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Enron Mail |
Hawk vote for California firm unanimous
Houston Chronicle, 05/15/01 INTERNATIONAL ECONOMY: Enron may cut stake in Gulf gas project Financial Times; May 15, 2001 JAPAN: Enron says high power rates costing Japan. Reuters English News Service, 05/15/01 Japan Must Speed Up Pwr Sector Dereg To Lower Rates-Indus Dow Jones Energy Service, 05/15/01 SINGAPORE: ANALYSIS-No Asia fallout seen from Enron's India woes. Reuters English News Service, 05/15/01 Saudi Won't Announce Winners Of Gas Projs Tue - Report Dow Jones Energy Service, 05/15/01 MSEB refutes allegations by Enron, DPC The Economic Times, 05/15/01 Saudi Supreme Petrol Council meeting to decide on huge gas project bids Business Recorder, 05/15/01 May 15, 2001 Houston Chronicle Hawk vote for California firm unanimous Montgomery Watson pegged for water plant By MARY FLOOD Copyright 2001 Houston Chronicle The Houston Area Water Corp. voted unanimously Monday to grant a $92 million contract to a California-based firm to design, build and operate a Lake Houston water plant. City Council soon will receive the contract for its approval. The administration of Mayor Lee Brown was believed to have favored Montgomery Watson's chief competitor, Azurix Corp., an arm of local energy giant Enron Corp. The water corporation, known as "the Hawk," voted 5-0 to grant the contract. If approved by City Council, the contract would give the company 2 1/2 years to get the plant up and treating raw lake water. It was initially expected that the plant, which will be designed to handle 40 million gallons of water daily, could cost as much as $150 million to build. The Hawk board asked the vying companies to modify their bids several times, and that caused the competitors to lower their prices. The contract calls for the Hawk to pay a monthly operating fee of $157,000 when the plant is working. And Montgomery Watson could be required to construct, at the Hawk's option, an additional 40 million-gallon-a-day plant expansion for $32 million. But the details of how the plant will be financed have not been determined. The Hawk board discussed borrowing money using the city's credit rating on a short-term basis until it could develop long-term financing by selling bonds itself. The initial customer for the water is the city of Houston, which would repay the Hawk the cost of producing the treated water. The hope is that the plant eventually will provide water to other entities in the area as well. This plant is part of an area plan for the treatment of surface water that could cost about $2 billion to implement. City Councilman Carroll Robinson, who heads the council infrastructure committee, said he expects to hold two hearings about the contract. One would focus on how the Hawk board picked Montgomery Watson. A series of three recommendations from City Hall staff recommended Azurix. Hawk board members said Montgomery Watson's prices were lower by millions and that Azurix plans to sell Azurix North America, the body that would oversee this contract. The second City Council hearing will focus on financing, Robinson said. "In my mind, how the city will pay for this construction is as important as who will do it," Robinson said. The Hawk board, appointed by Brown and approved by City Council, has been heavily lobbied by the contenders for the job. Because City Council does not have to follow the Hawk recommendation, new pressure has begun at City Hall. The third bidder, U.S. Filter Operating Services, part of a French company, has been heavily lobbying some council members to switch the contract to it. Some members of the Azurix team -- people at companies that would have gotten work had Azurix gotten the job -- have written letters complaining about the Hawk procedures as well. John M. Stokes, president and chief executive officer of Azurix, penned the first such distressed missive. In April, he wrote to Hawk board Chairman David Berg complaining of the "deleterious economic effect" on Azurix of the board's decision to negotiate with Montgomery Watson. He requested that Berg answer a series of questions in writing explaining why Azurix didn't get the job. Berg didn't do so. Although that letter had a threatening tone, Amanda Martin, president of Azurix North America, said no threat was intended and the letter simply indicated how upset the team was when it first learned Azurix wasn't chosen. Azurix was the rumored front-runner for months. INTERNATIONAL ECONOMY: Enron may cut stake in Gulf gas project Financial Times; May 15, 2001 By ROBIN ALLEN There are growing fears that Enron, the US power company, may withdraw or sharply reduce its stake in the Gulf's Dollars 10bn Dolphin gas export scheme, one of the most ambitious of its kind in the region. Enron officials have refused to comment on reports that the company is reconsidering its position as a minority shareholder in Dolphin Energy, in which France's TotalFinaElf (TFE) also has 24.5 per cent. However, one industry specialist said yesterday Enron was talking of "selling" at least part of its shareholding. The threat raises critical issues for western companies seeking to profit from accessing state-owned oil and gas in the Gulf. The project was launched two years ago by Abu Dhabi, the wealthiest of the United Arab Emirates, to promote energy security for the Gulf. But Abu Dhabiis seen as a prime example of a state where prestige and opaque domestic political considerations can be as important as profitability in such a large-scale project, especially in the early stages. Dolphin's majority owner is UAE's Offsets Group (UOG), an offshoot of Abu Dhabi's defence procurement industry. In March, Dolphin, a relative newcomer on Abu Dhabi's energy scene, signed a Dollars 3.5bn agreement with Qatar to exploit and pipe up to 2bn cubic feet a day of gas from Qatar's prolific North Field to Abu Dhabi. Qatari gas is the source of Abu Dhabi's long-term energy strategy, and Enron 's role was to develop, at a profit, the downstream section, primarily to construct and lay the 350km pipeline from Qatar to Abu Dhabi. Enron is not a specialist in energy production or pipeline fabrication, but one of its main aims, according to one analyst, was to gain access to the gas accruing to it from the Qatar deal and then trade it on. Sheikh Zayed Bin Sultan al-Nahyan, Abu Dhabi's ruler, disapproves of commodity trading. "If the Qatar-UAE gas deal was going to be profitable" for western energy majors, asked one senior western diplomat, "then why are the serious US energy majors not involved?" For more reports see www.ft.com/globaleconomy Copyright: The Financial Times Limited JAPAN: Enron says high power rates costing Japan. 05/15/2001 Reuters English News Service (C) Reuters Limited 2001. TOKYO, May 15 (Reuters) - A senior executive of U.S. energy giant Enron Corp said on Tuesday that Japan could save an estimated four trillion yen ($32.45 billion) in annual costs if electricity rates were cut to the average of members of the Organisation for Economic Cooperation and Development (OECD). "If you were to pare Japanese industrial electric rates to the OECD average...savings to all...customers would be about four trillion yen per year," Enron Corp Vice President Steven Kean told a seminar in Tokyo. Speaking at a seminar on electric power deregulation, Kean said that indigenous factors such as steep land prices and a lack of natural energy resources were often blamed for Japan's high electricity rates. But he said these factors were not sufficient to explain Japan's high electricity rates. A report commissioned by Enron Japan Corp showed that in 1998 Japan's electricity rates for industrial users were 16.81 yen per kilowatt hour (kWh) compared to a second highest rate of 12.44 yen in Italy. Japan's business sector has expressed concern at the nation's high electricity rates, saying that it blunts their competitive edge on the international market. Kean also drew parallels between Japan, in the midst of deregulation, and California which has been suffering from a power shortage since deregulating its market in 1998. These included the length of time that authorities in Japan took to issue permits to allow the construction of new power plants, he said. "The regulatory structure in Japan is very strict...just like in California," Kean said. North America's biggest buyer and seller of electricity, Enron gained its first foothold in Japan in 1999 when it established affiliate E Power Corp. In April of last year, it set up subsidiary Enron Japan Corp. Kean urged Japan to step up measures to open up its power market, a process he said held many benefits. Japan is in the process of deregulating its power market. Since March last year, large-lot consumers have been free to chose their suppliers. The measure liberalised an estimated 30 percent of the power market and ended Japan's 10 power utilities regional monopoly. However, industry watchers note that there have been very few new entrants and that further deregulation measures must be taken for rates to fall. The Japanese government is due to review the process in 2003. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Japan Must Speed Up Pwr Sector Dereg To Lower Rates-Indus 05/15/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) TOKYO -(Dow Jones)- Japan should accelerate the ongoing electric power sector deregulation to fully liberalize the retail market, in order to bring down the country's high power rates while ensuring stable power supply, experts said at an industry seminar Tuesday. The pressure is mounting for Japan's 10 power utilities, which have long enjoyed regional monopolies until a year ago, to become cost- effective and performance-conscious after the government partially liberalized the retail power market in March 2000. However, the current scheme has so far failed to lure a large number of potential entrants because of the high transmission fees they must pay to conventional power companies. "What happened in overseas (power industries) suggest that the liberalization in Japan wouldn't only lower power rates but would also contribute to stable power supply significantly," said Tatsuo Hatta, professor of economics at the University of Tokyo. Compared with the U.S., Japanese electricity charges are typically twice as much for households and three times higher for industrial users. "There is a large discrepancy (in rates), and that is why we should hurriedly implement the liberalization," Hatta said. He said Japan's steep seasonal peak-load curve - one of the reasons the power companies cite as the cause of high power rates in Japan - can be altered once the prices are liberalized. "If power rates are set higher during those peak hours following the liberalization, users would refrain from using electricity." Steven Kean, executive vice president of the U.S. energy major, Enron Corp. (ENE), told the same seminar that Japan's power costs remain on the upward trend despite cost reductions in Europe and the U.S. He said Japan could achieve a cost-saving of Y4 trillion a year if its power prices fall to levels in Organization for Economic Cooperation and Development countries following the liberalization. Hatta and Kean were speaking at the seminar called "Reassessing Power Deregulation," which was co-sponsored by the Houston-based Enron. Hatta of the University of Tokyo said "it's very wise" that Japan has begun the deregulation with the "bilateral supply, or trade" system under which suppliers and users clinch deals directly. Under the current reforms, the sector for high-volume, large-lot industrial and commercial users - which represents only 30% of the Y15 trillion market - is opened to free competition. The government is to review the partial deregulation by 2003 for further deregulation. Japan should then introduce spot electricity trading such as futures and derivatives to alleviate risks of complicated price volatility for power providers, Hatta said. Hatta and other experts attending the seminar said further deregulation should destroy the systems that have supported the country's high power rates - regional monopolies and the fair rate return method, under which all costs are levied on prices. "There is absolutely no need to set the same (power) prices" nationwide, Hatta said. Power companies should make the opaque transmission fees transparent and set them accordingly with regional demand, he said. Yoshinori Omuro, vice president of Takashimaya Co.'s (J.TKA or 8233) management department, acknowledged the slow progress of the deregulation. Takashimaya, a major department store operator, has shifted to Diamond Power Corp., a wholly-owned subsidiary of Mitsubishi Corp. (J.MIB or 8058) as its power supplier at two of its 18 stores, with "strong back-up" from the Ministry of Economy, Trade and Industry. "Despite the deregulation, the situation isn't where we can negotiate with power utilities to reduce (electricity costs). We have no choice but select independent power providers," Omuro said. -By Maki Aoto, Dow Jones Newswires; 813-5255-2929; maki.aoto@dowjones.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. SINGAPORE: ANALYSIS-No Asia fallout seen from Enron's India woes. By Cameron Dueck 05/15/2001 Reuters English News Service (C) Reuters Limited 2001. SINGAPORE, May 15 (Reuters) - A bitter payment battle between U.S. energy giant Enron Corp and authorities in India will serve as a reminder to foreign investors of the risks of putting money into emerging markets, analysts and bankers say. But it is unlikely to deter the flow of money into Asian electricity projects. The pace of power privatisation and deregulation varies too greatly from country to country for the controversy in India to chill investment activity across Asia, they say. It does, however, underline the risks companies take despite some security offered by government payment guarantees. "Independant power producers (IPPs) will see Enron and Dabhol as an illustration of the dangers and possible risks of investing in an emerging market, but it would be going too far to say that other markets will be adversely affected because of it," said Philip Jackson, a banker with JP Morgan Chase in Hong Kong. Enron is on the verge of bailing out of an almost completed $2.9 billion power project because of a decade-long dispute with the troubled Maharashtra State Electricity Board (MSEB) over pricing and unpaid bills. MSEB has fallen about six months behind in paying for electricity supplied by Dabhol Power Co, the Indian unit of Houston-based Enron. The utility said last month that it had repaid about $28.6 million of the $48.2 million outstanding. The board of Dabhol has authorised the management to stop selling power to MSEB if the dispute is not resolved. Local media reports earlier in May said Enron was pulling executives out of India and relocating them elsewhere. Dabhol has invoked payment guarantees issued by the state and federal governments, but neither has stepped forward to foot the bill. GOVERNMENT GUARANTEES Banks often demand sponsor or host government guarantees to lessen risk before financing energy projects, which have long lead times and high capital expenditure. Governments are keen to provide guarantees to attract foreign investment. Guarantees may cover shortfalls in production, default of customer payment or even changes in market conditions. But such guarantees do not always provide the desired safety net and analysts said the legal systems in many emerging nations are simply not efficient enough to back these agreements. Enron's experience in India highlighted the risks of power investment in emerging countries and the unpredictability of government guarantees, they said. "Guarantees like that are painful for companies and for polititicians they're even more so," said John Vautrain, vice president at Purvin & Gertz in Singapore. "If the call is substantial, it's going to be bad." Robert Booth, director of the Bardak Group in West Perth, Australia, was more pessimistic and reckoned some companies might take a lead from Enron and shy away from emerging Asian nations. "Investors will pull back from these countries until they see that there is a properly functioning legal system that gives them assurance if they have to call in a government guarantee," Booth said. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Saudi Won't Announce Winners Of Gas Projs Tue - Report 05/15/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) MANAMA, Bahrain -(Dow Jones)- Saudi Arabia's supreme petroleum council is expected to hold a meeting Tuesday evening, but it's unlikely to declare its choice of international oil companies to participate in downstream gas projects, Arabic al-Hayat newspaper reported. The newspaper quoted sources at the government's technical committee overseeing the proposed projects as saying that the committee hasn't completed its final report concerning the oil companies' offers. "Studies and recommendations haven't been completed yet and they need some time in order to present the project at its final structure, attached with recommendations from the technical committee," the sources said, according to the newspaper. However, the oil council "might endorse some balances concerning the offers," the newspaper said but didn't elaborate further. Sources in Saudi Arabia have said the oil companies were expected to be notified soon on whether they have been selected to participate in the gas projects. Saudi Arabia invited international oil companies in October 1998 to participate in proposals for downstream gas projects and upstream gas enhancement. After a series of meetings between the negotiating committee and the oil companies in the past year, several companies were shortlisted for each project. The companies shortlisted for Core Venture 1, the $15 billion South Ghawar Area Development were Royal Dutch/Shell Group (RD), BP PLC (BP), Exxon Mobil Corp. (XOM), Chevron Corp. (CHV), Total Fina Elf S.A. (TOT) and ENI SpA (E). For Core Venture 2, the Red Sea Development, Enron Corp. (ENE) and Occidental Petroleum Corp. (OXY) are bidding jointly and Exxon Mobil, Total Fina Elf, Marathon Oil Canada Inc. (T.M), Shell and Conoco Inc. (COCA) were shortlisted. And for Core Venture 3, the Shaybah area, Total Fina Elf, Conoco, Phillips Petroleum (P), Enron and Occidental, Exxon Mobil, Shell and Marathon Oil were shortlisted. -By Abdulla Fardan, Dow Jones Newswires; 973-530758; abdullah.fardan@dowjones.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. MSEB refutes allegations by Enron, DPC Girish Kuber 05/15/2001 The Economic Times Copyright (C) 2001 The Economic Times; Source: World Reporter (TM) MUMBAI THE MAHARASHTRA State Electricity Board on Monday in a letter to Enron refuted all allegations made against it by the company while invoking the political force majeure. Enron-promoted Dabhol Power Company on April 9 had invoked the political force majeure clause. DPC had indicated it was not in a position to fulfil its contractual obligations to MSEB because of political circumstances beyond its control. MSEB in a reply on Monday denied Enron's allegation of 'political circumstances' and said there was no reason why it should have felt insecure. "Such a step was necessary under the Power Purchase Agreement and related security documents to notify the board of 'certain events and to enforce our rights'," DPC had said. However, according to MSEB, such a step by DPC was uncalled for. For DPC, invoking the force majeure clause was necessary as 'certain events occurred that are beyond the reasonable control of the affected party (DPC)'. MSEB has expressed surprise in a letter on Monday. The energy major had dispatched the notice to MSEB, as an affected party, which had been subjected to "concerted, deliberate and politically motivated actions of state government, the Government of India and the Board, which will have a material and adverse effect on DPC's ability to perform obligations under PPA". "Given the cumulative effect of these political actions, DPC determined that the political force majeure declaration is an appropriate mechanism for providing that notice, and that is an appropriate and necessary step in protecting DPC and its stakeholders' rights," the statement added. However, for MSEB this was 'yet another move' from Enron to avoid paying Rs 402 crore penalty the MSEB has slapped on it for failing to supply electricity as per the agreement. MSEB, in today's letter, reiterated its suggestion to adjust December 2000 and Januray 2001 bills, against the Rs 800 crore penalty it has slapped on Enron for not supplying electricity as per demand. MSEB has refused to pay DPC's December 2000 and January 2001 bills worth Rs 213 crore. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Saudi Supreme Petrol Council meeting to decide on huge gas project bids 05/15/2001 Business Recorder Copyright (C) 2001 Business Recorder; Source: World Reporter (TM) RIYADH : Saudi Arabia's Supreme Petroleum Council (SPC) is holding meetings on bids by 12 foreign oil majors for three giant gas projects and should take a decision shortly, a top oil official said on Monday. "The SPC has been discussing recommendations by the negotiating committee about the bids, and the meetings will continues executive president of the committee Abdulrahman al-Suhaibani told AFP. "It is not clear yet when the discussions will be completed and wham a final decision will be issued," added Suhaibani, who expected it to be soon. The meetings began two weeks ago. A senior foreign oil executive in the kingdom expected an answer to his firm's bid by the end of this week or the start of next week. "The SPC is holding a crucial meeting today (Monday) and tomorrow. bin were told we would get an answer to our proposals either this weekend or early next week," the executive told AFP. The negotiating committee made detailed recommendations after meeting with the representative of 12 international oil companies (IOCs) which are bidding for the three multi-billion projects, the executive said. The committee, comprising ministers who are also SPC members, is headed by Foreign Minister Prince Saud al-Faisal. The gas projects, which would be the first foreign investment in the kingdom's energy sector since nationalisation in 1961, are located in the South Ghawar field near Al-Hufuf in the Eastern Province, Shaybah in the Empty Quarter desert, and the northern Red Sea area. They cover 440,000 square kilometres (176,000 square miles), making it the world's largest area for hydrocarbon investment. US majors Enron and Occidental in a joint bid, as well as Chevron, Conocokilometres, ExxonMobil, Marathon, Phillips and Texaco have been shortlisted for the Saudi projects. Rounding out the list are European firms BP Amoco, Eni, Royal Dutch Shell and TotalFinaElf. ExxonMobil, Shell and TotalFinaElf are in the bidding for all three ventures. The investment involves gas exploration and production, setting up petrochemical industries and power and water desalination plants. The projects, called the natural gas initiative, are to be carried out simultaneously by consortia of two to three firms in cooperation with Aramco, the national oil company, on long-term basis for up to 30 years, the executive said. Aramco has been working to double the Saudi gas network's capacity from the current 3.5 billion cubic feet (105 million cubic metres) per day to seven billion cubic feet (210 million metres) daily in 2004. Saudi Arabia, which sits on top of the world's biggest oil reserves, has proven natural gas reserves of 220 trillion cubic feet (6.6 trillion cubic metres).-AFP Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.
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