Hawk vote for California firm unanimous 
Houston Chronicle, 05/15/01

INTERNATIONAL ECONOMY: Enron may cut stake in Gulf gas project 
Financial Times; May 15, 2001

JAPAN: Enron says high power rates costing Japan.
Reuters English News Service, 05/15/01

Japan Must Speed Up Pwr Sector Dereg To Lower Rates-Indus
Dow Jones Energy Service, 05/15/01

SINGAPORE: ANALYSIS-No Asia fallout seen from Enron's India woes.
Reuters English News Service, 05/15/01

Saudi Won't Announce Winners Of Gas Projs Tue - Report
Dow Jones Energy Service, 05/15/01

MSEB refutes allegations by Enron, DPC
The Economic Times, 05/15/01

Saudi Supreme Petrol Council meeting to decide on huge gas project bids
Business Recorder, 05/15/01







May 15, 2001
Houston Chronicle
Hawk vote for California firm unanimous 
Montgomery Watson pegged for water plant 
By MARY FLOOD 
Copyright 2001 Houston Chronicle 
The Houston Area Water Corp. voted unanimously Monday to grant a $92 million 
contract to a California-based firm to design, build and operate a Lake 
Houston water plant. 
City Council soon will receive the contract for its approval. The 
administration of Mayor Lee Brown was believed to have favored Montgomery 
Watson's chief competitor, Azurix Corp., an arm of local energy giant Enron 
Corp. 
The water corporation, known as "the Hawk," voted 5-0 to grant the contract. 
If approved by City Council, the contract would give the company 2 1/2 years 
to get the plant up and treating raw lake water. 
It was initially expected that the plant, which will be designed to handle 40 
million gallons of water daily, could cost as much as $150 million to build. 
The Hawk board asked the vying companies to modify their bids several times, 
and that caused the competitors to lower their prices. 
The contract calls for the Hawk to pay a monthly operating fee of $157,000 
when the plant is working. And Montgomery Watson could be required to 
construct, at the Hawk's option, an additional 40 million-gallon-a-day plant 
expansion for $32 million. 
But the details of how the plant will be financed have not been determined. 
The Hawk board discussed borrowing money using the city's credit rating on a 
short-term basis until it could develop long-term financing by selling bonds 
itself. 
The initial customer for the water is the city of Houston, which would repay 
the Hawk the cost of producing the treated water. The hope is that the plant 
eventually will provide water to other entities in the area as well. This 
plant is part of an area plan for the treatment of surface water that could 
cost about $2 billion to implement. 
City Councilman Carroll Robinson, who heads the council infrastructure 
committee, said he expects to hold two hearings about the contract. One would 
focus on how the Hawk board picked Montgomery Watson. A series of three 
recommendations from City Hall staff recommended Azurix. 
Hawk board members said Montgomery Watson's prices were lower by millions and 
that Azurix plans to sell Azurix North America, the body that would oversee 
this contract. 
The second City Council hearing will focus on financing, Robinson said. "In 
my mind, how the city will pay for this construction is as important as who 
will do it," Robinson said. 
The Hawk board, appointed by Brown and approved by City Council, has been 
heavily lobbied by the contenders for the job. 
Because City Council does not have to follow the Hawk recommendation, new 
pressure has begun at City Hall. The third bidder, U.S. Filter Operating 
Services, part of a French company, has been heavily lobbying some council 
members to switch the contract to it. 
Some members of the Azurix team -- people at companies that would have gotten 
work had Azurix gotten the job -- have written letters complaining about the 
Hawk procedures as well. 
John M. Stokes, president and chief executive officer of Azurix, penned the 
first such distressed missive. In April, he wrote to Hawk board Chairman 
David Berg complaining of the "deleterious economic effect" on Azurix of the 
board's decision to negotiate with Montgomery Watson. He requested that Berg 
answer a series of questions in writing explaining why Azurix didn't get the 
job. Berg didn't do so. 
Although that letter had a threatening tone, Amanda Martin, president of 
Azurix North America, said no threat was intended and the letter simply 
indicated how upset the team was when it first learned Azurix wasn't chosen. 
Azurix was the rumored front-runner for months. 


		

		
		
		
		INTERNATIONAL ECONOMY: Enron may cut stake in Gulf gas project 
Financial Times; May 15, 2001
By ROBIN ALLEN

		There are growing fears that Enron, the US power company, may withdraw or 
sharply reduce its stake in the Gulf's Dollars 10bn Dolphin gas export 
scheme, one of the most ambitious of its kind in the region. 
		Enron officials have refused to comment on reports that the company is 
reconsidering its position as a minority shareholder in Dolphin Energy, in 
which France's TotalFinaElf (TFE) also has 24.5 per cent. 
		However, one industry specialist said yesterday Enron was talking of 
"selling" at least part of its shareholding. 
		The threat raises critical issues for western companies seeking to profit 
from accessing state-owned oil and gas in the Gulf. 
		The project was launched two years ago by Abu Dhabi, the wealthiest of the 
United Arab Emirates, to promote energy security for the Gulf. But Abu 
Dhabiis seen as a prime example of a state where prestige and opaque domestic 
political considerations can be as important as profitability in such a 
large-scale project, especially in the early stages. 
		Dolphin's majority owner is UAE's Offsets Group (UOG), an offshoot of Abu 
Dhabi's defence procurement industry. In March, Dolphin, a relative newcomer 
on Abu Dhabi's energy scene, signed a Dollars 3.5bn agreement with Qatar to 
exploit and pipe up to 2bn cubic feet a day of gas from Qatar's prolific 
North Field to Abu Dhabi. 
		Qatari gas is the source of Abu Dhabi's long-term energy strategy, and Enron
's role was to develop, at a profit, the downstream section, primarily to 
construct and lay the 350km pipeline from Qatar to Abu Dhabi. 
		Enron is not a specialist in energy production or pipeline fabrication, but 
one of its main aims, according to one analyst, was to gain access to the gas 
accruing to it from the Qatar deal and then trade it on. Sheikh Zayed Bin 
Sultan al-Nahyan, Abu Dhabi's ruler, disapproves of commodity trading. 
		"If the Qatar-UAE gas deal was going to be profitable" for western energy 
majors, asked one senior western diplomat, "then why are the serious US 
energy majors not involved?" For more reports see www.ft.com/globaleconomy 
		Copyright: The Financial Times Limited
		
		



JAPAN: Enron says high power rates costing Japan.

05/15/2001
Reuters English News Service
(C) Reuters Limited 2001.

TOKYO, May 15 (Reuters) - A senior executive of U.S. energy giant Enron Corp 
said on Tuesday that Japan could save an estimated four trillion yen ($32.45 
billion) in annual costs if electricity rates were cut to the average of 
members of the Organisation for Economic Cooperation and Development (OECD). 
"If you were to pare Japanese industrial electric rates to the OECD 
average...savings to all...customers would be about four trillion yen per 
year," Enron Corp Vice President Steven Kean told a seminar in Tokyo.
Speaking at a seminar on electric power deregulation, Kean said that 
indigenous factors such as steep land prices and a lack of natural energy 
resources were often blamed for Japan's high electricity rates. 
But he said these factors were not sufficient to explain Japan's high 
electricity rates. 
A report commissioned by Enron Japan Corp showed that in 1998 Japan's 
electricity rates for industrial users were 16.81 yen per kilowatt hour (kWh) 
compared to a second highest rate of 12.44 yen in Italy. 
Japan's business sector has expressed concern at the nation's high 
electricity rates, saying that it blunts their competitive edge on the 
international market. 
Kean also drew parallels between Japan, in the midst of deregulation, and 
California which has been suffering from a power shortage since deregulating 
its market in 1998. 
These included the length of time that authorities in Japan took to issue 
permits to allow the construction of new power plants, he said. 
"The regulatory structure in Japan is very strict...just like in California," 
Kean said. 
North America's biggest buyer and seller of electricity, Enron gained its 
first foothold in Japan in 1999 when it established affiliate E Power Corp. 
In April of last year, it set up subsidiary Enron Japan Corp. 
Kean urged Japan to step up measures to open up its power market, a process 
he said held many benefits. 
Japan is in the process of deregulating its power market. Since March last 
year, large-lot consumers have been free to chose their suppliers. The 
measure liberalised an estimated 30 percent of the power market and ended 
Japan's 10 power utilities regional monopoly. 
However, industry watchers note that there have been very few new entrants 
and that further deregulation measures must be taken for rates to fall. The 
Japanese government is due to review the process in 2003.

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


Japan Must Speed Up Pwr Sector Dereg To Lower Rates-Indus

05/15/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

TOKYO -(Dow Jones)- Japan should accelerate the ongoing electric power sector 
deregulation to fully liberalize the retail market, in order to bring down 
the country's high power rates while ensuring stable power supply, experts 
said at an industry seminar Tuesday. 
The pressure is mounting for Japan's 10 power utilities, which have long 
enjoyed regional monopolies until a year ago, to become cost- effective and 
performance-conscious after the government partially liberalized the retail 
power market in March 2000.
However, the current scheme has so far failed to lure a large number of 
potential entrants because of the high transmission fees they must pay to 
conventional power companies. 
"What happened in overseas (power industries) suggest that the liberalization 
in Japan wouldn't only lower power rates but would also contribute to stable 
power supply significantly," said Tatsuo Hatta, professor of economics at the 
University of Tokyo. 
Compared with the U.S., Japanese electricity charges are typically twice as 
much for households and three times higher for industrial users. 
"There is a large discrepancy (in rates), and that is why we should hurriedly 
implement the liberalization," Hatta said. 
He said Japan's steep seasonal peak-load curve - one of the reasons the power 
companies cite as the cause of high power rates in Japan - can be altered 
once the prices are liberalized. "If power rates are set higher during those 
peak hours following the liberalization, users would refrain from using 
electricity." 
Steven Kean, executive vice president of the U.S. energy major, Enron Corp. 
(ENE), told the same seminar that Japan's power costs remain on the upward 
trend despite cost reductions in Europe and the U.S. 
He said Japan could achieve a cost-saving of Y4 trillion a year if its power 
prices fall to levels in Organization for Economic Cooperation and 
Development countries following the liberalization. 
Hatta and Kean were speaking at the seminar called "Reassessing Power 
Deregulation," which was co-sponsored by the Houston-based Enron. 

Hatta of the University of Tokyo said "it's very wise" that Japan has begun 
the deregulation with the "bilateral supply, or trade" system under which 
suppliers and users clinch deals directly. 
Under the current reforms, the sector for high-volume, large-lot industrial 
and commercial users - which represents only 30% of the Y15 trillion market - 
is opened to free competition. The government is to review the partial 
deregulation by 2003 for further deregulation. 
Japan should then introduce spot electricity trading such as futures and 
derivatives to alleviate risks of complicated price volatility for power 
providers, Hatta said. 
Hatta and other experts attending the seminar said further deregulation 
should destroy the systems that have supported the country's high power rates 
- regional monopolies and the fair rate return method, under which all costs 
are levied on prices. 
"There is absolutely no need to set the same (power) prices" nationwide, 
Hatta said. Power companies should make the opaque transmission fees 
transparent and set them accordingly with regional demand, he said. 
Yoshinori Omuro, vice president of Takashimaya Co.'s (J.TKA or 8233) 
management department, acknowledged the slow progress of the deregulation. 
Takashimaya, a major department store operator, has shifted to Diamond Power 
Corp., a wholly-owned subsidiary of Mitsubishi Corp. (J.MIB or 8058) as its 
power supplier at two of its 18 stores, with "strong back-up" from the 
Ministry of Economy, Trade and Industry. 
"Despite the deregulation, the situation isn't where we can negotiate with 
power utilities to reduce (electricity costs). We have no choice but select 
independent power providers," Omuro said. 
-By Maki Aoto, Dow Jones Newswires; 813-5255-2929; maki.aoto@dowjones.com

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


SINGAPORE: ANALYSIS-No Asia fallout seen from Enron's India woes.
By Cameron Dueck

05/15/2001
Reuters English News Service
(C) Reuters Limited 2001.

SINGAPORE, May 15 (Reuters) - A bitter payment battle between U.S. energy 
giant Enron Corp and authorities in India will serve as a reminder to foreign 
investors of the risks of putting money into emerging markets, analysts and 
bankers say. 
But it is unlikely to deter the flow of money into Asian electricity projects.
The pace of power privatisation and deregulation varies too greatly from 
country to country for the controversy in India to chill investment activity 
across Asia, they say. 
It does, however, underline the risks companies take despite some security 
offered by government payment guarantees. 
"Independant power producers (IPPs) will see Enron and Dabhol as an 
illustration of the dangers and possible risks of investing in an emerging 
market, but it would be going too far to say that other markets will be 
adversely affected because of it," said Philip Jackson, a banker with JP 
Morgan Chase in Hong Kong. 
Enron is on the verge of bailing out of an almost completed $2.9 billion 
power project because of a decade-long dispute with the troubled Maharashtra 
State Electricity Board (MSEB) over pricing and unpaid bills. 
MSEB has fallen about six months behind in paying for electricity supplied by 
Dabhol Power Co, the Indian unit of Houston-based Enron. 
The utility said last month that it had repaid about $28.6 million of the 
$48.2 million outstanding. 
The board of Dabhol has authorised the management to stop selling power to 
MSEB if the dispute is not resolved. Local media reports earlier in May said 
Enron was pulling executives out of India and relocating them elsewhere. 
Dabhol has invoked payment guarantees issued by the state and federal 
governments, but neither has stepped forward to foot the bill. 
GOVERNMENT GUARANTEES 
Banks often demand sponsor or host government guarantees to lessen risk 
before financing energy projects, which have long lead times and high capital 
expenditure. 
Governments are keen to provide guarantees to attract foreign investment. 
Guarantees may cover shortfalls in production, default of customer payment or 
even changes in market conditions. 
But such guarantees do not always provide the desired safety net and analysts 
said the legal systems in many emerging nations are simply not efficient 
enough to back these agreements. 
Enron's experience in India highlighted the risks of power investment in 
emerging countries and the unpredictability of government guarantees, they 
said. 
"Guarantees like that are painful for companies and for polititicians they're 
even more so," said John Vautrain, vice president at Purvin & Gertz in 
Singapore. 
"If the call is substantial, it's going to be bad." 
Robert Booth, director of the Bardak Group in West Perth, Australia, was more 
pessimistic and reckoned some companies might take a lead from Enron and shy 
away from emerging Asian nations. 
"Investors will pull back from these countries until they see that there is a 
properly functioning legal system that gives them assurance if they have to 
call in a government guarantee," Booth said.

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


Saudi Won't Announce Winners Of Gas Projs Tue - Report

05/15/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

MANAMA, Bahrain -(Dow Jones)- Saudi Arabia's supreme petroleum council is 
expected to hold a meeting Tuesday evening, but it's unlikely to declare its 
choice of international oil companies to participate in downstream gas 
projects, Arabic al-Hayat newspaper reported. 
The newspaper quoted sources at the government's technical committee 
overseeing the proposed projects as saying that the committee hasn't 
completed its final report concerning the oil companies' offers.
"Studies and recommendations haven't been completed yet and they need some 
time in order to present the project at its final structure, attached with 
recommendations from the technical committee," the sources said, according to 
the newspaper. 
However, the oil council "might endorse some balances concerning the offers," 
the newspaper said but didn't elaborate further. 
Sources in Saudi Arabia have said the oil companies were expected to be 
notified soon on whether they have been selected to participate in the gas 
projects. 
Saudi Arabia invited international oil companies in October 1998 to 
participate in proposals for downstream gas projects and upstream gas 
enhancement. 
After a series of meetings between the negotiating committee and the oil 
companies in the past year, several companies were shortlisted for each 
project. 
The companies shortlisted for Core Venture 1, the $15 billion South Ghawar 
Area Development were Royal Dutch/Shell Group (RD), BP PLC (BP), Exxon Mobil 
Corp. (XOM), Chevron Corp. (CHV), Total Fina Elf S.A. (TOT) and ENI SpA (E). 
For Core Venture 2, the Red Sea Development, Enron Corp. (ENE) and Occidental 
Petroleum Corp. (OXY) are bidding jointly and Exxon Mobil, Total Fina Elf, 
Marathon Oil Canada Inc. (T.M), Shell and Conoco Inc. (COCA) were 
shortlisted. 
And for Core Venture 3, the Shaybah area, Total Fina Elf, Conoco, Phillips 
Petroleum (P), Enron and Occidental, Exxon Mobil, Shell and Marathon Oil were 
shortlisted. 
-By Abdulla Fardan, Dow Jones Newswires; 973-530758; 
abdullah.fardan@dowjones.com

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


MSEB refutes allegations by Enron, DPC
Girish Kuber

05/15/2001
The Economic Times
Copyright (C) 2001 The Economic Times; Source: World Reporter (TM)

MUMBAI 
THE MAHARASHTRA State Electricity Board on Monday in a letter to Enron 
refuted all allegations made against it by the company while invoking the 
political force majeure.
Enron-promoted Dabhol Power Company on April 9 had invoked the political 
force majeure clause. DPC had indicated it was not in a position to fulfil 
its contractual obligations to MSEB because of political circumstances beyond 
its control. 
MSEB in a reply on Monday denied Enron's allegation of 'political 
circumstances' and said there was no reason why it should have felt insecure. 
"Such a step was necessary under the Power Purchase Agreement and related 
security documents to notify the board of 'certain events and to enforce our 
rights'," DPC had said. However, according to MSEB, such a step by DPC was 
uncalled for. 
For DPC, invoking the force majeure clause was necessary as 'certain events 
occurred that are beyond the reasonable control of the affected party (DPC)'. 
MSEB has expressed surprise in a letter on Monday. 
The energy major had dispatched the notice to MSEB, as an affected party, 
which had been subjected to "concerted, deliberate and politically motivated 
actions of state government, the Government of India and the Board, which 
will have a material and adverse effect on DPC's ability to perform 
obligations under PPA". 
"Given the cumulative effect of these political actions, DPC determined that 
the political force majeure declaration is an appropriate mechanism for 
providing that notice, and that is an appropriate and necessary step in 
protecting DPC and its stakeholders' rights," the statement added. 
However, for MSEB this was 'yet another move' from Enron to avoid paying Rs 
402 crore penalty the MSEB has slapped on it for failing to supply 
electricity as per the agreement. 
MSEB, in today's letter, reiterated its suggestion to adjust December 2000 
and Januray 2001 bills, against the Rs 800 crore penalty it has slapped on 
Enron for not supplying electricity as per demand. 
MSEB has refused to pay DPC's December 2000 and January 2001 bills worth Rs 
213 crore.

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


Saudi Supreme Petrol Council meeting to decide on huge gas project bids

05/15/2001
Business Recorder
Copyright (C) 2001 Business Recorder; Source: World Reporter (TM)

RIYADH : Saudi Arabia's Supreme Petroleum Council (SPC) is holding meetings 
on bids by 12 foreign oil majors for three giant gas projects and should take 
a decision shortly, a top oil official said on Monday. "The SPC has been 
discussing recommendations by the negotiating committee about the bids, and 
the meetings will continues executive president of the committee Abdulrahman 
al-Suhaibani told AFP. 
"It is not clear yet when the discussions will be completed and wham a final 
decision will be issued," added Suhaibani, who expected it to be soon. The 
meetings began two weeks ago.
A senior foreign oil executive in the kingdom expected an answer to his 
firm's bid by the end of this week or the start of next week. 
"The SPC is holding a crucial meeting today (Monday) and tomorrow. bin were 
told we would get an answer to our proposals either this weekend or early 
next week," the executive told AFP. 
The negotiating committee made detailed recommendations after meeting with 
the representative of 12 international oil companies (IOCs) which are bidding 
for the three multi-billion projects, the executive said. 
The committee, comprising ministers who are also SPC members, is headed by 
Foreign Minister Prince Saud al-Faisal. 
The gas projects, which would be the first foreign investment 
in the kingdom's energy sector since nationalisation in 1961, are located in 
the South Ghawar field near Al-Hufuf in the Eastern Province, Shaybah in the 
Empty Quarter desert, and the northern Red Sea area. 
They cover 440,000 square kilometres (176,000 square miles), making it the 
world's largest area for hydrocarbon investment. 
US majors Enron and Occidental in a joint bid, as well as Chevron, 
Conocokilometres, ExxonMobil, Marathon, Phillips and Texaco have been 
shortlisted for the Saudi projects. Rounding out the list are European firms 
BP Amoco, Eni, Royal Dutch Shell and TotalFinaElf. 
ExxonMobil, Shell and TotalFinaElf are in the bidding for all three ventures. 
The investment involves gas exploration and production, setting up 
petrochemical industries and power and water desalination plants. 
The projects, called the natural gas initiative, are to be carried out 
simultaneously by consortia of two to three firms in cooperation with Aramco, 
the national oil company, on long-term basis for up to 30 years, the 
executive said. 
Aramco has been working to double the Saudi gas network's capacity from the 
current 3.5 billion cubic feet (105 million cubic metres) per day to seven 
billion cubic feet (210 million metres) daily in 2004. 
Saudi Arabia, which sits on top of the world's biggest oil reserves, has 
proven natural gas reserves of 220 trillion cubic feet (6.6 trillion cubic 
metres).-AFP

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