FYI news articles from Indian press.
---------------------- Forwarded by Sandeep Kohli/ENRON_DEVELOPMENT on 04/27/2001 08:24 AM ---------------------------


Nikita Varma
04/27/2001 07:51 AM
To:	Nikita Varma/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc:	 (bcc: Sandeep Kohli/ENRON_DEVELOPMENT)

Subject:	From The Enron India Newsdesk - April 27th newsclips



Friday Apr 27 2001, http://www.economictimes.com/today/cm03.htm
DPC board empowers MD to cancel MSEB contract


Friday Apr 27 2001,  http://www.economictimes.com/today/27comp11.htm
MSEB pays Rs 134cr under 'protest' to DPC


Friday, April 27, 001, http://www.businessstandard.com/today/economy4.asp?Menu=3
Enron India MD authorised to terminate PPA


Friday, April 27, 2001,http://www.financialexpress.com/fe20010427/top1.html
Foreign lenders slam brakes on disbursements to DPC , Sanjay Jog & Raghu Mohan
Global banks comfortable with Enron pull-out


Friday, April 27, 2001, http://www.indian-express.com/ie20010427/nat23.html
Enron: Dabhol chief gets powers to end deal with the MSEB


Friday, April 27, 2001, http://www.the-hindu.com/stories/0227000d.htm
Offer of renegotiation 'too late': Enron, By Mahesh Vijapurkar 


Friday ,27 April 2001, http://www.timesofindia.com/today/27home2.htm
Enron ready to pull out, but lenders say wait 


Friday, April 27, 2001, http://www.hindubusinessline.com/stories/142756dh.htm
DPC board authorises MD to issue PPA termination notice 


Friday, April 27, 2001, http://www.dailypioneer.com/secon2.asp?cat=story7&d=FRONT_PAGE
Enron testing Maharashtra's nerves, T N Raghunatha


Friday, April 27, 2001,http://www.telegraphindia.com/
ENRON SIGNAL TO SWITCH OFF DABHOL POWER 
 

Friday, April 27, 2001, http://www.thestatesman.org/page.news.php3?id=13026&type=Pageone&theme=A
Enron threatens to pull out


Friday, April 27, 2001, http://www.chalomumbai.com/asp/article.asp?cat_id=29&art_id=10006&cat_code=2F574841545F535F4F4E5F4D554D4241492F5441415A415F4B4841424152
'DPC may not wind up'


Friday, April 27, 2001, http://www.chalomumbai.com/asp/article.asp?cat_id=29&cat_code=2f574841545f535f4f4e5f4d554d4241492f5441415a415f4b4841424152&art_id=9953
Enron offers 'no comment' on renegotiation, H S Rao
 

 http://www.afternoondc.com/
'ENRON'S ON!' 
State govt. to renegotiate Dabhol Power Project , By Hubert Vaz 


THE ECONOMIC TIMES, Friday Apr 27 2001
DPC board empowers MD to cancel MSEB contract

THE ENRON power project crisis on Thursday deepened with the board of Dabhol Power Company authorising the management to issue a termination notice to the Maharashtra State Electricity Board even while international lenders to the project asked Enron to renegotiate power purchase agreement signed with the MSEB.
The decision to authorise managing director Neil McGregor to issue "notice of termination on the contract to sell 740 MW of power" was taken after the board prevented MSEB from voting on the ground that it was an interested party. The decision was taken with six votes in favour and the single opposition vote was cast by IDBI, sources said. 

According to reports, financial institutions such as ANZ Investment Bank, Credit Suisse First Boston, Citibank, ABN-Amro and the State Bank of India have on Wednesday advised Enron against terminating its PPA with MSEB. MSEB chairman Vinay Bansal, who with two other directors attended the meeting on Wednesday representing Maharashtra's 15 per cent stake in the near $3-billion project, said: "The Indian side told them that it would be unfortunate if Enron broke the contract." While Bansal declined comment on the board decision, the sources said the Indian side had expressed its interest to holds talks on the issue rather than terminating the project and there were possibilities of a fresh power purchase agreement between the company and the state. (PTI)


THE ECONOMIC TIMES, Friday Apr 27 2001
MSEB pays Rs 134cr under 'protest' to DPC

 DESPITE the threat of a possible termination notice hanging on its head, Maharashtra State Electricity Board on Thursday made a "protest payment" of Rs 134 crore disputed amount, towards March bill of Rs 146.64 crore to Dabhol. "We were ready with the payment on Wednesday itself, but DPC officials could not collect the cheque due to the statewide bandh", a senior MSEB official said. "We have disputed payment of Rs 12.64 crore and it would be now taken up at the disputes resolution forum, of which Enron India managing director K Wade Cline and Krishna Rao are members", MSEB sources said. 

Last week, DPC had dashed off a communication to the government and MSEB that it would not accept "protest payments" anymore. Cline had said the energy major shall treat such payments as an election to pay the sums, which MSEB in fact owed DPC in full and that the company would also not recognise the "purported protest or reservation". MSEB had paid a Rs 113.5 crore February bill in protest last month. On April 23 last, both domestic and international lenders of DPC had met in London and held exhaustive discussions the multinational's move to issue a termination notice to MSEB and state government. (PTI) 

BUSINESS STANDARD, Friday, April 27, 001
Enron India MD authorised to terminate PPA

The board of the Enron-promoted Dabhol Power Company (DPC), at its meeting in London on Wednesday, authorised the managing director of Enron India to issue a notice for terminating the power purchase agreement to the Maharashtra State Electricity Board and the state government. "The board has authorised Wade Cline to serve the termination notice. However, this does not mean that the termination notice will be served immediately. It is only an enabling provision and will be used only if the situation arises," a state government source told Business Standard from London. He said DPC was under pressure from its lenders. 
The DPC spokesperson here refused to comment on the issue. The hardening of the board's stand is in sharp contrast to the advice of DPC's lenders, who had warned Enron not to precipitate matters by issuing a termination notice. The lenders had arrived at a consensus that the termination notice need not be served at this stage. Serving of the notice requires a nod from the lenders, who have an exposure of about $2 billion in the project. Sources said given the lenders' strong opposition to termination of the contract, the Enron board's "enabling resolution" did not have much significance beyond conveying a hardening of its stand with regard to the current imbroglio. The Maharashtra Chief Minister had warned Enron not to scuttle the process of crisis resolution by issuing a termination notice. The state government is to nominate an expert group to renegotiate the terms of the Dabhol contract. 
Enron holds 65 per cent in DPC, while US-based GE and Bechtel hold 10 per cent each. The balance 15 per cent is held by MSEB through a special purpose vehicle, Maharashtra Power Development Corporation. The MSEB representatives were not allowed to vote at the meeting since they were an interested party. The IDBI representative protested against the board's decision. The meeting was attended by state energy secretary VM Lal. The meeting was held against the backdrop of a dispute between MSEB and DPC over payment of bills. 
After MSEB failed to pay Rs 102 crore towards the December 2000 bill, DPC invoked the state government's guarantee and then the Union government's counter guarantee. When payment of the Rs 127-crore January bill became overdue, DPC again invoked the state government's guarantee. MSEB retaliated on January 28, 2001 by slapping a Rs 401-crore penalty for non-supply of electricity at adequate levels. It demanded that DPC adjust the bills against this penalty. "This stand of MSEB was explained to DPC at the board meeting", a state government official said. The Centre also supported MSEB's stand and refused to honour the counter guarantee. The power company then invoked the political force majeure clause. A process of conciliation and arbitration between the Centre and DPC is currently on. 
THE FINANCIAL EXPRESS, Friday, April 27, 2001
Foreign lenders slam brakes on disbursements to DPC , Sanjay Jog & Raghu Mohan
Global banks comfortable with Enron pull-out
Lenders to the Dabhol Power Company (DPC) are a sharply divided lot. International lenders, in direct contrast to the stand taken by local ones led by the the Industrial Develoment Bank of India (IDBI), are categorical that additional assistance to DPC's phase-II will be held in abeyance despite the completion of 92 per cent of the project work.The stage is also set for a preliminary termination notice to be served by DPC to the Maharashtra State Electricity Board (MSEB) within the next four weeks.This follows the authorisation given to Enron India's managing director K Wade Cline and DPC president & CEO Neil McGregor to serve the termination notice, and transfer notices to MSEB, following Wednesday's DPC board meeting in London.
The essence of the message from the international lenders following the London meeting with DPC board is: Emotions do not work. Contractual obligations and payments have to be met. We are convinced that the MSEB has failed to meet its obligations. There is no point in Enron continuing with the project and the company should get out of it.The structuring of DPC's debt has created two classes of lenders. In phase-I, international lenders are covered by a sovereign guarantee while in phase-II, no lender is. However, all lenders have a parri passu charge, making attachment of assets a messy affair.
Sources in international banks were quick to point out that local lenders to phase-II of the project are worried that an awry DPC project will affect their interests more given that they have no security - other than assets - like a sovereign cover. "It was this desperation that made local lenders like IDBI slash the interest rates a few months back to 16.5 per cent from 21.5 per cent," a leading foreign banker pointed out.Three points that were made clear and stressed in no uncertain terms by international lenders were: a) there are contractual obligations b) MSEB was not punctual in its payments to DPC and c) MSEB adopted a confrontational position by slapping a Rs 401 crore rebate charge on DPC for misdeclaration and default on the availability of power.
While local lenders led by IDBI - with MSEB parroting the same - were of the view that the current situation is a temporary one, international lenders were steadfast that pulling out of the project is the only way out. This is despite the stance taken by IDBI and MSEB that authorisation for termination given to Mr Cline and Mr McGregor was not called for. International bankers pointed out that they will now have to look at the issue of charges and protection for their loans in the event of the power project being scrapped in its present form.The points of contention are: a) that phase-I of DPC is backed by a sovereign guarantee b) phase-II is not and c) to the extent that phase-II is covered by assets, cancellation of phase-II may see all assets - even those under phase-I - getting attached. Therefore, an examination on the segregation of assets under phase-I and phase-II is now warranted.
PTI adds: In a significant move, DPC board has empowered its management to sever power supply agreement with MSEB, a move that could inflict a financial liability of about Rs 2840 crore on the Centre. A decision to authorise DPC president Neil McGregor to issue a termination notice to MSEB for sale of power was taken by the board at its meeting on Wednesday. 
THE INDIAN EXPRESS, Friday, April 27, 2001
Enron: Dabhol chief gets powers to end deal with the MSEB

THE BOARD of Dabhol Power Company, a subsidiary of Houston-based Enron Corp, has decided to warn the Maharashtra State Electricity Board (MSEB) that it intends to pull the plug on its Guhagar-based project.In a board meeting held in London on Wednesday, the board decided to authorise DPC President and CEO Neil McGregor and Enron India's managing director K Wade Cline to serve a ''preliminary'' termination notice for sale of power to the MSEB within the next four weeks.The Dabhol project has been mired in disputes since MSEB began missing payments last year. MSEB owes Dabhol Power $48 million for power delivered in December and January. The payment ran into a dispute after MSEB slapped penalty notices of Rs 401 crore on DPC for its failure to supply power within three hours of the demand being placed.But MSEB has paid $24 million for February. And a payment of $31 million was made for March on Thursday.
The $3 billion Dabhol project is the largest foreign investment made in India to date. Issuing the preliminary termination notice could enable Dabhol to suspend deliveries as it negotiates payment disputes.While a preliminary termination notice is the first of three steps that could potentially lead to the abandonment of the project by Enron, analysts have described the decision as a ''procedural'' move consistent with DPC's negotiating strategy to recover overdue payments from the MSEB.
After the company issues the preliminary termination notice, step two would be an official termination notice, and step three would be a notice that the company is surrendering control of the project. If the project is terminated, the government of India will have to take a hit of $300 million besides paying bills of Rs 1,500 crore for the next one year to Enron as penalty. ''Our (Centre's) liability, if Dabhol power project is terminated, would be one year's electricity bill and a termination fee of $300 million,'' Power Secretary A K Basu said.''Contractually, the Centre will have to pay one year's electricity bill, totalling at present prices about Rs 1,400-1,500 crore, and take over DPC's debt, which stands at around $300 million, if the project was terminated,'' Basu said in Delhi. Dabhol Power is in the process of completing the second phase of the 2,184-megawatt power-plant project, which is 95 per cent through.
While the international lenders to the project are pressurising the company to get out of the project, Indian lenders, led by IDBI, are asking the company to reconsider its decision on its termination notice. During the meeting in London, MSEB which holds a 15 per cent stake in the project, had strongly opposed DPC's move to authorise Cline and McGregor to issue notices for termination.
MSEB Chairman Vinay Bansal and technical director Prem Paunikar - both directors on the DPC board - and the state principal secretary (energy) VM Lal, an invitee to the board, raised the issue at the board meeting in London. MSEB claimed that DPC was needlessly ''threatening'' to issue various arbitration notices and thereby interpreting the clauses of PPA in isolation.In recent weeks, Dabhol has raised the stakes in its spat with the MSEB, delivering a notice of political force majeure to Maharashtra - a step typically invoked to dissolve a contract in case of an emergency like a war, coup, or a similar radical political event. In this case, DPC's move was viewed as a threat to stop providing electricity.DPC has come under fire because of the relatively high cost of its power. Critics object to the company charging Rs 7.1 a kilowatt-hour for its power, compared with around Rs 1.5 a kilowatt-hour charged by other suppliers.
THE HINDU, Friday, April 27, 2001
Offer of renegotiation 'too late': Enron, By Mahesh Vijapurkar 
MUMBAI, APRIL 26. The Enron-sponsored Dabhol Power Company, which last night authorised its local management to issue a notice of termination of its Power Purchase Agreement (PPA) with the Maharashtra State Electricity Board, has decided to keep a stiff upper lip. This, in turn, has stoked speculation that the switching off of power from its Phase I plant was imminent, while in reality, a lengthy procedure has to be followed as prescribed within the PPA. 
As one source familiar with the PPA told The Hindu, ``it is not sudden death of the project'' and in all probability, the DPC, vexed with the developments, including sharp and pointed observations by the Godbole Committee, has chosen to only arm itself with a serious option. ``This would only eventually come into effect. It is not an overnight operation and a lot of legal work is involved''. Apparently, the DPC intends to do some arm-twisting. 
At the board of directors meeting in London, which Maharashtra was initially disinclined to attend but later used the forum to put across its contentions on the project, the DPC squarely told the MSEB nominees on the board that the offer of renegotiation had come rather ``too late''. It also said it did not see any room for optimism about the outcome. It did not, however, rule out the option of talks, thus underscoring the possibility that the decision to authorise termination was a new weapon. 
The Maharashtra Chief Minister, Mr. Vilasrao Deshmukh, had hoped that DPC would not take any ``harsh step'' which would cause lot of damage to the interests of both the independent power producer and the Government and today he expressed his dismay. In fact, the mandate of the team that went, on the strength of its stake in the DPC, was to put across the idea that negotiation was the requirement and not confrontation. 
Echo in LS 
The Enron issue also echoed in the Lok Sabha today where the Power Minister, Mr. Suresh Prabhu, said that scrapping of the agreement would cost the Centre Rs. 2,840 crores, whose liability in the project agreement was limited. The Centre's liability in case of termination is one year's electricity bill and a termination fee of $300 million. 
Blow to FIs 
The termination could prove to be a serious blow to the Indian Financial Institutions (FIs) which, under the leadership of the IDBI, were trying to convince the other lenders of the project against the notice. The exposure of Indian FIs in the project is understood to be not covered by any guarantee either of the Centre or the State. 

THE TIMES OF INDIA, Friday ,27 April 2001
Enron ready to pull out, but lenders say wait 

The Dabhol Power Company board, which met on Wednesday in London, authorised the company management to issue a termination notice to the Maharashtra State Electricity Board. The company, however, may not pull out of the project yet, considering its lenders, who met on Monday, opposed such a move and favoured renegotiations. Sources present during both the meetings said that though foreign lenders supported Enron on the termination issue, domestic financial institutions, led by the Industrial Development Bank of India, prevailed over the deliberations to oppose any such drastic move. Enron needs the lenders' consent to file a pre-termination notice for pulling out from the project. The decision to empower DPC chief Wade Cline to issue a termination notice was taken with six votes in favour against a single IDBI vote against such a move. 
Another significant development during the entire proceedings was that the financial institutions made it clear that further funding of Phase II of the project will depend on the Government of India assuring payment mechanisms. Institutions are yet to disburse about 30 per cent of the sanctioned package, which is crucial for completing the Phase II expansion project. ``The board has given powers to Wade Cline to issue a pre-termination notice. But the meeting quite unanimously felt the need of the hour is not to terminate the project but to initiate serious re-negotiation proceedings,'' said MSEB Chairman Vinay Bansal, who attended the board meeting. ``MSEB presented their views to the board members and it was understood by Enron which also included the Rs 401 crore penalty issue which is heading for arbitration proceedings. ``We have also made it clear that the tariff structure of Enron is quite high and a downward revision of tariffs is unavoidable," Bansal added. 
``They cannot issue a termination notice without our consent since our exposure in the project is quite large and the lenders should approve any plans in that direction,'' said a top banker who was present during the lenders' meet. ``There is a general consensus that the project must be completed and the proposal to terminate the PPA should be kept in abeyance,'' he added. The global arrangers for the DPC include ANZ Investment Bank, Credit Suisse First Boston, ABN-AMRO, Citibank and the State Bank of India, where all these parties conducted separate meetings with the company officials. However, some bankers said the company can file a termination notice even if one lender with a minimum 5 per cent exposure on the project favours such proceedings. 
Meanwhile, in a clear reversal of roles, Maharashtra Chief Minister Vilasrao Deshmukh said that the state government was not keen on terminating the PPA. ``We will ask them to refrain from taking any such harsh steps since that would be bad news for all of us, including DPC,'' Deshmukh said. Deshmukh was echoing Union Power Minister Suresh Prabhu's sentiments, who said that the government wanted an amicable settlement of the payment row. He, however, added that termination of the project would not hurt foreign investments, and dismissed warnings by analysts that winding up the $2.9 billion project would be a blow to India's efforts to woo foreign investors. 
The DPC has already slapped one conciliation notice on the Centre and three arbitration notices on the state government over non-payment of dues amounting to Rs 213 crore and interest towards the bills due for December 2000 and January 2001. Meanwhile, MSEB officials said in Mumbai that the March bills amounting to Rs 134 crore was paid on Thursday as protest payment, despite the dispute over the amount. 
When asked on the future course of action, Bansal said it was up to the DPC.

THE HINDU BUSINESSLINE, Friday, April 27, 2001
DPC board authorises MD to issue PPA termination notice 
THE board of directors of Dabhol Power Company (DPC) has authorised the Managing Director, Mr Neil McGregor, to issue the notice of intent to terminate its power purchase agreement (PPA) with the Maharashtra State Electricity Board (MSEB) ``at an appropriate time''. The decision was taken at a board meeting held in London yesterday. ``While MSEB, which is an `interested party', was not allowed to vote, it made a presentation clarifying its stand on the matter,'' a senior State Government official said. 
The resolution to authorise the management to issue the termination notice was carried by six votes to one. IDBI voted against the decision, the official said. The serving of the preliminary termination notice will lead to a six-month ``suspension period''. According to clause 17.8 of the Termination Procedure, of the PPA: ``Following the giving of a preliminary termination notice, the parties shall consult for a period of six months (or such longer period as they may agree) as to what step shall be taken with a view to mitigating the consequences of the relevant event having regard to all the circumstances...'' 
IDBI and State Bank of India, the principal Indian lenders, had earlier persuaded the overseas lenders to hold their consent to the termination notice for some more time. At least one lender has to consent for the company to serve termination notice. It is understood that overseas lenders are in favour of termination of the project and are prepared to consent. However, domestic lenders are worried about the security of their advances if the PPA is abandoned mid-way. 
According to institutional sources, Indian lenders are trying to get all the parties concerned to thrash out outstanding issues. The Maharashtra and Central Governments too are in favour of a conciliation. Mr Vilasrao Deshmukh, Chief Minister of Maharashtra, yesterday went on record that the State did not want the project terminated. Mr Yashwant Sinha, Union Finance Minister, is also understood to be of the same opinion. ``The DPC will now have to decide what is the `appropriate time' to serve the notice,'' the official said. MSEB pays Rs 134 crore: Meanwhile, MSEB has paid DPC Rs 134 crore towards its March 2001 bill. MSEB officials confirmed that the bill was paid `in protest'' today morning. ``They (DPC) had billed us for an amount of Rs 146 crore. We do not agree with some of the items included,'' a senior MSEB official said. 
THE PIONEER, Friday, April 27, 2001
Enron testing Maharashtra's nerves, T N Raghunatha
Dabhol Power Company (DPC) has begun to put fresh pressure on the Maharashtra State Electricity Board (MSEB), the Maharashtra State Government and the Centre for an early resolution to the prolonged dispute between them, if the DPC Board of Directors' decision to authorise its managing director to serve a contract termination notice to the MSEB is any indication.
The DPC Board, in its meeting in London on Wednesday, empowered the company management to sever its power supply agreement with MSEB, a move that could inflict a financial liability of Rs 2,840 crore on the Centre. The decision to authorise the DPC management to issue a termination notice to MSEB was taken by a vote of six to one after the Maharasthra Government representatives were prevented from voting on the ground of "interested party".
When contacted, the company's Mumbai-based spokesperson, Mr Jimmy Mogal, declined to comment on the reports about the decision taken by the DPC Board. "We have nothing to say on the reports emanating from London. We will express our views after a few days," he said. However, Maharashtra Chief Minister Vilasrao Deshmukh on Thursday termed the DPC board's decision as "unfortunate". "We have already requested the company not to take any harsh decision", Mr Deshmukh said in Mumbai. 
Official sources in the State Energy Ministry interpreted the DPC Board's decision as a pressure tactic employed by the Enron subsidiary to force the MSEB to clear the pending power bills without any further delay. Through its tough posture, the DPC wants to make its position stronger before it can formally agree for re-negotiations with the MSEB, the Centre and the State Government for cutting the price of power supplied by it to the State electricity board. The sources said that the DPC's reported decision to authorise its managing director to stop electricity supply to the MSEB did not mean that the Enron subsidiary would actually go ahead with the scrapping of the power contract with the MSEB.
"If anything, the DPC's reported decision is to mount additional pressure on the MSEB for clearance of pending power bills and put itself in a stronger position in settling its dispute with the MSEB. As part of its plan to arm itself with powers to break a contract in case situation goes beyond its control, the DPC had recently served a political force majeure to the MSEB, the Centre and the State Government," the sources said.Not surprisingly, the DPC's London decision comes on the heels of the Maharashtra Government's decision to set up a high-level committee, comprising representatives of the MSEB, the Centre and the State Government to re-negotiate with the Enron's subsidiary company for reducing the cost of power supplied to the State electricity board.Meanwhile, amidst the threat of a possible termination notice hanging on its head, the MSEB on Thursday made a "protest payment" of the Rs 134 crore disputed amount towards March bill of Rs 146.64 crore to DPC.
riday, April 27

THE TELEGRAPH, Friday, April 27, 2001

ENRON SIGNAL TO SWITCH OFF DABHOL POWER  

Enron today took the first decisive step out of the controversy-ridden Dabhol Power Company when it won an authorisation from the company's board to stop sale of power to Maharashtra State Electricity Board (MSEB). 
The meeting of the company, of which the Houston-based energy giant holds 65 per cent and the MSEB 15 per cent, was attended by state energy secretary V M Lal and MSEB technical director P Paunikar and it came days after its lenders discussed payment problems and a possible termination.The Centre's liability, if Enron decides to snap the agreement, will be a year's power bill and a termination fee of $ 300 million. However, the company will have to wait for six months from the day it serves the notice before it pulls the plug.The Centre shrugged off the move, saying there would not be any adverse effect on foreign investment in power if Enron walks out. "We do not see FDI inflows into the power sector being hit," power minister Suresh Prabhu said.MSEB officials said the ball is now in the court of DPC, which said its corporate policy did not allow it to comment on proceedings at board meetings. The decision coincided with a Rs 134-crore 'protest payment' by the cash-strapped power board as part of the March bill worth Rs 146.64 crore.
There was speculation that MSEB coughed up the amount to cool frayed tempers at Enron's hub in Houston, and because it was rattled by the sudden turn of events in the past few days during which the dispute had come to a head. MSEB officials brushed away the allusions, saying the cheque was ready on Wednesday but could not be handed over to DPC because of the state-wide bandh. "We have a disputed payment of Rs 12.64 crore, which will be taken up at the dispute-resolution forum," a board official said. Last week, DPC told the state government and MSEB it would no longer accept protest payments in a move to fortify its legal position. 
MSEB officials say Bechtel and General Electric, the other partners who hold around 20 per cent in DPC, are willing to go along with Enron Corp in terminating the deal but financial institutions such as IDBI are not game because it puts their loans at risk. Investments made by Indian institutions are not covered under the Centre's and state's counter-guarantees, unlike those made by international lenders.Maharashtra chief minister Vilasrao Deshmukh called Enron's decision unfortunate. "We had told state government officials attending the Enron board meeting to stop the company from winding up its operations in the state as it will harm both parties."
THE STATESMAN, Friday, April 27, 2001
Enron threatens to pull out
 
 The Enron crisis deepened with the Board of Directors of the Dabhol Power Company deciding to authorise the managing director, Mr K Wade Cline, to serve a notice of termination on the contract for the first phase of the $2.9 billion power project.The decision, which could lead to the cessation of Dabhol's power supply to the state, was taken at the meeting held yesterday in London according to reports quoting the chairman of the Maharashtra State Electricity Board, Mr Vinay Bansal. 
While DPC officials refuse to comment on anything, it is learnt that MSEB was itself prepared to serve a legal notice of termination just two days before the meeting.MSEB was said to have been dissuaded by the Nationalist Congress Party president, Mr Sharad Pawar, and union power minister Mr Suresh Prabhu, who had talks in New Delhi with the Maharashtra chief minister, Mr Vilasrao Deshmukh, and an MSEB delegation last Monday.
The state government has been served two arbitration notices while the Centre is ready to go for conciliation with the DPC for failing to honour its counter-guarantee.Further, the DPC has already slapped a notice of political force majeure which protects itself against undeserved claims in the event of exigencies that force it to take an extreme step.The union power minister, Mr Suresh Prabhu, contended in Delhi that since DPC contributed only 0.7 per cent of the total energy output of the country, its termination would not have such a phenomenal impact on the power situation. 
However, if terminations proceedings go through, Enron Corp, a 65 per cent share-holder in the Dabhol Power Company, would stand to net a hefty amount in damages. The union power secretary has been quoted as saying that termination of the DPC would cost the Centre Rs 1,800 crore, which is the total of one years' electricity bill and a termination fee of $300 million. According to an energy analyst, Mr Pradyumna Kaul, the total liability would not cross Rs 350 crore. However Mr Prabhu said in the Lok Sabha today that the that scrapping of the agreement would cost the Centre Rs 2,840 crore.It is learnt that on 20 April, Mr Deshmukh had given the go-ahead to the MSEB to prepare a legal notice to be issued to Enron during the meeting of the DPC's Board of Directors on Wednesday. At the meeting, the energy minister, Padamsinh Patil, energy secretary, Mr Vinay Mohan Lal and MSEB chairman Mr Vinay Bansal, were also present.The notice was prepared over the past weekend and taken by the delegation when they called on Mr Prabhu on 24 April. However, the politicians convinced them that Enron would not get tough, given its huge stake in the project, and that such a notice would not be necessary. The meeting thus ended with the decision to renegotiate the power tariff, with Enron's consent.
Among those present at the London meeting were Mr Lal, Mr Bansal and MSEB technical director, Mr P Paunikar, in their capacity as directors. However, they abstained from voting since they were deemed an interested party. The only vote to go against the decision was that of the IDBI which is also represented on the board, it is learnt.The chief minister, Mr Vilasrao Deshmukh, said the state was not in favour of terminating the project. This could mean that the latest manoeuvre to arm-twist the Indian authorities could achieve its immediate target of getting the arrears accumulated over the past three months cleared.The MSEB owes Enron Rs 146.64 crore for March 2001 and Rs 229 crore for December 2000 and January 2001.The Centre today put up a brave face on Enron's decision saying there would not be any adverse effect on foreign investment in power sector in the country, PTI reported from New Delhi.
"There will be no adverse impact as a result of any action by any domestic or foreign company. As far as we are concerned there will be no adverse impact on FDI in power sector," Power Minister Suresh Prabhu told reporters when asked about DPC's decision to authorise management to issue a termination notice to MSEB.Emphasising that there would be no fallout of such decision, Prabhu said after the meeting of the Cabinet Committee on Economic Affairs "we are expecting cooperation from many Scandinavian countries as well as European nations in the power sector."In fact not only the Power Minister but also the Prime Minister of Norway was here to inaugurate a seminar on power and he promised lot of cooperation in the sector."


MID DAY
'DPC may not wind up'
Maharashtra Chief Secretary V Ranganathan has said that though Neil McGregor, managing director of the Dabhol Power Corporation (DPC), has been given complete powers with regard to DPC's operations in the state, including the authority to wind up operations, it does not necessarily mean that McGregor will issue such a termination notice. McGregor was given the powers at a meeting of the DPC board in London on Wednesday. Ranganathan said that state officials, including Maharashtra State Electricity Board (MSEB) Chairman Vinay Bansal and Power Secretary V M Lal, have reported back to him about the meeting in London.
With regard to the state's failure to pay Enron, Ranganathan said, " Bills are prepared as per the Power Purchase Agreement (PPA) and DPC owes some money to us. Our people informed Enron officials about this.. In fact, there was no reason to give powers to the MD to slap a termination notice."In the London meeting, MSEB and Industrial Development Bank of India (IDBI) representatives insisted that the DPC must pay Rs 411 crore since it could not supply power whenever needed. 
Chief Minister Vilasrao Deshmukh has already termed as unfortunate the decision of the board of the Enron-promoted DPC to give McGregor powers to wind up operations. Deshmukh added, " We have already requested Enron not to take any harsh decision."Deshmukh had earlier said, " We have directed state Government officials attending the DPC board meeting to desist the energy company from winding up operations in the state, as it would be harmful to both of us."
Enron officials are keeping mum on the issue. McGregor said, " I am not going to give any comment."

MID DAY, April 27, 2001
Enron offers 'no comment' on renegotiation, H S Rao
A crucial meeting of the Board of Directors of the Dabhol Power Company (DPC), promoted by the US energy major Enron, was held here yesterday apparently to discuss fate of its $900-million power project in Maharashtra, but there was no official word on the Indian and state Governments' decision to renegotiate the contract. 
An Enron spokesman declined to divulge what transpired at the meeting, saying the issues discussed at the meeting were 'confidential' . " We have not received any direct communication. Unless we get it and evaluate the details, we have no comments to make," the spokesman said when asked about the proposed decision on re-negotiation of the project in which the Maharashtra State Electricity Board (MSEB) has 15 per cent stake.
Asked whether the Board had taken a decision on empowering DPC Managing Director Neil McGregor to wind up its operations in India, the spokesman said he had nothing to say on them. Enron has reportedly authorised Mcgregor to look at various options including selling the company's stake in DPC. Maharashtra Chief Minister Vilasrao Deshmukh said in Mumbai that the state Government would pay up the undisputed dues to the company. He said the Maharashtra government " is not in favour of terminating the 2184-MW project, but wanted an amicable solution to the imbroglio."
MID DAY, Friday, April 27, 2001,

Committee to renegotiate Enron deal
A committee to renegotiate the Power Purchase Agreement with the Dabhol Power Company will be appointed by this evening, Chief Minister Vilasrao Deshmukh said today. Addressing media persons after his meeting with the noted social reformer Anna Hazare at his official residence Varsha, Deshmukh said the committee would be formed by this evening or by tomorrow, at the most.He termed as unfortunate the Enron board decision empowering DPC chief Neil McGregor to serve a preliminary termination notice on the Maharashtra State Electricity Board and said the state was willing to negotiate the issue with power company.
" Renegotiations will be held as per the suggestions made by the Godbole committee and the center will also depute its representative on the renegotiating committee. We don't want to take any hasty decision," Deshmukh saidHe pointed that the only bone of contention with the DPC had been its expensive tariff and hoped that the issue would be resolved amicably.When pointed that the Enron board had taken a decision to serve the notice despite state s willingness to appoint a renegotiating committee, Chief Minister said it was unfortunate.
Earlier, in his meeting with Hazare, Deshmukh promised to make necessary amendments to the Right to Information law recently passed by the state so that the information was easily accessed by the common people. He also gave a patient hearing to Hazare on his complaints of corruption in various state departments and promised action against guilty after a thorough inquiry within three months.
 
AFTERNOON, APRIL 27, 2001
 'ENRON'S ON!' 
State govt. to renegotiate Dabhol Power Project , By Hubert Vaz 
The US power giant, Enron Power Corporation's willingness to wrap up the Dabhol Power Project and leave the shores may not actually materialise, though the Dabhol Power Company chief, Mr. Wade Cline, has been authorised to do so, since the lenders for the project would have a decisive say in the matter. 
Disclosing this, Chief Minister Vilasrao Deshmukh confirmed this morning that the state government would churn out a compromise formula by which the power project at Dabhol could be continued, and at the same time Enron did not feel slighted. "Enron has not yet conveyed to us about this decision. We are waiting for their letter," he said. When asked what sort of compromise the state government plans to forge, Mr. Deshmukh said, "Let our officers come back. After that we will decide a future course of action. But we are definitely going in for renegotiation of the project. It is very difficult to predict the outcome of Enron's decision but as of now the project is still on." When asked whether the project could be moved to another state, if wound up from Maharashtra, Mr. Deshmukh said, that was not possible as per the terms of the agreement between the US company and the state government. However, it was difficult for the project to move out of the state itself, he indicated. He also confirmed that both parties would face considerable losses if the project was terminated. 
The board of directors of the Dabhol Power Company, which met in London on Wednesday, decided to put an end to all controversies surrounding the project once and for all by empowering the DPC chief to terminate the project, if he deemed it fit. However, this decision, as of now, does not necessarily indicate the death knell for the project. The Enron project, which had been riddled with controversies right from its inception, had been a pretext for the political parties in the state to drag each other on the mat from time to time. The previous Sena-BJP government, which had been out to terminate the project, however, chose to continue with it following renegotiations with Enron's top visiting officials like Ms. Rebecca Mark. And, the Democratic Front government inherited the controversial project when the governments changed hands a year and a half ago. 
Meanwhile, State Energy Minister Dr. Padamsinh Patil, when contacted at the Osmanabad Circuit House, said the state government and the central government have decided to appoint a joint committee to renegotiate the project with Enron. "It is not easy for them to walk out of the project just like that. They will have to go in for litigation and this would prove costly for both sides," he said. In case the project is terminated, the government can still manage the power needs of the state, though it would be a bit tough job, he added.