Enron's India Unit Says Pleased With Supreme Court Ruling
Dow Jones International News, 08/06/01
INDIA: Indian top court rules in Enron's favour-companies.
Reuters English News Service, 08/06/01

Enron Wins Indian Court Decision Over Power Dispute Arbitration
Bloomberg, 08/06/01

INDIAN FM ADMITS MISTAKES OVER UNIT TRUST OF INDIA
Asia Pulse, 08/06/01
India: Uncertain fate of LNG carrier
Business Line (The Hindu), 08/06/01

Too Much Power? The utility industry's in a building boom. Why skeptics fear a bust.
Barron's, 08/06/01
Software companies face uphill battle in bid to shift from one-time sales fees to monthly subscriptions
Associated Press Newswires, 08/06/01



Enron's India Unit Says Pleased With Supreme Court Ruling

08/06/2001
Dow Jones International News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW DELHI -(Dow Jones)- Dabhol Power Co. said Monday it was "extremely pleased" with the Indian Supreme Court's ruling that asked the Bombay High Court to decide on Maharashtra Electricity Regulatory Commission's jurisdiction in settling DPC's $48 million payment dispute with Maharashtra State Electricity Board. 
DPC is a unit of U.S. energy major Enron Corp. (ENE).
"The favorable ruling gives further support to DPC's faith in the Indian legal system. The Supreme Court took note of DPC's argument that members of the MERC had previously published articles and position papers against the Dabhol project," said a DPC statement. 
"Although the court didn't rule on the question of MERC's bias, the court recognized the seriousness of potential bias and agreed that the matter could be heard before the Bombay High Court and not MERC," the statement added. 
Enron Corp. holds a controlling 65% stake in Dabhol Power Co., which operates a 740-megawatt power plant in the western Indian state of Maharashtra. 
DPC is embroiled in a long-standing dispute with its sole buyer MSEB over payments for electricity. MSEB stopped drawing power from DPC May 29, saying its tariffs were "unaffordable." DPC had earlier approached the Bombay High Court for redress of its grievances. It later appealed to the country's Supreme Court for justice. 
Valued at $2.9 billion, the Dabhol project is the single largest foreign investment in India. 
-By Himendra Kumar; Dow Jones Newswires; 91-11-461-9426; himendra.kumar@dowjones.com

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


INDIA: Indian top court rules in Enron's favour-companies.

08/06/2001
Reuters English News Service
(C) Reuters Limited 2001.

BOMBAY, Aug 6 (Reuters) - India's highest court on Monday ruled in favour of U.S. energy giant Enron Corp's Dabhol Power Company (DPC) in its ongoing dispute with a local utility over high tariffs and payment defaults, the utility's head said. 
The Supreme Court overturned a lower court's ruling in June, Maharashtra State Electricity Board chairman Vinay Bansal told Reuters.
"They have allowed Dabhol's petition and set aside the order of the Bombay high court," he said. 
The Supreme Court has asked the high court to decide whether Dabhol can take the dispute to the International Court of Arbitration in London. 
"The favourable ruling on the issue by the Supreme Court gives further support to DPC's historical faith in the Indian legal system," a Dabhol statement said. 
The current round of litigation was sparked off when the Maharashtra Electricity Regulatory Commission said the power company's dispute with the state utility fell within its ambit and Dabhol could not proceed with the arbitration. 
Dabhol then petitioned the high court, asking it to decide whether it could indeed take the dispute to London. 
On June 26, the high court rejected Dabhol's petition, saying the provincial regulator was empowered to take that decision. 
Dabhol then appealed to the Supreme Court. 
BITTER BATTLE 
Dabhol and the Board are locked in a bitter battle over a 2,184 MW power plant Enron's subsidiary is building in two phases on the western coast of India. 
At the centre of the dispute is the power purchase agreement, a contract that governs the terms of Dabhol's sale and the Board's purchase of electricity. 
Dabhol claims the utility has violated several clauses in this contract and wants the dispute to be resolved by the International Court of Arbitration. 
The Board cites its own clauses that it says Enron's unit has violated and insists the dispute be settled by the provincial regulator. 
The row threatens nearly $3 billion of foreign investment, the largest the country has seen.

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


Enron Wins Indian Court Decision Over Power Dispute Arbitration
2001-08-06 07:14 (New York)

Enron Wins Indian Court Decision Over Power Dispute Arbitration

     Mumbai, Aug. 6 (Bloomberg) -- India's highest court blocked
an attempt by the Maharashtra State Electricity Board to have a
provincial regulator arbitrate its dispute with Enron Corp. over
$64 million in unpaid power bills.
     The New Delhi-based Supreme Court ruled that the seven-month
old dispute must be settled through the Mumbai High Court and not
the Maharashtra Electricity Regulatory Commission, which was set
up in 1999 to regulate the power industry in the western Indian
state.
     The ruling is a victory for Enron, whose Dabhol Power Co.
unit in May began proceedings to end the seven-year-old power
supply contract with Maharashtra, its sole customer, because of
the debt. The state's electricity board, in response, stopped
buying Dabhol's power, saying it's too expensive, prompting the
generator to halt production.
     The ruling is ``favorable,'' said Enron in a statement.
     Dabhol has argued that the board didn't have the right to
cancel the contract, and the board referred the dispute to the
Maharashtra Electricity Regulatory Commission.
     Dabhol argued the regulator was created in 1999, after the
power purchase contract was signed, and therefore didn't have the
authority to decide the dispute.
     Dabhol's $3 billion plant, India's biggest foreign direct
investment, can generate 740 megawatts of power and the company
had planned to add another 2,184 megawatts of capacity this year.



INDIAN FM ADMITS MISTAKES OVER UNIT TRUST OF INDIA

08/06/2001
Asia Pulse
(c) Copyright 2001 Asia Pulse PTE Ltd.

NEW DELHI, Aug 6 Asia Pulse - Federal External Affairs Minister Jaswant Singh on Friday regretted the muddle caused in Unit Trust of India (UTI), but said it would not affect investor confidence. 
"It is regretable that it (UTI) happened....some mistakes have been made and the government has been hauled over the coals in Parliament for it," he said at the presentation of the first report on FDI by Mckinsey.
Stating that it was the function of parliament to pull up the federal government for any mistakes he said, "I would have been surprised had the Parliament not hauled us over the coals". 
Singh, however, said that the incident would not affect investor confidence. "UTI represents the foundation of investor confidence of India...abberrations of this kind will happen in any country." 
On the Enron issue, Singh said, "I wish it was handled better". 
''It would continue to remain the responsibility of the Government of India to promote an overall climate of investment and press for an early and fair resolution to the (Enron) issue to convey a positive message internationally'', he said. 
Admitting that the gap between 'promise and delivery' was impacting the flow of Foreign Direct Investment in the country he said, "the Vajpayee government has applied itself to this respnsibility and has taken measures but yet the delivery has not kept pace with the policy announcements". 
(PTI) 06-08 1037

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


India: Uncertain fate of LNG carrier

08/06/2001
Business Line (The Hindu)
Fin. Times Info Ltd-Asia Africa Intel Wire. Business Line (The Hindu) Copyright (C) 2001 Kasturi & Sons Ltd. All Rights Res'd

THE top brass of Enron, the Shipping Corporation of India and Mitsui-OSK Line have assembled in Tokyo to decide the fate of Laxmi, the 1.37-lakh cubic metre capacity LNG carrier, being built in a Japanese yard. 
Laxmi belongs to Greenfield Shipping, a wholly-owned subsidiary of Greenfield Holdings, promoted by the three companies. It is supposed to transport LNG from Oman and Abu Dhabi for the power plant being set up by Enron's Dabhol Power Company (DPC) at Ratnagiri in Maharashtra.
With Enron threatening to pull out of DPC, the fate of Laxmi has become somewhat uncertain. 
The objective of the Tokyo meeting is two-fold. First, the Greenfield partners will review the situation arising out of Enron's threat to pull out of DPC and, second, they will meet representatives of ANZ Investment Bank and 13 other lenders, funding acquisition of the vessel. 
ANZ Investment Bank is the leader of the 14-member consortium of lenders. 
The Greenfield partners have declined to give additional securities, which the lenders are insisting on. The lenders, who have already declared "an event of default" in view of uncertainty over the DPC's project, are believed to have threatened to hold back the payment of the last instalment, amounting to $55 million, in the event of non-availability of additional securities. The disbursement of the last instalment is due at the time of delivery of the vessel in the middle of November. ANZ Investment Bank and others in the consortium will part-fund the cost of Laxmi. Together, these lenders are to provide $165 million as loans, of which $110 million has already been disbursed. 
The vessel will finally cost about $230 million (its core cost being $189 million). 
The anxiety of the lenders is understandable. With Enron threatening to pull out of DPC, leading financial institutions and banks, earlier supporting the project, have already stopped releasing funds to DPC. 
ANZ Investment Bank and other lenders, therefore, apprehend that DPC, the charterer of the vessel, might find it hard to pay the charter hire. Hence, there is a threat to withhold the disbursement of the last instalment. 
All these developments are taking place at a time when construction of the vessel is nearly complete. The vessel is due to be delivered in November, while DPC's LNG-based power project is due to be commissioned in end-2001 or early 2002. 
The Greenfield partners are, however, not unduly worried over the probable deployment of Laxmi in case the proposed LNG transportation for the DPC plant comes a cropper. "It can be deployed on spot charter, and profitably," observe sources, pointing out that the global trend in the past one year suggests that LNG carriers are increasingly being offered on spot charters. 
True, 95 per cent of the 120-odd LNG vessels of the world are still dedicated to certain projects, but the share of LNG ships on spot charter today is about five per cent, up from one per cent a year ago. This is considered a significant development. 
In fact, Mitsui-OSK Line, which controls nearly one- third of the world's total LNG tonnage, is believed to be confident about deploying Laxmi on spot charter profitably, in case it is freed from the DPC project. 
Shipping sources said several LNG vessels already under construction are not tied to any project. For example, Shell, which by way of liquification, regasification and transportation through STASCO, is associated with nearly 60 per cent of the world's LNG business, has ordered four LNG carriers, none of them being tied to given projects. The same is true about several other world leaders in the field. 
Laxmi will be delivered at a time when the demand for LNG is expected to pick up as the entire western world will then be in the throes of winter. That will also be the time when the charter rates for LNG carriers is expected to shoot up. It will be another two years or so before LNG vessels currently on order are delivered. Till then, the spot demand for LNG vessels will persist, it is felt. 
However, one disadvantage of spot chartering is that it might imply a certain amount of idling of vessels. Also, one cannot be sure if the spotting will yield the same freight earning for Laxmi as has been fixed for DPC. The contract for LNG transportation for the DPC project was signed for 20 years at a confirmed rate of $97,600 per day. 
Alternatively, Laxmi can be put on one- year charter. Greenfield sources seem convinced that DPC's LNG- based power plant shall be commissioned someday, if not by Enron, then by any other promoter. After all, the $3-billion project, having made considerable progress, cannot now be scrapped. 
Santanu Sanyal

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

Too Much Power? The utility industry's in a building boom. Why skeptics fear a bust.
By Harlan S. Byrne

08/06/2001
Barron's
21
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Hardly a day went by last year without an announcement that a new electric power plant had been planned or put under construction somewhere in the U.S. And who could blame the utility industry for its zealous building binge? Politicians were wringing their hands about an energy crisis in full view of the television cameras. The price of electricity was surging from Montauk to Malibu. Meanwhile, all across California the seething citizenry was sitting in the dark. 
In recent months, however, the blackouts have abated and the lights have come on again. Electric bills are falling and the politicians have moved on. But the utility industry's troubles are only just beginning, say several consulting firms and some candid, and canny, insiders. The industry, they fear, is in the midst of a building boom that could result in a widespread financial bust.
By some counts the power industry plans to add as much as 290,000 megawatts of generating capacity over the next six years, which would represent an increase of almost 40% to current capacity of 760,000 megawatts of power. At the same time, the forward price curve for electric power, which tracks bid and asked prices for power delivered at specified future points, has been trending down. This has led some industry observers to predict a power glut, with potentially ugly consequences for firms that are forced to carry unused generating capacity. 
William McCormick Jr., chief executive of CMS Energy, a large electric power producer in Dearborn, Michigan, doesn't mince his words. "Just in Michigan, there are 9,000 megawatts of new power that are planned but probably won't be needed anytime soon," he says. 
Most of this power will be generated by new plants built by so-called merchant power producers, which sell their output in unregulated markets. If activated, they would increase the margin for capacity reserved for emergencies to an unnecessarily high 35%, from a current 15%. 
McCormick and others believe that Michigan may well be a microcosm of the nation as a whole. Says E. Linn Draper Jr., chief executive of American Electric Power, the largest U.S. power producer, "The question is how low the forward price curve will go, and whether future power prices will allow investors in power plants to recover their outlays for new generation." 
It is impossible to measure at this early date the aggregate financial damage that the industry might incur if its best-laid plans, and plants, ultimately do not provide adequate returns. Some consultants have suggested that 20%-30% of the plans announced for new facilities eventually will be shelved, and Electricity Daily, a well-regarded industry publication, already has reported scattered cancellations and deferrals around the country. A typical baseload plant generating 1,000 megawatts costs an average $500 million to build, although prices can vary widely by location and specifications. 
Wall Street, too, has begun to realize that too much of a good thing may be just that -- too much. Last year the Standard & Poor's electric utility index rang up gains of more than 40%, as many investors fleeing technology shares sought refuge in the group. This year, however, the utility index is down 10.4, compared with the S&P 500's 8% decline, and a drop of 2.5% in the Dow Jones industrial average. 
Utility stocks traditionally have lured investors with their fat dividend yields. But even that attraction may be dimming, as companies turn their attention to plowing cash into expansion. 
Among the industry's biggest players, Duke Energy has fallen 16%, to 40, and Southern 1.2%, to 23.60, from their respective 52-week peaks. The leading independent power producers have suffered even more. Shares of AES have skidded 46.6%, to 38.90, from last fall's high of 72.81, while Calpine has dropped 36.6%, to 36.80, since hitting a high of 58 in April. 
One New York money manager who has foreseen a capacity glut for some time, and who asked not to be quoted by name, says he's "aggressively shorting" General Electric. The stock, now 42.20 a share, has fallen 12% this year. GE's power systems unit, the leading manufacturer of gas turbines for power generation, has been a big beneficiary of the power-plant building boom, along with Siemens and some smaller equipment makers. "We'll probably be at our order and sales peak for domestic turbine deliveries this year and next," says Delbert A. Williamson, president of global sales for the power systems division. 
Williamson says its possible GE will sell out for 2003, as well, but it's not nailed down yet. The company has received some orders for delivery of gas turbines in 2004, but he doesn't yet view this order-flow as an indicator of a trend. On the other hand, Williamson sees signs of a pick-up in orders from Europe and the Middle East that could partially offset what looks like a slowdown in domestic sales two or three years from now. 
After struggling for business in the mid-1990s, GE's power systems unit has become a major contributor to the company's earnings growth. Segment profits more than doubled since 1998, reaching $2.8 billion last year. Profits nearly doubled again in the first half of this year, to $2.2 billion from $1.2 billion a year ago. But the aforementioned short-seller says "a lot of investors will start waking up late next year and belatedly discover that a power glut isn't far off." Williamson says he's unaware of any order cancellations, and probably wouldn't expect any for another 24 months, in accordance with the terms of most sales. 
Given the rosy long-term outlook for electricity demand, supply constraints eventually are bound to reappear. But near-term concerns about excessive generating capacity aren't all that surprising, either. Boom and bust cycles are endemic to commodities businesses, from steel to paper to power. Whenever there is a need, and the price is right, supply will rush in to meet demand. 
By way of illustration, John W. Rowe, co-chief executive of Exelon, a Chicago-based energy holding company, recently testified at Senate hearings on President Bush's proposals to boost energy supplies. Rowe observed that in the five years through 1999, electric demand increased by 9.5% while additions to generating capacity rose only 1.6%. He cited the dramatic rise in electricity prices, until recently anyway, as "proof positive" of what happens when capacity doesn't keep pace with demand. 
The electric utility market has wrestled with overcapacity in the past, but never in the memory of industry veterans has the problem loomed as large as today. That's because almost no new plants were constructed in recent years, as the industry coped with the fallout from deregulation. The wholesale market was deregulated six years ago by federal decree, and the industry has been further liberated on a state-by-state basis since. But the process was marked by political wrangling between consumer and other special-interest groups, and the outlook remained uncertain in many parts of the country until fairly recently. 
The upshot was a general reluctance industrywide to commit to large capacity expansions. As a result, the regulated utilities erected only a few power plants over a five-year span. This paved the way for several independent generators of power to thrive, and in the past two years catapulted the leaders in that market, AES and Calpine, into the growth-stock leagues. 
Calpine, in particular, achieved star status, and its shares quadrupled as the San Jose company's earnings soared. Last year Calpine posted earnings of $325 million, or $1.11 a share, on revenues of $2.3 billion, compared with net of $96.2 million, or 43 cents a share, on $848 million in revenues in 1999. In the latest quarter earnings more than doubled to $132 million, or 32 cents a share, while revenues more than tripled, to $1.6 billion. 
Yet, investors no longer seem quite as dazzled by the company's plans to build or acquire up to 70,000 megawatts of capacity by 2005, which would represent a 10-fold increase over current capacity of 7,000 megawatts of power. Calpine, too, must recognize that its ambitious plans could face some roadblocks ahead. Recently the company has turned much of its attention to expanding outside this country, in places such as the United Kingdom and Canada. 
If Calpine manages to realize its goals, however, the company could become one of the largest, if not the largest, U.S. power generator. It would be the leader of a spunky pack of merchant power producers, although it currently lacks the extensive power-marketing operations of some others in the field. 
Many regulated utilities also have been captivated by the potential for profits from wholesale and trading activities. Some frankly trumpet the wholesale trading of power as their main growth initiative, and a few have spun off or otherwise separated for operating purposes their unregulated operations. Mirant, a former subsidiary of Southern, came public last September, and after a rough start its shares spiked up to 47 from 20-21. The stock now trades around 33. Other prominent independents include Reliant Resources, spun out of Reliant Energy in May 2001; NRG Energy, an offshoot of Xcel Energy, and Aquila, which was recently taken public by parent UtiliCorp. 
Other power providers, including industry giants Duke Energy and American Electric Power, have been contemplating similar spinoffs. In part, the independents are hoping to emulate Enron, one of the largest traders of wholesale power. 
While brokerage analysts generally have applauded the utilities' drive to exploit wholesale trading, some are now growing wary about the possible financial consequences of an energy glut. That's because a recent and unexpectedly sharp decline in power prices has raised red flags about the industry's future earnings from the sale of wholesale power. According to statistics compiled for Barron's by McGraw Hill-Platts, a prominent trade publisher, wholesale electric prices nationwide have dropped to less than $50 per megawatt hour, and in some areas to $40, from about $125 in May. Late last year power in California fetched a stunning $1,000 per megawatt hour, while the national average soared above $200 in December. In part it was this sort of price action that spurred orders for new plants, as merchant power producers and others envisioned printing money. 
The forward price curve, which peaked in early April, tells a similarly sobering tale. According to Platts, the cost of power bought in the mid-Atlantic region for delivery in 2002 then sold for about $51 per megawatt hour. The price since has fallen to $38. Power for 2003 would have cost $44 per megawatt hour, and now it's $36. In the main hub in California, meanwhile, power for 2003 has fallen to $41 from an April high of $73. 
Two weeks ago Raymond Niles, a utility analyst at Salomon Smith Barney, issued a cautionary note about power prices, noting that June was the first month this year to show a year-to-year decline in electric prices, and a violent one at that. Niles sees worsening comparisons ahead, which prompted him to cut his earnings estimates and price targets for several utilities, including Entergy, Xcel and UtiliCorp. 
Steve Fleishman, of Merrill Lynch, long considered one of the top utility analysts, also has begun to acknowledge a potential power glut. But he's quick to give the weather and economy their due in guiding supply and demand. By Fleishman's reckoning 45,000 megawatts of new capacity will be added to the market next year. But demand has been dampened by a weak economy, lower power prices stemming, in part, from federally imposed price caps in California, and cooler summer weather throughout the U.S., which has led to cutbacks in air-conditioning loads. Fleishman maintains power prices may get weaker still before rebounding. 
Lowell Miller, a money manager specializing in utility shares, thinks the stocks are still vulnerable precisely because they were accorded glamour status by some fans on the Street. Once considered the province of risk-averse investors, they migrated last year into the hands of the growth-oriented crowd. 
Ruth Ann Gillis, the chief financial officer of Exelon, concurs. The company's stock recently dropped more than five points in two days, even after the company, which was formed by the merger of Philadelphia's PECO Energy and Chicago-based Unicom, posted strong second-quarter earnings, and predicted further gains. "The momentum crowd took over the trading in utility shares after dumping technology stocks," she says. "Now they may be getting out." 
The managers of the nation's biggest electric utilities are mixed in their assessments of the threat of a power glut, and in their tactics to combat it. Linn Draper, of AEP, sticks by what he calls a contrarian view about new generation. AEP, he notes, is meeting increased demand through its merger with Central & South West, which was completed in June 2000, and is increasing its operating efficiency by upgrading equipment and procedures. The company has entered into joint ventures with chemical companies for new plants, but Draper emphasizes that AEP has refrained from building new plants on its own. 
Initially, he says, the company's Wall Street followers failed to appreciate why the utility didn't follow the trail blazed by more aggressive producers, such as Calpine, Duke and Mirant. But with power prices falling, Draper feels that AEP's stance will be vindicated. The company based its predictions for future supply and demand on both published price curves and its own internal analysis, he notes. 
Draper's on the same page as the rest of the industry, however, in viewing the wholesaling and trading of unregulated power as the best avenue to earnings growth. (In addition to being the nation's largest electric power producer, with nearly 40,000 megawatts of capacity, AEP claims it's No. 2, behind Enron, in trading electric power and gas.) The bulk of the 85% growth in the company's second-quarter earnings, which totaled $287 million, or 89 cents a share, came from wholesale electric and gas operations. AEP expects to earn $3.50-$3.60 for the full year, and $3.75-$3.85 in 2002. 
Duke Energy, another giant in electric and gas operations, has taken a somewhat more aggressive stance than AEP in capacity additions. Richard B. Priory, the company's chief executive, doesn't seem surprised by the industry's aggressive building plans, given that many utilities, several years back, were too paralyzed by the problems surrounding deregulation to respond to an obvious impending shortage of power. "A lot of executives had their heads in the sand," he says. 
Duke is still expansion-minded, with a number of new power plants on its books. Priory seems reassured by the growing contributions of wholesale electric power and gas to the company's earnings stream; wholesaling drove second-quarter earnings up 23%, and contributed to a 43% gain in revenue in the year's first half. The company expects to earn $1.9 billion, or $2.50 a share, for the year, compared with $2.10 a share in 2000. 
Still, Priory is keeping an eye on industry supply, and says Duke could curtail construction if necessary. "Over the next three-to-five years we're likely to see an easing of currently tight markets, and that could mean some new plants that have been announced don't get built," he says. The company canceled orders for two small "peaker" plants earlier this year, but still plans to add around 20,000 megawatts of capacity by the end of 2002. 
In recent years the utility industry has been partially reconfigured by several big mergers, and further consolidations might radically alter the outlook for power supply and demand. It is hard to handicap the prospects for more deals, however, because proposed mergers often risk substantial regulatory and other delays. 
The electric industry has mounted a protracted effort to obtain Congressional repeal of the Public Utility Holding Company Act, a relic of the Great Depression that was designed to halt consolidation. Utility executives have speculated that outright repeal would unleash a tidal wave of mergers among the roughly four-score publicly traded firms. That, in turn, conceivably would lead to plant consolidations and diminished need for additional plant capacity. Completed and pending mergers between electric power producers and natural-gas pipeline companies also might mitigate the need for some new power plants. In the long term, the development of alternative energy sources, such as solar- and wind-based power, also could curb construction of coal- and gas-fired electric power plants. 
The supply of natural gas in itself might alter the utility industry's future building plans. Many independent oil and gas producers stepped up drilling last year as energy prices rose. But Christopher R. Ellinghaus, energy analyst with Williams Capital Group, a New York investment bank, recently predicted a third of the new power plants planned in the U.S. won't be completed because of a shortage of gas. Ellinghaus thinks contraints on the supply of electric power will be eased for the next few years, but anticipates a much tighter market thereafter unless an "unprecedented" amount of new gas is produced in three-to-five years. 
The Bush Administration, which took office in the midst of California's energy crisis, isn't banking entirely on gas-fired plants, but pushing for the expanded use of coal and nuclear power. In recent years, however, it has been tough to obtain regulatory approval for new coal-powered plants, despite much progress in developing so-called cleaner coal. Industry groups have been pressuring the White House to lower environmental standards in order to speed coal-mine development, and coal executives now seem jubilant about the prospects for success. The industry notes that coal-fired plants generating more than 20,000 megawatts of power are now in the planning or development stages. 
Similarly, the nuclear power industry is flexing its muscles again, thanks in part to encouraging words from President Bush. Nuclear plants, which now supply 20% of the nation's electric power, fell into disrepute after accidents at Three Mile Island in Pennsylvania, and Chernobyl, in Russia. But the operating records of most of the 104 nuclear plants in the U.S. since have improved, and the industry is determined to speed up the license renewal process. Building a new nuclear plantwould take several years, but some in the industry are looking to newly-designed models that require shorter lead times. 
In the meantime, plans continue apace for the industry's build-out of more gas- and coal-fired plants. But unless demand for power increases at a similar clip, their output will go begging. Company earnings will suffer, and investors will find little reason to fall in love with utilities all over again.

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

Software companies face uphill battle in bid to shift from one-time sales fees to monthly subscriptions
By MICHAEL LIEDTKE
AP Business Writer

08/06/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

SAN FRANCISCO (AP) - Oracle Corp. built an $11 billion dollar a year business selling and installing software on computers, but CEO Larry Ellison thinks those days are ending. Five years from now, Ellison believes Oracle will generate most of its revenue renting its products in a world wired to the Internet. 
Under this scenario, businesses and eventually consumers will go online to log on to a Web site and pay a monthly fee for access to a wide variety of applications, instead of buying a disk and installing the software on a single computer's hard drive.
The transition is a no-brainer in Ellison's mind because businesses will save money hiring consultants to handle the tedious process of installing software on in-house computers and their employees will have the flexibility to access applications from just about anywhere, using laptops and handheld devices. 
Meanwhile, Redwood Shores-based Oracle will build a more reliable revenue stream akin to a cash-rich cable TV company that collects subscriptions from a captive audience month after month. 
"I believe all software companies will transform themselves into online service companies. We have no choice," Ellison said earlier this summer. 
Even longtime Ellison nemesis, Microsoft Corp., is heading down the same path as Oracle. As part of a new Internet initiative unveiled last year, the Redmond, Wash.-based company is introducing a new service called "HailStorm," which will enable businesses and consumers to rent a variety of online applications for a monthly fee. 
Despite the resolve of the world's two biggest software companies, online software rentals seem like a pipe dream to many industry executives and analysts. 
"Large companies are never going to trust someone else to run their software. If you believe technology is your most precious asset, you are not going to let go of it," said PeopleSoft Inc. CEO Craig Conway. "Every year, it seems like there is some major paradigm shift predicted for the industry. Sometimes they actually happen, but most of the time they don't." 
Ellison certainly missed the mark with one of his most heralded predictions of sweeping technological change. In the mid-1990s, Ellison made worldwide headlines by unveiling a network company that would draw upon online resources and make Microsoft's Windows-based operating system obsolete. Ellison's vision hasn't panned out yet and most analysts believe he is shooting too high again with his ambitious predictions for online software services. 
"It's going to be a very gradual evolution, if it occurs at all," said industry analyst Charles Phillips of Morgan Stanley Dean Witter in New York. "People like to have control over their own technology. They like to build it themselves. They want to be able to see it in a room." 
Security concerns and worries about system outages also might discourage online software subscriptions. 
Software companies like Oracle and Microsoft are pushing to build online subscription businesses because they are beginning to recognize the growth limitations of their traditional sales approach, Phillips said. Both companies are reaching such a saturation point with their software that they realize there is only so much more money they can make from one-time fees for new products and upgrades. 
A breed of companies known as "application service providers" have been struggling terribly in their efforts to rent software online. The most prominent pure ASPs include Annapolis, Md.-based USinternetworking Inc. and San Mateo-based Corio Inc., which have lost $408 million and $186 million, respectively since their inceptions in 1998 while attracting fewer than 500 customers combined. 
Reflecting their grim outlook, the stocks of both companies are stuck under $1 per share. USinternetworking went public in April 1999 at $21 per share while Corio made its stock market debut in July 2000 at $14 per share. 
Despite the early troubles of pioneering ASPs, the research firm International Data Corp. sees a bright future for the concept. In a recent report, IDC predicted total ASP revenues will swell from $986 million last year to $24 billion in 2005. 
Proponents of online software rentals say the ASPs have flopped because they are leasing applications made by outsiders, such as PeopleSoft, SAP and Siebel Systems. 
"The only companies that will be successful in delivering online services will be the software companies themselves," Ellison predicts. "Everyone else that tries to deliver online services will fail." 
Marc Benioff, one of Ellison's former lieutenants at Oracle, says his San Francisco-based start-up is proof that online software subscriptions are the wave of the future. Since going online in March 2000, Salesforce.com has signed up 50,000 employees at 2,800 companies that pay $65 per monthly subscriber. 
"We are going great guns," Benioff said. "The Internet has matured to the point that it is more than capable of handling this kind of model." 
Backed by $65 million in venture capital, privately held Salesforce.com is projecting revenues of $25 million this year, nearly quadrupling last year's sales of $7 million. The company expects to become profitable early next year when its revenues are expected to hit $60 million. 
Analysts say Salesforce has proven that online subscription software works for certain people, like on-the-go sales representatives, and for small- and medium-sized companies that might not have the budget, or time, to install complex software applications. The skeptics doubt large corporations will depend on cookie-cutter online subscription services for complex applications critical to their day-to-day applications. 
"This is fine for the small guys that don't want to be bothered with technology, but the big companies want to be masters of their own destiny," said industry analyst Joe Outlaw of the Gartner Group in Stamford, Conn. 
After using Salesforce's service for four months, energy giant Enron Corp.'s director of sales, John Hillman, is convinced online subscription is the way to go for software applications. "I think you are going to see a whole rebirth in the ASP model," Hillman said. "It just makes too much sense for it not to work." 
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On The Net: 
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http://www.salesforce.com 
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http://www.usinternetworking.com 
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