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California and the West THE CALIFORNIA ENERGY CRISIS Davis Approves $850
Million for Energy Conservation Plan Legislation: Governor says the spending package is crucial to ease immediate pressures on the state. Los Angeles Times, 04/12/01 PG&E Creditors' Committee Is Appointed Bankruptcy: Federal trustee picks panel to represent thousands with unsecured claims against the utility. Los Angeles Times, 04/12/01 Energy & Environment: Britain Follows the Winds of Change --- Offshore Wind-Farm Projects Show Shift in Policy to Renewable Energy Sources The Wall Street Journal Europe, 04/12/01 Developments in California's energy crisis Associated Press Newswires, 04/12/01 Federal regulators may soon begin monitoring electricity market Associated Press Newswires, 04/12/01 Cowboys and indians The Daily Deal, 04/12/01 AES is frontrunner for Brazil telecom The Daily Deal, 04/12/01 India: Leveraging marketing PR to build business and brands Business Line (The Hindu), 04/12/01 India: Dabhol impasse Business Line (The Hindu), 04/12/01 Turning investors away from India The Hindu, 04/12/01 Hedging Their Bets The Wall Street Journal, 04/12/01 World Watch The Wall Street Journal, 04/12/01 Enron bid to quit selling power to California colleges blocked Houston Chronicle, 04/12/01 Energy status 'critical,' panel says Houston Chronicle, 04/12/01 Judge orders Enron to deliver electricity to universities Sacramento Bee, April 12, 2001 Electricity notebook: U.S. relief plan kept under wraps Orange County Register, 04/12/01 Enron deal change riles university officials San Diego Union Tribune, 04/12/01 Enron Told It Can't Cut Electricity To Schools San Francisco Chronicle, 04/12/01 Federal regulators may soon begin monitoring electricity market Associated Press Newswires, 04/11/01 Metro Desk California and the West THE CALIFORNIA ENERGY CRISIS Davis Approves $850 Million for Energy Conservation Plan Legislation: Governor says the spending package is crucial to ease immediate pressures on the state. ROBIN FIELDS; MIGUEL BUSTILLO TIMES STAFF WRITERS 04/12/2001 Los Angeles Times Home Edition A-3 Copyright 2001 / The Times Mirror Company Gov. Gray Davis approved $850 million for stepped-up energy conservation efforts Wednesday after making good on threats to reduce the plan's size, vetoing $250 million in items he said would not get results fast enough. Calling the spending package "the most aggressive, most expensive conservation effort in America," Davis depicted his signing of two conservation bills Wednesday as crucial in easing the state's most immediate power pressures. " "These are programs that Californians can use right now," said Assemblywoman Christine Kehoe (D-San Diego), whose AB 29 was one of the measures. The slimmed-down package provides $240 million to weatherize homes of low-income residents, plus millions for rebates on energy-efficient appliances, incentives for businesses that cut consumption, and public information campaigns. The governor's cuts included $25.2 million for efficiency programs at community colleges, $50 million for California Energy Commission loans and grants to small businesses to streamline refrigeration facilities, and $24 million to the Department of Corrections to retrofit generators. Davis also axed a $15-million provision for a California Public Utilities Commission study of "real-time" metering, but he left in $35 million for the purchase and installation of meters that allow utilities to calculate bills based on when power is used. Severin Borenstein, director of the UC Energy Institute in Berkeley, estimated that the funds would cover enough meters for businesses that consume more than 250 kilowatt-hours a day. Such devices, coupled with a rate plan, could encourage conservation by commercial customers during peak periods when demand--and prices--are highest, he said. "It is reasonable to estimate that we could take 2,000 to 3,000 megawatts off peak usage this summer, which could save $1 billion," Borenstein said. Davis' goal is to shave off at least 2,000 megawatts a day, enough to power 2 million homes. Experts estimate that the state faces an electricity shortfall this summer of 3,000 to 7,000 megawatts daily, depending on summer temperatures and hydroelectric supplies. Conservation is only one prong of the state's efforts to resolve its power crisis. Davis and executives at San Diego Gas & Electric confirmed Wednesday that negotiations have intensified this week over state purchase of the utility's transmission lines. Completed deals with Edison and San Diego Gas & Electric could persuade the judge in PG&E's Chapter 11 bankruptcy case to order the Northern California behemoth to accept similar terms for its system, Davis said. Edison concluded a deal with the state Monday. The governor performed a delicate balancing act at Wednesday's bill-signing in response to a report, disclosed by The Times on Wednesday, that several public utilities, including the Los Angeles Department of Water and Power, joined private suppliers in helping to drive up wholesale energy prices in California last summer. He defended the California Independent System Operator, which is using the report as evidence in its effort to persuade federal regulators to compel suppliers--public and private--to refund $6.3 billion to the state. But he also defended the DWP, although it ranked eighth on Cal-ISO's list of offenders for the period between May and November last year, reaping $17.8 million in allegedly excessive profits. "The DWP sold us power, which is more than I can say for the [private] generators," Davis said. He even thanked DWP General Manager S. David Freeman, who has acted as his chief negotiator in crafting long-term power purchase agreements with private suppliers. "Yes, they took their markup, but they came through," Davis said. The chairman of a state Senate committee investigating alleged manipulation in the state's power market said his panel will probe the activities of the public agencies as well as private marketers. Though the initial focus of the investigation has been on five large out-of-state sellers, Sen. Joe Dunn (D-Santa Ana) said, "We always intended to look at some of the publicly owned [suppliers], such as DWP." Dunn said Wednesday's report "just reinforces" the need for the review. Hearings will begin next week with an examination of recent studies, including the Cal-ISO report, of alleged efforts to inflate prices in the electricity market. In other developments Wednesday, a U.S. District Court judge ruled that Enron Energy Services Inc., a unit of Houston-based energy giant Enron Corp., must continue to sell electricity to California universities under the terms of its existing contract. The UC and Cal State systems signed a four-year contract with Enron in 1998, locking in discounted fixed rates. In February, Enron notified its commercial and industrial customers in California, including the universities, that their power would be supplied by Pacific Gas & Electric and Southern California Edison. Enron said it will appeal the ruling to the U.S. 9th Circuit Court of Appeals in San Francisco. Times staff writers Julie Tamaki in Sacramento and Rich Connell in Los Angeles contributed to this report. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Metro Desk PG&E Creditors' Committee Is Appointed Bankruptcy: Federal trustee picks panel to represent thousands with unsecured claims against the utility. TIM REITERMAN; VIRGINIA ELLIS TIMES STAFF WRITERS 04/12/2001 Los Angeles Times Home Edition A-18 Copyright 2001 / The Times Mirror Company SAN FRANCISCO -- A committee of Pacific Gas & Electric Co. creditors--ranging from major banks and energy suppliers to the state of Tennessee and a tree-trimming company--has been selected to represent thousands of creditors in the utility's bankruptcy case. Taking a key step in administering the bankruptcy case, U.S. Trustee Linda Ekstrom Stanley on Tuesday selected 11 creditors who collectively will serve as the eyes, ears and decision makers for those who have unsecured claims against the utility. In choosing companies that would represent various constituencies of creditors, Stanley selected four financial concerns and four energy suppliers with total claims of almost $5 billion. She also named Davey Tree Expert Co., which trims trees for PG&E and has a $9.6-million claim; the city of Palo Alto, which claims a $200-million debt; and Tennessee, which says PG&E owes $76 million. All are among the 100 largest unsecured creditors of PG&E, which filed for Chapter 11 protection from creditors on Friday, declaring that the energy crisis had thrown the company $9 billion in debt. Working over the weekend, the trustee's staff sent faxes to the largest 100 creditors, asking if they wanted to serve on the creditors committee. Seventy-five responded affirmatively. Not only was the acceptance rate extremely high, Stanley said, she was lobbied before the selection. "Today I am getting responses from the disappointed," she said. "Usually people do not want to serve." The number of committee members is discretionary, although it has to be an odd number so there are no tie votes. Eleven is an unusually large number, Stanley said, adding that "there is nothing typical about this case." The company's creditors touch many sectors of the nation's economy, from Wall Street to vendors providing goods and services to the utility. The committee members include companies that provided power but were not paid as PG&E's financial condition worsened--Enron Corp. ($580 million), Dynegy Power Marketing ($255 million), KES Kingsburg L.P. ($182 million) and GWF Power Systems ($62 million). Also named to the committee were the Bank of New York ($2.2 billion), a group of banks headed by Bank of America ($1.175 billion), U.S. Bank ($310 million) and Merrill Lynch ($106 million). The only trade creditor represented on the committee is employee-owned Davey Tree Expert Co. of Kent, Ohio. Chief Financial Officer David Adante said the company has trimmed brush and trees from around PG&E power lines for more than 30 years and has 600 employees on the account. "PG&E has always been a good client for us, and we believe firmly that at the end of the day they are going to survive and continue to be a good client," Adante said. Tom Milne, who represents the state of Tennessee on the committee, said, "This has become a political issue here." The Tennessee Consolidated Retirement Fund, Milne said, holds $25 million in commercial paper from PG&E. But the more politically volatile holding is the state general fund, which PG&E owes $50 million. "The taxpayers of the state of Tennessee are asking why we should subsidize the ratepayers of California," Milne said. "Our rates have doubled or tripled here. Why should California be spared? We are hoping for a 100% return on our investment." Enron Corp. spokesman Mark Palmer said, "I think in being a part of the solution for restructuring we offer a unique perspective, and I think that's why we were chosen as one of the members of the committee." He declined to discuss the company's claim. "We don't talk about specific credit exposures, but we have told our investors, Wall Street analysts and journalists that we have established adequate reserves," he said, "and regardless of the situation in California, we will meet our earnings per share estimates of $1.70 to $1.75 for 2001." Stanley said the committee members must put aside their individual interests while they act as a fiduciary for unsecured creditors. To represent it in court, the panel will hire an attorney, to be paid for by PG&E. The committee is expected to be an important player as bankruptcy Judge Dennis Montali figures out who should be paid and how much as the utility reorganizes its financial affairs. "The judge will pay lots of attention to them," Stanley said. "There are many creditors and many large creditors." Times staff writer Rone Tempest in Sacramento contributed to this story. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Energy & Environment: Britain Follows the Winds of Change --- Offshore Wind-Farm Projects Show Shift in Policy to Renewable Energy Sources By Geoffrey T. Smith Dow Jones Newswires 04/12/2001 The Wall Street Journal Europe 23 (Copyright © 2001, Dow Jones & Company, Inc.) Ten years ago, Peter Edwards, a dairy farmer in Cornwall, sold his cattle to raise money for the U.K.'s first wind farm intended to produce electricity. It was uncompetitive and did nothing to lessen the country's dependence on fossil fuels -- not the most convincing vision of the future. Today, many farmers might willingly change places with him. As livestock farming staggers from crisis to crisis, wind farming goes from strength to strength. Last week, in a landmark move, the Crown Estates, which holds the U.K. seabed in trust for the country, issued seabed leases for 13 offshore wind-farm projects to companies traditionally associated with fossil-fuel energy. The projects, which could attract as much as GBP 1.6 billion (2.6 billion euros) in investment, according to the British Wind Energy Association, will allow for the installation of 1,500 megawatts of generation capacity around Britain's coast by 2004. That would meet the electricity needs of 1.1 million households, according to BWEA estimates. The projects -- seven in the Irish Sea and six in the North Sea -- are the first concerted effort in the U.K. to raise the contribution of renewable energy sources, other than hydropower, to the energy mix. For the wind industry, going offshore is a test of technology and viability. If the engineering is robust enough, it will revolutionize the economics of the industry. Larger numbers of more powerful turbines, driven by higher wind speeds, could yield huge economies of scale. Offshore winds are more constant than those onshore, which could help offset wind power's major drawback, its unpredictability. Such projects are no longer the preserve of companies on the fringe of the energy sector. Among those awarded leases were units of Innogy PLC, Powergen PLC, Scottish Power PLC, Enron Corp. and TXU Europe. Under terms of the government's Renewables Obligation, all public electricity suppliers must get some of their power from renewable generation by 2003. The amount will probably start at 5% or more, rising to 10% by 2010. Via a system of tradable "green certificates," companies can trade surplus renewable power on the open market with suppliers who can't meet the obligation by themselves. The emphasis of U.K. policy-makers for the last 10 years has been on bringing prices down, rather than encouraging green energy to become competitive. As a result, the role of wind in the U.K. has been restricted to blowing the emissions of coal and gas-fired plants across the North Sea, forcing Norway and Germany to cope with the environmental impact. In countries with more government subsidies for the technology, more wind farms have flourished. Germany and Denmark had installed capacity bases of almost 5,500 megawatts and 2,280 megawatts, respectively, by the end of 2000, according to estimates by Dresdner Kleinwort Wasserstein. Crown Estates and the BWEA are currently in negotiations over a second round of licenses for larger sites; there is no timetable for awarding these leases yet. Alison Hill, communications manager at the British Wind Energy Association, says that the generation costs of existing onshore facilities have fallen to between 1.9 pence and 3.5 pence a kilowatt-hour today from around 11 pence a kilowatt-hour for first-generation technology. That makes some prices for wind-generated electricity competitive in Britain, where the market is deregulated. A pilot project off Blyth in northeast England is currently generating at between 5 pence and 6 pence per kilowatt-hour, she says. If offshore technology can improve at the same rate as onshore technology has, subsidies may not be needed for long. "If we can get capital grants to offset the initial higher costs, they should be enough to bring these projects into a competitive position," Ms. Hill says. Subsidies for wind power in the U.K. stand at around a total of GBP 49 million to date. That's not much compared to the GBP 1.6 billion investment expected from the first round of offshore farms. But even if generating costs fall to a level where wind power can compete with fossil fuels, the cost of electricity to consumers could increase. Investment in electricity grids would be needed to ensure that they are robust enough to deal with large and sudden surges in power supply, and such investments are generally financed by fees levied on all grid users. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Developments in California's energy crisis By The Associated Press 04/12/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. Here is a look at developments in California's energy crisis: WEDNESDAY: - Negotiations began in earnest with San Diego Gas & Electric Co.'s parent company for a state buyout of its transmission lines. Once that deal is done, Gov. Gray Davis said he hopes to persuade the bankruptcy judge in San Francisco to force PG&E to accept a similar deal. The state already reached an agreement to buy Southern California Edison's transmission lines. - Curt Hebert, chairman of Federal Energy Regulatory Commission, told congressmen meeting in San Jose that FERC hopes to begin "monitoring and mitigating" the energy markets by May 1. This would allow FERC to influence prices preemptively. Hebert, a strong free-market advocate, stopped short of promising caps on soaring energy prices, stressing the need to build more power plants and improve the transmission system to better manage the energy flow. - The 9th U.S. Circuit Court of Appeals said FERC is not required to order immediate refunds to ratepayers as the city of San Diego demands. The city asked FERC to order rebates to consumers who suffered "unjust and unreasonable" electricity bills last year. "FERC's delay is not so unreasonable," said the court, adding that it is confident FERC will review the charges. - A federal judge ordered Enron Energy Systems Inc. to abide by its agreement to sell cheap power to California's public universities. Enron, which said it would appeal, has tried to get out of delivering power for the final year of the four-year deal. Enron - whose parent company is the nation's largest energy trader - says honoring the contract would cost it $12 million a month because of skyrocketing wholesale power prices, and that taxpayers should pick up the tab. State Attorney General Bill Lockyer says Enron wants to play a "marketing game" and sell the universities' promised power on the open market for 10 times what it cost Enron. -Lockyer says whistle blowers who help prove energy wholesalers illegally profited from the state's power problems would be entitled to a percentage of the state's recovery. Lockyer estimated could range from $50 million to hundreds of millions of dollars. Lockyer's office is investigating whether the market was illegally manipulated - a charge wholesalers deny. - Bankruptcy experts say Pacific Gas and Electric's creditors will target $4.63 billion the utility transferred to its parent company while receiving no investments in return. Lawyers will likely exhume e-mail exchanges among PG&E management, take depositions from top executives and pore over reams of documents in search of evidence, said Bill Zewadski, co-chairman of the American Bar Association's bankruptcy litigation subcommittee. - Standard & Poor's said there is a "strong likelihood" that SoCal Edison's credit rating will be raised if its $27.6 billion transmission lines deal receives final approval. But the company's ratings, now at junk bond level, won't return to where they stood before soaring wholesale electricity prices buried the utility in debt. In any event, no action will be taken until the transmission line sale is approved by state and federal regulators, as well as the California legislature, S&P said. - Davis signed two bills creating more than $500 million in conservation initiatives and incentives. The money will reimburse homeowners and business owners for money spent on energy-efficient appliances and more efficient lighting. Lawmakers at the ceremony in Los Angeles blasted power generators for putting profits first. "Generators from out of state have no sense of patriotism or compassion for their fellow citizens," said Assemblyman Gil Cedillo, D-Los Angeles. -California Rep. George Radanovich announces his request for a General Accounting Office study of the energy crisis has been granted. He requested the investigation in March citing concerns about allegations of price gouging and market manipulation in California's wholesale power market. - Consumer activists proposed forming an energy buyers cartel among California, Oregon and Washington to force suppliers to reduce electricity rates. The united front could be the only way to avoid blackouts and steep rate increases as demand peaks this summer, according to the Utility Consumers' Action Network. - No power alerts were called as reserves stayed above 7 percent. - Shares of PG&E Corp. dipped 4 cents, or 0.5 percent, to close at $8.46. Edison International stock closed at $12.02, up 64 cents, or 5.6 percent. WHAT'S NEXT: - The House Government Reform Committee plans energy hearings in San Diego on Thursday. - Edison and PG&E are expected to file their 2000 earnings reports April 17. - The state Senate starts hearings April 18 in its inquiry into allegations that electricity suppliers illegally withheld power to drive up California's wholesale prices. Wholesalers deny such accusations. - Also April 18, the Assembly plans to resume hearings in its inquiry into California's highest-in-the-nation natural gas prices. THE PROBLEM: High demand, high wholesale energy costs, transmission glitches and a tight supply worsened by scarce hydroelectric power in the Northwest and maintenance at aging California power plants are all factors in California's electricity crisis. Edison and PG&E say they've lost nearly $14 billion since June to high wholesale prices that the state's electricity deregulation law bars them from passing onto ratepayers. PG&E, saying it hasn't received the help it needs from regulators or state lawmakers, filed for federal bankruptcy protection April 6. Electricity and natural gas suppliers, scared off by the two companies' poor credit ratings, are refusing to sell to them, leading the state in January to start buying power for the utilities' nearly 9 million residential and business customers. The state is also buying power for a third investor-owned utility, San Diego Gas & Electric, which is in better financial shape than much larger Edison and PG&E but also struggling with high wholesale power costs. The Public Utilities Commission has raised rates up to 46 percent to help finance the state's multibillion-dollar power-buying. Even before those increases, California residents paid some of the highest prices in the nation for electricity. Federal statistics from October show residential customers in California paid an average of 10.7 cents per kilowatt hour, or 26 percent more than the nationwide average of 8.5 cents. Only customers in New England, New York, Alaska and Hawaii paid more. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Federal regulators may soon begin monitoring electricity market By KAREN GAUDETTE Associated Press Writer 04/12/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. SAN JOSE, Calif. (AP) - Federal energy regulators would not promise caps on soaring energy prices, but said they hope to begin "monitoring and mitigating" the wholesale electricity market by May 1. The Federal Energy Regulatory Commission will look at future prices to determine if they are just and reasonable, commission chairman Curt Hebert told members of the House Subcommittee on Energy Policy and Regulatory Affairs on Wednesday. The commission already has sought California power sale refunds of $124 million, and the new system of tracking market abuses could help keep markets fair, Hebert said. Hebert left didn't say whether FERC would begin looking at daily trading activity in search of unfair pricing. Currently, FERC only reviews quarterly reports from energy traders, and periodically does spot audits of the markets. Meanwhile, on the other end of the power spectrum, a federal trustee selected a committee of Pacific Gas and Electric Co. creditors to represent more than 30,000 creditors in the utility's bankruptcy case, the Los Angeles Times reported. U.S. Trustee Linda Ekstrom Stanley selected 11 creditors Tuesday who represent various groups of creditors and will play an important role as federal Bankruptcy Judge Dennis Montali determines who should be paid and how much during the company's financial reorganization. "The judge will pay lots of attention to them," Stanley said. "There are many creditors and many large creditors." Stanly selected four financial concerns and four energy suppliers with total claims of nearly $5 billion. She also picked a tree-trimming company that has a $9.6 million claim; the city of Palo Alto, which claims a $200 million debt; and Tennessee, which claims PG&E owes $76 million, the newspaper reported. The committee members are among PG&E's 100 largest unsecured creditors. The utility filed for federal bankruptcy protection Friday, declaring the energy crisis had thrown the company $9 billion in debt. Cash-starved Southern California Edison Co. agreed Monday to sell its transmission lines to the state. Gov. Gray Davis said negotiations to buy the lines of San Diego Gas and Electric Co. began in earnest Wednesday, and once that deal is done, he'll ask the bankruptcy judge to force PG&E to sell the remaining grid to the state. But that will not end California's power problems. Hebert stressed the need to build more power plants to boost supply, to improve transmission infrastructure throughout the West and to create a "regional transmission organization" to better manage the flow of power. Hebert has been the target of criticism from state officials, the utilities and consumer watchdog groups for refusing to cap growing wholesale power rates. Members of California's Democratic delegation and PG&E again asked for the cap to avoid summer blackouts. FERC only has regulatory control over roughly half California's electricity, Hebert testified, since the rest is imported from Canada and municipal utilities not under federal jurisdiction. "How many studies must be done before you spend a dollar and start moving power in the other direction?" Hebert said. "The conversation needs to stop. Someone needs to start putting shovels in the ground." Backed by U.S. Rep. Dan Burton, the Indiana Republican who chairs the Government Reform Committee, which houses the energy subcommittee, Hebert warned too many changes to the rules may drive away the very generators needed to lower prices in the long term by providing more supply and competition. PUC President Loretta Lynch told the panel Tuesday in Sacramento the agency allowed utilities to enter into such contracts last year, but the utilities chose not to do so. "What was done then was only half the job," said Stephen Pickett, vice president and general counsel for SoCal Edison. He said the PUC retained the right to review contracts after they were signed, which scared away generators unsure if they would see the money. Davis signed two bills Wednesday, creating more than $500 million in conservation initiatives and incentives. The money will reimburse homeowners and business owners for money spent on such items as energy-efficient appliances and efficient lighting. Also Wednesday, a federal judge intervened in another power price battle, ordering Enron Energy Systems Inc. of Houston to abide by its agreement to sell cheap power to the California State University and University of California systems. Enron said it would appeal. U.S. District Judge Phyllis Hamilton issued a temporary injunction against Enron, forcing it to continue providing service, and said there is a likelihood Enron will lose the suit. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Industry Insight Cowboys and indians by L.J. Davis 04/12/2001 The Daily Deal Copyright © 2001 The Deal LLC Enron, Bechtel and General Electric got the deal of the century in a long-term contract to provide expensive electricity to India. Today we tell a tale of cowboys and Indians. The Indians are real Indians who live in India, the place Christopher Columbus thought he'd gotten to. The cowboys are Enron Corp., the big Texas energy firm, and Bechtel Group and the General Electric Co., who need no introduction. And who, in the approved Hollywood tradition, are kicking the stuffing out of the rightful owners of the land, even as we speak. If the Indians don't pay them a king's ransom for a whole bunch of electricity they don't want and can't afford, the contract says the cowboys could end up owning a big hunk of India. Yep. Says so right there in the treaty--er, contract. Sound familiar? It all began with a great big gas strike in Qatar. Gas strikes are wonderful things, because they give you a lot of gas to sell. The trick is to find a client who will pay a bundle for it. But by a happy chance, India beckoned. And India, by an even happier chance, was about to resemble Wile E. Coyote when he runs off a cliff. India was about to turn into a great big sucker. I have no idea why K. Wade Kline, Enron's top executive in India, gets so bemused in that fetching just-guys way when he ponders the fact that the Indians don't want to pay him. Why on earth should K. Wade Kline cry woe? Despite bickering and discord--and the temperature is heading higher as Enron pushes for arbitration over a $22 million missed payment--Enron and its partners have the deal of the century. When Enron and compadres showed up with the Qatari gas (which, by the way, it turned out they didn't really need) in the early 1990s, India resembled a country designed by the London School of Economics in the days of British socialist writer Harold Laski. Due to profound humanitarian intentions, India was a quasi-socialism that didn't work very well and sometimes not at all. And it didn't know squat about capitalism. This might seem like a harsh judgment, but let's consider what happened. In the early 1990s, India was pondering the error of its ways, globalism was the coming thing and India decided to try it. In the state of Maharastra, this involved inviting in Enron and its pals, letting them build a whacking big power plant without competitive bidding and fuelling it with all that Qatari gas, which Enron didn't have to get rid of after all. At this point things get interesting. Nowhere in the contract was it suggested that the state of Maharastra knew what Enron was, its size or the state of its balance sheet. Maharastra agreed to buy the output of the new plant, much of which it could not use, for three times the prevailing price of electrical power already available to it. Maharastra would, in fact, pay the Enron partnership a minimum of $220 million a year for 20 years, a sum it could not afford. And if it didn't, the Enron partnership could seize state assets until it was happy. If the state government decided it didn't like the deal, it could sue the American partnership in England under British law. I'm not making any of this up. And it gets better. When the World Bank pointed out that the Enron contract was a little, well, strange, the Indian central government took a hand. New Delhi decided the contract was a swell one. In fact, New Delhi liked the contract so much that it allowed the Enron partnership to seize assets of the national government if things went wrong and it wasn't satisfied with the assets of Maharastra. Understandably, there has been much trouble and turmoil over this remarkable contract--so much trouble and turmoil, in fact, that Human Rights Watch has concluded that Enron took the step of paying the soldiery and police to knock the daylights out of some protesters and throw others in the cooler on trumped-up charges. Meanwhile, the Maharastra government decided to cut itself in by paying $137 million of the taxpayers' money for 30% of the power plant. For reasons known but to God, it decided to cut itself in on a deal whose objective was its own fleecing. Somehow, this stake has now been reduced to 16%. How could such a state of affairs come to pass? Critics of the project suggest that the $20 million Enron paid to somebody in the form of "educational gifts" may have something to do with it. Now the project is in its second phase, which consists of making the power plant much larger. Maharastra keeps getting behind in its payments. And the big cry babies in the state capital keep saying they don't need all that power and anyway they can't pay for it, which was obvious from the start when the national government stepped firmly in and put up the national railroad (or whatever) as collateral. Is there a lesson here? Yes, and it is not a pretty one. When a baby falls to the ground at your feet and positively begs to have its candy stolen, exercise good taste. Do not be brazen about it. As Voltaire remarked when the British shot one of their own admirals, it only encourages the others. Funnily enough, though, not one of Enron's competitors has been able to get into the market, and not for lack of trying. And liberal, openhanded Enron keeps right on sending its bills to the state capital. No, I'm really not making any of this up. L.J. Davis is a writer in New York. He is the author of "The Billionaire Shell Game: How Cable Baron John Malone and Assorted Corporate Titans Invented a Future Nobody Wanted" (Doubleday 1998). Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. M and A AES is frontrunner for Brazil telecom by Leon Lazaroff 04/12/2001 The Daily Deal Copyright © 2001 The Deal LLC The U.S. power utility offered Bell Canada $300M for its 24% stake in Vespar. U.S. power utility AES Corp. may have the upper hand in negotiations with Bell Canada International in its effort to acquire the Canadian company's stake in a Brazilian telecom venture called Vesper. According to Brazilian media reports, AES offered BCI $300 million Wednesday for its 34.4% stake in Vesper; BCI rejected the offer. Neither company would comment on reports of negotiations. Telecom analysts, though, say BCI has little leverage in negotiations with AES and may be forced to accept the Arlington, Va. based electric company's recent offer. "BCI wants out because they're focused on mobile," said Carlos Sequeira, a telecom analyst at the Sao Paulo investment bank BBA Icatu. "They want to invest in other stuff, so they may not get the price they originally wanted." That price was $875 million, a result of the much higher valuations telecom assets received last year. In September, BCI signed a definitive agreement with VeloCom Inc., a privately held Englewood, Colo. telecom group that holds a 49.4% stake in Vesper. The deal, canceled in February, called for VeloCom to buy BCI's 34.4% stake for $875 million. But VeloCom, which did not return phone calls seeking comment, was unable to obtain financing to complete the deal. Since last summer, BCI has wanted to get out of its partnership with VeloCom because the Colorado company has been expanding its own operations in Argentina, where another BCI joint venture, Telecom Americas, also plans to do business. Last year, BCI joined with SBC Communications, of San Antonio, and the Mexican wireless company America Movil, to form Telecom Americas. The group's plan is to sell mobile and broadband communications services in Latin America's largest markets. "We realized we were going to run into conflicts sooner than later," said BCI spokesman Peter Burn. "So selling out of Vesper was the best option." AES, meanwhile, has stated it would like to acquire Vesper as a vehicle to expand a broadband network it has been building in the country for the past 18 months with Electrobras, Brazil's largest power company. AES joined up with Electrobras in August 1999 when it agreed to pay $155 million for a 51% stake in Electronet, a broadband communications builder; Electrobras owns the remaining 49% stake in Electronet. Like U.S. energy companies Enron Corp. and Williams Companies, AES has entered the telecom market by laying fiber optic lines alongside its power lines. In Brazil, AES owns the electricity distribution company Sul as well as power companies in Sao Paulo and the state of Belo Horizonte. "We see the possibility of owning Vesper as an outgrowth of our distribution business," said AES spokesman Kenneth Woodcock. "If it grows as we like it, we'll talk more about telecommunications. Right now, we're not going to do what Enron and Williams have done and create a telecom subsidiary." On Wednesday, Telecom Americas, which holds a license to offer wireless service in the states of Sao Paulo and Belo Horizonte, home to Rio de Janeiro, offered BellSouth International a 50% stake in its Sao Paulo state operations, known as Tess. BellSouth International, a subsidiary of Atlanta based BellSouth Corp., owns a license to offer wireless service in the city of Sao Paulo. BCI is a subsidiary of BCE Inc. which operates Bell Canada. Brazilian telecom stake available AES Corp. has the upper hand in negotiations with Bell Canada International in its reported attempt to acquire the Canadian company's stake in upstart Brazilian telecom venture Vesper. Company: VeloCom Inc. The AES Corp. Bell Canada International Inc. CEO: David J. Leonard Dennis W. Bakke Louis A. Tanguay Headquarters: Englewood, Colo. Arlington, Va. Montreal Date Action 1/05/00 VeloCom http://www.TheDeal.com/cgi-bin/gx.cgi/AppLogic%2BFTContentServer?pagename=Futu reTense/Apps/Xcelerate/Render&c=TDDArticle&cid=A12818-2000Jan5&preview=true for a venture designed to provide wireless communications services in Brazil 5/12/00 VeloCom Inc. http://www.TheDeal.com/cgi-bin/gx.cgi/AppLogic%2BFTContentServer?pagename=Futu reTense/Apps/Xcelerate/Render&c=TDDArticle&cid=A22415-2000May12&preview=true. Morgan Stanley Dean Witter & Co., Credit Suisse First Boston and Merrill Lynch & Co. are the underwriters. 9/26/00 Bell Canada International Inc. has $875 million more to invest in a new cable and telephone venture in Latin America after http://www.TheDeal.com/cgi-bin/gx.cgi/AppLogic%2BFTContentServer?pagename=Futu reTense/Apps/Xcelerate/Render&c=TDDArticle&cid=A29235-2000Sep26&preview=true to a development-stage company called VeloCom Inc 1/10/01 VeloCom http://www.TheDeal.com/cgi-bin/gx.cgi/AppLogic%2BFTContentServer?pagename=Futu reTense/Apps/Xcelerate/Render&c=TDDArticle&cid=TDDRORVITHC&preview=true, consisting of both equity and convertible debt from existing investors, led by San Diego communications company Qualcomm Inc. 2/01/01 Bell Canada International terminates agreement with VeloCom to sell Brazilian interests in the local exchange carriers, Vesper SA and Vesper Sao Paulo SA 3/13/01 Brasil Telecom Participacoes is interested in acquiring part of its rival, Vesper, but has made no offer yet. Bell Canada International and VeloCom are the principal share holders of Vesper, which said in February it would have to lay off workers and scale down operations Source: The Deal Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. India: Leveraging marketing PR to build business and brands 04/12/2001 Business Line (The Hindu) Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - Asia Intelligence Wire IN 1995 Microsoft launched its Windows 95 software. No paid ads had appeared for Windows 95 by August 24, 1995, the official launch day. Yet Windows 95 was already well known to consumers. The Wall Street Journal estimated that 3,000 headlines, 6,852 stories and over three million words were dedicated to Windows 95 from July 1 to Aug 24, 1995. By the end of the first week, US sales alone were $108 million, an outstanding achievement for a $90 product. In effect, more than one million copies of Windows 95 were sold before advertising began. This landmark marketing PR activity even finds mention in Philip Kotler's Marketing Management Millennium edition. Starbucks Coffee net revenues grew more than 500 per cent in less than four years and the brand became a household word through the use of PR before the company ran its first advertising campaign. The Sony Walkman is one of the most successful consumer electronics products, which initially was supported by a global PR campaign and no consumer advertising. Such examples underline the importance that brand or marketing PR has assumed today. As competition intensifies and marketers innovate to find new ways of connecting with their consumers, new communication and consumer contact tools are spawned to help build businesses and brands. Marketing or brand PR can be defined as "A cost-effective, targeted communication process that leverages news media and other communication vehicles to enhance reputation and create "compelling interest and purchase intent" amongst key stakeholders for a brand. Comments Shailesh Jejurikar, Marketing Director, Procter & Gamble: "Marketing PR is slowly coming into its own as a valuable marketing tool. It is being used to build awareness, increase share of voice with consumers and drive credibility of a product message to a focused target audience." There are five drivers of marketing PR: * Consumer awareness and trial are increasingly linked to marketplace excitement about a product. So when the buzz is big about a product, it enhances awareness and purchase intent amongst consumers. The Microsoft example cited above was a result of attention grabbing publicity efforts by Microsoft's PR team. Microsoft hung a 600 foot Windows 95 banner from Toronto's CN tower. The Empire State Building in New York was bathed in the red, yellow and green colors of Windows 95. Microsoft paid the The Times in London to distribute free its entire daily run of 1.5 million copies. The lesson to learn: Good advance PR can be much more effective than crores of rupees of advertising. * Consumers are increasingly looking for credible third party endorsement to help them make the right purchase decisions. Influencing the influencers is defining business success. So when a columnist of a reputed beauty magazine recommends a particular beauty care product it makes an impact on consumers. It should come as little surprise to you that every title recommended by Oprah Winfrey's Book Club has become an instant bestseller, selling more than one million copies. * Business is built when an organisation or brand has a loyal consumer base. It is far easier and costs far less to keep an old consumer than to get a new one. This is essentially the reason why a host of companies embark on several 'relationship' or loyalty programmes. In the US this concept even extends to companies working on campus to develop student ambassadors for their brands. * Awareness and trial are driven by a higher success rate of contact with the target consumer. In this, marketing PR affords some outstanding advantages. We can literally choose today an accurate vehicle to reach a particular target consumer. So Nike can use PR intelligently to target the sports enthusiast or Ariel can go the consumer magazine route to target the housewife. Beyond news media a host of other marketing PR tools exist - the use of exhibitions, events, seminars, contests and so on. * Cost efficiency drives any marketing equation. Marketing PR ensures a lower cost per thousand contacts than most other mediums with the added benefit of credibility. Comments Sunil Gautam, CEO, Hanmer & Partners, a Mumbai-based communications consultancy: "Marketing PR is a highly cost-effective tool that can facilitate sustained brand contact with target consumers. Body Shop for example has been built to a very large extent by Marketing PR, which has established it as one of the top five cosmetics names globally. In fact, corporates are increasingly turning to us for PR programmes that are linked to building awareness and driving trial for their brands. Today close to 60 per cent of all our clients' PR spends are in marketing PR." Several classical instances abound internationally of marketing PR, but I would like to share two examples that stand out in the Indian context. One of the ablest executions of marketing PR was perhaps the Coca-Cola 'Giant Best-of-Luck-India Cricket Bat' PR campaign. In perhaps the first realisation of cricket being the way to a consumers heart in India, Coca-Cola conceived an ambitious marketing PR campaign that focused on wishing the Indian cricket team the very best for the 1996 World Cup. As the cornerstone, Coca-Cola created a 21-foot long cricket bat that toured across key cities in India where celebrities and cricketing legends kicked off public signature campaigns on the bat to cheer India on to victory. From an inauguration of the giant bat by Sunil Gavaskar in Delhi to signatures on the bat in Mumbai by none less than the esteemed Eknath Solkar, Polly Umrigar and the victorious 1983 Indian cricket team, and M.L Jaisimha and P.R. Mansingh in Hyderabad, the bat exploded across the countryside in a Coca-Cola wave as thousands of consumers lined the streets to sign on the bat. From chief ministers to housewives, aged and handicapped to kids, all wanted to sign on the giant bat. That was not all. The company also produced a special music cassette with a 'best of luck India' theme song sung by music legend Asha Bhosle and Hariharan. The cassette was distributed free at the venues that the Coke bat toured further creating marketplace excitement around the campaign. News media, equally passionate about cricket gave the bat and Coke outstanding editorial space in their publications. Multiple TV channels did special features on Coca-Cola's giant Best-Of-Luck-India bat campaign. At every single venue the bat was accompanied by sampling of Coke to thousands of thirsty consumers. In a massive culmination of consumer goodwill behind the bat, Coca-Cola finally presented the giant bat, crammed with seven lakh signatures to the captain of the Indian cricket team of 1996 in Calcutta at the Salt Lake stadium. Comments Jimmy Mogal, currently Regional Vice-President, Corporate Communications, Enron India, and then Senior Manager, External Affairs, Coca-Cola India: "The Coca-Cola giant Best-of-Luck-India bat campaign was a marketing PR innovation that enabled us to connect with our consumers while leveraging a groundswell of support for the country. It was perhaps the critical first execution of Coke's sports activation campaign which laid the foundation for Coca-Cola today becoming almost synonymous with cricket." Reminisces Hemant Kenkre, currently Director, Corporate Communications, MTV India, and head of the consultancy team that managed the campaign in 1996: "In India cricket is like religion. Through the Coke Best-of-Luck-India cricket bat we struck a chord with consumers across the country. The campaign provided the man on the streets a means of getting involved in India's quest to win the World Cup and provided Coca-Cola with a great means of connecting with thousands of consumers." While India failed to keep the Cup home, Coca-Cola surely scored with consumers, leveraging a tremendous wave of positive sentiment and consumer involvement behind the bat for their brand Coke. That summer saw the beginning of Coca-Cola's ongoing relationship with the Indian consumer through cricket. If the Coke Best-of-luck-India campaign could be recognized as one of the earliest and largest marketing PR campaigns, then the Campaign that launched P&G's Whisper Ultra sanitary napkin in early 2000 must rate among the most focused. In end-1999, the company had decided to launch Whisper Ultra - P&G's superior sanitary napkin globally. However, at the time, P&G's competition was aggressively pushing low-priced sanitary napkins and given the price premium of Whisper Ultra, the PR campaign had the difficult task of highlighting the unique benefits of Ultra with consumers sufficiently to help build a suction for the product. P&G conceptualised an ambitious marketing PR campaign focused around two key messages: * Ultra is a revolutionary new product, thanks to its breakthrough technology * Ultra is five times thinner than ordinary napkins yet affords better performance P&G knew that Whisper Ultra's core target audience was teen girls across the top cities in India. But for a product at this cost, trade and news media were equally critical to trial for the brand. News media in particular needed to be fully convinced of its superiority, its benefits for them to support Ultra's price premium. Armed with this insight P&G kicked off its "smaller yet more powerful Ultra revolution" campaign with a set of three teaser items being sent out to opinion leaders and news media at 3-4 day intervals. The three teasers - a calculator v/s an abacus; a CD-ROM compared to three MTNL telephone directories and last of all an invitation to witness the revolution of "smaller but more powerful" at a premier mass communications institute in Mumbai all aroused tremendous curiosity in media. In a tactical move to impact the core target audience for Whisper Ultra, P&G involved the students of the institute to hold a press conference as a learning exercise for them on the college campus. This provided not just a valuable learning opportunity for budding journalists and PR practitioners but ensured added newsworthiness through the first-ever brand launch on campus. This created a tremendous buzz both with the young girls and with news media who turned up (despite a transport strike in Mumbai) to witness this unique event. Says Nandini Sen of the class of 2000 that worked on the Ultra conference and currently Account Manager, Abacus Integrated Communications: "The Whisper Ultra revolution took over our lives for an entire week as we prepared for the launch and ever since, the lady members of our class have never ever used anything but Ultra. It gave me a personal insight into a direct to consumer marketing PR campaign that really built equity for Whisper Ultra." To impact trade and involve employees who needed to champion the benefits of Ultra, P&G created the Whisper Ultra Employee Trade Convoy as the next leg of the PR campaign. The concept was simple - involve every single employee in P&G s Mumbai offices in a massive Ultra vehicle convoy and spread out in Mumbai along different routes to cover 6,000 retail outlets and place 50,000 packs of Whisper Ultra in markets in under 12 hours!!! This had never been done before. Armed with special product knowledge training and in resplendent blue 'Ultra Revolution' T-shirts and Ultra branded cars, enthusiastic employees took Ultra into the market. News media rode on the Ultra convoy and captured this unique moment of Ultra being rolled out by employees in retail outlets in a barrage of media exposure over the next few weeks. In the last phase of the campaign, P&G made contact with top women celebrities in Mumbai and sampled Whisper Ultra with them. The response was fantastic - positive feedback from a number of women celebrities sampled. Comments Jejurikar, "The marketing PR campaign provided a kickstart to the launch of Whisper Ultra. Trade also supported the programme enthusiastically seeing the suction that the product was creating through the barrage of news. It proved to us yet again that consumer awareness and trial are increasingly being driven by marketplace excitement about a product." In a year from launch Whisper Ultra already comprises over 20 per cent of the Whisper franchise. Even today the launch of Whisper Ultra continues to be referred to by media as one of the most outstanding activities that took place in 2000. Concludes Enron's Mogal: "There are some unmistakable benefits that marketing PR delivers that are just too difficult to ignore. The credibility of media exposure, cost-effectiveness, consumer contact and influencing ability all help build a brand. Net, we know now that marketing PR impacts business. As long as it continues to do that, this tool can only achieve increased importance." Sony, Microsoft, Coke and P&G all seem to be proof of that. The author is Senior Manager, Public Affairs, Procter & Gamble (India), holding additional responsibility for brand PR and media relations, P&G ASEAN-Australasia-India MDO. - ANTHONY ROSE Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. India: Dabhol impasse 04/12/2001 Business Line (The Hindu) Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - Asia Intelligence Wire SINCE SECRECY HEAVILY shrouds the recommendations made by the Madhav Godbole Committee - set up by the Maharashtra Government in early February to review the Dabhol Power Company (DPC) project - the details of the report are not yet known. However, the little that has come out strongly confirms the assessment made earlier by many independent analysts that the entire project has been flawed right from the beginning with the brunt of the resultant burden being shouldered by the Maharashtra State Electricity Board (MSEB) directly, and the State Government and the Centre indirectly. Among other things, reports indicate that the five-member committee has unanimously recommended that the power purchase agreement (PPA) be renegotiated principally to bring down the tariff charged by DPC. Further, it has been stressed that the tariff should not be linked to a fluctuating dollar and that ways should be found to lower the cost of loans taken by DPC, which is reflected in the high tariff. Clearly, the Godbole Committee has said nothing that is not already known which, in a sense, reduces the impact it can have on the exercise of finding a way out of the impasse. And yet, considering the current state of the controversy, the committee's report seems to be the only straw available which can be clutched by the parties involved to find a solution, even if of the patchwork variety. Admittedly, the dispute has formally reached the stage of conciliation which, if attended by failure, will lead to arbitration proceedings. But conciliation, by its very nature, involves intense negotiations, and it is conceivable that the Godbole Committee report can provide useful ideas which can serve as talking points. In fact, DPC should not have any problems on this score because, in early March, the company's chief executive officer and president, Mr Neil McGregor, made it clear (in an interview) that, despite the fact that the Centre did not have a "representative" on the committee, his company would "still support" it and would "help" it to "carry out its mandate". Of interest is the DPC's stand on a revision of the PPA which, interestingly, does not appear to be inflexible. In early February, Enron India's Managing Director, Mr Kay Wade Cline, made it clear that DPC was agreeable to amending the PPA with the MSEB so that "a change of buyer was possible". (In early March, the Godbole Committee was reported to have discussed the feasibility of lifting of DPC power by "licensees" such as TEC and BSES. In early December, the Maharashtra Government had underscored the idea that DPC power could be bought by National Thermal Power Corporation and the Power Trading Corporation.) A second point reportedly made was that, as regards the second phase of the DPC project, in return for the "change of buyer" concession, the company would prefer "a waiver of the penalty clauses in the contract in the event of non-functioning of its units for whatever reason". The interesting point here is that the Rs 400-crore penalty slapped by the MSEB on DPC on February 28 related to "technical problems in the supply of power" with regard to the project's first phase. Is there a hint here that the DPC's position is somewhat insecure in the specific dispute featuring the Centre's refusal to honour its counter-guarantee for MSEB payments for December and January on the ground that the penalty payment be made first by the DPC? Since it is widely recognised that renegotiating the PPA must be the central focus of any effort to make the two phases of the DPC project contribute effectively to the national power economy (unilateral scrapping of the 20-year PPA would entail a compensation of "beyond Rs 35,000 crore at the present rate"), it stands to reason that, from New Delhi's point of view, it is faced with Hobson's choice, namely, making alternative arrangements to lift DPC power and sparing an ailing MSEB from repeated defaults in payments. On its part, the least that DPC can do is to offer a reduction in tariff which, among other things, will reduce the current (justified) opposition from entities such as PTC and NTPC to lifting costly power. Everything, however, hinges on the seriousness of Enron - the major shareholder in DPC - to continue operations in India, which itself is now open to question in view of the political force majeure clause invoked by DPC to protect its rights and those of its shareholders. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Turning investors away from India Prem Shankar Jha 04/12/2001 The Hindu Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - Asia Intelligence Wire The news that Enron's Dabhol power company has invoked the force majeure (that is, circumstances beyond its control) clause in its contract with the Maharashtra State Electricity Board, to justify a possible termination of power supply to the MSEB, has provoked a yawn from the intelligentsia of the country. The dispute has been going on for months and has therefore lost its novelty. Despite all threats and counter-threats, Dabhol continues to pump out power. In any case, with Maharashtra awash with power because of the five-year industrial recession, who cares a damn about the power supplied by Dabhol. But has anyone spared a thought about the damage that Dabhol's action will do to the Indian economy, and the even greater damage that will ensue if India challenges Enron in an international court of arbitration and loses? The answer is short but not sweet. It will turn India into a destination to be avoided by foreign companies. Enron is not invoking the force majeure clause because an earthquake has damaged its power plant or a war has interrupted the supply of fuel. It is doing so because the governments it has to deal with are using their sovereign status to change, unilaterally, the terms of their contract with the company. In support of its contention it has cited the statements and actions of not only the Government of Maharashtra and the MSEB, but also the Government of India. These, it claims, have left it with no sovereign body within the country to whom it can turn for the enforcement of contract. As a result it has been left with no option but to invoke the force majeure clause. Though it has advised against any attempt to cancel either phase of the DPC project, the report of the Godbole committee has strengthened Enron's case, because it has recommended yet another renegotiation of the contract between MSEB and Dabhol. There are many in India who would regard an attempt to defend Enron as an act of disloyalty. But the fact is that Enron's case is well-nigh unassailable. The MSEB first refused to pay its bill for November 2000 but relented when Enron invoked the Central government's counterguarantee. But the MSEB again refused to pay the bill for December. When Enron again invoked the counterguarantee the MSEB responded by slapping Enron with a demand for Rs. 401 crores of 'penal rebate' because the Dabhol company was unable to supply power for a few hours on January 28. Since then MSEB has refused to pay the bill for January. When Enron went to the Central government for payment of the December bill, New Delhi told it to settle the dispute over the penal rebate first. This was the action that forced Enron to invoke the political force majeure clause. Were the case to go to court, it is difficult to see how any judge or arbitrator would accept Maharashtra's penal rebate claim. By linking the disputed issue of rebate with that of non- payment of a regular monthly bill, the Centre too has in effect refused to honour its counterguarantee. One can examine what lies behind the MSEB's unwillingness to pay. To put it simply, the MSEB has been forced into bankruptcy by the populist electricity pricing policies of a succession of governments. Taking old plants with new, Maharashtra's generation cost is a little over Rs. 2 per unit. But it is able to recover only a part of this cost because of low tariffs on power sold to the rural sector, and a 33 per cent transmission and distribution loss, of which more than two thirds is outright theft, to which the State government has turned a blind eye. Till 1996-97 Maharashtra raised its average tariffs by a few paise per unit every year. But in 1997-98 and 1998-99, that is, in the two years before Dabhol came on stream, the government did not do even that. As a result, while the addition of a new plant pushed up the average cost of generation the average tariff realisation remained static and power theft actually increased. To top it off, the Vilasrao Deshmukh government has been condoning payment defaults by the score, further reducing the MSEB's income. India is not exactly the foreign investors' darling even now. A recent study of foreign direct investment plans by the 1000 largest global companies, carried out by the international consultants A. T. Kearney, showed that very few companies that were not already in India had any intention of coming here in the near future. The reason cited by a senior executive of the company was the absence of a 'suitable investment environment'. Until this was changed for the better, he said, India had little hope of meeting its target for FDI inflows. The Enron saga highlights what is keeping foreign investors away from India. It is not simply that the sovereign state of India (Central government) is tacitly abetting a renegotiation under duress of an already signed contract for the second time, but that there is, in effect, no sovereign state in India. The writ of the Centre does not run in the States; that of the State government does not run with its parastatals; and that of none of these organisations runs with the bureaucrats. The time has come for Indian politicians to learn that nothing comes free. For the past ten years each and every State government has looked more and more frantically for ways of duping private investors into investing in power generation without having the nerve to raise power rates to pay them their dues. Instead, as in the Dabhol case, they have blamed predecessor governments, corrupt Central politicians and rapacious foreign investors - everyone, in short, except themselves. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Executive Pay (A Special Report) Hedging Their Bets By Joann S. Lublin 04/12/2001 The Wall Street Journal R1 (Copyright © 2001, Dow Jones & Company, Inc.) [The lush riches of the past few years have faded quickly in the souring market. but some CEOs are starting to win pay deals that promise at least partial protection against a longer downturn.] The runaway executive-pay train has hit a formidable barrier: the stock-market downturn. And the jolt hurts. Take Steve Jobs, co-founder of Apple Computer Inc. In July 1997, he returned to run the Cupertino, Calif., personal-computer maker -- for $1 a year. In January 2000, grateful board members recognized his role in Apple's recovery by awarding him 20 million stock options exercisable at $43.59 a share (reflecting a subsequent stock split). Today, with Apple shares depressed again, none of his options are worth a dime. Mr. Jobs and countless other corporate titans have seen their chances of reaching lush paydays shrink considerably. At the same time, the economic slowdown is in
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