Enron's Net Soars, Despite Telecom Loss, Gaining 40% Amid Strong Energy Units
The Wall Street Journal, 07/13/01

Enron Net Rose 40% in Quarter
The New York Times, 07/13/01

Treasury Prices Climb as More Money Is Shifted To U.S. Bonds on Weakness of Emerging Markets
The Wall Street Journal, 07/13/01

THE ENERGY CRISIS Some State Energy Consultants Own Generators' Stock Ethics: They negotiate deals and buy electricity from power firms. GOP officials claim credit for forcing the disclosure of potential conflict.
Los Angeles Times, 07/13/01

THE ENERGY CRISIS Plan Uses Public in Refund Demand Legislature: Democrats' proposal to pressure 'greedy' firms is attacked by GOP as political ploy.
Los Angeles Times, 07/13/01

COMPANIES & FINANCE THE AMERICAS - Surging energy sales behind Enron advance.
Financial Times, 07/13/01

Lex - Enron.
Financial Times - FT.com, 07/13/01

UK: Paladin says Enron sells entire stake.
Reuters English News Service, 07/13/01

White House adviser targeted for dealings with Salvation Army
Associated Press Newswires, 07/13/01

UK: Bidder list for Southern Water grows-report.
Reuters English News Service, 07/13/01

DPC not to re-start work on Phase II work
Business Standard, 07/13/01

California Power Bills Exceed Refunds, Judge Says (Update4)
Bloomberg, 07/13/01

California Governor Casts Blame for Crisis, to His Benefit
Bloomberg, 07/13/01




Enron's Net Soars, Despite Telecom Loss, Gaining 40% Amid Strong Energy Units
By Rebecca Smith
Staff Reporter of The Wall Street Journal

07/13/2001
The Wall Street Journal
A2
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Enron Corp. posted a 40% increase in second-quarter net income, reflecting the enormous profitability of its energy marketing and trading enterprise, which was sufficient to offset wider-than-expected losses at its telecommunications unit. 
The Houston company had net income of $404 million, compared with $289 million a year earlier, on revenue that nearly tripled to $50 billion. Earnings per share rose 32% to 45 cents from 34 cents.
Enron was lifted by exceptionally strong electricity- and gas-trading volumes. In North America, natural-gas volumes jumped 9% and electricity-trading volumes jumped 71%. In Europe, where Enron is pushing aggressively into newly deregulated markets, trading volumes for gas more than doubled and for electricity leapt to almost five times those of before. From practically nothing just two years ago, Europe generates one-quarter of Enron's energy-trading volumes. 
Profits from trading more than compensated for a $101 million loss posted for the company's telecommunications business that analysts had, until recently, proclaimed would soon generate more income than Enron's energy business. For the quarter, bandwidth-service revenue was $16 million. The unit posted a loss of $8 million for the year-earlier quarter. 
Enron's chief executive, Jeffrey Skilling, said prices for capacity on fiber-optic networks, such as the one Enron has built, have been "dropping like a rock. . . . We've been shocked at the extent." 
Mr. Skilling said the company is trying to boost revenue by focusing on fiber-optic delivery of data and entertainment -- "a narrow piece of the business but about all that's left" -- and is hoping the glut in capacity will evaporate as competitors go broke. He said companies that continue to invest, despite the "market meltdown," and keep their networks state of the art will be rewarded eventually. 
Enron's results beat analysts' expectations, but several said they fear softening electricity prices throughout the nation, and particularly in the West, could crimp third-quarter results. "Enron benefited from unusual price volatility," during the quarter, said Raymond Niles, an energy analyst for Salomon Smith Barney. But it is uncertain whether that will continue with a general softening of natural-gas and electricity prices across the country, most notably in the West. 
Mr. Skilling said he thinks California may have seen the worst of its energy crisis. He consistently has said he doesn't think Enron's earnings will be significantly affected by possible refund orders from federal energy regulators or other regulatory intervention. 
He added that Enron was pleased with steps the Federal Energy Regulatory Commission took this week to encourage the formation of four big electric-transmission grid operators in the West, the Northeast, the Southeast and the Midwest.


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




Business/Financial Desk; Section C
Enron Net Rose 40% in Quarter
Bloomberg News

07/13/2001
The New York Times
Page 12, Column 4
c. 2001 New York Times Company

HOUSTON, July 12 -- The Enron Corporation, an energy trader, said today that its second-quarter profit rose 40 percent as its sales of natural gas and electricity surged in the United States and Europe. 
Net income rose to $404 million, or 45 cents a share, from $289 million, or 34 cents, in the period a year ago, Enron said. Results beat analysts' estimates by 3 cents a share.
Revenue almost tripled to $50.1 billion. Enron, which is based in Houston, sold almost twice as much power in North America and five times as much in Europe than in the quarter a year ago. 
Although electricity and natural gas prices surged in California, Jeffrey K. Skilling, the chief executive of Enron, said the state ''is just not a big factor'' in Enron's increasing profits. The company bolsters earnings by increasing sales of energy and other commodities like lumber and steel rather than by raising prices, analysts said. 
''That's the nature of the commodities business,'' said Zach Wagner, an analyst with Edward Jones & Company. ''As markets open up, their volumes will grow. Their margins are basically flat.'' 
Enron's profit margin was less than 1 percent last year and has averaged 2.1 percent the last five years, based on Bloomberg data. That compares with a profit margin of 6.5 percent for Exxon Mobil, the largest publicly traded energy company. 
Shares of Enron have dropped 31 percent the last year, despite steadily increasing earnings, and sales that now rival those of Exxon Mobil. Shares of Enron rose 45 cents today, to $49.55. 
Enron was expected to make 42 cents a share in the quarter, the average estimate of analysts polled by Thomson Financial/First Call.


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



Credit Markets
Treasury Prices Climb as More Money Is Shifted To U.S. Bonds on Weakness of Emerging Markets
By Michael Mackenzie and Andrew Gelfand
Dow Jones Newswires

07/13/2001
The Wall Street Journal
C12
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW YORK -- Treasury prices closed higher as renewed weakness in emerging markets prompted investors to shift more money into the U.S. bond market. 
It is common for Wall Street traders to bid Treasurys higher when weakness in other markets seems likely to spur flows into Treasurys, which are viewed as a haven.
But yesterday's action involved more than just Wall Street firms and provided substantial support, mostly offsetting the bearish influence of a stock rally. "Argentina is keeping a good bid in the [Treasury] market," said Peter Cordrey, managing director at Prudential Investment Management in New Jersey. 
Much of the focus again was Argentina, whose long-term sovereign credit rating yesterday was cut by Standard & Poor's to single-B-minus from single-B. 
S&P said the ratings outlook for Argentina remained negative and cited "growing strain on the cohesion of the governing coalition and the risk that it may impede efforts by Economy Minister Domingo Cavallo to implement draconian measures to balance the federal budget." 
That country is "just looking worse and worse every time you turn around," said Drew Matus, market economist with Lehman Brothers in New York. 
Despite indications that Argentine officials are trying to win agreement on spending cuts, investors remained nervous about the nation's ability to service its large external debt burden. Prices of Argentine floating-rate bonds fell about 103/8 points to 623/8. 
In U.S. Treasury trading, meanwhile, the benchmark 10-year note at 4 p.m. EDT was up 8/32 point, or $2.50 per $1,000 face value, at 98 6/32. Its yield fell to 5.242% from 5.276% late Wednesday, as yields move inversely to prices. 
The 30-year Treasury bond's price was up 14/32 at 96 1/32 to yield 5.652%, down from 5.684% Wednesday. 
Shorter Treasury maturities preformed less strongly than longer ones, and analysts cited gains in stocks as a reason. 
The Dow Jones Industrial Average surged 237.97 points to 10478.99, and the Nasdaq Composite Index jumped 103.70 points to 2,075.74. Treasurys are being "pulled in two directions, and the stock market is winning in the [short] end," said Richard Gilhooly, senior bond strategist at Paribas Capital Markets in New York. 
Another factor bolstering Treasurys was economic news. In two early releases, the Labor Department reported both a huge rise in claims for state unemployment benefits and slightly lower prices for imported goods. 
The number of workers filing first-time applications for jobless benefits jumped by 42,000 to 445,000 in the week ended July 7, the highest level since about mid-1992. That raised the four-week moving average to 410,750 claims. 
Today, two other economic reports may dominate the attention of bond investors: the producer price index and retail sales, both for June. 
A Dow Jones Newswires/CNBC survey found that economists believe the PPI was unchanged in June and will show a slight 0.1% increase in the month excluding food and energy. "The friendly inflation news should help to keep a bid in long [dated] Treasurys," said Gemma Wright, a bond-market strategist at Barclays Capital in New York. 
A separate Dow Jones Newswires poll found that economists expect to see a 0.3% rise in overall retail sales in June, or a 0.2% sales gain excluding automobiles. 
Corporate Bonds 
Marlin Water Trust II sold $475 million and 515 million euros ($439 million) of securities via Credit Suisse First Boston and Deutsche Banc Alex. Brown. 
In 1998, Enron Corp. created a special-purpose entity, to finance the purchase of water utility Wessex Water PLC of the United Kingdom. Yesterday's issue was a refinancing of that debt, but was done in a way that keeps the debt off Enron's balance sheet, underwriting officials said. 
The U.S. portion of the deal was priced to yield 6.31%, or 2.25 percentage points over Treasurys. In early trading, it was quoted at 2.25 percentage points over Treasurys, which was "reasonably positive on a day when the corporate market was so jittery," said Stephen Kane, portfolio manager at Metropolitan West Asset Management. 
Generally, investment-grade corporate bonds weakened on concerns about emerging markets. Yield margins to Treasurys, an important performance gauge, widened by 0.05 to 0.10 percentage point. 
Separately, Citigroup Inc. tapped the market with $2 billion of two-year global floating-rate notes priced to yield 0.09 percentage point over three-month London interbank offered rate, or Libor. 
Agency Securities 
Fannie Mae sold $2.5 billion of callable benchmark securities, which traded strongly afterward. 
Its $1.5 billion of 5.5%, five-year notes yielded 5.5657%, or 0.05 percentage point over the Fannie Mae benchmark level on an option-adjusted spread basis. 
An additional $1 billion of 6.25%, 10-year notes yielded 6.408%, or 0.03 percentage point over the Fannie Mae benchmark level on an option-adjusted basis. 
Scott Graham, head of agency trading at Greenwich Capital Markets, said his company saw "a number of customers" who don't typically consider callable issues, but were nonetheless looking to buy some of the new securities. 
--- 
Sonja Ryst, Richard A. Bravo and Tyler Lifton contributed to this article.


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




California; Metro Desk
THE ENERGY CRISIS Some State Energy Consultants Own Generators' Stock Ethics: They negotiate deals and buy electricity from power firms. GOP officials claim credit for forcing the disclosure of potential conflict.
ERIC BAILEY
TIMES STAFF WRITER

07/13/2001
Los Angeles Times
Home Edition
B-10
Copyright 2001 / The Times Mirror Company

SACRAMENTO -- More than half a dozen consultants hired by the state to purchase electricity and to negotiate long-term power deals own stock in generating companies such as Calpine and Enron that have profited handsomely during California's energy crisis. 
The potential conflict of interest emerged Thursday with the release of financial disclosure statements by consultants who have been hired by the state since the start of the power crunch.
Among those disclosing stock ownership were two key negotiators of long-term energy contracts and two workers hired to purchase electricity from generators, including some of the firms in which they hold an interest. 
Several other consultants who played key roles in the state's energy efforts decided not to file financial disclosure statements, citing legal exemptions under state law. 
Among those who did not file the financial disclosure statements were a pair of executives at two Wall Street firms that stand to make $14 million if the state buys California's power grid. Of about 50 consultants hired by the state in the past six months, 27 filed the disclosures. 
The disclosures follow a firestorm in Sacramento last month over the hiring by Gov. Gray Davis of two media consultants also employed by Southern California Edison, the troubled utility that is negotiating with the state over a bailout package. 
Steve Maviglio, a Davis spokesman, said the governor's legal staff was reviewing the financial disclosure forms for any potential conflicts of interest. 
"If there's anything inappropriate," Maviglio said, "then we'll deal with it." 
Republicans, however, said the hired workers had revealed overt conflicts that clearly violated state law. 
Secretary of State Bill Jones, a Republican running for governor against Davis next year, said the revelations call into question the work performed by the consultants on high-priced energy contracts that are "going to mortgage our children's future for decades to come." 
"If you show a conflict, the potential is there for collusion," Jones said. "I'm not accusing anyone, but that's why you have disclosure." 
Rob Stutzman, a state GOP spokesman, said he was particularly troubled because the consultants had delayed filing the disclosure forms for months. Under state law, the forms are supposed to be submitted within 30 days after the consultants go to work for the state. 
Most of the energy consultants, who could not be reached for comment, reported owning relatively small amounts of stock in energy firms, generally less than $10,000. 
But one of the new workers, William Mead, disclosed that he owned between $100,000 and$1 million in Calpine, a San Jose-based energy firm. Mead did not report when the stock had been purchased. 
Only one of the contractors reported selling off stock after coming to work for the state. 
Vikram Budhraja, president of Pasadena-based Electric Power Group LLC, on Jan. 11 purchased between $10,000 and $100,000 in stock of Dynegy, a electricity and natural gas producer. He sold it off on Jan. 29, 10 days after he came to work for the state. Budhraja has been a top negotiator of the state's long-term energy contracts, which have included a deal concluded March 2 with Dynegy. 
Richard Ferreira, a retired Sacramento Utility District executive hired by the state to negotiate long-term power contracts, reported the purchase of between $2,000 and $10,000 of stock in Calpine, a San Jose-based energy firm, in August 2000. He also purchased a similar amount of stock in General Electric Co., which produces power plant equipment, in April 2000. 
Bernard Barretto, an energy trader, reported that he owned an undisclosed amount of stock in Enron Corp., a big Texas-based energy firm. Elaine Griffin purchased between $10,000 and $100,000 in Calpine stock on Feb. 1, less than three weeks before she came to work for the state as an energy trader. Constantine Louie, an energy scheduler, reported owning between $10,000 and $100,000 in Calpine stock. 
Republicans took credit for forcing the Davis administration to file the reports, a charge the governor's office brushed aside. 
Jones, the secretary of state, held a news conference Tuesday to complain about the failure of nearly all the state's energy consultants to file any sort of financial disclosure forms. The statements were only made available late in the afternoon Thursday, months after many consultants went to work for the state. 
Maviglio, the governor's spokesman, said the delays were explained in part by negotiations that began in March with the Fair Political Practices Commission, the state's ethics watchdog, to determine if the consultants were required to file the forms. 
He also suggested that Jones' accusations were fueled more by campaign politics than any devotion to constitutional duty. 
"One needs to question why the secretary of state is using taxpayer money to investigate something beyond his jurisdiction," Maviglio said. "That's why we have an FPPC, to look at these kinds of things."


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



California; Metro Desk
THE ENERGY CRISIS Plan Uses Public in Refund Demand Legislature: Democrats' proposal to pressure 'greedy' firms is attacked by GOP as political ploy.
CARL INGRAM
TIMES STAFF WRITER

07/13/2001
Los Angeles Times
Home Edition
B-10
Copyright 2001 / The Times Mirror Company

SACRAMENTO -- The Democratic-led state Senate intends to fill constituent mailboxes with a taxpayer-financed appeal urging Californians to demand nearly $9 billion in energy price refunds from "greedy out-of-state power generators." 
Senate leader John Burton (D-San Francisco) said the mailers will ask Californians to join the Senate and Gov. Gray Davis in insisting that the Federal Energy Regulatory Commission order the refunds of alleged overcharges.
Senate Democrats set the high target despite a federal mediator's ruling against Davis earlier this week. The mediator said California would be entitled to only about $1 billion in generator overcharges, not the $8.9 billion that Davis has fought for. 
Senate officers said the cost of the mail campaign will be paid from the budgets of senators, at taxpayer expense, as part of the Legislature's constituent service mail program. 
But Republicans attacked the mailer as political propaganda that may violate state law and Senate policy barring issuance of "partisan" documents at public expense. 
Sketchy details of the quietly developed project surfaced on the Senate floor Thursday. Staffers who worked on it said it was virtually impossible to calculate the program's cost. 
But they indicated that if all 26 Democrats agreed to send up to 30,000 mailers each to constituents, the postage alone would cost $140,400. 
If each mass mailing exceeded 30,000 pieces, a higher postage rate would apply, raising the cost, officials said. 
In the mailer, constituents are asked to return an attached card to their state senator, urging "full refunds of the outrageous prices charged by the greedy out-of-state power generators." 
Cynthia Lavagetto, manager of the Senate mail program, said each member will decide what do do with the returned cards, including simply filing them or sending them on to FERC. 
Lavagetto said a prototype mailer was prepared with the help of the Select Committee on Citizen Participation, a panel that has no chairman or members, since it has not been activated this year. But it does maintain an office and has three staffers on the Senate payroll. 
Burton dismissed the Republican charges of partisanship as baseless. "We do this all the time on a variety of issues," he said. "We're saying, 'Stop stealing California's money.' " 
But Sen. Ross Johnson of Irvine, the Senate's senior Republican, denounced the mailing as clearly partisan. He said it appeared to reflect a developing 2002 election strategy of Davis and Democrats to blame the FERC and out-of-state generators for California's energy mess. 
"I seriously question the appropriateness of using taxpayer money to get people to lobby [for the refunds]," Johnson said. 
Johnson and Sen. Ray Haynes (R-Riverside) suggested that Democrats turn their criticism to municipal utilities, including the Los Angeles Department of Water and Power. Some utilities charged the state even higher prices last winter than did private generators. 
"Why are they not attacking the DWP?" Johnson asked. 
He noted that S. David Freeman was running the DWP at the time some of its highest prices were charged to the state, which is buying power for California's financially crippled utilities. Later, Davis hired Freeman as his top energy price negotiator. 
"Doesn't David Freeman more properly belong in that same jail cell as the guy called Spike than he does in the governor's office?" Johnson asked. 
"Spike" has become a character in the California energy debate, thanks to Atty. Gen. Bill Lockyer, who is investigating whether power sellers engaged in price-gouging and antitrust behavior. 
In an interview with the Wall Street Journal in May, Lockyer said he would "love to personally escort [Enron Corp. Chairman Kenneth] Lay to an 8-by-10 cell that he could share with a tattooed dude who says, 'Hi. My name is Spike, honey.' "


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



COMPANIES & FINANCE THE AMERICAS - Surging energy sales behind Enron advance.
By JULIE EARLE.

07/13/2001
Financial Times
(c) 2001 Financial Times Limited . All Rights Reserved

Enron, the US energy trader, yesterday posted a 40 per cent rise in second-quarter profits to $404m, due to surging gas and electricity sales in North America and Europe. 
The Houston-based company also said it would continue to grow aggressively in Europe and seize any opportunities to expand in the US, after regulators on Wednesday ordered the formation of an organisation to open the North American electricity market.
Jeff Skilling, Enron chief executive, said the company had its sights set on Europe for strong earnings growth, which it hopes will eventually match North America. 
The company's wholesale business unit, the group's main profit driver, derives 70 per cent of its business from North America. 
"We see more growth opportunity in Europe than in North America. Gas volumes are up more than 100 per cent (in the quarter)," Mr Skilling said. "The gas and electric market in Europe is almost as big as North America and we got an early start." 
Mr Skilling said a decision by the Federal Energy Regulatory Commission to order the formation of four grid organisations to optimise the transmission of electricity in parts of the US was hugely important. 
He estimated only 20 per cent of the wholesale market for electricity could be accessed and the decision would take this to 90-95 per cent. 
Mr Skilling said Enron, which has transformed itself from a pipeline company into a large energy trader, was focused on its volumes, not revenues, which jumped to $50.1bn in the quarter, from $16.9bn a year ago. 
The only poor performer was the broadband division, which trades space on fibre-optic networks. The unit posted a loss of $102m in the quarter, against an $8m loss a year ago, and the company said it would cut costs there. 
Enron's result of $404m, or 45 cents a share, compared with $289m, or 34 cents, in the same quarter a year ago. 
Analysts had been expecting 42 cents a share. 
By the close in New York, the company's shares were trading 45 cents higher to $49.55. See Lex. 
(c) Copyright Financial Times Ltd. All rights reserved. 
http://www.ft.com.


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



Lex - Enron.

07/13/2001
Financial Times - FT.com
(c) 2001 Financial Times Limited . All Rights Reserved

Be careful of the company you keep. Having enjoyed its status as a telecommunications play last year, Enron is now suffering with its new friends. The US energy trader has dropped by 40 per cent since the start of the year - underperforming the market by a third - despite the earnings momentum in its core energy trading business. 
A 40 per cent increase in net income in the second quarter, even allowing for inevitable questions over earnings quality, is impressive. The strength of the energy trading business, with volumes up by almost 60 per cent, is more than enough to offset the misery in the broadband trading business.
However, the broadband division's $102m losses are shocking, even in these difficult times. The market has collapsed, partly owing to credit problems in the telecoms sector. Enron's cost base is completely out of kilter with the opportunity. At least it should not be too hard to put that right. Actual investment in assets is limited; and by reallocating staff to the fast-growing energy trading divisions, restructuring costs can be kept to a minimum. 
Broadband is not the only worry. California's troubles have not affected trading volumes, but regulatory risk remains, while promises on asset sales have not been met. Trading on 23 times 2002 forecast earnings, the valuation looks fair for a fast-growing trading company. The upside lies in convincing investors to give the company more credit for its value-added risk management services. The long-term potential of broadband trading, meanwhile, is thrown in for free. 
(c) Copyright Financial Times Group. 
http://www.ft.com.


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




UK: Paladin says Enron sells entire stake.

07/13/2001
Reuters English News Service
(C) Reuters Limited 2001.

LONDON, July 13 (Reuters) - UK oil and exploration company Paladin Resources said on Friday that U.S. energy firm Enron had sold the whole of its 19 percent holding. 
Enron, which was Paladin's largest shareholder, sold its stake of 40 million shares at 44 pence via HSBC.
A Paladin spokesman said the move would increase liquidity and broaden its shareholder base.


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



White House adviser targeted for dealings with Salvation Army
By RON FOURNIER
AP White House Correspondent

07/13/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

WASHINGTON (AP) - Senior White House adviser Karl Rove, increasingly a target of criticism from Democrats and Republicans, wound up at the center of a new storm over his dealings with the Salvation Army. 
White House aides rallied to his side, and Rove was unapologetic. But Democratic National Committee chairman Terry McAuliffe called for congressional hearings.
"I think the truth needs to come out," McAuliffe said Thursday. "Let's have hearings and get to the bottom of this." 
At issue was the Salvation Army's push for a regulation allowing religious charities to practice workplace discrimination against gays, and Rove's actions on behalf of the group. Rove said he was simply doing his job. 
While McAuliffe called for hearings, Senate Majority Leader Tom Daschle, D-S.D., seemed less riled. "Karl Rove is a very respected individual and I wouldn't have any comment to make," Daschle said. 
Thursday's flap was not the first for Rove, who oversees politics, strategy and public liaison at the White House. 
When Sen. James Jeffords bolted the GOP and turned the Senate over to Democrats last month, Republicans accused Rove of alienating the Vermont lawmaker during the tax-cut debate. He was fingered, too, for not warning Bush earlier that Jeffords might jump ship. 
When Rove sat in White House meetings on policy that could impact his stock portfolio, Democrats demanded to know whether his holdings with Houston-based Enron Corp. and Intel Corp. created a conflict of interest. 
When Bush crossed some military advisers and suspended Navy bombing on the Puerto Rican island of Vieques, Rove's involvement in the case was held up as proof by critics that the decision was politically-motivated. 
Rove's involvement in the Salvation Army case has stirred debate in Republican and Democratic circles about whether he wields too much power and is too political for the White House. 
The White House rejected the Salvation Army's request Wednesday, but only after the revelation of an embarrassing Salvation Army memo. The memo said the administration had promised to issue a regulation protecting it and other religious charities from efforts to prevent such discrimination in exchange for the Salvation Army's support of Bush's plan to open government programs to religious groups. 
White House officials left the impression that no senior officials were involved in the discussions, failing to point out Rove's activity until Thursday. 
In a telephone interview, Rove said he recalled having just three or four brief discussions on the topic. He received a request from a Salvation Army ally to looked into the rule, sent the ally to the White House faith-based office, forwarded the written request to a government lawyer and was told later by the lawyer, "We're not certain there's anything we can do." 
The lawyer, Jay Lefkowitz, told reporters the request lay dormant after his discussion with Rove. 
Rove rejected the criticism. "My job is not to say, `Don't send me something or call me.' My job is to keep my eyes and ears open and send things to the appropriate departments," he said. 
Some top Republicans outside the White House said Rove has become a lightening rod. 
"Part of his role is to be a deflection shield for the president," said GOP consultant Rich Bond. "Everytime Karl takes a hit, it's one less hit the president has to take. Karl knows that and he is a big boy." 
Aides say the president is not troubled by Rove's actions, even joking about the controversies. 
White House chief of staff Andrew Card also defended Rove. 
"I may be naive, but we have no problem of division on the senior level," said Card. "I was in the Reagan White House when we had three clear camps ... We don't have that here." 
Aides do acknowledge, however, that there is some resentment of Rove in the lower ranks of the White House. Some grumbled that Rove did not let White House press secretary Ari Fleischer know Wednesday about his involvement in the Salvation Army case. Others, still tired from a tough campaign and frustrated by their new jobs, said they resent Rove's wide reach.


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



UK: Bidder list for Southern Water grows-report.

07/13/2001
Reuters English News Service
(C) Reuters Limited 2001.

LONDON, July 13 (Reuters) - More potential bidders have emerged that may challenge Italian utility ENEL for Southern Water, the British regional utility put up for sale by its parent Scottish Power Plc earlier this year, a trade magazine reported on Friday. 
Utility Week said British gas and homes services retailer Centrica had teamed up with French utility Vivendi Environnement , which already owns UK water assets, "to consider a bid".
But it cited unnamed sources saying the German-owned investment bank WestLB Panmure, which was behind a management buyout of Southern Water's neighbour Mid Kent Water earlier this year, had "emerged as front-runner in the past week". 
ENEL has said it is interested, and according to Reuters' industry sources Scottish Power's floor price is 1.7 billion pounds ($2.4 billion) excluding any attached debt. 
Scottish Power said in March the business was for sale. 
It needs the cash to help fund its own plans for expansion in the United States, where industry sources say it has held talks on buying Portland General, a power utility owned by Enron Corp , which neighbours the UK group's own PacifiCorp arm.


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



DPC not to re-start work on Phase II work
Our Regional Bureau NEW DELHI

07/13/2001
Business Standard
3
Copyright (c) Business Standard

Enron-promoted Dabhol Power Company (DPC) today said that Enron Corp chairman Kenneth Lay during his meetings with the Centre and the Maharashtra government had not agreed to any proposal to complete the construction of phase-II of the power project. 
"Dabhol Power Company believes that a decision to recommence construction cannot be made unless various issues relating to the project are completely resolved," DPC said in a statement.
It said that any discussion that Lay had on recommending construction of phase-II was in the context of the current uncertainties surrounding the project. 
DPC said that contractors working on the project resorted to termination due to non-payment of their dues as lenders had stopped disbursing funds. 
"This decision was taken as a result of continuing defaults by MSEB (Maharashtra State Electricity Board), including MSEB's repudiation of the PPA, their failure to pay outstanding invoices and their stated unwillingness to accept phase-II power, as well as failure of the government guarantors to honour their payment guarantees," said the statement. 
It added that the situation had not changed.


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



California Power Bills Exceed Refunds, Judge Says (Update4)
2001-07-12 21:40 (New York)

California Power Bills Exceed Refunds, Judge Says (Update4)

     (Adds legislator comment in sixth paragraph, details from
judge in 11th paragraph, negotiator comment in 12th paragraph.)

     Washington, July 12 (Bloomberg) -- California's debts to
power sellers for electricity purchases exceed any refund the
state can claim for alleged overcharging, a judge overseeing
settlement talks said in a report to federal regulators.
     California and its utilities may be owed more than $1 billion
on claims generators overcharged them, Administrative Law Judge
Curtis Wagner wrote in a report to the Federal Energy Regulatory
Commission. California alleges power sellers like Duke Energy
Corp., Enron Corp. illegally inflated prices by $8.9 billion.
     ``While there are vast sums due for overcharges, there are
even larger amounts owed to energy sellers'' by California and its
utilities, Wagner wrote. He said the state is owed ``hundreds of
millions of dollars, probably more than a billion dollars.''
     The decision strengthens the generators' claim that the
state's request for billions isn't supported by the facts. Energy
companies have offered a total of $716 million in refunds to the
state, Wagner said.
     FERC-ordered negotiations between the state and the energy
sellers broke down without an agreement this week. FERC will
decide on the size of refunds within 60 days. California Governor
Gray Davis has said the state will sue if it does not receive the
refunds it demanded.
     ``I find it unlikely that someone will not be unhappy enough
to go to court,'' said State Senator Debra Bowen, a Democrat from
Los Angeles. ``There's too much money at stake.''

                         Wagner's Report

     FERC will use Wagner's report to calculate the size of any
refunds. California could receive refunds in the form of credit
against power-buying debts. In his report, Wagner didn't say how
much the state and its utilities owe to power companies.
     ``Can a cash refund be required where a much larger amount is
due the seller? The chief judge thinks not,'' wrote Wagner, who is
FERC's chief administrative law judge.
     Wagner provided suggestions to the FERC commissioners on how
to set any refunds. He urged that they calculate potential
overcharges beginning October 2000. California had urged the
settlement be figured from May 2000.
     Davis criticized that decision, calling it ``a $3 billion
free gouge for the generators'' in a statement released by his
office.
     The judge said California had rejected a settlement offer he
made during the talks. He did not say what that settlement offer
was. He said California would not budge from its initial demand.
He also said California did not provide him some of the background
information he requested until this week.
     ``If we had more time we might have been able to respond more
quickly, but we did the best we could,'' said Michael Kahn,
chairman of the Independent System Operator, the state's electric
grid manager. He led the state delegation.

                    Heart of Dispute

     At the heart of the dispute are federal regulations that
require power sellers to charge only those rates deemed by federal
regulators to be ``just and reasonable.'' FERC had price caps in
place when some of the disputed power purchases were made.
     Energy companies claim that rising natural-gas prices and a
lack of adequate supply pushed prices up. The state accuses the
companies reaping unreasonable profits.
     Davis has made attacks on power generators a staple of his
response to the energy crisis, and has accused them of gouging the
state in dozens of speeches since January. He said that if the
state isn't paid $8.9 billion, it would sue for up to $20 billion.
     Energy executives accuse Davis and California political
leaders of attempting to scapegoat the energy companies for a
failed deregulation plan that led to soaring wholesale prices last
year. The state's largest two utilities can't pay for their power.
     ``It's pretty clear that the state has no particular interest
in resolving this,'' Enron Chief Executive Jeffrey Skilling said
in an interview with Bloomberg News. ``It makes for good political
fodder, and so I think they'll spend a lot of time making a lot of
noise about it.''
     Several other energy companies praised the judge's
recommendations.
     ``We agree with the judge's position that the $8.9 billion
refund number is totally unsubstantiated,'' Duke Energy Corp.
spokesman Tom Williams said.
     PG&E Corp.'s Pacific Gas & Electric and Edison
International's Southern California Edison, the state's largest
investor-owned utilities, ran up more than $14 billion in debt
buying electricity last year. The state stepped in and began
buying power for them in January, and has spent more than $7
billion.




California Governor Casts Blame for Crisis, to His Benefit
2001-07-13 03:03 (New York)

California Governor Casts Blame for Crisis, to His Benefit

     San Francisco, July 13 (Bloomberg) -- California Governor
Gray Davis's popularity is bouncing back, and pollsters credit the
Democratic lawmaker's campaign to blame the state's energy
problems on out-of-state power companies.
     Davis has criticized Duke Energy Corp., Enron Corp. and other
power sellers as price gougers since January. This week, Davis
used a power-plant opening as a platform to claim that energy
sellers are ``bleeding us dry.'' The Democratic state attorney
general and Democratic-controlled state Senate are investigating
the firms for market manipulation.
     The governor is winning support because of his attacks. A Los
Angeles Times poll in June showed that 86 percent of Californians
believed power generators distorted prices. Davis's approval
rating rose to 52 percent of registered voters in June, from 46
percent in early April, his lowest since being elected in 1998,
his pollster, Paul Maslin, found.
     ``Gray Davis is very good at licking his fingers and seeing
which way the political winds blow,'' said Bruce Cain, a political
science professor at the University of California at Berkeley.
``And he's found good villains.''

                    Outlook for Settlement

     The politics may make it harder for the state to reach a
settlement with energy companies for claims they overcharged the
state by $8.9 billion, analysts say. A federal judge overseeing
settlement talks said the state is owed far less. Davis says the
state will sue for $18 billion if its demands aren't met.
     ``There is no way you are going to get any kind of agreement
from someone making such audacious claims,'' said Donato Eassey,
an energy analyst at Merrill Lynch & Co. in Houston.
     The refunds may be secondary to Davis's effort to be re-
elected in 2002, a victory that political analysts say position
him as a contender for national office in 2004.
     ``He's in good shape going into 2002, and if he wins, there's
the inevitable speculation about whether he eyes a run for
president in 2004,'' Cain said.
     Just months ago, Davis's public approval ratings were at
their lowest point since he was elected, according to a Field
Institute poll in April.
     PG&E Corp.'s utility, the state's largest, was in bankruptcy.
Wholesale-power prices were rising, and millions of Californians
lost power in a string of blackouts caused by reduced power
reserves.

                         Governor Rebounds

     The governor was widely criticized for failing to act swiftly
to end the crisis. Now Davis seems to be recovering, analysts
said.
     While vilifying the power companies, the first-term governor
has also been spearheading the state's response to the energy
crisis. He has created a team to negotiate a financial rescue
package to save Edison International's Southern California Edison
utility from bankruptcy, started an $800 energy conservation drive
and pushed for more power plants to be built.
     The energy companies lashed back at Davis this week. A
spokesman for Enron Corp., the world's largest energy trader,
accused Davis and California leaders of conducting a political
``witch hunt.''
     ``The last thing they want to do is take responsibility for
the problem they created,'' Enron spokesman Mark Palmer said.
``They set about looking for the biggest villains.''
     Enron filed suit against a California state Senate committee
investigating allegations of market manipulation, accusing the
panel and its Democratic chairman in a letter of seeking a
``scapegoat'' for a failed deregulation law.

                   Plotting his Response

     Davis began plotting his response to the crisis almost
immediately after it became public in January, said Garry South,
his chief political strategist. Step one, Davis aides said, was to
blame the energy companies that were profiting from the state's
woes. Davis targeted a half-dozen companies. In addition to Enron
and Duke, Mirant Corp., Reliant Energy Inc., and Williams Cos.
were placed in the crosshairs.
     ``There was a group of perpetrators from out of state
manipulating this system and screwing consumers,'' South said.
``We had to explain how this thing happened.''
     Republicans criticize Davis for inaction on the crisis, while
acknowledging he is favored to win re-election going into next
year's campaign.
     He leads three potential rivals -- Secretary of State Bill
Jones, banker William Simon, the son of former Treasury Secretary
William Simon, and former Los Angeles Mayor Richard Riordan,
according to the Times poll of 1,541 state residents conducted
June 23-26.
     ``He will be the favorite,'' said Rob Stutzman, a consultant
for the California Republican Party.

                         Worries Ahead

     Davis still has worries as the state struggles to address the
energy crisis, analysts say.
     PG&E Corp.'s Pacific Gas & Electric filed for bankruptcy in
April. Edison International's Southern California Edison, the No.
2 utility, is struggling to overcome legislative opposition to the
financial-rescue package negotiated by Davis.
     Davis may be blamed, analysts say, if the state Legislature
refuses to ratify the rescue plan for Edison and the utility files
for bankruptcy. Republicans and many Democrats in the Legislature
oppose the agreement, known as a memorandum of understanding.
     ``The MOU's dead, and the likely scenario is for the utility
is to go into bankruptcy,'' said Peter Navarro, an associate
professor of economics and public management at the University of
California at Irvine.
     California voters may receive unpleasant reminders of the
crisis all summer. The state has already suffered through six days
of rolling blackouts, and more are predicted.
     ``As soon as the lights go out, it's Gray's fault,'' Navarro
said.