Govt keen to solve Enron crisis
The Statesman, 09/27/01
HIGH-LEVEL INDIAN COMMITTEE TO MONITOR ENRON IMBROGLIO
Asia Pulse, 09/27/01
Panel suggests ways for tariff rationalisation
Business Standard, 09/27/01
Govt may consider sops for Dabhol
Business Standard, 09/27/01
USA: Enron sees new legal lever in Dabhol dispute.
Reuters English News Service, 09/26/01
FERC Proposes New Rules On Energy Co Affiliate Dealings
Dow Jones Energy Service, 09/26/01
India Hopes For Early Solution To Enron's Payment Dispute
Dow Jones International News, 09/26/01
Cantabrico Deal Won't Spark Elec Competition In Spain
Dow Jones Energy Service, 09/26/01


Govt keen to solve Enron crisis

09/27/2001
The Statesman
Fin. Times Info Ltd-Asia Africa Intel Wire. The Statesman Copyright (C) 2001 The Statesman Ltd. All Rights Res'd

STATESMAN NEWS SERVICE & AGENCIES NEW DELHI/MUMBAI, Sept. 26. An inter-ministerial committee of Union secretaries is monitoring the Enron crisis regularly, to facilitate some kind of early solution to the Enron imbroglio involving the Dabhol power project, the power minister, Mr Suresh Prabhu, said here today, while refusing to divulge the options being explored. 
An institutional framework committee, made up of the finance secretary Mr Ajit Kumar, power secretary Mr Ashok K Basu, law secretary Mr R L Meena and the petroleum secretary Mr V N Kaul, has been monitoring the developments on the project front, and regularly interacting with the parties Mr Prabhu said at a briefing.
We want an early solution to the problem, but the Centre has a very restricted role, limited only to facilitate an amicable solution, he said. 
Mr Prabhu refused comment on Enron chairman, Mr Kenneth Lays reported letter to the Prime Minister, Mr Atal Behari Vajpayee, seeking $5 billion in damages for terminating the contract, but said if by writing letters problems can be solved, we can also write letters. He said the government and the Cabinet have been kept informed of the status of the negotiations but it would be premature to speak at this stage on the problem which has its genesis in the contract signed in 1992. 
DPC AGM: Notwithstanding its depleting financial conditions, Dabhol Power Company has recorded a higher net profit of Rs 208 crore for the year ended 2000-01, compared with Rs 198 crore in the previous year. 
Disclosing this at the annual general meeting here today, the Enron India chief, Mr Wade Cline, said that the promoters of DPC would be making efforts to fetch additional finances from the institutions to complete the remaining 10 per cent construction work of the 2,184-MW power project at Guhaghar in Ratnagiri district of Maharashtra. 
Godbole report: The recommendations of the Godbole Committee, that held renegotiations with Enron on the future of DPC, are likely to remain on paper. 
This was clear from the Maharashtra Chief Minister, Mr Vilasrao Deshmukhs post-Cabinet-meeting statement today when he said the government noted certain recommendations of the Godbole panel following several round of talks with officials of Enron-DPC over the past five months. 
Mr Deshmukh said these recommendations would guide the government in future while negotiating fresh projects. 
The fate of DPC will thus remain undecided. In the last Cabinet meeting, the Maharashtra government announced terms of reference for an inquiry commission, which would be set up to probe the entire Enron-MSEB deal ab initio. However, the government is still to name a retired Supreme Court Judge to head the commission. 
Mr Madhav Godbole, a former bureaucrat, had clearly suggested that the panel should call off renegotiations, since Enron had announced its desire to walk out of the DPC. He said other states such as Karnataka, Madhya Pradesh, Delhi and Rajasthan were ready to purchase Enron power, provided the rate per unit ranged between Rs 2.25 and Rs 2.40. This was rejected by Enron. 
Other recommendations noted by the State include: The Union Government which has given counter guarantee of Rs 2,500 crore, should raise bonds of the same amount and give them to Maharashtra as interest-free loan.

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



HIGH-LEVEL INDIAN COMMITTEE TO MONITOR ENRON IMBROGLIO

09/27/2001
Asia Pulse
(c) Copyright 2001 Asia Pulse PTE Ltd.

NEW DELHI, Sept 27 Asia Pulse - A high-level inter-ministerial committee of secretaries is closely reviewing developments on the Enron promoted Dabhol power project front with a view to facilitate an early solution, Indian Power Minister Suresh Prabhusaid. 
"The institutional committee comprising Finance Secretary Ajit Kumar, Power Secretary A K Basu, Law Secretary R L Meenaand Petroleum Secretary V N Kaul would monitor the developments on the project front," Prabhu told reporters here.
"We want an early solution to the problem but Centre has a very restricted role, limited only to facilitate an amicable solution," he said adding there are various options which are being worked out by the committee. 
Refusing to divulge details about the options being explored, Prabhu said the committee was working closely with both parties to the dispute - Maharashtra Govenment and Enronpromoted Dabhol Power Company, to find an early solution. 
Asked about Enron Corp. Chairman Kenneth Lay's letter to Prime Minister Atal Bihari Vajpayee claiming US$5 billion in damages for terminating the contract, Prabhu said, "if by writing letters problems can be solved, we can also write letters." "The need is to sit together and find work out a viable solution," he added. 
(PTI) 27-09 1646

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Panel suggests ways for tariff rationalisation
Our Regional Bureau MUMBAI

09/27/2001
Business Standard
2
Copyright (c) Business Standard

The Madhav Godbole-headed renegotiations committee has suggested ways and means for bringing about a tariff rationalisation of the power available from the Enron-promoted Dabhol Power Company (DPC) that includes asking the Centre to raise Rs 2,500 crore from the market and give it to Maharashtra as a loan without interest in respect of its counter-guarantee for the project and allowing the DPC customs duty and income tax exemptions.


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

Govt may consider sops for Dabhol
Our Economy Bureau NEW DELHI

09/27/2001
Business Standard
2
Copyright (c) Business Standard

The Centre is willing to give concessions to Dabhol Power Company after an agreement on the sale of foreign equity is close to finalisation. Top government officials said DPC had already held the first round of discussions with two private power companies including Tata Power. 
While DPC has been seeking the mega power project status for long, officials are tightlipped about the kind of concessions the Centre will be willing to make. Sources said that the power ministry had rejected the request made by the Maharashtra government and DPC for granting it the mega power project status. Another major sop sought by DPC was to offset the customs duty paid by the company on import of equipment against duty to be paid on import of fuel once the plant re-commences operations.
The finance secretary, who is heading the informal committee of secretaries set up to resolve the vexed issue, held discussions with top Enron executives and other concerned parties this week. He has again called for a meeting of the stakeholders on October 4. 
Various scenarios to resolve the dispute have been worked out. One of the scenarios envisages that the DPC-produced power could be sold at Rs 2.70 per unit. Of 2,184 mw of power to be produced by the project, about 700 mw could be picked up by the Maharashtra State Electricity Board, another 700 mw could be purchased in bulk by the Railways and the remaining power could be allowed to be sold to a private power distributor in Maharashtra or to one of the adjoining states. Officials reiterated that the sale of foreign equity had to be directly negotiated between Enron and the prospective buyer. The financial institutions have been asked to act as the nodal agencies in resolving the spat between Enron and MSEB. While the Centre had asked Enron to take a 20 per cent hit on the foreign equity, the Indian lenders have suggested sale of foreign equity at 50 per cent discount.

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USA: Enron sees new legal lever in Dabhol dispute.
By C. Bryson Hull

09/26/2001
Reuters English News Service
(C) Reuters Limited 2001.

HOUSTON, Sept 26 (Reuters) - A recent decision by an Indian state regulatory commission could give Enron Corp. a new legal lever to keep the panel from interfering in a long-running payment dispute over the $2.9 billion Dabhol power project, the company said Wednesday. 
The Maharashtra Electricity Regulatory Commission (MERC) asserted that it has jurisdiction over the fight between Enron's Dabhol Power Co. and the Maharashtra State Electricity Board (MSEB), the sole customer for the massive, now-idle 740 MW Dabhol power plant.
The Bombay High Court is now considering whether MERC has the jurisdiction to intervene in the payment battle which has led Dabhol, 65-percent owned by Houston-based Enron, to shutter the plant and default on loan payments. 
Enron asserts that MERC has no jurisdiction and that the dispute with MSEB is best handled in international arbitration, as its power-buying contract lays out. The fight started when MSEB withheld $48 million in payments because it said Dabhol charges too high a rate for its electricity. 
Enron points to the MERC's Sept. 14 decision in which it said it does not have jurisdiction over power purchasing agreements (PPAs) executed before the panel's creation in 1999, unless there are changes in rates or any subsequent alterations. The Dabhol-MSEB deal was inked on Dec. 8, 1993 and amended in 1995. 
MERC's entry into the fight is a sign that the board is biased against Dabhol, Enron says. 
"The recent reports that MERC may be taking different positions on questions relating to other independent power producers are troubling and we're hoping for a just and equitable resolution," Enron spokesman John Ambler said. 
Along that same front, the Bombay High Court on Thursday will interview the MERC's three commissioners to determine if they are biased against Enron. Dabhol's lawyers assert that commissioner Jayant Deo has made several earlier statements exhibiting bias, including a 1994 statement in which he dubbed the Dabhol PPA "patently illegal." 
"We're very interested in the court's continuing consideration of questions relating to potential bias by the MERC commissioners," Ambler said. "The current disputes that are before the court are particularly significant because they'll demonstrate our ability to rely on the Indian judicial system for dispute resolution." 
DABHOL PREFERS ARBITRATION 
Enron would prefer to get its case to the International Court of Arbitration in London, which is where the contract says disputes between Dabhol and the MSEB are to be resolved. That option will lead to a faster resolution, Ambler said. 
Enron in May issued a preliminary contract termination notice that put in place a six-month deadline for the two to work out their differences. 
The cooling-off period expires November 19, and Enron would then be free to terminate the deal and trigger financial penalties against MSEB that could total between $4 billion an $6 billion. Then they would head to arbitration. 
The Indian national government and the Maharashtra state government would be on the hook for those penalties, since they backed the Dabhol deal, which is the largest private foreign investment in India. 
Enron wants out of India and has offered to sell the plant, which will eventually have another 1,444 MW of power, to the national government for cost. That would allow Enron, its fellow foreign investors and and foreign lenders to recoup their investment.

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

FERC Proposes New Rules On Energy Co Affiliate Dealings

09/26/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

WASHINGTON -(Dow Jones)- The U.S. Federal Energy Commission proposed Wednesday new restrictions governing natural gas pipeline and electric utility affiliate dealings. 
The commission unanimously agreed to initiate a rulemaking to tighten regulations prohibiting pipelines and utilities from providing market-sensitive information to their marketing affiliates.
FERC rules allow monopoly pipeline and utility companies to sell natural gas and electricity at market rates, providing they adopt codes of conduct that prevent the passage of information giving a competitive advantage to their marketing affiliates. 
The proposed changes reflect the sweeping convergence between the natural gas and power sectors in the years since FERC deregulated the pipeline industry in the 1980s. 
FERC's "code-of-conduct" rules prohibit pipelines from sharing market-sensitive information with their gas-marketing affiliates. But the rules don't address the pipeline's power marketing affiliates. 
The commission's proposed rules would expand the code-of-conduct rules to address all marketing affiliates, including those involved in financial transactions that don't entail the physical delivery of energy. 
The template for the proposed changes can be found in the conditions FERC imposed in a 1999 order authorizing the acquisition of Pittsburgh-based Consolidated Natural Gas by Dominion Resources (D). The commission approved the electricity-natural gas convergence merger, contingent on Dominion agreeing to adopt codes of conduct applying equally to its gas and power marketing affiliates. 
FERC's rule changes would apply to other electric utilities with pipeline investments, such as CMS Energy (CMS), Duke Energy (DUK) and American Electric Power Co. (AEP). 
It wasn't immediately clear how the changes would affect joint operating agreements, such as the one between Entergy Corp. (ETR) and privately held Koch Industries. 
The largest impact will be for large pipeline companies with extensive power marketing operations and investments in power plants. 
For example, El Paso Corp. (EPG), Williams Cos. (WMB) and Enron Corp. (ENE), represent about 70% of the interstate pipeline industry, and are among the nation's top power marketers and merchant power plant developers. 
The changes under consideration stem from the commission's investigation of El Paso Natural Gas Co.'s controversial contract with a marketing affiliate for pipeline capacity into California. 
The affiliate transaction has been blamed for California's dramatic runup in natural gas prices over the past year, which contributed to the state's unprecedented high electricity cost last year. 

The commission vote to approve the new rulemaking came after it adjourned for two hours, in part to work out compromise language to satisfy concerns of Commissioner Linda Key Breathitt. 
The commission majority wanted the proposed rulemaking to encompass new restrictions affecting wholesale power transmission services "bundled" into retail rates regulated by the states. 
Breathitt said she wasn't "comfortable" with proposing that employees involved in bundled retail sales would be excluded from the utility's transmission-grid control room, citing the effect it would have on FERC's relations with state utility regulators. 
State regulators are already upset by FERC's recent mandate for reshaping the U.S. power grid under control of four large regional transmission organizations, or RTOs. The states view the RTO mandate as treading on their traditional regulatory turf. 
Breathitt questioned further encroaching on the states' regulatory arena "at a time we are trying to strengthen relationships" with state utility commissions. 
While she supported the concept, Breathitt suggested delaying action on wholesale transmission bundled into retail rates until "after we do a little bit more bridge-building" with state regulators. 
But FERC staff argued strongly in favor of the proposed change, which they said would help address concerns of power marketers and merchant generators that utilities are reserving more transmission capacity than needed to serve retail customers as a means of thwarting market entry by wholesale power market competitors. 
Cynthia Marlette, FERC's acting general counsel, urged the commission to propose the change to allow the industry to comment on "undue discrimination" by vertically integrated utility companies. FERC will receive many comments on the issue, she predicted. 
Daniel Larcamp, director of FERC's office of markets, tariffs and rates, also strongly supported the proposal. He cited "fairly steady and recurring" complaints about discriminatory uses of the interstate transmission system. 
FERC Chairman Pat Wood III and Commissioner William Massey argued in favor of the staff's recommended approach. 
"I understand the political issue here, but this is an opportunity for discrimination...to be eliminated," Massey said to Breathitt. 
Wood said he was surprised to learn, after joining FERC this summer, that officials involved in bundled retail sales weren't excluded from the control room. He cited the "propensity for a very unequal weighing of the scales." 
Breathitt eventually agreed to support including the provision in the rulemaking proposal after compromise language was worked out specifically seeking comments from state regulators on the issue. 
Wood said the wording of the proposed rule would make clear that, "if we don't hear from people that they really want it, we ain't going to do it." 
Unless comments clearly enumerate benefits from including bundled retail sales in the new affiliate rules, "I would agree to pull it down," Wood said. 
-By Bryan Lee, Dow Jones Newswires; 202-862-6647; Bryan.Lee@dowjones.com

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

India Hopes For Early Solution To Enron's Payment Dispute

09/26/2001
Dow Jones International News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW DELHI (AP)--India's government said Wednesday it was hoped to soon settle a payment dispute between U.S.-based Enron Corp. (ENE) and a state-run power utility. 
"The negotiations are at a very advanced stage...We will facilitate a solution as soon as possible," Power Minister Suresh Prabhu told reporters in New Delhi.
The minister said there had been no deadlock in talks with the Enron officials. 
Enron Corp., with a 65% stake in the Dabhol Power Project, is locked in a dispute with the state-run Maharashtra State Electricity Board over nonpayment of electricity charges. 
Enron suspended work on the second phase of the project in May and plans to pull out from India. 
The latest round of talks earlier this week focused on the sale of Enron's stake in the $2.9 billion project, the Business Standard newspaper reported. Enron's equity stands at $858.6 million in the Dabhol Power Company. 
Prabhu refused to discuss the government proposals. "There are various options under negotiation. I can't comment on them." 
Enron sold electricity produced from naphtha to its sole customer, the Maharashtra State Electricity Board, which found it too expensive. 
The contract included a federal government guarantee to cover nonpayment of dues. Enron says the guarantee has not been met despite notice.

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

Cantabrico Deal Won't Spark Elec Competition In Spain
By Sarah Wachter and Victoria Knight
Of DOW JONES NEWSWIRES

09/26/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

PARIS -(Dow Jones)- The conditions attached to the European Union Competition Authority's approval Wednesday of a takeover bid for Spain's Hidroelectrica del Cantabrico(E.HIC) aren't expected to kickstart competition in that country's electricity market. 
The E.U. started an in-depth probe back in June into the Electricite de France-backed(F.EDF) purchase of joint control of Spain's fourth-largest utility, by engineering group Ferroatlantica SL and Germany's Energie Baden-Wuerttemberg AG (G.ENR). The Commission was concerned over the limited import capacity between France and Spain, and EDF's stranglehold over imports into Spain.
The E.U. said Wednesday a pledge by French grid operator RTE, a wholly-owned EdF unit, to raise electricity capacity with Spain to 4,000 megawatts from 1,100 MW was sufficient to alleviate its concerns the deal would strengthen the dominant positions in the Spanish market of Iberdrola(E.IBR) and Endesa(ELE). 
Without additional electricity capacity at the border, the Iberian peninsula risks being cut off from the single E.U. power market. Current capacity is inadequate to meet the demands brought on when E.U. electricity markets deregulated in Feb. 1999. What's more, the current method grid operator RTE uses to divvy up capacity isn't very transparent, and is currently subject of a separate E.U. investigation. 
But in the short run, RTE's plans to auction existing capacity available to third parties of 550 MW, and to raise capacity another 300 MW next year, won't do much to lift competition in Spain, traders say. 
"This should lead to an increase in competition, but not by a huge amount," said Graham Southall, a power trader for TXU Europe Energy Trading. 
"It's hard to calculate the effect of a few hundred megawatts on the Spanish market, when peak demand is 32,000 MW," he added. 
At the same time, market participants await a detailed, final plan before saying whether the auction is a boon to competition. 
"The devil's in the details," a French trader said. No more than three companies are awarded capacity currently, traders estimate. A Spanish Ministerial Order is expected this month to allow the auction to start. 
"The French and Spanish (energy) regulators should be paying close attention to what is the optimum market-based mechanism," said Peter Styles, E.U. deregulation expert for U.S. energy trader Enron. 
Already, there are worrying signs. One European power trader cites RTE's auction proposal to issue separate, weekly tenders for peak and base load power, in time slots which don't coincide with norms in large liquid trading markets, like Germany. 
"Companies which are less active in trading will find it hard to buy standard products," he said, which means few, smaller power companies will take part in the auction. 
In the long run, RTE's plans to double current electricity capacity by building an estimated EUR1 billion, 1200 MW electricity line, to run alongside a proposed, high-speed rail line from the French city of Perpignan to Barcelona, don't mollify the Commission's competitive concerns, because the line probably won't be operational until 2008, industry experts say. 
RTE said it will launch public consultations in the concerned communities in the Pyrenees this fall. But EdF's previous plans to build an electricity line across the Pyrenees between Cazaril and Aragon were scuppered in 1995 following protests by French environmentalists, analysts caution. 
With a big increase in cross-border capacity some way off, competition in Spain will be capped by a lack of additional power generation for new market participants, analysts say. 
"There's no new fundamental source of power. The Spanish incumbents represent the largest proportion," a trader said. 
Because it's difficult to get access to natural gas supplies, Enron is the only new market entrant scheduled to operate 1,200 MW of almost 6,000 MW of new power generation starting up in the next two years, said Antonio Cruz of Banco Espanol de Credito SA(E.BEC). 
-By Sarah Wachter, Dow Jones Newswires; 331-4017-1740; sarah.wachter@dowjones.com and Victoria Knight in Brussels; 32-2-285-0130, victoria.knight@dowjones.com

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