US power major that has a 49 per cent stake in the Orissa Power Generation Company (OPGC) and a 51 per cent stake in CESCO, the distribution company for central Orissa, threatened to pull out. Dennis Bakke, AES president and CEO, in a terse press statement, warned of drastic measures. The message "enough is enough" sent Orissa in a tizzy.
This is not the first time that the private sector players have pulled the plug. In May this year, the managing director of a power generation company switched off its generating stations to pressurise the government-owned GRIDCO into clearing its dues. The Government in desperation sought to bring about order by threatening to arrest the managing director. The bad blood continues to linger. 
Foreign power companies locking horns with state governments is nothing new. Enron's Dabhol Power Company feud with the Maharashtra government has run on for years. But the hostility and distrust among Orissa's power players go a step further. The AES has initiated arbitration proceedings against GRIDCO for non-payment of dues and has threatened to pull out of CESCO if tariffs are not increased. With CESCO losing several crores every month in high costs and low tariffs, the implicit message is loud and clear: AES is not into charity and it cannot be expected to lose perennially. 
The fact that the power corporations are still in the red after six years bodes ill for the privatisation process. Orissa was the only state to privatise distribution. Generation was partly privatised with AES picking up a stake in OPGC. The four distribution companies-the AES-owned CESCO and the BSEs-owned NESCO, WESCO and SOUTHCO for different zones of the state-were to buy power from GRIDCO, collect tariffs from the consumer and pay GRIDCO, which in turn had to pay the generating companies, including the OPGC. All this and more was envisaged by the Orissa Electricity Reforms Act of 1995 that saw the unbundling of the government-owned state electricity board. But the ground situation now presents an entirely different picture. 
Instead of a chain of supply and payment, it has become a series of losses and non-payment. The distribution companies have begun to crack the whip on consumers, disconnecting power lines in case of non-payment. But these distribution companies themselves owe GRIDCO around Rs 800 crore. They claim they are still in the red. AES's CESCO owes Rs 250 crore but that has not deterred AES from initiating legal proceedings against GRIDCO for the Rs 160 crore it owes OPGC. "When CESCO pays us, we would square up with OPGC the next day," says GRIDCO Chairman Priyabrata Patnaik. 
While the war of attrition is on among the players in power sector, the public is ready to retreat. The general feeling is that the reforms have failed. "Enough is enough. It's time that the reforms process is rolled back," declares Janardhan Pati of the CPI(M). Angry consumers ransacked the CESCO office on learning that it is still to pay its dues to GRIDCO despite charging higher tariffs. With reforms making a bigger hole in the consumers pockets, the reformists are on the defensive. 
Breaking away from the subsidy regime was bound to be painful. The Rs 250-crore annual subsidy was supposed to be offset by cutting down on distribution losses and improving collections. But it's not going as per plan. The private companies are defaulting on payments to GRIDCO, which as a result is reeling under liabilities of over Rs 2,700 crore. "The power business here has grown into a very complicated affair," admits R. Mishra, finance director of GRIDCO. " 
The whole episode puts the reforms in a quandary. If AES walks out, it will be difficult to find someone to fill the breach in CESCO. While monthly power bills amount to Rs 52 crore, CESCO manages to collect only Rs 40 crore. And if salaries and other administrative costs are added, its losses mount to more than Rs 12 crore. 
Privatisation, however, has not been a total loss. The reforms have already yielded results: Andhra Pradesh pays over Rs 1,500 crore annually to prop up its power sector, while the Orissa Government pays not even a rupee. Revenues also flowed in when the companies paid several hundred crores of rupees to get licences. The stumbling block which threatens to overturn the reforms is that the distribution companies are unable to cover their costs. Reformists say that it would balance out eventually when transmission losses are minimised and the collection goes up. The immediate need is that the private players like AES must keep their commitment of bringing in capital. 
Recent developments have put a question mark on AES's role. Even the World Bank that goaded the state onto the reforms track has not delivered on its promise. It had foreseen a 5 per cent reduction in transmission losses every year, but after six years losses are still high at 43 per cent. From being a model in power sector reforms, Orissa's experience is now a lesson on how not to go about privatising the core sector.

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