The State Governor Asks Generators to Take Less Than They're Owed Power: 
Meeting with firms, Davis says that settling for 70% of debt would help 
Edison stay solvent. One executive bristles.
Los Angeles Times, 05/10/01

US AND CANADA: Few US business chiefs see recession ahead White Sulphur 
Springs Financial Times; May 10, 2001

Abreast of the Market
Dow Industrials, Nasdaq Decline; Cisco Helps Weaken Tech Issues
The Wall Street Journal, 05/10/01

INDIA: Enron prepares to move execs out of India - paper.
Reuters English News Service, 05/10/01

India: A rational renegotiation plan
Business Line (The Hindu), 05/10/01

India: Centre to back Maharashtra on tariff talks with Enron
Business Line (The Hindu), 05/10/01

Centre asks IDBI to seek legal advice on DPC
Business Standard, 05/10/01

USA: CEOs urge major moves to deal with energy crisis.
Reuters English News Service, 05/09/01

USA: INTERVIEW-Enron CEO sees gasoline prices staying high.
Reuters English News Service, 05/09/01

SMARTMONEY.COM: Power Surge
Dow Jones News Service, 05/09/01

India: No To Guarantees For Enron Power Project -Report
Dow Jones International News, 05/09/01

N American Newsprint: Publishers Hold Large Inventories
Dow Jones Commodities Service, 05/09/01


California; Metro Desk
The State Governor Asks Generators to Take Less Than They're Owed Power: 
Meeting with firms, Davis says that settling for 70% of debt would help 
Edison stay solvent. One executive bristles.
DAN MORAIN
TIMES STAFF WRITER

05/10/2001
Los Angeles Times
Home Edition
B-8
Copyright 2001 / The Times Mirror Company

SACRAMENTO -- After spending months bashing independent power generators, 
Gov. Gray Davis on Wednesday called on them to take 30% less than the $1.2 
billion they are owed by Southern California Edison. 
"The Legislature [is] going to insist on a reduction," Davis said after a 
meeting in his office with representatives of a dozen power generating 
companies. Davis said he told them that "70% this year was more valuable to 
them than whatever they get two or three years down the line" if Edison is 
forced into bankruptcy.
Davis urged generators to help California extricate itself from a summer of 
rolling blackouts by selling every available electron to the state. 
He held out the possibility that he might sign legislation imposing a 
windfall profits tax on generators if they fail to help out this summer. 
"My attitude on that would depend a lot on whether they showed good faith and 
cooperated throughout this process," Davis said, emerging after a four-hour, 
closed-door meeting with the generators. 
The Democratic governor issued an invitation last week to the chief executive 
officers of power generating and marketing companies including Enron, 
Reliant, Duke Energy and others to meet with him in Sacramento. But most of 
the executives who attended were a few pay grades below CEO. 
Davis said he urged that the executives press lawmakers to approve the deal 
he struck with Edison in which the state would give the ailing utility an 
infusion of cash by buying its transmission system for $2.76 billion. Edison 
would use the money to restructure its debt and pay its creditors. 
Davis said lawmakers will not approve the deal unless the independent power 
generators take less than they are owed. 
He noted that the state and the power generators have "a collective interest 
in seeing that this summer has as few disruptions as possible." If California 
is hit with repeated blackouts, Davis has said, other states will delay or 
end efforts to deregulate their electricity markets. 
Executives, who braved taunts from a few protesters wearing pig masks and 
carrying a small but loudly squealing pig, characterized the meeting as 
businesslike. But at least some generators are less than enthusiastic about 
taking less than they are owed. 
"I have a real concern about the notion that we should give back some of the 
money we made," said John Stout, a senior vice president of the Houston-based 
Reliant Energy, which says it is owed $300 million by Southern California 
Edison and Pacific Gas & Electric. 
Stout said that much of the money Reliant made in California is being 
reinvested in power plant construction--although he added that the company 
has no generators under construction in California. 
"Political uncertainty has put a huge risk factor on investment in 
California," Stout said. 
Randy Harrison, an executive with Mirant, based in Atlanta, said the issue of 
a so-called "haircut" was discussed, though not in detail. Harrison said it 
is "not completely off the table." But he added that his company is not 
profiteering. Nor has it withheld electricity in any attempt to manipulate 
wholesale energy prices. 
"Our people are working 24 hours a day and we are spending millions of 
dollars to try and keep our power plants up and running," Harrison said. 
The meeting was aimed at opening communication with the generators. But Davis 
aides said the governor also wanted to bring attention to companies that he 
believes are at least partly responsible for California's energy crisis. 
The meeting occurred as polls show that voters are increasingly angry about 
the energy crisis and as lawmakers, fearful that the energy crisis will wreck 
California's economy, sharpen their attacks on power generators. 
Legislators have introduced bills to impose a windfall profits tax on 
generators and make it a felony to manipulate electricity markets. Lt. Gov. 
Cruz Bustamante and Assemblywoman Barbara Matthews (D-Tracy) sued several 
generators last week. Atty. Gen. Bill Lockyer is investigating whether 
generators violated antitrust and other laws as wholesale prices soared to 
record heights, hobbling Edison and helping push PG&E into bankruptcy. 
Voters are not sure who is to blame, but they are convinced that "whoever is 
taking our money is taking way too much," said Democratic political 
consultant Richie Ross. 
"They want to find this deregulation's Charles Keating," Ross said, referring 
to a central figure in the 1980s savings and loan debacle. 
Still, as much as Davis and others demonize generators, the state needs them, 
some officials say. 
"We don't have enough power without them," said Assembly Energy Committee 
Chairman Roderick Wright (D-Los Angeles). "There needs to be an adult 
discussion to see what can be worked out."


PHOTO: CHP Officer Stacey Brashares holds a pig taken from protesters outside 
the Capitol, where Gov. Gray Davis was meeting with executives of power 
generating companies. Masks worn by the protesters carry the names of some of 
the companies.; ; PHOTOGRAPHER: ROBERT DURELL / Los Angeles Times; PHOTO: 
Gov. Gray Davis, after a meeting in his office with representatives of a 
dozen power generating companies.; ; PHOTOGRAPHER: Associated Press 

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




		
		
		
		
		US AND CANADA: Few US business chiefs see recession ahead White Sulphur 
Springs Financial Times; May 10, 2001
By PERONET DESPEIGNES and ANDREW HILL

		Only 11 per cent of chief executives at the largest US companies believe the 
country is heading for a recession this year, according to a survey released 
yesterday, but most agree 2001 will be at best a year of sluggish growth. 
		The survey was published to coincide with the spring meeting of the Business 
Council, an association of chief executives from many of the largest US 
companies. 
		Bill Harrison, president and chief executive of JP Morgan Chase, the banking 
group, said the survey reflected "substantial uncertainty and difference of 
opinion" about the potential length and depth of the slowdown. 
		Business leaders also appeared divided about the role of the Federal Reserve. 
The chief executives listed the Fed's interest rate increases as the most 
important cause of the US economic slowdown, but they also gave credit to the 
central bank for staving off recession by easing monetary policy this year. 
		The Business Council survey released at last October's meeting was an early 
indicator of corporate America's growing concern about the US economic 
outlook. 
		Yesterday's report indicated nearly three quarters of US business leaders 
expected growth to improve in 2002, but of those who responded, 70 per cent 
expected growth in output this year of between 0 and 1.5 per cent. Some 19 
per cent predicted economic growth of 1.5 per cent to 3.5 per cent, and only 
11 per cent predicted a US recession. 
		The business leaders also remained pessimistic about growth outside the US. 
The survey found they expected 1-2.5 per cent growth in the euro-zone this 
year, down from 3.4 per cent in 2000, and growth of 0 to 1 per cent in Japan, 
compared with 1.7 per cent last year. 
		There was, however, optimism about the potential for continued productivity 
improvements. "The wide majority of respondents expect that the current pace 
of productivity growth can and will be maintained," said Mr Harrison, 
vice-chairman of the council. 
		Economic data released on Monday showed US workers' productivity slipped in 
the first three months of this year, but Mr Harrison said it would be wrong 
to overreact to data from one quarter. 
		More than 80 current and former chairmen and chief executives are expected to 
attend the Business Council sessions today and tomorrow at the Greenbrier 
resort hotel in West Virginia. 
		One of the hottest topics will be the US energy crisis. Scott McNealy of Sun 
Microsystems, the computer group, and Ken Lay, chairman of Enron, the energy 
group, criticised the sluggishness with which California had reacted to the 
problems. 
		Mr McNealy said it was time to make "trade-offs on the environmental front", 
including reconsidering the use of nuclear power. 
		* One of the most prominent groups of US economists remains "steadfast" in 
its belief that a US recession is unlikely, Peronet Despeignes writes in 
Washington. The National Association of Business Economics said in its latest 
quarterly economic outlook, based on a survey of 27 members, that interest 
rate cuts by the Fed would sustain economic growth. The chance of a recession 
was put at 35 per cent, and most panellists agreed any recession would likely 
be "milder than the usual post-World War II recession". 
		The group maintained its forecast for economic growth of 2 per cent in 2001, 
but lowered its forecast for 2002 to 3.1 per cent from 3.5 per cent. The 
panel also expected inflation of 3 per cent in 2001 and 2.5 per cent in 2002. 
		The group reversed its previous criticism of monetary policy as "too tight", 
deeming the Fed's current conduct "just right". 
		Most panellists attributed the slowdown to a "classic inventory correction", 
the Fed's monetary tightening, which ended a year ago, and the drop in stock 
prices since March of last year. 
		Copyright: The Financial Times Limited
		
		




Abreast of the Market
Dow Industrials, Nasdaq Decline; Cisco Helps Weaken Tech Issues
By Robert O'Brien
Dow Jones Newswires

05/10/2001
The Wall Street Journal
C2
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW YORK -- Disappointment with Cisco Systems' earnings statement weakened 
technology issues exposed to the telecommunications-gear business, but 
without causing any fallout in the rest of the market. 
Cisco itself declined $1.25, a loss of 6%, to $19.09 at 4 p.m. in Nasdaq 
Stock Market trading, after the company, the leading maker of 
Internet-switching equipment, came through late Tuesday with fiscal 
third-quarter results that closely tracked the forecast the company offered 
last month. Meanwhile, the commentary accompanying the profit statement 
didn't do anything to stimulate hope for a pickup in the moribund 
telecom-equipment market.
Shares in makers of the communications chips used in Cisco's networking 
products declined sharply, with PMC-Sierra falling 3.99 to 40.11, while 
Conexant Systems declined 1.33 to 9.87, and Broadcom dropped 4.29 to 40.24, 
all on Nasdaq. 
Some of the enterprise networking products also came undone, with Extreme 
Networks falling 2.16 to 32.49 on Nasdaq. Makers of rival communications 
technologies also took a spill. Juniper Networks declined 1.53 to 57.37, 
while Ciena dropped 1.06 to 60.54, both on Nasdaq. 
"Cisco's results put further scrutiny on the earnings and revenue projections 
of related companies as we look ahead to second-quarter results," said Brian 
Belski, fundamental market strategist at U.S. Bancorp Piper Jaffray. "But on 
a relative basis, the market held in there." 
The Nasdaq Composite Index, suffering from the Cisco fallout, declined 42.14, 
or 1.9%, to end at 2156.63. But the Dow Jones Industrial Average acquitted 
itself nicely, keeping its loss to 16.53, or 0.15%, to finish at 10866.98. 
Investors adopted a somewhat defensive posture in the face of the weakness in 
technology, gravitating toward areas that aren't especially sensitive to 
economic trends, or toward sectors where profit growth looks dependable. 
Shares of Procter & Gamble, for example, moved up 1.69 to 66.19, one of the 
better moves by consumer-product stocks, which generally aren't sensitive to 
economic weakness. 
Utilities also proved popular. Duke Energy gained 1.87 to 45.84, Public 
Service Enterprise Group advanced 1.08 to 46.20, and Enron climbed 3.09 to 
59.20. The Dow Jones Utility Average increased 5, or 1.3%, to 383.74. 
Energy stocks rose briskly, after weekly inventory data released late Tuesday 
tamped down some of the concerns about increasing reserves stoked by reports 
last week. Chevron gained 1.63 to 95.43, Texaco added 1.28 to 71.10, and 
Exxon Mobil moved ahead 98 cents to 89.72. Oil-services and equipment 
providers, which have been in a funk, recovered nicely, with Schlumberger 
gaining 1.14 to 62.95, Halliburton advancing 1.28 to 42.51, and B.J. Services 
improving 1.39 to 75.90. 
Maxim Integrated Products (Nasdaq) fell 2.51 to 49.49. The Sunnyvale, Calif., 
maker of analog circuits posted fiscal third-quarter results late Tuesday 
that matched Wall Street's projections, but also gave details about the 
expected decline in its revenue and earnings in the fourth quarter. Lehman 
Brothers, which had forecast weak guidance, said in a research note that it 
remains cautious about the company's outlook. 
Other integrated circuit makers also declined in the session, with Linear 
Technology falling 2.38 to 48.04, while Analog Devices fell 1.61 to 46.35. 
Chip maker National Semiconductor lowered its fiscal fourth-quarter earnings 
forecasts, and announced plans to cut 10% of its work force, but the stock 
made up intraday weakness, finishing unchanged at $25. 
Exodus Communications (Nasdaq) fell 69 cents to 9.43. The Santa Clara, 
Calif., provider of Internet hosting services said it planned to cut 15% of 
its work force as part of an effort to cut costs. 
WorldCom (Nasdaq) inched up 31 cents to 18.29. UBS Warburg reiterated its 
strong buy rating on the Clinton, Miss., telecommunications service provider, 
saying that the company's recent bond offering, which has been a drag on its 
share price, won't have much, if any, impact on its ability to live up to 
earnings forecasts. 
Verizon Communications sagged 1.78 to 53.82. The telecommunications service 
concern unveiled one of the largest convertible debt issues ever, a $3 
billion offering of zero-coupon notes. 
Johnson & Johnson gained 30 cents to 98.25. The New Brunswick, N.J., 
medical-products concern said it is in discussions about acquiring Inverness 
Medical Technology's diabetes-care product operations for about $1.3 billion 
in stock. 
Sepracor (Nasdaq) gained 3.49 to 30.49. The Marlborough, Mass., specialty 
drug maker said the Food and Drug Administration accepted for review its 
capsule-form version of Soltara, an allergy-relief treatment. 
Willamette Industries moved up 19 cents to 48.75. The Portland, Ore., lumber 
and paper-products concern rejected Weyerhaeuser's sweetened takeover bid of 
$50 a share, calling the offer inadequate. Weyerhaeuser, Federal Way, Wash., 
eased 15 cents to 56.22. 
Northrop Grumman fell 3.50 to 88. The Los Angeles defense contractor made an 
unsolicited bid to buy rival Newport News Shipbuilding for $67.50 a share, or 
$2.1 billion, in cash and stock. Newport News added four cents to 65.04. 
General Dynamics, which had previously agreed to buy Newport News for the 
same price, fell 15 cents to 78.15. 
Shares of several other aerospace and defense contractors moved higher in the 
session, after Credit Suisse First Boston sketched the benefits to the group 
from some of the Bush administration's prospective military-spending 
initiatives. TRW added 2.05 to 40.20, Boeing rose 54 cents to $65, and 
Raytheon advanced 35 cents to 29.46. 
Alliant Techsystems, another name in the group identified by Credit Suisse 
First Boston as benefiting from military spending, fell 2.50 to 95.50, even 
though the Minneapolis aerospace and defense concern's fiscal fourth-quarter 
earnings topped Wall Street's profit forecasts. 
Forest Laboratories moved ahead 2.88 to 62.21 following some upbeat comments 
from Thomas Weisel Partners. 
Triad Hospitals fell 2.45 to 24.70. Lehman Brothers cut its rating on the 
Dallas hospital operator, citing concerns about the recent acquisition of 
Quorum Health Group. 
Circuit City dropped 97 cents to 13.55, after Lehman Brothers in a research 
note offered some cautious comments about the valuation of the Richmond, Va., 
consumer-electronics retailer. 
Spinnaker Exploration gained 3.55 to 40.50. Credit Suisse First Boston, which 
had cut its rating on the Houston natural-gas concern last month, returned 
its strong buy rating on the stock.

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



INDIA: Enron prepares to move execs out of India - paper.

05/10/2001
Reuters English News Service
(C) Reuters Limited 2001.

BOMBAY, May 10 (Reuters) - U.S. energy giant Enron Corp has begun a process 
of relocating executives overseeing its controversy-wracked $2.9 billion 
power project in India, an Indian financial daily said on Thursday. 
The Economic Times said company sources, which it did not name, said the 
Houston-based company was preparing to offer its dozen managers in India a 
choice of transfering elsewhere or accepting a lump sum to retire.
"Unfortunately, the company could not pursue its projects in India, and has 
decided to fold up its operations in the country," the newspaper quoted an 
unnamed Enron official as saying. 
The report also said: "The whole process of relocating the Indian staff is 
expected to be completed within a month or two." 
An Enron spokesman declined comment, saying it was company policy not to 
comment on administrative and personnel matters. 
On Wednesday another domestic daily, the Times of India, reported that the 
families of executives overseeing Enron's troubled Dabhol Power Company (DPC) 
project in India were leaving the country. 
It said the children of Enron executives had been pulled out of the American 
School in Bombay as their families were being relocated to Singapore. 
It also said security around the expatriate executives had been tightened, 
and personal bodyguards assigned to senior executives, because "there is 
likely to be a tremendous backlash" if the project is terminated, causing the 
loss of 15,000 jobs. 
The Economic Times report on Thursday noted that Enron had already pulled out 
of all the other projects in India in which it once planned to invest. 
Metgas, which was to build a liquefied natural gas pipeline in the state of 
Maharashtra, and Enron Broadband Solutions, which was to lay an optic fibre 
cable network across the country, have virtually folded up operations, the 
newspaper said. 
"The other group company, Enron Oil & Gas (India), which is a joint venture 
between Reliance and ONGC, is currently in the process of selling its stake," 
it added. 
Enron has also scrapped plans to invest in other power projects in India, due 
to financial problems encountered by its nearly complete 2,184 MW power plant 
south of Bombay. 
The project is mired in controversy after the Maharashtra State Electricity 
Board (MSEB) reneged on its commitment to buy all the power produced by the 
giant plant, saying it is too costly. 
MSEB has also defaulted on monthly payments to DPC for the electricity it has 
taken, forcing the company's board last month to authorise the management to 
terminate the contract.

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


India: A rational renegotiation plan

05/10/2001
Business Line (The Hindu)
Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - 
Asia Intelligence Wire

Separating the LNG project from the power project would reduce the tariffs 
for the latter, but not remove the financial hurdles for the State and the 
Centre. They would continue to pay more for the LNG project and guarantee its 
loans. DPC is now recovering the cost of the LNG project from the power 
project. Therefore, the mere segregation of the LNG project without 
readjusting the PPA or delinking the sovereign guarantee obligations would 
only help DPC and not the people of Maharashtra, says S. Padmanabhan. 
THE MAHARASHTRA Government recently announced its plans to renegotiate the 
Enron-promoted Dabhol power project. In this connection, Mr R. K. Pachouri, a 
committee member appointed for the renegotiation, outlined the priorities of 
the project in a television interview:
- To reduce the interest rate for the project debt of DPC to be in line with 
the current market trends; 
- To achieve higher output and identify power purchasers outside Maharashtra; 
and 
- To separate the LNG project from the power project. 
A business daily on May 2 reported that Indian Oil plans to supply 1.2 
million tonnes of naphtha to DPC at around the international price of $290 a 
tonne, including sales tax of 16-18 per cent per tonne. 
The report indicates that DPC has requested the Maharashtra Government to 
waive the sales tax so that the reduction in the sales tax can be passed on 
to the consumers. 
Similar news reports on the project have started appearing in both the print 
and visual media. These indicate that the State Government and the DPC 
management seem to have come to an understanding on the broad principles of 
renegotiation and both are in the process of educating the public about the 
benefits these various measures would bring to the project. 
No doubt, these steps would bring down the tariff. But, then, the reduction 
will be due to concessions and subsidies offered by the State and the 
financial institutions by way of waiver of sales tax and reduction in 
interest rate. It appears that DPC will not offer any reduction or concession 
offered in the tariff or the rate of returns. 
Reduction in project debt: When the DPC loans were sanctioned, the prime 
lending rate was around 14 per cent and the power projects were offered loans 
at 3-3.5 per cent over the PLR. Now the PLR is around 12.5 per cent and the 
interest rates for the power sector will be 15-15.5 per cent. Effectively, 
there would be a reduction of around 1.5-2 per cent in the interest rate. 
However, it must be noted that the same refinancing opportunity is good for 
every other Indian project. 
If the Centre permits refinancing for DPC, it should permit projects in other 
States as well to be refinanced. If it does, that will be at a considerable 
loss to the FIs such as the IDBI, the IFCI and the ICICI. 
To achieve higher output and identify power purchasers outside Maharashtra: 
This is not a tariff- reduction exercise. In fact, this would help DPC 
improve its profits and cash flows under the present PPA. DPC has a single- 
point tariff which consists of a fixed and a variable charge. Higher the 
output the DPC recovers, higher the fixed charges and higher the profits. 
Thus, without any significant changes in the existing PPA, this step would 
help DPC, and put more States in trouble. 
Perhaps, the renegotiating committee wants other States to sink as well with 
Maharashtra. 
To separate the LNG project from the power project: This is a welcome step. 
While it would reduce the tariff for the power project, it would not remove 
the financial hurdles for the State and the Centre, which would continue to 
be paying more for the LNG project and guaranteeing the loans of the LNG 
project. DPC is now recovering all the cost of the LNG project from the 
Dabhol project, which will consume only around 2.5 million tonnes of LNG, 
whereas the capacity of the LNG project is being upgraded to five million 
tonnes. Therefore, the mere segregation of the LNG project without 
readjusting the PPA or delinking the sovereign guarantee obligations does not 
serve the purpose. It would help DPC and not the people of Maharashtra. 
To exempt sales tax on naphtha: This is like robbing Peter to pay Paul. As 
IOC suggested, if $290 is the price of naphtha per tonne, it works out to Rs 
13,630 (one $ = Rs 47). Given that DPC gets paid fuel cost per kWh at 2,000 
kcal (heat rate) and the naphtha has a heat value of 11,000 kcal, one tonne 
of the fuel will give DPC fuel price for 5,500 kWh, that is at the rate of Rs 
2.48 per kWh for naphtha. 
If sales tax of 16 per cent is exempted from this price, the naphtha price 
drops to Rs 11,750 and the per kWh fuel price for DPC drops to Rs 2.14 from 
Rs 2.48. IOC expects to supply 1.2 million tonnes of naphtha for producing 
6,600 million kWh and the sales tax exemption effect will be Rs 225 crore 
(0.34 per kWh). 
What is DPC's contribution in this reduction? On the same account, every 
power project would seek to reduce the sales tax on the fuel they use. 
Remember that if the State sacrifices revenue in one area, it will recover 
the loss through some other taxes. When the current trend is to remove 
subsidies in all the sectors, the State and the renegotiating committee are 
opening up new subsidies to support DPC. 
An alternative 
The renegotiating committee should reduce the real tariffs from DPC's fixed 
costs, rather than making cosmetic changes in the taxation structure. 
The following steps are needed: 
- To remove the corporate veil protecting the DPC project documents: 
The public at large are paying for the revenues of DPC and no government can 
have the right to keep a veil of secrecy on the documents. This will help the 
public at large and the experts in the industry understand the implications 
and suggest viable alternatives. 
- To change DPC tariff formula from a single-part to two-part tariff: 
The Centre has a two-part tariff policy which stipulates recovery of fixed 
cost under certain circumstances. The most critical issue of this policy is 
the recovery of all fixed costs at a capacity utilisation (PLF) at 75 per 
cent. DPC has adopted a single part tariff system where the fixed costs are 
paid for all capacities and, thus the return of DPC increases as the capacity 
utilisation rises. While this method may promote efficiency, DPC has tied the 
State in tight knots with this higher capacity utilisation and, will make 
very high levels of profits. Therefore, it is essential that the single-part 
tariff is renegotiated at lower levels or better still scrapped and two-part 
tariff adopted. 
Renegotiating the station heat rate: DPC has a station heat rate of 2000 kcal 
per kWh. Thus, for every unit of electricity it produces the fuel - naphtha - 
it is reimbursed to DPC at the rate of 2,000 kcal per kWh. At $290 per tonne 
(Rs 13,630 at one $ = Rs 47) of IOC price this works out to Rs 2.48 per kWh. 
DPC uses GE 9FA machines-gas turbines which burn naphtha at around 1,700 kcal 
per kWh. In other words, DPC uses 1,700 kcal of naphtha and gets paid for 
2,000 kcal. 
Thus, it spends Rs 2.11 per kWh on fuel but gets paid Rs 2.48 per kWh, making 
a profit of Rs 0.37 for every kWh. On 2,100 MW at 80 per cent capacity, this 
is a whopping Rs 550 crore. While there may be technical grounds to pay at a 
level higher than 1,700 kcal due to considerations of part load, there is no 
justification for paying at 2,000 kcal. In fact, the Centre and the CEA as 
well as other States have been successfully forcing all power producers to 
reduce from the 2,000 kcal levels while Maharashtra has not been able to do 
this. 
This is a key issue in negotiations. 
To source naphtha only from domestic sources: India has a surplus of naphtha 
as of now and there is no need to import it. DPC should be forced to buy fuel 
only from domestic sources so that the profits remain with domestic 
companies, and not allow DPC to make higher profits of fuel handling. 
What if renegotiation fails? 
DPC will not agree to changes in the PPA as it would feel that it is a signed 
and sealed document. Maharashtra may look at cosmetic changes, and may make 
sacrifices to reduce the tariff. But in the long run, the contract will run 
aground because of the inability of the State Government to use and pay for 
the power produced by DPC. 
Given the background of Enron worldwide, it would press ahead with its 
perceived advantages - legal and contractual. It is better for the State to 
ready a back-up action plan. The following line of action is suggested: 
- To terminate the PPA and other project contracts and give notice to Enron 
to wind up operations; 
- To inform the lenders, the beneficiaries of the sovereign guarantee, that 
the Centre will pay up its commitments. Perhaps, this may involve setting up 
an escrow account and placing sufficient debt reserve funds that the lenders 
may request, pending final payments; 
- To quickly move towards an arbitration process primarily to d etermine the 
amounts payable to Enron towards contract termination; 
- To initiate an international competitive tendering process, with the 
permission of the lenders, to sell the power project and the LNG terminal as 
independent projects - the process should also permit bids from Indian 
companies; 
- To make a serious effort to complete the bid finalisation and selection of 
the successful bidder in two-three months; 
- The bidding process should have two parameters for the bidders to quote: 
a) tariff payable to the bidder for the next 20 years (in the case of LNG 
terminal - price of gas on long term basis); 
b) price for the assets; 
c) The bid would attract several international power players including 
American companies for the power and the LNG projects and the bids offered 
will be attractive. Also Indian companies or consortia would line up for the 
bid; 
d) Simultaneous with this exercise, as soon as determination of amounts 
payable to Enron becomes clear, to place the funds so determined and accepted 
with an escrow agent acceptable to Enron; 
e) To set up an investigating team to go into the approval process to 
determine whether there has been any corrupt practice in the process of 
granting approvals. There is a Supreme Court case (filed by CITU) pending 
decision on charges of corruption. The investigating team to focus, with the 
cooperation of the US Government, on the issues relating to Foreign Corrupt 
Practices Act (FCPA) of the US. Violation of the FCPA by any American 
corporate is a serious issue attracting criminal prosecution. There can be a 
time bound investigation; 
f) To proceed with the prosecution of all people concerned if found guilty - 
if Enron is found guilty the compensations may not be payable and the US law 
agencies will step in to prosecute Enron; 
j) If Enron is not found guilty, to pay the monies due to it by releasing the 
amounts in escrow. By this time the asset takeover and the debt repayment 
issues would have been resolved; 
k) Conservatively, it is believed that there would be an ultimate gap of 
$1,000 million (Rs 4,700 crore at one $ = Rs 47) after the assets are sold 
and debts transferred to the new owners. It is suggested that the State float 
a public debt issue for paying this to Enron and levy an 'Enron Cess' to 
recover the loss and repay the debt issue over the next 15-20 years. At a 
return of 10 per cent per annum on Rs 4,700 crore over the next 15 years and 
assuming that 100 per cent of the loss is recovered from the 2,100 MW project 
and assuming an 80 per cent PLF, the 'Enron Cess' per kWh of energy produced 
will be Rs 0.42. 
But will the Central and State governments have the political will to force 
this issue? 
(The author is a power-finance consultant.)

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


India: Centre to back Maharashtra on tariff talks with Enron
Our Bureau

05/10/2001
Business Line (The Hindu)
Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - 
Asia Intelligence Wire

BANGALORE, May 9. THE Centre has conveyed that it would support the 
Maharashtra Government on the contentious issue of tariff renegotiations with 
Enron for power purchase from Dabhol Power Company (DPC). 
Talking to newspersons here on Wednesday, the Union Minister for Power, Mr 
Suresh Prabhu, said the Centre had already appointed the Solicitor-General of 
India as its nominee in the panel set up by the Maharashtra State Government 
headed by Mr Madhav Godbole to renegotiate the terms of the power purchase 
agreement. Enron's executives were due to meet the panel on May 11 in this 
connection, he added.
Replying to questions on Enron's proposals to exit from DPC, he said that 
neither the Maharashtra Government nor Enron had conveyed their desire to 
exit from DPC. "We will support the State Government," he emphasised. He said 
that the Centre was not in a position to intervene in the matter since it was 
for Enron to take a decision on the issue. 
However, the Centre's counter guarantee liabilities in DPC would be confined 
to the extent of the State Government's payment defaults. 
Earlier speaking at the inauguration of CII institute of quality, he said 
that the Centre's new focus was on conservation of power rather than adding 
fresh capacity. 
The Karnataka Chief Minister, Mr S.M. Krishna, who was also present, said 
that WTO's impact on the agriculture sector needed to be addressed and said 
that the Prime Minister should call a meeting of the Chief Ministers to 
discuss the outcome of the WTO and future steps that needed to be taken. 
He added that the Congress had initiated reforms - liberalisation and 
globalisation - and there was no intention of retreating on them. 
However, it was necessary to have a mid-term appraisal on them. Dr K. 
Kasturirangan, Chairman, Indian Space Research Organisation said, "Behind 
every successful company is a quality culture, and that in the unforgiving 
environment of space strict quality awareness was very essential and any 
violation would mean that we have to pay heavily in space." 
He added that space had given to the world configuration, control and 
management and in the Rs 1,000 crore GSLV programme, over 10,000 computer 
simulations had been done in th last six-seven years, before it was 
considered flight worthy. 
Almost 1000 major reviews were done and input collected not only from senior 
engineers, but from youngsters too, "as their minds are fresh. 
We worked towards transparency and fairly and frankly exchanged ideas. 
Around half a million a A-4 size papers documentation was done on the 
programme," he added.

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


Centre asks IDBI to seek legal advice on DPC
Our Regional Bureau New Delhi

05/10/2001
Business Standard
3
Copyright (c) Business Standard

The Centre has asked the Industrial Development Bank of India (IDBI) to seek 
legal advice on the letter issued by the international lenders to Enron 
seeking a series of demands from the Maharashtra and central government. 
In a communication to the financial institution, the finance ministry has 
said that a decision to provide escrow cover and increase the limit under 
letter of credit to Dabhol Power Company as per the demand of the energy 
major's global and domestic lenders last week, can only be taken after 
considering all the relevant issues.
In the reply, also sent to the Maharashtra government, the ministry has also 
referred to the state government's refusal to tow the line on the demands put 
forward by the lenders in a letter to the finance secretary, Ajit Kumar. 
The lenders to Enron including ABN-Amro, Credit Suisse First Boston, Citibank 
N A, ANZ Export Finance Ltd and Banc Of America had asked for payment of the 
disputed Rs 213 crore towards December and January bills plus an escrow cover 
and an increase in the letter of credit amount. 
It had also asked the Centre to honour the counter guarantees and its 
obligations in the power purchase agreement. 
Meanwhile, the state yesterday appointed Singapore-based lawyer Quentin Loh 
as its representative for the three arbitration cases and MSEB would be 
represented by former Bombay High Court judge ML Pendse.

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


USA: CEOs urge major moves to deal with energy crisis.
By Jeremy Pelofsky

05/09/2001
Reuters English News Service
(C) Reuters Limited 2001.

WHITE SULPHUR SPRINGS, W.Va., May 9 (Reuters) - In fear of the unpredictable 
power outages in California, Scott McNealy, the chief executive at computer 
giant Sun Microsystems Inc. , has resorted to carrying a flashlight with him 
at all times. 
Plus, the network computer maker will be $8 million to $9 million over the 
annual budget for its facilities in California because of high energy costs, 
he said Wednesday at the chief executive summit known as the Business Council.
"I don't know about you but I carry a flashlight everywhere I go," McNealy 
said. "We've got third world power out there." 
California's summer of blackouts could cost its economy almost $22 billion in 
lost productivity and chop as many as 135,000 jobs in the state, according to 
an industry association study released Wednesday. 
With energy prices expected to soar as the year progresses, the executives 
surveyed by the Business Council, an association of corporate executives, 
urged further liberalization of the energy market and sought new incentives 
for exploration. 
"Consensus expectations are for higher petroleum and electricity costs over 
the balance of this year," said J.P. Morgan Chase & Co. Inc. executive 
William Harrison. 
The blackouts - the most visible result of an energy crisis caused by 
California's disastrous 1996 experiment with power market deregulation - are 
forecast to continue through the summer as warm temperatures keep air 
conditioning demand high. 
The industry groups that commissioned the study hope to use it to campaign 
against a new, tiered power rate structure being considered by the California 
Public Utilities Commission (CPUC), which they claim will pass too much of 
the burden of paying for California's energy crisis on to industrial 
customers. 
That rate proposal, officially put forward Wednesday, would slap residential 
customers who use the most electricity with average rate hikes of between 35 
and 40 percent, while industrial users could face rate hikes of 50 percent or 
more. 
Kenneth Lay, chairman of Enron Corp. , the biggest buyer and seller of 
electricity in North America, said California could pay from $50 billion to 
$80 billion this summer for electricity. 
"The biggest impact will be the disruptions in that economy if in fact we 
have a normally warm or even warmer than normal summer," Lay said. "There's 
still a lot of things that have to be done." 
He said there has to be a complete plan to solving the crisis and the longer 
the state waits, the more money that will be paid out. Lay also urged for 
more steps to promote energy conservation. 
"I think it's a very solvable problem, it just cannot be solved without some 
pain," Lay said. "Finally they're raising rates ... and at least correcting 
some of the problems." 
Sun's McNealy said there must also be another look at building nuclear power 
plants. 
In the meantime, he quipped that while Palo Alto, Calif.-based Sun has a 
dress code requiring employees to come to work in clothes, that may change. 
"We're thinking of backing that off a bit or even encouraging people to wear 
shorts because we're cranking up the thermostats," he said.

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


USA: INTERVIEW-Enron CEO sees gasoline prices staying high.

05/09/2001
Reuters English News Service
(C) Reuters Limited 2001.

WHITE SULPHUR SPRINGS, W.Va., May 9 (Reuters) - Consumers will not likely get 
any relief at the gas pumps this summer but prices are not expected to hit $3 
a gallon as some have forecast, Enron Corp. Chairman Kenneth Lay told Reuters 
on Wednesday. 
Gasoline inventories have been rising in recent weeks, more than was 
expected, which could hold prices from skyrocketing, Lay told Reuters in an 
interview on the sidelines of the annual meeting of the Business Council in 
the mountains of West Virginia.
"Hopefully they will not go up as much as people feared," he said, adding 
that he "would not be surprised if they go up a little bit." 
The Energy Information Agency said the national retail gasoline price hit a 
new record high of $1.70 a gallon on Monday and could climb to $1.75 this 
summer with demand expected to grow despite the increase. 
EIA warned that current gasoline inventories, which have risen recently but 
remain below historical levels, set the stage for fuel supply disruptions 
that could result in price spikes this summer. 
Lay said that holding down summer gas prices will largely depend on whether 
there are any disruptions at refineries across the country and the flow of 
imports from abroad. 
"But with normal refinery runs, and imports and all the rest of it, hopefully 
the market will not get too far out of balance," he said. 
"We'll probably not see much softness in the gasoline prices either until 
back in the fall some time," Lay said.

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


SMARTMONEY.COM: Power Surge
By Roben Farzad

05/09/2001
Dow Jones News Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW YORK -(Dow Jones)- Talk about vindication. In the late 1990s, when tech 
was shooting through the roof, no one wanted to waste their time in the 
greasy, sweaty world of oil and gas stocks. The fact that energy prices were 
touching multiyear lows at the time didn't help. In those days, being an 
energy analyst was the loneliest of callings. 
Needless to say, things have changed. Last year, power shortages and record 
oil and gas prices sent the once forsaken group of energy stocks soaring 
while investors ran screaming from the likes of Cisco Systems (CSCO), Intel 
(INTC) and the B2B flavor of the month. Suddenly, energy experts were the 
life of the party.
So dramatic was the rotation that unearthing value plays has become 
difficult. The Dow Jones U.S. Energy Index, for example, is up 18% in the 
last year, while the American Stock Exchange Natural Gas Index has soared 33% 
- compared with the Standard & Poor's 500's 12% drop. 
But that doesn't mean finding underappreciated stocks is impossible. It just 
takes some, well, drilling down. 
Start with Houston-based fuel exploration and producer Apache (APA), a 
SmartMoney.com favorite stubbornly trading at a 21% discount to its 52-week 
high of $74 set last December. In March, Robert Hunter noted that natural-gas 
prices would likely continue to spike into 2001 even after quadrupling 
between 1999 and 2000. So far, that scenario has played out, yet Apache still 
trades at a 33% discount to its 2001 estimated net asset value, while sector 
rivals currently trade at a more reasonable 15% to 20% discount to their 
NAVs. Moreover, the stock presently changes hands at just 12 times forward 
earnings - a hefty discount to its historical Cisco-like multiple of 66. 
Why the disconnect? Admittedly stumped, the oil and gas analyst community - 
which is almost uniformly positive on Apache - concedes that investors have a 
difficult time believing the gas industry's "perfect storm" combination of 
all-time high prices, low reserves and high demand will last. Brad Beago of 
Credit Lyonnais points out that the market is pricing the stock as if oil 
were trading in the low $20s per barrel and gas at $3 per million cubic feet, 
instead of the $28 and $4.50, respectively, they fetch now. What's more, 
Apache's well-known growth-by-acquisition strategy has scared away investors 
who fear that a sudden collapse in commodity prices could torpedo the 
company's business model. 
Such thinking could be a mistake. In the past decade, Apache has spent more 
than $10 billion to snap up reserves and production facilities at low prices, 
a work in progress that has created a rock-solid asset portfolio with 
consistent revenue streams. Recently, the company put the finishing touches 
on $1.4 billion in high-profile property acquisitions from the Spanish 
concern Repsol and the Australian Fletcher Challenge, deals that have 
produced, among other things, gushing oil yields in Egypt and Canada. 
"Historically, Apache has done an exceptionally good job on the acquisition 
side," says Kenneth Beer of New Orleans-based Johnson Rice. "The upside," he 
adds, "now comes from the maturation of their exploration program." 
Another intriguing energy play: Williams Cos. (WMB). Known as the poor man's 
Enron (ENE), the $19 billion Tulsa, Okla.-based energy powerhouse has a hand 
in virtually all areas of the business - gas and oil transportation, 
gathering, exploration, refining, power marketing and energy trading, to name 
just a few. And like Apache, Williams has been aggressive lately. On Monday, 
the company snarled off suitor Royal Dutch/Shell Group (RD) by paying $2.5 
billion for Denver natural-gas producer Barrett Resources (BRR), a deal that 
not only will be immediately accretive to earnings but also effectively 
doubles Williams' proven gas stockpile. 
On the accounting front, first-quarter revenues at Williams surged 63% 
year-over-year to $3.09 billion, while earnings from continuing operations 
shot up to $378.3 million from $138.9 million. Yet Williams' stock, currently 
around $39, trades at a 21% discount to its 52-week high of $48.13 set last 
August, and just 14 times estimated 2002 earnings. Since rich cousin and 
industry standard-bearer Enron trades at 27 times forward earnings, analysts 
who cover Williams think the stock is long overdue for a pop. 
Finally, investors looking to increase their exposure to the energy sector 
should consider the booming area of power generation, an industry that has 
consolidated a frightening amount of clout in the disastrously deregulated 
state of California and elsewhere. Based in San Jose, Calif., Calpine (CPN) 
does the dirty work of generating and selling electricity to utilities and 
other third parties. Ironically, the company's two primary fuel sources for 
its turbines - natural gas and geothermal - actually make for some of the 
cleanest electricity production around. 
And Calpine's numbers suggest that green (or at least greener) can be good 
from a profitability standpoint. For the three months ended March 31, 
revenues skyrocketed to $1.23 billion from $235.4 million, with net income 
surging fivefold to $93.7 million. First-quarter earnings per share of 30 
cents beat the Street by six cents and persuaded the analyst community to 
predict decidedly un-utility-like 45% to 50% annual EPS growth for the 
company for the next five years. 
While Calpine's healthy 2002 price-to-earnings ratio of 23 is in line with 
that of the S&P 500, political momentum is certainly on the company's side. 
The Bush administration has taken a hands-off approach to the California 
energy crisis, leaving it in the lap of Democratic governor Gray Davis of 
California. Still reeling from the bankruptcy of PG&E, the Davis 
administration is left with little power aside from exhortation to compel 
generators like Calpine to give the state's financially strapped utilities a 
break. As California's rolling blackouts make front-page news again this 
summer, it will become increasingly clear to Americans that new power plants 
are needed to meet our growing energy demand - 1,900 over the next two 
decades, according to Vice President Dick Cheney. Flush with cash and 
proceeds from the capital markets, Calpine is all too happy to come to the 
rescue. 
With growth prospects like these, Calpine - along with its underappreciated 
cousins Apache and Williams - could make for some exciting talk around the 
candle-lit water cooler his summer. 
For more information and analysis of companies and mutual funds, visit 
SmartMoney.com at http://www.smartmoney.com/

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


India: No To Guarantees For Enron Power Project -Report

05/09/2001
Dow Jones International News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW DELHI -(Dow Jones)- India's Finance Ministry has upheld the Maharashtra 
state government's decision not to extend financial guarantees sought by 
lenders to Enron Corp.'s (ENE) controversial Dabhol Power Co., the Press 
Trust of India, quoting state government sources, reported late Wednesday. 
The federal government upheld the state government's decision not to provide 
escrow cover or increase the limit of a letter of credit, the Press Trust 
said.
The Finance Ministry's response, in a letter to the Maharashtra government, 
followed demands for the guarantees by the $3 billion power-plant project's 
global and domestic lenders, the Press Trust reported. 
Enron spokesman John Ambler in Houston couldn't confirm that a letter had 
been sent and said it would be inappropriate to comment. 
The 2,184-megawatt project - India's single largest foreign investment - has 
been mired in financial disputes since the Maharashtra State Electricity 
Board, its main customer, failed to pay several bills. Under a 1996 
counter-guarantee agreement, the federal government is obliged to pay Enron 
when MSEB defaults. 
According to the Press Trust, the consortium of lenders asked in a May 1 
letter to Finance Secretary Ajit Kumar for payment of the disputed 2.13 
billion rupees ($1=INR46.8325) in power bills from December and January, 
activation of escrow cover and an increase in the letter of credit amount. 
The lenders also asked the federal government to Honiara its counter 
guarantees to Dabhol Power under the power purchase agreement with 
Maharashtra State. 
The lenders are ABN Amro (ABN), Credit Suisse First Boston (Z.CSF), Citibank 
NA (C), ANZ Export Finance Ltd, Bank of America (BAC) and the Industrial 
Development Bank of India. 
Dabhol has come under fire because of the relatively high cost of its power. 
Critics object to Dabhol charging INR7.1 a kilowatt-hour for its power, 
compared with INR1.5/kWh charged by other suppliers. 
As reported, a nine-member state committee headed by retired federal Home 
Secretary Madhav Godbole is working to lower the DPC's power tariff and allow 
the sale of excess power to the federal government or its utilities. A 
restructuring of the DPC's stakeholding may also be on the agenda. The 
Maharashtra government has asked the committee to try to negotiate a revised 
agreement within a month. 
The DPC currently operates a 740-megawatt naphtha plant contributing about 
0.7% to India's installed capacity. Enron has maintained that work will be 
completed by the year-end in the second phase of the Dabhol project that will 
add 1,444 MW to its capacity. The plant will switch from naphtha to liquefied 
natural gas as a fuel source in 2002. 
Texas-based Enron has a 65% stake in the DPC and is the project's largest 
shareholder. Other shareholders include the MSEB with 15%, and General 
Electric Co. (GE) and Bechtel Enterprises (X.BTL) with 10% each. 
-By Himendra Kumar, Dow Jones Newswires; 91-11-461-9427; 
himendra.kumar@dowjones.com

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


N American Newsprint: Publishers Hold Large Inventories

05/09/2001
Dow Jones Commodities Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

CHICAGO -(Dow Jones)- Publishers in the North American newsprint market, 
which are holding large amounts of inventory, continued to resist the 
recently revised price hike, though prices hadn't suffered further erosion in 
the week ended Wednesday. 
Producers reduced their original March price hike of $50 a metric ton to $25 
a ton, effective May 1.
Market participants said the pressure was on producers to lower prices 
further. 
"We're selling at the same price and buying at the same price," said a source 
at a U.S. merchant, which caters to small- to medium-sized buyers. But added 
the source, "I think the ($25 a ton) price increase will get scaled back to 
unchanged." 
The element setting the last few price increases apart from this year's 
increase is that they were implemented during a tight market. 
This price hike comes at a time when publishers have considerably reduced 
their consumption of newsprint and are holding substantial inventory, 
according to publisher sources. 
Some of that inventory had been built to beat the March price hike, and it 
went unused as advertising linage started to fall beyond expectations. 
"I've cut orders because my inventories are going up, up and up," said a 
purchasing executive with a major Midwestern daily. "I'm not buying more than 
what I have committed under contract." 
The executive said other newspaper publishers in the Midwest - Tribune Co. 
(TRB) as well as some medium-sized buyers - were facing similar circumstances 
and cutting back on newsprint purchases. 
The Midwestern daily, whose consumption has fallen 12% mainly due to 
advertising linage and classified advertising reductions, held 59 days of 
newsprint inventory, the executive said. 
Meanwhile, to increase their leverage, some larger publishers turned to 
purchasing newsprint from entities like Enron Corp. (ENE), while denying 
business to larger producers like Abitibi-Consolidated Inc. (ABY) and Bowater 
Inc. (BOW). 
Enron physically buys and sells pulp and paper, as well as risk-management 
instruments related to forest products, among other commodities. 
Transaction prices averaged $620 a ton, but larger newspaper chains paid 
between $580 a ton to $610 a ton, sources said. Newsprint's list price is 
currently at $635 a ton. 
Despite low newsprint consumption and a concerted effort by publishers to 
stave off the May price increase, BMO Nesbitt Burns Inc.'s forest products 
analyst, Stephen Atkinson, said the price hike should be implemented "without 
any problems." 
"Yes, there is a slowdown (in consumption), but the power is in the hands of 
the producers" following a high degree of consolidation in the newsprint 
industry, he said. 
"The producers can't drive publishers into bankruptcy, but the publishers are 
now finding that they can't drive producers into bankruptcy either," Atkinson 
added. 
-By Zahida Hafeez, Dow Jones Newswires; 312-750-4132; 
zahida.hafeez@dowjones.com

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