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8 Concerns Get Saudi Gas Project Role
The New York Times, 05/19/01 8 Western Firms Picked for Huge Saudi Gas Project Los Angeles Times, 05/19/01 2 Houston-based companies win Saudi gas prize / Kingdom inviting 8 Western firms back in Houston Chronicle, 05/19/01 Utility withdraws offer of aid Associated Press Newswires, 05/19/01 Racicot lobbying for energy giant Enron Associated Press Newswires, 05/19/01 INDIA: SBI says Enron move not to hit lenders. Reuters English News Service, 05/19/01 Enron threatens to stop electricity supply to Indian state Associated Press Newswires, 05/19/01 Gas bonanza in Saudi for BP and Shell: Eight companies are given stakes in pounds 15 billion bid to develop South Ghawar reserves The Daily Telegraph, 05/19/01 Western oil companies invited back by Saudis The Independent - London, 05/19/01 DPC issues PTN to MSEB, Deshmukh terms it as "improper step" Press Trust of India Limited, 05/19/01 India's largest US investor Enron issues pull-out warning Agence France-Presse, 05/19/01 Lenders to Dabhol to vote on termination notice The Economic Times, 05/19/01 Business/Financial Desk; Section C 8 Concerns Get Saudi Gas Project Role AP 05/19/2001 The New York Times Page 2, Column 5 c. 2001 New York Times Company DALLAS, May 18 -- The Exxon Mobil Corporation and Royal Dutch/Shell led a group of eight oil companies that will take part in a $25 billion gas development program in Saudi Arabia, the country's biggest opening of its oil and gas industry to outsiders since the 1970's. The Western companies will help Saudi Arabia convert its utilities, which now burn oil, to natural gas. This would free more crude oil for export. The other companies selected are BP P.L.C., TotalFinaElf S.A., Conoco Inc., the Phillips Petroleum Company, the Occidental Petroleum Corporation and the Enron Corporation. Saudi Arabia's government-owned energy company, Saudi Aramco, will be an equity owner in the projects. Exxon Mobil, based in Irving, Tex., the world's largest publicly traded oil company; Shell; BP; and Phillips were picked to participate in the biggest of the projects, a $15 billion development in the South Ghawar region, according to the official Saudi Press Agency. The lead company was not announced. Exxon Mobil was also selected to lead a smaller Red Sea project that involves Enron and Occidental. Exxon Mobil said the combined investment in both projects would total $20 billion. Shell, TotalFinaElf and Conoco will help develop gas at Shaybah in southeast Saudi Arabia. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Business; Financial Desk 8 Western Firms Picked for Huge Saudi Gas Project From Times Wire Services 05/19/2001 Los Angeles Times Home Edition C-2 Copyright 2001 / The Times Mirror Company Exxon Mobil Corp. and Royal Dutch/Shell Group led a group of eight Western companies named Friday that will take part in a $25-billion natural gas development program in Saudi Arabia, the kingdom's biggest opening of its energy industry to outsiders since the 1970s. The companies, including Occidental Petroleum Corp. of Los Angeles, will help Saudi Arabia convert oil-burning utilities to natural gas, which would free up more of the kingdom's crude oil for export. The other companies selected were BP of Britain, Total Fina Elf of France and American energy firms Conoco Inc., Phillips Petroleum Co. and Enron Corp., the official Saudi news agency said. For Saudi Arabia, the program would create jobs and spur an economy saddled with a 15% unemployment rate. For its business partners, the initiative offers benefits in the short and long term. In particular, analysts noted, the Western companies would have a lead should the kingdom open access to its crude oil reserves, the world's largest. "I don't think it's going to be spectacularly lucrative, but there are other pressing reasons to be there," said Julian Lee, an analyst at the Center for Global Energy Studies in London. "It's part of a long-term play by the oil companies, [which] want ultimately to get access again to Saudi crude." Saudi Arabia took over its oil fields in 1975 in the wake of tensions arising from the Arab oil embargo against the West that began in 1973. The awards announced Friday are the culmination of three years of talks and lobbying by the companies with the Saudis, whose natural gas reserves are the world's fifth-largest. Shares of all five American companies rose in trading Friday on the New York Stock Exchange. Exxon Mobil gained $1.47 to close at $90.20, Phillips rose $1.65 to $67.52, and Enron added $2.70 to $54.90. Occidental rose 53 cents to $31.08, and Conoco climbed $1.25 to $33.05, both 52-week highs. * Associated Press and Bloomberg News were used in compiling this report. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. A 2 Houston-based companies win Saudi gas prize / Kingdom inviting 8 Western firms back in MICHAEL DAVIS Staff 05/19/2001 Houston Chronicle 3 STAR 1 (Copyright 2001) Conoco, Shell and Enron were among eight major energy companies that have won a place in Saudi Arabia's coveted natural gas initiative, a sweeping $25 billion project to exploit the country's vast gas reserves. Announced Friday, the project will be the first time in decades that foreign oil companies will be allowed to be involved in exploration in the kingdom. The project will produce huge amounts of natural gas, which the Saudis have not historically used because their economy was built around oil exports. This also represents an industrial development project on a gigantic scale. In the past, Saudi Arabia has not had the capability to capitalize on its natural gas reserves. The gas initiative began two years ago when oil prices were just starting to rebound and the kingdom was looking for new ways to expand its economy. In addition to drilling for gas, the three ventures will also finance and build industrial facilities such as power plants and water desalination plants to use the gas. That is expected to create much needed jobs in the country, which suffers from a high unemployment rate. All of the companies vying for the Saudi projects have been tight- lipped about their proposals and the negotiations, which have lasted two years. Even after learning they were winners of this multibillion- dollar prize, the most any company had to say was that it was pleased with the decision. A formal signing of memoranda of understanding for the projects will take place in the next few weeks. Royal Dutch/Shell Group, Houston-based Conoco and Total Fina Elf were picked for Saudi Arabia's Shaybah natural gas project, also known as Core Venture 3, the official Saudi Press Agency reported. Exxon Mobil Corp., Occidental Petroleum Corp. and Houston-based Enron Corp. were chosen for the Red Sea project, or Core Venture 2, the agency said. Exxon, Shell, BP and Phillips Petroleum Co. won the rights to the most coveted project, Core Venture 1, the South Ghawar project, the largest of the three. There were three companies who just missed the cut. Chevron, Italy's ENI and Houston-based Marathon Oil Corp. They had all made the kingdom's original shortlist of 11 potential participants. Chevron had the oldest ties of any of the companies, because it initially discovered oil in Saudi Arabia at the Ghawar Field, the largest oil field in the world. "I don't think the results were that surprising. Clearly the Saudis wanted to go with the two largest integrated oil companies in the world," said Michael Young, oil analyst with Gerard Klauer Mattison in New York. Chevron's rejection "was a bit surprising given its history there," he said. Core Ventures 1 and 2 could result in a total estimated industry investment of more than $20 billion, according to an estimate provided by Exxon Mobil. Core Venture 1 will expand Saudi Arabia's power, water desalination, petrochemical and gas system. It will also provide for exploration and development of the kingdom's gas resources in the Northern Rub' Al-Khali region. The project includes field production and gathering facilities, gas processing and fractionation plants to recover and separate liquids from existing and new gas production, gas and liquids pipelines and investment in power, petrochemicals and water desalination. Core Venture 2 includes development of discovered gas resources in northwest Saudi Arabia, power and desalination facilities in that region and exploration in the Northern Red Sea with the opportunity for additional investment in chemicals, power and desalination facilities on the West Coast depending on exploration success. Exxon Mobil is the largest foreign investor in Saudi Arabia, with stakes in two petrochemical and a refinery joint venture. Exxon Mobil will be the lead operator on Core Venture 2. The company expects a percentage return "in the mid- to high teens" from its investment, Chief Executive Lee Raymond said in an interview with Bloomberg News. The possibility this could allow the company to get back into Saudi oil fields "was not a consideration," he said. "The crown prince told me 2 1/2 years ago that this was a gas project, not an oil project," Raymond said. "I've known him for a long time and I take him at his word. It would be foolish to spend money now on these projects in the hope of getting oil in 20 years." Leaders for Core Ventures 1 and 2 were not revealed. The Saudi press agency quoted Saudi Foreign Minister Saud al-Faisal as saying a ministerial committee will announce that decision later. Details about Core Venture 3, as well as estimated investment, were not available. Archie Dunham, Conoco's chairman, said at the company's annual meeting last week that he would be "very disappointed," if Conoco was not named the lead operator for Core Venture 3. Conoco issued a statement saying it was pleased to be included in Core Venture 3. Dunham said Conoco maintains a high interest in expanding its presence in the Middle East beyond Dubai and its growing presence in Syria. "We are prepared to quickly pursue other opportunities that fit our strategy and capital discipline requirements," he said in the statement. Alex Parsons, Enron spokesman in London, declined to comment on Enron's participation in the project. "We are unable at this stage to discuss our involvement because of commercial confidentiality," Parsons said. Mug: 1. Conoco exec Archie Dunham will be "disappointed" if his firm doesn't have a lead role in deal (color); Map: 2. Locations of Saudi Arabia Core Venture 1 and 2 (b/w, p. 19) Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Utility withdraws offer of aid 05/19/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. LAS VEGAS (AP) - Sierra Pacific Resources, the holding company for the state's two largest electric utilities, has withdrawn its offer to contribute $5 million to help low-income residents pay their power bills. Sierra Pacific made that offer in January when it asked state regulators for a record $311 million rate increase. But now Sierra, the parent of Nevada Power Co., no longer sees a need for the $5 million outlay, spokeswoman Sonya Headen said Friday. Headen explained that Assembly Bill 349, sponsored by Las Vegas Democrat David Goldwater, would provide funds to help low-income people pay their bills. But a state official was displeased with the utility company's about-face. "The greed of this company never ceases to amaze me," said Tim Hay, state consumer advocate. Hay noted that the $311 million rate increase for Nevada Power and a sister company in Reno, Sierra Pacific Power Co., set a new record. About two-thirds of the $311 million was sought for Nevada Power. To withdraw the $5 million offer, he said, "is totally inequitable and irresponsible." Hay compared the $5 million to $7.5 million that the company paid to Enron Corp. of Houston to terminate Sierra's agreement to acquire Portland General Electric of Oregon on April 26. Had Sierra waited 10 days, the merger agreement would have terminated automatically without any payment to Enron, Hay said. "They can afford to do what they want to do (with Enron), but they're a little too greedy to pay money to assist low-income ratepayers," Hay said. Gov. Kenny Guinn budgeted $5 million to subsidize the bills of the poor for one year, but it's possible that money won't be available. Jack Finn, the governor's press secretary, said late Friday he didn't have current information on the status of the $5 million budget item. The governor has trimmed his budget since learning of anticipated state revenue shortfalls. Goldwater's bill passed the Assembly by a 28-11 vote, but the Republican-dominated Senate has not yet acted on the measure. His bill provides for a 40-cent assessment on the typical residents' power bill to raise $10 million for subsidizing the utility bills of poor people and for weatherizing their homes to cut energy consumption. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Racicot lobbying for energy giant Enron 05/19/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. HELENA (AP) - Former Gov. Marc Racicot is lobbying for Enron Corp. as part of its effort to fight possible government controls on energy prices, The Wall Street Journal reported. Racicot was Montana's Republican governor from 1993 until January. Four years ago he signed into law a bill for deregulation of the electric industry in the state. He recently took a job in the Washington, D.C., office of Bracewell & Patterson, a Texas law firm. Racicot could not immediately be reached for comment Saturday about his work on behalf of Enron. The Texas company is the nation's largest trader of gas and electricity. The Wall Street Journal reported Friday that the company has been lobbying hard for open access to electricity transmission systems across the country, as well as fighting any attempts to delay or roll back deregulation through measures such as caps on energy prices. Enron and eight other energy companies have pledged $50,000 each to pay for a media and lobbying campaign countering anti-deregulation initiatives, according to the newspaper. States where deregulation is being reconsidered include Oregon. Lawmakers there passed a deregulation law in 1999, and the Oregon Legislature now is considering whether to repeal or delay the implementation. Two weeks ago Racicot met with Oregon's governor, Democrat John Kitzhaber, who supports caps on wholesale prices for electricity. The men talked about "the energy situation in general in the West," said Bob Applegate, Kitzhaber's press secretary. Sky-high prices for power in the West have been blamed for a number of cutbacks by industries unable to pay steep prices for electricity and still make a profit. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA: SBI says Enron move not to hit lenders. 05/19/2001 Reuters English News Service (C) Reuters Limited 2001. BOMBAY, May 19 (Reuters) - State Bank of India (SBI), , India's largest commercial bank, on Saturday dispelled fears a preliminary notice by the Indian unit of U.S. energy giant Enron Corp to cancel a contract to sell power would affect the country's lenders. "We are definitely concerned. But there is no reason to panic as there is an arrangement to recover our loans," SBI chairman Janaki Ballabh, told Reuters. On Saturday, Enron's Dabhol Power Company (DPC) moved closer to walking out of its giant power plant in India by issuing a preliminary notice of termination. "After months of working with the Maharashtra State Electricity Board (MSEB), and the governments of Maharahstra and India to find a solution, it is apparent that they are unwilling to honour their offtake commitments for the entire power station," a statement by DPC said. The move immediately sparked concerns that Indian lenders, whose loans are not covered by a federal government guarantee, would suffer the most. Local banks have provided $1.4 billion of the total debt of around $2.0 billion for the 2,184 MW project covering two phases. Ballabh said even if Enron walked out, lenders will not lose as their loans are secured by the assets of the plant, which is nearing full completion. "The project is more or less ready and running," he added. Other Indian lenders to the project are Industrial Development Bank of India , Industrial Finance Corporation of India , Canara Bank and ICICI Ltd . Ballabh said Dabhol Power Company had only issued a preliminary notice and has not actually walked out of the project. "There is a procedure for dealing with this. There is a six months cooling off period. We are hopeful that negotiations will resolve the issue," he added. ($1=46.93 indian rupees). Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron threatens to stop electricity supply to Indian state By RAMOLA TALWAR BADAM Associated Press Writer 05/19/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. BOMBAY, India (AP) - The Indian subsidiary of American energy giant Enron Corp. on Saturday delivered a notice to a state-run utility that it would stop supplying electricity if the latter continued to default on payments. "After months of working with Maharashtra State Electricity Board, the government of Maharashtra state and the government of India to find solutions, it is apparent that (they) are unwilling to honor their offtake commitments," company spokesman Jimmy Mogul said in a statement. Mogul, however, added: "We are still open to constructive discussion of solutions." Enron Corp.'s dlrs 3 billion power project in western India is the largest foreign investment in India. The dispute centers on the state-run utility's stand that the outstanding December and January bills should be offset against a fine of 4 billion rupees (dlrs 85.31 million) it imposed on Enron for non-supply of power during that period. Enron does not accept the fine imposed by the Maharashtra State Electricity Board and demands that the state utility pay dlrs 48 million in electricity bills for December and January. A six-month reconciliation period will now follow. Maharashtra state Chief Minister Vilasrao Deshmukh criticized Enron's threat to cut off electricity to the state-run utility and offered to resolve the issue through talks. "There should be a right kind of atmosphere to talks. The MSEB has fulfilled all its contractual obligations. We are not defaulters as we have cleared all Enron dues," Deshmukh told reporters in Bombay. Maharashtra state has been complaining about the high cost of power from Enron. The price of electricity has almost quadrupled from the 1.8 rupees (four cents) per unit agreed upon six years ago to 7 rupees (15 cents) now. Enron has a 65 percent stake in Dabhol Power Corporation and is the project's largest shareholder. Other shareholders include the Maharashtra State Electricity Board with 15 percent and General Electric Co. and Bechtel Enterprises with 10 percent each. "We have continued to meet our contractual obligations, including enforcing our rights under contracts and taking various disputes to dispute resolution process. This will continue," Mogul of Dabhol Power Corporation said in a statement. (rtb, aks/ss) Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Gas bonanza in Saudi for BP and Shell: Eight companies are given stakes in pounds 15 billion bid to develop South Ghawar reserves Sophie Barker 05/19/2001 The Daily Telegraph Copyright (C) 2001 The Daily Telegraph; Source: World Reporter (TM) BP AND Shell were among eight oil giants chosen by Saudi Arabia yesterday to begin developing its multi-billion-dollar gas reserves - the biggest opportunity for foreign investment in the Kingdom since the 1980s. Both London-listed companies are members of the consortium chosen to develop the centrepiece of the initial $25 billion scheme, the $15 billion South Ghawar development, said Saudi Arabian foreign minister Prince Saud al-Faisal. Sir John Browne, BP chief executive, said he "looked forward to working closely with the Kingdom in a long-term partnership". The western oil majors are banking on the three gas projects providing a foothold for larger and more lucrative oil and gas developments. Exxon Mobil, the world's largest oil company, and America's Phillips Petroleum were also given stakes in the South Ghawar project. Saudi Arabia has yet to decide which of the four will lead the scheme. Of the two smaller gas projects on offer, Shell was named as one of the partners in the Shaybah development in the empty quarter of south-eastern Saudi Arabia, alongside France's TotalFinaElf and America's Conoco. Exxon Mobil secured the leading role in the third project, on the Red Sea coast, while two fellow United States oil giants, Enron and Occidental, were named as partners. Prince Saud said a ministerial committee would decide which companies would lead the South Ghawar and Shaybah developments later, although industry sources speculated that Exxon Mobil and Shell would win the biggest roles. Three shortlisted companies, the Italian group ENI and Chevron and Marathon of the US, did not win shares in the projects, although Prince Saud said he hoped they would have further opportunities. Oil companies have spent the last two years competing to develop the three gas projects, as a first step towards taking part in future Saudi Arabian oil and gas developments. As the world's largest oil producer, with the fifth-largest gas reserves, Saudi Arabia is keen to develop its gas reserves for its own domestic use as an alternative to oil. Output from the three projects will be for internal consumption only, helping to plug the growing gap between Saudi Arabia's electricity demand and its generation capacity, which will have to treble to 70,000 megawatts by 2020. The eight western companies will sign a formal memorandum of understanding with Saudi Arabia soon. Although the structure of the contracts is not known, the state-owned oil company Saudi Aramco is expected to control the projects, with 100pc of the equity but none of the costs. Analysts described the three gas projects as a gamble that Saudi Arabia would reopen its crude oil fields to western companies. They warned that the gas projects would not be commercially viable at present oil prices. One said: "They have all pitched quite aggressively because they think this is a precursor to a longer-term end game. But in the meantime, with a 15pc return on investment, it only becomes attractive with an oil price of $10 a barrel." London's benchmark Brent crude oil contract soared to a four-month high of $28.95 a barrel yesterday on fresh fears of tight gasoline supplies in the United States. BP and Shell shares rose 10 1/2 and 15 to 625p and 615p respectively. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Business Western oil companies invited back by Saudis Saeed Shah 05/19/2001 The Independent - London FOREIGN 19 (Copyright 2001 Independent Newspapers (UK) Limited) WESTERN ENERGY companies, expelled from Saudi Arabia in the 1970s, were yesterday invited back to take part in a $25bn (pounds 17.5bn) gas exploration and production programme. In the first opportunity to participate in upstream Saudi projects for 25 years, several of the world's major energy companies were awarded roles in three big schemes on offer. Exxon, Shell, BP and Phillips were given stakes in the biggest of the projects, the $15bn development in South Ghawar, known as core venture one. Exxon also secured the leading role in core venture two, on the Red Sea coast, with Enron and Occidental taking smaller shares. Shell, TotalFinaElf and Conoco won stakes in core venture three, for gas development at Shaybah in the Empty Quarter of south-east Saudi Arabia. Sir John Browne, chief executive of BP, said: "We are delighted to have been selected for a very significant project for both BP and Saudi Arabia and look forward to working closely with the kingdom in a long- term partnership." During the 1970s and early 1980s, the Saudi oil industry was transformed from one controlled by the US majors - Chevron, Mobil, Texaco and Exxon, through their ownership of the local operator, Aramco - into a government- owned business. Aramco became Saudi Aramco, with decisions taken directly by the royal family. Yesterday, some of these same companies were asked back, but there is no suggestion that oil will again be opened up to foreigners soon. The main loser is Chevron, an investor in Saudi petrochemicals, which failed to gain stake in any of the three new developments. Texaco, in the throes of a merger with Chevron, withdrew in January. The agreement relates solely to gas, which has been overlooked and underexplored in a country whose economy is dominated by its massive oil reserves. A formal signing of memorandums of understanding will take place in the next few weeks. Manouchehr Takin, of London's Centre of Global Energy Studies, said the liberalisation move would have met opposition from elements in the Saudi government, as well as Saudi Aramco, which wanted to exploit gas itself: "There are people in government who were in favour of foreign companies, to break the [Saudi Aramco] monopoly, providing a comparator, investment and know-how. Governments across the world have realised that national companies have management and efficiency shortcomings." Saudi Crown Prince Abdullah initially invited major oil companies to return to the kingdom in October 1998, at a time of low oil prices. To the surprise of some, the country has stuck by the policy, even through the current oil price boom. Saudi gas is reckoned to be at least the fourth- largest reserve in the world. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. DPC issues PTN to MSEB, Deshmukh terms it as "improper step" 05/19/2001 Press Trust of India Limited © 2001 PTI Ltd. Mumbai, May 19 (PTI) The curtain finally seems to be falling over the western Indian state of Maharashtra's most controversial and ambitious 2,184 mw power project with Enron's Dabhol Power Company (DPC) issuing a preliminary termination notice (PTN) to its partner, Maharashtra State Electricity Board (MSEB). After six months of allegations and counter allegations of non-adherence and violation of the Power Purchase Agreement (PPA) of the USD three billion project in Dabhol, DPC's move did not much surprise the state government, but chief minister of Maharashtra Vilasrao Deshmukh termed the decision as an "improper step". "It is not proper to issue a PTN when the renegotiations aimed at bringing down the power tariff are on", he said adding that legal advise would be taken to decide upon the future course for solving the Enron imbroglio. Deshmukh said "exorbitant power tariff" was the only core issue and it could be resolved through discussions alone. On the other hand, in a faxed statement DPC said "it had no choice but to issue the PTN, given MSEB, state and federal government's failure to meet their contractual obligations". "Even though it was necessary to take this step, DPC is still open to constructive discussions on the solutions", the US energy major said. DPC alleged that "it was apparent that MSEB and the state are unwilling to honour their offtake commitments for the entire power station". Many state government officials termed the development as a "hasty decision" as the state government appointed Godbole Rengotiations panel had already commenced talks with DPC. Interestingly, DPC continues to maintain that its May 11 meeting with the panel was a mere "courtesy call". In its statement, it categorically stated that MSEB, the federal Government and state (Maharashtra) should come up with a specific proposal for purchasing DPC's power, "which will form the basis for future discussions, and not the Godbole committee report" DPC is also upset with the federal government over the absence of the latter's nominee at the May 11 meeting. "Although this date was known several days in advance, federal government did not even bother to send their representative", it said. Last week, federal Power Minister Suresh Prabhu had said India's National Thermal Power Corporation would not buy DPC's "costly" power. The officials regard the above statement as "mere passing the buck tactic" and have been doubting the federal government's intentions over sharing Maharashtra's problems. Meanwhile, the most taken aback due to DPC's sudden decision are the Indian financial institutions, whose exposure in the entire project runs to more than Rs 70 billion, as they have signed the counter-guarantee payable to their foreign counterparts in case of default by DPC. Terming the move as "a hurried decision", the FIs said the inevitable has happened and DPC has gone ahead despite the London meeting" The Enron Virodhi Andolan (Anti Enron Movement) welcomed the move, saying "we see a beginning to the end of Enron crisis" and Janata Dal (Secular) demanded scrapping of the project. (THROUGH ASIA PULSE) 19-05 2001 Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. India's largest US investor Enron issues pull-out warning 05/19/2001 Agence France-Presse (Copyright 2001) NEW DELHI, May 19 (AFP) - US-based Enron Power Corp's Dabhol Power Company on Saturday issued a warning notice threatening to terminate an electricity supply contract with India's Maharashtra state. The "preliminarly termination notice" effectively gives six months to the state to sort out disputes over a power purchase pact with US-based Enron Corp., that has become mired in controversy. The Enron-backed Dabhol Power Co. (DPC) is building a three- billion-dollar two-part power plant in the western state -- the single largest US investment project in India. "Dabhol Power Company has issued a preliminary termination notice under the Power Purchase Agreement (PPA)," a company statement said. "This initiates the process of terminating the PPA with Maharashtra State Electricity Board (MSEB). "After months of working with the MSEB, the Government of Maharashtra state and Government of India to find solutions, it is apparent that MSEB and Government of Maharashtra are unwilling to honour their offtake commitments for the entire power station." The power station is being erected at the port town of Dabhol, 200 kilometres (125 miles) south of the state capital, Bombay. Payments for electricity have been guaranteed by the state and federal governments. Part one of the plant began generating power in May 1999, but the project has run into snags, with the Maharashtra state government arguing it could not afford the high electricity bills. The state and federal governments last month decided to set up a panel to renegotiate the power purchase agreement. "We have continued to meet our contractual obligations, including enforcing our rights under contracts and taking various disputes to the dispute resolution process," the company said Saturday. Early in April, DPC served the state electricity board a notice of political "force majeure", which is a legal manoeuvre that enables a party to break a contract in the case of events beyond its control. The Dabhol project has had a turbulent ride since intial contracts were signed in 1992. Allegations of corruption and high costs led to the scrapping of the contract in 1995, but it was re-negotiated the same year. In February a state government panel recommended fresh re- negotiations to bring down the tariffs and charged Enron with inflating costs. bm/kma Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Lenders to Dabhol to vote on termination notice Our Bureau 05/19/2001 The Economic Times Copyright (C) 2001 The Economic Times; Source: World Reporter (TM) MUMBAI INSTITUTIONAL lenders to the Dabhol Power Company on Friday agreed that the final decision on the issue of a pre-termination notice would be taken through a vote in writing instead of a voice vote as earlier planned. A written vote would enable representatives to decide after taking up the issue with their respective headquarters, but would delay the results until next Tuesday. The Indian and foreign lenders on Friday attended a conference call with US energy major Enron, the promoters of Dabhol Power Company, on whether the company should issue a PTN to the Maharashtra State Electricity Board. Sources said the meeting was attended by the lenders to Phases I and II of project. "Discussion over the conference call continued for three successive days, and, finally, it was decided that each lender will express its decision in writing after careful deliberation," said sources. The lenders to the 2,144-mw power company are divided on the issue and unless the majority of the lenders agrees, DPC cannot go ahead with issuing a PTN to MSEB. Enron is keen on issuing PTN to MSEB following defaults in payments for a number of months. Although Indian lenders are a majority both in terms of funded amount and number or participants, the voting rights are so framed that the rights of each investor is protected and that large lenders do not end up dominating the voting proceedings. Indian lenders to the project are firm on the view that DPC should not issue a PTN to MSEB considering that the government has set up the Godbole Committee to renegotiate the deal. The Godbole panel is due to meet next on May 23. Enron officials will also be present in the meeting. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.
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