California and the West THE CALIFORNIA ENERGY CRISIS Davis Approves $850 
Million for Energy Conservation Plan Legislation: Governor says the spending 
package is crucial to ease immediate pressures on the state.
Los Angeles Times, 04/12/01

PG&E Creditors' Committee Is Appointed Bankruptcy: Federal trustee picks 
panel to represent thousands with unsecured claims against the utility.
Los Angeles Times, 04/12/01

Energy & Environment: Britain Follows the Winds of Change --- Offshore 
Wind-Farm Projects Show Shift in Policy to Renewable Energy Sources
The Wall Street Journal Europe, 04/12/01

Developments in California's energy crisis
Associated Press Newswires, 04/12/01

Federal regulators may soon begin monitoring electricity market
Associated Press Newswires, 04/12/01

Cowboys and indians
The Daily Deal, 04/12/01

AES is frontrunner for Brazil telecom
The Daily Deal, 04/12/01

India: Leveraging marketing PR to build business and brands
Business Line (The Hindu), 04/12/01

India: Dabhol impasse
Business Line (The Hindu), 04/12/01

Turning investors away from India
The Hindu, 04/12/01

Hedging Their Bets
The Wall Street Journal, 04/12/01

World Watch
The Wall Street Journal, 04/12/01

Enron bid to quit selling power to California colleges blocked
Houston Chronicle, 04/12/01

Energy status 'critical,' panel says 
Houston Chronicle, 04/12/01

Judge orders Enron to deliver electricity to universities
Sacramento Bee, April 12, 2001


Electricity notebook: U.S. relief plan kept under wraps 
Orange County Register, 04/12/01

Enron deal change riles university officials 
San Diego Union Tribune, 04/12/01

Enron Told It Can't Cut Electricity To Schools
San Francisco Chronicle, 04/12/01

Federal regulators may soon begin monitoring electricity market
Associated Press Newswires, 04/11/01




Metro Desk
California and the West THE CALIFORNIA ENERGY CRISIS Davis Approves $850 
Million for Energy Conservation Plan Legislation: Governor says the spending 
package is crucial to ease immediate pressures on the state.
ROBIN FIELDS; MIGUEL BUSTILLO
TIMES STAFF WRITERS

04/12/2001
Los Angeles Times
Home Edition
A-3
Copyright 2001 / The Times Mirror Company

Gov. Gray Davis approved $850 million for stepped-up energy conservation 
efforts Wednesday after making good on threats to reduce the plan's size, 
vetoing $250 million in items he said would not get results fast enough. 
Calling the spending package "the most aggressive, most expensive 
conservation effort in America," Davis depicted his signing of two 
conservation bills Wednesday as crucial in easing the state's most immediate 
power pressures.
" "These are programs that Californians can use right now," said 
Assemblywoman Christine Kehoe (D-San Diego), whose AB 29 was one of the 
measures. 
The slimmed-down package provides $240 million to weatherize homes of 
low-income residents, plus millions for rebates on energy-efficient 
appliances, incentives for businesses that cut consumption, and public 
information campaigns. 
The governor's cuts included $25.2 million for efficiency programs at 
community colleges, $50 million for California Energy Commission loans and 
grants to small businesses to streamline refrigeration facilities, and $24 
million to the Department of Corrections to retrofit generators. 
Davis also axed a $15-million provision for a California Public Utilities 
Commission study of "real-time" metering, but he left in $35 million for the 
purchase and installation of meters that allow utilities to calculate bills 
based on when power is used. 
Severin Borenstein, director of the UC Energy Institute in Berkeley, 
estimated that the funds would cover enough meters for businesses that 
consume more than 250 kilowatt-hours a day. Such devices, coupled with a rate 
plan, could encourage conservation by commercial customers during peak 
periods when demand--and prices--are highest, he said. 
"It is reasonable to estimate that we could take 2,000 to 3,000 megawatts off 
peak usage this summer, which could save $1 billion," Borenstein said. 
Davis' goal is to shave off at least 2,000 megawatts a day, enough to power 2 
million homes. Experts estimate that the state faces an electricity shortfall 
this summer of 3,000 to 7,000 megawatts daily, depending on summer 
temperatures and hydroelectric supplies. 
Conservation is only one prong of the state's efforts to resolve its power 
crisis. 
Davis and executives at San Diego Gas & Electric confirmed Wednesday that 
negotiations have intensified this week over state purchase of the utility's 
transmission lines. 
Completed deals with Edison and San Diego Gas & Electric could persuade the 
judge in PG&E's Chapter 11 bankruptcy case to order the Northern California 
behemoth to accept similar terms for its system, Davis said. Edison concluded 
a deal with the state Monday. 
The governor performed a delicate balancing act at Wednesday's bill-signing 
in response to a report, disclosed by The Times on Wednesday, that several 
public utilities, including the Los Angeles Department of Water and Power, 
joined private suppliers in helping to drive up wholesale energy prices in 
California last summer. 
He defended the California Independent System Operator, which is using the 
report as evidence in its effort to persuade federal regulators to compel 
suppliers--public and private--to refund $6.3 billion to the state. 
But he also defended the DWP, although it ranked eighth on Cal-ISO's list of 
offenders for the period between May and November last year, reaping $17.8 
million in allegedly excessive profits. 
"The DWP sold us power, which is more than I can say for the [private] 
generators," Davis said. He even thanked DWP General Manager S. David 
Freeman, who has acted as his chief negotiator in crafting long-term power 
purchase agreements with private suppliers. 
"Yes, they took their markup, but they came through," Davis said. 
The chairman of a state Senate committee investigating alleged manipulation 
in the state's power market said his panel will probe the activities of the 
public agencies as well as private marketers. 
Though the initial focus of the investigation has been on five large 
out-of-state sellers, Sen. Joe Dunn (D-Santa Ana) said, "We always intended 
to look at some of the publicly owned [suppliers], such as DWP." Dunn said 
Wednesday's report "just reinforces" the need for the review. 
Hearings will begin next week with an examination of recent studies, 
including the Cal-ISO report, of alleged efforts to inflate prices in the 
electricity market. 
In other developments Wednesday, a U.S. District Court judge ruled that Enron 
Energy Services Inc., a unit of Houston-based energy giant Enron Corp., must 
continue to sell electricity to California universities under the terms of 
its existing contract. 
The UC and Cal State systems signed a four-year contract with Enron in 1998, 
locking in discounted fixed rates. In February, Enron notified its commercial 
and industrial customers in California, including the universities, that 
their power would be supplied by Pacific Gas & Electric and Southern 
California Edison. 
Enron said it will appeal the ruling to the U.S. 9th Circuit Court of Appeals 
in San Francisco. 
Times staff writers Julie Tamaki in Sacramento and Rich Connell in Los 
Angeles contributed to this report.

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



Metro Desk
PG&E Creditors' Committee Is Appointed Bankruptcy: Federal trustee picks 
panel to represent thousands with unsecured claims against the utility.
TIM REITERMAN; VIRGINIA ELLIS
TIMES STAFF WRITERS

04/12/2001
Los Angeles Times
Home Edition
A-18
Copyright 2001 / The Times Mirror Company

SAN FRANCISCO -- A committee of Pacific Gas & Electric Co. creditors--ranging 
from major banks and energy suppliers to the state of Tennessee and a 
tree-trimming company--has been selected to represent thousands of creditors 
in the utility's bankruptcy case. 
Taking a key step in administering the bankruptcy case, U.S. Trustee Linda 
Ekstrom Stanley on Tuesday selected 11 creditors who collectively will serve 
as the eyes, ears and decision makers for those who have unsecured claims 
against the utility.
In choosing companies that would represent various constituencies of 
creditors, Stanley selected four financial concerns and four energy suppliers 
with total claims of almost $5 billion. 
She also named Davey Tree Expert Co., which trims trees for PG&E and has a 
$9.6-million claim; the city of Palo Alto, which claims a $200-million debt; 
and Tennessee, which says PG&E owes $76 million. 
All are among the 100 largest unsecured creditors of PG&E, which filed for 
Chapter 11 protection from creditors on Friday, declaring that the energy 
crisis had thrown the company $9 billion in debt. 
Working over the weekend, the trustee's staff sent faxes to the largest 100 
creditors, asking if they wanted to serve on the creditors committee. 
Seventy-five responded affirmatively. 
Not only was the acceptance rate extremely high, Stanley said, she was 
lobbied before the selection. "Today I am getting responses from the 
disappointed," she said. "Usually people do not want to serve." 
The number of committee members is discretionary, although it has to be an 
odd number so there are no tie votes. Eleven is an unusually large number, 
Stanley said, adding that "there is nothing typical about this case." 
The company's creditors touch many sectors of the nation's economy, from Wall 
Street to vendors providing goods and services to the utility. 
The committee members include companies that provided power but were not paid 
as PG&E's financial condition worsened--Enron Corp. ($580 million), Dynegy 
Power Marketing ($255 million), KES Kingsburg L.P. ($182 million) and GWF 
Power Systems ($62 million). 
Also named to the committee were the Bank of New York ($2.2 billion), a group 
of banks headed by Bank of America ($1.175 billion), U.S. Bank ($310 million) 
and Merrill Lynch ($106 million). 
The only trade creditor represented on the committee is employee-owned Davey 
Tree Expert Co. of Kent, Ohio. Chief Financial Officer David Adante said the 
company has trimmed brush and trees from around PG&E power lines for more 
than 30 years and has 600 employees on the account. 
"PG&E has always been a good client for us, and we believe firmly that at the 
end of the day they are going to survive and continue to be a good client," 
Adante said. 
Tom Milne, who represents the state of Tennessee on the committee, said, 
"This has become a political issue here." 
The Tennessee Consolidated Retirement Fund, Milne said, holds $25 million in 
commercial paper from PG&E. But the more politically volatile holding is the 
state general fund, which PG&E owes $50 million. 
"The taxpayers of the state of Tennessee are asking why we should subsidize 
the ratepayers of California," Milne said. "Our rates have doubled or tripled 
here. Why should California be spared? We are hoping for a 100% return on our 
investment." 
Enron Corp. spokesman Mark Palmer said, "I think in being a part of the 
solution for restructuring we offer a unique perspective, and I think that's 
why we were chosen as one of the members of the committee." 
He declined to discuss the company's claim. "We don't talk about specific 
credit exposures, but we have told our investors, Wall Street analysts and 
journalists that we have established adequate reserves," he said, "and 
regardless of the situation in California, we will meet our earnings per 
share estimates of $1.70 to $1.75 for 2001." 
Stanley said the committee members must put aside their individual interests 
while they act as a fiduciary for unsecured creditors. To represent it in 
court, the panel will hire an attorney, to be paid for by PG&E. 
The committee is expected to be an important player as bankruptcy Judge 
Dennis Montali figures out who should be paid and how much as the utility 
reorganizes its financial affairs. "The judge will pay lots of attention to 
them," Stanley said. "There are many creditors and many large creditors." 
Times staff writer Rone Tempest in Sacramento contributed to this story.

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



Energy & Environment: Britain Follows the Winds of Change --- Offshore 
Wind-Farm Projects Show Shift in Policy to Renewable Energy Sources
By Geoffrey T. Smith
Dow Jones Newswires

04/12/2001
The Wall Street Journal Europe
23
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Ten years ago, Peter Edwards, a dairy farmer in Cornwall, sold his cattle to 
raise money for the U.K.'s first wind farm intended to produce electricity. 
It was uncompetitive and did nothing to lessen the country's dependence on 
fossil fuels -- not the most convincing vision of the future. Today, many 
farmers might willingly change places with him. 
As livestock farming staggers from crisis to crisis, wind farming goes from 
strength to strength. Last week, in a landmark move, the Crown Estates, which 
holds the U.K. seabed in trust for the country, issued seabed leases for 13 
offshore wind-farm projects to companies traditionally associated with 
fossil-fuel energy. The projects, which could attract as much as GBP 1.6 
billion (2.6 billion euros) in investment, according to the British Wind 
Energy Association, will allow for the installation of 1,500 megawatts of 
generation capacity around Britain's coast by 2004. That would meet the 
electricity needs of 1.1 million households, according to BWEA estimates.
The projects -- seven in the Irish Sea and six in the North Sea -- are the 
first concerted effort in the U.K. to raise the contribution of renewable 
energy sources, other than hydropower, to the energy mix. 
For the wind industry, going offshore is a test of technology and viability. 
If the engineering is robust enough, it will revolutionize the economics of 
the industry. Larger numbers of more powerful turbines, driven by higher wind 
speeds, could yield huge economies of scale. Offshore winds are more constant 
than those onshore, which could help offset wind power's major drawback, its 
unpredictability. 
Such projects are no longer the preserve of companies on the fringe of the 
energy sector. Among those awarded leases were units of Innogy PLC, Powergen 
PLC, Scottish Power PLC, Enron Corp. and TXU Europe. 
Under terms of the government's Renewables Obligation, all public electricity 
suppliers must get some of their power from renewable generation by 2003. The 
amount will probably start at 5% or more, rising to 10% by 2010. Via a system 
of tradable "green certificates," companies can trade surplus renewable power 
on the open market with suppliers who can't meet the obligation by 
themselves. 
The emphasis of U.K. policy-makers for the last 10 years has been on bringing 
prices down, rather than encouraging green energy to become competitive. As a 
result, the role of wind in the U.K. has been restricted to blowing the 
emissions of coal and gas-fired plants across the North Sea, forcing Norway 
and Germany to cope with the environmental impact. 
In countries with more government subsidies for the technology, more wind 
farms have flourished. Germany and Denmark had installed capacity bases of 
almost 5,500 megawatts and 2,280 megawatts, respectively, by the end of 2000, 
according to estimates by Dresdner Kleinwort Wasserstein. 
Crown Estates and the BWEA are currently in negotiations over a second round 
of licenses for larger sites; there is no timetable for awarding these leases 
yet. 
Alison Hill, communications manager at the British Wind Energy Association, 
says that the generation costs of existing onshore facilities have fallen to 
between 1.9 pence and 3.5 pence a kilowatt-hour today from around 11 pence a 
kilowatt-hour for first-generation technology. That makes some prices for 
wind-generated electricity competitive in Britain, where the market is 
deregulated. 
A pilot project off Blyth in northeast England is currently generating at 
between 5 pence and 6 pence per kilowatt-hour, she says. If offshore 
technology can improve at the same rate as onshore technology has, subsidies 
may not be needed for long. "If we can get capital grants to offset the 
initial higher costs, they should be enough to bring these projects into a 
competitive position," Ms. Hill says. 
Subsidies for wind power in the U.K. stand at around a total of GBP 49 
million to date. That's not much compared to the GBP 1.6 billion investment 
expected from the first round of offshore farms. 
But even if generating costs fall to a level where wind power can compete 
with fossil fuels, the cost of electricity to consumers could increase. 
Investment in electricity grids would be needed to ensure that they are 
robust enough to deal with large and sudden surges in power supply, and such 
investments are generally financed by fees levied on all grid users.

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




Developments in California's energy crisis
By The Associated Press

04/12/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

Here is a look at developments in California's energy crisis: 
WEDNESDAY:
- Negotiations began in earnest with San Diego Gas & Electric Co.'s parent 
company for a state buyout of its transmission lines. Once that deal is done, 
Gov. Gray Davis said he hopes to persuade the bankruptcy judge in San 
Francisco to force PG&E to accept a similar deal. The state already reached 
an agreement to buy Southern California Edison's transmission lines. 
- Curt Hebert, chairman of Federal Energy Regulatory Commission, told 
congressmen meeting in San Jose that FERC hopes to begin "monitoring and 
mitigating" the energy markets by May 1. This would allow FERC to influence 
prices preemptively. Hebert, a strong free-market advocate, stopped short of 
promising caps on soaring energy prices, stressing the need to build more 
power plants and improve the transmission system to better manage the energy 
flow. 
- The 9th U.S. Circuit Court of Appeals said FERC is not required to order 
immediate refunds to ratepayers as the city of San Diego demands. The city 
asked FERC to order rebates to consumers who suffered "unjust and 
unreasonable" electricity bills last year. "FERC's delay is not so 
unreasonable," said the court, adding that it is confident FERC will review 
the charges. 
- A federal judge ordered Enron Energy Systems Inc. to abide by its agreement 
to sell cheap power to California's public universities. Enron, which said it 
would appeal, has tried to get out of delivering power for the final year of 
the four-year deal. Enron - whose parent company is the nation's largest 
energy trader - says honoring the contract would cost it $12 million a month 
because of skyrocketing wholesale power prices, and that taxpayers should 
pick up the tab. State Attorney General Bill Lockyer says Enron wants to play 
a "marketing game" and sell the universities' promised power on the open 
market for 10 times what it cost Enron. 
-Lockyer says whistle blowers who help prove energy wholesalers illegally 
profited from the state's power problems would be entitled to a percentage of 
the state's recovery. Lockyer estimated could range from $50 million to 
hundreds of millions of dollars. Lockyer's office is investigating whether 
the market was illegally manipulated - a charge wholesalers deny. 
- Bankruptcy experts say Pacific Gas and Electric's creditors will target 
$4.63 billion the utility transferred to its parent company while receiving 
no investments in return. Lawyers will likely exhume e-mail exchanges among 
PG&E management, take depositions from top executives and pore over reams of 
documents in search of evidence, said Bill Zewadski, co-chairman of the 
American Bar Association's bankruptcy litigation subcommittee. 
- Standard & Poor's said there is a "strong likelihood" that SoCal Edison's 
credit rating will be raised if its $27.6 billion transmission lines deal 
receives final approval. But the company's ratings, now at junk bond level, 
won't return to where they stood before soaring wholesale electricity prices 
buried the utility in debt. In any event, no action will be taken until the 
transmission line sale is approved by state and federal regulators, as well 
as the California legislature, S&P said. 
- Davis signed two bills creating more than $500 million in conservation 
initiatives and incentives. The money will reimburse homeowners and business 
owners for money spent on energy-efficient appliances and more efficient 
lighting. Lawmakers at the ceremony in Los Angeles blasted power generators 
for putting profits first. "Generators from out of state have no sense of 
patriotism or compassion for their fellow citizens," said Assemblyman Gil 
Cedillo, D-Los Angeles. 
-California Rep. George Radanovich announces his request for a General 
Accounting Office study of the energy crisis has been granted. He requested 
the investigation in March citing concerns about allegations of price gouging 
and market manipulation in California's wholesale power market. 
- Consumer activists proposed forming an energy buyers cartel among 
California, Oregon and Washington to force suppliers to reduce electricity 
rates. The united front could be the only way to avoid blackouts and steep 
rate increases as demand peaks this summer, according to the Utility 
Consumers' Action Network. 
- No power alerts were called as reserves stayed above 7 percent. 
- Shares of PG&E Corp. dipped 4 cents, or 0.5 percent, to close at $8.46. 
Edison International stock closed at $12.02, up 64 cents, or 5.6 percent. 
WHAT'S NEXT: 
- The House Government Reform Committee plans energy hearings in San Diego on 
Thursday. 
- Edison and PG&E are expected to file their 2000 earnings reports April 17. 
- The state Senate starts hearings April 18 in its inquiry into allegations 
that electricity suppliers illegally withheld power to drive up California's 
wholesale prices. Wholesalers deny such accusations. 
- Also April 18, the Assembly plans to resume hearings in its inquiry into 
California's highest-in-the-nation natural gas prices. 
THE PROBLEM: 
High demand, high wholesale energy costs, transmission glitches and a tight 
supply worsened by scarce hydroelectric power in the Northwest and 
maintenance at aging California power plants are all factors in California's 
electricity crisis. 
Edison and PG&E say they've lost nearly $14 billion since June to high 
wholesale prices that the state's electricity deregulation law bars them from 
passing onto ratepayers. PG&E, saying it hasn't received the help it needs 
from regulators or state lawmakers, filed for federal bankruptcy protection 
April 6. 
Electricity and natural gas suppliers, scared off by the two companies' poor 
credit ratings, are refusing to sell to them, leading the state in January to 
start buying power for the utilities' nearly 9 million residential and 
business customers. The state is also buying power for a third investor-owned 
utility, San Diego Gas & Electric, which is in better financial shape than 
much larger Edison and PG&E but also struggling with high wholesale power 
costs. 
The Public Utilities Commission has raised rates up to 46 percent to help 
finance the state's multibillion-dollar power-buying. 
Even before those increases, California residents paid some of the highest 
prices in the nation for electricity. Federal statistics from October show 
residential customers in California paid an average of 10.7 cents per 
kilowatt hour, or 26 percent more than the nationwide average of 8.5 cents. 
Only customers in New England, New York, Alaska and Hawaii paid more.

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


Federal regulators may soon begin monitoring electricity market
By KAREN GAUDETTE
Associated Press Writer

04/12/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

SAN JOSE, Calif. (AP) - Federal energy regulators would not promise caps on 
soaring energy prices, but said they hope to begin "monitoring and 
mitigating" the wholesale electricity market by May 1. 
The Federal Energy Regulatory Commission will look at future prices to 
determine if they are just and reasonable, commission chairman Curt Hebert 
told members of the House Subcommittee on Energy Policy and Regulatory 
Affairs on Wednesday.
The commission already has sought California power sale refunds of $124 
million, and the new system of tracking market abuses could help keep markets 
fair, Hebert said. 
Hebert left didn't say whether FERC would begin looking at daily trading 
activity in search of unfair pricing. Currently, FERC only reviews quarterly 
reports from energy traders, and periodically does spot audits of the 
markets. 
Meanwhile, on the other end of the power spectrum, a federal trustee selected 
a committee of Pacific Gas and Electric Co. creditors to represent more than 
30,000 creditors in the utility's bankruptcy case, the Los Angeles Times 
reported. 
U.S. Trustee Linda Ekstrom Stanley selected 11 creditors Tuesday who 
represent various groups of creditors and will play an important role as 
federal Bankruptcy Judge Dennis Montali determines who should be paid and how 
much during the company's financial reorganization. 
"The judge will pay lots of attention to them," Stanley said. "There are many 
creditors and many large creditors." 
Stanly selected four financial concerns and four energy suppliers with total 
claims of nearly $5 billion. She also picked a tree-trimming company that has 
a $9.6 million claim; the city of Palo Alto, which claims a $200 million 
debt; and Tennessee, which claims PG&E owes $76 million, the newspaper 
reported. 
The committee members are among PG&E's 100 largest unsecured creditors. The 
utility filed for federal bankruptcy protection Friday, declaring the energy 
crisis had thrown the company $9 billion in debt. 
Cash-starved Southern California Edison Co. agreed Monday to sell its 
transmission lines to the state. Gov. Gray Davis said negotiations to buy the 
lines of San Diego Gas and Electric Co. began in earnest Wednesday, and once 
that deal is done, he'll ask the bankruptcy judge to force PG&E to sell the 
remaining grid to the state. 
But that will not end California's power problems. 
Hebert stressed the need to build more power plants to boost supply, to 
improve transmission infrastructure throughout the West and to create a 
"regional transmission organization" to better manage the flow of power. 
Hebert has been the target of criticism from state officials, the utilities 
and consumer watchdog groups for refusing to cap growing wholesale power 
rates. Members of California's Democratic delegation and PG&E again asked for 
the cap to avoid summer blackouts. 
FERC only has regulatory control over roughly half California's electricity, 
Hebert testified, since the rest is imported from Canada and municipal 
utilities not under federal jurisdiction. 
"How many studies must be done before you spend a dollar and start moving 
power in the other direction?" Hebert said. "The conversation needs to stop. 
Someone needs to start putting shovels in the ground." 
Backed by U.S. Rep. Dan Burton, the Indiana Republican who chairs the 
Government Reform Committee, which houses the energy subcommittee, Hebert 
warned too many changes to the rules may drive away the very generators 
needed to lower prices in the long term by providing more supply and 
competition. 
PUC President Loretta Lynch told the panel Tuesday in Sacramento the agency 
allowed utilities to enter into such contracts last year, but the utilities 
chose not to do so. 
"What was done then was only half the job," said Stephen Pickett, vice 
president and general counsel for SoCal Edison. He said the PUC retained the 
right to review contracts after they were signed, which scared away 
generators unsure if they would see the money. 
Davis signed two bills Wednesday, creating more than $500 million in 
conservation initiatives and incentives. The money will reimburse homeowners 
and business owners for money spent on such items as energy-efficient 
appliances and efficient lighting. 
Also Wednesday, a federal judge intervened in another power price battle, 
ordering Enron Energy Systems Inc. of Houston to abide by its agreement to 
sell cheap power to the California State University and University of 
California systems. Enron said it would appeal. 
U.S. District Judge Phyllis Hamilton issued a temporary injunction against 
Enron, forcing it to continue providing service, and said there is a 
likelihood Enron will lose the suit.

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


Industry Insight
Cowboys and indians
by L.J. Davis

04/12/2001
The Daily Deal
Copyright (c) 2001 The Deal LLC

Enron, Bechtel and General Electric got the deal of the century in a 
long-term contract to provide expensive electricity to India. 
Today we tell a tale of cowboys and Indians.
The Indians are real Indians who live in India, the place Christopher 
Columbus thought he'd gotten to. The cowboys are Enron Corp., the big Texas 
energy firm, and Bechtel Group and the General Electric Co., who need no 
introduction. And who, in the approved Hollywood tradition, are kicking the 
stuffing out of the rightful owners of the land, even as we speak. 
If the Indians don't pay them a king's ransom for a whole bunch of 
electricity they don't want and can't afford, the contract says the cowboys 
could end up owning a big hunk of India. Yep. Says so right there in the 
treaty--er, contract. Sound familiar? 
It all began with a great big gas strike in Qatar. Gas strikes are wonderful 
things, because they give you a lot of gas to sell. The trick is to find a 
client who will pay a bundle for it. 
But by a happy chance, India beckoned. And India, by an even happier chance, 
was about to resemble Wile E. Coyote when he runs off a cliff. India was 
about to turn into a great big sucker. 
I have no idea why K. Wade Kline, Enron's top executive in India, gets so 
bemused in that fetching just-guys way when he ponders the fact that the 
Indians don't want to pay him. Why on earth should K. Wade Kline cry woe? 
Despite bickering and discord--and the temperature is heading higher as Enron 
pushes for arbitration over a $22 million missed payment--Enron and its 
partners have the deal of the century. 
When Enron and compadres showed up with the Qatari gas (which, by the way, it 
turned out they didn't really need) in the early 1990s, India resembled a 
country designed by the London School of Economics in the days of British 
socialist writer Harold Laski. 
Due to profound humanitarian intentions, India was a quasi-socialism that 
didn't work very well and sometimes not at all. And it didn't know squat 
about capitalism. This might seem like a harsh judgment, but let's consider 
what happened. 
In the early 1990s, India was pondering the error of its ways, globalism was 
the coming thing and India decided to try it. In the state of Maharastra, 
this involved inviting in Enron and its pals, letting them build a whacking 
big power plant without competitive bidding and fuelling it with all that 
Qatari gas, which Enron didn't have to get rid of after all. 
At this point things get interesting. 
Nowhere in the contract was it suggested that the state of Maharastra knew 
what Enron was, its size or the state of its balance sheet. 
Maharastra agreed to buy the output of the new plant, much of which it could 
not use, for three times the prevailing price of electrical power already 
available to it. 
Maharastra would, in fact, pay the Enron partnership a minimum of $220 
million a year for 20 years, a sum it could not afford. And if it didn't, the 
Enron partnership could seize state assets until it was happy. If the state 
government decided it didn't like the deal, it could sue the American 
partnership in England under British law. 
I'm not making any of this up. And it gets better. 
When the World Bank pointed out that the Enron contract was a little, well, 
strange, the Indian central government took a hand. New Delhi decided the 
contract was a swell one. In fact, New Delhi liked the contract so much that 
it allowed the Enron partnership to seize assets of the national government 
if things went wrong and it wasn't satisfied with the assets of Maharastra. 
Understandably, there has been much trouble and turmoil over this remarkable 
contract--so much trouble and turmoil, in fact, that Human Rights Watch has 
concluded that Enron took the step of paying the soldiery and police to knock 
the daylights out of some protesters and throw others in the cooler on 
trumped-up charges. 
Meanwhile, the Maharastra government decided to cut itself in by paying $137 
million of the taxpayers' money for 30% of the power plant. For reasons known 
but to God, it decided to cut itself in on a deal whose objective was its own 
fleecing. Somehow, this stake has now been reduced to 16%. 
How could such a state of affairs come to pass? Critics of the project 
suggest that the $20 million Enron paid to somebody in the form of 
"educational gifts" may have something to do with it. 
Now the project is in its second phase, which consists of making the power 
plant much larger. Maharastra keeps getting behind in its payments. And the 
big cry babies in the state capital keep saying they don't need all that 
power and anyway they can't pay for it, which was obvious from the start when 
the national government stepped firmly in and put up the national railroad 
(or whatever) as collateral. 
Is there a lesson here? Yes, and it is not a pretty one. 
When a baby falls to the ground at your feet and positively begs to have its 
candy stolen, exercise good taste. Do not be brazen about it. As Voltaire 
remarked when the British shot one of their own admirals, it only encourages 
the others. 
Funnily enough, though, not one of Enron's competitors has been able to get 
into the market, and not for lack of trying. And liberal, openhanded Enron 
keeps right on sending its bills to the state capital. 
No, I'm really not making any of this up. 
L.J. Davis is a writer in New York. He is the author of "The Billionaire 
Shell Game: How Cable Baron John Malone and Assorted Corporate Titans 
Invented a Future Nobody Wanted" (Doubleday 1998).

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


M and A
AES is frontrunner for Brazil telecom
by Leon Lazaroff

04/12/2001
The Daily Deal
Copyright (c) 2001 The Deal LLC

The U.S. power utility offered Bell Canada $300M for its 24% stake in Vespar. 
U.S. power utility AES Corp. may have the upper hand in negotiations with 
Bell Canada International in its effort to acquire the Canadian company's 
stake in a Brazilian telecom venture called Vesper.
According to Brazilian media reports, AES offered BCI $300 million Wednesday 
for its 34.4% stake in Vesper; BCI rejected the offer. Neither company would 
comment on reports of negotiations. 
Telecom analysts, though, say BCI has little leverage in negotiations with 
AES and may be forced to accept the Arlington, Va. based electric company's 
recent offer. 
"BCI wants out because they're focused on mobile," said Carlos Sequeira, a 
telecom analyst at the Sao Paulo investment bank BBA Icatu. "They want to 
invest in other stuff, so they may not get the price they originally wanted." 
That price was $875 million, a result of the much higher valuations telecom 
assets received last year. In September, BCI signed a definitive agreement 
with VeloCom Inc., a privately held Englewood, Colo. telecom group that holds 
a 49.4% stake in Vesper. The deal, canceled in February, called for VeloCom 
to buy BCI's 34.4% stake for $875 million. 
But VeloCom, which did not return phone calls seeking comment, was unable to 
obtain financing to complete the deal. 
Since last summer, BCI has wanted to get out of its partnership with VeloCom 
because the Colorado company has been expanding its own operations in 
Argentina, where another BCI joint venture, Telecom Americas, also plans to 
do business. 
Last year, BCI joined with SBC Communications, of San Antonio, and the 
Mexican wireless company America Movil, to form Telecom Americas. The group's 
plan is to sell mobile and broadband communications services in Latin 
America's largest markets. 
"We realized we were going to run into conflicts sooner than later," said BCI 
spokesman Peter Burn. "So selling out of Vesper was the best option." 
AES, meanwhile, has stated it would like to acquire Vesper as a vehicle to 
expand a broadband network it has been building in the country for the past 
18 months with Electrobras, Brazil's largest power company. AES joined up 
with Electrobras in August 1999 when it agreed to pay $155 million for a 51% 
stake in Electronet, a broadband communications builder; Electrobras owns the 
remaining 49% stake in Electronet. 
Like U.S. energy companies Enron Corp. and Williams Companies, AES has 
entered the telecom market by laying fiber optic lines alongside its power 
lines. In Brazil, AES owns the electricity distribution company Sul as well 
as power companies in Sao Paulo and the state of Belo Horizonte. 
"We see the possibility of owning Vesper as an outgrowth of our distribution 
business," said AES spokesman Kenneth Woodcock. "If it grows as we like it, 
we'll talk more about telecommunications. Right now, we're not going to do 
what Enron and Williams have done and create a telecom subsidiary." 
On Wednesday, Telecom Americas, which holds a license to offer wireless 
service in the states of Sao Paulo and Belo Horizonte, home to Rio de 
Janeiro, offered BellSouth International a 50% stake in its Sao Paulo state 
operations, known as Tess. BellSouth International, a subsidiary of Atlanta 
based BellSouth Corp., owns a license to offer wireless service in the city 
of Sao Paulo. 
BCI is a subsidiary of BCE Inc. which operates Bell Canada. 
Brazilian telecom stake available AES Corp. has the upper hand in 
negotiations with Bell Canada International in its reported attempt to 
acquire the Canadian company's stake in upstart Brazilian telecom venture 
Vesper. 
Company: VeloCom Inc. The AES Corp. Bell Canada International Inc. 
CEO: David J. Leonard Dennis W. Bakke Louis A. Tanguay 
Headquarters: Englewood, Colo. Arlington, Va. Montreal 
Date Action 
1/05/00 VeloCom 
http://www.TheDeal.com/cgi-bin/gx.cgi/AppLogic%2BFTContentServer?pagename=Futu
 reTense/Apps/Xcelerate/Render&c=TDDArticle&cid=A12818-2000Jan5&preview=true 
for a venture designed to provide wireless communications services in Brazil 
5/12/00 VeloCom Inc. 
http://www.TheDeal.com/cgi-bin/gx.cgi/AppLogic%2BFTContentServer?pagename=Futu
 
reTense/Apps/Xcelerate/Render&c=TDDArticle&cid=A22415-2000May12&preview=true. 
Morgan Stanley Dean Witter & Co., Credit Suisse First Boston and Merrill 
Lynch & Co. are the underwriters. 
9/26/00 Bell Canada International Inc. has $875 million more to invest in a 
new cable and telephone venture in Latin America after 
http://www.TheDeal.com/cgi-bin/gx.cgi/AppLogic%2BFTContentServer?pagename=Futu
 reTense/Apps/Xcelerate/Render&c=TDDArticle&cid=A29235-2000Sep26&preview=true 
to a development-stage company called VeloCom Inc 
1/10/01 VeloCom 
http://www.TheDeal.com/cgi-bin/gx.cgi/AppLogic%2BFTContentServer?pagename=Futu
 reTense/Apps/Xcelerate/Render&c=TDDArticle&cid=TDDRORVITHC&preview=true, 
consisting of both equity and convertible debt from existing investors, led 
by San Diego communications company Qualcomm Inc. 
2/01/01 Bell Canada International terminates agreement with VeloCom to sell 
Brazilian interests in the local exchange carriers, Vesper SA and Vesper Sao 
Paulo SA 
3/13/01 Brasil Telecom Participacoes is interested in acquiring part of its 
rival, Vesper, but has made no offer yet. Bell Canada International and 
VeloCom are the principal share holders of Vesper, which said in February it 
would have to lay off workers and scale down operations 
Source: The Deal

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


India: Leveraging marketing PR to build business and brands

04/12/2001
Business Line (The Hindu)
Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - 
Asia Intelligence Wire

IN 1995 Microsoft launched its Windows 95 software. No paid ads had appeared 
for Windows 95 by August 24, 1995, the official launch day. 
Yet Windows 95 was already well known to consumers. The Wall Street Journal 
estimated that 3,000 headlines, 6,852 stories and over three million words 
were dedicated to Windows 95 from July 1 to Aug 24, 1995. By the end of the 
first week, US sales alone were $108 million, an outstanding achievement for 
a $90 product. In effect, more than one million copies of Windows 95 were 
sold before advertising began.
This landmark marketing PR activity even finds mention in Philip Kotler's 
Marketing Management Millennium edition. 
Starbucks Coffee net revenues grew more than 500 per cent in less than four 
years and the brand became a household word through the use of PR before the 
company ran its first advertising campaign. 
The Sony Walkman is one of the most successful consumer electronics products, 
which initially was supported by a global PR campaign and no consumer 
advertising. 
Such examples underline the importance that brand or marketing PR has assumed 
today. As competition intensifies and marketers innovate to find new ways of 
connecting with their consumers, new communication and consumer contact tools 
are spawned to help build businesses and brands. 
Marketing or brand PR can be defined as "A cost-effective, targeted 
communication process that leverages news media and other communication 
vehicles to enhance reputation and create "compelling interest and purchase 
intent" amongst key stakeholders for a brand. 
Comments Shailesh Jejurikar, Marketing Director, Procter & Gamble: "Marketing 
PR is slowly coming into its own as a valuable marketing tool. It is being 
used to build awareness, increase share of voice with consumers and drive 
credibility of a product message to a focused target audience." 
There are five drivers of marketing PR: 
* Consumer awareness and trial are increasingly linked to marketplace 
excitement about a product. So when the buzz is big about a product, it 
enhances awareness and purchase intent amongst consumers. The Microsoft 
example cited above was a result of attention grabbing publicity efforts by 
Microsoft's PR team. Microsoft hung a 600 foot Windows 95 banner from 
Toronto's CN tower. The Empire State Building in New York was bathed in the 
red, yellow and green colors of Windows 95. Microsoft paid the The Times in 
London to distribute free its entire daily run of 1.5 million copies. The 
lesson to learn: Good advance PR can be much more effective than crores of 
rupees of advertising. 
* Consumers are increasingly looking for credible third party endorsement to 
help them make the right purchase decisions. Influencing the influencers is 
defining business success. 
So when a columnist of a reputed beauty magazine recommends a particular 
beauty care product it makes an impact on consumers. It should come as little 
surprise to you that every title recommended by Oprah Winfrey's Book Club has 
become an instant bestseller, selling more than one million copies. 
* Business is built when an organisation or brand has a loyal consumer base. 
It is far easier and costs far less to keep an old consumer than to get a new 
one. This is essentially the reason why a host of companies embark on several 
'relationship' or loyalty programmes. 
In the US this concept even extends to companies working on campus to develop 
student ambassadors for their brands. 
* Awareness and trial are driven by a higher success rate of contact with the 
target consumer. In this, marketing PR affords some outstanding advantages. 
We can literally choose today an accurate vehicle to reach a particular 
target consumer. So Nike can use PR intelligently to target the sports 
enthusiast or Ariel can go the consumer magazine route to target the 
housewife. Beyond news media a host of other marketing PR tools exist - the 
use of exhibitions, events, seminars, contests and so on. 
* Cost efficiency drives any marketing equation. Marketing PR ensures a lower 
cost per thousand contacts than most other mediums with the added benefit of 
credibility. 
Comments Sunil Gautam, CEO, Hanmer & Partners, a Mumbai-based communications 
consultancy: "Marketing PR is a highly cost-effective tool that can 
facilitate sustained brand contact with target consumers. Body Shop for 
example has been built to a very large extent by Marketing PR, which has 
established it as one of the top five cosmetics names globally. 
In fact, corporates are increasingly turning to us for PR programmes that are 
linked to building awareness and driving trial for their brands. Today close 
to 60 per cent of all our clients' PR spends are in marketing PR." 
Several classical instances abound internationally of marketing PR, but I 
would like to share two examples that stand out in the Indian context. 
One of the ablest executions of marketing PR was perhaps the Coca-Cola 'Giant 
Best-of-Luck-India Cricket Bat' PR campaign. In perhaps the first realisation 
of cricket being the way to a consumers heart in India, Coca-Cola conceived 
an ambitious marketing PR campaign that focused on wishing the Indian cricket 
team the very best for the 1996 World Cup. As the cornerstone, Coca-Cola 
created a 21-foot long cricket bat that toured across key cities in India 
where celebrities and cricketing legends kicked off public signature 
campaigns on the bat to cheer India on to victory. From an inauguration of 
the giant bat by Sunil Gavaskar in Delhi to signatures on the bat in Mumbai 
by none less than the esteemed Eknath Solkar, Polly Umrigar and the 
victorious 1983 Indian cricket team, and M.L Jaisimha and P.R. Mansingh in 
Hyderabad, the bat exploded across the countryside in a Coca-Cola wave as 
thousands of consumers lined the streets to sign on the bat. From chief 
ministers to housewives, aged and handicapped to kids, all wanted to sign on 
the giant bat. 
That was not all. The company also produced a special music cassette with a 
'best of luck India' theme song sung by music legend Asha Bhosle and 
Hariharan. The cassette was distributed free at the venues that the Coke bat 
toured further creating marketplace excitement around the campaign. News 
media, equally passionate about cricket gave the bat and Coke outstanding 
editorial space in their publications. Multiple TV channels did special 
features on Coca-Cola's giant Best-Of-Luck-India bat campaign. At every 
single venue the bat was accompanied by sampling of Coke to thousands of 
thirsty consumers. 
In a massive culmination of consumer goodwill behind the bat, Coca-Cola 
finally presented the giant bat, crammed with seven lakh signatures to the 
captain of the Indian cricket team of 1996 in Calcutta at the Salt Lake 
stadium. 
Comments Jimmy Mogal, currently Regional Vice-President, Corporate 
Communications, Enron India, and then Senior Manager, External Affairs, 
Coca-Cola India: "The Coca-Cola giant Best-of-Luck-India bat campaign was a 
marketing PR innovation that enabled us to connect with our consumers while 
leveraging a groundswell of support for the country. 
It was perhaps the critical first execution of Coke's sports activation 
campaign which laid the foundation for Coca-Cola today becoming almost 
synonymous with cricket." 
Reminisces Hemant Kenkre, currently Director, Corporate Communications, MTV 
India, and head of the consultancy team that managed the campaign in 1996: 
"In India cricket is like religion. Through the Coke Best-of-Luck-India 
cricket bat we struck a chord with consumers across the country. The campaign 
provided the man on the streets a means of getting involved in India's quest 
to win the World Cup and provided Coca-Cola with a great means of connecting 
with thousands of consumers." 
While India failed to keep the Cup home, Coca-Cola surely scored with 
consumers, leveraging a tremendous wave of positive sentiment and consumer 
involvement behind the bat for their brand Coke. That summer saw the 
beginning of Coca-Cola's ongoing relationship with the Indian consumer 
through cricket. 
If the Coke Best-of-luck-India campaign could be recognized as one of the 
earliest and largest marketing PR campaigns, then the Campaign that launched 
P&G's Whisper Ultra sanitary napkin in early 2000 must rate among the most 
focused. In end-1999, the company had decided to launch Whisper Ultra - P&G's 
superior sanitary napkin globally. 
However, at the time, P&G's competition was aggressively pushing low-priced 
sanitary napkins and given the price premium of Whisper Ultra, the PR 
campaign had the difficult task of highlighting the unique benefits of Ultra 
with consumers sufficiently to help build a suction for the product. 
P&G conceptualised an ambitious marketing PR campaign focused around two key 
messages: 
* Ultra is a revolutionary new product, thanks to its breakthrough technology 
* Ultra is five times thinner than ordinary napkins yet affords better 
performance 
P&G knew that Whisper Ultra's core target audience was teen girls across the 
top cities in India. But for a product at this cost, trade and news media 
were equally critical to trial for the brand. News media in particular needed 
to be fully convinced of its superiority, its benefits for them to support 
Ultra's price premium. Armed with this insight P&G kicked off its "smaller 
yet more powerful Ultra revolution" 
campaign with a set of three teaser items being sent out to opinion leaders 
and news media at 3-4 day intervals. The three teasers - a calculator v/s an 
abacus; a CD-ROM compared to three MTNL telephone directories and last of all 
an invitation to witness the revolution of "smaller but more powerful" at a 
premier mass communications institute in Mumbai all aroused tremendous 
curiosity in media. 
In a tactical move to impact the core target audience for Whisper Ultra, P&G 
involved the students of the institute to hold a press conference as a 
learning exercise for them on the college campus. 
This provided not just a valuable learning opportunity for budding 
journalists and PR practitioners but ensured added newsworthiness through the 
first-ever brand launch on campus. This created a tremendous buzz both with 
the young girls and with news media who turned up (despite a transport strike 
in Mumbai) to witness this unique event. 
Says Nandini Sen of the class of 2000 that worked on the Ultra conference and 
currently Account Manager, Abacus Integrated Communications: "The Whisper 
Ultra revolution took over our lives for an entire week as we prepared for 
the launch and ever since, the lady members of our class have never ever used 
anything but Ultra. It gave me a personal insight into a direct to consumer 
marketing PR campaign that really built equity for Whisper Ultra." 
To impact trade and involve employees who needed to champion the benefits of 
Ultra, P&G created the Whisper Ultra Employee Trade Convoy as the next leg of 
the PR campaign. The concept was simple - involve every single employee in 
P&G s Mumbai offices in a massive Ultra vehicle convoy and spread out in 
Mumbai along different routes to cover 6,000 retail outlets and place 50,000 
packs of Whisper Ultra in markets in under 12 hours!!! This had never been 
done before. 
Armed with special product knowledge training and in resplendent blue 'Ultra 
Revolution' T-shirts and Ultra branded cars, enthusiastic employees took 
Ultra into the market. News media rode on the Ultra convoy and captured this 
unique moment of Ultra being rolled out by employees in retail outlets in a 
barrage of media exposure over the next few weeks. 
In the last phase of the campaign, P&G made contact with top women 
celebrities in Mumbai and sampled Whisper Ultra with them. The response was 
fantastic - positive feedback from a number of women celebrities sampled. 
Comments Jejurikar, "The marketing PR campaign provided a kickstart to the 
launch of Whisper Ultra. Trade also supported the programme enthusiastically 
seeing the suction that the product was creating through the barrage of news. 
It proved to us yet again that consumer awareness and trial are increasingly 
being driven by marketplace excitement about a product." 
In a year from launch Whisper Ultra already comprises over 20 per cent of the 
Whisper franchise. Even today the launch of Whisper Ultra continues to be 
referred to by media as one of the most outstanding activities that took 
place in 2000. Concludes Enron's Mogal: "There are some unmistakable benefits 
that marketing PR delivers that are just too difficult to ignore. The 
credibility of media exposure, cost-effectiveness, consumer contact and 
influencing ability all help build a brand. Net, we know now that marketing 
PR impacts business. As long as it continues to do that, this tool can only 
achieve increased importance." Sony, Microsoft, Coke and P&G all seem to be 
proof of that. 
The author is Senior Manager, Public Affairs, Procter & Gamble (India), 
holding additional responsibility for brand PR and media relations, P&G 
ASEAN-Australasia-India MDO. 
- ANTHONY ROSE

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


India: Dabhol impasse

04/12/2001
Business Line (The Hindu)
Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - 
Asia Intelligence Wire

SINCE SECRECY HEAVILY shrouds the recommendations made by the Madhav Godbole 
Committee - set up by the Maharashtra Government in early February to review 
the Dabhol Power Company (DPC) project - the details of the report are not 
yet known. However, the little that has come out strongly confirms the 
assessment made earlier by many independent analysts that the entire project 
has been flawed right from the beginning with the brunt of the resultant 
burden being shouldered by the Maharashtra State Electricity Board (MSEB) 
directly, and the State Government and the Centre indirectly. Among other 
things, reports indicate that the five-member committee has unanimously 
recommended that the power purchase agreement (PPA) be renegotiated 
principally to bring down the tariff charged by DPC. Further, it has been 
stressed that the tariff should not be linked to a fluctuating dollar and 
that ways should be found to lower the cost of loans taken by DPC, which is 
reflected in the high tariff. 
Clearly, the Godbole Committee has said nothing that is not already known 
which, in a sense, reduces the impact it can have on the exercise of finding 
a way out of the impasse. And yet, considering the current state of the 
controversy, the committee's report seems to be the only straw available 
which can be clutched by the parties involved to find a solution, even if of 
the patchwork variety. Admittedly, the dispute has formally reached the stage 
of conciliation which, if attended by failure, will lead to arbitration 
proceedings. But conciliation, by its very nature, involves intense 
negotiations, and it is conceivable that the Godbole Committee report can 
provide useful ideas which can serve as talking points. In fact, DPC should 
not have any problems on this score because, in early March, the company's 
chief executive officer and president, Mr Neil McGregor, made it clear (in an 
interview) that, despite the fact that the Centre did not have a 
"representative"
on the committee, his company would "still support" it and would "help" it to 
"carry out its mandate". 
Of interest is the DPC's stand on a revision of the PPA which, interestingly, 
does not appear to be inflexible. In early February, Enron India's Managing 
Director, Mr Kay Wade Cline, made it clear that DPC was agreeable to amending 
the PPA with the MSEB so that "a change of buyer was possible". (In early 
March, the Godbole Committee was reported to have discussed the feasibility 
of lifting of DPC power by "licensees" such as TEC and BSES. In early 
December, the Maharashtra Government had underscored the idea that DPC power 
could be bought by National Thermal Power Corporation and the Power Trading 
Corporation.) A second point reportedly made was that, as regards the second 
phase of the DPC project, in return for the "change of buyer" concession, the 
company would prefer "a waiver of the penalty clauses in the contract in the 
event of non-functioning of its units for whatever reason". 
The interesting point here is that the Rs 400-crore penalty slapped by the 
MSEB on DPC on February 28 related to "technical problems in the supply of 
power" with regard to the project's first phase. 
Is there a hint here that the DPC's position is somewhat insecure in the 
specific dispute featuring the Centre's refusal to honour its 
counter-guarantee for MSEB payments for December and January on the ground 
that the penalty payment be made first by the DPC? 
Since it is widely recognised that renegotiating the PPA must be the central 
focus of any effort to make the two phases of the DPC project contribute 
effectively to the national power economy (unilateral scrapping of the 
20-year PPA would entail a compensation of "beyond Rs 35,000 crore at the 
present rate"), it stands to reason that, from New Delhi's point of view, it 
is faced with Hobson's choice, namely, making alternative arrangements to 
lift DPC power and sparing an ailing MSEB from repeated defaults in payments. 
On its part, the least that DPC can do is to offer a reduction in tariff 
which, among other things, will reduce the current (justified) opposition 
from entities such as PTC and NTPC to lifting costly power. Everything, 
however, hinges on the seriousness of Enron - the major shareholder in DPC - 
to continue operations in India, which itself is now open to question in view 
of the political force majeure clause invoked by DPC to protect its rights 
and those of its shareholders.

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


Turning investors away from India
Prem Shankar Jha

04/12/2001
The Hindu
Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - 
Asia Intelligence Wire

The news that Enron's Dabhol power company has invoked the force majeure 
(that is, circumstances beyond its control) clause in its contract with the 
Maharashtra State Electricity Board, to justify a possible termination of 
power supply to the MSEB, has provoked a yawn from the intelligentsia of the 
country. The dispute has been going on for months and has therefore lost its 
novelty. 
Despite all threats and counter-threats, Dabhol continues to pump out power. 
In any case, with Maharashtra awash with power because of the five-year 
industrial recession, who cares a damn about the power supplied by Dabhol. 
But has anyone spared a thought about the damage that Dabhol's action will do 
to the Indian economy, and the even greater damage that will ensue if India 
challenges Enron in an international court of arbitration and loses? The 
answer is short but not sweet. It will turn India into a destination to be 
avoided by foreign companies.
Enron is not invoking the force majeure clause because an earthquake has 
damaged its power plant or a war has interrupted the supply of fuel. It is 
doing so because the governments it has to deal with are using their 
sovereign status to change, unilaterally, the terms of their contract with 
the company. In support of its contention it has cited the statements and 
actions of not only the Government of Maharashtra and the MSEB, but also the 
Government of India. 
These, it claims, have left it with no sovereign body within the country to 
whom it can turn for the enforcement of contract. As a result it has been 
left with no option but to invoke the force majeure clause. 
Though it has advised against any attempt to cancel either phase of the DPC 
project, the report of the Godbole committee has strengthened Enron's case, 
because it has recommended yet another renegotiation of the contract between 
MSEB and Dabhol. There are many in India who would regard an attempt to 
defend Enron as an act of disloyalty. But the fact is that Enron's case is 
well-nigh unassailable. 
The MSEB first refused to pay its bill for November 2000 but relented when 
Enron invoked the Central government's counterguarantee. But the MSEB again 
refused to pay the bill for December. When Enron again invoked the 
counterguarantee the MSEB responded by slapping Enron with a demand for Rs. 
401 crores of 'penal rebate' because the Dabhol company was unable to supply 
power for a few hours on January 28. Since then MSEB has refused to pay the 
bill for January. When Enron went to the Central government for payment of 
the December bill, New Delhi told it to settle the dispute over the penal 
rebate first. This was the action that forced Enron to invoke the political 
force majeure clause. 
Were the case to go to court, it is difficult to see how any judge or 
arbitrator would accept Maharashtra's penal rebate claim. By linking the 
disputed issue of rebate with that of non- payment of a regular monthly bill, 
the Centre too has in effect refused to honour its counterguarantee. 
One can examine what lies behind the MSEB's unwillingness to pay. To put it 
simply, the MSEB has been forced into bankruptcy by the populist electricity 
pricing policies of a succession of governments. 
Taking old plants with new, Maharashtra's generation cost is a little over 
Rs. 2 per unit. But it is able to recover only a part of this cost because of 
low tariffs on power sold to the rural sector, and a 33 per cent transmission 
and distribution loss, of which more than two thirds is outright theft, to 
which the State government has turned a blind eye. 
Till 1996-97 Maharashtra raised its average tariffs by a few paise per unit 
every year. But in 1997-98 and 1998-99, that is, in the two years before 
Dabhol came on stream, the government did not do even that. As a result, 
while the addition of a new plant pushed up the average cost of generation 
the average tariff realisation remained static and power theft actually 
increased. To top it off, the Vilasrao Deshmukh government has been condoning 
payment defaults by the score, further reducing the MSEB's income. 
India is not exactly the foreign investors' darling even now. A recent study 
of foreign direct investment plans by the 1000 largest global companies, 
carried out by the international consultants A. T. Kearney, showed that very 
few companies that were not already in India had any intention of coming here 
in the near future. The reason cited by a senior executive of the company was 
the absence of a 'suitable investment environment'. Until this was changed 
for the better, he said, India had little hope of meeting its target for FDI 
inflows. 
The Enron saga highlights what is keeping foreign investors away from India. 
It is not simply that the sovereign state of India (Central government) is 
tacitly abetting a renegotiation under duress of an already signed contract 
for the second time, but that there is, in effect, no sovereign state in 
India. The writ of the Centre does not run in the States; that of the State 
government does not run with its parastatals; and that of none of these 
organisations runs with the bureaucrats. 
The time has come for Indian politicians to learn that nothing comes free. 
For the past ten years each and every State government has looked more and 
more frantically for ways of duping private investors into investing in power 
generation without having the nerve to raise power rates to pay them their 
dues. Instead, as in the Dabhol case, they have blamed predecessor 
governments, corrupt Central politicians and rapacious foreign investors - 
everyone, in short, except themselves.

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


Executive Pay (A Special Report)
Hedging Their Bets
By Joann S. Lublin

04/12/2001
The Wall Street Journal
R1
(Copyright (c) 2001, Dow Jones & Company, Inc.)

[The lush riches of the past few years have faded quickly in the souring 
market. but some CEOs are starting to win pay deals that promise at least 
partial protection against a longer downturn.] 
The runaway executive-pay train has hit a formidable barrier: the 
stock-market downturn.
And the jolt hurts. Take Steve Jobs, co-founder of Apple Computer Inc. In 
July 1997, he returned to run the Cupertino, Calif., personal-computer maker 
-- for $1 a year. In January 2000, grateful board members recognized his role 
in Apple's recovery by awarding him 20 million stock options exercisable at 
$43.59 a share (reflecting a subsequent stock split). Today, with Apple 
shares depressed again, none of his options are worth a dime. 
Mr. Jobs and countless other corporate titans have seen their chances of 
reaching lush paydays shrink considerably. At the same time, the economic 
slowdown is intensifying investors' and workers' clamor for greater pay 
moderation in the corner suite. 
Some big bosses have begun to fight back -- by snaring packages that better 
hedge their bets against a protracted market slump and their increasingly 
insecure posts. Among the risk-reduction approaches: a surge in grants of 
restricted stock; larger signing bonuses; guaranteed future awards; 
subsidiary options; and wider use of internal performance measures and cash 
payouts for long-term plans. A handful of leaders even get to reprice options 
that have lost their value, although doing so causes an earnings charge. 
Wary chiefs clearly want "more of a sure thing," says Patrick McGurn, 
director of corporate programs at Institutional Shareholder Services, a 
proxy-advisory firm in Rockville, Md. 
The bottom line: The heads of the nation's biggest businesses are still 
pocketing larger pay packets, but they're getting richer at a slightly slower 
pace. Chief executive officers with at least two years' tenure reaped a 10% 
median increase in salaries and bonuses last year to $1,844,429, according to 
a survey by New York pay consultants William M. Mercer Inc. Corporate profits 
improved 8.9% in 2000, according to Mercer, which analyzed the latest proxy 
statements of 350 major U.S. companies. Standard & Poor's 500-stock index, 
including reinvested dividends, dropped 9.1% last year. 
Sounds good for CEOs. But compare that with the 11% gain to a median of 
$1,688,088 that Mercer found corporate chiefs garnered in 1999. (The 
year-earlier figure comes from a slightly different sample.) The tempered 
growth rate in executive pay may become more evident this year amid further 
economic weakness and a renewal of shareholder activism. 
The escalation in the No. 1 executives' cash compensation did exceed that of 
white-collar employees. Paychecks of nonunion salaried workers climbed 4.2% 
in 2000, the same proportion as in 1999. But workers generally don't get 
bonuses, and the gap diminishes if bonuses are excluded. Base pay of surveyed 
business commanders went up 5.3% in 2000, following a 5.4% increase during 
the prior year. Overall U.S. wages and benefits advanced an estimated 4.5% 
last year, the highest level in at least five years and above the 3.2% growth 
in 1999. 
Many CEO bonuses are on the wane. Of the leaders studied, 122 collected 
smaller or zero bonuses last year, compared with 113 in 1999. Bonuses fell 
for Kimberly-Clark Corp.'s Wayne R. Sanders, Knight Ridder Inc.'s Tony Ridder 
and Schering-Plough Corp.'s Jay Kogan, among others. At Bank One Corp., which 
had a $511 million loss last year, Chief Executive Jamie Dimon gave up his 
$2.5 million guaranteed bonus. "The company cannot and will not pay the 
senior people more when the company does worse," he wrote employees on Jan. 
30. 
Overall, total direct compensation for surveyed CEOs rose just 8.2% last year 
to a median of $2,902,886, Mercer found. The latest figure compares with a 
10.8% rise to $2,782,482 in 1999. (Total direct compensation covers salaries, 
bonuses, the value of restricted stock at the time of the grant, gains from 
option exercises and other long-term incentive payouts.) 
Heads of companies with the highest shareholder returns were more richly 
rewarded than their counterparts with the lowest returns. CEOs at the 10 
best-performing companies saw a gain of 254.7% in total direct compensation 
to a median of $10,893,557, according to Mercer. By contrast, chiefs of the 
10 with the worst returns suffered a 3.2% slide to a median of $1,061,352 
(though a few still enjoy hefty pay packages). Total shareholder return, 
which equals the sum of stock-price appreciation plus reinvestment of 
dividends, were a median of 5.3% among all 350 surveyed concerns last year. 
The impact of the market downturn shows up most starkly among CEOs who 
exercised options last year. Altogether, 151 cashed in a median of 98,333 
options apiece, compared with the 143 exercising a median of 99,150 options 
each in 1999, according to the Mercer study. The median realized gain was 
$1,892,938, far below the prior year's record of $2,857,676. 
"We could have a number of years of option meltdowns," predicts L. Dennis 
Kozlowski, the longtime leader of Tyco International Ltd. "But I don't spend 
a lot of time worrying about that." 
No wonder. He scored a $99.9 million paper profit from exercising about 3.2 
million options in the company's fiscal year ended Sept. 30. Mr. Kozlowski 
also received $4.15 million in salary and bonus; $21.2 million in restricted 
shares; and 5.1 million options initially valued at $68.6 million. (Tyco says 
4.2 million of those options replaced exercised ones.) 
The 54-year-old chairman and chief executive does worry about making sure the 
acquisitive conglomerate achieves performance targets, however. A portion of 
his latest options grant has exercise prices far above market levels and 
vests early if Tyco's per-share earnings grow substantially. He also could 
lose his restricted shares if the business misses tough earnings goals. 
As the owner of more than 12 million Tyco shares, Mr. Kozlowski says, "my 
whole net worth is tied up here. So I better not make a mistake." 
On the other hand, critics point out that he holds 800,000 options in Tycom 
Ltd., Tyco's fiber-optic unit. The Tycom stake diversifies his holdings and 
lowers his risk. And that diversification requires little work, as Tycom has 
separate full-time management. Mr. Kozlowski, who says he also bought 200,000 
Tycom shares when it went public last August, spends about 10 hours a week as 
the unit's executive chairman. "That's just an extra job where I only get 
something if the stock goes up," he adds. 
With many share prices in the doldrums, most big bosses no longer can 
envision easy fortunes from their sizable stash of options. So, some held off 
exercising options until the market recovers. Their median unrealized gains 
from unexercised options totaled $5.84 million in 2000, up from 1999's $3.87 
million. Overall unrealized gains for polled executives with in-the-money 
options increased to $15.48 billion from $11.5 billion in 1999. The latest 
figure includes $3.4 billion in unrealized option gains for Oracle Corp.'s 
Lawrence J. Ellison. 
Chief executives fearful of their battered wealth prospects are cutting pay 
deals so "they stay whole through this" stock-market slide, says Nell Minow, 
editor of the Corporate Library.com, a corporate watchdog Web site based in 
Washington, D.C., that tracks employment contracts for about 560 
public-company CEOs. "People are going for more restricted stock." 
Restricted-share recipients enjoy plenty of upside and scant downside. The 
shares typically cost the recipient little or nothing, and the restrictions 
on sale of the stock usually lapse within five years. Even if a company's 
stock price slumps, an executive can make plenty selling vested shares. 
Increasingly, companies are handing out so-called megagrants of restricted 
stock -- with a face value of at least two times cash pay. Last year, 17 of 
the polled businesses delivered such mammoth helpings of restricted shares, 
up from 15 in 1999, according to the Mercer study. 
In October, Compaq Computer Corp. bestowed a megagrant of 970,000 restricted 
shares valued at $24.4 million upon Chief Executive Michael D. Capellas when 
the world's largest PC maker elevated him to chairman. Mr. Capellas must 
forfeit 500,000 restricted shares if Compaq fails to reach certain earnings 
and share-price targets. But in a highly unusual move, restrictions on 
170,000 shares lapsed 30 days after he got them. (The new three-year contract 
states he won't sell those shares for a year "except to defray associated 
taxes.") The remainder vests over a longer period. 
The 46-year-old executive's promotion to chairman also won him an $850,000 
one-time bonus, base pay of at least $1.6 million a year and a potential 
annual bonus of twice that amount. Separately, he got 850,000 options last 
year. 
Critics say the loose restrictions on some of Mr. Capellas's shares give him 
less incentive to make good. Mr. Capellas won't "have to work as long or as 
hard" as do most holders of restricted shares, says Judith Fischer, managing 
director of consultants Executive Compensation Advisory Services in 
Alexandria, Va. 
Kenneth Roman, a Compaq outside director, strongly disagrees. "Whatever 
Michael is getting, Michael is worth," Mr. Roman says. "We really needed 
him." 
And restricted stock, which Compaq never offered top executives until it 
elevated Mr. Capellas to president and chief executive in July 1999, makes 
sense, maintains Compaq spokesman Arch Currid. It "provides a greater equity 
interest in the company sooner than do options," he says. Mr. Capellas was 
unavailable to comment. 
Under Mr. Capellas, the Houston company initially experienced an upturn. 
Compaq's operating income last year more than tripled to $1.7 billion, 
including a $1.8 billion charge for writedown of investments. 
But now, Compaq has hit a rough patch again. In mid-March, the company 
slashed its first-quarter profit projection and disclosed a broad 
restructuring plan that will cut 7% of its full-time work force. Compaq's 
share price has fallen below the $24.50 level it was at when Mr. Capellas 
assumed the top job. 
Certain businesses are sheltering their leaders' pay from the stormy market 
by canceling worthless options and substituting retention grants of 
restricted shares. Daniel H. Schulman, Priceline.com Inc.'s president and 
chief executive, received 2.5 million restricted shares after he gave up his 
seven million options last December. At the same time, the Norwalk, Conn., 
name-your-own-price online concern accelerated its planned forgiveness of 
half of his $9 million in loans from the company. 
In a Feb. 15 announcement of the tradeoff by Mr. Schulman and two high-level 
colleagues, Priceline said they gave back their perks "to make options 
available" for a new employee compensation and retention plan. 
But the company's press release failed to mention an important fact: The 
trio's options were deeply underwater, with exercise prices far in excess of 
Priceline's share price. The company's stock had sunk to about $1.13 by late 
last December from an April 1999 high of $162. 
The Feb. 15 press release omitted another crucial detail: Mr. Schulman signed 
a revised employment contract Dec. 20. The accord raised his base salary to 
$400,000 from $300,000. It promised to grant him two million options in late 
June; he can exercise half immediately. And starting May 20, he will be free 
to sell 1.5 million of his recently awarded restricted shares. (Priceline 
disclosed the renewed contract in a March 30 Securities and Exchange 
Commission filing.) 
Priceline directors believe the restricted-stock awards "are appropriate for 
the current business conditions," says company spokesman Brian Ek. He says 
Mr. Schulman declines to comment. 
Institutional investors take a contrary view, arguing that substituting 
restricted-stock awards for worthless options allows executives to largely 
escape the consequences of a falling stock price. "It's `Heads, I win. Tails, 
we'll flip again,'" says Peter Clapman, a senior vice president of New 
York-based TIAA-CREF, a leading pension system for U.S. colleges and 
universities. 
Some CEOs left out of the renewed boom in restricted stock can take comfort 
from their giant new dollops of options. Last year, 68 major companies 
tracked by Mercer gave their leaders such megagrants, up from 50 in 1999. An 
option megagrant has a face value of at least eight times an individual's 
salary and bonus. The face value of these options is computed by multiplying 
the number of options by the market price at the time of the grant. 
Hefty signing bonuses and future guarantees help some newly hired chief 
executives hedge their compensation bets. Look at Gary Wendt's deal. Last 
June, the retired General Electric Co. executive received a $45 million 
upfront bonus, 10 million options and 3.2 million restricted shares worth 
$18.8 million for taking the helm of Conseco Inc., a beleaguered insurance 
and finance company based in Carmel, Ind. He replaced Stephen C. Hilbert, the 
founder and CEO, who was forced out after Conseco's earnings and market value 
declined sharply. 
Mr. Wendt's five-year employment pact provides him with another special cash 
bonus of between $8 million and $50 million based on its average closing 
share price for the 20 trading days preceding June 30, 2002. Conseco also 
guarantees him an annual salary of at least $1 million, an annual bonus of up 
to $2.8 million and 500,000 options a year during the last three years of his 
deal. 
"That was the single worst pay package for a CEO in 2000 -- and possibly 
ever," says the Corporate Library's Ms. Minow. She especially dislikes Mr. 
Wendt's big signing bonus. It "sends a very powerful signal to the market 
that you are bringing on someone who isn't very hungry," she continues. 
Mr. Wendt says he took a huge risk to run Conseco. "What guarantees did I 
have?" the feisty 59-year-old chief asks. "This company was headed for 
liquidation!" 
He says that joining Conseco cost him money, too. Under a noncompete accord 
with GE, Mr. Wendt previously has said he would have reaped more than $65 
million for staying "in a hammock" another 21 months. (Conseco issued a 
warrant for 10.5 million of its common shares to a GE finance unit to release 
Mr. Wendt from his noncompete agreement.) He notes that he also receives no 
salary until mid-2002. 
"I left tens of millions of dollars of money on the table," says Mr. Wendt, 
"to take the risk that these options will be worth something someday and that 
the restricted stock will be worth something someday and that the company 
will be in existence" long enough to earn a salary and the extra bonuses. 
Conseco's share price has about tripled since he arrived. Mr. Wendt declares 
that he soon "will be No. 1 on the sheet [comparing] value to shareholders 
with compensation." 
Highly protective CEO pay packages are provoking more shareholder activism. 
As of late March, investors had submitted executive-pay stockholder 
resolutions at 113 corporations -- up from the 91 proposed in all of 2000, 
according to the Investor Responsibility Research Center in Washington, D.C. 
Proxy Monitor, a New York investor-advisory firm, recently urged 
institutional clients to vote against six companies' executive 
restricted-stock plans submitted for investor approval this year. Restricted 
stock does "little more than guarantee participants' right to make money, 
whether or not long-term sustainable wealth is created for shareholders," 
says Mary-Ellen Robinson, a governance analyst at the firm. 
Some businesses have started to heed such criticism. Baxter International 
Inc. recently decided to stop granting senior management restricted shares 
because they "basically have no risk," says Harry M. Jansen Kraemer Jr., 
chairman and CEO of the medical products and services company in Deerfield, 
Ill. He personally swapped about 37,500 restricted shares for 187,500 options 
in late November. 
HealthSouth Corp., a Birmingham, Ala., operator of rehabilitation hospitals 
and outpatient surgery and diagnostic centers, last month agreed that 25% of 
the options it offers the top brass will contain performance triggers linked 
to market measures. The move persuaded the state of Connecticut employees' 
pension fund, which holds 448,000 HealthSouth shares, to kill a related 
shareholder proposal. 
"Companies do have to attract and retain top management," says Meredith 
Miller, Connecticut's assistant treasurer for policy. But CEOs "should not be 
totally insulated from the market fluctuations." 
--- 
Ms. Lubin, the Careers News Editor in The Wall Street Journal's New York 
bureau, served as contributing editor for this report. 
--- Winners and Losers

The median total shareholder return of 350 major businesses was 5.3%
last year, while their chief executives' total direct compensation
advanced 8.2% to a median of $2,902,886. Leaders of the best
performers once again received more sizable rewards than the heads of
companies with the poorest returns for investors:

BEST RETURNS

Pct. Total Pct. Change
Change Direct In Total
Chief Executive In TSR Compensation Compensation

Lawrence J. Ellison, Oracle
479.4% $75,232,427 N.A

Paul B. Fireman, Reebok International
233.9 3,160,012 216.0%

Brian L. Halla, National Semiconductor
177.4 10,332,312 881.0

Tony L. White, Applera
176.4 16,352,462 254.7

William J. Schoen, Health Management Associates
168.5 11,454,801 64.4

WORST RETURNS

Pct. Total Pct. Change
Change Direct In Total
Chief Executive In TSR Compensation Compensation

Glen H. Hiner, Owens Corning
-95.8% $3,035,600 -51.7%

John Nils Hanson, Harnischfeger Industries
-93.9 1,285,704 N.A.

William H. Bricker, LTV
-91.3 116,667 N.A.

James C. Kempner, Imperial Sugar
-81.6 569,750 - 1.7

Duane R. Dunham, Bethlehem Steel
-79.1 837,000 N.A.

Note: N.A.=Valid comparison not available

Source: Analysis of 350 major corporations' latest proxy statements
by William M. Mercer Inc. To calculate total direct compensation, the
firm counts salary, bonus, the value of restricted stock at the time
of grant, gains from stock-option exercises and other long-term
incentive payouts. Total shareholder return, or TSR, equals the sum of 
stock-price appreciation plus reinvestment of dividends.
---
Who Made The Biggest Bucks

Despite the wobbly stock market, some corporate titans hit the
jackpot when they cashed in stock options last year.
The lucky ones stood out in William M. Mercer Inc.'s annual
compensation survey for The Wall Street Journal. The study covers
chief executives' gains from exercising options and other long-term
incentive payouts as well as their salary, bonus and the value of
restricted-stock grants.
The median value of shares owned by CEOs at the end of their
companies' 2000 fiscal year was $9.7 million, down slightly from
1999's $9.85 million. The median total shareholder return, or TSR,
equaled 5.3%, compared with minus 3.9% in 1999. (The methodology used
to calculate TSR differs from that in The Wall Street Journal
Share-holder Scoreboard of Feb. 26.)
Here's who landed in the winner's circle for last year:

-- Sanford I. Weill, Citigroup Inc., with total direct compensation
of $224.4 million. That includes a $196.2 million gain from exercising 
stock options and a restricted-stock grant initially valued at about
$2.2 million. Mr. Weill appeared on seven earlier scorecards. He owned 
shares valued at $1.19 billion at the end of a year in which TSR was a
respectable 23.5%.

-- John T. Chambers, Cisco Systems Inc., with total direct
compensation of $157.3 million. The figure primarily reflects nearly
$156 million in option gains. He owned shares valued at $169.7 million 
as of July 29, a fiscal year in which investors reaped a return of
102.3%, the best return among the highest-paid CEOs last year.

-- Kenneth L. Lay, Enron Corp., $140.4 million, with about $123.4
million in paper profit from option exercises, a restricted-stock
grant initially valued at $7.5 million and $1.2 million in long-term
incentive payouts. He held shares valued at $175.3 million during a
year in which TSR was an impressive 88.6%.

-- L. Dennis Kozlowski, Tyco International Ltd., $125.3 million,
including $99.9 million from exercising options and restricted shares
initially valued at $21.2 million. The head of the industrial
conglomerate, who led the year-earlier scorecard, owned an equity
stake valued at $162.4 million when fiscal 2000 ended Sept. 30. Tyco
investors didn't fare as well: TSR was almost flat at 0.6%.

-- John F. Welch Jr., General Electric Co., $122.5 million, with
$57.1 million in gains from exercised options and a restricted-stock
grant initially valued at $48.7 million. This marks Mr. Welch's sixth
straight year on the scorecard. His year-end stake was worth about
$141.7 million. But TSR was minus 6.1%.

-- Joseph P. Nacchio, Qwest Communications International Inc., $96.6
million, primarily the result of $93.45 million in option gains and
$1.1 million in long-term incentive payouts. Mr. Nacchio had shares
valued at $23.1 million at the end of a year in which TSR was minus
4.9%.

-- W.J. Sanders III, Advanced Micro Devices Inc., $92.4 million,
which mainly reflects $85.1 million from option exercises. He owned
shares valued at about $3.3 million at year's end. Shareholders
experienced a return of minus 4.5%.

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


International
World Watch
Compiled by David I. Oyama

04/12/2001
The Wall Street Journal
A13
(Copyright (c) 2001, Dow Jones & Company, Inc.)

BRIEFLY: 
-- Singapore canceled its auction for third-generation wireless licenses, 
after only three bidders emerged for the four licenses on offer. As a result, 
Singapore Telecommunications, MobileOne and StarHub Mobile will each pay the 
minimum price of 100 million Singapore dollars (US$55.2 million) for licenses 
under the Infocomm Development Authority's rules. 
-- Sinar Mas Group, parent of ailing Asia Pulp & Paper, said it is seeking to 
borrow an additional $200 million to ease a liquidity crunch and help boost 
production of its Indonesian pulp and paper units. "We're looking for new 
creditors," Sinar Mas's general manager for forestry said. 
-- U.S. energy company Enron named Sir Laurence Street, former chief justice 
for Australia's New South Wales state, to act as a conciliator in a dispute 
with India's Maharashtra State Electricity Board over bills not paid to its 
Dabhol Power unit.

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





April 12, 2001, 12:07AM
Houston Chronicle
Enron bid to quit selling power to California colleges blocked 
By MICHAEL DAVIS 
Copyright 2001 Houston Chronicle 
A federal judge on Wednesday ordered Enron Corp. to keep supplying low-cost 
power to California's state university systems after Enron tried to shift 
responsibility for buying the school's power to the state's troubled 
utilities. 
The ruling is the first strong indicator that Enron will not be able to avoid 
being dragged into the California power crisis. The company has maintained 
that because it does not own plants there like its rivals, Reliant Energy and 
Dynegy, the crisis would not harm its bottom line. 
The power markets have change so drastically in recent months that if Enron 
is forced to sell power to the systems under terms of the contract, it could 
lose out on potential profits made in the open market. 
The school systems argued that if Enron was allowed to dump them as "direct 
access" customers who receive power bought and resold directly by the 
company, they would lose the ability to manage their power most efficiently, 
which could cost the taxpayers of California millions. 
Enron said it would file an emergency appeal to the 9th U.S. Circuit Court of 
Appeals in San Francisco to overturn U.S. District Judge Phyllis Hamilton's 
ruling in the lawsuit brought by the California State University and 
University of California systems. 
Enron was attempting to get out of directly delivering power for the final 
year of a four-year deal with the school systems. 
If Enron had been allowed to get out of directly delivering power, the school 
systems would no longer be "direct access" customers but would have to buy 
power acquired by the state's utilities. 
Such a shift in the school systems' power supply arrangements would have cost 
the schools millions of dollars, said Ken Swisher, spokesman for the 
California State University system in Long Beach, Calif. 
"We are very happy with today's ruling," Swisher said. "Given the current 
uncertainty, remaining a direct access customer is very important to us." 
A statement issued by the systems said the ruling blocked Enron "unilaterally 
jettisoning" the school systems back to the utilities. 
Enron wanted to have the utilities buy the schools' power on the state's spot 
markets and Enron would bill the schools for the power instead of Enron 
buying the power and selling it directly to the systems, said Peggy Mahoney, 
Enron spokeswoman in Houston. 
Enron is honoring all terms of the contracts, she said, and the company 
believes it has the legal right to shift the systems back into the hands of 
the utilities, Mahoney said. 
Pacific Gas & Electric Co., the state's largest utility, filed for Chapter 11 
bankruptcy protection last week, saying it is owed $9 billion for power sales 
it was forced to make that it could not pass on to its customers. 
"It is chaotic now and uncertain how direct access is going to be handled," 
Mahoney said. "We are trying to get the California Public Utility Commission 
to rule on direct access." 
Enron's contract with the two school systems initially was valued at $500 
million. Mahoney couldn't confirm reports that Enron would lose $12 million a 
month for the rest of its current contract. 
The University of California systems' annual electric bill is about $87 
million and its natural gas bill is about $26 million. The California State 
University system annually pays about $40 million for electricity and $20 
million for natural gas. 
In her ruling, the judge said Enron may be in breach of its contract with the 
school systems and ordered the Houston company to abide by its agreement to 
sell low-cost power directly to the state's public universities. 
The judge issued a temporary injunction against Enron, forcing it to continue 
providing service as the suit brought by the universities proceeds. She also 
said there is a likelihood Enron will lose the lawsuit. 
"I am persuaded, in the end, there is a very strong likelihood of success on 
the breach of contract claim," the judge said. 







April 12, 2001, 12:32AM
Houston Chronicle
Energy status 'critical,' panel says 
Experts in field cite capacity problems 
By DAVID IVANOVICH 
Copyright 2001 Houston Chronicle Washington Bureau 
WASHINGTON -- The United States must develop a comprehensive energy strategy 
or face more crises like the rolling electricity blackouts in California, a 
panel of energy experts has concluded. 

"There could be more Californias in America's future," a task force organized 
by Rice University's James A. Baker III Institute for Public Policy and the 
Council on Foreign Relations warned in a report released today. 
As the Bush administration weighs its energy options, the group of 51 energy 
experts urged the policy-makers not to "muddle through" with short-term fixes 
that do not address fundamental supply and transportation constraints. 
"Taking the we-can-drill-our-way-out approach won't work," said Amy Myers 
Jaffe, the task force's project director and co-author of the report, 
Strategic Energy Policy Challenges of the 21st Century. 
With gasoline prices on the rise, natural gas prices high and electricity 
shortages all but a given this summer, the task force members characterized 
the energy sector as being in "critical condition." 
"There is no escaping the fact that we are reaching the beginning of an 
extensive period of sporadic supply shortages and periodic price hikes in the 
United States and other parts of the world," the report said. 
Back in 1985, for example, the Organization of the Petroleum Exporting 
Countries had an estimated 15 million barrels worth of spare production 
capacity, comparable to about 25 percent of global oil demand. Last winter, 
the cartel's spare capacity was a negligible 2 percent of global demand. 
"America can no longer assume that oil-producing states will provide more 
oil," the report said. 
While stopping short of branding the current energy crunch a "crisis," the 
report notes: "The situation is worse than the oil shocks of the past, 
because ... the tight oil market condition is coupled with shortages of 
natural gas ... heating fuels for the winter and electricity supplies in 
certain localities." 
Drafts of the report already have circulated around the White House, the 
State Department and other parts of the administration. 
An Energy Department spokesman said Wednesday he had not seen the report and 
could not comment. 
Bush has created a task force, headed by Vice President Dick Cheney, to 
formulate the administration's energy strategy. 
And while the report could provide the kind of intellectual underpinnings the 
administration will need to push its energy strategy, the White House may not 
find the report completely to its liking. 
President Bush, for instance, favors drilling in a portion of the Arctic 
National Wildlife Refuge, although he has largely backed off that push in the 
face of strong opposition. 
While generally supportive of the notion of drilling there, the report argued 
that such proposals would not get adequate political support in the absence 
of other measures aimed at curbing energy demand. 
And with an estimated 300 trillion cubic feet of natural gas hidden away in a 
geological formation in the Rocky Mountain region, the industry might be 
better off targeting those resources rather than the "distant" reserves in 
the arctic refuge. 
The report also noted that if "light trucks," a category that includes sport 
utility vehicles and minivans, were required to meet the same fuel efficiency 
standards as cars, the United States would save 910,000 barrels of oil a day. 
Energy Secretary Spencer Abraham, a former Republican senator from Michigan, 
opposed stiffening fuel efficiency standards while serving on Capitol Hill. 
Other recommendations included: 
? Reducing the number of "boutique" gasoline blends required in markets 
across the country to avoid potential supply shortages and price spikes. The 
"balkanization" of the gasoline market has been blamed for the Midwest's 
price spikes last summer. 
? Expanding the Strategic Petroleum Reserve and reconstituting the makeup of 
the International Energy Agency to include developing nations, which now are 
large consumers of crude. 
? Rethinking the sanctions policy toward Iraq, which has emerged as a 
critical "swing" producer for the world oil markets. 
? Prioritizing relations with Saudi Arabia, the United Arab Emirates and 
Kuwait, some of the producers expected to have spare production capacity in 
the foreseeable future. 
The report did not assign blame for the energy crunch, saying both Democrats 
and Republicans share the blame for failing to fashion a workable energy 
policy. 
The report did criticize former Energy Secretary Bill Richardson's very 
public efforts to jawbone OPEC producers into boosting crude production and 
push down oil prices. 
"This fueled anti-American sentiment among certain sectors of the population 
in the Middle East, lent support to the claims of Saddam Hussein and brought 
pressures on some U.S.-friendly regimes in the region." Also: "Specific 
discussions of price should be kept to private diplomatic discussion whenever 
possible." 
For his part, Richardson, in an op-ed piece published earlier this week in 
the Washington Post, questioned whether the nation is actually experiencing 
an energy crisis and blasted the Bush administration for concentrating too 
heavily on boosting supplies. 
Ed Morse, executive adviser at Hess Energy Trading Co. and former publisher 
of the Petroleum Intelligence Weekly, headed the task force. 
Other participants included Enron Corp. Chairman Ken Lay; Dynegy Chief 
Executive Chuck Watson; former Deputy Energy Secretary Bill White; former 
Deputy Energy Secretary Charles Curtis; Houston earth scientist and engineer 
Michel Halbouty; Simmons & Co. President Matthew Simmons; ChevronTexaco Chief 
Executive David O'Reilly; former Petroleos de Venezuela Chairman Luis Giusti; 
and Cambridge Energy Research Associates Chairman Daniel Yergin. 




Judge orders Enron to deliver electricity to universities
Sacramento Bee

Updated: April 12, 2001
SAN FRANCISCO -- Saying that Enron Energy Systems Inc. may be in breach of 
contract, a federal judge Wednesday ordered the Houston company to abide by 
its agreement to sell cheap power to the state's public universities. 

Enron was attempting to get out of delivering power for the final year of a 
four-year deal with the California State University and University of 
California systems. 

Enron, which buys power from producers and sells it on the market, said the 
contract would cost the energy concern $12 million a month because of 
skyrocketing wholesale power prices. 

Enron said the state should free Enron from its obligation and taxpayers 
should pick up the tab. 

"It's our economic interest to provide a service with the least amount of 
dollars we can provide it for," Enron attorney A. William Urquhart said. He 
later described the case as being "all about money. It's all about money." 

Enron said it would file an emergency appeal to the 9th U.S. Circuit Court of 
Appeals in San Francisco to overturn U.S. District Judge Phyllis Hamilton's 
ruling in the suit brought by the state's two university systems. 

Appearing in federal court, state Attorney General Bill Lockyer argued that 
Enron wants out of the contract so it can engage in a "marketing game" with 
the universities' promised power and sell it on the open market for 10 times 
more than what the electricity cost Enron. 

He said lawmakers may have "left the keys in the car" when they approved 
California's failed energy deregulation scheme that has prompted the energy 
crisis, "But it is still theft to steal the car." 

The judge issued a temporary injunction against Enron, forcing it to continue 
providing service as the suit brought by the universities proceeds. When the 
judge issued the order, she also said there is a likelihood Enron will lose 
the suit. 

"I am persuaded, in the end, there is a very strong likelihood of success on 
the breach of contract claim," the judge said. 

UC's annual electric bill is about $87 million and its natural gas bill is 
about $26 million. CSU annually pays about $40 million for electricity and 
$20 million for natural gas. 

The case is UC Regents vs. Enron Energy Systems Inc., 01-1006. 








Electricity notebook: U.S. relief plan kept under wraps 
Orange County Register
April 12, 2001






Judge won't let Enron out of deal for cheap power 
SAN FRANCISCO - Saying that Enron Energy Systems Inc. may be in breach of 
contract, a federal judge Wednesday ordered the Houston company to abide by 
its agreement to sell cheap power to the state's public universities. 
Enron was attempting to get out of delivering power for the final year of a 
four-year deal with the California State University and University of 
California systems. Enron, which buys power from producers and sells it on 
the market, said the contract would cost the energy concern $12 million a 
month because of skyrocketing wholesale power prices. 
Enron said the state should free Enron from its obligation and taxpayers 
should pick up the tab. 
Appearing in federal court, state Attorney General Bill Lockyer argued that 
Enron wants out of the contract so it can engage in a "marketing game" with 
the universities' promised power and sell it on the open market for 10 times 
more than the electricity cost Enron. 
The UC system's annual electric bill is about $87 million, and its 
natural-gas bill is about $26 million. The CSU system annually pays about $40 
million for electricity and $20 million for natural gas. 
Bloomberg News and the Associated Press contributed to this report. 









Enron deal change riles university officials 



By Craig D. Rose?
UNION-TRIBUNE STAFF WRITER 
March 12, 2001 
With a contract in hand from the nation's largest electricity trader, 
California's two big university systems thought they were mere spectators to 
the power crisis roiling the state. 
But now California State University and the University of California are 
seeking a federal injunction to block Enron Energy Services from changing the 
deal in a way that the university systems say would dump them into the 
turmoil of deregulation. 
They say Enron is seeking to return the campuses to receiving power from 
utility companies so it can boost its profits. 




"It's a unilateral abrogation of the contract in order to make more money," 
said Charles McFadden, a spokesman for UC. 
On Friday, CSU and UC asked the federal court in Oakland for an expedited 
review of their injunction request. 
Enron insists that it is changing only the source of electricity to the 
campuses, while keeping other provisions of its contract in place, including 
a guaranteed discount on electricity. 
"I have not tossed my contract out the window," said Marty Sunde, vice 
chairman of Enron Energy Services. 
"I am simply getting my electrons from a different source." 
Under terms of the four-year agreement signed in 1998, Enron agreed to sell 
power to the university systems for 5 percent less than the cost offered by 
utility companies. Enron also agreed to provide an array of products and 
services intended to conserve and monitor electricity consumption. 
Enron insists it always lost money by discounting the power sales to the 
universities but that the breakdown of deregulation caused the losses to 
grow. Now the Houston-based company said it can reduce its losses on the deal 
by having PG&E and Southern California Edison supply power to campuses in 
their service areas. Enron intends to continue supplying power to campuses in 
the SDG&E area. 
But Enron says it will continue to provide the power discount, so the 
universities' cost of power will not change. 
The universities say Enron's action in returning them to local utility 
service, however, will force a revamping of expensive new billing systems 
created under the Enron contract, could cause the removal of the advanced 
meters and could make the college systems liable for a share of the rescue 
plan that may be forthcoming for the troubled utilities. 
The spokesman for UC said the proposed change would be costly to the 
university and profitable for Enron. 
"They discovered they can resell the power they earmarked for us at vastly 
inflated prices," McFadden said. 
The university systems also argue that Enron has no right to make the changes 
under their agreement. 
Sunde denied that Enron is reselling the power and insists the contract 
allows the company to change the source of power supply. He said the 
universities face no liability he can think of by being returned to the local 
utilities. 
Oakland-based Clorox Co., another Enron customer returned to local utilities, 
said the change has had no impact on its business. 
? 

		

		
		Enron Told It Can't Cut Electricity To Schools

Bob Egelko, Chronicle Staff Writer 
		?
		Thursday, April 12, 2001 
		
		
		
		
		
		

		
		A federal judge ordered energy giant Enron to restore direct electric service 
to the University of California and the California State University system 
yesterday. Enron had wanted to abandon its agreements with the universities 
so it could sell the power for more money elsewhere. 
		U.S. District Judge Phyllis Hamilton issued the injunction after a hearing in 
which an Enron lawyer said the company was entitled to act in its own 
economic interest, and state Attorney General Bill Lockyer accused Enron of 
gouging Californians. 
		Enron Energy Systems signed four-year contracts with the two university 
systems in 1998, agreeing to supply power for 5 percent less than the price 
cap set by the state's 1996 deregulation law. All the campuses were covered 
except UCLA and UC-Riverside, which buy electricity from municipal suppliers. 
		The contracts were due to run through next March, but Enron dropped direct 
service to the universities Feb. 1 and left them to rely on power supplies 
from Pacific Gas & Electric and Southern California Edison Co. Enron, 
meanwhile, brokered sales of the same electricity at much higher prices on 
the spot market. 
		Enron promised to keep its promise of low rates for the rest of the contract, 
but the universities said the change to utility service would hurt their 
conservation efforts and expose them to the risk of blackouts. They also said 
losing their status as direct-power purchasers could exclude them from future 
long-term purchases, costing them as much as $297 million over 10 years. 
		Shifting two of the state's biggest energy consumers to utility service also 
increased the need for power purchases by the state, which took over that 
role in January after PG&E and Edison defaulted on payments to power plants. 
		Lockyer, the state's top lawyer, said yesterday that Enron was costing the 
state $12 million a month by refusing to honor contracts with the university 
and other customers who had signed long-term, fixed-price agreements. 
		In issuing an injunction restoring the universities to direct service, 
Hamilton said the language of the contracts indicates that "Enron did not 
have the right to return the university systems to the utilities." She cited 
the "precarious position of PG&E," which filed for bankruptcy last Friday, 
and said the universities had bought some protection from the risks of 
utility service when they signed the contracts. 
		Enron attorney A. William Urquhart said the company would seek an emergency 
stay from the U.S. Court of Appeals in San Francisco. 
		"It is unreasonable that a publicly traded company like Enron would not try 
to manage its risk by returning the universities to utility service," 
Urquhart said. 
		
		
		?	

	
?	

Federal regulators may soon begin monitoring electricity market
By KAREN GAUDETTE
Associated Press Writer

04/11/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

SAN JOSE, Calif. (AP) - Federal energy regulators plan to monitor the 
wholesale electricity market and potentially lower "unreasonable" prices 
preemptively, the head regulator said Wednesday, although he stopped short of 
promising caps on soaring energy prices. 
Curt Hebert, chairman of Federal Energy Regulatory Commission, told members 
of the House Subcommittee on Energy Policy and Regulatory Affairs that the 
commission hopes to begin "monitoring and mitigating" the markets by May 1.
FERC would look at future prices to determine if they are just and 
reasonable, Hebert said. The commission already has sought California power 
sale refunds of $124 million, and the new system of tracking market abuses 
could help keep markets fair, Hebert said. 
Hebert left without taking questions from reporters, and gave few details 
about this new system for tracking market abuses, which he also mentioned at 
FERC's meeting in Boise on Tuesday. For example, he didn't say whether FERC 
would begin looking at daily trading activity in search of unfair pricing. 
Currently, FERC just reviews quarterly reports from energy traders, and 
periodically does spot audits of the markets. 
Hebert also stressed the need to build more power plants to boost supply, to 
improve transmission infrastructure throughout the West and to create a 
"regional transmission organization" to better manage the flow of power. 
But other panelists said FERC still wasn't doing enough to help fix 
California's broken market. 
"We don't have a functioning market right now," said U.S. Rep. Zoe Lofgren, 
D.-Calif. "Along with supply and demand, getting control of price gouging is 
just as important." 
Hebert has been the target of criticism from state officials, the utilities 
and consumer watchdog groups for refusing to cap growing wholesale power 
rates. Members of California's Democratic delegation and Pacific Gas and 
Electric Co. again asked for the cap to avoid summer blackouts. 
FERC only has regulatory control over roughly half of California's 
electricity, Hebert testified, since the rest is imported from Canada and 
municipal utilities not under federal jurisdiction, such as the Los Angeles 
Department of Water and Power. 
FERC's general counsel, Kevin Madden, said those energy sellers not regulated 
by FERC, "if they want, can lower their prices for consumers." 
Hebert sat tall in his chair as guards dragged away a handful of protesters 
clamoring for the chance to question his handling of the energy crisis. 
Instead, he questioned the actions of the state Public Utilities Commission. 
He referred to the PUC's recent authorization of a study of Path 15, a 
transmission bottleneck in moving power from Southern to Northern California. 
"How many studies must be done before you spend a dollar and start moving 
power in the other direction?" Hebert said. "The conversation needs to stop. 
Someone needs to start putting shovels in the ground," he said on the second 
of three days of hearings scheduled by the House subcommittee. 
Backed by U.S. Rep. Dan Burton, the Indiana Republican who chairs the 
Government Reform Committee which houses the energy subcommittee, Hebert 
warned that too many more changes to the rules may drive away the very 
generators needed to lower prices in the long term by providing more supply 
and competition. 
But changes seem inevitable after PG&E filed for federal bankruptcy 
protection Friday, and cash-starved Southern California Edison Co. agreed 
Monday to sell its transmission lines to the state. Gov. Gray Davis said 
negotiations to buy the lines of San Diego Gas and Electric Co. began in 
earnest Wednesday, and once that deal is done, he'll ask the bankruptcy judge 
to force PG&E to sell the remaining grid to the state. 
Lofgren said Hebert's comments gave her some hope for eventual consumer 
refunds. 
"Whether we want to call it a price cap or market mitigation, I think it 
shows the move to do something," she said. 
Representatives from PG&E and SoCal Edison also testified that confusing PUC 
rules prevented them from signing long-term contracts, which energy experts 
now say could have saved the utilities billions. 
PUC President Loretta Lynch told the panel Tuesday in Sacramento the agency 
allowed utilities to enter into such contracts last year, but the utilities 
chose not to do so. 
"What was done then was only half the job," said Stephen Pickett, vice 
president and general counsel for SoCal Edison. Pickett said the PUC retained 
the right to review contracts after they were signed, which scared away 
generators unsure if they would see the money. 
Davis also signed two bills Wednesday, creating more than $500 million in 
conservation initiatives and incentives. The money will reimburse homeowners 
and business owners for money spent on such items as energy-efficient 
appliances and efficient lighting. 
Other lawmakers seized the forum to blast power generators. 
"We are under attack," Assemblyman Gil Cedillo, D-Los Angeles, said under a 
canopy of solar collectors at the headquarters of the Los Angeles Department 
of Water and Power. "Generators from out of state have no sense of patriotism 
or compassion for their fellow citizens." 
Also Wednesday, a federal judge intervened in another power price battle, 
ordering Enron Energy Systems Inc. of Houston to abide by its agreement to 
sell cheap power to the California State University and University of 
California systems. Enron said it would appeal. 
A subsidiary of the nation's largest power broker, the company said honoring 
the final year of the four-year contract would cost it $12 million a month 
because of skyrocketing wholesale power prices, and argued that taxpayers 
should pick up the tab. 
U.S. District Judge Phyllis Hamilton issued a temporary injunction against 
Enron, forcing it to continue providing service, and said there is a 
likelihood Enron will lose the suit.

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