Enron Hits Back At Indian State In Long Dispute Over Power Fees
The Wall Street Journal, 05/21/01

Saudis Signal Bigger Is Better In Gas Project
The Wall Street Journal, 05/21/01

Corrections & Amplifications
The Wall Street Journal, 05/21/01

Power: Bush Plan, Davis Reactions
Los Angeles Times, 05/21/01

Enron pulls out of multi-billion-dollar Gulf gas network
AFX News, 05/21/01

UAE: UPDATE 2-Enron sells stake in Dolphin project.
Reuters English News Service, 05/21/01

UK PRESS: Energy Grps May Express Interest In Montedison
Dow Jones International News, 05/21/01

INDIA: India's Enron lenders to lobby for government help.
Reuters English News Service, 05/21/01

Dabhol project suffers $400-m cost overruns
The Economic Times, 05/21/01

The mouth that roared
The San Francisco Chronicle, 05/21/01

COMMENT & ANALYSIS: India's power struggles: Enron's plight could mark a 
turning point in India's attempts to attract foreign investment, says David 
Gardner: Financial Times; May 21, 2001

Enron Withdraws From U.A.E.'s $2 Bln Gas Project (Update1)
Bloomberg, 05/21/01

Lenders to Enron's Indian Unit Hoping for Solution (Update1)
Bloomberg, 05/21/01

State Bank, ICICI Decline as Enron Plans to Pull Out of India
Bloomberg, 05/21/01

ANZ Investment's Rangnekar on Loans to Power Companies: Comment
Bloomberg, 05/21/01




International
Enron Hits Back At Indian State In Long Dispute Over Power Fees
By Jesse Pesta
Staff Reporter of The Wall Street Journal

05/21/2001
The Wall Street Journal
A14
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW DELHI -- Enron Corp.'s troubled Indian power project turned up the heat 
in its battle with its only customer, the Maharashtra State Electricity 
Board, by taking a formal step toward ending its contract in six months. 
Dabhol Power Corp. also outlined the key points it says should underpin 
future negotiations in the dispute over unpaid bills. 
The fight between Dabhol and Maharashtra is closely watched because the $3 
billion power plant near Bombay is India's largest foreign investment. 
Dabhol, of which Enron owns 65%, says it's owed $48 million in unpaid bills 
by the state electricity board for December and January. However, the 
cash-strapped electricity board counters that Dabhol owes it four billion 
rupees ($85 million) in fines for a service lapse around the same time, which 
Dabhol disputes.
On Saturday, Dabhol issued a preliminary termination notice, the first of 
several prescribed steps toward ending the contract. It triggers a six-month 
cooling-off period. 
"After months of working with Maharashtra State Electricity Board, government 
of Maharashtra and government of India to find solutions, it is apparent that 
MSEB and [Maharashtra] are unwilling to honor their...commitments," Dabhol 
said. The statement also blasted India's central government, saying it 
recently failed to send a representative to the first round of talks over the 
dispute. Dabhol holds a guarantee from the central government to cover 
payment defaults. 
Vinay Bansal, chairman of the Maharashtra State Electricity Board, said he 
received Dabhol's notice and will respond, although "we will take some time; 
we have the six-month suspension to work with," he said. In the meantime, he 
expects negotiations to continue. The state government has set up a panel, 
the Godbole Committee, to study the contract between Dabhol and the 
electricity board. Dabhol's critics say its rates are unreasonably high. 
Dabhol has said its rates aren't out of line. 
Dabhol's weekend statement also outlined its terms for resolving the problem, 
saying a solution can occur only if the parties contractually bound to 
purchase Dabhol's power -- the electricity board, with guarantees from the 
state and national governments -- "are willing to either purchase themselves 
or find other creditworthy entities" willing to buy electricity from Dabhol's 
2,184-megawatt plant. Those requirements "should form the basis for any 
future discussions," Dabhol said, "and not the Godbole Committee report." 
Mr. Bansal, electricity-board chairman, responded yesterday that the "Godbole 
Committee is the forum available for negotiations." He added that "all 
discussions should be without prejudice and precondition, and all solutions 
will have to be explored."


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


Economy
Saudis Signal Bigger Is Better In Gas Project
By Thaddeus Herrick
Staff Reporter of The Wall Street Journal

05/21/2001
The Wall Street Journal
A2
(Copyright (c) 2001, Dow Jones & Company, Inc.)

In tapping some of the world's largest oil companies to help build a 
multibillion-dollar natural-gas infrastructure, Saudi Arabia is signaling 
that bigger really is better in competing on the world stage. 
The oil industry has been notable for its huge mergers in recent years as 
Exxon Corp. joined with Mobil Corp., British Petroleum PLC gobbled up two big 
American companies, and TotalFinaElf SA of Paris was formed from three 
European companies. In consolidating, the companies said that they needed 
heft and deep pockets to bid for projects like Saudi Arabia's and match 
effectively with national oil companies.
Friday, Saudi Arabia said it picked just eight companies to participate in 
three projects that are expected to total $25 billion over several years, and 
most of the companies selected have grown by mergers or acquisitions in the 
past two years. 
"This is really a game for the big boys," says Roger Diwan, an analyst with 
the Petroleum Finance Co., a consulting firm in Washington, D.C. Mr. Diwan 
says the largest companies are willing to take bigger risks, have more 
capital and can take a longer view. 
Exxon Mobil Corp. of Irving, Texas, and the Anglo-Dutch Royal Dutch/Shell 
Group each will participate in two of the three projects. Other participants 
include London-based BP PLC, TotalFinaElf and Enron Corp. of Houston, the 
only nonoil company chosen. Chevron Corp. of San Francisco, Rome-based ENI 
SpA and USX-Marathon Group of Pittsburgh made the short list, but weren't 
selected. "Not everyone wanted this badly," Mr. Diwan says. "But no one 
wanted to be left out." 
The selection comes more than two years after Saudi Crown Prince Abdullah 
invited major oil companies to return to the kingdom. For Saudi Arabia, the 
gas projects promise to bring in foreign investment that will help create 
jobs for the country's booming work force. 
Oil companies, however, are hopeful that the foot in the door will someday 
lead to a piece of Saudi's oil business as well. Saudi Arabia sits atop more 
than a quarter of the world's oil reserves. While oil has been off limits 
since the mid-1970s, when the Saudis nationalized the industry, the 
international companies are eager to be in position should oil open up again. 
"Ultimately, it's oil that everyone is eyeing," said Fadel Gheit, an analyst 
with Fahnestock & Co. 
While Exxon Mobil was tapped to lead a project along the Red Sea coast, 
leaders for the Ghawar and Shaybah projects aren't expected to be chosen 
until June. After that, negotiations on terms for the three ventures will get 
under way; it may be months before final agreements are signed. 
State oil company Saudi Aramco will hold equity in the projects and oversee 
them. Though the projects may include some natural-gas exploration, the main 
thrust of the ventures is to build natural-gas infrastructure, such as 
petrochemical, desalinization and power plants. 
Occidental Petroleum Corp., Los Angeles, will join Enron and leader Exxon 
Mobil on the Red Sea project. Both Exxon Mobil and Shell were chosen for the 
marquee $15 billion Ghawar project, along with BP and Phillips Petroleum Co. 
of Bartlesville, Okla. The Shaybah project in the kingdom's Empty Quarter 
will include Shell, TotalFinaElf SA and Conoco Inc. of Houston. 
Chevron, which has agreed to acquire Texaco Inc., said the Saudi gas 
initiative didn't meet the company's business objectives. Chevron bid on the 
Ghawar project and hoped to make exploration and production as well as 
petrochemical investments, said spokesman Fred Gorrell. But apparently such 
investment opportunities weren't offered. Chevron is still thought to be 
well-positioned in Saudi Arabia because of Texaco's exploration and 
production activity in the so-called neutral zone between Saudi Arabia and 
Kuwait. 
Industry analysts say Saudi Arabia is also hoping to give Washington more 
incentive to protect the kingdom from its Middle East adversaries, while at 
the same time allowing the country to keep political distance from the U.S.


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



Corrections & Amplifications

05/21/2001
The Wall Street Journal
A2
(Copyright (c) 2001, Dow Jones & Company, Inc.)

ENRON Corp. and its employees contributed a total of $1.3 million during the 
2000 presidential campaign to George W. Bush's presidential effort, the 
Republican Party and the presidential inauguration. A chart accompanying a 
page-one article Friday on Enron's political connections mislabeled the total 
amount as $1.3 billion. 
(See accompanying illustration -- WSJ May 18, 2001)

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



California; Letters Desk
Power: Bush Plan, Davis Reactions

05/21/2001
Los Angeles Times
Home Edition
B-10
Copyright 2001 / The Times Mirror Company

Davis is spouting pure hypocrisy as he takes on Reliant Energy (May 17). He 
mentions no word of Enron, another "gouger." Why? Because the state public 
employees' retirement system is heavily invested in Enron, and, in fact, 
CalPERS has a billion-dollar business deal with Enron aside from stock. The 
state and Enron are business partners. CalPERS is also invested in many other 
energy companies. If one studies the energy sector of the financial world, 
CalPERS is in the midst of everything. And CalPERS, because of its large 
stock holdings, has the power of influence over corporate boards. 
So Davis, who has spent the past two years raising campaign funds, is really 
just laying down a diversion. The state is an energy gouger and profits from 
it. 
Andy Levinson 
Thousand Oaks

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




Enron pulls out of multi-billion-dollar Gulf gas network

05/21/2001
AFX News
(c) 2001 by AFP-Extel News Ltd

ABU DHABI (AFX) - Enron Corp pulled out of a project to deliver Qatari gas to 
the United Arab Emirates (UAE) by selling its 24.5 pct stake in the Dolphin 
Energy Project to its partner, the state-run UAE Offsets Group (UOG). 
No price was disclosed.
UOG will own 75.5 pct of DEL, which was set up in July 2000 to implement the 
gas project, while TotalFinaElf continues to hold the remaining 24.5 pct. 
"The project has evolved into a strong upstream and gas transportation and 
delivery project. Enron is not an upstream company," the managing director of 
Enron Middle East explained to reporters. 
DEL's chairman Ahmad Ali al-Sayegh said new partners would be brought into 
the venture to transport 2 bln cubic feet per day (20 mln cubic metres) of 
Qatari natural gas by undersea pipeline to the UAE and on to Oman. 
Patrick Rambaud, a TotalFinaElf vice president, said his company wanted to 
increase its own equity in DEL. "This project fits perfectly with our 
strategy for long-term presence in these countries," he said. 
The first phase of the gas project has a price tag of between 3.5-4 bln usd. 
str/kl/cmr 
For more information and to contact AFX: www.afxnews.com and www.afxpress.com

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


UAE: UPDATE 2-Enron sells stake in Dolphin project.
By Ghaida Ghantous

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

ABU DHABI, May 21 (Reuters) - U.S. Enron Corp has bowed out of a $3.5 billion 
project to route Qatari gas to the United Arab Emirates and sold its stake in 
Dolphin Energy Ltd (DEL), the project chairman and U.S. firm announced on 
Monday. 
Enron sold its stake to the UAE Offsets Group (UOG) for an undisclosed amount.
Richard Bergsieker, the U.S. firm's Middle East managing director, told a 
news conference in Abu Dhabi that Enron did not believe it could add much to 
the project in its current stage. 
"As the project had evolved into a strong upstream gas supply project and gas 
transport and delivery, we don't believe there is a lot of value that Enron 
can add," he explained. 
"The project requires longterm equity investment in upstream and Enron is 
frankly not an upstream company." 
DEL Chairman Ahmed Ali al-Sayegh had earlier said that Enron had agreed to 
transfer its 24.5 percent stake in Dolphin to UOG for an undisclosed amount, 
raising the UAE firm's stake to 75.5 percent. TotalFinaElf holds the 
remaining stake. 
Patrick Rambaud, TotalFinaElf's senior vice president for the Middle East, 
said his firm has formally asked UOG to increase its own stake in the 
project. Sayegh, however, said UOG was seeking a different partner. 
"We are studying the TotalFinaElf request... (but) there will be another 
partner in the project," he said. "Starting tomorrow, we will begin 
negotiations with the international firms who have shown interest in 
acquiring a state. They are more than eight companies." 
He refused to name the firms but said "everybody who is working in the Gulf 
is interested. We are not in a hurry to choose a partner." 
PRODUCTION SHARING DEAL ON SCHEDULE 
Qatar and DEL in March signed a "commercial term sheet agreement" which 
outlined the conditions of the upstream agreement for the long-awaited $3.5 
billion project. 
The two sides aim to sign a production sharing agreement by the end of the 
third quarter 2001. Sayegh said they would stick to that deadline. "The 
latest date is mid-September," he added. 
Qatar, which sits on the world's third largest gas reserves, is seeking to 
boost its natural gas exports to the Gulf region after investing billions of 
dollars to tap its vast gas riches. 
The gas deal would entitle DEL to develop a tract of Qatar's giant North 
Field and produce up to two billion cubic feet per day (cfd) of gas. UOG is 
to invest $2 billion in developing the tract, drilling and setting up 
production facilities. 
The remaining $1.5 billion would be invested to lay a pipeline and set up 
receiving terminals at Dubai's Jebel Ali and Taweelah in Abu Dhabi. 
First gas is targeted to reach the UAE capital Abu Dhabi by late 2004 or 
early 2005. About one billion to 1.5 billion cfd of Qatari gas would be used 
by utilities in Abu Dhabi and the remainder supplied to Dubai. 
DEL has started inviting local, regional and international companies to 
prequalify for five contracts between May 19-23 following the establishment 
of a technical project team to oversee the implementation of the first 
cross-border gas pipeline project in the Middle East. 
Engineering and construction management firms will have two weeks to submit 
their prequalification statement for each contract after the date of the 
official announcement.

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


UK PRESS: Energy Grps May Express Interest In Montedison

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

MILAN -(Dow Jones)- Electricite de France's (F.EDF) purchase of 4% of 
Montedison SpA (I.MNT) may soon force other large energy groups to express an 
interest in the Italian holding company, the Financial Times reported Monday. 
Enron (ENE), Vivendi SA (F.VVN), Electrabel (B.ELE), RWE AG (G.RWE) and Eon, 
British Gas and others also could make a move to acquire Montedison's Edison 
SpA (I.EDS) and Sondel SpA (I.SON) units, industry executives and analysts 
say.
Newspaper Web site: http://www.ft.com 
-Milan bureau; Dow Jones Newswires; 39(0)2-7601-5386

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


INDIA: India's Enron lenders to lobby for government help.
By Anirban Nag and Sriram Ramakrishnan

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

BOMBAY, May 21 (Reuters) - Indian lenders want the federal government to 
intervene after a threat by U.S. energy giant Enron Corp, the country's 
largest foreign investor, to walk out of a giant power project put their 
loans in jeopardy. 
"We want the government to step in and resolve the matter with lenders' 
interests in mind. We are continuously monitoring the situation," a senior 
official at one of the lenders told Reuters late on Sunday. The official did 
not want to be named.
Local lenders including the Industrial Development Bank of India, ICICI Ltd 
and the country's largest commercial bank, State Bank of India, stand to lose 
if Enron pulls out. 
They have lent $1.4 billion out of the project's total cost of $2.9 billion. 
The rest of the project is being funded through equity and by loans from 
foreign banks led by ABN AMRO 
Shares of the local lenders fell in early trade on Monday with IDBI sliding 
9.39 percent to 24.60 rupees, SBI dipping 1.1 percent to 233.60, while ICICI 
was down six percent to 84.90. The 30-share Bombay index was up 0.17 percent 
at 3,661.19 points. 
The project is now 90 percent complete, but faces an uncertain future after 
Enron's Dabhol Power Company (DPC) on Saturday issued a preliminary notice to 
terminate power sales from the plant. 
DPC cited payment defaults by the buyer, the Maharashtra State Electricity 
Board (MSEB) and non-cooperation from the federal and state government as the 
reason behind the move. The notice leaves the door open for negotiations for 
six months. 
The latest move is likely to further tarnish India's poor image as a place to 
set up power projects. 
The federal government has so far not reacted to the termination notice, 
although analysts say the country needs to tap more foreign investment in the 
power sector. 
OTHER CUSTOMERS 
"This is a complex problem and cannot be solved instantly. The basic issue is 
the cost of power and there needs to be an agreement on a reasonable tariff," 
the official said. 
MSEB has said the power produced by DPC is expensive and has refused to buy 
the output from the second phase. The contract between the two signed in the 
mid-1990s had called for MSEB to buy the entire capacity of 2,184 MW. The 
first phase of 740 MW began operations in May 1999. 
Enron has said it is open to negotiations and that the cost of power would 
fall once the second phase of 1,444 MW starts operations. 
The lenders would like the government to clear MSEB's defaults of $48 million 
and also find a buyer for electricity from the second phase. 
But the banker said roping in other customers to buy the second phase's 
output could be difficult to achieve. 
"If the first phase is generating excess power, who will buy the power from 
the second phase?" he asked. 
TO BLOCK FURTHER LOANS 
The official said Indian lenders had decided to block further loans to the 
second phase till an agreement was reached. The SBI, for instance, had 
sanctioned about 20 billion rupees ($425.9 million), but has disbursed only 
14 billion rupees so far. 
Both ICICI and IDBI officials declined to comment, but sources said the 
domestic lenders were acting together. 
Indian lenders said they were hopeful the matter could be resolved given 
there was a window of six months for negotiation. 
"There is no reason to panic. We are hopeful that talks will resolve the 
issue," said the official. 
Indian media speculated at the weekend that the balance sheet of the lenders 
would be under pressure if the dispute was not resolved quickly. ($1 = 46.96 
Indian rupees).

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


Dabhol project suffers $400-m cost overruns
Anto T Joseph

05/21/2001
The Economic Times
Copyright (C) 2001 The Economic Times; Source: World Reporter (TM)

MUMBAI 
AS IF the current dispute with the Maharashtra government was not enough, the 
Dabhol project now has to deal with cost overruns.
The Enron-promoted Dabhol Power Company has experienced a cost overruns to 
the tune of $400 million, taking the total project cost to $3.3 billion. 
DPC, which issued a preliminary termination notice to Maharashtra State 
Electricity Board on Saturday (May 19), is in a fix as both domestic and 
offshore lenders have refused to increase their exposure in the controversial 
power project, the largest-ever foreign direct investment, so far, in India. 
After Indian lenders stopped disbursements as a fallout of a long payment 
crisis, DPC is believed to have scouted for foreign debt, albeit 
unsuccessfully, to maintain the debt-equity status quo at 70:30 ratio. 
DPC's issuance of PTN has compounded the problem. According to the power 
purchase agreement between the MSEB and Enron, issuing a PTN would mean 
fixing a deadline of six months for pulling the final plug on the project. 
"As of now, the FIs have held back $250-million debt to the project. Once the 
PTN is served, DPC can't expect lenders to make any more disbursements, and 
it has almost sealed the fate of the project," said a financial institution 
source. 
While the 740-mw phase I is operational, the second phase of 1,144 mw was 
expected to be fully operational by the year-end. One unit of 740 mw (part of 
the second phase) is undergoing trial-runs, and was expected to be 
commercially operational in June. 
Sources said the huge cost overruns had been a major deterrent in project 
completion. Worried by the mounting payment defaults, the EPC (engineering, 
procurement and construction) contractor of the project -- Bechtel -- is 
believed to have threatened to pull out of the project by mid-June. 
The cost overruns stem from devaluation of the rupee vis-a-vis the dollar and 
an increase in equipment cost. Indian FIs are now wary of further cost 
overruns owing to the delay in project execution. 
"Indian FIs, who have contributed 40 per cent of $2.9 billion (earlier 
project cost), had refused to take more exposure. DPC was forced to approach 
foreign lenders for raising funds to cover the cost overruns. They have also 
taken a negative stand," said sources. The ABN-AMRO led offshore consortium 
is believed to have refused to contribute any more debt to the project. 
The only way out for DPC is for the promoters to increase their equity 
contributions. Proportionately, Enron, which holds around 65 per cent in DPC, 
will have to shell out a major chunk if this were to happen. 
DPC's move to issue PTN has considerably irked Indian institutions. Lenders 
were planning to cast a confidential vote on PTN this week. However, armed 
with the required mandate from offshore lenders, DPC went ahead and issued 
the PTN.

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


NEWS
ROB MORSE
The mouth that roared
Rob Morse

05/21/2001
The San Francisco Chronicle
FINAL
A.2
(Copyright 2001)

Last week I was watching the TV news and saw a frightening sight. An angry 
Gray Davis was declaring war on Texas. 
"We are literally in a war with energy companies who are price- gouging us," 
the governor said, shaking with something that looked an awful lot like 
emotion. "Many of those companies are in Texas."
In typical Davis style, the governor is a little late in declaring war on 
Texas. If he had been president in 1942, he would have spoken of that day of 
infamy in 1941. 
It also was a typical Davis half-measure. He didn't declare war on all of 
Texas, just the Texans who poll badly in California. 
Those would be George W. Bush and his friends and contributors who cut off 
our power, robbed us, and then used us as an example of why the nation needs 
holes punched in Alaska and hundreds of Homer Simpsons put in charge of 
nuclear fuel rods. 
Davis isn't the type to boldly declare unlimited war on all of Texas, 
certainly not "Austin City Limits," chili and the Texans we love, like Willie 
Nelson, Tommy Lee Jones, Charlotte Mailliard Shultz and Willie Brown. 
But Davis had a Texas stereotype in mind as he spoke of the hardscrabble 
hombres in Houston high-rises who are smart and mean and are holding us up 
long-distance. Yep, it's as if Texas is saying to California, "Your money or 
your lifestyle." 
Davis said he would retaliate each month by naming a Texas corporation "pig 
of the month." 
Yeah, that'll hurt those guys at Reliant Energy and Enron. 
----------------------- 
HAVING GRAY DAVIS ON YOUR SIDE IN A DUSTUP WITH A BUNCH OF TEXANS IS LIKE 
HAVING THE HEAD OF THE HIGH SCHOOL AV CREW ON YOUR SIDE IN A RUMBLE WITH THE 
CRIPS. 
Right now the gashouse gangsters in Houston are having a jeweler make 
14-karat gold pigs they can wear proudly in their lapels while they eat steak 
and laugh at Californians deprived of their sushi because of the loss of 
refrigeration. Texas kids will have bumper stickers on their fuel- 
inefficient scooters saying, "My dad is a proud pig of the month in 
California." 
We have to do better than this pig of the month stuff. Slogans won't do when 
you're fighting guys who are cutting off the electricity to read them by. 
Texans have a better slogan, "Don't mess with Texas," and they're a tight 
bunch who won't take kindly to Davis messing with any of their citizens, no 
matter how rich. 
How is Davis going to match "Don't mess with Texas"? Sorry, but "Californians 
are people, too" won't cut it. 
----------------------- 
LONG BEFORE DAVIS DECLARED HALF-WAR ON TEXAS, a couple of readers suggested 
that California retaliate by cutting off the supplies of our products to 
Texas, specifically wine. 
This, of course, is indication of Californians' isolation from mesquite 
reality. There may be six guys in Texas who ever order wine with their 
T-bones, and they're all in Austin. The menus say, "One: red. Two: white. 
Three rose. Please order by number." And they all might as well be from 
upstate New York. 
If California were the world's only producer of beer and tequila, then we 
might have a chance of beating Texas by cutting off the essentials of life. 
There's only one way to defeat Texas short of an outright shooting war 
pitting our kids armed by junk-gun manufacturers against their citizens with 
concealed-carry permits. We have to declare an embargo on the one thing that 
Texans really need from California -- entertainment. 
Texans are shutting down our televisions and movie theaters, so we'll cut 
them off from movies and TV shows made in California. Hey, they're all made 
here. Until we get affordable power, it's no sitcoms and no J-Lo for them. 
They won't even get Westerns, since those are shot in parts of California 
blighted enough to look like Texas used to look. Nowadays much of Texas looks 
like Beverly Hills, hold the hills. 
We'll also embargo that branch of entertainment known as California itself. 
At the border crossing into California on I-70, a heavily armed guard will 
peer into each car and truck looking for pointy boots and ask, "Are you 
carrying any fruit, vegetables or Texans?" 
Should any Texans turn up, they'll be sent packing toward El Paso, never to 
taste seared ahi, never to see the weirdos on the Sunset Strip, and never to 
feel the natural air-conditioning they can never shut off in San Francisco. 
They'll have to go to Florida if they want to see a guy in a mouse head. 
There's a governor there who won't call them pigs.

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



		

		
		

		
		COMMENT & ANALYSIS: India's power struggles: Enron's plight could mark a 
turning point in India's attempts to attract foreign investment, says David 
Gardner: Financial Times; May 21, 2001
By DAVID GARDNER

		The soap opera of Enron in India has reached a critical moment. Once again, 
the US energy company is pitted against the state of Maharashtra, in western 
India. But the twist this time is that Enron is threatening to pull the plug 
on the Dabhol Power Company, the single largest foreign investment in India. 
		It is, at first sight, a wearisome repetition of earlier episodes. The 
Dollars 2.9bn Dabhol deal has been in trouble before. In 1995, a rightwing 
Hindu nationalist coalition of the Shiv Sena and Bharatiya Janata party - now 
the majority of the ruling coalition in New Delhi - ousted the Congress party 
government in Maharashtra and tore up the contract its predecessors had 
signed. The project went ahead after Enron secured a sovereign guarantee from 
the government of India to cover any failure to pay by the Maharashtra State 
Electricity Board, Dabhol's sole customer. 
		The first 740MW Dabhol plant is now functioning and a second 1,444MW phase is 
close to completion. But MSEB has been defaulting on payments since last 
December and wishes to renegotiate the contract with Enron, claiming the 
electricity tariffs are unjustifiably high. 
		This weekend Enron began proceedings to terminate the agreement. The move 
triggers an arbitration process that could begin as soon as Wednesday between 
Dabhol and the MSEB. But Enron's actions are beginning to look like the first 
step towards withdrawal from the project, in which it has a 65 per cent 
stake. 
		In the past 18 months, Cogentrix of the US, National Power of the UK, Daewoo 
of South Korea and Electricite de France have all withdrawn from the Indian 
power sector. Of eight so-called "fast track" power projects authorised by 
New Delhi in the past decade, Enron's is the only one to have been 
commissioned. 
		Whatever the outcome, a great deal is at stake. The imbroglio could further 
deter a barely detectable trickle of foreign direct investment into India. It 
could blight India's urgent need to double its electricity generation. And it 
raises the question of the extent to which contracts are enforceable in India 
- which alone could raise the risk premium future investors may seek. 
		Unless carefully handled, the controversy could damage India's ambition to 
raise growth by creating an investment-friendly environment, in spite of the 
success of industries such as software and pharmaceuticals. 
		Kenneth Lay, Enron's chairman, said earlier this month that while his company 
had no immediate plans to sell its Dabhol stake, the dispute "sends a very 
bad signal to the rest of the world as to the difficulties of investing in 
India, which is not what India needs right now". 
		Several ministers, including Yashwant Sinha, finance minister, have said they 
see no reason why Enron's experience should deter foreign investors. That is 
true only in the sense that there is very little foreign investment anyway. 
"The government is in denial," one minister admits. Publishing foreign direct 
investment figures has become "an annual embarrassment", he adds. 
		India received an estimated Dollars 2.6bn in inward investment last year, or 
0.24 per cent of worldwide foreign direct investment flows. Complete figures 
for 1999 show it received Dollars 2.2bn. China, its regional rival, received 
Dollars 63.4bn - including Hong Kong - according to the United Nations. 
		In just as telling a contrast, Electricite de France, which pulled out of 
India after battling for seven years to advance its 1,000MW Bhadravati 
project, is proceeding with a series of power plants in China, Egypt and 
Mexico. 
		"We say we want foreign investment in the power industry and the policy says 
'yes, yes, yes'," says one civil servant who has soldiered long and hard to 
introduce reform. "But the practice, I'm afraid, is 'no, no, no'." 
		The Enron project, its critics say, is particular. Although Dabhol's power 
purchasing agreement with the MSEB is confidential, it is widely believed to 
embody a "hurdle rate of return" - the after-tax, internal rate of return on 
equity in dollars - in excess of 20 per cent. The normal rate sought by the 
dwindling investors in India's power industry is 16-18 per cent. 
		In addition, Dabhol's charges per kilowatt hour are higher than anticipated 
because its "load factor", or capacity usage, is much lower. The financially 
strapped MSEB is buying less and Enron's contract allows it to apply variable 
charges over the fewer units of output, raising the cost. 
		There is an important sense, however, in which all this is academic. India's 
state electricity boards are de facto bankrupt. Whether the cost per unit is 
one rupee or 10, they cannot pay. 
		The problem is user charges. Most Indian farmers get free power, much of 
India's urban middle class steals power and too many of India's populist 
politicians are frightened of agreeing on a minimum common tariff that might 
begin restoring the solvency of the state electricity boards and thus 
facilitate investment. 
		Many industrial users that could pay, angered by cross-subsidies they are 
charged for the inefficient system, have switched to secure "captive" 
capacity of their own, an estimated 10,000MW of which is now in place. While 
India needs to boost installed capacity by about 100,000MW by 2010, with no 
one to pay for electricity a mere 464MW was commissioned last year, according 
to Power Line, an industry newsletter. 
		"It is self-defeating to try to attract an Enron without first putting your 
house in order," one minister says. "It was always obvious that within the 
present set-up Maharashtra would never be able to pay." 
		Hari Dhaul, head of the Independent Power Producers of India, says restoring 
the solvency of "the (state electricity boards) is priority number one; 
unless we do that, all talk of power and infrastructure is academic." 
		The government made a start when Mr Sinha, in the February budget, announced 
a still-to-be-determined package of soft loans for states that reform their 
electricity boards and begin introducing more realistic tariffs. But since 
then the government has floundered over a series of scandals - not a 
propitious climate for reform. 
		The Enron case has the potential to become, if not another scandal, at least 
a blight. As a senior executive at a foreign power company puts it: "India 
needs modern infrastructure if it is ever to become a modern country. It 
needs foreign investment to do part of it but that will only come if the 
perception becomes that it is easy to invest in India." 
		Copyright: The Financial Times Limited
		
		
		
		
		
Enron Withdraws From U.A.E.'s $2 Bln Gas Project (Update1)
2001-05-21 06:04 (New York)

Enron Withdraws From U.A.E.'s $2 Bln Gas Project (Update1)

     (Add comments from Dolphin's chairman in the second
paragraph, and background throughout)

     Abu Dhabi, May 21 (Bloomberg) -- Enron Corp., the world's
biggest energy trader, withdrew from Abu Dhabi's $2 billion
project to import natural gas from Qatar and sell it to other
Persian Gulf emirates, the project's chief said.
     The Houston-based company, which had held almost 25 percent
of Dolphin Energy Ltd., will sell its stake back to the Abu Dhabi
government, said Ahmed al-Sayegh, the chairman of state-
controlled Dolphin,
     ``We have started negotiations with a number of international
players keen to become shareholders'' in the company, he said.
     An Enron spokeswoman declined to comment.
    The announcement comes two months after Dolphin, a venture
between Abu Dhabi, Enron and Total Fina Elf SA, agreed with Qatar
to develop its North Dome field, the world's largest natural-gas
deposit, and build a pipeline under the Persian Gulf to the United
Arab Emirates and Oman.
     Governments in these Gulf states plan to use the gas for
industrial development, after a collapse in oil prices in 1998
reinforced their need to reduce dependence on crude oil sales.
     Abu Dhabi had owned 51 percent of Dolphin, with Enron and
Total splitting the remainder. The development of the Qatari gas
field will require investment of $2 billion to $3 billion, while
the pipeline to Abu Dhabi costs another $1 billion to $2 billion,
Dolphin has said.

                         Mystery

     Al-Sayegh didn't say why Enron had withdrawn from the
project. This is the second time in five years that the U.S.
company has withdrawn from a multibillion natural gas project
involving Qatar. Enron earlier pulled out of negotiations to build
a plant for turning gas into liquid form and exporting it to
India.
     Gas from the North Dome field, discovered in 1971, has so far
been liquefied and exported by tanker to Asia. Shipping by
pipeline is cheaper.
     Enron's shares have fallen 34 percent this year to close on
Friday at $54.90.



Lenders to Enron's Indian Unit Hoping for Solution (Update1)
2001-05-21 04:38 (New York)

Lenders to Enron's Indian Unit Hoping for Solution (Update1)

     (Adds comment from lender in seventh paragraph, fund manager
comment in ninth paragraph, updates share price in last.)

     Mumbai, May 21 (Bloomberg) -- State Bank of India, ABN Amro
and others that loaned money to a unit of Enron Corp. of the U.S.
are hoping a settlement will still be reached to prevent the $3
billion project from being scrapped in a row over unpaid bills.
     Dabhol Power, which borrowed about $2 billion from local and
international lenders to build a 2,184 megawatt power plant in
western Maharashtra state, issued a notice Saturday saying it
would cancel its power supply contract with the local government
because of unpaid bills.
     ``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 $1 billion to
Dabhol, are at the most risk from a possible termination of the
project as their loans were not guaranteed by the federal
government. They were seen as safe because of Enron's 65 percent
stake in the project. Should the world's largest power supplier
walk away from its investment, the risk of these loans turning bad
would increase.
     Foreign currency loans, made by lenders including ABN Amro
Holding NV and Bank of America Corp as well as State Bank of
India, are guaranteed.
     ``I won't call it a panic situation, though lenders including
us have to keep a watch,'' said Ballabh at SBI, who declined to
specify a figure for the bank's exposure. He also said it was
premature to comment on the impact of a possible termination of
the Dabhol project on the bank's balance sheet.
     ICICI Ltd., the country's second-largest lender to companies,
is ``covered back-to-back by state government guarantees,'' said
Kalpana Morparia, executive director at ICICI.
     Still, investors viewed the termination notice as bad news
for lenders, which saw their share prices fall.
     ``The banks will take a big hit on their balance sheet if the
Dabhol project is stalled,'' said Deepak Malhotra, who helps
manage $88 million in assets at Max India Ltd. in New Delhi.
     The so-called ``preliminary termination notice'' is being
seen as an attempt to force the central and Maharashtra state
governments to the negotiating table to resolve a standoff over
payments to the company, which is owed 3 billion rupees ($64
million) for power supplies in December and January.




                         Negotiating Ploy

     The notice was issued so that all parties to the dispute come
to the negotiating table, said an official at ICICI, who requested
anonymity.
     The fate of Dabhol, the biggest single foreign investment in
India, holds the key to further overseas investment in India's
power industry. Four foreign power companies, including
Electricite de France, Europe's largest, have pulled out of Indian
power projects worth $3 billion, citing long delays and the slow
pace of reforms.
     A failure of further negotiations may lead Enron to pull out
of the country. Parties involved in the project have six months
from the issuance of the preliminary termination notice to reach a
settlement. In case the project is scrapped, the Maharashtra
electricity board, the state government and the central government
face 170 billion rupees in liabilities.
     ``It's too big a project to fall off the ground,'' said
Sachin Sawrikar, fund manager at SBI Fund Management Ltd. ``If
Enron does back out, another promoter may step in to take over the
project and take over the liabilities after negotiations.''

                         Meeting Wednesday

     To end the impasse, DPC and the Maharashtra government plan
to meet on Wednesday. Dabhol said that if the government of India
stays away from the meeting, like it did the last time on May 11,
and if the federal and state governments don't come up with fresh
proposals ``further meetings will not be productive.''
     The Maharashtra State Electricity Board says it hasn't paid
the money it owes as the price of Dabhol's electricity is more
than double the rate it pays for power from other Indian
generators. Under the terms of the supply agreement it agreed to
pay a fee whether it used all the electricity or not, which has
meant rates have risen as high as nine times the price of power
bought from alternative sources such as Tata Power Co.
     The defaults spurred Dabhol to invoke payment guarantees by
the Maharashtra state and federal governments. The company on
April 25 authorized its management to cancel contracts to sell
power to the board.
     ICICI shares fell 4.25 rupees, or 4.75 percent, to 85.15
rupees on the Mumbai stock exchange. Industrial Development Bank
of India Ltd., the largest lender to Enron, fell 2 rupees, or 7.4
percent, to 25.15 rupees while State Bank shares were down 3.7
rupees, or 1.57 percent, to 232.5 rupees.


State Bank, ICICI Decline as Enron Plans to Pull Out of India
2001-05-21 03:02 (New York)


     Mumbai, May 21 (Bloomberg) -- State Bank of India and ICICI
Ltd., lenders to Enron Corp.'s Dabhol Power Co., fell after Enron
served a notice on India's Maharashtra State Electricity Board to
end its power supply contract because of unpaid dues. The state
electricity board owes 3 billion rupees ($64 million) to Dabhol
for supplying power in December and January. ``The banks will take
a big hit on their balance sheet if the Dabhol project is
stalled,'' said Deepak Malhotra, who helps manage $88 million in
assets at Max India Ltd. in New Delhi.
     State Bank of India, India's biggest commercial bank, fell
2.7 rupees, or 1.1 percent, to 233.5 rupees after earlier falling
as much as 2 percent. ICICI Ltd., India's second-largest lender,
fell as much as 7.1 percent. ICICI declined 4.35 rupees, or 4.9
percent, to 85.05 in recent trading on the Mumbai Stock Exchange.
Industrial Development Bank of India Ltd., India's biggest lender,
fell as much as 2.75 rupees, or 10 percent, to 24.4 rupees. IDBI
shares dropped 2 rupees, or 7.4 percent, to 25.15 in recent
trading.


ANZ Investment's Rangnekar on Loans to Power Companies: Comment
2001-05-21 05:36 (New York)

ANZ Investment's Rangnekar on Loans to Power Companies: Comment

     New Delhi, May 21 (Bloomberg) -- Abhay Rangnekar, director
and head of project finance and corporate advisory services at ANZ
Investment Bank in India, speaks on the impact on lending to power
companies after Enron's Dabhol Power Co. served notice it may
cancel its power supply contract with the Maharashtra State
Electricity Board.
     Dabhol on Saturday started a procedure to end its contract by
serving a ``preliminary termination notice'' on the electricity
board, with which it has been in dispute over 3 billion rupees
($64 million) of unpaid power bills for December and January.


     ``Pace of investments in the power sector is already slow.
It'll get slower.''

     ``Lender sentiment has definitely been affected. Making sure
that the contracts are watertight is not enough anymore'' for any
private power project.

     ``Lenders will need to ensure that power projects will have a
continuing ability to offer competitive tariffs, which would
(give) incentive (to) the state electricity boards to dispatch
them.''

     ``Lenders will also be cautious about accepting the demand-
supply estimates in different states.

     ``The track record of state electricity boards in paying
private power producers will also be stringently monitored.''

     ANZ Investment is one of the four global coordinators that
helped raise overseas loans for the $2.8 billion second phase of
the Dabhol project.