Democrats Prepare to Duel Bush Over Energy Price Caps in West
The Wall Street Journal, 06/01/01

Electricity Trading Is Target of State Probe Regulation: A special Senate 
panel is investigating alleged price manipulation of power transactions.
Los Angeles Times, 06/01/01

Companies Rush to Purchase Their Indian Units, Boosting Share Prices of 
Concerns With Foreign Ties
The Wall Street Journal, 06/01/01

Exxon, Shell Poised to Win Saudi Deals --- They Appear Favored To Lead Key 
Projects In Coveted Gas Sector
The Wall Street Journal, 06/01/01

NEW PACKAGE TO RESOLVE DPC, INDIA'S MSEB SITUATION: OFFICIAL
Asia Pulse, 06/01/01

GLOBAL INVESTING: Betting on better times for utilities 
Financial Times; Jun 1, 2001

INTERNATIONAL ECONOMY, MIDDLE EAST & AFRICA: Hopefuls await details of Saudi 
gas deal Financial Times; Jun 1, 2001

FITCH PLACES INDIA ON NEGATIVE RATING OUTLOOK ON FISCAL CONCERNS
Asia Pulse, 06/01/01

Thomas E. White becomes Secretary of the Army
M2 Presswire, 06/01/01

Some light at last!
The Economic Times, 06/01/01

Calif. investigations focus on whether out-of state wholesalers manipulated 
energy prices
Associated Press Newswires, 06/01/01

California Lawmakers Eye Billing Businesses for Edison Rescue
Dow Jones Business News, 05/31/01

Construction of power plant in DeSoto County is underway
Associated Press Newswires, 05/31/01



Politics & Policy
Democrats Prepare to Duel Bush Over Energy Price Caps in West
By John Harwood and Jeanne Cummings
Staff Reporters of The Wall Street Journal

06/01/2001
The Wall Street Journal
A16
(Copyright (c) 2001, Dow Jones & Company, Inc.)

WASHINGTON -- If you talk to economists, many will say President Bush is on 
solid ground in opposing caps on soaring electricity prices in California and 
elsewhere. But if you talk to voters, many will suggest he has political 
problems. 
And now that Democrats control the U.S. Senate, they are poised to make those 
problems a lot worse.
Mr. Bush got a taste of what is coming in his widely touted showdown with 
California Gov. Gray Davis in Los Angeles this week. The Republican president 
repeated his familiar argument that capping wholesale electricity prices 
would do nothing to curb demand or increase the supply of power for 
California. But the Democrats' Mr. Davis, fortified by polls showing that 70% 
of Californians favor price caps, managed to get equal billing during Mr. 
Bush's visit for his argument that they are needed to keep the state from 
slipping into recession and threatening the national economy in the process. 
Because Sen. Jim Jeffords of Vermont left the Republican Party last week and 
changed control of the Senate, Democrats now have a more effective national 
platform to press the same arguments -- and to threaten Mr. Bush's political 
standing beyond the already hostile turf of California. The incoming chairman 
of the Senate Energy and Natural Resources Committee, Democratic Sen. Jeff 
Bingaman of New Mexico, says he plans to move soon on legislation capping 
prices for California and other Western states, a bill that has attracted 
some GOP support as well. 
"I think it's clear to anybody that the prices being charged for wholesale 
power are excessive," said Sen. Bingaman, in an interview while he was 
heading toward California on a fact-finding mission. "I don't believe it's 
going to be adequate to get us through this summer, to just continue saying 
that eventually supply will come into line with demand and the problems will 
be resolved." 
Meantime, the incoming chairman of the Permanent Subcommittee on 
Investigations, Democratic Sen. Carl Levin of Michigan, plans to investigate 
the role of oil companies in higher gas prices. "This is the manipulation of 
prices, and we've got to investigate it because our people in Michigan are 
absolutely furious," Sen. Levin says. Just as Republicans once used the 
machinery of Congress to probe then-President Clinton's problems, Democrats 
see ripe opportunities for embarrassing an ex-oilman president with strong 
links to Texas energy-producing companies that are profiting from today's 
supply squeeze. 
During the 2000 presidential campaign, five of the major companies now 
supplying power to California -- Duke Energy Corp., Dynegy Inc., Enron Corp., 
Reliant Energy Inc., and Williams Cos. -- gave some $3.6 million to Mr. Bush 
and the GOP, more than triple the amount donated to Democrats. Three of those 
companies are based in Mr. Bush's home state of Texas, which only adds to the 
political tensions. 
The Democratic offensive has the GOP worried. Price caps amount to "terrible 
policy, but good politics," frets Republican pollster Neil Newhouse. Mr. Bush 
now faces "a difficult job" overcoming the Democratic arguments for caps, he 
adds, because "control of the Senate has given them a megaphone on issues 
that they just didn't have before." 
That doesn't necessarily mean Mr. Bush ultimately will suffer grave damage. 
As congressional Republicans learned to their chagrin in battles with Mr. 
Clinton, the presidential bully pulpit remains the most potent weapon in 
American politics for framing policy debates. Even with that advantage, 
though, the Clinton administration found that the initial appeal of arguments 
on issues such as tobacco regulation and prescription drugs faded under 
sustained counterattack by Republicans and affected industries. 
And so far, polls are showing that Mr. Davis also is paying a political price 
in California for the crisis. Still, Mr. Davis, who faces re-election next 
year and may later seek the 2004 Democratic presidential nomination, believes 
he can limit the damage by emphasizing his efforts to expand supply and 
spotlighting the actions of energy companies in Texas and elsewhere. On CNN's 
"Larry King Live" this week, he complained that "money sucked out of this 
state" amounts to "a massive transfer of wealth" from Californians to the 
industry. 
Whatever the political ramifications, they aren't limited to California. 
Consumers in Washington, Idaho and Montana that are serviced by the same 
electric grid have seen 30% increases in their utility rates. That is why Mr. 
Davis, with support from some GOP governors in the West, is asking the 
Federal Energy Regulatory Commission to impose short-term wholesale price 
caps to help protect electricity consumers from soaring rates until new power 
plants approved for construction in California increase supply enough to 
bring prices down through market forces. California Democratic Sen. Dianne 
Feinstein and Oregon Republican Sen. Gordon Smith are offering legislation to 
accomplish that in the committee that Mr. Bingaman now will chair. 
As a matter of policy, most economists probably would agree with Mr. Bush's 
free-market position on price caps, though that sentiment is hardly 
unanimous. As he met with the president this week, Mr. Davis released a 
letter from 10 prominent economists backing price caps as a temporary remedy 
for a market "not characterized by effective competition." One of the 
signatories was Alfred Kahn, architect of airline deregulation under 
President Carter. 
But Bush economic advisers, heeding the free-market arguments that have held 
the high ground in regulatory policy debates since the Reagan era, insist 
that such caps would distort the energy market and be difficult to abandon 
even when market conditions turn more favorable for consumers. "Price caps do 
nothing to reduce demand, and they do nothing to increase supply," Mr. Bush 
said in California this week. 
Mr. Davis says the Federal Energy Regulatory Commission is obliged under law 
to assure "just and reasonable" prices, and he says he will sue the agency to 
force it to act despite the dismissal earlier this week of a similar lawsuit 
filed by California's Democratic legislative leaders. Whether the governor's 
effort succeeds, it could provide another forum in which supporters of price 
caps can make their case. In discovery, for instance, California attorneys 
may be able to get industry data on how much the wholesalers are paying to 
produce electricity and their real costs of delivering it. 
Such transactions are drawing attention because of the significantly higher 
prices being charged in California compared with other states. This week, for 
instance, the price of a million British Thermal Units of natural gas in the 
San Juan Basin in New Mexico was $2.80, said one economist for the Senate 
Energy Committee. But when that gas arrived at the Southern California 
border, she said, the price was $10.20 per million BTUs. 
Mr. Bush himself voiced concern about such differentials in his meeting with 
Mr. Davis, and ordered the FERC to step up monitoring for price gouging. He 
has designated Pat Wood, a recent FERC appointee who headed the Texas Public 
Utilities Commission during his governorship, as the administration's lead 
liaison to California. 
Mr. Wood, in fact, could end up an increasingly important player as the 
crisis in California and other Western states plays out this summer. Mr. 
Wood, who supported some price caps in Texas, is considered more flexible on 
the issue than is FERC's current chairman, free-market champion Curtis 
Hebert. During his confirmation hearings, Mr. Wood said it may be too late 
for price caps because the commission would need months to study materials 
and determine an appropriate market rate. 
If the administration continues resisting caps, Democrats vow to score 
political points heading into the 2002 congressional elections. "Bush is the 
individual who ginned this up into a crisis" by frequently calling attention 
to the nation's energy problems, says Jim Jordan, executive director of the 
Democratic Senatorial Campaign Committee. "Yet the administration won't 
consider any serious short-term action to alleviate the problem for the 
public." 
--- Energy Problems?

Public views of President Bush and energy problems, nationally and
among Californians:

Nationally
Q: In general, do you approve or disapprove of the way President Bush 
is handling his job as president?

Approve 52%
Disapprove 38%

Q: Based on what you have read or heard, do you favor or oppose
President Bush's plan to deal with the country's current energy
problems?

Poor job 49%
Good job 38%

Q: How do you think President Bush is handling energy?

Oppose 42%
Favor 38%
Unsure 20%

In California
Is it a good or bad thing for the federal government to cap energy
prices?

GOOD THING BAD THING NO OPINION

All adults 70% 24% 6%
Registered voters 68 26 6
Democrats 79 17 4
Republicans 57 37 6
Other 63 29 8

Sources: National poll numbers from CNN/Time poll; California numbers 
from the Field Poll

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



California; Metro Desk
Electricity Trading Is Target of State Probe Regulation: A special Senate 
panel is investigating alleged price manipulation of power transactions.
RICH CONNELL; ROBERT J. LOPEZ
TIMES STAFF WRITERS

06/01/2001
Los Angeles Times
Home Edition
B-1
Copyright 2001 / The Times Mirror Company

California officials are probing a vast private network of electricity 
trading floors suspected of being a central culprit in California's spiraling 
energy prices. 
A special state Senate panel investigating alleged manipulation of the energy 
market is zeroing in on hundreds of thousands of secretive transactions each 
year that help determine whether California will have the power it needs--and 
what it will have to pay to get it. Those activities also are central to a 
lawsuit by the San Francisco city attorney, who has accused power companies 
of using unfair business practices to reap huge profits from the state's 
volatile and vulnerable energy market.
A single electron may be traded nearly a dozen times, often at escalating 
prices, before reaching California. By then, the actual cost of producing the 
electricity may have no relation to its price. 
Unlike other commodity and stock exchanges, the frenzied daily activity on 
the energy trading floors escape any independent oversight, which critics 
contend makes the operations ripe for collusion and price-fixing. 
"They're playing the California power game," said attorney Michael Aguirre, a 
former federal prosecutor now suing power companies on behalf of Lt. Gov. 
Cruz Bustamante. "The trading is the epicenter of the whole enchilada. They 
trade and inflate the value." 
Power company representatives say their trading floors operate legally and 
ethically. "I don't think there has ever been the slightest shred of evidence 
[of] something illicit or wrongdoing," said Gary Ackerman of the Western 
Power Trading Forum, an industry trade group. 
Ackerman and players in the market say prices are not always ratcheted up 
through the trading. Often, they say, traders can match supply and demand to 
help stabilize prices through daily transactions and long-term contracts. 
Still, Aguirre and others say, these sophisticated trading operations have 
outmaneuvered bureaucrats at Cal-ISO and the state Department of Water 
Resources, the agencies responsible for buying billions of dollars worth of 
power over the past several months. 
The sprawling trading floors, scattered across the country, are marvels of 
high technology. Amid banks of computers and huge wall screens that track 
weather, electricity prices and demand across vast regions, mathematicians, 
meteorologists and rows of gung-ho traders try to optimize profits buying and 
selling one of the world's most volatile commodities. 
"These are trading floors that are well outside any regulatory format," state 
Sen. Joseph Dunn (D-Santa Ana) said Thursday. "What impact do these trading 
floors have on the situation in California?" 
Plant Operations Also Scrutinized 
Although trading floors are an important focus of state authorities, the 
probes of the power companies include an array of issues. Investigators are 
digging into the operations of power plants to determine whether unnecessary 
shutdowns have been used to tighten supplies and hike prices. Dunn, a onetime 
consumer attorney, is heading the Senate investigation panel that is trying 
to unravel these issues and the role of the trading floors, operated by the 
nation's largest power marketers: Enron, Mirant, Duke Energy, Dynegy Inc., 
Williams Cos. and Reliant. 
The committee is seeking records that could determine whether the power 
companies have swapped information on trading tactics to maximize prices. 
Among dozens of categories of documents Dunn's committee has requested--and 
may ultimately subpoena--are computer records from trading floors, recordings 
of communications between traders for different companies and training 
manuals for traders. 
"We know one product of that trading is it drives up the price. . . . What 
are you trading for, other than to drive up the price?" Dunn said in a recent 
interview. 
His committee, which has yet to uncover any wrongdoing, is battling with the 
power companies to obtain information the firms insist is confidential. 
San Francisco City Atty. Louise H. Renne also is focusing on trading-floor 
activity. 
"That is a central concern of ours," said Owen Clements, Renne's chief of 
special litigation. Clements suspects power traders may be "churning" 
megawatts through repeated sales and boosting prices. 
"If everyone passes it around and makes a profit, and the ratepayer and the 
state of California are stuck with the bill . . . that certainly looks like 
an unfair business practice," he said. 
A spokesman for Houston-based Enron, which operates one of the busiest 
trading operations, said critics misunderstand the energy market, where 
profits are not necessarily tied to high prices. 
"We're agnostic about the direction of prices," Mark Palmer said. "We make 
money one way or the other." He said the trick is in having a diversified 
portfolio--and offering unique risk services--to absorb the changing market. 
Palmer said those implying misconduct on the trading floors are "100% 
politically motivated. . . . These are folks who want to return California to 
[power] regulation." 
Still, some industry officials acknowledge that some additional oversight of 
trading floors may be needed. Ackerman, of the power trading association, 
said his members have asked federal regulators to consider an auditing 
program to review trading activities. 
"If people don't have confidence in trading floors," Ackerman said, "that's a 
problem." 
* 
Times staff writer Miguel Bustillo contributed to this story.

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




World Stock Markets
Companies Rush to Purchase Their Indian Units, Boosting Share Prices of 
Concerns With Foreign Ties
By Jesse Pesta
Staff Reporter of The Wall Street Journal

06/01/2001
The Wall Street Journal
C11
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW DELHI -- Foreign companies are on a shopping spree in India's stock 
market, buying up their own affiliates and hoping to take them private. 
In recent weeks, companies ranging from Otis Elevator Co. and Carrier Corp., 
both of Farmington, Conn., to Hoganas AB of Sweden, a player in the global 
iron-powder business, have made open offers for the shares of their Indian 
units, sometimes at prices that suggest they consider themselves a bargain. 
Boston chemicals maker Cabot Corp. offered 100 rupees ($2.13) a share for 
Cabot India Ltd. at a time when it was trading around 55 rupees.
Royal Philips Holland has offered to buy the 17% of light-bulb maker Punjab 
Anand Lamp Industries it doesn't already own, according to Punjab. Otis and 
Carrier, which are units of United Technologies Corp., Hartford, Conn., have 
offered to buy all shares outstanding of their Indian affiliates, Otis 
Elevator Co. (India) Ltd. and Carrier Aircon Ltd. The price for Carrier 
shares was a nearly 100% premium to the stock's price prior to the offer. 
The buybacks have triggered a surge in the stocks of other companies with a 
foreign pedigree. Companies including Rayban Sun Optics India Ltd. (a unit of 
Bausch & Lomb Inc., Rochester, N.Y.) and Philips India Ltd. (a unit of Royal 
Philips Holland) have seen share prices rise as much as 40% or more since the 
mid-May offers for Otis and Carrier, which were two of the early ones in the 
current wave. 
Both Rayban and Philips India deny open offers are planned. In any case, 
Philips already boosted ownership in its Philips India unit to 83% from 51% 
late last year. 
In contrast to the surging shares of multinationals since mid-May, the Bombay 
Sensitive Index has risen only 1.56%. It closed yesterday at 3631.91, down 
30.13. 
The trend has several drivers. For one thing, Indian stocks remain battered 
after a rash of big market scandals earlier this year. Meantime, taking a 
company private means it no longer is required to share as much information 
about its business either with the market or a local partner. "In tough times 
it will safeguard your interest," says Jignesh Shah, strategist at Ask-RJ 
Investment Management in Bombay. 
But most significantly, India has slowly made it easier in recent years for 
foreigners to invest. Indeed, the buyback trend contrasts with the feud 
between Dabhol Power Co. and its customer, the Maharashtra State Electricity 
Board, over unpaid electricity bills. Dabhol, which is 65%-owned by Houston's 
Enron Corp., is India's largest foreign investment and an emblem of the 
difficulties foreign companies have encountered through the years. But the 
buyback trend "works against the story of negative foreign-investment 
environment" in India, one analyst notes. 
As a rule, the companies play down the importance of stock price. Hoganas's 
buyback for instance reflects the company's global strategy, but reflects as 
well on a liberalizing India: Everywhere else in the world Hoganas owns 100% 
of its subsidiaries, even Japan and China, says Virendra Sud, managing 
director. But India didn't allow full foreign ownership 15 years ago, when 
the company came here, he says, or else "we would have done it then." It's 
purely coincidental that the buyback comes just as the stock market "has sort 
of hit rock bottom," he says. 
Otis attributes its buyback partly to India's growing appetite for more 
sophisticated elevators, which means transferring advanced designs here. 
Technology transfer heightens the need for closer cooperation with the 
parent, says Managing Director Ashok Malhotra. But the company's reason for 
going public in the first place sheds light on the regulatory cycle playing 
out today in India. In the 1970s, India went through a phase of requiring 
foreign companies to be part locally owned, so Otis made the public offer 
that it is trying to undo today. "You have to work under the rules of the 
time," Mr. Malhotra says. 
--- 
Yesterday's Market Activity 
Nasdaq's losses overnight pressured markets throughout Asia as Tokyo blue 
chips tumbled 1.7% and South Korea's benchmark index fell 2.6%. European 
markets rebounded somewhat from the previous day's declines, though volume 
was thin. Overall, the Dow Jones World Stock Index rose 0.10%, or 0.20, to 
195.33. Excluding the U.S., the index fell 0.68%, or 0.96, to 141.08. 
In TOKYO, the Nikkei Stock Average was down 1.7%, or 231.21 points, to 
13262.14. Nomura Securities downgraded its ratings on Fujitsu, Toshiba and 
NEC, causing a broad slump in technology shares. Fujitsu ended down 2.8% at 
1,543 yen, NEC slumped 3.9% to 1,947 yen, and Toshiba fell 3.6% to 675 yen. 
In HONG KONG, the Hang Seng Index ended down 1.8%, or 245.72 points, at 
13174.41. China Mobile fell 2.8% or 1.1 Hong Kong dollars to close at 
HK$37.80. Property concern Cheung Kong dropped 3.4% to HK$85 and Sun Hung Kai 
finished down 2.4% at HK$72.75. 
In LONDON, the FTSE 100 Index slipped 0.01%, or 0.8 points, to 5796.10. 
Services company Rentokil Initial surged 12.9% to 215 pence after it said 
sales from continuing businesses were up 7.1% and operating profit was up 9% 
year on year. It also said it has bought back 120 million of its own shares 
since March. Invensys closed 6% higher at 142 pence after posting results in 
line with expectations. Retailer Boots ended 3.5% higher at 597 pence after 
posting earnings results in line with expectations. 
In PARIS, the CAC 40 Index closed up 0.2%, or 9.92 points, to 5454.19. 
Alcatel closed up 2.4% to 29.95 euros following the release Wednesday of 
weaker-than-expected results and the demise of merger talks with Lucent 
Technologies. J.P. Morgan cut its earnings-per-share forecast for the 
communications-equipment supplier. Deutsche Bank also expressed negative 
sentiment about the company, saying an industry turnaround is unlikely before 
the fourth quarter of 2001. Car maker Renault closed down 1.1% to 55.15 
euros. Lehman Brothers cut its 2001 earnings forecast, citing exposure to 
falling demand in U.S. and Europe. 
--- MSCI Indexes

% FROM
May 30 May 29 12-00

U.S. ........... 1183.7 1201.5 -5.3
Britain ........ 1723.9 1744.4 -6.4
Canada ......... 1030.8 1049.4 -10.9
Japan .......... 828.4 844.2 +2.5
France ......... 1763.4 1794.3 -7.3
Germany ........ 755.2 767.4 -7.7
Hong Kong ...... 6844.0 6920.0 -11.0
Switzerland .... 939.5 946.6 -7.6
Australia ...... 700.3 702.9 +9.4
World Index .... 1120.6 1136.4 -8.2
EAFE MSCI-p .... 1325.6 1342.7 -11.2

As calculated by Morgan Stanley Capital International Perspective,
Geneva. Each index, calculated in local currencies, is based on the
close of 1969 equaling 100.

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


International
Exxon, Shell Poised to Win Saudi Deals --- They Appear Favored To Lead Key 
Projects In Coveted Gas Sector
By Bhushan Bahree
Staff Reporter of The Wall Street Journal

06/01/2001
The Wall Street Journal
A11
(Copyright (c) 2001, Dow Jones & Company, Inc.)

PARIS -- Exxon Mobil Corp. and the Royal Dutch/Shell Group appear poised to 
win coveted leadership roles this weekend in a historic reopening of Saudi 
Arabia's energy industry. 
People familiar with developments said that barring last-minute upsets, 
Exxon, the world's largest publicly owned oil company, will be named operator 
of the largest opening being offered by the Saudis, the South Ghawar 
natural-gas project that will require investment of $15 billion and is named 
after the world's largest oil field, in the country's eastern province. But, 
they cautioned, because Shell has been competing hotly for South Ghawar, 
nothing can be taken for granted until the Saudis officially name the winners 
and sign memorandums of understanding on Sunday.
As of late last night, Shell, the second largest company, was expected to win 
the second prize: leadership of the Shaybah gas project, which requires 
investment of $5 billion and is named after a recently developed oil field in 
the kingdom's remote Empty Quarter, a southeastern desert region. Saudi 
Arabia already has named Exxon leader of the third and last gas project 
opened to foreign investment, the Red Sea project that requires investment of 
as much as $5 billion. 
Saudi Arabia's energy industry was nationalized in the 1970s, but over the 
past two years has been reopened to foreign investment, prompting a fierce 
contest among the world's largest oil companies. The people familiar with 
developments cautioned that until the choices have been endorsed by an 
11-member ministerial committee headed by Saudi foreign minister Prince Saud 
al-Faisal, and given the final nod by Saudi Crown Prince Abdullah, they 
couldn't be considered final. 
The people said the ministerial committee met late yesterday ahead of a 
formal signing ceremony planned for Sunday in Jeddah, the Saudi city on the 
Red Sea coast. Such is the importance of getting into Saudi Arabia that the 
chief executives of the eight companies chosen to participate in the gas 
projects are flying to Jeddah to sign the memorandums, a prelude to 
negotiations about fiscal and other terms. Final agreements aren't expected 
until year's end at the earliest. 
Officials of Exxon, Shell and the Saudi government declined to comment on the 
choices made by the kingdom, which has the world's largest crude reserves and 
is fifth in the natural-gas reserves after Russia, Iran, Qatar and the United 
Arab Emirates. A leadership role -- or operatorship in industry parlance -- 
brings the opportunity to set the pace of the project and create local 
networks that can prove valuable for future projects. 
The kingdom still isn't allowing foreign companies into its crude-oil 
business, which is run by the state-owned Saudi Aramco, but foreign oil 
companies hope they eventually will be allowed into that sector, too. Indeed, 
Aramco is expected to participate in the gas projects opened to foreigners, 
with voting rights that have yet to be determined. The projects are 
wide-ranging and encompass a long chain from exploration and production of 
natural gas, to its transportation and use to generate electricity and in 
water desalination plants. 
Last month, Saudi Arabia named eight foreign companies, from a list of 11, to 
take part in three consortiums for these projects. Besides Exxon and Shell, 
they are BP PLC, TotalFinaElf SA, Conoco Inc., Phillips Petroleum Corp., 
Occidental Petroleum Corp. and Enron Corp. The three companies that sought 
but failed to get a place are Chevron Corp., ENI SpA, and Marathon Oil Canada 
Inc. 
Industry officials say the competition was some of the fiercest ever. Said a 
senior industry executive: "Everybody is looking 10 years down the road, and 
the place to be is in Saudi Arabia."

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




NEW PACKAGE TO RESOLVE DPC, INDIA'S MSEB SITUATION: OFFICIAL

06/01/2001
Asia Pulse
(c) Copyright 2001 Asia Pulse PTE Ltd.

NEW DELHI, Jun 1 Asia Pulse - A new package 'acceptable to all' is being 
evolved to resolve the seven-month old wrangle between Enron promoted Dabhol 
Power Company and the Maharashtra State Electricity Board (MSEB) over the 
issue of cost of power and payment of bills, A V Gokak, the federal 
government's representative in Maharashtra's negotiation committee said 
today. 
"Things are moving in the right direction and government is serious to 
resolve the crisis," Gokak told PTI after a meeting with the Finance 
Minister, Yashwant Sinha, here.
Gokak said none of the parties to the dispute are in favour of closure of the 
$3 billion project. 
Earlier, the Indian government had asked Central Electricity Authority (CEA) 
to explore possibility of selling the DPC power to deficient states. But the 
Power Minister, Suresh Prabhu, had ruled out possibility of National Thermal 
Power Corporation (NTPC) lifting DPC power. 
Prabhu had stated that the government would make all efforts to settle the 
matter in consultation with the stake holders. 
Asked if any time frame has been set to break the impasse, Gokak said "delay 
is in nobody's interest, but there are no readymade solutions." 
The negotiating committee, headed by Madhav Godbole, has held two rounds of 
negotiations with the last round held earlier this week being termed 
"positive" by both DPC and the MSEB. 
Gokak is believed to have put forward alternative solutions in resolving the 
crisis. 
(PTI) MYB 01-06 2030

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


		

		
		
		
		GLOBAL INVESTING: Betting on better times for utilities 
Financial Times; Jun 1, 2001
By JOHN DIZARD

		The share price of one large electron-pushing company is up nearly 70 per 
cent this year, but could be in line for another pop to the upside. 
		That may sound like a report from Mary Meeker, the formerly omniscient 
internet stock guru, or like your broker's stock-of-the-week pitch. 
		Well, neither will be making such a claim at the moment - their legal 
departments have them on too tight a leash. And the stock I have in mind is 
not a technology stock in the sense of a silicon basher or programmer farm. 
It is Edison International, the California electric power holding company, 
whose Southern California Edison utility has been very publicly hovering at 
the edge of bankruptcy for several months. 
		The day after President George W. Bush made his "You're on your own, 
California" speech, Edison's share price dropped more than 5 per cent. And 
while the year-to-date rise, from Dollars 6.25 to Dollars 10.50 this week, 
has been impressive, share-holders have seen a 46 per cent loss year on year. 
		So why should anyone be optimistic about the chances for the common 
shareholders in the holding company? Essentially because the state 
legislators are being terrified into coming up with a bail-out plan - not 
exactly the plan of Gray Davis, the governor of California, but one that will 
preserve some value for the holding company shareholders and give them a more 
predictable future. 
		By now every one knows that the California utilities were squeezed by fixed 
retail rates and rising wholesale costs. Edison has said it has Dollars 3.5bn 
in "undercollected" wholesale power purchase costs. The state of California 
(and its taxpayers) stepped in to buy power when the utilities ran out of 
borrowing capacity in January. PG&E, the other big investor-owned utility, 
filed for Chapter 11 protection back in April. Edison held off from filing, 
preferring to try to get a state government bail-out. 
		Much is missing from the standard account. For example, consumer groups 
believe there is a lot of padding in the "undercollect", and that the holding 
company should cough up billions in assets paid for with dividends supplied 
by the SCE subsidiary. Many of the California public believe that the 
merchant generators such as Duke Energy and Enron should pay back overcharges 
rather than get any back bills paid. 
		And yet the legislative tide is turning in Edison's favour. Within the next 
couple of weeks, I expect the Democrats - who control both the state Assembly 
and Senate - to come up with a bail-out plan for Edison that has a good 
chance of passing both houses and being signed into law by the governor. The 
reason is the the distinction they have begun to make between ratepayers and 
taxpayers. 
		To a legislator, tax payments, as distinct from utility rates, are things 
that run through their hands and go to favoured programmes. Taking over the 
payment of electric wholesale costs did not look too scary back in January, 
when Governor Davis said it would go on for a few weeks and be easily covered 
with the cash on hand. Well, the state has paid out nearly Dollars 8bn and 
its cash reserves will be under increasing pressure until a Dollars 
12bn-Dollars 13bn bond issue can be floated some time after August 15. A 
decline in tax receipts is putting even greater stress on the state 
government's resources. 
		So the legislators want to get as far out of the power business as they can, 
as fast as they can. That means saving Southern California Edison from 
Chapter 11. 
		The deal being negotiated within the Democratic leadership looks something 
like this. The state will make a large loan, call it Dollars 1bn, against the 
security of Edison's transmission system, to be repaid either through a sale 
of the system to the state or a deduction from the allowed return on the 
towers and wires. The holding company will pay out about Dollars 400m to prop 
up the subsidiary. The rest of the undercollect will be paid for by a 
"dedicated rate component", or charge to ratepayers - mostly commercial, 
industrial and large users - that cannot be revoked by the Public Utility 
Commission. The generators can get 70 cents on the dollar for their back 
bills right away, or they can litigate forever. 
		There are a few details that lawyers will quibble over, such as the 
constitutionality of retroactively raising rates. And some may ask if it is 
not cheaper just to let Edison go into Chapter 11, because even with the plan 
it will not be able to take the state's place as a wholesale buyer at any 
time soon. But I would bet on its passing anyway. And that would be good news 
for Edison International shareholders, since they will have held on to most 
of the holding company's assets, and still have an ongoing business in the 
subsidiary. 
		Don't bet the rent money on it, but it looks closer to me than a comeback in 
spending on semiconductors. Maybe the children's college money - if you lose 
it, they should work harder anyway. 
		Copyright: The Financial Times Limited
		
		

		
		
		
		
		INTERNATIONAL ECONOMY, MIDDLE EAST & AFRICA: Hopefuls await details of Saudi 
gas deal Financial Times; Jun 1, 2001
By ROBIN ALLEN and MATTHEW JONES

		ExxonMobil and Royal Dutch/Shell are the favourites to lead two of Saudi 
Arabia's multi-billion dollar upstream gas projects to be opened to foreign 
companies, according to industry observers in the Middle East. 
		A committee of Saudi ministers responsible for the developments was due to 
meet late last night. The companies are expected to learn the size of their 
stakes either late today or early tomorrow, an official close to the projects 
said. 
		Saudi Arabia, which has excluded foreign companies in upstream operations 
since 1975, last month announced the selection of eight oil groups to 
participate in three gas projects requiring initial investment of around 
Dollars 25bn. 
		Exxon has already been appointed leader of Core Venture 2, on the Red Sea 
coast, which also includes Occidental Petroleum and Enron Corp of the US. The 
partners in Core Venture 3, the Shaybah development in the south-eastern 
quarter of the kingdom, are Shell, TotalFinaElf of France and Conoco of the 
US. 
		Analysts and industry experts in Riyadh and Abu Dhabi said Exxon was expected 
to be named leader of South Ghawar, also known as Core Venture 1, with a 35 
per cent stake. BP and Shell would each be awarded 25 per cent shares while 
Phillips would receive 15 per cent. 
		Exxon was expected to be given a 70 per cent share of Core Venture 2, with 
the remainder split equally between Occidental and Enron. Shell was tipped to 
lead Core Venture 3 with 40 per cent of the project, while Total and Conoco 
were expected to win 30 per cent each. 
		One analyst said there was an outside chance that BP would be awarded 
leadership of Core Venture 1 for political reasons. 
		A BP official last night said the group had had no indication of the 
decision, but added: "Even if we are not selected we will still have a very 
significant part in a huge project. The important thing is to be there." 
		Additional reporting by Robin Allen in Dubai 
		Copyright: The Financial Times Limited
		
		



FITCH PLACES INDIA ON NEGATIVE RATING OUTLOOK ON FISCAL CONCERNS

06/01/2001
Asia Pulse
(c) Copyright 2001 Asia Pulse PTE Ltd.

NEW DELHI, June 1 Asia Pulse - International ratings agency Fitch has changed 
the Rating Outlook on India's sovereign ratings from Stable to Negative, 
citing well-flagged concerns about fiscal policy, privatization and the 
deterioration in the foreign investment climate. 
Fitch currently rates the foreign and local currency obligations of India at 
BB+ and BBB- respectively.
The negative rating outlook reflects the slow progress of the government in 
implementing privatization and addressing the weaknesses in public finances. 
The fiscal-monetary policy mix in India remains unfavorable, resulting in 
relatively high real interest rates and crowding out of private sector 
investment. 
Until the authorities display a concerted willingness to address fiscal 
imbalances, India will remain locked in a stop-go cycle of growth and the 
sovereign could slip into a debt trap, Fitch said in a press statement. 
The recent corruption scandal, involving the ruling Bhartiya Janata Party 
(BJP)-led coalition government, threatens to exacerbate these trends and slow 
economic reform. 
India's general government fiscal deficit at over 9 per cent of GDP is among 
the highest in the realm of rated sovereigns. 
Persistently high fiscal deficits have led to a build-up of the general 
government's debt burden, estimated to be over 60 per cent of GDP. 
In addition, the government has guarantees outstanding amounting to 9 per 
cent of GDP. 
Fitch reiterates the point that such guarantees, issued to back mainly 
infrastructure projects, are contingent liabilities of the government. 
This has most recently been borne out in the case of Enron, where the US 
power company has invoked a central government guarantee for payment arrears 
accumulated by the Maharashtra State Electricity Board. 
ASIA PULSE 01-06 1609

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


Thomas E. White becomes Secretary of the Army

06/01/2001
M2 Presswire
Copyright 2001 M2 Communications, Ltd. All Rights Reserved.

Thomas E. White became the 18th secretary of the Army today after being 
nominated by President George W. Bush on May 1, 2001, and confirmed by the 
Senate on May 24. 
White expressed his gratitude to the president and the secretary of Defense 
for their confidence and trust in him. During his confirmation hearing before 
the Senate Armed Services Committee on May 10, White identified four 
objectives he will pursue as secretary of the Army in support of the 
president and the secretary of Defense: to invest in people, to assure 
readiness, to transform the entire Army and to adopt sound business practices.
The secretary of the Army is the U.S. Army's senior civilian, responsible by 
statute for all matters relating to Army manpower, personnel, reserve 
affairs, installations, environmental issues, weapons systems and equipment 
acquisition, communications and financial management. The secretary leads a 
work force of some one million active duty, National Guard and Army Reserve 
soldiers and 225,000 civilian employees. The department has an annual budget 
of approximately 70 billion dollars. 
Before his appointment as secretary of the Army, White was the vice chairman 
of Enron Energy Services, the Enron corporation subsidiary responsible for 
providing energy outsource solutions to commercial and industrial customers 
throughout the United States. 
White began his service to the nation in 1967, after graduating from the U.S. 
Military Academy at West Point. His distinguished career as a commissioned 
Army officer included two tours in Vietnam and service as commander, 1st 
Squadron, 11th Armored Cavalry Regiment; commander, 11th Armored Cavalry 
Regiment, V Corps; and executive assistant to the chairman, Joint Chiefs of 
Staff. He retired from the Army in 1990 with the rank of brigadier general. 
For additional information, see the Army web site at 
http://www.dtic.mil/armylink or contact Army Public Affairs at (703) 
697-7550. 
((M2 Communications Ltd disclaims all liability for information provided 
within M2 PressWIRE. Data prepared by named party/parties. Further 
information on M2 PressWIRE can be obtained at http://www.presswire.net on 
the world wide web. Inquiries to info@m2.com)).

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


Some light at last!

06/01/2001
The Economic Times
Copyright (C) 2001 The Economic Times; Source: World Reporter (TM)

NEW Delhis intervention in the tussle between Enron and the Maharashtra 
government is a welcome development. The government wants the Central 
Electricity Authority to find out whether electricity generated by Dabhol 
Power Company can be sold to states which need power badly if it cant be used 
by Maharashtra.
This is a good idea India is seriously short of reliable, quality electricity 
supply. Maharashtra claims that it doesnt need even the 740 MW now generated 
by DPC at going rates. This creates further trouble: the lower Maharashtras 
offtake, the higher the unit price of DPC power. Once other power hungry 
states start buying up electricity from DPC, the price per kilowatt hour will 
fall sharply. 
The first step to getting DPC out of the hole that Enron, Maharashtra and 
successive Indian governments have dug it into, is to allow the utility to 
sell power to anyone who wants to purchase it at going rates. However, asking 
central utilities like the fledgling Power Trading Corporation to evacuate 
DPC power for sale outside Maharashtra wont solve the hassles of the sector 
for all time. 
The government should modify electricity laws to allow generating companies 
to sell electricity to all users immediately. An ordinance passed by New 
Delhi will do the trick power is a concurrent subject, with central 
legislation overriding states. 
But even if that happens, it is doubtful if there will be too many buyers for 
Dabhol power at its present price about Rs 4 per unit with the plant running 
at high capacities. If the price is to be brought down further, the deal with 
MSEB will have to be renegotiated. 
The Godbole Committee says that some financial restructuring, de-dollarising 
of debt and equity, and so on can bring prices down by about 30 per cent from 
DPCs minimum Rs 4 per unit rate today. 
Otherwise, as the GC points out, it will be impossible for the project to be 
viable at current tariffs. India desperately needs electricity to grow. For 
the power sector to grow, reforms are necessary at every level 
renegotiations, yes, but also changes in laws and the rules of the game.

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



Calif. investigations focus on whether out-of state wholesalers manipulated 
energy prices
By MICHAEL LIEDTKE
AP Business Writer

05/31/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

SAN FRANCISCO (AP) - State energy regulators say they are close to finishing 
probes into whether electricity wholesalers illegally aggravated the state's 
power squeeze. 
In one year, California's power crisis has raised customer rates by $5.7 
billion and dumped a $13 billion bailout bill on taxpayers. State officials 
hope to recover the money if they find evidence that out-of-state wholesalers 
manipulated the market to illegally driving up prices.
The wholesalers say they are being turned into scapegoats for a 1996 
deregulation law sculpted by California lawmakers and the state's two largest 
utilities, Pacific Gas and Electric and Southern California Edison. 
The utilities have reported a combined $8.2 billion in losses since June 
2000. 
Two legislative committees are investigating allegations that wholesalers 
created artificial supply shortages that drove wholesale electricity prices 
as high as $1,900 per megawatt hour. Before June 2000, wholesale prices for 
energy sold under similar terms rarely climbed above $150 per megawatt hour. 
At least five lawsuits, including one filed by San Francisco City Attorney 
Louise Renne, seek damages from wholesalers on behalf of all Californians. 
"I don't think these are going to be very hard cases to make," said Owen 
Clements, chief special litigator for San Francisco. "Even if they didn't 
break the letter of the law, they clearly have violated the spirit of the 
law." 
Attorney General Bill Lockyer is offering multimillion-dollar rewards to 
power plant workers and energy traders who provide the state with inside 
information about wholesaler's decisions. 
"Everyone feels like they're being ripped off. There's a lot of emotional 
belief that unfair things have been done, but we're still working through the 
case," said Lockyer, a Democrat who voted for the deregulation law when he 
served in the state Senate. 
The state utilities commission is inspecting power plant documents that may 
show whether some facilities shut down unnecessarily to diminish supply. The 
commission and Lockyer are investigating whether the plants then increased 
production to reap big profits. 
Power wholesalers maintain that the plants, many of which are 30 to 40 years 
old, shut down for legitimate equipment repairs and maintenance. 
"No one in our industry cuts back on production so a competitor can make more 
money. It just doesn't happen, at least not on planet Earth," said Gary 
Ackerman, executive director of the Western Power Trading Forum, a trade 
group. 
The Federal Energy Regulatory Commission earlier this year alleged that 
Tulsa, Okla.-based Williams profited from the closure of two Southern 
California power plants owned by a business partner, Arlington, Va.-based AES 
Corp. 
Without admitting wrongdoing, Williams refunded $8 million to settle the 
charges. 
California's investigations are examining the conduct of Williams, as well as 
several other prominent power wholesalers, including Houston-based Enron 
Corp., Dynegy Inc., and Reliant Energy, Charlotte, N.C.-based Duke Energy and 
Atlanta-based Mirant Corp. 
Cohen said the utilities commission could file a civil lawsuit against the 
wholesalers by the end of June. Lockyer expects to wrap up an investigation 
in late July at the earliest. 
--- 
On The Net: 
California Public Utilities Commission: http://www.cpuc.ca.gov 
California Attorney General: http://www.caag.state.ca.us 
http://www.enron.com 
http://www.reliant.com 
http://www.dynegy.com 
http://www.duke-energy.com 
http://www.williams.com 
http://www.mirant.com

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


California Lawmakers Eye Billing Businesses for Edison Rescue
By Jason Leopold

05/31/2001
Dow Jones Business News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Dow Jones Newswires 
LOS ANGELES -- California lawmakers are mulling yet another set of ideas for 
rescuing embattled Southern California Edison, and this time businesses would 
be on the hook.
In an attempt to deflect charges of a bailout that have thus far stymied 
efforts to restore the utility to solvency, legislators are now considering 
ways to shift the burden of financing the rescue from residential ratepayers 
to the state's largest businesses, aides to key state lawmakers said this 
week. 
The ideas being worked over by Senate President Pro Tem John Burton, Assembly 
Speaker Robert Hertzberg and Assemblyman Fred Keeley have yet to take shape 
as formal proposals. But an aide to Burton said some key lawmakers are so 
"desperate" to keep Edison International (EIX) utility Southern California 
Edison from following PG&E Corp. (PCG) unit Pacific Gas & Electric into 
bankruptcy court that they are willing to consider anything that will takse 
residential consumers out of the equation. 
"The idea is that the large industrial customers are the ones who pushed for 
deregulation in the first place, so they should be responsible for bailing 
out Edison," the aide said. "We're looking to take the burden off of 
residential ratepayers." 
The premise of a plan discussed by lawmakers on a conference call Thursday is 
to designate Southern California Edison's largest commercial ratepayers as 
non-core customers. Those customers -- some 3,600 users of more than 500 
kilowatt-hours a month -- would be responsible for financing the cost of 
power the utility must purchase or have purchased for it in the wholesale 
market. The non-core customers would also help the utility recoup most of its 
$5.5 billion in unrecovered power costs through a surcharge on their bills. 
Core residential customers would be protected from the wholesale power market 
as the primary beneficiaries of the low-cost power the utilities generate 
themselves or have locked up in long-term contracts. 
Enron Pushing Access to Customers 
Separately, Enron Corp. (ENE) has been lobbying lawmakers for several weeks 
to win approval to sign power-supply contracts with Southern California 
Edison's largest commercial customers, leaving the utility to serve just its 
residential customers and small businesses, aides to Gov. Gray Davis, Messrs. 
Burton and Hertzberg said. 
An Enron executive confirmed that the company sent a four-page proposal to 
Mr. Hertzberg proposing that Southern California Edison's large industrial 
customers sign so-called direct-access contracts with Enron. Enron also has 
recently made a presentation about direct access to some members of the 
California Chamber of Commerce. 
Under the proposal, heavy users would be required to contract directly with 
companies like Enron for their power. 
Direct access was a key part of the state's 1996 deregulation plan, but was 
scrapped early this year when the state started buying wholesale power in 
place of the utilities. 
The core/non-core proposal is one of several being discussed by lawmakers as 
alternatives to a memorandum of understanding Mr. Davis struck with Edison in 
April. The MOU -- which doesn't vary much from an agreement in principle 
reached in February -- has been called dead on arrival by some lawmakers, who 
have been mulling various alternatives rather than moving the agreement 
forward. 
State Sen. Debra Bowen, a Redondo Beach Democrat and chairwoman of the Senate 
energy committee, said there are so many "Plan B's" floating around the 
Legislature that, "We're going to need to hire an apiculturist." 
Steve Maviglio, a spokesman for the governor, said the Davis administration 
is still dedicated to seeing legislation to enact the memorandum of 
understanding move through the Legislature, but said separating the utility's 
"core and non-core" customers would be at the forefront of new discussions. 
It was too early to say whether the governor would support the plan, he said. 
Dominic DiMare, a lobbyist with the California Chamber of Commerce, said the 
chamber has told the Davis administration that shifting the burden of the 
Southern California Edison bailout to businesses is "a very bad idea" that 
could cost the state billions of dollars in economic activity. 
"This [plan] would really screw businesses," Mr. DiMare said. "We just got 
hit with a 50 to 90% rate increase. We're dangerously close to losing our 
businesses to other states." 
Write to Jason Leopold at jason.leopold@dowjones.com 
Copyright (c) 2001 Dow Jones & Company, Inc. 
All Rights Reserved

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


Construction of power plant in DeSoto County is underway
By TIMOTHY R. BROWN
Associated Press Writer

05/31/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

JACKSON, Miss. (AP) - A North Carolina-based independent electric power plant 
developer and operator has started construction on a $490 million generating 
facility in DeSoto County. 
Cogentrix Energy Inc. will build the 800-megawatt power plant in Southaven on 
40 acres next to existing TVA and Entergy electric substation facilities. The 
plant is the largest economic development project in the history of the north 
Mississippi county.
The second largest project is a $150 million power plant currently being 
built by Duke Energy. 
Both are expected to be operational in 2003. 
The National Energy Production Corporation, a subsidiary of the Enron Corp., 
is serving as the engineering and construction contractor for the Congentrix 
project. 
"It is in construction as we speak," Jeff Freeman, Congentrix vice president 
for corporate communications, said Thursday. "NEPCO is mobilized on site and 
they are doing earth work. It will probably take them 24 to 27 months to get 
the plant in commercial operation." 
Freeman said the Charlotte, N.C., company found several reasons why building 
a plant in Southaven, a fast-growing city located just south of Memphis, 
Tenn., was a good investment. 
"The first thing that we look for in any project is a basic need for the 
commodity that we produce, which is electricity," Freeman said. "The area 
served by the transmission systems, TVA and Entergy, at this location provide 
access to areas that need electricity." 
The plant will use natural gas as fuel and will include the latest in 
environmental and combustion control technologies, Freeman said. 
Cogentrix owns all or part of 27 facilities with a capacity to generate about 
7,000 megawatts in 14 states. 
Southaven Mayor Greg Davis said both plants will generate about $300,000 to 
the city, in lieu of taxes, and about $1 million each to the county school 
system. 
Davis said the plants will not employ many workers so traffic in the area 
will not increase. He also pointed to the positive impact of temporary jobs 
during construction. 
"Then, road and bridge tax that they will be paying is substantial also," 
Davis said. "So from a financial impact we will see a great return in the 
investment." 
--- 
On the Net: 
Congentrix: http://www.congentrix.com 
Duke Energy: http://www.duke-energy.com

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