Scottish Power reportedly considering 3 bln usd bid for Enron's Portland
AFX News, 04/29/01

UK PRESS:Scottish Power Mulls Bid for Enron's Portland
Dow Jones, 04/29/01

Scottish Power Mulls Bid for Portland General, Observer Says
Bloomberg, 04/29/01

India's MSEB Hopeful Of New Power Pact With Enron Unit
Dow Jones, 04/29/01

India: Enron pull-out could put Indian lenders in a spot
Business Line (The Hindu), 04/29/01

Enron not interested in completion of Dabhol project
Press Trust of India Limited, 04/29/01

African-American museum gathers support, money, ideas
Houston Chronicle, 04/29/01

After several tries, black museum approaches reality in Houston
Associated Press, 04/29/01

COMMUNITY HELPERS SOUTH SCHOOL GIVES $2,500
Portland Oregonian, 04/29/2001

World Bank to vote on $450 mln India power loan 
Reuters, 04/28/01

UK: Scottish Power mulls Portland bid - paper
Reuters, 04/28/01

India: Save Dabhol project
Business Line (The Hindu), 04/28/01

India: Systemic changes needed for SEBs, says Prabhu
Business Line (The Hindu), 04/28/01

India: Enron not to affect India ratings: S&P
Business Line (The Hindu), 04/28/01

Maharashtra to appoint Godbole to lead renegotiations with DPC
Press Trust of India Limited, 04/28/01

Power play over Dabhol
Business Standard, 04/28/2001

India waits for a rediscovery
Business Standard, 04/28/01

 Enron gets set to pull the plug on power project
South China Morning Post, 04/28/01

Enron not needed at all, says NGO
The Times of India, 04/28/01

State-wide stir against Enron from March 1
The Times of India, 04/28/01

Enron, India in dispute over future of gas-fired power plant
Associated Press Newswires, 04/28/01

STARS & DOGS A selection of this week's winners and losers compiled by Andrew 
Bell
The Globe and Mail, 04/28/01

Talk & Speculation
San Antonio Express-News , 04/28/01

Enron's stock price gets whipped after broadband unit falls short
Associated Press Newswires, 04/28/01



Scottish Power reportedly considering 3 bln usd bid for Enron's Portland

04/29/2001
AFX News 
(c) 2001 by AFP-Extel News Ltd 

LONDON (AFX) - Scottish Power PLC is considering a move to bolster its U.S. 
West Coast operations by bidding for Enron Corp unit Portland General for 
around 3 bln usd, reports the Observer, without citing sources. 

Enron last week broke off talks with U.S. utility Sierra Pacific over a deal 
said to be worth 3.1 bln. This opened the door to Scottish Power, the report 
says.

An unnamed City source said Portland, which sells power to 725,000 customers 
in and around the Oregon state capital, would be a perfect fit for the 
Pacificorp business in the north-west U.S. which Scottish bought in 1999 for 
4.7 bln stg. Scottish has consistently said it wants to build up its business 
in the U.S. 

PacifiCorp has some 1.5 mln residential, commercial and industrial customers 
spread in Oregon, California, Washington, Wyoming, Utah and Idaho. 

"Portland sits in the middle of PacifiCorp territory in Oregon," the source 
said. "There would be added customers and big synergies in infrastructure, 
opera tions, and head office functions. It would make sense." 

Scottish Power unveils results this week. 



UK PRESS:Scottish Power Mulls Bid for Enron's Portland

04/29/2001
Dow Jones International News 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 

LONDON -(Dow Jones)- Utility giant Scottish Power PLC (SPI) is considering a 
move to bolster its American West Coast operations by bidding for Enron 
Corp's (ENE) Portland General in a deal that could total $3 billion, The 
Observer newspaper reports. 

-London Bureau; Dow Jones Newswires; 44 (0)20 7842 9279



ScottishPower Mulls Bid for Portland General, Observer Says
2001-04-29 11:30 (New York)

     Glasgow, Scotland, April 29 (Bloomberg) -- ScottishPower Plc,
the U.K.'s No. 2 utility, may bid for Enron Corp.'s Portland
General Electric Co. in a transaction worth as much as $3 billion,
the Observer newspaper said.
     ScottishPower spokesman Gordon Laidlaw declined to comment on
the newspaper's report.
     Portland General has 725,000 customers in Oregon. Its
operations and infrastructure could fit with PacifiCorp, the
biggest utility in the U.S. Northwest, which ScottishPower bought
for $10.7 billion in 1999, the paper said.
     Last week, Enron's planned sale of Portland General to Sierra
Pacific Resources was canceled after both companies agreed that
the California energy crisis had made regulatory approval too
difficult.
     ScottishPower has asked Oregon regulators to allow it to
raise customer prices in the state by 24 percent for three months
from May 2 to cover costs it expects to incur in the period. The
company is losing about $1 million a day because of a failure at a
plant in Utah.

(The Observer, 4-29, business p.1) Click {WNUK <GO>} for a list of
U.K. newspaper Web sites

--Richard Blackden in the London newsroom on +44 (0) 20-7673-2821
or at rblackden@bloomberg.net /ja

Story illustration: {SPW LN <Equity> COMP <GO>} for a graph
comparing ScottishPower shares with major indexes.

SPW LN <Equity> ENE US <Equity> SRP US <Equity>

NI SUM NI UTI NI MNA NI CA NI ELC NI NRG NI CMD NI OR NI RULES NI
UK NI SCOTS NI USWE

-0- (BN ) Apr/29/2001 15:30 GMT

 
India's MSEB Hopeful Of New Power Pact With Enron Unit
By Himendra Kumar
Of DOW JONES NEWSWIRES

04/29/2001
Dow Jones International News 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 
NEW DELHI -(Dow Jones)- India's Maharashtra State Electricity Board is 
hopeful of renegotiating its power purchase agreement with the U.S. energy 
major Enron Corp.'s (ENE) Indian unit Dabhol Power Co., MSEB Chairman Vinay 
Bansal said late Sunday. 

The $3 billion, 2,184-megawatt Dabhol project has been mired in financial 
disputes after MSEB, its main customer, failed to pay several of its bills. 
The project has the largest single foreign investment in India.

The Dabhol project has been in trouble since December when the government of 
Maharashtra state, where the Dabhol project is located, said the company 
charged exorbitant prices for electricity, and thus demanded a new price 
agreement. 

Meanwhile, the board of Dabhol Power at its meeting in London April 25, had 
authorized DPC's managing director to proceed with a preliminary move toward 
terminating its troubled joint venture power project in western India. 

"We are at a point of renegotiating the power purchase agreement with Dabhol 
Power Co. A committee has been constituted with the government of India 
participation. I am hopeful of a positive outcome," Bansal told Dow Jones 
Newswires in a telephone interview. 

He said he hadn't heard anything from DPC's management on the preliminary 
termination notice. 
"It's true that the DPC board has authorized the company's managing director 
to issue a preliminary termination notice. I am not sure why, when or whether 
he will use it," Bansal said. 

The preliminary termination notice is the first of three steps that end in 
the abandonment of the project, agreed to by investors when the joint venture 
was formed. 

Bansal said that if the preliminary notice of termination is issued by the 
DPC's managing director, there will be a six-month suspension period in which 
the two sides will be "negotiating to remedy the defect." 
"If the dispute cannot be resolved even after the negotiations, the final 
termination takes place. Thereafter, MSEB or a third party may buy the Dabhol 
unit. The compensation price will be decided by the arbitrator whose decision 
will be based on which of the two parties has defaulted," Bansal said. 

Enron India spokesman Jimmy Mogal refused to comment on the DPC board's 
decision when reached by Dow Jones Newswires, saying it was an internal 
company matter. 

Indian lenders, present at a meeting with foreign financial institutions in 
London on April 23 have said they favor re-negotiation of the DPC-MSEB power 
purchase agreement. 

Under a 1996 counter-guarantee agreement, the federal government is obliged 
to pay Enron when MSEB defaults. 

Enron invoked that guarantee in February - marking the first time in Indian 
history that a company has invoked such a federal guarantee - when the state 
utility said it couldn't afford to pay Dabhol. 

But before the federal government stepped in, the state government paid $17 
million in outstanding bills. Since then, the state power utility has 
confirmed that all pending bills have been paid. 

However, a dispute over payment of $48 million for December and January bills 
is pending. For its part, MSEB says it wants the power bills to be offset 
against a 4 billion rupee ($1=INR46.8575) fine it levied on Dabhol for what 
it said was the non-supply of power for intermittent periods between October 
2000 and the end of January. 

Several political parties had earlier demanded the project be scrapped, since 
the costs had increased to INR7 from INR1.8 per unit agreed to six years ago 
for electricity generated by the 740-megawatt naphtha plant. 

Enron has maintained that work will be completed by year's end on the 1,444 
megawatt liquified natural gas plant. 

Houston, Texas-based Enron has a 65% stake in Dabhol Power, 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


India: Enron pull-out could put Indian lenders in a spot

04/29/2001
Business Line (The Hindu) 
Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - 
Asia Intelligence Wire 
MUMBAI, April 28. DABHOL Power Company's (DPC) overseas lenders have a 
guarantee cover of about Rs 6,000 crore from the IDBI-led consortium of 
Indian lenders. 

If the Enron-sponsored project is terminated, the Indian lenders will have to 
incur the additional burden over and above the funds they have already sunk 
in.

This is in addition to the Union Government's guarantee of about Rs 2,500 
crore to overseas lenders. Sources said according to the agreements between 
the overseas lenders, the Indian financiers and the Government, the "total 
pay-out in the event of termination would not be less than the entire foreign 
debt". Of the total debt of close to $2.2 billion, about 70 per cent has been 
already disbursed by lenders of which 40 per cent has been lent by overseas 
entities. 

If the "blame" of termination finally comes to rest on any Indian entity, the 
penalty payable to Enron would amount to about Rs 30,000 crore. Irrespective 
of the payments to be made to Enron - promised returns on premature 
termination - the foreign lenders are secured by the word of domestic 
financial institutions and not just the Central and State Governments. 

Sources said this is one of the major reasons Indian lenders are opposed to 
premature termination of the project, apart from their loans being 
"unsecured". At the DPC board meeting in London, IDBI had voted against the 
resolution to initiate termination. 

The sources said Enron wants to "see some concrete and positive signals" from 
the Government within about three weeks that it is "serious" about the 
project. A positive signal, according to them, would mean a commitment that 
phase II would continue on schedule and the power produced would be lifted 
completely. It also wants the "first phase to be up and running at full steam 
without hindrance". 

However, even if foreign creditors have to be paid off, it is unlikely to be 
in a single settlement. Domestic lenders may have to negotiate some kind of 
an arrangement to repay the foreign debt in tranches. 

Another possibility, albeit a remote one, is that the new entity that takes 
over the project will also take over the foreign debt. 

Meanwhile, the expert panel to be formed for renegotiation of the power 
purchase agreement will include all members of the Godbole Committee, a State 
Government official said. It will also include one member each from the Union 
Finance Ministry, the Central Electricity Authority, the State Finance 
Ministry and the Chairman of the Maharashtra State Electricity Board. 

He also said the State Government will appoint the arbitrator before May 9. 

- Archana Chaudhary - Dinesh Narayanan


Enron not interested in completion of Dabhol project

04/29/2001
Press Trust of India Limited 
(c) 2001 PTI Ltd. 
Mumbai, Apr 29 (PTI) The US energy major Enron-promoted Dabhol Power Company 
(DPC) has said it is "not interested" in completing the USD three billion 
power project in western Indian state of Maharashtra, following non-payment 
of dues by the state electricity board (MSEB) and federal government's 
refusal to honour the Rs 1.02 billion counter-guarantee. 
In DPC's board meeting held in London on April 25, Enron India Managing 
Director K Wade Cline and DPC President Neil McGregor made it clear they were 
"not very keen for completion of the project as the management felt that both 
the state government and the Centre (Indian Government) were undermining the 
gravity of the situation", a senior state government official who attended 
the meeting told PTI here Sunday.
Cline told the DPC directors that since the state government had "not shown" 
any serious interest in dissolving the imbroglio, DPC and its international 
lenders were "not in favour of continuing the project". 
When contacted DPC spokesperson refused to comment. 
The fate of DPC's 2,184 MW project, which is 92 per cent complete, hangs in 
balance, since the Indian financial institutions (FIs) led by IDBI have 
stopped funding the debt portion of the project, with around 70 per cent of 
the USD 1.8 billion worth total disbursement already pumped in. 
"Naturally, we have stopped disbursement as we think that it is indeed a 
loss-making proposition, as of now. If MSEB begins paying, we would go ahead 
with our funding as well", an IDBI official said. 
According to the IDBI official, this very stand adopted by Indian lenders has 
upset the DPC management and Enron top bosses in Houston as well. 
In the meeting, Cline had informed that DPC's foreign lenders had put up a 
condition before the company, that they would cough up the required USD 250 
million, "only if Indian FIs fulfill their debt component", the official 
added. 
Other than the issuance of termination notice to MSEB, another issue that 
rocked the heated meeting was Godbole review committee's strong stand on 
separating the USD 800 million Liquified Natural Gas terminal from Dabhol 
project. 
"On what basis has Godbole committee asked for renegotiation of the LNG 
facility? ...do they have any international expertise in purchase of this 
particular fuel?", Cline had questioned the MSEB representatives in London. 
He asked whether the high-powered panel had "ever consulted any expert before 
commenting on "take or pay" clause of the LNG contract which is mandatory 
feature worldwide". 
In its recommendations made public two weeks ago, the Godbole panel had 
recommended renegotiation of the five million tonnes LNG terminal facility 
and DPC's shipping agreements with Oman LNG and ADGAS. 
"The ministry for Petroleum and Natural Gas should examine the feasibility of 
integrating Dabhol facility within the broad plans of LNG imports into India 
and also necessary pipeline investments in this regard", the panel 
recommended. 
While the 740 MW Phase-I is already operational, the 1,444 MW Phase-II is 
scheduled for commissioning in January 2002. 
(THROUGH ASIA PULSE) 29-04 2001


 A
African-American museum gathers support, money, ideas
SALATHEIA BRYANT
Staff

04/29/2001
Houston Chronicle 
4 STAR
44
(Copyright 2001) 

It's an idea that organizers say goes back more than 10 years. But after a 
few false starts, plans for a state-of-the-art African- American museum in 
Houston appear closer to becoming a reality. 

Since kicking off its planning efforts last year, the museum's board has 
raised about $400,000 from such corporate sponsors as Enron, Compaq Computer 
Corp. and Chase Bank. Organizers are now looking for land in the Museum 
District, meeting with community advisers and turning to local schoolchildren 
for name suggestions.

Planners expect to break ground on the museum within 12 to 18 months. 

"So far the people are very enthusiastic," said board chairman Gerald Smith. 
"This is one of the few larger cities that does not have this type of 
representation. What we want to do in Houston is different than what has been 
done in other cities." 

Smith said the idea for an African-American museum goes back about 15 years, 
but died for a lack of broad support. It was later revived under the 
administration of Mayor Lee Brown. Fund-raising for the museum is expected to 
start in earnest once the land is bought. Plans call for the museum to 
highlight 400 years of African-American contributions in history, art, 
literature, science and other areas. Organizers say the museum will feature 
technology, exhibits and educational programming. 

"We're talking the whole concept of African-American experience," Smith said. 
"It's a blending of all those things." 

Irene Johnson, the project's planning director, said organizers want to 
encourage community involvement.  One way to accomplish that, she said, is by 
sponsoring the naming contest.  Interested students can submit proposed names 
for a chance at winning several prizes. The winning entry will win a Compaq 
laptop computer, a printer and other prizes. A winner will be chosen by the 
end of May. 

"We want the contest to inspire and garner support for the project. The 
school children will be our future museum goers, so it's important to capture 
their ideas," Johnson said. Marti Mayo, the director of the Contemporary Arts 
Museum and president of the Houston Museum District Association, said there 
is widespread support and interest in adding the new museum to the 11 
institutions already in the district. 

"(African-American museums) exist in Los Angeles, New York and Chicago," Mayo 
said. "It's late in coming, but at the same time we'll take it whenever it 
comes.  "All of us are excited and pleased to potentially welcome this 
institution to the district. We all feel there is a great need for this 
institution," he said. "None of us feel like we've been able to focus enough 
on African-American arts. Everybody would welcome another player."

 

After several tries, black museum approaches reality in Houston

04/29/2001
Associated Press Newswires 
Copyright 2001. The Associated Press. All Rights Reserved. 
HOUSTON (AP) - Proponents of a museum spotlighting black culture and history 
say they expect to break ground within 12 to 18 months on a state-of-the-art 
facility in Houston. 
Organizers are now looking for land in the Museum District just southwest of 
downtown, meeting with community advisers and turning to local schoolchildren 
for name suggestions.
It's an idea that organizers say goes back more than 10 years. 
Since kicking off its planning efforts last year, the museum's board has 
raised about $400,000 from such sponsors as Enron Corp., Compaq Computer 
Corp. and Chase Bank. 
"So far the people are very enthusiastic," board chairman Gerald Smith said. 
"This is one of the few larger cities that does not have this type of 
representation. What we want to do in Houston is different than what has been 
done in other cities." 
The idea for an African-American museum goes back about 15 years, but died 
for a lack of broad support, Smith said. It was later revived under the 
administration of Mayor Lee Brown. 
Fund-raising for the museum is expected to start in earnest once the land is 
bought. Plans call for the museum to highlight 400 years of black 
contributions in history, art, literature, science and other areas. 
Organizers say the museum will feature technology, exhibits and educational 
programming.  "We're talking the whole concept of African-American 
experience," Smith said. "It's a blending of all those things." 
To encourage community involvement, organizers want to let students propose a 
name for the museum. The winning entry will win a Compaq laptop computer, a 
printer and other prizes. A winner will be chosen by the end of May. 
"We want the contest to inspire and garner support for the project. The 
schoolchildren will be our future museum goers, so it's important to capture 
their ideas," project planning director Irene Johnson said. 
Marti Mayo, the director of the Contemporary Arts Museum and president of the 
Houston Museum District Association, said there is widespread support and 
interest in adding the new museum to the 11 institutions already in the 
district. 
"All of us are excited and pleased to potentially welcome this institution to 
the district. We all feel there is a great need for this institution," Mayo 
said. "None of us feel like we've been able to focus enough on 
African-American arts. Everybody would welcome another player."



LOCAL STORIES
COMMUNITY HELPERS SOUTH SCHOOL GIVES $2,500
Gregg R.S. Blesch - The Oregonian

04/29/2001
Portland Oregonian 
SUNRISE
C05
(Copyright (c) The Oregonian 2001) 
The South Salem High School Shine program, with the help of PGE- Enron's 
Community 101 program, gave a $2,500 grant to the Easter Seals Children's 
Guild, a therapy center in Salem for children with disabilities. 

The students who participated in Shine (Saxons Helping Inspire Neighborhood 
Excellence) are members of Jon Abel's class in business leadership. They 
received $7,500 from PGE-Enron, then, acting as a foundation to disburse the 
money, screened applications, listened to presentations and visited possible 
recipients.

"Now it's not just someone requesting money," said Abel of the students' 
experiences visiting the organizations. "They suddenly become aware that the 
world doesn't revolve around them." The Easter Seals Children's Guild will 
put the grant toward a new park with a range of surfaces -- such as brick, 
concrete and gravel - - for physical and occupational therapy. 

The Children's Guild also received a $15,000 grant from the Ready to Learn 
fund of the Oregon Community Foundation. The grant will pay for services that 
prepare preschool children with disabilities for classes in public schools. 
Other donations 

* Parrot Creek Child & Family Services will receive $200,000 during the next 
three years from the Meyer Memorial Trust for a new development and marketing 
program. The grant will pay the salary and costs of a development director 
and a half-time support position. It also received $25,000 from the Collins 
Foundation to cover moving and set-up costs of consolidating its Clackamas 
County satellite offices into one building in Oregon City. The organization, 
which has been in Oregon City for 32 years, provides services for at-risk 
youth, including residential treatment, mentoring, parent counseling and 
Healthy Start. 

* The Library Foundation received $5,000 in grants from Tektronix and 
Northwest Natural for its summer Web Camp, which will give more than 100 
middle school students experience designing Web pages and teach them about 
high-tech careers. Three one-week sessions will be offered for free during 
the summer. 

* Southwest Washington Medical Center received $10,000 from Bank of America 
for the Stepping Stones bereavement camp. The three-night summer camp 
provides counselors -- professionals and trained volunteers -- who organize 
activities to help families with grief. The medical center also received 
$1,400 from Columbia Credit Union for the year-round Stepping Stones program, 
which provides support for children who have lost loved ones. 

-- Gregg R.S. Blesch 
If you know of a grant or donation to a nonprofit group or project to 
consider noting in Community Helpers, please e-mail the item to 
helpers@news.oregonian.com or fax it to 503-227-5306, or send it to Community 
Helpers, The Oregonian, 1320 S. W. Broadway, Portland, Ore. 97201.



World Bank to vote on $450 mln India power loan 
Reuters, 04-28-01 04:56:44 PM

By Nick Edwards
WASHINGTON, April 28 (Reuters) - The World Bank said on Saturday its board 
would vote next week on lending India's Power Grid Corp. $450 million as part 
of a $1.3 billion package to finance reform and development in the country's 
power sector.

"The total amount of money, with everything included, is about $1.3 billion," 
a bank spokeswoman told Reuters.

The multilateral lender's board meets on Thursday to vote on its contribution 
to the package that has three central elements -- two related to efficiency 
and distribution and a third to Power Grid's diversification into 
telecommunications.

"Part of the World Bank loan, if approved, will go to support the first phase 
of laying fiber-optic cables across the (Power Grid) network," the 
spokeswoman said.

India threw open its long-distance telecommunications sector last August, and 
Power Grid, which has a network of 24,850 miles (40,000 km) of transmission 
lines, plans to provide end-to-end bandwidth services.

The loan package is unusual in that it would be granted directly to the 
state-owned power distribution utility, rather than to the sovereign 
government of India. The government is, however, guarantor to the program.

The bank spokeswoman declined to speculate on whether the board's decision 
would be influenced by the crisis brewing in India's power sector with U.S. 
energy company Enron Corp.
(ENE.N).

"The bank is engaged at the national level and the state level in power 
reforms, broadly," the spokeswoman said, declining to comment specifically on 
Enron and the questions that its potential pullout from India raised about 
reform in the mainly state-run power sector.

Houston-based Enron took a major step on Wednesday toward bailing out of an 
almost complete $2.9 billion power project on the west coast of India in a 
bitter dispute over pricing and unpaid bills.

The dispute threatens to undermine already weak foreign private investor 
confidence in direct investments in India, which totaled just $2.6 billion 
last year -- a fraction of China's $40.8 billion.

The World Bank would make any loan to Power Grid on its usual repayment terms 
of 20 years with five years grace with an interest rate at an unspecified 
margin above the London Interbank Offered Rate (LIBOR).

The spokeswoman said other lenders in the program included Germany's 
Kreditanstalt fuer Wiederaufbau (KfW) with up to $150 million and domestic 
Indian institutions.

If passed by the bank's Washington-based board next week, the World Bank loan 
agreement would then be signed in India by representatives from the bank in 
Delhi, Power Grid and government officials.

The funds would then be available for draw down within 60 days.



UK: Scottish Power mulls Portland bid - paper
04/28/2001
Reuters English News Service 
(C) Reuters Limited 2001. 

LONDON, April 28 (Reuters) - Scottish Power is considering a move to bolster 
its operations on the west coast of the U.S. via a bid for Oregon-based 
Portland General in a deal worth up to $3 billion, according to a report in 
Sunday's Observer newspaper. 

Portland's owner, Enron, last week broke off talks with the U.S. utility 
Sierra Pacific on a $3.1 billion sale, opening the door to Scottish Power, it 
said.

The article said Portland, which sells power to 725,000 customers around the 
state capital of Oregon, would be a perfect fit for the Scottish Power's 
Pacificorp unit in the U.S. northwest, which it bought in 1999. 

The paper said Scottish Power's intentions would come under scrutiny when the 
company reports results next week.  

Scottish Power could not be immediately reached for comment.

 

India: Save Dabhol project
04/28/2001
Business Line (The Hindu) 
Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - 
Asia Intelligence Wire 
THE DECISION OF the Dabhol Power Company board - at its meeting in London on 
Wednesday - "to authorise the Managing Director to issue a notice of 
termination on the contract to sell 740 MW of power in India" is important 
for the message it sends to New Delhi, the Maharashtra Government and the 
Maharashtra State Electricity Board: Closing down the project would be a real 
option at the right time. In the normal course - especially in view of all 
that has happened over the past few months (including DPC invoking the 
political force majeure clause in the power purchase agreement) - it would 
have been no surprise had a final decision on termination been taken at the 
board meeting itself. That this has not happened means the project can still 
be salvaged and this should now become the focus of all the parties. 
But this will not be easy not merely because of the defects in the PPA (from 
the Indian standpoint, that is) but also because of the bad blood 
unnecessarily created between the two sides. To take but one example: The 
MSEB went ahead to clear its March bill to DPC 'under protest' despite an 
earlier communication (after the payment of the February bill) from the Enron 
India Managing Director, Mr K. Wade Cline, that the company "would not and 
will not recognise any payments made as being 'under protest'." The MSEB's 
reported response was that it was not taking any notice of this stand because 
Mr Wade Cline's "letter had no legal standing," adding, "we will continue to 
pay our bills 'under protest'. Let them dispute it." This is no way to engage 
in a dispute as it detracts from the main effort to arrive at a mutually 
acceptable solution and instead focusses on ephemeral and secondary issues 
that have little bearing with the core problem.
Now that the focus will once again shift to India from London, hopefully both 
sides will try their best to arrive at a settlement, which actually means 
they will have to climb down from their positions. One, the MSEB cannot be 
expected to continue paying through its nose for power which it does not even 
consume, not merely because this is unfair and unjust but also because the 
Board simply does not have the funds. 
Further, if it does not make any sense for the MSEB to be part of such an 
arrangement (even if it is of its own making), it makes even less sense for 
the Maharashtra Government and the Centre to be penalised for a 
widely-acknowledged infirmity in the PPA. As for DPC, being the hardnosed 
investor it is, it cannot but be aware of the financial untenability of 
certain aspects of the PPA. In such a situation, provided the principal 
promoters like Enron Corporation want to continue operating in India (of 
which one is not very certain), the sensible - perhaps even 'ethical' - 
course would be to agree to an amended PPA which would at least be equitable 
to the two sides. 
The central point in the issue is that the 2,184 MW power project (to be 
completed by the year-end) is an asset to the nation's infrastructure, 
implying at once that letting it go to seed is no option at all. At the same 
time, the DPC promoters must be allowed to make their money - not on the 
scale allowed by the existing, one-sided and patently unfair PPA but at a 
level which will make the PPA seem a fair document in keeping with the norms 
applied to such projects. This means the PPA will have to be renegotiated - a 
path already accepted by the Indian side but on which DPC is yet to make its 
stand clear. Admittedly, top DPC officials have let it be known that they are 
willing to talk (preferably with the Centre). So all may not be lost 
vis-a-vis the Dabhol power plant.

 

India: Systemic changes needed for SEBs, says Prabhu
04/28/2001
Business Line (The Hindu) 
Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - 
Asia Intelligence Wire 
NEW DELHI, April 27, THE Union Power Minister, Mr Suresh Prabhu, has informed 
the Lok Sabha that "systemic changes" need to be introduced and 
institutionalised if the chronically sick State electricity boards (SEBs) 
were to be restructured on an enduring basis. 

Responding to the concern expressed by the senior Congress leader, Mr 
Madhavrao Scindia, during question hour, Mr Prabhu said that the outstanding 
dues of the SEBs were a staggering Rs 30,000 crore.

The Government has constituted an expert group to recommend measures for 
one-time settlement of outstanding dues of the SEBs towards Central public 
sector understandings as also the dues from the Central public sector units 
to State power utilities. 

The expert group headed by the Planning Commission member, Dr Montek Singh 
Ahluwalia, would submit its report before the end of this month. 

It would suggest a strategy for capital restructuring of SEBs including the 
provision of structural adjustment loans so as to enable them to tide over 
the present financial crisis, make them operationally viable and improve 
their credit rating. 

He agreed with Mr Scindia that the one-time solution for outstanding dues 
should be an all-time solution and there should not be any recurrence of this 
problem in future. Tracing the genesis of the problems of the SEBs to the 
difference in the cost of energy generation and the cost of tariff which 
entails a loss of Re 1 per unit, Mr Prabhu said this year the power stations 
would be generating 525 billion units. 

That is why restructuring of the SEBs on a permanent basis was a must. 

The Minister said that the Government was working on a package. 

Accordingly, all the consumers should be metered and all the distribution 
centres would be treated as profit centres and all the SEBs would have to 
give a projection of their performance before the year begins. 

When Mr Scindia drew the Minister's attention to a point on the liabilities 
of the Enron company which he described as damaging the interest of the 
country, the State Government and the power company resulting in "massive 
confusion," Mr Prabhu clarified that the agreement was between the State 
Government of Maharashtra and the Enron company and the Centre's role is 
'limited' in giving counter-guarantee to the guarantee provided by the State 
Government. 

He said a Standing Committee has been constituted under the Ministries of 
Finance, Power and Law and the Petroleum and Natural Gas would also be roped 
in to resolve the tangle. 

Sops for shipping urged: When Mr Rajaiah Malayala, and Mr P.C. Thomas, 
demanded sops for the indigenous shipping industry which has been facing 
rough weather, the Minister of Shipping, Mr Arun Jaitley, said that the 
Finance Minister has responded to the concern of the shipping industry while 
moving the Finance Bill on Wednesday. 

As the domestic shipping industry has to improve its competitiveness 
globally, efforts would continue to be made with the Department of Revenue to 
ensure that the domestic shipping industry does not get bogged down by harsh 
tax regime. He conceded that in most countries the shipping industry was 
operating on a zero-tax regime. 

Fast-track courts: In response to a question by Mr Chandra Bhusan Singh, Mr 
Jaitley, who is also the Minister of Law, Justice and Company Affairs, said 
that to clear the huge pendency of cases in the various courts in the 
country, it is proposed to set up 1,734 courts on a fast-track basis. 
- Our Bureau

 

India: Enron not to affect India ratings: S&P

04/28/2001
Business Line (The Hindu) 
Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - 
Asia Intelligence Wire 

MUMBAI, April 27. INDIA'S sovereign rating would remain unaffected by 
aggravation of the Enron dispute, according to international rating agency 
Standard & Poor's. 

"The ratings are unaffected because the issues with Dabhol Power Company 
(DPC) are not about a default on debt. This is a technical distinction but an 
important one. The Government incurs many types of liabilities, but we do not 
consider all of them to be 'debt' for our purpose," Mr Joydeep Mukherji, Head 
of Sovereign Ratings, S&P told Business Line in a mailed reply.

"A counter-guarantee backing the Maharashtra guarantee on the State 
Electricity Board's obligation to pay Dabhol is not 'debt' as far as our 
ratings go," he said. 

With the Enron-sponsored DPC teetering on the brink, many quarters feared 
that it would "seriously impair foreign investor sentiment" and international 
rating agencies would downgrade the country. 

Mr Mukherji agrees that the issue would hit sentiment. "Our rating is a 
judgement on the ability to pay 'debt' fully and on time. It is not an 
indication of profitability or a view about investment prospects. 

The Enron episode will certainly hurt foreign investor sentiment but that is 
separate from a debt rating," he said. Enron is about the only foreign 
investor left in the country's power sector. Many players such as Cogentrix 
and Powergen have already exited their respective ventures. 

With that backdrop, Mr Mukherji said, "At a broader level, not about the 
rating itself, the episode is very bad for India. 

Regardless of the merits of the Dabhol case, it sends a clear and negative 
signal to potential foreign investors, going beyond the energy sector. India 
has lots of consumers, farmers, and industries willing to pay lots of money 
for reliable, guaranteed power supply. 

"Many Indian and foreign groups are eager to set up plats to provide that 
power and make a profit. It should have been a win-win situation for all 
sides. Instead, the only result after a decade of reform is that 
load-shedding is as bad as ever and most private investors in power have 
packed up and left in bitterness." 

However, a view, that projects such as Dabhol power are not viable in a 
country with low resources and paying capacity, is gaining currency. 

Some analysts ask when utilities in California, where delinquency levels are 
close to zero, could not afford the power sold by independent producers such 
as Enron, what chances of survival does MSEB have. 

- Dinesh Narayanan

 

Maharashtra to appoint Godbole to lead renegotiations with DPC

04/28/2001
Press Trust of India Limited 
(c) 2001 PTI Ltd. 

Mumbai, Apr 28 (PTI) The government of the western Indian state of 
Maharashtra has decided to appoint former bureaucrat Madhav Godbole, who had 
recently reviewed Dabhol Power Company's (DPC) Power Purchase Agreement (PPA) 
with Maharashtra State Electricity Board (MSEB), to lead the expert team for 
renegotiating the PPA following the US energy major's threat to terminate the 
agreement. 

An official order would be issued on Monday and the experts' committee would 
have to consider the recommendations and terms of reference put forth by the 
Godbole Review Committee, state government sources said here Saturday.

Sources said no time-frame had been set, but "it will all depend on the other 
side (DPC) also participating in resolving the imbroglio". 

"Godbole has been chosen to head the renegotiation team as he knows each and 
every minute detail of the 2,184 mw project", they said, adding at least two 
of the five members of the Godbole panel--Deepak Parekh and E A S 
Sharma--would be nominated on the renegotiations committee. Sources said MSEB 
chairman Vinay Bansal and the country's National Thermal Power Corporation's 
representative would also be included in the panel. 

On Friday, state Chief Minister Vilasrao Deshmukh had categorically stated 
that he was hopeful of renegotiating the PPA even though Enron was 
contemplating serving of notice terminating power supply to the state. 

He maintained that termination of PPA between DPC and MSEB would be harmful 
to both and that Enron should not take any "harsh decision" in the matter. 

(THROUGH ASIA PULSE) 28-04 2001

 

The BS Weekend
Power play over Dabhol
Pradeep Raje and S Ravindran

04/28/2001
Business Standard 
3
Copyright (c) Business Standard 
As Vinay Bansal, chairman of the Maharashtra State Electricity Board (MSEB) 
walked into a board meeting of the Enron-promoted Dabhol Power Company (DPC) 
in London on Wednesday, April 25, he had reason to be happy. The other person 
who had reason to smile was the Maharashtra energy secretary V M Lal. Bansal 
and Lal are on the DPC board by virtue of MSEB holding a 15 per cent stake in 
it. 
Why should they be smiling when the chief item on the agenda was to authorise 
Enron managing director Wade Cline to serve a preliminary notice terminating 
the contract for the Dabhol power project a contract signed in 1992 and 
renegotiated in 1995? Well, for the simple reason that, two days earlier, the 
clique of 25 lenders to the project had advised Enron not to terminate the 
contract. Fortified with the knowledge that Enron couldn't possibly go 
against the advice of the lenders, the Bansal-Lal duo assumed the board 
agenda was almost infructuous.
Indeed, the lenders had made a strong case against the termination of the 
contract, noting that since 92 per cent of the construction was already over, 
no purpose would be served by precipitating matters. Even the foreign 
lenders, whose loans are covered by the central government counter-guarantee, 
were persuaded by the Indian lenders Industrial Development Bank of India 
(IDBI), ICICI and the State Bank of India that the bankers' primary business 
was to invest money in a project that would return revenue streams over a 
period of time, and not simply to recover their principal invested. 
Preliminary reports of the lenders' meeting suggest the foreign lenders who 
were initially planning to pack their bags and escape the uncertainties of 
the project, saw merit in the argument that they might lose a significant 
chunk of their India exposure at one go. Fresh investment avenues are not 
coming up, and the foreign lenders didn't want to be left out of the India 
pie. After all, in the business of global banking, it is only association 
with existing projects that begets fresh opportunities. 
But despite the lenders' posturing and well-intentioned advice for the Enron 
representatives on the DPC board, the latter wasn't one to give up so easily, 
especially after venturing this far just to show its displeasure with the way 
matters were progressing. DPC has, all along, argued that it has a watertight 
contract and that MSEB should honour its obligations under the contract. 
It was only after the state government refused to honour its guarantee, and 
even the central government seemed to side with the Maharashtra government 
rather than honour its own counter-guarantee, that DPC decided to pull the 
trumps in its contract. It had to make a point: if MSEB and the local 
governments weren't willing to pay up what was due, they would have to pay up 
all the penalty clauses for termination of the contract. 
So despite the lenders' advice, the board chose to let the sword hang 
tantalisingly closer to MSEB's head. It authorised Enron (India) managing 
director Wade Cline to serve the notice as and when he deemed fit. 
If the Indian side was talking tough all this while to force DPC to accept 
its stand on renegotiating a lower tariff, the latter had dangled the threat 
of phenomenal penalties if the government strayed off the course charted in 
the power purchase agreement. 
As the resolution was carried through, the MSEB chairman and energy secretary 
realised their bluff was called. The smiles vanished. But they still put up a 
brave front. Speaking from London, MSEB officials denied that they had been 
checkmated: "This does not mean that they will issue the notice immediately. 
Cline has only been authorised to do so," they said. 
But they did admit that the situation had not been defused in spite of the 
fact that the government had made some conciliatory moves. Just before the 
DPC board meet, the Union government had announced on April 23 that a 
committee, comprising representatives of the state government, MSEB and 
nominees from the Centre, would be set up to renegotiate the power purchase 
agreement with DPC to get lower tariffs. 
In retrospect, lenders say, Enron seems to have realised that they had no 
option but to sit with the state government and thrash out fresh tariffs. 
After all, it couldn't afford to let payments being held up for months on 
end. Moreover, if MSEB was not drawing enough power from the 740 MW Phase I 
of the project, claiming financial inability to service the purchases, what 
is the guarantee that it would draw power when the larger 1,444 MW Phase II 
comes up? Putting up capacities when the goods don't sell doesn't make sense. 
So to salvage the investment, Enron realised that it had little option but to 
renegotiate with the state government. 
Then it simply became a matter of fortifying positions ahead of the 
negotiations. In short, it is trying to convey that it will negotiate but it 
better be a deal that satisfies the Houston (Texas)-based company. 
The problem as far as the DPC is concerned is the high tariff it charged the 
MSEB. These have been as high as Rs 8 per unit at times. Critics of the 
project, consisting of politicians, bureaucrats and NGOs, have said that this 
is crippling MSEB. The fixed cost alone for the first phase of 740 MW is Rs 
95 crore per month. 
This means that MSEB has to pay DPC Rs 95 crore whether it 
buys power or not. This fixed charge will rise to Rs 500 crore per month when 
the second phase is commissioned by December 2001. For the MSEB, which rakes 
in around Rs 800 crore per month, the prospect of paying out Rs 500 crore to 
one supplier is a nightmare. 
What does the immediate future offer? In the next few weeks expect Enron and 
the negotiating committee to open direct parleys. There will be hard 
bargaining on both sides. By deciding to to send its nominees into the 
renegotiating committee, the Government of India has made it clear that it is 
taking the issue very seriously. 
Earlier, the government was content to treat it as a fight between the state 
government, MSEB and DPC. But the fact that unpaid bills were being claimed 
from its own account, through the counter-guarantee clauses, seems to have 
forced the Centre to be much more careful in what the two sides agree on. 
Indeed, the central government has just realised what a mess it had got 
itself into. It had sided with MSEB when it decided not to honour the counter 
guarantee invoked by DPC for the December, 2000, bill of Rs 102 crore. But 
that got the Centre embroiled in an arbitration proceeding over this amount. 
And, above all, the central government, being the sovereign, cannot be seen 
as being so petty as to wriggle out of its obligations. One false move and 
the entire worth of the Centre's word would be laid to waste. 
Playing on that, Enron is trying to show that any renegotiations on its part 
are in the nature of mercy concessions: since it has a valid signed contract, 
no one messes with it. 
What this means is that there is no way the state government, MSEB and the 
Government of India can shy away from their obligations of paying the DPC 
bills. MSEB owes at least Rs 230 crore to DPC for December 2000 and January 
2001. 
Indeed, DPC made it clear to the Godbole committee that nothing was sacred. 
However, it would negotiate at a common forum which consists of all the three 
other affected parties MSEB, the Maharashtra government and the Union 
government. This concern of DPC has already been met. 
The issue of what is to be renegotiated still remains. The Godbole committee 
itself had laid out the extent of concessions for each of the parties to the 
deal, and had warned that unless the entire package is agreed upon, this 
round of negotiations will end like the previous round held in 1995. The 
committee said: "The renegotiations will be a complete failure and will only 
end up complicating matters further." 
These recommendations are well known and documented now. However, for the 
record, the Godbole panel has recommended splitting the liquefied natural gas 
(LNG) project from the power project. DPC has set up a 5 million tonne LNG 
terminal of which only 2.1 million tonne is for the power plant. However the 
entire cost of the LNG facility has been loaded on to the power project. 
If this recommendation is accepted, it will, first, bring down the cost of 
the power project. Then, it will eliminate the need for MSEB to buy about 1.8 
million tonne of LNG whether it wants it or not. 
This, in turn, will relieve MSEB of an annual burden of $ 403 million. The 
excess LNG could be marketed to other players which are mushrooming. The 
Reliance and Essar groups as well as Petronet LNG are keen to set up LNG 
terminals in western India. It has also said that the equity return for the 
DPC tariff be defined in rupees than in dollar terms. This will insulate the 
tariff from exchange rate fluctuations. 
It further adds that this tariff should be benchmarked to the lowest cost of 
power supply from other gas-based plants in the world. The committee has 
recommended that the sale of power be allowed to others apart from MSEB. This 
is possible only if the tariff is brought down to rates comparable with other 
producers. 
Central utilities like the National Thermal Power Corporation (NTPC) and the 
Power Trading Corporation, besides power companies like BSES and Tata Power, 
have already made it clear that they are not keen on buying DPC power at the 
current rates. BSES and Tata Power charge their customers only between Rs 2 
to Rs 3.50 per unit. The least cost DPC power works out to Rs 4 per unit. 
What happens if the renegotiations fail and Enron decides to pull out of the 
project? Will it mean the end of foreign direct investment in a sector which 
is starved of funds? 
"There has been little investment in the power sector over the last decade 
due to the poor financial health of the state electricity boards. The health 
of these boards has, in fact, deteriorated over the last decade when reforms 
have been launched. Unless this basic problem is addressed, there will be 
little investment coming into this sector," says R V Shahi, CMD of power 
major BSES. 
This is a point of view that is echoed in the Godbole committee report which 
is otherwise quite critical of DPC. The report warns, "The committee would 
like to state strongly that none of the solutions espoused for independent 
power projects in general and DPC in particular is tenable without the reform 
of MSEB, especially its distribution business." The day MSEB reforms and its 
finances are in order, Bansal and Lal will smile more often.

 

India waits for a rediscovery
Paran Balakrishnan

04/28/2001
Business Standard 
13
Copyright (c) Business Standard 

Has India slipped off the world map once again? Or, is it about to be 
re-discovered, now that times are turning tough and inventories are piling up 
in the international marketplace?

Six years ago international bankers and corporations couldn't get enough of 
India. In everyone's mind India was the Promised Land with a gigantic 
population that was hungering for everything, from electricity to televisions 
and Black Label whisky. Foreign investors bought the GDRs of companies like 
Garden Vareli and Arvind Mills that were selling extraordinary growth stories.

The world has altered beyond recognition since then. The foreign investors 
discovered the harsh truth that a gigantic market by itself doesn't always 
add up to huge sales. Many investors burnt their fingers buying GDR issues in 
companies that soon became terminally ill. 

The enthusiasm for India ebbed gradually but it returns from time to time. 
India became the flavour of the season about one year ago when hi-tech fever 
was at its frenzied peak. Suddenly, investors decided that India was logging 
on to the world and would soon be a good bet once again. Businessmen like 
Azim Premji were written about in magazines around the world and it was hard 
not to notice India's hi-tech revolution. 

Plenty has happened since then and it's a safe bet that anyone who invested 
in the Indian stock market one year ago must have lost money if he didn't get 
out in double-quick time. 

What about the giant investments that everyone predicted would flow into 
India? A few years ago, former finance minister P Chidambaram told an 
audience in London that foreign investment in India would easily touch $10 
billion by 2000. It hasn't even touched half that amount in 2001 and there's 
certainly no sign that it is about to pick up sharply. 

The fact is that brokers, analysts and the global corporations are a bit 
tired of India. This country is a rickety and rumbunctious democracy and it 
suffers from a degree of unpredictability that foreigners find baffling. The 
stock market had just begun to pick up when the Tehelka tapes threw it off 
course once again. The body blow came after bull operator Ketan Parekh was 
arrested and accused of manipulating the market. Says one London-based 
broker: "You never know what to expect. It is just one thing after another." 

On another front the signals are getting mixed by the continuing travails of 
Enron and the Maharashtra government. As everyone knows the world's power 
position has changed unimaginably and companies like Enron have discovered 
that there are electricity shortages in places like California. Suddenly 
their enthusiasm for the developing world has waned rapidly. 

Nevertheless, foreign money is still pouring into the stock markets. As the 
Dow Jones Index and the Nasdaq grind to a halt it is clear that there won't 
be super profits in these markets for several years to come. Suddenly, with 
the index at 3,500 Mumbai looks a better bet. The market is almost certainly 
undervalued and there are definitely bargains to be had. 

Back in the mid-'80s growth in the United States had slowed to a halt and the 
giant corporations decided that they had to get to Europe and South East Asia 
where growth was ticking along at a comfortable pace. Come the '90s and the 
action has shifted back to America. It is extremely likely that the wheel is 
about to turn once again and this time countries like China and India could 
be in sharp focus. 

Does it matter what foreign businessmen think about India? The answer is 
definitely yes. Foreign money has changed the balance of power on the Bombay 
Stock Exchange. And the globe has shrunk with e-mail and swifter jet travel. 
And with the WTO policing the world, India must learn to play by the rules of 
the game. It must learn to look like a star of the business world and do 
business like one.


 
 
 
Enron gets set to pull the plug on power project

04/28/2001
South China Morning Post 
4
(c) Copyright 2001 South China Morning Post Publishers. All Rights Reserved. 

A dispute over unpaid debts owed to a United States power conglomerate
is casting a cloud over India's foreign investment hopes 

After a 10-year battle the country's largest direct foreign investor is ready 
to retreat, but the Indians could be the long-term losers. Texas-based Enron 
this week took a big step toward abandoning an almost-complete US$2.9 billion 
project in India. 

The board of Dabhol Power, the Indian subsidiary of Enron, met in London on 
Wednesday and authorised the company's managing director to issue a 
preliminary notice to terminate the project, which has been billed as the 
world's largest natural-gas-fired power plant, The Times of India reported. 

"The board has given powers to the management to issue the pre-termination 
notice. But the meeting unanimously felt the need of the hour was not to 
terminate the project but to initiate a re-negotiation process," Vinay 
Bansal, chairman of the Maharashtra State Electricity Board (MSEB), was 
quoted as saying by the newspaper. 

The notice is the first of three steps that could end in the abandonment of 
the US$3 billion project. A six-month reconciliation period would follow any 
move by Dabhol to issue the termination notice, Mr Bansal said. 

In the past six months, the MSEB has defaulted on bills for electricity 
supplied by Dabhol, which operates another plant 160 kilometres south of 
Bombay. 

Late on Thursday, the MSEB said it had paid Dabhol Power 1.34 billion rupees 
(about HK$222.5 million) for electricity it bought in March. 

But the payment only partially resolves the total overdue amount of 2.26 
billion rupees, which Enron has been unable to collect even after invoking 
guarantees issued by the government of Maharashtra and the federal 
government. 

The state utility also owes Enron payments for power delivered in December 
and January. 

Neither government is willing to foot the bill for a project which has proved 
expensive and hugely unpopular. Yet failing to meet obligations with Enron 
threatens to reinforce the image of India as a poor investment climate, 
making it harder for the nation to raise the huge sums needed to improve its 
infrastructure. 

Ironically, Enron was once viewed as playing a lead role in sparking 
infrastructure-investment led growth. 

A decade ago, the company offered to build a string of power plants after 
India rolled out the red carpet to multinationals. 

The country needed to add 8,000 megawatts of generating capacity a year to 
meet demand that was growing at 8 per cent to 10 per cent annually. 

However, years of socialism had left the nation with a network of 
money-losing, state-run utilities incapable of paying the estimated 300 
billion rupees per year development cost. The government's reluctance to 
reform the domestic power sector meant few domestic companies were willing to 
build plants. 

Enron, and a swarm of other foreign energy companies, offered to fill the 
void.  Enron quickly struck a deal in the early 1990s to build a plant in 
Maharashtra, a contract renegotiated after a state election brought to power 
a new government which claimed the terms were too generous and the result of 
alleged kickbacks. 

Through the deal, Enron became the largest foreign investor in the country, 
accounting for 10 per cent of total direct foreign investment in India since 
1992. 

The massive project proved hugely unpopular. Its power cost more than that 
from state-owned plants, as a result of the rupee's depreciation against the 
US dollar and partly due to the rise in the cost of naphtha, the original 
fuel source. 

At its peak operating rate, the plant's output cost about 4.75 rupees per 
kilowatt hour. However, because of the payment dispute with the state power 
board, it is running at only 25 per cent of capacity and charges 7.1 rupees 
per kilowatt hour, more than three times the rate of other suppliers. 

Many Indians believe the Enron contract has bankrupted the state power board, 
and threatens to wreck the shaky state budget if the contract is not 
renegotiated. "We don't want Enron. They can go and sell their power 
elsewhere," state finance minister Jayant Patil said last month. 

The 740 MW first phase of the project began operating in May, 1999, and later 
this year the second phase is due to come on line, tripling output to 2,184 
MW. 

That is forcing both sides to toughen their positions, as next year the 
amount owed by the state will more than quadruple to more than US$1 billion a 
year under the 20-year contract. 

The nasty dispute seems certain to cripple efforts to attract other foreign 
investment. India attracted just US$2.6 billion in direct foreign investment 
last year. China, with a roughly comparable population and an economy twice 
the size of India's, attracts 20 times more. 

 

Enron not needed at all, says NGO
Manjiri Damle

04/28/2001
The Times of India 
Copyright (C) 2001 The Times of India; Source: World Reporter (TM) 
PUNE: Prayas, the consumer watchdog body on electricity, has told the energy 
review committee headed by Dr Madhav Godbole that the costly Enron power 
project was not needed to meet the energy requirements of the state and that 
the very legality and clearances given to the project were questionable. 

Prayas was invited by the Godbole committee, which is reviewing the 
controversial project and other private power projects that are coming up in 
the state, to make a submission on the Enron issue.

The non-governmental organisation (NGO) stated that the energy demand of the 
state was 67,500 million units (MU) in fiscal 1998-99 which was expected to 
go up to 86,200 MU in fiscal 2003-04. Possible generation from the existing 
plants would be 87,060 MU and hence there would be no need to add capacity. 
The state may suffer a peak-hour shortfall of 400 to 1,500 MU which could be 
mitigated by exploring other options like purchase of captive energy from 
industrial units, Prayas added. 

The NGO told the committee that the MSEB's own generation could be maximised 
through a series of steps. Quality of coal supplied to the MSEB's thermal 
plants could be improved by blending imported coal, thereby generating an 
additional 670 MW. Utilisation of Uran's idle capacity could yield another 
500 MW. Power could also be procured from Tata, BSES, captive industrial 
plants and co-generation by sugar factories. 

On proposed options regarding Enron, Prayas stated that the sale of Enron 
power outside Maharashtra would not be possible because other states would 
not afford it. Besides, there would be major legal and contractual problems 
as well, the NGO has said. 

About other private power projects like Bhadrawati, Reliance and other liquid 
fuel-based projects coming up in the state, Prayas advised that the 
government and the MSEB should ensure cancellation of all power purchase 
agreements (PPAs).

 

State-wide stir against Enron from March 1
A Staff Reporter

04/28/2001
The Times of India 
Copyright (C) 2001 The Times of India; Source: World Reporter (TM) 

PUNE: Leftist and socialist parties have planned an intense state-wide 
agitation from March 1 to demand the scrapping of the Enron project. 

Addressing a press conference here on Tuesday, general secretary of the 
committee Prof Ajit Abhyankar said over 10,000 demonstrators would group 
under the banner of the anti-globalisation action committee and stage 
demonstrations at the Enron site in Dabhol. "We will be ready to face any 
action from the police," he said, adding that dharnas would also be held in 
front of all tehsil offices around the state to coincide with the 
demonstrations at Dabhol.

In Pune district, demonstrations have been planned at Khed, Junnar, Haveli, 
Purandar, Shirur, Maval, Pimpri-Chinchwad and other tehsil offices, Prof. 
Abhyankar said. Over 3,000 activists are expected to participate in the 
agitation in the district while a team of 200 Pune activists will leave for 
Dabhol on Wednesday. 

Prof. Abhyankar expressed happiness over the fact that not just the leftists 
parties but also the common people were participating in the anti-Enron 
drive. "Although some constituents of the Democratic Front government are 
trying their best to save Enron, a strong section in the government is of the 
opinion that the Enron agreement is an insult to the state and the Union 
government," he said. Without taking names, he hinted that the Nationalist 
Congress Party (NCP) and the Bharatiya Janata Party (BJP) may forge an 
alliance to keep Enron in the state. 

Speaking on the economic aspects, Prof Abhyankar said that once the second 
phase of Enron became operational, the MSEB would have to cough up Rs 7,144 
crore annually for buying electricity that the state did not need or could 
afford.


Enron, India in dispute over future of gas-fired power plant
By RAMOLA TALWAR BADAM
Associated Press Writer

04/28/2001
Associated Press Newswires 
Copyright 2001. The Associated Press. All Rights Reserved. 

DABHOL, India (AP) - Workers in yellow helmets scramble up steel girders to 
fit pipes into place for the world's largest natural gas-fired power plant, 
to be completed off India's western coast this year by American energy giant 
Enron Corp. 

But 200 miles away in Bombay, government officials say they cannot afford the 
electricity that Enron is now providing from a naphtha plant at the site, and 
they expect the electricity generated by liquefied natural gas will cost even 
more.

"Enron is simply unaffordable," said Padamsinh Patil, energy minister for the 
state of Maharashtra, which includes Bombay. "The state cannot afford the 
power, so we take less power, but still have to pay Enron huge amounts." 

India needs power - during the April-to-October 2000 hot season, the nation 
had a daily shortfall of nearly 8,000 megawatts of electricity, according to 
the Center for Monitoring the Indian Economy. 

Enron's naphtha and gas plants at Dabhol will together be able to generate 
about 2,200 megawatts, but politicians have trouble with the price. Aging 
coal- and gas-fired plants that have been depreciated can charge about two 
rupees (4 cents) per kilowatt hour, while Enron's naphtha plant has been 
charging 11 to 15 cents. 

"Everyone wants to use us to blame for the systemic problem that the state 
electricity boards in this country sell power for less than it costs them to 
generate or buy power," said K. Wade Cline, president of Enron India. 

Despite the protests, Cline believes that the $3 billion project - India's 
biggest-ever foreign investment - will go on line at the end of 2001. 

An advantage for Enron - and the major complaint against it - is a unique 
contract that requires the federal government to pay up in case of default by 
Maharashtra. Another grievance is that the Enron deal requires Maharashtra to 
pay for electricity even if it doesn't use it. 

Enron invoked the federal guarantee in February, when the state utility said 
it could not afford to pay Dabhol Power Corp., Houston-based Enron's Indian 
subsidiary. But before the national government stepped in, state officials 
paid $17 million in overdue bills. 

Enron says it is owed $48 million for power delivered in December and 
January. The February power bill has already been paid, and Krishna Rao, 
member of the Maharashtra State Electricity Board, said Wednesday the March 
electricity bill was being paid. 

The state bailout drew attention to the Enron deal, with opponents again 
raising questions about the cost to be borne for foreign investment and 
development. The debate comes as the government in New Delhi tries to reduce 
subsidies and sell off state-owned enterprises. 

Enron says federal payment guarantees were essential because few foreign 
companies were willing to invest when India began opening its economy in the 
early 1990s. 

"Who wanted to come to India at that time? Very few companies did," said 
Cline. "We came along, with some others, and said we're willing to invest 
because we think India has a bright future." 

Preparing for that future, workers at Dabhol clamber around inside an LNG 
tank that could fit three jets stacked one atop another. They weld a 
steel-reinforced dome, while others outside drill concrete blocks for the 
mile-long jetty where the LNG tanker Laxmi - meaning "wealth" in Hindi - is 
scheduled to dock in November. 

Enron says LNG is the cleanest and most economical fuel, but Bombay 
politicians have their doubts. They point at electricity prices that have 
increased fourfold, which Enron attributes to the rise to the jump in oil 
prices and a depreciation of the Indian rupee. 

Opponents of the project say the government should have invested in its own 
power plant instead of tying up with a foreign company. 

"We're not against foreign companies, but the Enron project is a sure pill 
for India's financial collapse," said Pradyumna Kaul, an anti-Enron activist. 
"It will bankrupt the nation. Both sides should agree to a separation and 
abort the contract now." 

Enron believes a crackdown on power theft and reduction of waste in 
transmission and distribution would generate enough money to pay for Dabhol's 
electricity. 

A state government-appointed committee agreed and this month called for 
reform of the state power utility that defaulted on its payments to Enron. 
But the five-member panel also insisted on lower tariffs and urged 
renegotiating the price agreement. 

Enron chief executive Jeffrey Skilling likened the India situation to the 
power woes being felt in California. 

"The utility offers a fixed rate to their customers and the wholesale costs 
of electricity have gone up like they have in the U.S.," he said from Enron 
headquarters in Houston. "The distribution company is having a liquidity 
squeeze identical to what you have with (Pacific Gas & Electric)." Meanwhile 
at Dabhol, managers are moving to the next phase, training workers to man tug 
boats to guide that first LNG tanker into port. 

"When you first go into these villages with helicopters, bulldozers, they're 
nervous, as any of us would be," said Cline. "But we're in a 20-year 
partnership here. Dabhol is going to be producing power for Maharashtra for a 
long, long time." 

End advance for release weekend editions, April 28-29
 
 


Report on Business: Net Worth
STARS & DOGS A selection of this week's winners and losers compiled by Andrew 
Bell

04/28/2001
The Globe and Mail
Metro
B10
All material copyright Thomson Canada Limited or its licensors. All rights 
reserved.

*** *** Blockbuster BBI in Nyse $17.90 U.S., up $1.65 (BBI-NYSE) Top 
management in huge pointy hats, doublets and hose aren't scared of 
video-on-demand over the Internet. Profits are up and, anyway, movies on the 
Web are still a blurry bore. And investors seem pleased to hear a 
transmission joint venture with stumbling pipeline thing Enron has been 
allowed to suffocate quietly. After all, who wants toxic volatile gas 
shooting out of the TV? . *** *** Fidelity Canadian Asset Allocation

Business
Talk & Speculation

04/28/2001
San Antonio Express-News 
Metro
02C
(c) Copyright 2001 San Antonio Express-News. All Rights Reserved. 

Alamo City execs don't make the list 

For the second time in as many weeks, San Antonio has been dissed by a 
national ranking. 
First it was a Progressive Policy Institute that ranked San Antonio 49th in 
technology out of the top 50 metro areas. If that weren't bad enough, a Worth 
magazine ranking of the country's 50 best CEOs ignores San Antonio 
executives. 

Sure, there's Jeffrey Skilling of Enron in second place. Michael Dell of Dell 
Computer made the list at No. 21. James Truchard of Austin's National 
Instruments was 28th, while Gordon Bethune of Continental Airlines and 
William Wise of El Paso Energy scored 33rd and 36th, respectively. 
Houston-based Spinnaker Exploration's CEO, Roger Jarvis, was ranked 43rd. 
Douglas Rock of Houston's Smith International rounds out the Texas contingent 
at No. 46. 

No San Antonio representation whatsoever, even though the list was compiled 
based on the executives' "foresight, judgment and competitive juice to make 
their investors happy," as the magazine said. Don't San Antonio's oil 
companies, with their record-breaking earnings, meet that description?


Enron's stock price gets whipped after broadband unit falls short
By BRAD FOSS
AP Business Writer

04/28/2001
Associated Press Newswires 
Copyright 2001. The Associated Press. All Rights Reserved. 

With natural gas and power prices pumped up, investors have electrified the 
stocks of the major energy-trading companies over the past year. For Enron 
Corp., however, the surge was short-circuited. 

Enron, the nation's top natural gas trader and the leading wholesale 
electricity marketer, has been punished on Wall Street for the past seven 
months.

Its stock price has fallen more than 30 percent since August 23, in large 
part because of investor pessimism toward the company's nascent high-speed 
Internet unit. 

Just as Enron shares were inflated by speculative enthusiasm for Enron 
Broadband Services Inc., they lost considerable gas when investors realized 
the unit would not be profitable for a couple of years, said Jeff Skilling, 
Enron's president and chief executive. 

Meanwhile, the stock prices of Enron competitors Duke Energy Corp., Dynegy 
Inc., Reliant Energy Inc. and El Paso Corp., seen double-digit percentage 
growth for the year thanks to volatile natural gas and electricity prices, an 
essential ingredient for profits in the energy-trading business. 

Enron's success as a buyer and seller of power contracts helped shield its 
own stock for a while, Skilling said, but the weak Internet unit left them 
feeling "a little bit like a duck in a pond. And there are still a lot of 
hunters around that pond with a lot of ammo left." 

The only way to resuscitate Enron's stock price now, Skilling said, is to 
improve earnings. 
The Houston-based company has done just that. Its wholesale electricity 
trading operations fueled a 25 percent growth in net profit during the three 
months ended March 31. 

But a recent spate of negative news about the company has kept investors 
jittery. 

In March, Enron's attempt to sell its Portland General Electric Co. unit to 
Reno, Nevada-based Sierra Pacific Resources fell apart and its exclusive 
20-year video-on-demand partnership with Blockbuster Inc. was called off. 

Enron also has been dogged lately by difficulties collecting money from 
customers in India, where a utility has defaulted on nearly $50 million in 
payments, and in California, where the company's exposure to the bankrupt 
Pacific Gas and Electric Co. is about $580 million.  The deflated valuation 
of Enron's stock, however, is most directly linked to its money-losing 
broadband unit. 

"People ascribed a lot of value to (the unit's) business plan," said Dennis 
Higgins, an energy analyst at Morgan Stanley Dean Witter. 

Enron Broadband Services delivers speedy Web services over its nationwide 
fiber-optic network and sells bandwidth as a commodity to telecommunications 
firms such as BellSouth Corp. and Qwest Communications International Inc. 

It lost $35 million in the first quarter, but Skilling said the wholly-owned 
subsidiary is "gaining traction," though it would not be profitable for 
another two or three years. 

Financial analysts now either ignore the Internet services division when 
discussing Enron's outlook for 2001 and early 2002, or they go out of their 
way in research reports to highlight reduced expectations for Enron 
Broadband. 

Ronald Barone, an energy analyst at UBS Warburg, put a positive spin on the 
"collapse in broadband valuation," in a recent research note. 

"The downward revision of some highly aggressive price targets well above 
$100 were healthy steps in getting this once top performer back on track to 
delivering solid shareholder returns," he said. Barone still says Enron's 
stock will reach this level, only it will take 18 months instead of 12 
months. 

The company's first-quarter profit was $425 million as it swapped electricity 
and natural gas contracts at a time when low supplies and high demand drove 
up energy prices nationwide.  The stocks of Enron's competitors have chugged 
along since April 2000, but Enron shares have fallen about 14 percent. The 
Williams Companies Inc., which also invested heavily in telecommunications, 
has also been a weak performer on Wall Street compared to its rivals, 
remaining basically unchanged since a year ago. 

Donato Eassey, an energy analyst at Merrill Lynch, said Enron's shares are 
due for a turnaround, predicting that "the floodgates are going to open." 

At a time when the United States is short on supplies of natural gas and 
electricity and demand is on the rise, "few companies are better-suited than 
Enron to help folks deal with those high prices," Eassey said. 

As for the once-ballyhooed broadband unit, he said, "It'll be icing on the 
cake if it comes back." 
--- 
On the Net: 
http://www.enron.com 
End advance for release weekend editions, April 28-29