-----Original Message-----
From: 	Varma, Nikita  
Sent:	Wednesday, June 06, 2001 7:52 AM
To:	Varma, Nikita
Subject:	From The Enron India Newsdesk - June 6th newsclips

 
Wednesday, June 06, 2001, http://www.economictimes.com/today/06infr01.htm
DPC lenders' Singapore meet inconclusive

The above article also appeared in the following newspaper:

 
Wednesday, June 06, 2001, http://www.dailypioneer.com/secon3.asp?cat=\busi5&d=BUSINESS
FIs meet on Enron remains inconclusive 
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Wednesday, June 06, 2001, http://www.timesofindia.com/today/06busi1.htm
Lenders split over DPC transfer notice to MSEB ,  Pradipta Bagchi 
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Wednesday, June 06, 2001, http://www.indian-express.com/ie20010606/bus1.html
DPC lenders meet opens on a positive note
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Wednesday, June 06, 2001, http://www.financialexpress.com/fe20010606/top6.html
DPC lenders to resume talks today in Singapore 

The above article also appeared in the following newspaper:

 
Wednesday, June 06, 2001, http://www.business-standard.com/today/economy7.asp?Menu=3
DPC lenders to meet again today 
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Wednesday, June 06, 2001, http://www.business-standard.com/today/economy6.asp?Menu=3
MSEB refuses DPC power at 90% PLF , Renni Abraham
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Wednesday, June 06, 2001, http://www.hindubusinessline.com/stories/14065601.htm
Dabhol says ready to extend conciliation , Shaji Vikraman , Balaji C. Mouli 
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Wednesday, June 06, 2001, http://www.hindubusinessline.com/stories/14065602.htm
MSEB unruffled amid power talk , Dinesh Narayanan 
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Wednesday, June 06, 2001, http://www.financialexpress.com/fe20010606/news2.html
CEA to assess viability of Dabhol power despatch to various states' ,   Sanjay Jog
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Wednesday, June 06, 2001, www.asianageonline.com
Gujarat, Up High on Power Reforms, By Rajesh Unnikrishnan
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THE ECONOMIC TIMES, Wednesday, June 06, 2001 
DPC lenders' Singapore meet inconclusive
 
THE CRUCIAL talks between the foreign and Indian lenders of US energy major Enron-promoted Dabhol Power Company at Singapore remained inconclusive on Tuesday and are slated to continue on Wednesday. "The meeting has spilled over to the second day with DPC to participate in the proceedings on Wednesday," financial institutions sources said. The sources said Enron India managing director K Wade Cline and DPC president Neil McGregor were likely to participate in the second day of the meeting. They said the meeting, which went on for over an hour, discussed the ongoing financial and legal disputes between DPC and the Maharashtra State Electricity Board. "Nothing has been finalised as yet," they said when asked whether both the Indian and foreign lenders were able to arrive at any solution for solving the current status quo. At the Singapore meet, the lenders have come together to try and diffuse the tension and unite the two "warring partners" - DPC and MSEB. 

The foreign lenders were expected to be updated by their Indian counterparts about developments like DPC's preliminary termination notice to MSEB, which in retaliation rescinded the PPA and stopped drawing power from the multinational from May 29. The Indian lenders would press for completion of the $3-billion project, as DPC has stopped commercial production and doubts are being expressed for commissioning of its 1,444-mw phase-II, due on Thursday. The Indian team is led by Industrial Development Bank of India executive director R S Agarwal, who is also DPC board member, along with representatives of State Bank of India and ICICI. The foreign lenders include a consortium led by ABN-Amro, Citibank NA, Japan Exim Bank and Opic. (PTI)
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THE TIMES OF INDIA, Wednesday, June 06, 2001 
Lenders split over DPC transfer notice to MSEB ,  Pradipta Bagchi 
Lenders to the $ 2.9-billion Dabhol Power Company are split over whether DPC should be allowed to issue a transfer notice to MSEB. Last Friday, Enron sought the lenders' permission--for the second time in a month--to issue a transfer notice to MSEB. A transfer notice allows the valuation of all fixed assets to begin with and is the first step in starting the process of transfer of assets to the MSEB. While domestic lenders like IDBI, ICICI and SBI--with an exposure of more than Rs 5,000 crore to the project--are opposing the move to issue a transfer notice, most foreign lenders including the lead arrangers to the project are now agreeable to the transfer notice being issued by the DPC. On the first day of lenders' deliberations in Singapore, vast differences emerged between the domestic and foreign lenders in this regard. 
While domestic lenders are worried about the impact of the huge exposure on their balance sheets, foreign lenders, who typically have smaller exposure, are of the opinion that without any alternative concrete solutions, it may be worthwhile to pull the plug on the project. ``Without any concrete solutions and no fixed time-frame, foreign lenders are not willing to go to their respective credit committees for further disbursals,'' a lender from Singapore told The Times of India. ``There is no point throwing more good money after bad, is the consensus among foreign lenders,'' said the lender. 
Among other issues discussed on the first day of the meetings was whether the lenders should throw Enron out of the project and take over the operations of DPC. However, without a proper team of skilled managers in place, it is unlikely that the lenders will risk throwing out the current operators. Fresh disbursals from the lenders are unlikely. Among the first casualties will be an Enron affiliate company, which is the EPC contractor for the LNG terminal. On June 8, a payment of $ 13 million is to be made to the LNG contractor, which will not be disbursed by the lenders. Another big payment of $ 25 million has to be made to Bechtel, the EPC contractor for the power plant, by June 18 as well. 
Enron and DPC officials will make a presentation on Wednesday to the bankers, following which, further deliberations will be held among the lending banks.
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THE INDIAN EXPRESS, Wednesday, June 06, 2001 
DPC lenders meet opens on a positive note

The first day of the crucial meeting between the Indian and international lenders in Singapore has opened on a positive note with the foreign lenders showing signs of giving more time to Indian government to resolve the problem. 

Foreign lenders are enthused by the fact that the Centre is ready to give incentives to the project so that DPC can reduce its tariff. The Centre' package include cutting interest rate on the project, and asking the Central Electricity Authority (CEA) to work out a contingency plan for sale of power to other States from the Dabhol power project.''The international lenders are ready to give some more time to find out a solution. Lenders will take the maximum hit if the Enron pulls the plug into the project,'' FI sources said. Hence, the rethinking among the international lenders. The Centre's package, to be ready in another two months, would also lower the customs duty on imported LNG which would further help the company to lower the tariff.

Enron India managing director K Wade Cline and DPC president Neil McGregor are likely to participate in the second day of the meeting on Wednesday to present their side of the story. Tuesday's meeting, which went on for over an hour, discussed the on-going financial and legal disputes between DPC and its partner Maharashtra State Electricity Board (MSEB).At the meet, the lenders have come together to try and diffuse escalated tension and unite the two warring partners, DPC and MSEB, say FI sources. 

While loans from international FIs enjoy the Indian government guarantee, it would be Indian FIs which will have to take the maximum hit if the project gets derailed. On Tuesday, the foreign lenders were updated by the Indian counterparts over series of events like DPC's Preliminary Termination Notice to MSEB, which in retaliation rescinded the PPA and stopped drawing power from the multinational from May 29. The Indian team is led by Industrial Development Bank of India (IDBI) executive director R S Agarwal, who is also DPC board member, along with representatives of State Bank of India and ICICI. The foreign lenders include a consortium led by ABN-Amro, Citibank NA, Japan Exim bank and OPIC. 

Sanjay Jog 
 The Central Electricity Authority (CEA) has launched an exercise to assess the viability of despatch of Dabhol power to various power deficit states across the country, announced the Union minister of state for power Jayavantiben on Tuesday. Mehta said that the CEA, which has been asked to undertake this exercise recently, will take into account the burden to be borne by various power deficit states during the despatch of power. Currently, if the power has to be transported from eastern grid to western grid, there is certain fixed charge imposed on it. "The CEA will have to carry out this exercise at length so that the exact picture will emerge whether or not the Dabhol power despatch is viable and whether the states are keen to purchase that power," the minister added. Mehta said that the centre will not purchase Dabhol power as its undertakings cannot take the additional burden on them. She informed that the union finance ministry in no uncertain terms made it clear that the centre cannot purchase Dabhol power and sell it at cheaper rate to the states especially when these states owe over Rs 30,000 crore to various central public sector undertakings. Mehta said that prime minister AB Vajpayee who has been apprised him of the present situation on the Dabhol front has assured to provide necessary assistance especially technical one to resolve the issue.
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THE FINANCIAL EXPRESS, Wednesday, June 06, 2001
DPC lenders to resume talks today in Singapore 

 THE two-day talks to resolve Dabhol tangle opened on a positive note in Singapore on Tuesday.Sources in Indian financial institutions (IFIs) told The Financial Express that the IFIs comprising representatives of IDBI, ICICI, State Bank of India (SBI) met to chalk out their strategy at the two-day meeting with offshore lenders and Enron officials. The Indian team was lead by Mr RS Agarwal, IDBI executive director, along with the other officials from other lending institutions including those from the SBI and ICICI.Apparently, the IFIs, on Tuesday revived their efforts to convince DPC's offshore lenders to maintain "restraint" to save the Dabhol project. The meeting between the IFIs and their foreign counterparts remained inconclussive on Tuesday. The foreign lenders are expected to take a clear stand on Wednesday.

Interestingly, the meeting is expected to be participated by members of the DPC on the second day, said financial institutions sources. The sources said, Enron India managing director K Wade Cline and DPC president Neil McGregor are likely to participate in the second day of the meeting. The meeting was also attended by a consortium led by ABN-Amro, Citibank NA, Japan Exim Bank and OPIC. According to sources in IDBI: "The foreign lenders have given us a patient hearing to our views suggesting that they should not precipitate the crisis by any of their further moves." The sources said the IFIs are determined to take up the issue of completion of the Dabhol phase-II in view of 90 per cent of its completion. "The IDBI has recieved a mandate from the government that an all-out effort be made to save the Dabhol project," the sources added.

The offshore lenders are believed to have sought various details with reference to the payment guarantees from the Maharashtra State Electricity Board (MSEB) as well as fulfilment of contractual obligations in the wake of revoking of the power purchase agreement. The IFIs are likely to press for the revocation of suspension of loan disbursement by offshore lenders so that phase-II be completed. The offshore lenders had suspended loan disbursement after the DPC board meeting of London on April 25. 
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BUSINESS STANDARD, Wednesday, June 06, 2001
MSEB refuses DPC power at 90% PLF, Renni Abraham
 The Maharashtra government will not buy power from the first phase of the Dabhol Power Company's (DPC) project at a 90 per cent plant load factor (PLF), a senior state government official said here today. The statement represents a hardening of Maharashtra's position on talks with DPC and virtually kills the latter's proposal to split tariffs for the Centre and Maharashtra. The Maharashtra State Electri- city Board (MSEB) is now required to buy 90 per cent of the power generated by the first phase (740 mw) of the project. But during negotiations with the Godbole Committee, it has been demanding that the requirement be cut to 35 per cent. At the last Godbole Committee meeting, DPC had put forward a plan to split tariffs for the Centre and Maharashtra, with the Centre paying Rs 3.30 per unit of power and MSEB paying Rs 3.50. 
The Centre, DPC suggested, could buy two-thirds of the power it generated, once the second phase (1,444 mw, taking the total capacity to 2,184 mw) was completed. Maharashtra's latest position undermines DPC's proposal since the Enron-promoted company's tariff hinges on MSEB absorbing 90 per cent of the power it generates in the first phase. A senior state government official said: "The Centre has been talking a lot about playing the role of a facilitator. What we need is a buyer for the second phase." Despite recent central government pronouncements, state government officials privately argue that the Centre is not playing an active role in resolving the problems that have plagued the DPC project. At the very first Godbole Committee meeting he attended, the Centre's nominee, AV Gokak, adopted a non-committal stand. The Maharashtra government official added: "Gokak said he was merely attending the meeting in the capacity of a messenger and would communicate to the Centre any solution worked out by the renegotiation committee. The Union power ministry has stated that a solution worked out by the renegotiation committee would be acceptable to it. Unless the Centre takes an active part and assures the offtake of the second phase, no solution can be worked out."
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THE HINDU BUSINESSLINE, Wednesday, June 06, 2001 
Dabhol says ready to extend conciliation , Shaji Vikraman , Balaji C. Mouli 

THE Dabhol Power Company (DPC) has accepted the Finance Ministry's proposal for a two months' extension for the conciliation process. The extension will be effective from June 7. This development is perceived by the Government as a positive signal as it offers more leeway to work out a solution to resolve the Dabhol crisis. DPC's nod for an extension, which was communicated to the Finance Secretary on Monday, is subject to the Government acceding to the company's stand on the ongoing arbitration proceedings. The company has said that it would continue to pursue the arbitration proceedings which have already been initiated by the company, according to senior Ministry officials. Under the power purchase agreement (PPA), conciliation and arbitration are two methods under the contract to resolve disputes between the two parties. Normally, arbitration is resorted to only after conciliation fails. However, in this case, DPC has dragged MSEB to the arbitration forum even as the conciliation process is being pursued. 

DPC has already slapped three arbitration notices on the Maharashtra State Electricity Board (MSEB). The first notice was issued to the board for its failure to honour the December 2000 bill of Rs 102 crore and the January 2001 bill of Rs 111.6 crore while two other notices were for failures to honour the Maharashtra Government's State support agreement and the supplementary State support agreement. The conciliation process was adopted in the wake of the dispute arising over the settlement of DPC's December bills of Rs 102 crore, followed by the MSEB's counter claim of Rs 400 crore for the same period. 

The conciliation process was agreed upon on April 7 and was to be concluded in two months. However, simultaneously, arbitration proceedings were triggered between DPC and MSEB. With the conciliation process making little headway, the Finance Ministry sought an additional two months time for concluding the process. Prior to that, the Attorney General's interpretation of the MSEB-DPC contract was that the payment could be made to DPC only if the bill was undisputed. Hence, the Centre decided to opt for the conciliation process. 

During recent meetings between the Government and the DPC officials, the latter had pointed out that if the Government was able to work out a package in six months, it would withdraw its termination notice and reamin in the project for up to a year. The Finance Ministry officials feel that the Centre has been dragged into the DPC controversy well beyond its contractual obligation. ``The Centre's involvement in DPC-MSEB issue is restricted to the first phase. The fate of the second phase is entirely a matter between the MSEB and DPC,''they said. 

Analysts feel that the Power Minister, Mr Suresh Prabhu's words of hope to defuse the Dabhol crisis are not grounded in reality. ``The Centre is totting sale of Dabhol power to third-party as a key solution. However, first, under the existing electricity laws, the Centre cannot authorise third-party sale since it is in the State's domain. Secondly, since it is a purely commercial decision, the Central Electricity Authority's (CEA) intervention does not offer any significant breakthrough.'' Recently, the Power Ministry had instructed the CEA to survey the demand requirement of neighbouring States over the next two years as well as their purchase price. 
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THE HINDU BUSINESSLINE, Wednesday, June 06, 2001 
MSEB unruffled amid power talk , Dinesh Narayanan 

EVEN as officials from various financial institutions and banks split hairs in Singapore on whether to sink or sail with the Dabhol power project, the Maharashtra State Electricity Board (MSEB) is cool about the entire affair. Unlike previous instances when the odds were stacked against it, this time MSEB knows pretty well that whatever happens, it will remain unscathed. If someone has to take a hit, it has to be the financiers and maybe the Governments.At the hearing before the Maharashtra Electricity Regulatory Authority (MERC), the Advocate-General, Mr Goolam Vahanvati, had said on behalf of the board that MSEB was being kind towards Enron when it rescinded the contract for ``material misrepresentation''. One more step, and it's fraud, he had told MERC. 

Knowing this fully well, MSEB has kept its cool throughout the altercation. It firmly believes that if nothing else, it can pin down the company on just this one point at any forum. Enron too has not said at any point of time that it can actually perform as per the ``cold-start graph'' in the power purchase agreement. In fact, it has said such performance -- making available full power in 180 minutes -- is ``not possible'' by any such plant in the world. In a way, it was MSEB's defiant posturing coupled with the Maharashtra Government's passing the buck up that got the Central Government to act. 

One thing evident throughout the crisis is that all the players are trying to save their own skin. In spite of the developments, Enron has played its cards close to its chest, and hinted to institutions at taking a hit on its returns only a few days ago. Even that, Mr Wade Cline, Managing Director, Enron India Pvt Ltd, is reported to have told Indian lenders, would hinge on substantial give and take. Indian lenders have a genuine case in that they are the ones without any assurances apart from the plant itself. And, they are not in the business of running power plants. They cannot do much except try get the players to somehow shake hands. They had tried to convince the Government some time ago to get MSEB to activate the escrow and increase the letter of credit amount. But they were told off by MSEB which was in no mood to relent. Today's meeting in Singapore remained inconclusive and the talks will continue tomorrow. Tomorrow, Enron will make presentations to lenders at Singapore on what it feels can be done to move ahead. Whatever the outcome of the meeting, MSEB is unlikely to agree to anything that might queer its pitch. 
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THE FINANCIAL EXPRESS, Wednesday, June 06, 2001 
CEA to assess viability of Dabhol power despatch to various states' ,   Sanjay Jog

THE Central Electricity Authority (CEA) has launched an exercise to assess the viability of the despatch of Dabhol power to various power deficit states across the country, Union  minister of state for power Jayavantiben Mehta on Tuesday. Ms Mehta told The Financial Express that the CEA, which has been asked to undertake this exercise recently, will take into account the burden to be borne by various power deficit states during the despatch of power. Currently, if the power has to be transported from eastern grid to western grid, there is a certain fixed charge imposed on it. "The CEA will have to carry out this exercise at length so that the exact picture will emerge whether or not the Dabhol power despatch is viable and whether the states are keen to purchase that power," the minister added. Ms Mehta said that the Centre will not purchase Dabhol power as its undertakings cannot take the additional burden on them. 

She informed that the Union finance ministry had in no uncertain terms made it clear that the Centre cannot purchase Dabhol power and sell it at cheaper rate to the states, especially when these states owe over Rs 30,000 crore to various Central public sector undertakings. Ms Mehta said that Prime Minister Atal Behari Vajpayee, who has been apprised of the present situation on the Dabhol front, has assured that he would provide necessary assistance, especially technical, to resolve the issue. "The Centre is quite eager for the resolution of issue and will provide necessary cooperation," she added.

Ms Mehta said that she had a meeting with the representatives of the Bank of America and ABN Amro before they left for the Singapore meeting. "These lenders explained their position and the amount involved in the Dabhol plant. However, they also expressed their wish to participate in finding an acceptable wayout," she added.
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THE ASIAN AGE, Wednesday, June 06, 2001
Gujarat, Up High on Power Reforms, By Rajesh Unnikrishnan

Uttar Pradesh, Delhi and Gujarat are moving ahead with implementing reforms in the power sector, even as the reforms in Maharashtra have come to a standstill due to the Dabhol fiasco. Maharashtra was one of the first states to initiate steps for reforms phase-II, by appointing a state regulatory commission and going in for unbundling MSEB. Uttar Pradesh State Electricity Board and Delhi Vidyut Board are finalising plans to privatise transmission and distribution, while Gujarat is planning to set up one more power project with private sector participation. 

According to State Bank of India Capital Markets officials, UPSEB is going to float a new tender, inviting private sector players for power supply in Kanpur region. Due to employees' protests against the privatisation, the state electricity board had cancelled its earlier tender floated in 2000.  SBI Caps had also short-listed four companies: L&T, CESC, BSES and Tata Power for transmission and distribution in Kanpur. The officials said: "UPSEB will come out with a new tariff order for Kanpur by this week end and a new tender will be floated by month-end. We would undertake the short-listing process by mid-July."They said that besides this, the UP State Industrial Development Corporation is also setting up a 30 MW captive power project for the newly-developed industrial park, Tronica City, in the state. Total cost of the project is estimated at Rs 100 crores and BHEL is the equipment supplier for the project.

SBI Caps short-listed six private players for supplying power in three regions Tata Power, BSES, Reliance Power, China Light&Power, AES, the AV Birla Group and CESC. Two months back, the Delhi government had cleared State Bank of India Caps' proposal for the unbundling of DVB by dividing the board into five separate units. The proposal envisaged three transmission and distribution companies and two generation companies. DVB makes losses to the tune of Rs 1 crore per day. Officials said the Gujarat, on the other hand, is focussed more on generation and the state electricity board recently proposed a 500 MW project in Mundra and invited a proposal from the private sector.

The project will use imported coal as fuel and the state will keep a minimum equity in it. There are two independent power projects in Gujarat: the Reliance-promoted, 500 MW, naphtha-based Hazira project and the 500 MW, gas-based project promoted by Gujarat Power Corporation. According to the officials, the unbundling of Gujarat SEB has failed to take off because the state government has not yet appointed any merchant banker for it. The government initiated the state electricity board unbundling around two years back.


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