USA: INTERVIEW-El Paso had no reason to inflate price-chairman.
Reuters English News Service, 05/21/01

Former TVA director signs as Enron lobbyist
Associated Press Newswires, 05/21/01

'Enron's allegations will hurt foreign investment'
The Times of India, 05/22/01

Re-negotiation best: Deshmukh; lenders' SOS to Centre
The Times of India, 05/22/01

Enr-off and Enr-out
Business Standard, 05/22/01

Dabhol: more heat than light
Business Standard, 05/22/01

USA: Enron eyes entry into coffee, sugar, cocoa - trade.
Reuters English News Service, 05/21/01

Enron to End Involvement in $3.5 Billion Middle East Gas Project
Dow Jones Business News, 05/21/01

Bush Energy Plan Stirs Pot, But Not Energy Prices
Dow Jones Energy Service, 05/21/01

INDIA: India says optimistic about Enron settlement.
Reuters English News Service, 05/21/01

UK: INTERVIEW-Axia starts trading German, Italian power.
Reuters English News Service, 05/21/01

Brazil's Petrobras to Set Terms for Currency Risk on Gas Sales
Bloomberg, 05/21/01

Enron Target of Protests Over Energy Policy and Higher Prices
Bloomberg, 05/21/01

Enron Power Dispute May Cost India More Than $3.6 Bln (Update3)
Bloomberg, 05/21/01

Enron Withdraws From $2 Bln Middle East-Gas Project (Update4)
Bloomberg, 05/21/01


USA: INTERVIEW-El Paso had no reason to inflate price-chairman.
By C. Bryson Hull

05/21/2001
Reuters English News Service
(C) Reuters Limited 2001.

DALLAS, May 21 (Reuters) - El Paso Corp. had no incentive to inflate natural 
gas prices on its pipelines to California because it had hedged most of its 
gas to third parties before prices took off last year, the gas company's top 
executive said on Monday. 
The Houston-based company is currently fighting price-gouging claims brought 
to federal regulators by the California Public Utility Commission and that 
state's two largest investor-owned utilities, PG&E Corp.'s . Pacific Gas & 
Electric and Edison International's Southern California Edison.
El Paso Chairman, President and Chief Executive Officer William Wise told 
Reuters he expects his company to be cleared once it makes its case to the 
U.S. Federal Energy Regulatory Commission in hearings this week. 
"The last piece we think is very elemental and so easy to understand is that 
we hedged our capacity into California. If we thought the gas prices were 
going to go up, we wouldn't have hedged it. We were hedging it because we 
thought prices would be flat or down," Wise said in his first interview on 
the topic since El Paso began fighting the accusations several months ago. 
Even SoCal Edison's main witness admitted during testimony last week that it 
would be irrational for a market manipulator to hedge like El Paso did, Wise 
said. Ninety percent of El Paso's gas was hedged to others in the period 
during which the company was alleged to have raised prices. 
On Monday, lawyers for El Paso continued fighting those accusations in 
proceedings before FERC Administrative Law Judge Curtis Wagner. 
The California trio alleges El Paso, California's largest natural gas 
supplier, withheld capacity on its four pipelines into the state from March 
through November 2000 in order to inflate prices. The CPUC alleges that cost 
Californians an additional $3.7 billion. 
Even in the worst case, if Wagner substantiates the claims and orders El Paso 
to refund some of the money it made, Wise said the exposure will not be 
great. 
"I think in total last year, we didn't make more than $100 million in 
California," Wise said during an interview following El Paso's annual 
shareholder's meeting in Dallas. 
The FERC already rejected a related accusation from the CPUC, which charged 
El Paso rigged bidding in a capacity auction for its main pipeline into 
California to favor a sister company. 
Wise said he was confident that El Paso would prove that it did not withhold 
pipeline capacity, as the company's accusers have alleged. 
The genesis of the complaints to FERC is a desire by the utilities and the 
CPUC to shift blame, Wise said. 
"They're attempting to deflect away from decades of bad policy and bad 
business decisions, both by the public utility commission and by the 
utilities in which they did not build power plants and they did not build 
natural gas infrastructure within the state," Wise said. 
The most glaring infrastructure problem is the limited capacity to move gas 
inside of California, especially from south to north. The utilities 
traditionally countered that by storing natural gas, but Wise said they made 
a critical mistake last year by selling stored gas at an arbitraged profit. 
"They depleted storage, and by the time they figured this out, they needed 
every bit of capacity just to serve the market and they had no capacity to 
refill storage," Wise said. "Economics 101 would tell you you're going to get 
prices spikes, and that's exactly what happened." 
ACQUISITIONS STILL ON RADAR 
Outside of California, Wise said that EL Paso will remain an active acquirer, 
given its track record of executing mergers and acquisitions like its recent 
$24 billion purchase of Coastal Corp. 
"Do we buy an electric utility? Do we buy more (exploration and production)? 
The market should expect us to do merger and acquisition activity within the 
playing field that we have a demonstrated expertise in," Wise said. 
Asked whether he had any interest in hometown rival Enron Corp.'s Portland 
General utility, which is on the block again after Enron's $3 billion sale 
with Sierra Pacific Resources Corp. fell through last month, Wise answered: 
"The utility side of the business is not my favorite side of the business. 
The generation side of a utility could be interesting," Wise said.

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


Former TVA director signs as Enron lobbyist

05/21/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

KNOXVILLE, Tenn. (AP) - Johnny Hayes, a former Tennessee Valley Authority 
director, has been hired to lobby Congress for electric wholesaler Enron 
Corp., a potential TVA competitor. 
Hayes, who resigned from the three-member TVA board in January 1999 to become 
the top fund-raiser for Al Gore's presidential campaign, registered this 
month to lobby for Houston, Texas-based Enron, The Knoxville News-Sentinel's 
Washington bureau reported Sunday.
Enron is one of the nation's largest energy companies, reporting $101 billion 
in revenues last year compared to government-owned TVA's $6.7 billion. 
Enron spokesman Eric Thode confirmed Hayes has been hired to work for the 
company, but refused to say his salary. Enron paid another lobbyist $415,000 
last year, records show. Hayes' salary at TVA was $118,400 annually. 
Hayes, a former Tennessee economic and community development commissioner who 
lived in Gallatin, did not immediately return calls to The Associated Press 
for comment. 
Stephen Smith, executive director of the TVA watchdog and environmentalist 
group Southern Alliance for Clean Energy, said he is concerned about a TVA 
insider joining ranks with a potential TVA competitor. 
"As a board member for TVA, one knows where a lot of the skeletons are 
throughout the agency," Smith said. "What is always a concern is when you 
step out away from the organization, do you potentially now profit from that 
and turn it against consumers in the Valley?" 
Hayes was hired to lobby "on energy issues, TVA-related, kind of a host of 
issues that would affect that area and be related to energy," Thode said. 
The lobbying "may include TVA, but it would be a variety of things," he said. 
"We're looking at things, projects all over the nation at all times." 
TVA and Enron have done business before. TVA contracted with Enron to provide 
power during peak periods in the summers of 1998 and 1999. When Enron failed 
to deliver, TVA sued and recovered more than $200 million. 
That experience also resulted in TVA deciding to devote money that might have 
been used to trim its $26 billion debt to buying more peak-power gas turbines 
of its own. 
Hayes, who registered under the company name of Sideview Partners Inc., also 
signed up to lobby for Gas Generation, a subsidiary of Tractebel Power Inc. 
of Houston, and Voith Siemens Hydro Power Generation, a Pennsylvannia company 
with offices in Chattanooga. 
--- 
On the Net: 
Enron Corp: http://www.enron.com/ 
TVA: http://www.tva.gov/

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



'Enron's allegations will hurt foreign investment'
A Staff Reporter

05/22/2001
The Times of India
Copyright (C) 2001 The Times of India; Source: World Reporter (TM)

PUNE: Unhappy with Enron for its "extreme" step of serving a pre-termination 
notice (PTN) to the Maharashtra government over the issue of continuance in 
Dabhol Power Project (DPP), former chief minister of Maharashtra Sharad Pawar 
said the US power company's charges of political interference would create a 
negative impression about India in the minds of foreign investors. 
Although the resignations of three members from the Madhav Godbole committee 
was unfortunate and led to some confusion, it did not warrant such a drastic 
step by Enron, Mr Pawar said. The US power major should not discard the 
option of negotiations, he added.
Advising an amicable solution to the present deadlock between Enron and the 
Maharashtra government, he said, the state is no position to buy the costly 
power to be supplied by Dabhol Power Company (DPC) from its second phase in 
near future. "Moreover, the state does not have a demand good enough to 
consume all the electricity offered by Phase II of Enron," he added. 
Mr Pawar said, the surplus power generated by phase II of Enron could be 
utilised by the Centre to bail out other states facing inadequate power 
supply. "There are many states in the country, which have an acute power 
shortage. Instead of going for new capital intensive power projects in these 
states, the Centre should purchase the surplus electricity to be made 
available by phase II of Enron," he clarified. Mr Pawar said, while the 
Centre's change of mind on the issue of taking over DPC phase II was crucial, 
it is imperative for the US power major to reduce its steep power price. 
Asked about the financial implications arising out of Enron's likely exit 
from the DPC, Mr Pawar said, such an eventuality should be avoided at all 
costs. "The Centre and the State will have to pay astronomical costs if the 
talks fail. The heavy penalty would be simply unbearable," he added.

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


Re-negotiation best: Deshmukh; lenders' SOS to Centre
The Times of India News Service

05/22/2001
The Times of India
Copyright (C) 2001 The Times of India; Source: World Reporter (TM)

NEW DELHI: ``The (best) solution lies in an amicable settlement,'' remarked 
Maharashtra CM Vilasrao Deshmukh to journalists' queries here on Monday 
regarding the Enron standoff. 
The CM, who was here at the meeting called by the PM to discuss India's 
position at the WTO talks on agricultural trade, reiterated the basic point: 
His government was keen on negotiating and that was the only way out. The 
Maharashtra electricity board just cannot afford to buy Enron's generation at 
the current price, he said.
Queried on the latest set of notices between the two parties, Deshmukh said 
what was being aired verbally is not so important. What is more to the point 
is a willingness to find a way out. 
PTI adds from Mumbai: Following Enron-promoted Dabhol Power Company's 
issuance of the preliminary termination notice (PTN) to MSEB, its Indian 
lenders have once again decided to seek the Centre's intervention to solve 
the imbroglio. 
"Like our earlier effort, even this time, we wish that the Union government 
intervene and help diffuse the entire crisis amicably", FI sources said. 
The Indian lenders, led by IDBI and a consortium of several banks including 
SBI and ICICI have lent around $ 1.4 billion out of DPC's total $ 3 billion 
2,184-MW project in Dabhol. 
In fact, the sources said, IDBI along with the global lenders had written to 
Union finance secretary Ajit Kumar in the first week of this month, seeking 
the Centre's intervention to direct MSEB and the Maharashtra government to 
pay dues up to Rs 213 crore towards the November and December 2000 bills. 
"We had also asked the Centre to convince MSEB, and refrain it from issuing a 
termination notice to DPC," they said. 
However, Kumar in his reply, had put the ball in the lenders' court and asked 
Indian FIs to take "the course deemed fit to them in this case".

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


Enr-off and Enr-out
Our Editorial

05/22/2001
Business Standard
15
Copyright (c) Business Standard

The Dabhol power project seems to be heading for a denouement, along two 
parallel tracks. The company itself, there can be no doubt, is getting ready 
to dump the project and pull out, just weeks before trial runs are due to 
start on the 1,444mw second phase (the first phase of 740mw has already 
stopped producing power). Dabhol Power has presumably seen the obvious: that 
there is no way in which either the Maharashtra State Electricity Board or 
the Maharashtra government will be able to meet their contractual obligations 
and guarantees on power purchase. In its present form, therefore, the project 
is as good as dead and one might as well recognise the fact. Can the project 
be revived, and if so on what sustainable terms? A re-negotiation committee 
has been put together and will meet Dabhol's representatives on Wednesday. 
But three members of the committee have already walked off, citing one reason 
or other, so the re-negotiation process hasn't got off to a propitious start. 
Then, given the unpromising history of earlier re-negotiations and the 
incompetence with which MSEB has handled its original negotiations, it is far 
from clear whether anything substantial can be extracted from Dabhol 
especially if Dabhol is clear about the legal ground on which it stands.
One must presume that Dabhol's promoter, Enron, and its American lawyers have 
sewn up a watertight deal, without the bungling that has typified the Indian 
handling of the matter. So it is likely that the cost of killing the project 
will be heavy indeed, and perhaps unbearable, for both MSEB and the 
Maharashtra government. Keep in mind the cost of the project ($2.9 billion, 
or about Rs 14,000 crore) plus the present value of future profits foregone 
and profits are said to be in the region of 30 per cent of equity, every 
year. The numbers are staggering. Is there a way to not pay such a bill? Yes, 
there are two possible options. One is for MSEB to reform its power tariff 
structure (90 per cent of its customers are subsidised), cut its transmission 
losses (which are as high as 30 per cent), and then to persuade the central 
government to allow Dabhol power to be sold to other users as well. The 
Godbole committee's first report, submitted some six weeks ago, suggests that 
if handled this way, Dabhol can still be made a workable proposition provided 
some re-negotiation of tariffs is done. Dabhol has said it is willing to 
re-negotiate, but with its typical in-your-face style has asked for the moon 
in return (among other things, tax breaks of all kinds). Since agreeing to 
such terms will only add to the existing scandal of past mis-negotiations, 
and since MSEB is not about to reform itself in a hurry, the prospects for 
successful re-negotiation of a reasonable and workable tariff are slim. The 
second way of avoiding footing an impossible bill is to go the 
extra-commercial route, and use diplomatic pressure so as to force the 
company to compromise substantially. But since Enron is among the firmest 
supporters and biggest financiers of the new US president, it is difficult to 
see diplomatic pressure achieving very much, unless President Bush recognises 
a one-sided deal when he sees one, takes into account the bad odour that 
might settle on other American companies and Indo-US relations in general, 
and leans gently on Enron to compromise. However, these are will-o'-the-wisp 
hopes and prayers, and no strategy can be predicated on their success. What 
does that leave with MSEB and the Maharashtra government? The answer is: the 
Godbole report. On which, read on.

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


Dabhol: more heat than light
A V Rajwade

05/22/2001
Business Standard
14
Copyright (c) Business Standard

The general impression propagated by the critics of the Enron-promoted power 
project, and often accepted by the man on the street, is that MSEB and, as a 
by-product, the citizens of Maharashtra, are victims of very high-cost power; 
that the agreements were signed at the behest of corrupt politicians; and 
that, therefore, the best course of action is to tear up the agreements and 
forget about it. But the first phase of the power plant has been in operation 
for a few years, and the second phase is also reportedly 92 per cent 
complete. These are genuine productive assets that the economy will 
eventually need, and cannot be wished away. Nor can the country afford to 
renege with impunity, solemnly undertaken financial obligations.
In my regular weekly column (World Money, which appears on Mondays), I have 
been a supporter of foreign investment and had criticised the initial stance 
of the BJP-Shiv Sena government, which had terminated the contract, only to 
revive the project on a much bigger scale, on the basis of the efforts of a 
renegotiation committee appointed by it. The controversy has once again 
become front-page news, given the inability of MSEB to pay the dues of Dabhol 
Power Company (DPC). In turn, the MSEB has served notices for what it claims 
are dues from DPC because of defaults, and the whole matter has become a 
first-class mess. The recent report of the Godbole Committee is certainly a 
step in the right direction, and the government has appointed another group, 
once again led by Mr Godbole, to renegotiate the contracts with DPC/Enron. 
Theoretically of course there are three possible culprits _ politicians, a 
devious Enron that corrupted them, or a system whose competence (and 
professional commitment) was less than adequate to evaluate the project 
properly. To be sure, the committee has, while commenting on how the tariff 
was shown to be within government of India norms, felt "this combination of 
circumstances to be beyond the realm of coincidence". This is the closest it 
has come to questioning the motives of those involved. But before drawing 
conclusions, consider some basic issues. Demand estimation: The report 
concludes that gross errors were committed in estimating the total amount and 
nature of the demand for power in the state. The growth in the high tariff 
group has been very limited (surely this was foreseeable at a particular MSEB 
tariff, industry finds it cheaper to generate captive power), while 
low-tariff demand has grown steadily. Again, the report argues that, on the 
supply side, MSEB had enough generating capacity available for the so-called 
"base load", to meet which plants have to run 24 hours a day. MSEB really 
needed generating capacity, even according to its own demand projections, for 
the intermediate and peak loads. While the fuel envisaged to be used in DPC 
is ideal to take care of this, the plant load factor (PLF) used for cost and 
tariff calculations is completely unrealistic for such a power plant. Were 
these major errors in demand estimation and so on or political failure or 
system weaknesses? Return on equity: If there were gross errors in the 
demand-supply projection side, the assured 16 per cent return on equity, (at 
68.5 per cent PLF) after tax, is also open to serious questioning. What is 
truly amazing is that the return was the same in percentage terms 
irrespective of whether the equity was contributed in rupees, dollars or 
perhaps even yen and that too in the respective currencies! The Maharashtra 
government is not responsible for this: it is government of India policy, 
cleared at the highest ministerial levels. Before adopting the norm, did we 
use concepts like Capital Asset Pricing Model (CAPM) which show that equity 
market returns in all countries are not identical; that they crucially depend 
on the risk-free rate of interest which is different for each currency. 
Again, there are robust benchmarks available for quantifying the political 
risk that a foreign direct investor faces (for example, the premium charged 
for different countries by the Multilateral Investment Guarantee Association 
of the World Bank). Was such analysis done before the 16 per cent tax-free 
norm, and exchange-rate protected returns, were assured? If not, who is 
responsible? The discount rate: I started thinking about the discount rate 
used in the Power Purchase Agreement (PPA), for the calculation of the fixed 
charge, on a simple issue. If for the first phase, the fixed charge is Rs 95 
crore per month or, say, Rs 1,000 crore per annum, and is payable for the 
next 20 years, what should be the rate of discount at which the present value 
of these payments would be roughly Rs 3,000 crore, which is the cost of the 
first phase? Moreover, the bulk of the fixed charge is indexed to the 
dollar-rupee exchange rate in other words, for all practical purposes, the 
fixed charge is a dollar-denominated outflow as far as MSEB is concerned. It 
seems that nowhere is the discount rate used for calculating the present 
value of the fixed charge outflows specified or documented! Empirical 
analysis seems to indicate that the rate is about 17 per cent per annum! It 
is worth noting that even in the dark days of monetary tightness in 1996, a 
17 per cent discount rate would be too high for simple rupee obligations 
guaranteed by the government of India it is absurd for discounting a stream 
of what are effectively dollar payments. Elementary financial economics 
requires that for calculating the present value of a dollar stream, the 
discounting rate should be based on the US treasury bond yields of 
corresponding duration. This has never been more than 7 per cent after 1994. 
For the desired present value, therefore, the correct fixed charge needs to 
be perhaps 40 per cent of what it is now! There is a similar logical flaw in 
the dollar-denominated O&M charges being subject to Indian inflation. While 
the latter point has been commented on in the report, the former has not been 
adequately weighed. To be sure, this is something of a technical issue and 
one cannot expect the average minister to understand it. The actual discount 
rate used has inflated the fixed charges enormously: one suspects that Enron 
knew this, hence the obvious efforts to hide the number. But surely the MSEB 
and other officials and advisers dealing with the negotiations, should have 
appreciated the crucial importance of the number, and insisted on 
ascertaining the discount rate? It could of course be argued that the 
political pressure was such that the civil servants were silenced from 
voicing any objections they may have had on the various issues. Is there any 
evidence in the notings on various papers to support that the issues of 
financial economics pertaining to the case had been pinpointed? How is it 
that the impracticability, nay impossibility, of more than half of MSEB's 
revenue being escrowed for a single plant was not noticed by anybody? Were 
not at least some of the issues important and significant enough for the 
financial health of MSEB, and indeed the Maharashtra government, for at least 
one bureaucrat to stand up? A way out: The Godbole committee has recommended 
a package of proposals to resolve the tangle. One would like to add a 
suggestion worth exploring. This is based on what happened in the now 
celebrated dispute between Procter & Gamble (P&G), the US multinational, and 
Bankers Trust Company (BTC) in the United States. P&G had entered into 
various, complex derivative contracts with BTC. When it incurred huge losses, 
it sued BTC on the grounds that it was persuaded to sign contracts the 
implications of which it had not understood properly, and that therefore the 
amounts already paid by it should be refunded and the contracts voided. 
Admittedly, this was a novel plea to be taken by a litigant of P&G's 
standing. Unfortunately, the case was settled out of court with BTC paying $ 
100 million-plus to P&G. But if P&G can claim that it did not understand the 
implications of a financial contract, so surely can MSEB, particularly in 
relation to discounting rate or the return on equity, and demand the 
contracts be voided or renegotiated? But it is the Godbole Committee that 
should have the last word on the issue: "The Committee would like to state 
strongly that none of the solutions espoused for IPPs ... and DPC in 
particular is tenable without the reform of MSEB, especially its distribution 
business." That, perhaps, is the crux of the controversy.

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


USA: Enron eyes entry into coffee, sugar, cocoa - trade.

05/21/2001
Reuters English News Service
(C) Reuters Limited 2001.

NEW YORK, May 18 (Reuters) - Houston-based Enron Corp. , the largest natural 
gas and electricity trading house in the United States, is looking to 
continue its expansion into industries beyond energy with a move into the 
cocoa, coffee and sugar businesses, industry sources said. 
Enron has had conversations and interviews with members of the commodity 
trade in recent weeks, using a London-based recruitment firm to help them, 
the sources said.
"They are definitely interested in getting into the business. Enron has been 
looking for physical traders. They have some internal people and are looking 
for lieutenants with experience." said a cocoa trader. 
"They are serious about softs. They have been sniffing around the marketplace 
for several weeks now. If they come in they will be extremely visible," 
according to a coffee trader who interviewed for a position. 
A representative of Enron's public relations department would only say that 
the firm is constantly investigating different markets and opportunities. 
"There is always a lot of speculation about what we (Enron) are doing," 
Habiba Bayi of Enron said on Monday. 
Enron has been no stranger to industries outside the energy complex in recent 
years and has aggressively embraced the communications industry by turning 
broadband capacity into a commodity. 
The broadband unit encompasses two distinct segments: the bandwidth 
intermediation business, which turns Internet bandwidth into a tradeable 
commodity; and the content services division, which engages in sales and 
transmission of Internet content. 
Enron has consistently said it does not expect its broadband arm to record a 
profit until 2002 and instead has offered other measures of growth by which 
to benchmark the unit's progress. 
In May 2000 Enron Corp. announced their purchase of London-based MG Plc. MG 
is a leading independent international metals dealing firm providing 
financial and marketing services to the metals industry. 
In July of the same year, MG Plc bought Rudolf Wolff Group, which had a soft 
commodity brokerage operation to trade cocoa, coffee and sugar on the London 
International Financial Futures and Options Exchange (LIFFE). 
Traders speculated about what kind of business Enron might pursue. 
"Will they do huge physical business? Not likely, I expect OTC (over the 
counter) options which would hurt the exchange (New York Board of Trade)," 
said one cocoa broker. 
Another trader who looked at what Enron has done when they get into a new 
business said, "They try to secure supply whether coal, electricity or steel. 
It wouldn't be too hard to stop the certified (coffee) stocks on (the) 
exchange." 
"Stopping certified coffee is a relatively low risk trade," he added.

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


Enron to End Involvement in $3.5 Billion Middle East Gas Project

05/21/2001
Dow Jones Business News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

DUBAI, United Arab Emirates -- U.S. energy giant Enron Corp. has decided to 
pull out of a $3.5 billion natural-gas project, selling its 24.5% stake in 
the Dolphin project to the United Arab Emirates Offsets Group, or UOG, Ahmed 
Al Sayigh, managing director of Dolphin Energy Ltd., said Monday. 
The Dolphin project, an initiative of the government-sponsored UOG, plans to 
use natural gas from Qatar's North Field, the world's largest, to power 
economic growth in the region. UOG and Qatar's General Petroleum Corp. signed 
an agreement in principle two years ago for the project, which would pipe 
natural gas from the offshore North Field to Abu Dhabi for delivery to Dubai 
and Oman. UOG last year sold 49% of the project to France's TotalFinaElf SA 
(TOT) and Enron (ENE).
Mr. Al Sayigh said the UOG will now talk to other companies about buying all 
or part of Enron's stake, including TotalFinaElf. He said the French company 
is interested in increasing its stake and will have first right of refusal. A 
TotalFinaElf official confirmed that the company is interested in a greater 
stake in the project. 
TotalFinaElf is set to operate the upstream phase of the project, which 
includes developing gas reserves in two blocks of the North Field. The first 
wells are scheduled to be drilled in the second half of 2001 and come 
onstream in 2004. 
Enron's role would have been to focus on the midstream part of the project, 
or gas transportation, which requires building a pipeline from a processing 
plant in Ras Laffan, Qatar, to the Taweelah terminal in Abu Dhabi and the 
Jebel Ali terminal in Dubai. 
Richard Bergester, manager for Enron Middle East, said that having 
contributed to the initial stages of the project, Enron now feels it can't 
"add" any more. He didnt elaborate and said the decision was unrelated to the 
company's activities in India or pending involvement in Saudi Arabia. 
Over the weekend, Enron's Dabhol Power Co. issued a preliminary notice to 
terminate power sales from the plant. Dabhol says it is owed millions in 
unpaid bills. Last Friday, Enron was awarded a stake in Saudi Arabia's Red 
Sea Gas project, along with Occidental Petroleum Corp. (OXY) and Exxon Mobil 
Corp. (XOM). 
Mr. Al-Sayigh said UOG will hold onto at least 51% of Dolphin Energy, in 
accordance with its agreement with Qatar. 
Copyright (c) 2001 Dow Jones & Company, Inc. 
All Rights Reserved.

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


Bush Energy Plan Stirs Pot, But Not Energy Prices
By Arden Dale
Of DOW JONES NEWSWIRES

05/21/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW YORK -(Dow Jones)- President George W. Bush's energy plan is getting a 
big reaction, just not in U.S. energy markets. 
Electricity, natural gas and crude oil prices haven't budged in response to 
the 105-part master plan unveiled last week, because its fate is uncertain 
and it lacks specific action items.
Don't expect prices to move any time soon as a result of the proposal. 
If it survives political gridlock to become policy, it will lead to lower 
energy prices, said Raymond Niles, an energy analyst at Salomon Smith Barney. 
Until then, it won't move most, if any, energy markets. 
"It's not going to move the near-term markets because the two things that 
will lower, say, electricity prices, are greater availability of natural gas 
and more transmission lines," Niles said. "Those are long-term improvements." 
Wholesale gasoline prices did surge after the plan was announced last week, 
as traders reacted to the news that a gasoline production waiver they'd been 
expecting wasn't included. But the rally was short-lived, and prices at the 
pump weren't affected. 
U.S. drivers can probably look forward to lower gasoline prices once driving 
season starts after Memorial Day, according to the American Automobile 
Association. The group says prices are likely to peak before then. 
Crude oil prices hit $30 a barrel on Monday, but the driver there has been 
uncertainty over whether Iraq will cut off oil exports to protest a British 
proposal to lift some economic sanctions against the nation. 
Bush's plan to drill for oil in the Arctic National Wildlife Refuge is a 
non-factor in markets currently. Turbocharged Gas Rumor 

A few days before the Bush plan was announced, gasoline trader pushed down 
prices with a selloff prompted by rumors that the plan would immediately 
relax rules on reformulated gasoline, or RFG, a cleaner-burning fuel. An RFG 
waiver would have brought more supply to the market. 
RFG restrictions last year contributed to price spikes at the pump in the 
Midwest, by tightening overall supplies. They govern the way reformulated 
gasoline, or RFG, is made. 
On Thursday, when the plan came out with no waiver in sight, prices rose, 
aided by news of a snag at a crude oil unit of Tosco Corp.'s (TOS) Bayway 
refinery in New Jersey. 
On the New York Mercantile Exchange, the June gasoline futures contract 
jumped 3.44 cents to as high as $1.022 a gallon. 
"The plan came out and there was nothing of the sort in there," said John 
Kilduff, senior vice president at Fimat USA. "All the barrels we thought 
would come onto the market, for now, aren't." 
For electricity prices, two key issues are price caps and short supply. 
Much of the market had already been operating under the assumption that Bush 
wouldn't support electricity price caps, which was borne out by the plan. 
In California, the power industry had already been planning to develop new 
baseload units, big power plants that run continuously. But smaller, 
gas-fired plants known as peakers - which can be switched off and on quickly 
- will be in shorter supply. 
"Investments in peakers are probably going to wait awhile for the policy 
rhetoric to quiet down, for the price cap rhetoric to quiet down," said Mark 
Palmer, a spokesman for Enron Corp. (ENE), a big electricity and natural 
supplier. 
As for natural gas, developments were underway before the Bush plan to boost 
supply and bring down prices, which have been high. 
U.S. companies want to import liquified natural gas procured in the vase 
reserves of Trinidad and Tobago, for example. 
But there's just too far to go before the Bush plan becomes a reality to even 
project how the natural gas industry might proceed from here, according the 
Palmer. 
"Some people may have anticipated short-term actions by the administration, 
and to its credit, that proved to be unfounded," said Larry Goldstein, 
president of PIRINC, Inc., an energy research group. - By Arden Dale, Dow 
Jones Newswires; 201-938-2052;
arden.dale@dowjones.com

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


INDIA: India says optimistic about Enron settlement.

05/21/2001
Reuters English News Service
(C) Reuters Limited 2001.

NEW DELHI, May 21 (Reuters) - The Indian federal government is optimistic 
that Enron Corp's and the Maharashtra state will resolve their wrangle which 
has jeopardised the U.S. energy giant's $2.9 billion power project, a top 
official told Reuters. 
Federal Power Secretary A.K. Basu said the government had appointed a nominee 
in the talks between the western state and Dabhol Power Co, 65-per-cent owned 
by Enron, that are aimed at settling the long-running row.
"We are optimistic. We have our nominee, Mr A.V. Gokak. He is a very senior 
person and he represents the whole of the government of India," Basu said. 
Gokak, a retired senior bureaucrat, represents the federal government in the 
panel appointed by the Maharashtra government to renegotiate the Power 
Purchase Agreement with the Dabhol Power Co. The panel is expected to resume 
talks on Wednesday. 
On Saturday, Dabhol issued a preliminary notice to terminate its contract to 
sell power to the Maharashtra State Electricity Board (MSEB). 
Houston-based Enron and the MSEB have been locked in a long-standing dispute 
over the state utility's unpaid bills. 
In March, Enron invoked a counter-guarantee of the Indian government after 
the MSEB failed to clear its bill of 1.02 billion rupees ($21.91 million) for 
December. 
In April, the multinational's Indian unit sent a political force majeure 
notice to MSEB. Such a notice is a contractual clause dissatisfied parties 
give as a first step towards possibly dissolving a contract. 
It also notified the federal government that it was applying to an 
arbitration court in London to consider its claim for 1.02 billion rupees. 
DPC has come under fire because of the relatively high cost of its power. 
Critics object to it charging 7.1 rupees per kilowatt hour compared with the 
1.5 rupees charged by other suppliers.

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


UK: INTERVIEW-Axia starts trading German, Italian power.
By Margaret Orgill

05/21/2001
Reuters English News Service
(C) Reuters Limited 2001.

LONDON, May 21 (Reuters) - U.S.-owned Axia Energy Europe has started trading 
electricity in Germany and Italy and is looking at entering the Spanish power 
market, said CEO and Chairman Clarke Harris on Monday. 
Axia, a newly created trading joint venture between U.S. companies Koch and 
Entergy , entered the German over-the-counter power (OTC) market in February 
and is concentrating on the forward curve, he said.
"Everything is OTC and everything is forward," Harris told Reuters in an 
interview, adding the company started trading small volumes but has recently 
done deals of 100 megawatts. 
He declined to give details of trading volumes. 
Harris said the company was not active in the prompt market because of a lack 
of transparent information about the operation of power stations which makes 
it difficult for newcomers to compete with local utilities like E.ON and RWE 
. 
"It's not a level playing field on the prompt. Incumbents have the assets and 
the information," he said. 
He added Axia is also interested in the Austrian and Swiss power markets as 
they are linked to Germany and supply it with electricity generated by Alpine 
reservoirs. 
Axia, which started operating on February 1, is the latest in a wave of U.S. 
utilities to start energy trading in mainland Europe which is gradually 
opening its gas and electricity sectors to competition. 
Levels of liberalisation vary widely with some countries like Germany and the 
UK deregulating completely while others, for example France, have insisted on 
sticking to the minimum level of deregulation ordered by the European Union 
electricity directive. 
Harris said Axia had done a couple of transactions in Italy, bringing 
electricity from Germany and was considering entering the Spanish market. 
"The jury is still out on Spain. We are looking at it as our development 
brethren Entergy have a couple of projects there," he said. 
Although Spain set up a wholesale trading pool in 1998, the OTC derivatives 
market has been slow to expand although there have been some signs recently 
that activity is picking up. 
Like its compatriots including AEP and Enron , Axia is basing all its 
European trading operations in London, he said, noting parent companies 
Entergy and Koch want to keep centralised control. 
In Europe, the joint venture included Entergy's trading operations in London 
while Koch contributed two weather experts from the United States to help 
launch a weather derivatives operation.

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


Brazil's Petrobras to Set Terms for Currency Risk on Gas Sales
2001-05-21 16:18 (New York)

Brazil's Petrobras to Set Terms for Currency Risk on Gas Sales

     Rio de Janeiro, May 21 (Bloomberg) -- Brazil's state-
controlled oil company Petroleo Brasileiro SA said it may absorb
about $80 million in currency-related losses over a year and get
reimbursed later by companies that build gas-fired power plants.
     Petrobras plans to sell Bolivian gas it buys in dollars to
Brazilian power-plant operators in reais at fixed-rates for a
year, exposing itself to a currency risk if the real weakens,
company president Philippe Reichstul said.
     The measure is to ensure Petrobras's partners in 10 power
plants can profit from electricity sales regardless of currency
fluctuations, thus ensuring investment that will stave off power
shortages. Brazil faces power rationing beginning next month and
needs $14 billion in investment by 2008 to stave off power
shortages, according to government estimates.
     ``If new thermo-electric plants are working at full capacity
we imagine that we'll be offering a credit line of about $80
million,'' Reichstul said in an interview with Bloomberg News, in
Buenos Aires. ``This is not a subsidy, but a type of financing
that will earn interest.''
     Reichstul didn't elaborate on details of the measures. The
terms for Petrobras gas sales to at least 10 thermal power plants
may be set this week, Reichstul said. Companies like Duke Energy
Corp. and Enron Corp. that are building plants slated to produce
2,700 megawatts of power, will later pay Petrobras for any losses
it accrues, Reichstul said.

                          Power Prices

     Petrobras will only receive the payouts from plant operators
after they win approval for an annual increase in power prices,
which must take into account currency depreciation in the year
before, Reichstul said.
     Companies such as AES Corp., Duke Energy Corp. and El Paso
Energy Corp. have delayed or limited expected investment in
natural gas-fired generation plants on concern that government
rules limit their ability to pass increases in dollar-denominated
fuel costs to electricity consumers who are billed in reais.
     The delays are partly responsible for government plans to
begin rationing energy in June. Electricity supply is expected to
fall short of fulfilling demand by as much as 20 percent in the
coming months.
     The new plants are supposed to come on line in the first
quarter of next year. Under Brazilian law, electricity prices to
consumers can only be adjusted once a year.


Enron Target of Protests Over Energy Policy and Higher Prices
2001-05-21 16:15 (New York)

Enron Target of Protests Over Energy Policy and Higher Prices

     Houston, May 21 (Bloomberg) -- Enron Corp. offices in eight
U.S. cities were picketed by activists angry about the energy
trader's ties to the Bush administration and the effect of high
fuel and power prices on the poor and working class.
     ``As a major wholesaler and a major profiteer, we're
demanding they return some of the profits to help low- and
moderate-income families pay their bills,'' said Lisa Clawson, an
organizer with the Association of Community Organizations for
Reform Now (Acorn).
     Acorn protested in Washington, New York, Chicago, Denver and
Houston and well as Sacramento, California; Santa Fe, New Mexico,
and Portland, Oregon.
     The activists accused power traders such as Enron of price
gouging and said inaction by the Bush administration was bringing
energy bills that ``could condemn thousands of people to a painful
death'' if high electricity prices force them to shut off air
conditioning this summer.
     ``It's brass-knuckle politics,'' said Mark Palmer, a
spokesman for Houston-based Enron. ``We have this new energy plan
we've been associated with rather strongly. I think (protests are)
to be expected in this kind of a debate.''
     Enron's chairman, Kenneth Lay, was one of only a few people
who got direct access to Vice President Dick Cheney as he led a
task force that came up with recommendations for a national energy
plan released on Thursday.
     The task force's 163-page report calls for construction of
new power plants and refineries and the opening of more areas to
drilling as well as tax incentives for energy-efficient cars,
solar power and conservation.
     It does nothing to end power shortages and rate increases for
consumers in California this summer, Acorn said. The activist
organization called for price caps on electricity sales, and a
moratorium on utility service shutoffs for the elderly and
families with children paid for with taxes on energy sellers.
     Lay has advised President George Bush on energy matters, and
was a contributor to the Bush campaign. Bush was governor of
Texas. Enron is based in Houston and was one of several Texas-
based companies to back Bush.
     Enron's first-quarter profit quadrupled to $50.1 billion from
$13.1 billion a year earlier. Enron Chief Executive Jeffrey
Skilling has said revenue may exceed $200 billion in 2001,
possibly making Enron the largest publicly traded energy company
in the world.
     Shares of Enron rose 2 cents to $54.92 in late trading.



Enron Power Dispute May Cost India More Than $3.6 Bln (Update3)
2001-05-21 16:21 (New York)

Enron Power Dispute May Cost India More Than $3.6 Bln (Update3)

    (Closes shares.)

     Mumbai, May 21 (Bloomberg) -- India's federal and state
governments may have to pay Dabhol Power Co. more than 170 billion
rupees ($3.6 billion) if the Enron Corp. unit cancels a 2,184
megawatt power venture.
     ``The total liability may be above 170 billion rupees,''
Vinay Bansal, chairman of the Maharashtra State Electricity Board
said in an interview. ``The final tally is a matter of
negotiations but the figure is of that order.''
     On Saturday, Dabhol started a procedure to end its power
supply contract by serving a ``preliminary termination notice'' on
the board. It's owed 3 billion rupees by the board for power
supplied in December and January. Dabhol is 65 percent owned by
Houston-based Enron, the world biggest energy trader.
     ``We believe that the preliminary termination notice sends a
clear signal to the Maharashtra State Electricity Board of the
seriousness in which Dabhol Power and its lenders and shareholders
view this issue,'' Enron spokesman John Ambler said in an
interview from Dubai.
     The procedure may lead to cancellation of the $3 billion
project, India's biggest foreign investment, and trigger payment
guarantees by India's federal and state governments for
electricity bought by the board, plus ``termination charges.'' The
governments also guaranteed the bulk of $2 billion of loans that
Enron and its partners used to finance Dabhol.
     Shares of Enron rose 9 cents to $54.99.

                        Termination Process

     The full process to end the contract is expected to take
about six months, Ambler said.
     ``If the problems aren't resolved during that period, then
the power production agreement would terminate,'' he said.
     Included in possible liabilities of the federal and state
governments are one year's electricity bills and $300 million in
termination charges, A.K. Basu, secretary at the country's
ministry of power, said in an interview. This may amount to about
28 billion rupees, he said.
     State Bank of India, ABN Amro Holdings NV and other banks
that loaned Dabhol the money are hoping a settlement will still be
reached to prevent the project from being scrapped.
     ``The notice does not mean that the project is off,'' said
Janki Ballabh, chairman of State Bank of India, the country's
biggest commercial bank and one of the largest lenders to the
project. ``All parties are making attempts to find an acceptable
solution.''
     Indian banks, which made rupee loans worth about $1 billion
to Dabhol, are the most exposed to a possible termination of the
project. The federal government didn't guarantee all their loans,
which were seen as safe because the project was backed by Enron.
     Foreign currency loans by banks such as ABN Amro, Bank of
America Corp. and State Bank of India are guaranteed.
     Dabhol, which runs a 740-megawatt power plant, has invoked
payment guarantees and ``political force majeure,'' which allows
it to stop selling power to the electricity board without being
penalized.

                             Harm Investment

     Even so, overseas energy companies believe the Enron dispute
will harm foreign investment in India.
     Dabhol Power ``will have an impact on how people look at
India, and that's very unfortunate because we do see India as
potentially a very good market,'' Peter de Wit, director of Shell
International Gas, said Friday at a conference in Seoul.
     Shell plans to spend 19.5 billion rupees to build a 5 million
ton-a-year liquefied natural gas terminal at Hazira, a port in
Gujarat. The company may double the gas facility to 10 million
tons later.
     Enron's ``the first LNG project into India, and the sort of
circumstance they're faced with now doesn't give a lot of
confidence to people who want to consider long-term contracts into
India,'' he said.
     Enron is building a 5 million ton-a-year LNG facility at
Dabhol.

                       Delays, Slow Reforms

     Four foreign power companies, including Electricite de
France, Europe's largest, have so far pulled out of Indian power
projects worth $3 billion, citing long delays and the slow pace of
reforms.
     India wants to double its electricity generation capacity to
200,000 megawatts over the next ten years. It needs $100 billion
to do that, and is relying mainly on foreign companies.
     ``The pace of investments in the power sector is already
slow. It'll get slower,'' said Abhay Rangnekar, head of project
finance and corporate advisory services at ANZ Investment Bank,
which helped raise overseas loans for Dabhol.
     ``Lender sentiment has definitely been affected. Making sure
that the contracts are watertight is not enough anymore'' for
lenders to private power projects, he said.
     The preliminary termination notice gives Dabhol and the
electricity board six months to seek a resolution to the dispute.
     On Wednesday, Dabhol and the board are due for the second
time to meet a committee set up by the state government to
negotiate a solution. A.V. Gokak, former secretary at the
department of fertilizers, will represent the federal government.


Enron Withdraws From $2 Bln Middle East-Gas Project (Update4)
2001-05-21 16:26 (New York)

Enron Withdraws From $2 Bln Middle East-Gas Project (Update4)

     (Closes shares.)

     Houston, May 21 (Bloomberg) -- Enron Corp. pulled out of a
pipeline project in the Middle East as it became increasingly
likely that an Indian power-sales agreement will collapse.
     The Houston-based company ended its role in a $2 billion
project to export gas from Qatar. The Dabhol Power Co., owned 65
percent by Enron, filed Saturday to India's Maharashtra state's
electricity board to stop supplying power because it's owed 3
billion rupees ($63.9 million) by the board.
     Enron's exit from the Middle East project had nothing to do
with its decision to stop supplying power in Dabhol, company
spokesman John Ambler said. Analysts said some of the gas from the
Qatar plant likely would have gone to the Indian project.
     ``The (ending of operations in Qatar and India) go hand in
hand,'' First Albany Corp. analyst Bob Christensen said. ``The
liquefied natural gas would presumably be used to fuel the second
phase of the Dabhol project.''
     The timing of the two announcements was a ``coincidence,''
Ambler said in an interview from Dubai. ``We initiated discussions
several weeks ago (with partners in the Middle East project).''
     Pulling out of Qatar is part of Chief Executive Officer
Jeffrey Skilling's shift away from big construction and
infrastructure projects such as pipelines and power plants, and
into trading, the business of brokering large sales of energy and
other commodities, Ambler said.

                              Trading

     Skilling was named chief executive in December after helping
build what was once a sleepy gas-pipeline company into the biggest
competitor in the energy trading business.
     The company predicts it may top $200 billion in revenue this
year, largely because of energy trading. Through its EnronOnline
Internet market, Enron buys and sells gas, power and oil and oil
products. It also trades weather derivatives, pulp and paper,
steel and metals.
     Rebecca Mark and Joseph Sutton, Enron executives who had been
involved in buying or building large projects such as the Dabhol
plant, left last year.
     ``(Enron has) basically been a divestor of North American
hard assets,'' Christensen said. ``Now that's spinning into the
international sphere.''
     Shares of Enron rose 9 cents to $54.99. The stock has fallen
34 percent this year because of setbacks in the company's fiber-
optic trading business, the conflict over the India plant and
falling gas prices in recent weeks. Enron also failed to sell its
Oregon utility, Portland General Co., as planned.

                            Blockbuster

     In March, Blockbuster Inc. and Enron broke off a venture to
deliver movies directly to customers' homes. Enron owns a fiber-
optic telecommunications network, and it trades broadband
bandwidth, or space, on the networks. The broadband business lost
$35 million last quarter on revenue of $83 million. It lost $60
million last year on revenue of $408 million.
     Enron's $3.1 billion sale of Portland General to Sierra
Pacific Resources collapsed because state regulators weren't
likely to approve power plant sales needed to win antitrust
approval.
     U.S. Representative Peter DeFazio, a Democrat from
Springfield, Oregon, said last week that Enron should sell
Portland General to Oregon so state consumers can be protected
from soaring power prices.
     Enron will sell its 25 percent stake in Dolphin Energy Ltd.,
the owner of the Middle East project, to the Abu Dhabi government,
said Ahmed al-Sayegh, the chairman of state-controlled Dolphin.
     Dolphin had agreed two months ago with Qatar to develop its
North Field, the world's largest gas deposit, and build a pipeline
in the Persian Gulf to the United Arab Emirates and Oman.
     Enron was among eight energy companies picked Friday by Saudi
Arabia to spend $25 billion to develop gas projects.