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Enron Mail |
Enron's Dispute With Indian State Over Power Bills Takes New Turn
The Wall Street Journal, 04/10/01 E.ON and Powergen Form a Superpower --- Deal Will Create World's Second-Largest Utility --- It Also Marks Europe's First Big Leap Into U.S. Market The Wall Street Journal Europe, 04/10/01 American, TWA Close Deal The Washington Post, 04/10/01 Govt to seek conciliation with Enron unit on Maharashtra power issue: Sinha AFX News, 04/10/01 INDIA: India govt says to seek conciliation with Enron. Reuters English News Service, 04/10/01 India: Finance minister on telecom, textiles policy, Enron issue BBC Monitoring, 04/10/01 India: 'Failed business model' for Dabhol Business Line (The Hindu), 04/10/01 State seeks more power from Central Grid The Times of India, 04/10/01 Board picks California firm to build and run water plant Houston Chronicle, 04/10/01 ASIA-PACIFIC, AFRICA & MIDDLE EAST: Enron threat to withdraw from India Financial Times; Apr 10, 2001 International Enron's Dispute With Indian State Over Power Bills Takes New Turn By Daniel Pearl Staff Reporter of The Wall Street Journal 04/10/2001 The Wall Street Journal A15 (Copyright © 2001, Dow Jones & Company, Inc.) BOMBAY, India -- Enron Corp.'s Indian power project has given the state of Maharashtra notice amounting to a threat to cut off electricity, raising the stakes in a dispute over bills from India's first big private power plant. The Enron-controlled Dabhol Power Co. delivered a notice of political force majeure to the Indian state, saying recent government actions could harm the company's ability to "perform obligations." A political force majeure is typically used to dissolve a contract after a war, a coup, or a similar radical event. In this case, the declaration may be a pressure tactic, as the state government moves to renegotiate a five-year-old contract for the plant's second phase. A spokesman for Dabhol, in which Bechtel Group Inc. and General Electric Co. are junior shareholders, said yesterday that the notice was an effort to protect the $3 billion project's lenders, who "have expressed concern" about difficulties getting payments. He declined to elaborate. The cash-strapped Maharashtra State Electricity Board, Dabhol's only customer, has failed to make payments since December. The federal government has guaranteed the payments. But the government has withheld two months' worth, a total of $48 million, citing a claim against the gas-fired plant for taking two hours longer than promised to restart after shutdowns. The Dabhol spokesman said the Indian government agreed yesterday to send the payment dispute to a mediation panel. Vinay Bansal, chairman of the state electricity board, said he disagrees with the force majeure declaration. Mr. Bansal said Dabhol's notice pointed to recent statements by Maharashtra's top official questioning the need for the project's second phase. It also cited pronouncements by the federal government that it wouldn't pay until the shutdown dispute is resolved. He said the notice cited the state government's creation of a panel to review, and possibly renegotiate, the Dabhol contract. The panel is scheduled to release its conclusions on Dabhol today. The notice from Dabhol didn't say what the power company might do. Cutting off power would have limited effect. The board has already reduced purchases from Dabhol to a minimum, letting the 740-megawatt plant produce at 30% of capacity. The board blames Dabhol's high rates for the reduction, saying it must buy from cheaper sources first. Enron says rates would fall if the plant produced at 90% capacity, as envisioned when the first-phase contract was reached in 1993. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. E.ON and Powergen Form a Superpower --- Deal Will Create World's Second-Largest Utility --- It Also Marks Europe's First Big Leap Into U.S. Market By Vanessa Fuhrmans and Marc Champion Staff Reporters 04/10/2001 The Wall Street Journal Europe 1 (Copyright © 2001, Dow Jones & Company, Inc.) E.ON AG unveiled plans to take over Powergen PLC for 8.2 billion euros in cash and assume 7.1 billion euros in debt, a deal that would create the world's second-largest electricity-service provider and strike one of the boldest moves yet to consolidate Europe's newly deregulated power industry. E.ON said it would offer Powergen shareholders 765 pence (12.18 euros) per share -- an 8.4% premium to last week's closing share price -- valuing the U.K. utility at 8.2 billion euros. In addition, E.ON would take on roughly 7.1 billion euros in debt from Powergen's acquisition of Kentucky-based LG&E Energy Corp. The deal is the latest in a recent string of mergers and acquisitions to roil Europe's energy sector; E.ON itself was formed in late 1999 from the merger of German utility giants Veba AG and Viag AG. But the acquisition of Powergen would go further, creating the world's second-largest utility, after state-owned Electricite de France, in terms of electricity sales volume. It also marks the first big leap by a continental European utility into the U.S., the world's biggest power market, via LG&E. Monday, Powergen shares rose 1.9% in London to 719.5 pence, while E.ON shares jumped 5.2% to 54.45 euros in Frankfurt. Analysts cautioned that while the deal looks good on paper, carrying it out could prove difficult. E.ON still has to find buyers and reasonable prices for businesses with a total market value of more than 15 billion euros. And expanding in the U.S., where prices for utilities are on the rise and the regulatory environment is tough, also won't be easy. "It will be very easy to get their fingers burned," said Peter Atherton, analyst at Schroder Salomon Smith Barney. "This is a deal that makes sense, but it carries a large execution risk." The Kentucky utility, LG&E, is only the first step in E.ON's broader U.S. expansion plans, E.ON Chief Executive Ulrich Hartmann said. The German power giant will have a war chest of between 30 billion euros and 45 billion euros, depending how quickly it sells some of its nonenergy businesses. Much of it, Mr. Hartmann said, would go toward spreading further into more industrialized parts of the Midwest, which makes up one-third of the U.S. electricity market. "Our goal is to achieve a leading position in the United States," said Mr. Hartmann, who will remain chief executive of the enlarged E.ON and become chairman of Powergen. Powergen Chief Executive Nick Baldwin will continue to lead the U.K. utility as a unit of E.ON. The deal also will step up E.ON's plans to shed other assets, including major subsidiaries such as Degussa AG, a specialty chemicals maker, logistics company Stinnes AG, and real estate unit Viterra. E.ON and Powergen first disclosed they were in advanced takeover talks nearly four months ago. But negotiations snagged on concerns that the acquisition would run afoul of strict ownership laws in the U.S. that allow only utilities to operate other utilities. Authorities have instead viewed E.ON -- which derives half of its market capitalization from activities such as oil, chemicals and even electronics -- as a conglomerate. E.ON already plans to sell some of those businesses as part of a wider restructuring. On Monday, Mr. Hartmann pledged to sell all of them within the next three to five years. E.ON plans to make a formal offer for Powergen early next year, once it obtains all the regulatory approvals in the U.S., U.K. and European Union, and complete the deal by the spring of 2002. Like other European utilities, E.ON has been prowling for new acquisitions abroad as growing competition and lower electricity prices have cut into revenues in its home market. Acquiring Powergen would give E.ON instant access to two markets that present more near-term opportunities than elsewhere in Europe. Prices being asked for companies in Spain were far too high, Mr. Hartmann said, while in France and Italy there were big hurdles for purchasers. The U.S., by contrast, offers "a market with greater growth than in Europe and an energy market that is very fragmented with a lot of opportunity for consolidation," he said. E.ON and other European utilities also have been eager to expand into the U.S. to tap into its lucrative energy trading market particularly as U.S. utilities, such as Enron Corp. and Duke Energy Corp., make further inroads into Europe's fledgling trading market with their homegrown expertise. With Powergen, E.ON will have a utility whose management has 10 years of experience competing in a deregulated market and negotiating in the U.S. By comparison, the German market embarked on deregulation only three years ago. Powergen has been narrowing its generation business in recent years as it moved to develop an integrated energy business that includes generation, distribution, retail services and trading. Two years ago, for example, Powergen owned over 20% of the U.K.'s generating capacity. It now has 10%, comprised of seven mainly gas- and coal-fired plants but has expanded in the retail sector, adding one million customers last year. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Financial American, TWA Close Deal 04/10/2001 The Washington Post FINAL E02 Copyright 2001, The Washington Post Co. All Rights Reserved American Airlines became the world's largest air carrier after acquiring the assets of bankrupt Trans World Airlines. The deal was completed after a federal appeals court denied a last-minute bid by a group of Israeli TWA workers to stop financially troubled TWA from selling its assets to American Airlines' parent company, AMR. AMR's deal to pay $742 million for the airline, plus the assumption of $3.5 billion in debt, does not include funds for TWA's unsecured creditors. The Israeli workers are unsecured creditors owed about $18 million in salaries and benefits, their attorney said. MORE NEWS American Airlines, meanwhile, said it will charge passengers $10 each for paper tickets if a customer qualifies for an electronic ticket, as the carrier tries to reduce costs. The fee will be levied for tickets on American and American Eagle bought at the AA.com Web site; American's reservations centers; its Travel Centers, which are outside airports; and airports. American wouldn't say how it decides who qualifies for an e-ticket. Bank One has agreed to purchase Wachovia's $8 billion portfolio of consumer credit cards for undisclosed terms. The acquisition is the first for Chicago-based Bank One since Jamie Dimon became chief executive last March. T-bill rates fell. The discount rate on three-month Treasury bills auctioned yesterday fell to 3.82 percent, from 4.125 percent last week. Rates on six-month bills fell to 3.815 percent from 4.02 percent. The actual return to investors is 3.912 percent for three-month bills, with a $10,000 bill selling for $9,903.40, and 3.945 percent for a six-month bill selling for $9,807.10. Separately, the Federal Reserve said the average yield for one-year constant maturity Treasury bills, a popular index for making changes in adjustable-rate mortgages, fell to 4 percent last week from 4.19 percent the previous week. New York jurors who ordered online music provider MP3.com to pay nearly $300,000 to a record label for copyright infringement have told the trial judge that they checked the math and discovered they made a mistake: What they really meant was $3 million. After seeing press reports about their $300,000 award to Tee Vee Toons, jurors over the weekend alerted the federal judge of the error in their calculations, according to a court clerk. The judge scheduled a hearing. AT&T said in a regulatory filing that it's trying to sell a $1.98 billion stake in Cablevision Systems, the New York City area's largest cable television provider, as it sells investments in other companies to pay down debt. Prudential Insurance estimated its initial public offering could raise as much as $3.9 billion, which would make it the fourth-biggest first-time stock sale in U.S. history. Under the name Prudential Financial Inc., the company plans to sell 89 million common shares. IBM and United Technologies' Carrier unit said they will offer air conditioners that can be controlled remotely using personal computers and mobile phones. Owners of the new line of air conditioners will be able to set temperatures and switch units on and off using the Myappliance.com service, the companies said. Prices weren't disclosed. LOCAL BUSINESS Verizon, the nation's largest local phone company, should be split up to ensure rivals get fair treatment when seeking access to its network, competitors told Virginia regulators. AT&T, Covad Communications, Cavalier Telephone and Network Access Solutions asked the Virginia State Corporation Commission to split the company into units leasing lines to rivals and selling service to its own customers. In Pennsylvania, regulators last month ordered Verizon to run separate wholesale and retail units and spared it from a breakup. W.R. Grace & Co. of Columbia has named David B. Siegel the chemicals firm's chief restructuring officer after the company's filing for Chapter 11 bankruptcy protection. Siegel will continue to serve as Grace's senior vice president and general counsel. Siegel joined Grace in 1977 as corporate counsel and has held several positions in the company's legal office. Cingular Wireless, the second-largest U.S. mobile-phone company, was sued by a Maryland customer who alleged the company inflated her rates by recording several months of calls on one monthly bill. Girard & Green, a San Francisco firm, filed suit in Prince George's County, seeking damages and refunds on behalf of Ann Boldoc. The suit requests class-action status for the case. Allegheny Energy of Hagerstown plans to sell as much as $457.4 million of common stock by early May to help finance its $1.03 billion purchase of three power plants from Enron. The natural-gas-fueled plants are in Indiana, Illinois and Tennessee. Royal Ahold, the Netherlands-based international food company that includes Giant Food and U.S. Foodservice, said that it plans to add two new members to its executive board -- William J. Grize, president of Chantilly-based Ahold USA-Retail, and James L. Miller, president of U.S. Foodservice, which is headquartered in Columbia. INTERNATIONAL NEC, the Japanese electronics giant, plans to halt its production of computer memory chips in the United States by the end of June, cutting about 700 jobs at its NEC Electronics plant in Roseville, Calif. The company cited a severe downturn in demand for DRAM (dynamic random access memory) chips. Compiled from reports by the Associated Press, Bloomberg News, Dow Jones News Service and Washington Post staff writers http://www.washingtonpost.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Govt to seek conciliation with Enron unit on Maharashtra power issue: Sinha 04/10/2001 AFX News © 2001 by AFP-Extel News Ltd NEW DELHI (AFX) - The government will seek conciliation with Enron Corp unit Dabhol Power Co after the company invoked the political "force majeure" clause yesterday over non-payment of arrears by the Maharashtra state electricity board (MSEB), Finance Minister Yashwant Sinha said. "We have agreed to conciliation," Sinha told reporters on the sidelines of a seminar. Enron said that it was planning for arbitration in a London court to recover 1.02 bln rupees worth of bills owed to it by MSEB for December. ams/jag/rf For more information and to contact AFX: www.afxnews.com and www.afxpress.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA: India govt says to seek conciliation with Enron. 04/10/2001 Reuters English News Service (C) Reuters Limited 2001. NEW DELHI, April 10 (Reuters) - India said on Tuesday that it planned to seek conciliation with U.S. energy giant Enron after the company invoked political force majeure over its controversy-ridden power project in western India. "We have agreed to conciliation and we will go ahead with conciliation," Finance Minister Yashwant Sinha told reporters on the sidelines of a textiles conference. He did not elaborate. The Indian unit of Enron , Dabhol Power Company (DPC), sent the force majeure notice on Monday to state utility Maharashtra State Electricity Board (MSEB). The notice was the latest step in a running confrontation between the U.S. multinational and the Maharashtra government over unpaid bills. Last week, Houston-based Enron notified the government it was applying to an arbitration court in London to consider its claim for 1.02 billion rupees owed by MSEB for power it purchased in December from DPC. Enron owns 65 percent of DPC. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. India: Finance minister on telecom, textiles policy, Enron issue 04/10/2001 BBC Monitoring Source: PTI news agency, New Delhi, in English 0918 gmt 10 Apr 01/BBC Monitoring/© BBC Excerpt from report by Indian news agency PTI New Delhi, 10 April: Indian Finance Minister Yashwant Sinha on Tuesday [10 April] said there was no rethinking on the part of Federal Government over its telecom policy, but the issue of providing limited area mobile telephone through wireless local loop system was being reviewed by the Group of Ministers on Telecom. "Government is not having any rethinking. The issue is being reviewed by a group on telecom and IT. We will soon have a meeting of the group to look at the policy and make recommendations to the government", Sinha told reporters on the sidelines of a conference of state textile ministers in the Indian capital city. Asked about federal Communication Minister Ram Vilas Paswan's statement that the 1999 telecom policy would be modified to enable introduction of Wireless Local Loop (WLL), Sinha said Paswan is a member of the group and it will listen to what he has to say. "I cannot anticipate the conclusions of the group. The one lesson I have learnt is not to react to newspaper reports which are appearing," he said. On the dispute over Enron's Dabhol power project, Sinha said, Indian government has decided to resolve the issue through conciliation. "We have agreed to conciliation and we will go ahead with conciliation," Sinha said. The Dabhol power company had slapped arbitration and conciliation notices on federal finance ministry for not settling dues totalling 1.02bn rupees for December. Sinha's observation came after a meeting of senior officials of federal finance and power ministry on Monday which decided to adopt the conciliation route rather than arbitration to settle the standoff. On the demand of the textile sector to review the 16 per cent excise duty imposed on branded garments, Sinha said, he would not like to go into the specific taxation proposals now as they were the property of parliament. But at the same time, he admitted there were some areas of concern in the textile sector which merited reconsideration in consultation with the textile ministry. On the loss making National Textile Corporation, Sinha said the government was "trying its best to revive as many mills as possible within our means". The Group of Ministers on NTC had already gone into the issue and had come out with some recommendations which would be sent to the cabinet for taking a final view, he said. Sinha said the government had a very positive approach on the issue. Earlier addressing the state textiles ministers conference, Sinha cautioned the textiles industry against raising the bogey of dumping and said there was no escape from fair competition within the WTO regime. "We have to prepare ourselves for fair competition, through modernization, upgradation of technology and adoption of good management practices on a continuous basis." Sinha, however, said government would take all steps to ensure there was no unfair competition through enforcement of anti-dumping regulations and tariff measures. He said the dismantling of Multi-Fibre Agreement by December 2004 offered both opportunity and challenges. "If we do not prepare for it we will end up on the losing side"... Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. India: 'Failed business model' for Dabhol 04/10/2001 Business Line (The Hindu) Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - Asia Intelligence Wire MUMBAI, April 9. EVEN as the wrangling continues over the Dabhol power project, financial analysts, in consultation with legal experts, are trying to identify means by which the feuding parties can back off after cutting their losses. One proposal that has been put forward is by Mr Pradyumna Kaul, management consultant and anti-Enron activist. Mr Kaul has suggested that the project be treated as a "failed business model". In other words, a sick company. In his deposition before the Godbole Committee, set up to examine the Enron issue, Mr Kaul examined various alternatives available, and homed in on the "open market" method. The model suggests restructuring the project in consultation with lenders, as the "minority shareholders have developed serious differences with the majority stakeholders". Mr Kaul has argued that Dabhol Power Company (DPC) must not be allowed third-party sale of power (as suggested by it as a possible solution) as that would wean away the high-paying customers of the Maharashtra State Electricity Board, paving the way for its bankruptcy. "A Greenwich University report speaks about 8-10 ways adopted by different countries for cancelling IPP contracts. The most common one is a legislative fiat - Parliament or a State Assembly pass a law declaring the project illegal ab initio, and, therefore, void ab initio. No rights would accrue to any of the parties involved in the contract," he told the panel. He cited the example of Pakistan which cancelled six projects already producing power at one stroke through this route and the nation "remained unaffected". A "workable private sector cure", according to Mr Kaul, would be to reduce the "over-invoiced" capital cost. The share capital, by way of illustration, can be written down from Rs 10 to Re 1. This has happened in Far East Asia, he said. To deal with the debt, loans have to be restructured and interest deferred. The capital cost of phase I of the Dabhol project is around Rs 3,760 crore, comprising 30 per cent (about Rs 1,100 crore) equity and the rest debt (around Rs 2,600 crore). "The equity has to be written down by a factor of 10 to about Rs 100 crore and the debt has to be brought down by half. The interest has to be deferred," Mr Kaul suggested. This depends on the Government and MSEB playing a major role. - Our Bureau Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. State seeks more power from Central Grid The Times of India News Service 04/10/2001 The Times of India Copyright (C) 2001 The Times of India; Source: World Reporter (TM) BANGALORE: The state government has urged the Centre to provide an additional 14 million units (MU) of power from the Central Grid to tide over the present shortfall in demand. Speaking to reporters here on Monday, Energy Minister Veerakumar Patil said KPTC chairman V.P. Baligar was in Delhi for talks with the Union Power Ministry and had put forth this request. ``The state generates 57.244 MU and is supplemented with 24.260 MU from the grid while the demand is around 95 MU leading to a shortfall of roughly 14 MU,'' he stated. Patil said the government had held discussions with Enron of Maharashtra for supply of power but dropped the proposal since it was an expensive affair at Rs 4.60 per unit. ``We did ask them to reconsider the pricing but they have not responded so far,'' he said. Meanwhile, the state was also getting ready to implement a programme for proper distribution of the available power within a week. ``Irrigation pumpsets will get three-phase power only at night, while supply will also be suitably regulated for non urban users as well. As of now we have no urban loadshedding proposal,'' he declared. As for eight-hour uninterrupted power supply for farmers from May 1 as announced by Chief Minister S.M. Krishna in his budget speech, Patil felt the state would be ready to fulfil the promise. ``We expect demand to fall by May enabling us to provide this amount. We are chalking out a detailed programme to achieve this,'' he informed. Referring to the Raichur Thermal Power Station, he said the third unit had started functioning about 10 days ago, while the fifth would commence on May 15. ``Work on the seventh unit is in full swing and is ahead of schedule by 28 days,'' he said. Asked about arrears, Patil said the KPTC had no outstanding dues to Maharashtra from where it buys power but owed the KPC more than Rs 1,000 crore. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. April 10, 2001, 6:43AM Houston Chronicle Board picks California firm to build and run water plant By MARY FLOOD Copyright 2001 Houston Chronicle A Pasadena, Calif., engineering firm was chosen Monday by a citizens board that will now negotiate a design-build-operate contract for a Lake Houston water plant that could cost as much as $150 million. The Houston Area Water Corp. board, known as the Hawk, voted 4-1 to negotiate a contract with Montgomery Watson Inc. despite three recommendations from City Hall staff that it choose another bidder. City Hall favored Houston-based Azurix Corp., a troubled affiliate of Enron Corp. After a contract is worked out, it will be presented to the City Council for approval, but the council does not have to accept the board's recommendation. Azurix was the rumored front-runner for months. Evidence that Mayor Lee Brown's administration wanted Azurix to get the contract came when City Attorney Anthony Hall had a heated public argument with the Hawk's chairman, David Berg, at a mayoral fund-raiser last month. They discussed an attempt by City Hall staff to change its calculation to favor Montgomery Watson. The staff was told by Hall and the mayor's chief administrative officer that such a change would taint the decision process and that the staff should support Azurix. The Hawk was not bound by the staff recommendation. "There was no pressure from City Hall that I and the board could not withstand," Berg said. He also joked when a reporter's cell phone rang midmeeting, "If that's Anthony Hall, tell him our anger management class is at 3:30." The plant is part of a Houston-area surface-water treatment and use plan that could cost about $2 billion to implement. Montgomery Watson's bid came in around $17 million below Azurix's. The third bidder is U.S. Filter Operating Services, part of a French company. "Montgomery Watson is, frankly, cheaper. And that's impressive to me," Berg said. He also told the anxious crowd of business people at the meeting that he went against the City Hall staff's recommendation in part because of the financial viability of the three companies and Azurix's announcement Friday that it plans to sell Azurix North America, the body that would oversee this contract. "We are disappointed with the decision the Hawk made," said Diane Bazelides, spokeswoman for Azurix. Board member Andy DeAnda, an engineer, was the sole voter for Azurix, though a sixth board member, Binh Ho, was absent but had indicated he, too, would have voted for Azurix. "I wanted to respect the staff recommendation," DeAnda said. "Plus companies are bought and sold all the time. That doesn't bother me." Kathi Wilkes, a lobbyist for Montgomery Watson, said it was happy to get the board's nod and doesn't really know what pressure City Council will get from the other companies. City Councilman Carroll Robinson, who heads the council's infrastructure committee that will hear from the Hawk board, said the council will now ask questions of the board and staff and decide if the right decision was made. "I don't think everybody's going to walk away. I assume (all three companies) will still want to make their case to council about why they should have been picked," he said. Berg will make a preliminary report to Robinson's committee today. "This has been a very long process, longer than we thought," said Berg. "I recall (the mayor's chief administrative officer) saying to us it'll be six months, six meetings and it'll be over, no big deal." The board, appointed almost eight months ago, has instead been a center of controversy. Legislators have questioned the wisdom of allowing local government corporations like the Hawk to handle such large projects. The board is allowed by state law to choose a design-build-operate contract winner without following the traditional bidding process. There has also been some friction over the Hawk with Harris County and regional water boards about how the city of Houston will provide surface water and how much it will cost. ASIA-PACIFIC, AFRICA & MIDDLE EAST: Enron threat to withdraw from India Financial Times; Apr 10, 2001 By DAVID GARDNER and KHOZEM MERCHANT Enron, the US-based power company, yesterday delivered a warning that it could withdraw from a controversial Dollars 3bn (Pounds 2.1bn) power project in India, where it is locked in a payments dispute with a Bombay utility. Officials at the Houston-based company said last night that it had lost confidence in the state company that is contractually obliged to buy the output of its Maharashtra plant. Enron's 2,364MW plant at Dabhol, Maharashtra is the biggest foreign investment in India and the only one of eight fast-track power projects unveiled in the early 1990s to be up and running. Enron's departure would be damaging to the government, which held up the sector as a standard-bearer of liberalisation, only to see entrants scared off by red tape. Cogentrix of the US quit in December 1999 after waiting seven years for approval of its project. Enron yesterday issued a "political force majeure" notice to the Maharashtra State Electricity Board (MSEB), a standard contractual clause that aggrieved parties use as a first step towards possibly quitting. Companies issue the notice if they believe circumstances on the ground have undermined a contract. Enron is owed Rs2.25bn (Pounds 33m) in unpaid bills by MSEB, which recently raised the stakes by imposing a Rs4.02bn penalty on the company for "technical under-performance". Enron has called in two federal government guarantees on the unpaid bills. Enron said "the concerted, deliberate and politically motivated action of the government of Maharashtra, government of India and MSEB have or potentially will have a material and adverse effect (on the company's) ability to perform obligations under the power purchase agreement". Vinay Bansal, chairman of MSEB, said Enron's notice "does not seek particular relief so it is unclear what is their intention". But he said MSEB would press ahead with its claim for Rs4.02bn for "services that we have a right to expect". Enron has dismissed the claim as "frivolous and a diversion". Power industry sources in New Delhi said the effect of Enron's move yesterday could be to raise the stakes in its struggle to get paid by MSEB, or to signal its intention to withdraw from India. One power industry executive noted, however, that Enron, as part of its world-wide strategy, has begun moving out of the ownership of assets into the trading of power, although investment in assets is often part of the entry strategy to build the trading relationship. "The question is whether Enron is willing to write India off," he said. "Or, rather, will they get rid of the assets before the trading strategy has had time to get going." For regional reports, www.ft.com/asiapacific Copyright: The Financial Times Limited
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