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Brazil Scrambles for More Energy The New York Times, 04/06/2001 World Watch The Wall Street Journal, 04/06/2001 Dabhol notice: Govt has till Monday to respond Business Standard, 04/06/2001 Houston-Based Energy Company's Broadband Division Pares 250 from Work Force KRTBN Knight-Ridder Tribune, 04/06/2001 Chelmsford, Mass., Telecom Network Company Cuts Staff, Earnings Forecast KRTBN Knight-Ridder Tribune, 04/06/2001 UK: Auto-sector unlikely to boost 2001 metal demand. Reuters English News Service, 04/06/2001 Business/Financial Desk; Section W Brazil Scrambles for More Energy By JENNIFER L. RICH 04/06/2001 The New York Times Page 1, Column 3 c. 2001 New York Times Company SAO PAULO, Brazil, April 5 -- Though nightly newscasts show cars floating down flood-prone streets here, residents are hoping for more rain -- at least 20 percent more than normal for this time of year, to be precise. That is how much the operators of Brazil's electricity grid say needs to fall to ensure that hydroelectric plants will continue to run at full capacity, averting the need for energy rationing, like the recent rolling blackouts in California, in at least part of Brazil later in the year. Here, as elsewhere across the globe, the struggle to deregulate has been coupled with soaring demand for power. As the Brazilian government seeks other energy sources, formulates a rationing plan and encourages consumers to voluntarily cut back energy use, companies --especially those in power-hungry industries -- are scrambling for ways to make sure their electricity needs will be met. And independent local and foreign power developers, like EnergyWorks, based in Landover, Md., are hoping to be of service, offering to construct minipower plants on the companies' premises. ''A lot of companies have been calling us in the last two weeks to see if it is possible to invest in this type of project,'' said Nelson Cardoso de Oliveira, business development manager for EnergyWorks, a unit of the electric utility Iberdrola S.A. of Spain. For the last few years, experts have warned of an impending energy crisis in Brazil, as increasing industrialization has caused the demand for energy to outpace supply by about 20 percent. The government's three-year-old effort to attract more investors through the privatization of most of the country's power grid has had a slow start. Local companies have been hindered by a lack of financing. And uncertainties in the newly deregulated power market over such things as the pricing of electricity have stymied grid-expansion plans by the private enterprises, including Enron, that bought up the former state-owned companies. Even the completion last year of a natural gas pipeline from Bolivia has been slow to stimulate investments in thermoelectric power, a move that was meant to reduce the country's near-total dependence on hydroelectric power. Only 15 of the 49 thermoelectric plants that the government focused on almost two years ago in its emergency power plan seem close to coming on line, in the next year or so. With rainfall missing major reservoirs and a shortage of transmission lines preventing excess power that does exist from moving among regions, the government says that the power situation in Brazil will be touch-and-go at least until 2003. So some of the country's biggest power-intensive companies are taking matters into their own hands, hoping to ensure a constant power supply with their own natural-gas-fired generators. Among those that have recently done so are Cia. Siderurgica Nacional, a steel maker, and Globo Comunicacoes e Participacoes, parent of the Rio de Janeiro daily newspaper O Globo. So have two rival breweries: Cia. Cervejarias Kaiser, owned by the Coca-Cola Company, its Brazilian bottlers and Heineken; and the maker of Brahma beer, Cia. de Bebidas das Americas, known as AmBev. Plants are planned for the Brazilian units of the American-based multinationals Corn Products International and International Paper. Rudi Anvari, director of Engineering and Technology at Corn Products Brazil, said the company's decision was based on the ''need to count on a reliable and flexible source of energy.'' In a study of power use in the state of Sao Paulo, the state's secretary of energy found that companies produced 14 percent of the energy they consumed in 2000, up from 5 percent in 1994. In some cases, the excess power from these company plants can be sold to the national grid. Jayme de Hollanda, general director of the National Institute for Energy Efficiency, a nonprofit advocacy group, said that this so-called cogenerated power should account for about 15 percent of the country's electricity supply by 2010. ''The volumes that we are dealing with don't provide a complete solution for the country, but they can certainly resolve localized problems,'' said Ivan Marimon, the sales manager at Guascor do Brasil, a joint venture controlled by Grupo Guascor of Spain, which builds small-scale power plants for hospitals. Companies said that part of the appeal of small power projects was that they required less time to build than a public power project -- sometimes as little as six months. And the cost, at about $6 million for a small 5-megawatt plant, could be just as cost effective for some companies as buying electricity from the national grid, especially since electricity prices were expected to increase significantly in the next several years. Some private power concerns, including EnergyWorks, even finance the projects outright. But for a project to be viable for financiers and builders, companies need to agree to buy the electricity for 15 to 20 years. That is a daunting proposition for Brazilians, who have been made shy of long-term commitments by years of economic turmoil. Part of the doubt has been caused by exchange rate worries. Unlike natural gas prices, which are charged in dollars, electricity prices are fixed by the government in local currency. Indeed, private power plants are clearly not for everyone. ''For most companies,'' said Pio Gavazzi, director of infrastructure at the Federation of Industries of the State of Sao Paulo, a trade group, a solution ''could just be a matter of renegotiating existing electricity contracts or installing more energy efficient parts in the factory.'' Photo: Brazilian companies and some overseas concerns are searching for more energy sources to make sure their electricity needs will be met. This EnergyWorks power plant was built for the Kaiser brewery in Pacatuba. (EnergyWorks do Brazil Ltd.) copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. International World Watch Compiled by David I. Oyama 04/06/2001 The Wall Street Journal A11 (Copyright © 2001, Dow Jones & Company, Inc.) ASIA/PACIFIC China Cracks Down On Foreign Investors In Cable Networks China's telecommunications regulator threatened to seize assets in a move to reinforce a ban on foreign investment in domestic telecommunications networks. The move, announced on the Ministry of Information Industry's Web site, follows widespread links between local cable-television operators and companies seeking to use those networks to offer lucrative services such as high-speed Internet access. A crackdown on the practice could threaten the business operations of some Hong Kong-listed companies that have invested in China's cable networks, usually with the tacit approval of local governments. The ministry's notice said foreign companies, including Hong Kong and Macau concerns, can't invest in telecom networks before China's expected entry into the World Trade Organization. The notice requires foreign investors in telecom networks to report to the ministry and "voluntarily rectify" the investments. Local governments and companies that own fiber-optic networks are also required to report their holdings within 30 days. The notice exempts companies with a basic license for telecommunications services, including state-controlled China Telecommunications, China Mobile Communications and China Unicom. UPS to Open Asian Hub in Philippines United Parcel Service said it plans to open a hub in the Philippines to handle deliveries within Asia. The Atlanta-based company said it hasn't decided how large the facility will be, but "some limited operations" are expected to begin by year's end. The hub is likely to be located at Clark International Airport, a former U.S. Air Force base. UPS said the facility should improve delivery times in the region because jet freighters from there can reach all major Asian cities in fewer than four hours. It plans to keep its existing cargo hub at Taipei's airport in Taiwan for trans-Pacific operations. UPS, which began direct flights between the U.S. and China on Sunday, can't fly between Taiwan and China because of the political stalemate between Beijing and Taipei. Indonesian Sports-Shoe Exports Decline Indonesia's sports-shoe exports to the U.S. have fallen by 10% since December because of the U.S. economic slowdown, putting thousands of people out of work as companies such as Nike, Reebok and Adidas cut production orders, a local industry-group official said. More than 300,000 Indonesians are employed in sports-shoe factories, and exports last year totaled $2 billion. Companies have also cut orders because of fears that Indonesia's political instability could disrupt output, he said. BRIEFLY: -- Honda Motor plans to begin producing motorcycles in Asia outside Japan within two years for sale in Japan, its president said. He said lower labor costs would allow Honda to aim at reducing domestic prices of its 50-cc-engine bike to less than 100,000 yen ($800), from 140,000-150,000 yen now. -- Dabhol Power, an Indian unit of U.S. power company Enron, issued a notice of arbitration to India's government to try to recover, at the Court of Arbitration in London, 1.02 billion rupees ($21.9 million) it says it is owed for supplying power to the Maharashtra State Electricity Board. -- Indian investigators have concluded that the crash of a jet operated by Alliance Air, a unit of state-run Indian Airlines, that killed 61 people last July was the fault of the pilots of the Boeing 737-200 aircraft in making their approach to Patna airport. Taiwan's president, Chen Shui-bian, and the Dalai Lama, the exiled Tibetan spiritual leader, met in Taipei, in a session that marked their common interests and mutual differences with China's government. --- EUROPE France Telecom's Access Offer Rejected France's telecommunications regulator said it again rejected France Telecom's offer for the unbundling of the country's so-called local loop, and has ordered the company to submit a new proposal by Thursday. Implementation of the local-loop unbundling, which came into force Jan. 1, has been delayed because of high prices set by France Telecom for access to local exchanges by rival telecommunications operators. The regulator said some of the fees announced by France Telecom remain too high and need to be reduced further. Rival operators have complained repeatedly that the former French telephone monopoly is erecting barriers that prevent them from access to the local loop. EU Vote Backs Livestock Vaccinations The European Parliament voted overwhelmingly to ask European Union countries to consider introducing wider vaccination programs to stem the spread of foot-and-mouth disease. Although not binding, the vote will add to pressure on EU members that have resisted calls for all but very limited immunization programs against the virus, which sickens cloven-hoof animals. Opposition to vaccinations has centered on potential trade losses. EU countries, notably Britain, where more than 1,000 farms have been infected in six weeks, have largely stuck to a policy of restricting livestock movements and killing animals at risk of spreading the virus. RWE Drops Bid for Spain's Cantabrico German utility conglomerate RWE pulled out of the bidding for Spain's Hidroelectrica del Cantabrico, paving the way for a negotiated end to the yearlong takeover battle for the smallest of Spain's four power companies. A joint bid of 27.30 euros ($24.61) a share from Ferroatlantica, a unit of Spain's Villar Mir group, and German utility Energie Baden-Wuerttemberg had trumped RWE's bid of 26 euros a share. RWE withdrew from the bidding war after Cantabrico's board yesterday approved the Ferroatlantica offer. That leaves just Electricidade de Portugal, the 30% state-controlled utility, in the running for Cantabrico. EdP holds 35% of Cantabrico, which will force Ferroatlantica to negotiate for control. BRIEFLY: -- L'Oreal's chairman said he is confident the French cosmetics maker can maintain sales growth this year, after the company reported first-quarter sales rose 12.7% from a year earlier to 3.4 billion euros ($3.07 billion). "My confidence goes beyond the current year," he told analysts. -- Swiss-Swedish engineering and technology company ABB plans to list its American depositary shares on the New York Stock Exchange today, despite the volatile market and a sharp decline in its stock price earlier this week in Swiss trading. -- Kenya's respected central-bank governor, Micah Cheserem, was abruptly dismissed this week by President Daniel arap Moi, in a move that could cripple the country's ailing economic-reform program. He was replaced by Nahashon Ngigi Nyagah. --- THE AMERICAS Some Canadian Cigarette Taxes Raised Canada's federal government said it is immediately raising the taxes on cigarettes by four Canadian dollars (US$2.54) a carton in the provinces of New Brunswick, Nova Scotia, Prince Edward Island, Quebec and Ontario, where cigarette taxes were lowered a few years ago. The government is also increasing the federal excise tax on each carton of cigarettes across Canada by C$1, and will allocate an additional C$480 million over five years to its antismoking campaign. Canada lowered cigarette taxes across eastern Canada sharply a few years ago after widespread smuggling from the U.S., where cigarettes were much cheaper. The initiatives are aimed at discouraging smoking among youths, government officials said. Brazil Posts Unexpected Rise in Output Brazil's industrial production in February rose by a surprising 1.5% from a year earlier, even though the month had three fewer working days than in 2000 because the nationwide Carnival festivities fell in February this year instead of March. Output also rose 0.8% from January, boosted in part by an 8.7% rise in production of capital goods, the government said. Canada Propane Merger to Be Reviewed Canada's Federal Court of Appeal ordered the country's Competition Tribunal to reconsider the proposed merger of propane distributors Superior Propane and ICG Propane, Superior said. The tribunal ruled last August that the merger could proceed, but Canada's Competition Bureau appealed the decision. Court Rules Chavez Term Extends to 2007 Venezuela's Supreme Court ruled that President Hugo Chavez should stay in power until January 2007, a decision that effectively allows Mr. Chavez to extend what began as a five-year term to eight years, local media reported. The court ruled that under a new constitution, "a transition period" and fresh elections last July, which Mr. Chavez won handily, he didn't officially begin his current term until January 2001. Supreme Court officials weren't available to comment. Mr. Chavez could conceivably remain in power until 2013 because the new constitution allows for re-election to a new term. The ruling is likely to spur Mr. Chavez's critics, who say he is trying to impose authoritarian rule. BRIEFLY: -- Ecuador's government asked the International Monetary Fund to extend the expiration of its $304 million standby-credit agreement to June 30 from April 18. -- Free-market reform has brought prosperity to Brazil but hasn't narrowed the gap between rich and poor. According to a report by Brazil's national statistics institute, average per-capita income rose 30% between 1992 and 1999 to 525 reals ($245) a month. But the average income of the richest 10% of all Brazilians remained 19 times greater than that of the poorest 40%. Dabhol notice: Govt has till Monday to respond Santosh Tiwary NEW DELHI 04/06/2001 Business Standard 2 Copyright © Business Standard With little time left to respond to the arbitration notice served on it by the Dabhol Power Company, the Union finance ministry has asked the law ministry and the Maharashtra government to advise the Centre on the counter-moves to be made. The Enron-promoted company had issued a notice of conciliation and arbitration for the non-payment of the December bill of MSEB of Rs 102 crore, which had the state government as well as the Centre's counter-guarantee. DPC has informed the Centre that it has to respond by 3.00 pm on Monday. Maharashtra government sources said, "Thursday and Friday are holidays on account of Moharrum and Mahavir Jayanti respectively. We will be able to work on the notice only on Saturday. The Centre too will be able to take action only on Monday as Saturday and Sunday are holidays." Finance ministry sources said that the law ministry had earlier informed the government that there was a case for Maharashtra seeking adjustment of "availability penalty" from DPC against the outstanding bills and the Centre was expected to fight it out in the international court of arbitration. They further said that the Centre will respond to the notice well in time. Sources also said that the Centre was contemplating the options through which a long-term solution to the payment wrangle could be achieved. The finance ministry was also firming up on its suggestion of the possibilities of a re-negotiation of the counter-guarantee for a discussion in the Cabinet, they pointed out. The Centre had made it clear earlier that it was interested in finding a long-term solution to the problem by not paying the December bill for which the GoI counter-guarantee was invoked by the DPC, till the penalty issue taken up by the MSEB was settled. Houston-Based Energy Company's Broadband Division Pares 250 from Work Force Tom Fowler 04/06/2001 KRTBN Knight-Ridder Tribune Business News: Houston Chronicle - Texas Copyright (C) 2001 KRTBN Knight Ridder Tribune Business News; Source: World Reporter (TM) Enron Broadband Services has eliminated up to 250 positions in recent weeks, a reflection of changes in the high-tech market and a consolidation of operations in the company. Many of the employees have found work elsewhere with parent company Enron Corp., said Chief Executive Officer Ken Rice, but the move brings the number of Enron Broadband employees from as many as 1,200 in recent months to about 900. Many of the job cuts came when Enron Broadband, a division of energy giant Enron Corp., finished building out the 18,000-mile fiber optic network that it uses to buy and sell Internet bandwidth, Rice said. "We had a number of people working on that, but now that it's in place we needed to redeploy them elsewhere," Rice said. Consolidating operations from outlying Enron Broadband offices, such as Portland, Ore., to Houston, also accounts for some of the lost positions, as well as slowing demand for a PC-based streaming media product the company developed, Rice said. It's not unusual for Enron to move several hundred employees to different locations and divisions around the country every year to account for changes in the market, Rice said. The company employs about 15,000 people. "It's just a part of the way we do business," he said. Enron Broadband is still growing and has posted more than a dozen new broadband-related jobs on its Web site since March 20. Enron officials have shied away from calling the eliminated jobs "layoffs." When word of the job cuts first surfaced at the end of March, a company spokesman used the term "redeployed" to describe the action. Many employees were offered the opportunity to find other jobs in Enron, but those who did not find new jobs or accept other positions in the company had few other options than leaving. That saved the company from actually firing workers, which could have required it to report the actions to the Texas Workforce Commission. Enron Broadband Services has attracted a lot of attention in the past year for pioneering a previously unheard of notion -- treating access to the biggest Internet data lines as a fluid commodity that could be bought and sold. The group was created following Enron's 1997 acquisition of Portland General Electric, a small Oregon utility company that was also in the process of building its own fiber optic network. Enron used that as a starting point to build its network, which now has access to dozens of other global networks. The company buys time and access to those networks and sells it to end-users who want to send large amounts of data over the Internet for things such as broadcasts of concerts and meetings or more mundane tasks like exchanging business data between two different offices of a company. The company uses "pooling points," about 25 data switching hubs it owns around the world, to open and close connections with other networks around the world to effect those trades. The company is also building a platform to deliver broadband content to homes and businesses, such as movies and games. The cornerstone of that content was originally a 20-year contract with Blockbuster Video that would have combined that company's movie industry clout with Enron's technology to bring video-on-demand to homes. Enron canceled that deal in March, however, when Blockbuster couldn't deliver the quantity or quality of movies Enron wanted, Rice said. "We're working directly with the studios, broadcasters and other producers to get content for that ourselves," Rice said. The company announced a deal with a gaming firm to let customers order and play a variety of video games through the Web shortly after the Blockbuster deal fell through, but Wall Street quickly punished Enron's stock for the news. Combined with word of the job shuffling on March 21, the company's stock dropped more than 8 percent in a single day and has continued to sag. Since early March the stock lost more than 31 percent of its value, going from about $74 to as low as $51, but closed up $1.98 on Thursday at $55.70. Carol Coale, a senior analyst with Prudential Securities, said the market already made adjustments for the reshuffling of jobs at EBS and reacted to the dropping price of bandwidth. "The balance of the drop has been in reaction to the premium multiple they were getting for their technology in general," Coale said. "What would make the stock go back up is if technology as a whole goes back up." Chelmsford, Mass., Telecom Network Company Cuts Staff, Earnings Forecast Peter J. Howe 04/06/2001 KRTBN Knight-Ridder Tribune Business News: The Boston Globe - Massachusetts Copyright (C) 2001 KRTBN Knight Ridder Tribune Business News; Source: World Reporter (TM) Sycamore Networks, the Chelmsford optical networking company that once dreamed of rivaling Lucent Technologies and Nortel Networks, yesterday said it will lay off 140 workers. It also slashed its earnings forecasts. Facing the same imploding market for telecommunications gear that has battered Lucent, Nortel, and companies across the telecom industry, Sycamore said its revenue for the quarter ending April 28 is likely to come in at a stunning $100 million below analyst forecasts, or $50 million to $60 million. That is only one-third of the last quarter's sales. Instead of earning 5 cents a share as it did last quarter, Sycamore forecast a loss of 16 to 19 cents per share, heavily driven by up to $150 million in one-time charges for firing workers, writing off inventory, and other expenses. "This [13 percent] reduction in staff is a difficult step to take, but we believe it is a necessary one," Sycamore president Daniel E. Smith said in an analysts' conference call last evening. Sycamore said the layoffs will occur over the next three weeks and would not comment on severance packages. Sycamore cited the same set of factors that have led Wall Street to punish telecom stocks it adored just a year ago: Carriers are abruptly slowing down or abandoning spending on network upgrades as they struggle to make profits on their huge investments so far and try to determine how bad and how long the U.S. economic slowdown will be. Sycamore also said it has faced problems from an unnamed supplier in getting enough components to ship expected volumes of its high-end SN 16000 optical switching device this quarter, but hopes to have it worked out by May or June. Sycamore chief financial officer Frances M. Jewels said the company will not generate net cash from operations "for the next several quarters," but is in a fair position to ride out the slowdown. Sycamore last month reported just under $975 million in cash and short-term securities, plus another $400 million in long-term liquid assets. That should be ample to cover its typical payroll, research, and operating expenses of about $20 million a month. Jewels and Smith said that despite the collapse in revenue, the company does not want to cut back so deeply on research and sales that it will hurt its chances of resuming sales growth. "The question is when, not if, service providers will return to investing in their infrastructure," Smith said. Sycamore recently bought a roughly 100-acre parcel of land in Tyngsborough where it plans to build a new campus consolidating its far-flung Chelmsford offices. "Those plans are still proceeding, albeit at a much more modest pace," Sycamore spokesman Richard Williams said last night. Sycamore would not say which customers have cut back or dropped spending plans, but noted that it is well known Williams Communications accounts for more than half of its revenue and that Williams has said it will slow down capital expenditures. Sycamore said it recently turned down a sale to a customer who was demanding "vendor financing," or buying gear on credit. It said two customers with which it had made such deals had drawn down only $50 million of $200 million in authorized credit. Many analysts have said Sycamore sorely needs to branch out from its customer base of about a dozen emerging carriers like Williams, 360 Networks, and Enron Broadband to land a marquee name like AT&T, SBC, or Verizon. Smith said Sycamore is getting "positive feedback" from trials at big-name U.S. and foreign carriers of that ilk, but gave no indication any sales deals are imminent. Sycamore shares, which have collapsed from highs of more than $190 last year, had risen $1.41 to $9.06 in Nasdaq Stock Market action before trading was stopped before the news announcement. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. UK: Auto-sector unlikely to boost 2001 metal demand. 04/06/2001 Reuters English News Service (C) Reuters Limited 2001. LONDON, April 6 (Reuters) - Transport sector end-use is unlikely to provide a substantial boost to base metal demand in the coming year, UBS Warburg/Enron Metals said in their LME weekly metal report on Friday. Depending on the metal, end-use by the transport sector makes up a large proportion of overall demand for most of the base metals complex. Only in tin does it appear to be less than ten percent of total demand, it said. "The bulk of the transport demand is from the motor vehicles industry," UBS Warburg economist, Warren Oliver said in the report. Aluminium is also used in the aerospace sector while nickel is utilised in a wide range of transport applications, the report added. North America, Japan and Western Europe account for around 70 percent of world auto production, although developing economies are begining to play an important role. USB Warburg auto equity research team estimates show despite five percent increases in global auto production for 1999 and 2000, reaching 57.29 million units last year, production is likely to stagnate or even decrease in 2001. "UBS Warburg forecasts 2001 global production of 57.06 million units, a decline of 0.4 percent from 2000." Wide variations in regional production for 2001 are expected, the report said. "Of the large OECD producers, the U.S. is likely to show a substantial decline, Japan a small decline and Western Europe a small increase," it said. U.S. production, which was above the long term trend, is expected to fall backwards, because of production cut backs by the 'Big Three' carmakers. "While other producers in North America are increasing production, seemingly confident in winning market share, this is swamped by cutbacks by GM , Ford , and Chrysler DE)," the report said. Elsewhere, Japanese output has been decreasing during the 1990s. Annual average output will show little change in 2001 and stay close to the trend line over the past two decades. In western Europe, production levels are above trend estimates and USB Warburg predicts production in this area is likely to grow enough to remain so. U.S CAR SALES HOLDING UP, GERMANY FALLING Car sales in the U.S have been strong so far this year despite overall weakness of the American economy, the report said. Preliminary estimates show March sales of just over 17 million units, above the typical range of Wall Street estimates of 16.3-16.9 million. "Indeed, in each of the three months of the first quarter, U.S sales have surpassed consensus estimates." "While we expect a deterioration of sales performance in coming months. it is true that car sales have held up better than expected." But car sales for the first two months of the year in Germany, which accounts for around a quarter of the European market, are down five percent year-on-year. The rebound in German unemployment is one sign that consumer spending could disappoint in coming months and autos could be particularly at risk. Declining demand from the auto sector poses a clear risk, it added. So although car sales have been better than expected in such markets as the U.S, there is still concern the transport sector may not substantially boost base metal demand over the coming year. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.
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