THE FINANCIAL EXPRESS, Monday, October 22, 2001
Dabhol seeks dismissal of MSEB's special leave petition, Sanjay Jog 
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THE ASIAN AGE, Monday, October 22, 2001
Judge name for Enron panel will be out in a week 
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THE FINANCIAL EXPRESS, Sunday, October 21, 2001
Maharashtra govt seeks Lord Alexander at ?500 per hour, Sanjay Jog 
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THE TIMES OF INDIA, Monday, October 22, 2001
DPC for written undertaking from Maharashtra govt 
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THE INDIAN EXPRESS, Monday, October 22, 2001
Why Enron needs to simply 'Lay Off', Ramesh Chauhan 
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THE TIMES OF INDIA, Saturday, October 20, 2001
MSEB asked to rescind tariff hike plan, Vidyadhar Date
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THE FINANCIAL EXPRESS, Monday, October 22, 2001
Dabhol seeks dismissal of MSEB's special leave petition, Sanjay Jog 

The Dabhol Power Company (DPC), in its counter affidavit has appealed to the Supreme Court to dismiss the special leave petition filed by the Maharashtra State Electricity Board (MSEB) against the Mumbai high court order with regard to invocation of letter of credit (L/C) of Rs 136 crore towards April power purchase bill by the DPC through its assignee, the Bank of America (BoA). The Supreme Court, which has stayed the Mumbai high court order on September 21, would hold hearing on November 2. However, MSEB in its reply has made it clear that it will face irrepairable loss and harm if DPC was allowed to draw a letter of credit. The invocation of letter of credit would also upset the financial equilibrium. "DPC ought not to be permitted to upset the status quo and financial equilibrium as it now seeks to do particularly after Supreme Court order of September 21," the board said. 

The DPC has opposed the MSEB's pray to maintain status quo in view of May 29 order passed by the Maharashtra Electricity Regulatory Commission (Merc) and later upheld by the high court and apex court with regard to reactivation of escrow account and proceed on international arbitration. According to the company, MSEB's claim of causing irrepairable harm in the wake of invocation of letter of credit was "unsupported by reference to any factual basis." The company has reiterated that the Merc was not a competent authority to adjudicate the dispute and difference between DPC and MSEB. "Any attempt to preserve status quo by freezing all payments and suspending all operations will have a contrary effect. MSEB is refusing to pay any payments. It has not paid since early May 2001," the company said. 

However, MSEB has reiterated that the Merc's May 29 order has been issued keeping in view the interest of the power consumers of Maharashtra and its finding has not been disturbed by either Mumbai high court or Supreme Court. The Board has made out special equities. The DPC has reiterated its argument that the letter of credit was an independent contract and on June 21, 1999, it had irrevocably transferred its right under letter of credit to the Bank of America, which is a trustee as per the provisions of PPA. The Bank of America is likely to intervene in the matter and is expected to make a petition in this regard shortly. The letter of credit has been renewed from time to time. It was renewed on August 16, 2001 by the Canara Bank and its validity was extended up to May 2002. According to DPC, the invocation of letter of credit was necessary as sufficient funds would be made available in the onshore retention account to meet the debt service payment to be made to the lenders and meet DPC's other liabilities. 
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THE ASIAN AGE, Monday, October 22, 2001
Judge name for Enron panel will be out in a week 

Chief Minister Vilasrao Deshmukh has described his two-year tenure as a tight rope walk. Addressing a district Congress meet at Satara on Saturday, Mr Deshmukh said: "Running the government for the past two years has meant walking the tight rope. I learnt to keep an ice-pack on my head and put sugar in my mouth while carrying out my responsibilities. That is why I am constantly smiling while doing my work and there is nothing wrong with it. Since there is no money in the treasury, the development work is moving at a slow pace and this is a fact. To add to it, I have to run an eight-party coalition government where it is difficult to predict who would be satisfied with a decision and who would not." He said the government would name a judge within a week for the judicial inquiry set up to probe the Enron imbroglio. "I am committed that the truth about Enron should come forth for it will be in the interest of the people. Within a week, we will announce the name of the judge to head the inquiry. The Congress is strong enough to weather the consequence of this decision. Even if we have to lose the government because of our decision, we will have no regrets," he said. The Nationalist Congress Party, which is a member of the Democratic Front government, has been insisting that the appointment of the judge be deferred and the state, along with the Centre, hold negotiations with Enron to resolve the issue. The party had asked Mr Deshmukh to defer the inquiry by two months. 
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THE FINANCIAL EXPRESS, Monday, October 22, 2001
Maharashtra govt seeks Lord Alexander at ?500 per hour, Sanjay Jog 

The Maharashtra government's woes vis-a-vis the Dabhol Power Company (DPC) continue to mount. Additional financial burden is on the cards for the state government to the extent of Rs 8 crore as payment towards the Queen's counsel and solicitors. This is to vacate the ex-parte order granted by the London High Court of Justice restraining it from filing any suit in Indian courts against the international arbitration proceedings initiated by DPC. Senior state government sources told The Financial Express that the hunt is on for the appointment of a counsel based in London. And on the shortlist: leading Queen's Counsel Lord Alexander who is to be appointed soon. Sources said that Lord Alexander would plead the Maharashtra government's case before the London High Court of Justice (Queen's Bench division, Commercial Court). 

But the good Lord Alexander's services come at a price. The state coffers are none-too-healthy. Efforts, therefore, are on so that Lord Alexander's services can be contracted at 500 sterling pounds per hour instead of the quoted 750 sterling pounds per hour. The state authorities, on their part, have appointed Messers DLA as its solicitors to provide back-up support to Lord Alaxander, and a resolution has already been issued to this extent. The government's solicitors in India, Rafiq Dada, Amit Harayani and Darious Khambata would brief DLA and Lord Alexander. According to sources, Messers DLA has also been appointed as solicitors for the government during the international arbitration proceedings initiated by DPC. The DPC has served arbitration notices for the violation of State Support Agreement, Supplemental State Support Agreement and Government of Maharashtra Guarantee. The hourly rates at which fees would be paid to DLA are as follows: senior partner 325 pounds, junior partner 300 pounds, senior advocate 235 pounds, assistant 180 pounds and paralegal/trainees at 100 pounds. These rates would be discounted at between five per cent to 10 per cent for lawyers in their offices outside London. The London court in its ex-parte order of October 10 has restrained the state government from filing any suit in the Indian court to challenge the international arbitration proceedings initiated by the DPC. 

Simultaneously, the government has been prohibited from filing any suit with regard to fraud against DPC. The DPC had earlier pointed out that the injunction ordered by the London court "facilitates the timely and impartial review by the international arbitration panel of the dispute between DPC and Government of Maharashtra dealing with its failure to comply with its obligations under the state guarantee and the state support and supplemental state support agreements". However, the anti-Enron lobby has alleged that the London's order has created a disadvantageous situation for the State where it would be unable to defend itself in the writ-petitions with respect to its disputes with the DPC and to which, it has been made a party pending before various courts and tribunals. 
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THE TIMES OF INDIA, Monday, October 22, 2001
DPC for written undertaking from Maharashtra govt 

US energy major Enron's Dabhol Power Company has demanded a written undertaking from Maharashtra government stating that it will not file a civil suit against the multinational as it was not a party to the power purchase agreement.. "Any attempt by the Government of Maharashtra to file a civil suit agaisnt DPC in which the Power Purchase Agreement is impeached, is precisely that which it undertook not to do as per the terms of the final consent award of December 1996", DPC's legal firm Linklaters and Alliance have said in a letter dated October 16 to Maharashtra government's lawyers M/s Hariyani & Co.Referring to a media report, Linklaters has warned Maharashtra government that it was "not and has not ever been a party to the power purchase agreement signed between DPC and Maharashtra State Electricty Board"."Accordingly, any civil suit such as that being referred (in the media report) must relate to the agreement to which the GoM is party, namely the guarantees", the letter said. The firm said, it wanted a "written undertaking" from GoM that it will not file a civil suit against DPC in respect of any disputes arising out or in connection with any three GoM agreements, but that any such dispute would be referred to arbitration in accordance with arbitration agreements. The media report has quoted the state as saying that Queen's Court in London did not enjoy jurisdiction to issue an injunction restraining it from filing a suit against in India against on-going international proceedings, Linklaters said. 

The US energy major's legal firm said, "DPC simply could not understand how the state government is not enjoined from filing a civil suit against DPC of the sort described in the article". The multinational has also filed a suit in the London Queen's Court alleging that GoM had breached the consent agreement which it had entered with itself in 1996. On October 10, DPC dealt a legal blow to Maharashtra by obtaining an injunction from Commerical Court of London, restraining the state from filing a suit in India challenging international arbitration proceedings to be held in UK. The injuction was obtained due to the state's failure to comply with its obligations under GoM guarantee dated February 10, 1994, state support agreement dated June 24, 1994 and supplemental state support agreement dated July 27, 1996. "Over the last few months, Maharashtra and other government entities have taken actions to aviod complying with their contractual oblogations. This has frustrated the rights of international investors that were legally agreed to by the relevant parties several years ago", DPC said. Meanwhile, the state administration is gearing up to present its case before the London commercial court with a team comprising of lawyers, state energy secretary V M Lal and MSEB chief Vinay Bansal leaving for London on October 29. ( PTI ) 
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THE INDIAN EXPRESS, Monday, October 22, 2001
Why Enron needs to simply 'Lay Off', Ramesh Chauhan 

Surfing the net, the other day, I came across an interesting debate. It emanated from a comment made by the California Attorney General Bill Lockyer, who is investigating the energy crisis in that state and has offered hundreds of millions of dollars in reward for information about law breaking in the energy business. It is a comment that has had the gay rights groups, the prisoners' rights groups and assorted other civil liberties groups up in arms. But it has even more interesting import for India. So what is the comment anyway? Well talking about Enron and the way the energy major conducts its business Lockyer said, 'I would love to personally escort (Enron Corp chairman Kenneth) Lay to an 8 x 10 cell that he could share with a tattooed dude who says, Hi honey! My name is Spike'. 

Remember, this is the AG of the State of California. Not some money grabbing, 'property expropriating' communist ideologue from a third world country. Does he know something that we in India don't? Enron Corp has its back to the wall and has made it abundantly clear that it is desperate to get out of India. Good riddance all of us would say, except for the caveats attached for this exit. It has been claimed the project has been financed using a combination of debt (about $2.2 billion odd) and the rest by equity. The equity number varies from time to time, but their claim is about billion plus, perhaps as much as 1.2 billion. Enron wants the equivalent of 1.2 billion odd dollars (about Rs 6,000 crore) to make an exit. On the face of it this would seem to be a perfectly reasonable argument. After all as a businessmen, if I want to exit a project mid-way, the least I expect the buyer to pay is what I have invested in the project. But herein lies the problem. 

If these numbers were correct, then the project cost of Dabhol is now adds up about $3.4 billion that is, the equivalent of $1.7 million per MW. This would have the dubious honour of the MOST expensive gas fired power station in the history of the world and winning the honours without even a close competitor. Let us keep the Enron issue aside for a minute and look at three power plants that were set up over the last eight years in our part of the world. Seoinchon, Korea has a 2,000 MW combined cycle gas turbine plant. In every technical sense, it is a clone of the Dabhol Plant. The same GE STAG 207FA turbines are being used, as those in the Dabhol plant. Guess what is the cost of the plant? $900 million or $0.45 million/MW! Less than a third of the Dabhol cost. 

Again in Korea, construction of the 2,000 MW combined cycle gas turbine plant at Poryong began in 1996 and the plant was commissioned in 1999. And the price. $850 million or $0.425 million/MW! Interestingly, the efficiency of the Pryong power plant is 60 per cent, while that of Dabhol is effectively 48 per cent. As recently as this month, Malaysian state-owned utility Tenaga Nasional Bhd signed a PPA to buy power from Malakoff Bhd for its 640-MW project. The project's cost are estimated at about $370 million or about $0.58/MW. This is slightly higher than the other two examples, but bigger plant would always be cheaper due to efficiencies of size. Prayas, a tiny, three-member NGO from Pune, has studied project costs of about 40,000 MW of power projects between 1991 and 1998. The average project cost was in the region of $0.6 million/MW and this included small 30 MW plants as well. 

As a businessman, the cost of electricity matter to me to run my business efficiently. The main reason for my interest in the subject is the ridiculously high cost of power and the decline of competitiveness on this among other reasons. As a matter of interest, the energy from the Malaysian PPA is slated to be delivered at energy prices of about 3.2 cents/kWh under a 21-year PPA that is about Rs 1.54/unit. This represents the cheapest power on this side of the world and less than a one-third of both Enron as well as the price my plants pay today. So let us look at the calculations for investment in Dabhol again. $900 million is cost of an identical plant (the first Korean one of the same size and using identical turbines that is nearly a clone). 'Wait a minute,' you may ask me here, 'but did Enron not spend more money.' Yes we would probably need to factor some 'additional' costs. 

Let us add the cost of the LNG jetty, the regassification terminal and other add ons. (By the way these had very little to do with the Dabhol Power Plant. The LNG jetty was to the cornerstone of Enron's energy distribution business in India. But like any good supplier Enron billed all of it's costs to its client-Maharashtra State Electricity Board (MSEB)- which like any good public sector unit agreed to pay for things it did not need in the first place). Even with these add ons, the capital costs (proportionately) to MSEB ought not exceed $1.2 billion. Now doing business in India is particularly difficult. As Enron itself said, it had to spend a lot of money to 'educate' Indian decision makers. ('Educating' IDBI and ICICI on how to lend. So let us assume that the cost of doing business in India is an additional one or two per cent of project costs -two per cent in this case, adds another 24 million-Enron had of course claimed about 20 million in these 'additional' costs (in other words 'over and above project costs'-the now infamous 'education monies' of 20 million). The figure does not budge. 1,224 million. This represents a difference of 250 odd per cent! 

Let me be more generous and add, on say another 30 per cent to this-say $400 million. ($400 million is a very large number by the way, in today rupee terms nearly Rs 2,000 crore) for completely arbitrary costs. But this still brings us to $1,600 million odd. One would think the number above, $1,600 million, would be the cost of the project. However, we are not even close. Enron has claimed project costs to be nearly $3,400 million. I can think of perhaps a difference of a few per cent, but over a 100 per cent? The explanation perhaps lies in a little story that was related to a friend of mine. A few years ago, he was a consultant to an industrialist setting up a steel plant. He was looking at the numbers and felt that they did not add up. The industrialist put his head back, laughed and said, 'No one puts up projects in India so that you can make money after the project is commissioned and product starts selling. You put up a project so that you can make money while the project is being implemented'. 

I suspect that is exactly what has happened in the Enron project. The missing $1.7 billion odd has been probably siphoned off by over invoicing and other time honoured tricks. In other words, Enron has already recovered all its money that it had invested and also made a very generous return on the money it actually invested. At this stage, instead of demanding money at all, Enron should be worrying about returning the siphoned money in equity, perhaps about $400 million, and additionally, the $400 million it owes MSEB a result of the breach of its contractual obligations. To summarise, an equitable settlement at this stage would be that Enron pays us $800 million (about Rs 3,800 crore) and in return, we agree to forget the whole issue! Three days after the tragic events of September 11, when not only America but the entire world was in a state of deep shock, Lay ought to be told to stop screaming 'expropriation' and threatening sanctions on us. Instead he ought to be grateful for small mercies, count the money he has already made and simply lay off. Otherwise he may have to worry about some Indian prosecution. 
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THE TIMES OF INDIA, Saturday, October 20, 2001
MSEB asked to rescind tariff hike plan, Vidyadha Date

The Maharashtra government has been announcing subsidy on electricity sold to farmers, powerloom owners and other categories but not actually passing on the benefit to the Maharashtra State Electricity Board (MSEB), the distribution agency. This has added to the financial problems of MSEB. The dues to be given to MSEB run into hundreds of crores of rupees. It includes a subsidy of Rs 700 crore for farmers, Rs 300 crores for powerloom operators, Rs 600 crore to municipal bodies for use of power for water supply and Rs 215 crore for the Mula Pravara cooperative electric distribution society.The chairperson of MSEB Vinay Bansal has appealed to the Maharashtra Electricity Regulatory Commission to ask the government to pay the arrears to MSEB. Mr Bansal was responding to opposition voiced by a number of representatives of domestic, commercial and powerloom consumers before the Maharashtra Electricity Regulatory Commission (MERC) against the proposed power tariff? hike by MSEB. If it recovered the arrears and reduced its losses, MSEB could manage very well without any tariff increase, they said.Mr Bansal said the board suffered from various constraints. It could not cut off the power supply of municipal bodies because this would be in conflict with public interest. He said the board had improved its performance in various ways. There had been no load shedding in the past one week, he said. There had been no increase in arrears in the past one year as against the previous two years. MERC chairperson P. Subrahmanyam observed that the board was `more sinned against than sinning.' Its job was not easy and it could not improve its performance overnight, he said.

Experts during their submissions strongly opposed MSEB's move to increase tariff every year. S.R. Paranjpe, a former director of the Indira Gandhi Centre for Atomic Research, Kalapakkam, said his techno-economic evaluation of MSEB's working revealed several shortcomings and lapses. He said the board deliberately created the impression of a power shortage in the state last year in a bid to justify its purchase of power from Dabhol Power of Enron at exorbitant rates. The board resorted to deliberate load shedding as part of this exercise and in the process it lost revenue. Besides, sections which were getting? subsidised power were deprived of the supply. The power stations also? performed at an `under frequency' level posing several problems. The board should have resorted to demand and supply management. It should have asked farmers to consume power at night when the supply was easily available.When Dabhol company's power supply was reduced, MSEB's generation suddenly went up. This shows that earlier the board had deliberately operated below capacity. MSEB was disconnecting power supply to many consumers to show that it was taking action against defaulters. Yet, the consumption of power by consumers in these categories had gone up. It means, some consumers drew power from their neighbours unauthorisedly or resorted to some other means.

The small fry among them were being penalised while the big fish were being allowed to scot free, Mr Paranjpe said. Pradyumna Kaul, a management consultant and environmentalist, said MSEB had failed to improve its performance on the lines suggested by MERC last year. S.C. Karandikar, appearing on behalf of the Bhiwandi citizens' welfare society, complained that powerloom owners in Bhiwandi were unjustifiably being given a bad name. He faulted the MSEB on several counts and showed photographs depicting the sorry state of transformers in the town. He also complained that Bhiwandi experienced daily power cuts for three hours in morning and three hours in evening.He said transmission and distribution losses of the board had gone up, though the commission had stipulated last year that they be brought down. Some consumers also alleged that the MSEB was claiming subsidy from the government even for power not supplied to subsidised consumers. Pratap Hogade, vice-president of state Janata Dal (secular), called for? rejection of the entire tariff proposal. It was wrong to penalise consumers for the inadequacies of the board, he said. The board's deficit and its expenditure had gone up instead of going down. The commission should not allow frequent tariff revisions. More reprehensible, he said, was that the board had sought to effect the maximum increase for ordinary consumers, including domestic users, small traders, farmers and gram panchayats. Those using two or three bulbs face an increase of almost 250 per cent, Mr Hogade said.