THE FINANCIAL EXPRESS, Tuesday, November 20, 2001
BSES to complete DPC due diligence by January

Similar story also appeared in the following publications:

THE TELEGRAPH, Tuesday, November 20, 2001
Trio to help BSES in Dabhol study 

THE ASIAN AGE, Tuesday, November 20, 2001
BSES to complete due diligence of dpc in 2 months 

THE HINDU, Tuesday, November 20, 2001
BSES to complete due diligence of Dabhol project by Jan. 

THE HINDUSTAN TIMES, Tuesday, November 20, 2001
Due diligence of DPC

PIONEER, Tuesday, November 20, 2001
BSES to complete due diligence of DPC in 2 months

THE FREE PRESS JOURNAL, Tuesday, November 20, 2001
BSES to complete due diligence of Dabhol project by Jan end
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THE ASIAN AGE, Tuesday, November 20, 2001
Maharshtra stand on Enron is vindicated, Seema Mustafa 

Similar story also appeared in the following publication:

THE DECCAN CHRONICLE, Tuesday, November 20, 2001
Enrons fiddles vindicate Indian claims on DPC 
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THE FINANCIAL EXPRESS, Tuesday, November 20, 2001
MSEB seeks refund of Rs 1,200 cr from DPC, Sanjay Jog 
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THE DECCAN HERALD, Tuesday, November 20, 2001
DPC deadline expires for issuing final termination notice
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THE HINDU BUSINESS LINE, Tuesday, November 20, 2001
Greenfield-DPC time-charter pact set to be scrapped, P. Manoj 
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OUTLOOK (MAGAZINE), November 26th issue
Enron had no choice but agree to what seems to be a shotgun marriage
(Abhay Mehta, is the author of Power Play, a book on the Enron controversy.) Abhay Mehta 
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THE FINANCIAL EXPRESS, Tuesday, November 20, 2001
BSES to complete DPC due diligence by January

BSES Ltd will begin due diligence of the 2,184 mw Dabhol power project in a fortnight. The process, aimed at assessing the right price for buying 85 per cent stake in the Enron-promoted Dabhol Power Company's (DPC), will be completed by January. Speaking to reporters on Monday, BSES chairman and managing director RV Shahi said, "The due diligence process will take six to eight weeks after signing of the confidentiality agreement." According to Mr Shahi, his company would be signing the confidentiality agreement, a pre-requisite for beginning due diligence, in another ten days. BSES has sent its comments on various clauses of the agreement to DPC. The company would appoint three separate consultants for doing technical, financial and legal due diligence of the $2.9-billion project, he said on the sidelines of a seminar on natural gas. 

It would also be constituting an internal task force for doing parallel ground work. The whole exercise would involve assessing the value of DPC's assets and liabilities besides finding out further investment needed to complete the 1,444 mw Phase-II. Stating that the Dabhol power project as its stands was not viable, Mr Shahi said that BSES will be going in for financial re-engineering and renegotiation of the gas supply agreement for Phase-II before taking over the project. DPC had signed a 20 year contract with Oman LNG for 1.6 million tonnes per year and Abu Dhabi Gas Liquification Company for 480,000 tonnes. He said the total cost of power generation has to be brought down to Rs 2.60-2.70 per unit for making it viable. For this fuel cost and capital cost has to be brought down, he added. BSES has shown interest in acquiring 85 per cent stake of Enron, Bechtel and GE in the Dabhol project at the recently concluded Singapore meeting convened by the Indian financial institutions. It will fix a price for taking over the stake once due dilligence is completed. After signing the confidentiality agreement BSES will formally look into the financial books of DPC, its loans, sponsors and other assets and legal wrangles. Before taking any decision on the acquisition price of the distressed company. 
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THE ASIAN AGE, Tuesday, November 20, 2001
Maharshtra stand on Enron is vindicated, Seema Mustafa 

The Maharashtra government's refusal to accept Enron's claim of bringing in capital cost of $2.8 billion into the controversial Dabhol Power Corporation has been vindicated by reports of large-scale fraudulent practices by the company in the United States. At present under inquiry by the US Stock Exchange Commission, Enron has been virtually wiped out with Dynegy, a Chevron and Texaco company, having reportedly bought Enron for a paltry $9.12 billion stock swap. Enron's share value plummeted from $90 last year to $7 this month following disclosures that its senior officials had been transferring funds to their own pri vate companies without reflecting this in the balance sheets for the last five years. Enron's chief financial officer was found involved in the scam and was sacked, although this move could not save the company, which has been unable to explain the big gap in its balance sheets. It is reported to have gone down taking $72 billion in shareholders' wealth with it. In fact, the President and CEO of Halliburton, Mr Dave Lesar, is on record as saying that Enron's "credibility is finished because they did not provide financial information and, therefore, investor confidence declined." Halliburton claims to be the world's largest provider of products and services to petrol and energy industries, functioning in 120 countries with US vice-president Dick Cheney being the earlier CEO of the company. 

The UK, following the expose, has brought Enron's Wessex Water operations in the country under scrutiny with the entire range of utility and energy assets being given a close look. Pressure is being exerted on the Maharashtra government now to ensure that the records are opened and the entire deal investigated. Mr Probir Purkayastha of the Delhi Science Forum, which had led a major campaign against the Enron power project here, said the US company has survived entirely "on energy trading and influence brokering." It had extremely close contacts with the Republican party, including former President George Bush. 

There was tremendous pressure on India to withdraw its objections and clear the project, particularly after the Bush administration assumed power. The new US ambassador to India, Mr Robert Blackwill, is on record saying that India-US relations could be summed up in just five alphabets: "Enron." In fact, shortly after assuming office in New Delhi, the ambassador addressed several business and corporate meetings and pushed for the quick clearance of the stalled Enron project. The Maharashtra government, which had cancelled the seven-year-old power purchase agreement with Enron, was in the middle of court proceedings with the company. It is now expected to resume discussions with Dynegy, although it is in a position to ensure that all records are made available and the project thoroughly investigated. Enron's capital cost claim, despite the fact that it was not supported by statistics, was accepted by the state government under the then chief minister, Mr Sharad Pawar. 

Enron went ahead with the construction of Phase I. In 1995, the Shiv Sena-BJP government cancelled the project. Within six months the same government revived it. The government claimed that this was because Enron had agreed to reduce the capital cost to $2.5 billion. But, as was pointed out by the Opposition parties here and has been accepted by the state government now, the Dabhol Power Corporation had borrowed at least $2.05 billion from Indian and foreign institutions, with the result that the total equity component was actually only $450 million. Of this the Maharashtra State Electricity Board had put in $130 million as its own equity, thus, leaving only $320 million equity put in by Enron. 
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THE FINANCIAL EXPRESS, Tuesday, November 20, 2001
MSEB seeks refund of Rs 1,200 cr from DPC, Sanjay Jog 

The Maharashtra State Electricity Board (MSEB) on Monday appealed to the Bombay High Court that Dabhol Power Company (DPC) be ordered to pay it an amount of Rs 1,200 crore towards the excess payment of capacity charges during May 1999 and April 2001. According to MSEB, of the total payment of Rs 3,499 crore towards the power purchases, the capacity charge amounted to Rs 2,087 crore. The average purchasing rate per unit of Dabhol Phase-I (740 mw) power in 2000-01 has been about Rs 7.30 while its payment for the Phase-II (if and when commissioned) would have been in the range of Rs 500 crore per month. 

MSEB has denied that it has failed or neglected to make payments to DPC under the power purchase agreement (PPA) from time to time and whenever the payments were made after the due dates, interest was paid to DPC. "It is DPC that has defaulted in paying the rebate due to MSEB for the default and material misrepresentation on the availability of power without any basis whatsoever. The DPC's refusal to pay/adjust the rebate in terms of the express provision of the PPA of undisputed facts is obdurate and wrongful," it said. 

MSEB in its counter affidavit has prayed that DPC's writ petition challenging the jurisdiction of Maharashtra Electricity Regulatory Commission (MERC) to adjudicate upon dispute and difference between MSEB and DPC be dismissed at cost. The Bombay High Court division bench comprising justices Ajit Shah and Sharad Bobde would begin hearing on the DPC's writ petition from December 11 following the Supreme Court's order of August 6 to settle the MERC jurisdiction issue. The filing of counter affidavit by MSEB today coincides with the completion of six months period after the issuance of two preliminary termination notices by DPC on May 19. DPC, which has already issued another two preliminary termination notices to MSEB on September 10 however, has been restrained from serving a final termination notice to MSEB by the Bombay High Court on November 9 over a civil suit filed by Indian financial institutions. 

MSEB further said that the DPC cannot be permitted to go ahead with the arbitration when the statute requires that its dispute with DPC be adjudicated upon only by the Merc. "DPC is an Indian company doing business in India and subject to Indian laws and an utility within the meaning of the Electricity Regulatory Commission Act (ERCA)," MSEB added. MSEB has strongly denied DPC's apprehension that it would not get a proper or fair hearing before the MERC. It further said that "MERC has both the competence3, expertise and regulatory responsibility to adjudicate upon the disputes raised in the MSEB's petition filed on May 25 before the MERC," it said. 

According to MSEB, the disputes it has raised before the MERC involve technical, commercial and legal issues and it would clearly have consequences/ramifications, which directly bear on matters which have exclusively been entrusted to the MERC under section 22 (1) and 29 of The ERCA. "The MERC, which is fully competent in every respect to adjudicate upon, is an expert body with special knowledge and experience in matters relating to electricity in Maharashtra state," MSEB said. MSEB said that adjudicating functions/powers/jurisdiction have been conferred on the MERC in respect of disputes and differences between utilities. 
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THE DECCAN HERALD, Tuesday, November 20, 2001
DPC deadline expires for issuing final termination notice
The six-month deadline set by Enron-promoted Dabhol Power Company (DPC) for Maharashtra State Electricity Board (MSEB) to issue the final termination notice (FTN) expired today. The power major, however, has been restrained by the Bombay High Court from initiating the process till December 3. Had the DPC issued FTN today, it would have irrevocably bound all parties to ending the contract without going in for any alternative, an option which is still open. DPC, on April 19, slapped a preliminary termination notice (PTN) on MSEB, due to what it called continuing default in payment of dues by the board on several occasions and political interference to the detriment of its business operations. As per the power purchase agreement (PPA) signed between DPC and MSEB, the PTN gave six months to both parties to resolve the dispute, or else, allows the aggrieved party to terminate the contract and claim damages.While the possibility of DPC issuing the final termination notice was real, a dramatic intervention by the Indian financial institutions (FIs) led by IDBI, which moved the high court on November 5, have given a temporary reprieve to the MSEB. The FIs and banks pleaded for an injunction against DPC and sought reopening of the Dabhol plant The intervention by FIs so incensed DPC that it called off the two-day meeting with the representatives of the FIs in Singapore in protest .

However, it was persuaded to participate in the meeting, which was aimed at finding a buyer of Enron's stake in the company. Two private power majors, Tata Power and BSES, have shown interest in picking up Enron's stake, but at a discounted price The high court, which heard the preliminary arguments of the FIs and DPC on November 9, restrained DPC from issuing the FTN andadjourned the hearing till December 3. DPC sources told Deccan Herald the high court order means the PTN notice period will continue till December 3 and the company would initiate termination process on that day, if the high court allowed it to do so. DPC has claimed that the damages it would claim on final termination of the contract would run around Rs 24,000 crore. This figure too has been disputed by the MSEB and the state government. MSEB, on its part, stopped drawing power from Dabhol plant from May 29 onwards, which brought the plant to standstill
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THE HINDU BUSINESS LINE, Tuesday, November 20, 2001
Greenfield-DPC time-charter pact set to be scrapped, P. Manoj 

THE time-charter party agreement signed between Greenfield Shipping Company and Dabhol Power Company (DPC) is set to be scrapped as an outcome of the controversy surrounding the Enron-promoted troubled power plant in Maharashtra. With Dabhol's LNG facility yet to go on stream, DPC will not be able to deploy the 1,37,000 cubic metre capacity tanker `LNG Laxmi' once the promoters of Greenfield deliver it to the charterer as per the charter party agreement signed between the two. The charter party agreement states that the charterer will have to take delivery of the tanker within 45 days of being delivered by the shipowners and operators. ``A failure by the charterer to take delivery of the tanker within the stipulated 45 days would automatically rescind the charter party agreement", sources familiar with the developments told Business Line. 

Greenfield and DPC had entered into a time-charter agreement wherein DPC will time-charter `LNG Laxmi' for a period of 20 years at a charter hire rate of $ 98,600 per day for transporting gas from Oman to its LNG facility in Dabhol, Maharashtra. Shipping Corporation of India (SCI) is a 20 per cent stakeholder in Greenfield. The promoters of Greenfield took possession of the LNG carrier on November 15 after paying the last instalment of $ 55 million from Mitsubishi shipyard at Nagasaki in Japan, overcoming certain last-minute hiccups. Since DPC is not in a position to take physical delivery of the tanker, the promoters of Greenfield are going through the formalities to full-fill contractual obligations. After the 45 days time limit is exhausted and the time charter contract between Greenfield and DPC automatically annulled, the promoters of Greenfield will be able to time-charter `LNG Laxmi' to a new charterer. 

In the meanwhile, Greenfield was able to locate a new charterer in the form of Oman Government, which will time-charter `LNG Laxmi' for 20 years at a charter hire rate of a little over $ 70,000 per day as well as pick-up a 50 per cent stake in Greenfield. Enron-affiliate Atlantic Commercial Inc., one of the original promoters of Greenfield with a 20 per cent stake worth $ 11 million, has sold its entire stake to Oman Government. Besides, the lead-partner in the consortium, Japan's Mitsui O.S.K. Lines have parted with half of its 60 per cent holding in Greenfield amounting to 30 per cent in favour of Oman Government. Oman Government will contribute $ 27.5 million for acquiring 50 per cent stake in Greenfield. It will sub-charter `LNG Laxmi' to Oman LNG in which it holds a 51 per cent stake. Oman LNG is expected to deploy `LNG Laxmi' to transport some of its LNG cargo sold on c.i.f basis to destinations including Britain and Korea, the sources said. A new time-charter party agreement between Greenfield and Oman Government will be inked after the DPC contract is revoked. Oman Government is currently thrashing out the finer details of the charter agreement with Oman LNG in which Shell,Total and Mitsubishi has equity stakes. `` This will ensure that LNG Laxmi is gainfully employed without being allowed to remain idle``, the sources said.
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OUTLOOK (MAGAZINE), November 26th issue
Enron had no choice but agree to what seems to be a shotgun marriage

Enron had no choice but agree to what seems to be a shotgun marriage with a rival, Dynegy, a fourth its size Lay: time to play dead? Enron, the most admired company in the US six years in a row, has been consigned to the dustbin of history and business school case studies. Once the darling of Wall Street for its aggressive no-holds-barred growth, its stock was languishing at historical lows of $7.21 last week, a steep fall of 90 per cent from its peak last October, representing a notional loss of $80 billion. In the last six weeks alone, its stock plunged by over 400 per cent.Kenneth Lay, the politically-connected chairman who counts on the United States' First as well as Second Families (Vice-President Dick Cheney) as close friends, and the acknowledged power behind 'deregulation', has faced a nightmare over the last three weeks.

Following a series of stories first published in The Wall Street Journal and The New York Times, Enron's stock went into a tailspin and it never recovered. The strawalbeit a heavy onethat broke the camel's back was a $1.01 billion charge on its pro-forma statement of earnings. Subsequently, it has emerged that most of Enron's purported earnings were bogus and accounting jugglery is the most charitable explanation. The company has formally acknowledged that its audited statements of earnings for the last three years were of no consequence! It appears that several limited partnerships (LJM and LJM2 in particular, apparently named after Star Wars film characters), in which officers of Enron had substantive financial interests, were key elements in its concocted business numbers. Enron had till now gotten way with the business equivalent of murder. To illustrate, in the matter of appointment of key regulatory figures in the US, the California power debacle in which the conservative California governor went as far as saying that nothing would please him more to see Kenneth Lay in a prison cell with a fellow cellmate greeting him with "Hi Honey, my name is Spike," and its international operationsthe debacles in India, Indonesia, Nigeria etc, etc, the failures of its very expensive forays into the broadband and water businesseswere in a sense forgivable. What was unforgivable was the ultimate crime of siphoning off shareholders' money through these limited partnerships and brazenly lying to Wall Street.

With a daily decline in its share prices ($37 to $7 in two weeks), the failure of white knights to emerge (such as Warren Buffett's Berkshire Holdings, on which Enron had pinned some hope), its bonds being only notionally above junk status (trading in two weeks from 101 to 65 cents on the dollar) and, consequently, the potential collapse of its trading business where it acts as a trusted counter party, Enron had no choice but to agree to what appears to be a shotgun marriage with a rival, Dynegy, a fourth of its size. The almost overnight surrender and the fact that the final price for Enron was as low as $8 billion represents a collapse unparalleled in recent business history.
 
This merger, slated to occur over the next six to nine months, subject to a series of caveats, may or may not take place as there could very well be several unpleasant surprises in store. Among these are the pending Securities and Exchange (SEC) investigation (in which the Enron counsel is a former colleague of the investigating officer!), the several dozen class-action suits filed over the last three weeks against Enron, its directors, Lay and several officers as well as its auditors Arthur Andersen, and, of course, appropriate regulatory approval.

In my opinion, the key surprise may very well be the several as-yet secret limited partnerships. If these are ever made public, the reverberations throughout the US business spectrum may be too unpleasant. In any event, the consequences of these events do not appear to have sunk in in India. Given the huge, and what appears to be a very difficult-to-service debt, of $22 billion from various forays that Enron has engaged in in the last three years (raised from $15 billion the week before), it is likely a solution crafted to the needs and limitations of all parties may be feasible given appropriate spine. Spine on India's part, that is.The terms that were proposed by Enron for a settlement of the Dabhol issuea payment of $1.2 billion, now brought down to $850 millionare clearly unacceptable. The missile that Enron has now aimed at India has not been comprehended either by the state apparatus or the media.
 
It rests in an order issued by the London High Court, which, inter alia, prohibits the government of Maharashtra from even opening its mouth about Enron, even in an Indian court or tribunal. There are several, in my opinion, historically unprecedented consequences of this. This craven, abject surrender of sovereignty is a result of a consent agreement the erstwhile BJP-Shiv Sena government signed a year after the fraudulent 'renegotiations'. This is a truly unpardonable crime and should be sufficient reason to send the 'renegotiators' to jail.

In any event, given a series of interests, inter alia the interests of Sharad Pawar (who negotiated the first Enron contract) and consequently the present state government, the danger that Indian financial institutions, in particular IDBI, may simply go under for lending without any due diligence to this over-invoiced project, the Damocles sword hanging over Maharashtra in the form of the London High Court order and so on, it may be in the best interests of all parties concerned to iron out an appropriate transparent agreement that has India's and the public interest at its core, a comprehensive settlement, given the effective non-existence of Enron at this moment in history
 
(Abhay Mehta, is the author of Power Play, a book on the Enron controversy.) Abhay Mehta