SJM to mobilise retired army officers
Business Standard, 06/08/01

States cannot afford DPC power
Business Standard, 06/08/01

Dabhol lenders to study pullout cost
Business Standard, 06/08/01

Enron Introduces Price Hedging for Memory Chips
Dow Jones Business News, 06/07/01

Calif Eyes Ending Access To Alternative Power Suppliers
Dow Jones Energy Service, 06/07/01

Enron's Lenders Consider Closure of Indian Project (Update6)
Bloomberg, 06/07/01

California Spending Less on Power, May Renegotiate, Reports Say
Bloomberg, 06/07/01

Enron, DuPont Urge Bush to Salvage Environmental Pact (Update1)
Bloomberg, 06/07/01

`Obsolete' Stock-Picking Tool Gives 52% Return: John Dorfman
Bloomberg, 06/07/01

California to Utilize Lower Electricity Prices, Paper Reports
Bloomberg, 06/07/01


SJM to mobilise retired army officers
Our Political Bureau New Delhi

06/08/2001
Business Standard
2
Copyright (c) Business Standard

The Swadeshi Jagran Manch (SJM) would marshal a battery of retired army 
officials to raise the banner of revolt against the government's decision for 
privatisation of the defence sector. 
The SJM is expecting to mobilise support of retired senior army officials in 
order to drive home the point that the decision to privatise and allow FDI in 
defence production was "anti-national". These officials would lead the dharna 
from July 25 outside Parliament, sources in the SJM say.
After its council meeting at Shimla, the SJM is preparing to launch a 
full-blown attack against the government for pursuing its policies of 
economic liberalisation and globalisation. "The decision to hold a three-day 
agitation during the monsoon session of Parliament is intended to convey the 
message that the SJM would continue its struggle," said a senior 
office-bearer. The Swadeshi faction within the Sangh Parivar appears buoyed 
by the fact that the council had adopted four resolutions which approved the 
SJM's struggle against the Enron project, WTO and the government's decision 
to privatise the defence productions. 
Sources in the SJM maintain that given the resolutions passed by the council, 
it was unlikely that the RSS leadership would intervene and ask the SJM to 
mend its ways. "In the Bangalore meeting with the RSS leadership, a broad 
consensus was evolved that all RSS-affiliated organisations were free to 
chalk out their own course of actions and the RSS would not intervene," they 
said. 
Obviously, the SJM has been bracing up for a confrontation with the 
government in major economic issues by putting up BMS founder and senior RSS 
leader Dattopant Thengadi in front to criticise the government.

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


States cannot afford DPC power
Santosh Tiwary & P Vaidyanathan Iyer NEW DELHI

06/08/2001
Business Standard
2
Copyright (c) Business Standard

The Centre's initiative towards facilitating sale of power from the Enron
-promoted Dabhol project in Maharashtra to other states is likely to come a 
cropper. 
Sources told Business Standard that the states would in no way be able to 
purchase power from Dabhol Power Company (DPC) as it would be difficult to 
lower the tariff to Rs 3 per unit. "No state will be able to buy power from 
DPC at a rate above Rs 3 per unit considering the rate at which they are 
supplying power to the consumers at present," said a source in the Central 
Electricity Authority (CEA).
Power minister Suresh Prabhu had only last week asked CEA to consult the 
power-deficient neighbouring states of Maharashtra seeking their views on the 
requirement and tariff at which they would be able to buy electricity from 
DPC. 
Sources said that states such as Gujarat, Madhya Pradesh and Goa, to which 
DPC could supply power, were not in a position to buy it at a cost which was 
more than what they spend at present. 
They pointed out that even after a considerable reduction in tariff, it was 
highly unlikely that DPC would sell power to these states at the rates 
affordable by them. 
As for the other states, transmission cost would only add up to the already 
high cost of Dabhol power. Hence, the proposition is almost ruled out, said 
sources. 
They said that the unit cost of power for all SEBs was around Rs 3 at 
present. Interestingly, the average tariff of all the SEBs was estimated to 
be 208 paise per unit in 1999-2000, at a 74 per cent tariff to cost ratio. 
In 1999-2000, the unit cost of power supply in Gujarat was 287.30 paise, and 
in Madhya Pradesh, it was 252.72 paise. Maharashtra had 254.36 paise per unit 
cost of power supply in 1999-2000. 
Sources said that the the existing tariff structure and supply cost was a 
clear indication why third party sale had not been allowed by the states even 
though Section 43 of the Indian Electricity (Supply) Act, 1948 allowed such 
sale. 
They added that the chances of states allowing third-party sale by the 
independent power producers in the light of the DPC-MSEB controversy was 
remote. The Centre has asked the states to allow third-party sale from the 
IPPs.

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


Dabhol lenders to study pullout cost
Freny Patel MUMBAI

06/08/2001
Business Standard
1
Copyright (c) Business Standard

Lenders to the Dabhol Power project have mandated their engineer, Stone and 
Webster, to do a costing study on the implications of mothballing the second 
phase of the project. The issue is whether to close it now or wait till the 
civil work on the project is over. 
Enron has made it clear that it wants to pull out of the second phase unless 
issues relating to the power purchase agreement are resolved and the 
government of India makes a firm commitment on the offtake of power.
IDBI executive director RS Agarwal, who was present at the two-day lenders' 
meeting in Singapore, told Business Standard that the institutional lenders 
will discuss the report of the engineers before deciding on a further course 
of action. 
The second phase is 92 per cent complete. Total completion would entail the 
finalisation of the power blocks and the LNG facility. Incidentally, the 
trial run of the first block of the second phase_740 mw was to have taken 
place today, but failed to happen on account of the legal battle between DPC 
and MSEB. 
To date, more than $1,570 million has been invested in the second phase. 
Stone & Webster's report will identify how much additional funds the lenders 
would have to plough in depending upon whether the project is shelved 
immediately or after completion of construction activity. It will also figure 
out the funds required to restart the project. 
"The legal position of the two parties - DPC and MSEB - has complicated the 
issue," said Agarwal. Foreign lenders are reportedly unconvinced about the 
Indian government's seriousness in resolving the issue. 
Lenders have expressed anxiety over the suspension of power offtake by the 
MSEB, as this has affected the $50 million cash flow. The priority is for the 
two sides to resolve the issue through negotiations at the earliest. DPC 
ought to take the initiative as it is at the receiving end, said industry 
sources.

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


Enron Introduces Price Hedging for Memory Chips
By Bob Sechler

06/07/2001
Dow Jones Business News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Dow Jones Newswires 
HOUSTON, Texas -- Dynamic random access memory chips, known as DRAM, have 
long been viewed as the pork bellies of the computer industry, commodities 
whose prices swing widely based on supply and demand.
Enron Corp. (ENE) is taking the analogy a step further by enabling DRAM 
manufacturers and consumers, such as computer companies, to engage in the 
same price hedging strategies deployed in industries that depend on 
traditional commodities. 
The company has launched a lot program to buy and sell DRAM chips based on 
forward contracts, and it says an average of 25,000 standard 128-megabit DRAM 
chips a week were traded through its system during the first quarter, the 
initial quarter for active trading. That is a small amount relative to the 
overall world-wide DRAM market, estimated at $32 billion last year, but it's 
a start. 
"The [DRAM] chip market is a boom-or-bust cycle, with prices very high or 
very low," said Kenneth Wang, director of Enron's global semiconductor group. 
"It's the perfect market. And Enron has the credibility." 
Enron is no stranger to making markets. The company, once a stodgy natural 
gas pipeline operator, has evolved into a major commodity marketer and 
trader, dealing in everything from energy products to chemicals and Internet 
bandwidth capacity. 
Chip industry players and observers are intrigued by the DRAM effort, 
although many remain skeptical. Most point out that the potential for a DRAM 
futures market has been discussed for years with little to show for it. 
"All of the PC companies I know of would love to have an effective hedge" 
against DRAM price swings, Lehman Brothers Inc. analyst Dan Niles said. 
Every computer contains at least one of the chips, and many contain multiple 
chips, making DRAM chips among the top component expenses for computer 
makers. Other products, such as automobiles and digital cameras, use the 
memory chips as well. 
At present, DRAM chips are sold through direct contracts with manufacturers, 
such as Micron Technology Inc. (MU) and Samsung Electronics Co., and through 
a spot market, where the price fluctuates daily. There is no independent 
exchange for DRAM futures that would allow manufacturers of the chips or 
their consumers to hedge against unexpected price swings. 
Challenges to forward trading in DRAM have proved daunting. DRAM isn't quite 
uniform, although it's considered the closest thing to a commodity in the 
computer industry. Many different configurations of the same basic chip 
exist, depending on the needs of the customer. 
DRAM prices have fallen over time -- about 30% a year over the past 25 years 
as manufacturing costs have declined -- despite short-term fluctuations. 
Memory-chip prices have fallen steeply this year because of weak computer 
demand. Standard 128-megabit chips have been selling recently for about $2.40 
on the spot market, off almost 50% since February. 
Technical innovation always has the potential to render existing DRAM 
varieties obsolete, which would open the door to additional risk for the 
holder of a forward buy contract. 
Nonetheless, some major industry players are watching Enron's effort closely. 
Officials at Compaq Computer Corp. (CPQ), a leading consumer of DRAM chips, 
think the effort has merit and could work. Compaq hasn't made any DRAM 
purchases through Enron yet but remains receptive to the idea. 
The trend of falling DRAM prices "happens on a macro level, but there have 
been years when the price has increased 50% or 100%, and it happens in a very 
quick period of time," said Jack Baikie, Compaq's vice president of corporate 
procurement. "It's not a predictable cost curve" in the short-term. 
This year's declining prices likely would reverse quickly upon some signal 
that PC demand was rebounding, he said. A forward trading market "could 
provide us the ability to anticipate market trends and do some no-risk, or 
minimal-risk, hedging," Mr. Baikie said. 
Mr. Baikie dismisses the notion that DRAM isn't a commodity. "A memory chip 
is a memory chip," he said, with the only difference being how an individual 
consumer elects to configure and use it. 
Micron, one of the top DRAM manufacturers, also is receptive to the idea of a 
forward trading market. But Micron spokesman Kipp Bedard cautioned that the 
technical variations of DRAM, combined with continuing innovation, aren't 
insignificant issues and have proved to be a problem in past efforts. 
Enron is confident it has the expertise to package and make standard its 
forward contracts for DRAM in a way that renders the technical differences 
surmountable. Company officials point to Enron's pioneering effort in 
Internet bandwidth trading as an example of a market that also faced 
technical hurdles. 
But Enron officials acknowledge they are still demonstrating that their 
effort is viable and valuable. 
"We want people to first get used to it," Enron's Mr. Wang said. "It's a 
process of education." He expects trading volume to increase when big 
companies use the market. 
Enron executives said that DRAM is the first of their efforts to establish 
forward markets for all types of computer components. Eventually, Enron plans 
to trade forward contracts for components such as liquid-crystal displays. 
"We'd like to hedge maybe 60% of a computer, if possible, in the long-term," 
Mr. Wang said. "That's our plan." 
Write to Bob Sechler at bob.sechler@dowjones.com 
Copyright (c) 2001 Dow Jones & Company, Inc. 
All Rights Reserved.

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


Calif Eyes Ending Access To Alternative Power Suppliers
By Jason Leopold
Of DOW JONES NEWSWIRES

06/07/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

LOS ANGELES -(Dow Jones)- California utility regulators appear ready to vote 
next week on a proposal to suspend the ability of large electricity users to 
sign contracts directly with energy suppliers. 
The move is called for in the February bill that put the state in the power 
business, but its approval by the California Public Utilities Commission 
would damp plans in the Legislature to reduce the burden on Edison 
International (EIX) unit Southern California Edison by making large 
industrial customers responsible for securing their own power.
"We're still trying to figure that out," said an aide to Assembly Speaker Pro 
Tem Fred Keeley, D-Boulder Creek. "We don't know how to get around that right 
now." 
Keeley is expected to introduce legislation to shift the burden of rescuing 
Southern California Edison to large businesses. Under the proposal, which is 
also supported by Assembly Speaker Robert Hertzberg, customers that use 500 
kilowatt-hours of power a month or more would pay a surcharge on their bills 
to help Southern California Edison recoup its losses on wholesale power. 
The so-called direct-access component - under those large users would buy 
their power from suppliers - is the cornerstone of the Keeley plan, for which 
Enron has been lobbying hard in recent weeks, according to several aides to 
key legislators. 
The Keeley plan is an alternative to the memorandum of understanding Gov. 
Gray Davis signed with Southern California Edison two months ago. Under that 
proposal, the state would buy Southern California Edison's power lines for 
$2.76 billion and allow the utility to issue $2 billion in bonds backed by 
ratepayers to recover $3.5 billion in net uncollected power costs. 
That plan has run into snags in the Legislature, which must enact it into 
law, and the PUC, which has been slow to rule on enabling measures. 
One key Democratic Senator said the PUC's move to quash direct access is an 
attempt to ensure a deal to rescue Southern California Edison doesn't pass 
through the Legislature. 
"The PUC has demonstrated it does not want SoCal Ed to remain solvent," the 
senator said. "They have dragged their feet on several key issues they need 
to address in order to make sure legislation to save the utility is never 
heard." 
A PUC spokesman didn't return calls for comment. 
Direct-access was the key part of the state's 1996 deregulation law, giving 
retail customers the opportunity to choose from a variety of energy suppliers 
in an effort to lower their electric rates. 
Commissioners Richard Bilas and Henry Duque said they support direct access 
and would vote against any measure to reverse it. 
"I would never vote against direct access," said Bilas, a Republican, who 
authored the agenda item. Bilas said the item was amended by another 
commissioner. 
The measure could be held, because it might disrupt negotiations between the 
Legislature and Southern California Edison, said PUC Commissioner Geoffrey 
Brown, a Democrat. 
The PUC may be looking to protect the state's interest as a power purchaser, 
some legislative aides said. 
The DWR's long-term power supply contracts cover the state's wholesale-market 
power needs in 2002 and 2003. If large industrial customers were to sign 
direct-access contracts, the DWR would lose them as customers and thus fail 
to collect enough revenue to pay off the long-term contracts. 
The agency could be stuck with a large surplus of electricity that it would 
be forced to sell it on the open market at a loss. The market price of power 
in the coming years is expected to be lower than what the state paid for 
forward power in 2001. 
Wholesale power prices plunged this week, and the DWR for the first time sold 
excess power on the open market, according to Oscar Hidalgo, DWR spokesman. 
Arnold Rosenthal, of Newport Beach-based Utility Resource Management Group, 
an organization that represents more than 700 large electricity users in the 
state, said state regulators are "looking to get us back into a mode where we 
are held captive once again." 
"The DWR is acting as this super utility," Rosenthal said. "What you're left 
with is absolutely no choice. Instead, we'll be subjected to several large 
rate increases." 
Rosenthal said some of his San Diego clients have direct access deals. A 
number of clients served by Southern California Edison want to sign 
direct-access contracts to escape recent rate increases imposed by the PUC. 
-By Jason Leopold, Dow Jones Newswires; 323-658-3874; 
jason.leopold@dowjones.com

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


Enron's Lenders Consider Closure of Indian Project (Update6)
2001-06-07 16:13 (New York)

Enron's Lenders Consider Closure of Indian Project (Update6)

     (Adds closing share price.)

     Mumbai, June 7 (Bloomberg) -- Industrial Development Bank of
India, ABN Amro Holding NV and other lenders to Enron Corp.'s $3
billion Indian power project are considering a plan to shut the
plant for as long as a year until a tariff dispute is settled.
     The lenders hired Stone & Webster, a U.S. engineering
company, to determine the costs and consequences of temporarily
closing Dabhol Power Co.'s plant, said R.S. Agarwal, executive
director of Industrial Development Bank of India.
     Indian banks, which have loaned $1.4 billion to Enron's
Dabhol Power, have the most at stake in salvaging the project, the
country's biggest foreign investment. The $600 million lent by ABN
Amro, Bank of America Corp., Citigroup Inc. and other banks are
covered by government guarantees, while Indian bank loans are not.
     ``We may have to go for a mothballing of the project, which
means preservation of assets and removal of workers,'' said
Agarwal, the spokesman for Enron's lenders, who will decide on a
closure after Stone & Webster submits its report within a week.
     A solution to the dispute can only be found if all parties
are willing to make ``sacrifices,'' said Rumy Kanga, senior
general manager at Tata Power Ltd., which supplies power mainly to
industrial consumers in Mumbai. ``Lenders will have to take a
cut'' on the cost of their loans to Dabhol.

                      Completing Construction

     Dabhol, 65 percent owned by Enron, is owed 3 billion rupees
($64 million) by the Maharashtra State Electricity Board, its only
customer, for power supplied in December and January.
     The board has refused to pay, saying Dabhol's price is more
than double the rate charged by other Indian generators, and has
stopped buying power from Dabhol. It also charged Dabhol an 8-
billion rupee penalty for not supplying power at full capacity on
three days between January and March.
     Enron, the largest energy trader, has no plans for
renegotiating Dabhol's power-purchase agreement with the
Maharashtra board, company spokesman John Ambler said Friday.
     Dabhol pays 16.5 percent annual interest on the $1.4 billion
worth of rupee loans. That's more than the 11.5 percent banks
charge their best customers.
     The lenders to Dabhol, who met for a third day in Singapore,
discussed consequences of a temporary closure. Loan disbursements
of $280 million to the second phase of the project, which was to
add 1,444 megawatts of capacity, were also discussed.
     ``We've told Dabhol a closure at this stage, when 95 percent
of the construction work is over, will push up the cost of power
even further,'' Agarwal said. ``We've suggested construction and
mechanical work at the project be allowed to continue.''

                      `Keeping Project Alive'

     Dabhol should carry through with its proposal to ``suspend''
the project only if a buyer for its power is not found after the
construction is finished, Agarwal said.
    ``Foreign lenders and Dabhol are not interested in keeping the
project alive because there's no assurance that there will be
another buyer (for the power) and the power purchase agreement has
been rescinded,'' Agarwal said. ``The legal position adopted by
both the parties has complicated the issue.''
     Indian Prime Minister Atal Behari Vajpayee yesterday said it
would be difficult to find buyers for Dabhol's power because it's
too expensive, newspapers and news agencies reported.
     ``The difficulty (about the high cost of power) facing
Maharashtra will be for other states as well. What is to be done
about such costly power?'' he was quoted as saying.
     India's government risks having to pay 170 billion rupees in
fines, resulting from guarantees it has offered on payments and
loans, if Enron pulls out of the project.
     Joahn Zaayman, an Enron spokesman in India, declined to
comment on the lenders meeting.

                          Enron and India

     Shares of Enron fell $1.81, or 3.5 percent, to close at
$50.52 after touching a 52-week low of $48.80. Stocks of
California power suppliers have fallen since late May on concern
that the companies won't be paid as part of Pacific Gas &
Electric's bankruptcy filing, analysts said.
     ``It looks like the sector is taking it on the chin to begin
with, and Enron looks like it's leading the charge down because of
the news in India,'' said Andre Meade, a utility analyst at
Commerzbank Securities in New York.
     Houston-based Enron has been moving away from infrastructure
projects, such as power plants and pipelines, to focus on trading
natural gas, electricity and other commodities.
     Enron shares have fallen 39 percent this year. In addition to
the India project, investors have been concerned about California
power sales and its telecommunications unit, said Neal Dingmann, a
Dain Rauscher Wessels analyst in Dallas.
     Enron is owed $400 million to $500 million by California
power purchasers, Chairman Kenneth Lay said this week. Most of
that is owed by PG&E Corp.'s Pacific Gas & Electric, which filed
for bankruptcy protection in April. Enron's broadband unit, which
has a fiber-optic network and helps trade space on such networks,
had a first-quarter loss of $35 million on revenue of $83 million.
     India ``is a distant third'' in factors moving Enron shares,
Dingmann said.


California Spending Less on Power, May Renegotiate, Reports Say
2001-06-07 14:11 (New York)


     Sacramento, California, June 7 (Bloomberg) -- The California
Department of Water Resources reduced by $630 million the amount
it is spending for power under long-term contracts and may back
away from other term offers above current market rates, reports
said.
     The department said in a posting on its Web site that the
average amount it is paying for power for five-year contracts is
$84 a megawatt-hour. It previously estimated $86 a megawatt-hour,
Dow Jones Newswires reported. A megawatt-hour can light 750
California homes for an hour.
     In the past two months, the forward price of electricity has
fallen, enabling the department to sign contracts at lower rates,
Dow Jones said. The state has agreed to contracts with 20
suppliers, including Duke Energy Corp., Calpine Corp., Enron
Corp., Williams Cos. and Dynegy Inc.
     The department has signed 38 contracts to purchase
electricity for the next 10 years and 23 still are being
negotiated, the San Francisco Chronicle said. Ray Hart, deputy
director of the department, said the state will demand more
favorable prices or drop some of the contracts still being
negotiated, the newspaper reported.
     The state has spend more than $7 billion buying electricity
on behalf of its two largest utilities, PG&E Corp.'s Pacific Gas &
Electric and Edison International's Southern California Edison.
The utilities have racked up more than $14 billion in debt buying
power at soaring prices that couldn't be passed to customers.
     Shares of PG&E rose $1.03 to $12.10 in midafternoon trading.
Edison shares rose $1.02 to $11.



Enron, DuPont Urge Bush to Salvage Environmental Pact (Update1)
2001-06-07 13:15 (New York)

Enron, DuPont Urge Bush to Salvage Environmental Pact (Update1)

     (Adds White House comment on global warming report in
seventh, eighth paragraphs.)

     Washington, June 7 (Bloomberg) -- Enron Corp., DuPont Co.,
American Electric Power Co. and other U.S. companies that have
taken voluntary steps to limit greenhouse gas emissions are urging
the Bush administration to salvage at least parts of the 1997
Kyoto global warming treaty.
     These companies ``very much like the Kyoto framework and hope
that there is a way to preserve the best parts and fix the parts
that need to be fixed,'' said Eileen Claussen, executive director
of the Pew Center for Global Climate Change, whose 33 members also
include Alcoa Inc., Holnam Inc. and BP Plc.
     President George W. Bush decided in February to oppose
regulation of the carbon dioxide emissions that contribute to
global warming and to abandon the Kyoto accord.
     When U.S. allies in Europe objected, the administration
created a task force to come up with a counter proposal to reduce
harmful emissions. Bush travels to Europe next week for
discussions that will include global warming.
     The task force, led by Vice President Dick Cheney, hasn't
made a recommendation yet, White House officials said, though it
is considering a voluntary system that sets incentives and targets
for greenhouse gas emissions reductions.
     Pressure on the administration to act increased yesterday
when the National Academy of Scientists released a report that
said the threat of global warming is real and will have an impact
on economic growth and public health. The NAS study had been
requested by the Bush administration.

                       White House Reaction

     The president agrees that the earth's temperature is rising
and ``is committed to reducing global warming,'' White House
spokesman Ari Fleischer said today, responding to questions about
the report.
      ``There is still some remaining question about what the
cause is,'' he said, ``how much of that rise is as a result of man-
made factors.''
     The corporations that want Bush to act have been lobbying the
task force, saying regulation of carbon dioxide emissions is
inevitable. They don't want to have to deal with an international
patchwork of regulations, and they want to benefit from the anti-
pollution steps they've already taken, Claussen said.
     Other businesses, such as Exxon Mobil Corp., are arguing
against reviving Kyoto. They say the treaty is flawed because it
exempts developing nations from emission limits and that it would
damage the U.S. economy.
     The U.S. was among the 167 countries that signed the treaty,
which calls for industrial countries to cut smokestack emissions
by 5.2 percent below 1990 levels by 2012. The Clinton
administration never presented it to the U.S. Senate for
ratification because of congressional opposition, and Bush in
March declared the treaty dead.

                          Trading Credits

     For corporations favoring an international approach, part of
the appeal is economic.
     DuPont, for example, has embraced scientific evidence of
rising global temperatures caused by carbon dioxide and other
emissions. The second largest chemical maker says it has cut its
greenhouse emissions by 50 percent since 1992 through relatively
low-cost improvements in plastics manufacturing.
     The company favors several provisions of the Kyoto accord,
including a system that would allow companies that exceed their
emissions targets to sell credits to dirtier companies.
      The company also wants to include ``credit for early
action'' that would reward its environmental efforts with tax
credits or amnesty from future regulation.
     ``We view this as a global issue that requires a global
response,'' said Thomas Jacob, who oversees DuPont's climate
change program.

                          Future Markets

     Although U.S. withdrawal from mandatory controls would appear
to let U.S. polluters off the hook, it may give European companies
an advantage to ``move more quickly toward being viable in the
future marketplace'' of clean energy sources, he said.
     Other companies such as Alcoa, BP, and Ford Motor Co. say
they view the scientific evidence of climate change to be
overwhelming and are positioning themselves for eventual controls
on carbon dioxide emissions.
     BP has set a target of cutting greenhouse gases 10 percent
below 1990 levels by 2010. It has already cut them 5 percent by
cutting methane leaks from wellheads, an effort that will
``improve profitability,'' said BP's Jeff Morgheim, who is working
on the company's climate change program.
     BP, whose chief executive John Browne visited the White House
in February, has ``been careful not to say anything'' about the
Kyoto Protocol, Morgheim said.
     Jacob said DuPont is concerned that if other countries ratify
Kyoto without the U.S. its overseas operations would be placed
under different regulations.
     ``Those of us who are multinationals could be caught in the
middle,'' Jacob said. ``What we need to do is capture some of the
positive contributions that have come out of the negotiations and
build on those.''
     Some members of the Pew group have pitched their stance
directly to the Bush administration. Executives from American
Electric Power, Enron, Pacific Gas & Electric, and Detroit Edison,
all of them Pew members, have visited the White House to advocate
regulating carbon dioxide.
     ``They've been pretty active in terms of trying to get their
views known,'' said Claussen.

                         Against Mandates

     The White House also is being pressed by the other side.
Companies that are members of the United States Council for
International Business, including Exxon Mobil, say Bush would be
unwise to go back to Kyoto, and should supplant mandatory cuts in
greenhouse gases in favor of voluntary programs.
     The group, which represents 300 companies, wrote Bush May 11
calling for voluntary efforts rather than ``rigid, mandated caps,
targets, timetables and command and control regulations,''
president Thomas M.T. Niles said in the letter.
     ``I don't think the business community will ever support
internationally mandated reductions,'' said Bill Kovacs, who
handles environmental issues at the U.S. Chamber of Commerce.
     National Security Adviser Condoleezza Rice said Bush will
share his views about global warming in meetings next week with
leaders of the European Union in Gothenburg, Sweden. ``He really
wants to talk about the seriousness of the problem and how to
address it,'' she said.
     An administration official said Bush's plans will include
voluntary measures to curb global warming, including an emissions
trading system, helping power plants improve their equipment, and
protecting farms and forests that absorb greenhouse gases.
     Kevin Fay, executive director of International Climate Change
Partnership, who is advising the White House, said Bush hopes to
have a policy finished by July 15. That's when U.S. officials will
join talks in Bonn in which European countries hope to revive the
Kyoto treaty. There is also a meeting of G-8 ministers on July 20.
     U.S. businesses are ``very concerned with the potential
appearance of this community doing nothing,'' said Fay. ``There's
a lot of potential in the outline of Kyoto.''



`Obsolete' Stock-Picking Tool Gives 52% Return: John Dorfman
2001-06-07 12:48 (New York)

`Obsolete' Stock-Picking Tool Gives 52% Return: John Dorfman

     (Commentary. John Dorfman, president of Dorfman
Investments in Boston, is a columnist for Bloomberg News.
The opinions expressed are his own.  His firm or its clients
may own or trade investments discussed in this column.)

     Boston, June 7 (Bloomberg) -- AT&T Corp. and AMR Corp.
look like great buys according to an old-fashioned stock-
picking tool, the price-to-book ratio.
     Why should anyone care about stocks picked by such an
antique method? Because it still works, that's why.
     A year ago, I recommended seven stocks selling below
book value. They were Azurix Corp., Gaylord Entertainment
Co., Loews Corp., McDermott International Inc., Raytheon
Co., Saks Inc. and Tommy Hilfiger Corp. From June 8, 2000
through Wednesday's close these seven stocks rose an average
of 52 percent. Over the same period, the Standard & Poor's
500 Index fell 11 percent.
     The best performer was Hong Kong-based clothing maker
Tommy Hilfiger Inc., which surged 117 percent. I own this
stock for some clients. Despite its big rise, it's selling
for less than 11 times earnings.
     The worst performer was Saks Inc., up 8.4 percent. The
Birmingham, Alabama, retailer has shown anemic profits in
the past four quarters, though I continue to see power in
its collection of brand-name department stores, such as Saks
Fifth Avenue, Carson Pirie Scott and Boston Store.

                      Nothing's Perfect

     Returns for the other five stocks were 108 percent for
Loews, 43 percent for McDermott, 41 percent for Raytheon, 26
percent for Gaylord and 23 percent for Azurix, which was
acquired by Enron Corp. (My clients own Loews, McDermott and
Raytheon.)
     Book value is simply corporate net worth. Take a
company's assets, subtract its liabilities and you have book
value. The price-to-book ratio is the stock price divided by
the book value per share of outstanding stock.
     Critics say book value is tainted or distorted by
corporate write-offs, inflation, or unrealistic depreciation
techniques. That's true to some degree. It was never a
perfect tool and nothing ever captures a complex reality
completely. But many, from the late Benjamin Graham on, have
successfully used book value for stock picking. It's still
useful, as this year's results attest.
     Frankly, I have no expectation of beating the S&P by 66
percentage points again over the coming year. But I think
investors who buy this year's selection of low price-to-book
stocks will probably be happy they did.

                            AT&T

     In addition to AT&T and AMR, I recommend Dillard's
Inc., Blockbuster Inc., Security Capital Group Inc., and
Kmart Inc. I reiterate my recommendation of Saks. All seven
are selling for less than book value.
     AT&T remains the nation's largest telephone company,
but it is increasingly a cable company, providing cable
television and rapid Internet service. Its stock has fallen
from about $60 in early 1999 to $21.65 today, which works
out to just 0.79 times book value.
     The biggest depressant for AT&T stock is the rate war
in long-distance voice service. I predict that within two
years a major competitor will withdraw from that field,
leading to better pricing for the remaining players. I hope,
however, that the market anticipates such a development in
advance because some of my clients own AT&T call options
that expire next January.
     AMR, like many airline stocks, has fallen because of
high prices for fuel, planes and labor. Revenue so far is
fine, but investors fear that a recession will reverse the
thrust.
     Teleconferencing and Internet conferencing are also
perceived as threats to business travel. Even with all the
problems, AMR looks cheap to me at 10 times earnings and 0.8
times book value.

                         Blockbuster

     Dillard's is a department store chain based in Little
Rock, Arkansas. It owns about 340 stores, mostly in the
Southeast, Southwest and Midwest. The stock fetches only
0.55 times book value. Analysts expect earnings to total
only $1.28 this fiscal year, the lowest in a decade. But the
company has demonstrated earnings power: It earned more than
$2 a share in six of the seven years from 1993 through 1999.
At $16.88, the stock looks bargain-priced to me.
     Blockbuster, based in Dallas, Texas, is the nation's
largest video rental company. Its stock has climbed 146
percent this year, yet still sells for 0.6 times book value.
Critics dismiss the company as a dinosaur, saying that soon
everyone will have video on demand by cable or satellite. I
doubt it. More likely, I think, is a slow transition from
old technologies to new ones. Blockbuster had free cash flow
of $6.28 a share in 2000 and the stock sells for only 3.5
times that figure.
     Security Capital, based in Santa Fe, New Mexico,
invests in real estate, manages real-estate properties, and
sells real-estate research. It earned $2.75 a share in the
fiscal year that ended in February; analysts expect it to
earn about a dime less this fiscal year. At the current
price of $21.27, the stock sells for just 6 times earnings
and 0.7 times book.
                            Kmart

      People will laugh at me for recommending Kmart, which
has declined about 39 percent during the past ten years. In
that decade, the S&P 500 has more than quadruped. Laughter
or not, the Troy, Michigan-based retailer is selling for
0.87 times book value and 0.14 times revenue. I think a
company that could shape it up and run it better may buy it.
     As for Saks, it earned 99 cents a share in the fiscal
year that ended in March, down from $1.64 the year before.
In the current fiscal year analysts expect earnings to
decline another 7 percent.
     With brands such as Proffitt's, McRae's, Younkers,
Parisian, Herberger's, Bergner's and Off 5th, in addition to
the ones mentioned above, I think Saks has the potential for
successful restructuring and creative financial engineering.
The stock sells for only 0.72 times book.


California to Utilize Lower Electricity Prices, Paper Reports
2001-06-07 11:04 (New York)


     San Francisco, June 7 (Bloomberg) -- California state
officials are prepared to use an unexpected drop in electricity
prices to forego almost two-dozen long-term power contracts priced
at above-market rates, the San Francisco Chronicle reported.
     Two weeks ago, officials were at the whim of power companies
and were desperate for available megawatts, the paper said.
     The California Department of Water Resources already signed
38 contracts to purchase electricity at fixed prices over the next
decade, the paper said.
     The state may not need all of the other 23 contracts, or
about 40 percent of the total agreements, that are in
negotiations, the paper reported.