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Enron Mail |
California Blame Game Yields No Score --- Probes Reveal Little Evidence
Suppliers Acted Illegally The Wall Street Journal, 05/22/01 Enron Unit Moves to End India Contract For Power The New York Times, 05/22/01 The State GOP Criticizes Davis' Choice of PR Aides Capitol: Legislative leaders call the pair political operatives who are too partisan to represent the state during energy crisis. Los Angeles Times, 05/22/01 BUSINESS DIGEST The New York Times, 05/22/01 World Watch The Wall Street Journal, 05/22/01 IN BRIEF / ENERGY Enron Withdraws from Qatar Project Los Angeles Times, 05/22/01 INDIA: UPDATE 1-Indian state spurred by Enron reopens power deals. Reuters English News Service, 05/22/01 INDIA: India utility may slap 4bln rupee fine on Enron unit. Reuters English News Service, 05/22/01 IXEurope creates a Storm in colocation M2 Presswire, 05/22/01 Power corrupts... The Economic Times, 05/22/01 The Godbole findings Business Standard, 05/22/01 SMARTMONEY.COM: Power Grab Dow Jones News Service, 05/22/01 Malaysian LNG Sales to India Threatened by Enron Power Dispute Bloomberg, 05/22/01 LEADER: India unplugged Financial Times; May 22, 2001 Enron pulls out of venture drilling in Qatar's waters Houston Chronicle, 05/22/01 Enron exploring commodity trading Houston Chronicle, 05/22/01 Plains Resources Gets New Officers Houston Chronicle, 05/22/01 Economy California Blame Game Yields No Score --- Probes Reveal Little Evidence Suppliers Acted Illegally By John R. Emshwiller Staff Reporter of The Wall Street Journal 05/22/2001 The Wall Street Journal A2 (Copyright © 2001, Dow Jones & Company, Inc.) LOS ANGELES -- California may be struggling to keep its lights on, but one thing there is no shortage of is accusations over who is to blame for an electricity crisis that has sent power prices skyrocketing. In recent days, top California officials have stepped up their rhetoric against a handful of merchant power companies, many of them Texas-based, that supply the state with much of its juice. Gov. Gray Davis says companies such as Reliant Energy Inc., of Houston, have engaged in "unconscionable price gouging." Loretta Lynch, president of the California Public Utilities Commission and a Davis appointee, proclaims that a "cartel" of electricity producers has created artificial shortages. Lt. Gov. Cruz Bustamante is backing a bill that would make energy price fixing a felony, and as a private citizen he is suing several major power producers in Los Angeles state court. About half a dozen investigations are being conducted by entities ranging from state legislative committees to the California attorney general's office. So far, these probes -- some of which have been under way for months -- haven't yet yielded either civil or criminal charges. While the energy suppliers are generating "unconscionable profits," the question remains "whether they are illegal profits," says California Attorney General Bill Lockyer, who has offered rewards of as much as hundreds of millions of dollars for information about lawbreaking in the energy business. Mr. Lockyer says he believes his office will eventually file civil charges against suppliers. He would very much like to add criminal counts. "I would love to personally escort [Enron Corp. Chairman Kenneth] Lay to an 8 x 10 cell that he could share with a tattooed dude who says `Hi my name is Spike, honey,'" adds Mr. Lockyer. Houston-based Enron is a major energy-trading company. Like other such firms, Enron has denied wrongdoing in the California market. Mark Palmer, Enron's vice president for corporate communications, said Mr. Lockyer's comment about Mr. Lay "is so counterproductive that it doesn't merit a response." Investigators and academics say there is abundant evidence that individual firms have been exercising "market power." This term is used to denote efforts to influence wholesale-electricity prices, such as by withholding supplies. The California Independent System Operator, or ISO, which manages the state's electric transmission grid, estimates that by exercising market power, suppliers may have added about $6.8 billion to the cost of electricity in the state since early last year. A single firm exercising such power isn't necessarily illegal, says Severin Borenstein, director of the University of California Energy Institute. If a company is a large supplier in the state and "you're not exercising market power, you are not doing your job" on behalf of shareholders, he says. Mr. Borenstein and others say that there are steps that should be taken against suppliers. They note that under federal power law, the Federal Energy Regulatory Commission can order refunds for wholesale prices that are above "just and reasonable" levels. So far, FERC has tentatively ordered California suppliers to make tens of millions of dollars of such refunds, as part of that agency's ongoing inquiry into the California market. Critics of the suppliers and FERC say the refunds should be in the billions of dollars. The power industry, not surprisingly, says there is nothing to accusations of price manipulation or collusion. Executives point to a botched state-utility-deregulation plan that relies heavily on volatile spot-market purchases. Suppliers note that over the past decade, California didn't build enough new power plants to keep up with demand growth. The allegations of manipulation are "a lot of sound and fury and they won't produce anything," says Gary Ackerman, executive director of the Western Power Trading Forum, an industry trade group. Power generators also point to sharp increases in some of their costs, particularly natural gas, which is a major power-plant fuel. This rise in natural-gas prices also has set off a flurry of investigations over possible manipulation. One such case, involving El Paso Corp., Houston, is the subject of probes by federal and state officials. El Paso denies any wrongdoing. While power-industry officials say they have been cooperating with the investigations, law-enforcement officials say they have hit some roadblocks. For instance, Mr. Lockyer's office has gone to San Francisco state court to enforce subpoenas against Reliant, Houston-based Dynegy Inc., and Southern Co. and Mirant Corp., both of Atlanta, after the companies resisted turning over certain business documents they deemed confidential. Investigators have zeroed in on the increased frequency with which plants are going out of service for unscheduled outages. At times, several thousand fewer megawatts of capacity are available than a year ago. A thousand megawatts can power about one million homes. Generators say that this increased "forced outage" rate shows that tight supplies over the past year have required them to run plants, some of them more than 40 years old, for long periods without routine maintenance. This combination has produced more breakdowns. "Plants have been running flat out," says Tom Williams, a spokesman for Duke Energy Co., Charlotte, N.C., which says that its California power plants produced 50% more electricity in 2000 than in 1999. At the same time, during periods of lower demand, the number of unplanned outages often seems to rise enough to keep supplies tight, says Frank Wolak, a Stanford University professor and chairman of the ISO's market surveillance committee. "Clearly, something is going on here." However, he and others say that it is almost impossible to tell why a particular pipe failed or whether such a failure was a legitimate reason to reduce output. Some of the most intriguing evidence to date about forced outages surfaced in a federal case. FERC officials said an investigation had raised questions about whether two major power companies had taken plants out of service in order to reap higher electricity prices. The charges against AES Corp., Arlington, Va., which owns the plants, and Williams Cos., Tulsa, Okla., which markets their output, asserted that those actions allowed the companies to reap an extra $10.8 million in revenue. In one instance, according to case filings, a Williams employee "indicated" to AES officials that his firm wouldn't financially penalize AES for extending an outage at one plant. This conversation, which was voluntarily divulged by Williams, could be an indication of collusion. Williams and AES settled the case without admitting any wrongdoing by paying back $8 million to the ISO and by taking certain other measures. A Williams spokeswoman says the employee who talked to AES was "counseled not to enter into any conversations of that nature" in the future. Another issue raised by the FERC case touched on maintenance procedures. According to the filings, AES stopped doing a certain procedure to keep its plant's cooling system from getting clogged. The clogging of the system was cited as a reason for one of the forced outages. Mark Woodruff, president of the AES unit that operates the plant in question, says the company substituted what it felt was an equally effective maintenance procedure. If someone was looking to keep supplies tight and prices high, changes in maintenance procedures would be an easy way to ensure that plants, particularly old ones, have frequent forced outages, says a senior utility-industry executive. By restricting maintenance resources, he says, an operator can simply allow a plant "to take itself out of service." --- Journal Link: What is California doing to alleviate the energy crisis? See a video report of California State Treasurer Philip Angelides discussing the state's plans, in the online Journal at WSJ.com/JournalLinks. --- Investigations Aplenty In the year since California's energy deregulation plan began resulting in higher prices and even blackouts, a flurry of investigations has gotten under way. Here are the main ones: AGENCY: Federal Energy Regulatory Commission INVESTIGATION: Whether generators are charging more than "just and reasonable" rates as demanded by the Federal Power Act; whether El Paso Corp. used its position as a major natural-gas supplier to the state to illegally drive up the price of fuel used to generate electricity. AGENCY: California Public Utilities Commission and the State Attorney General INVESTIGATION: Whether generators and power traders have acted illegally through collusion or other means to artificially inflate electricity prices. AGENCY: PUC and California Independent System Operator INVESTIGATION: Whether generation plants were shut down for spurious reasons in order to create supply shortages and, thus, to raise electricity prices. AGENCY: California Electricity Oversight Board INVESTIGATION: Whether patterns of bidding and pricing in California's electricity auction indicate collusive or otherwise illegal behavior. Sources: state and federal agencies Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Business/Financial Desk; Section W Enron Unit Moves to End India Contract For Power By SARITHA RAI 05/22/2001 The New York Times Page 1, Column 6 c. 2001 New York Times Company BANGALORE, India, May 21 -- Fed up with its main customer's refusal to pay its bills, the Enron Corporation's Indian power-generating venture served formal notice on Saturday that it would terminate its power supply contract and pull out. The move by the Dabhol Power Company, 65 percent owned by Enron, starts the clock ticking on a six-month notice period before the contract is voided, during which negotiations to settle the dispute are expected. The $2.9 billion Dabhol project represents the largest single foreign investment in India. Separately, Enron said today that it was withdrawing from a pipeline project in Qatar, which would have supplied some gas to Dabhol. The company said that the two steps were unrelated. The Dabhol project has been the subject of a series of wrangles between the company and the governments of India and of the western Indian state of Maharashtra. The state-owned utility company that contracted to buy power from the Dabhol plant has defaulted on some $64 million in unpaid power bills, and has accused Dabhol of charging too much. Dabhol said it was left with little choice but to issue the termination notice after both governments failed to honor their contractual commitments to buy and pay for its output. But in a statement issued over the weekend, Dabhol said it was ''still open to constructive discussion on the solutions.'' The company said a ''lasting and feasible solution'' to the dispute would require that the two governments either honor their obligations to buy Dabhol's power or find other creditworthy buyers to take the power instead. The first phase of the project now generates 740 megawatts of power, and the second phase, adding another 1,444 megawatts of capacity, is scheduled to go on line next month. Under the contract, the termination that Enron has set in motion would oblige the federal and state governments to pay damages to Enron and the lenders that financed the project, possibly as much as $500 million -- the value of a year's output of power plus the project's $300 million in debt -- if it is shut down. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. California; Metro Desk The State GOP Criticizes Davis' Choice of PR Aides Capitol: Legislative leaders call the pair political operatives who are too partisan to represent the state during energy crisis. DAN MORAIN TIMES STAFF WRITER 05/22/2001 Los Angeles Times Home Edition B-8 Copyright 2001 / The Times Mirror Company SACRAMENTO -- Republican legislative leaders Monday blasted Gov. Gray Davis' decision to spend $30,000 a month in taxpayer money to retain communications consultants known for their highly partisan work. Labeling consultants Mark Fabiani and Chris Lehane as "cut-throat," Senate GOP leader Jim Brulte of Rancho Cucamonga and Assembly Republican leader Dave Cox of Fair Oaks said in a letter to Davis that the hiring "undermines the assertions you have made both publicly and privately throughout this crisis." Davis announced Friday that he retained the duo and that the state will pay them a combined $30,000 a month for at least the next six months. "We're not going to support the hiring of political hacks on government payroll," Brulte said in an interview. "Lehane and Fabiani are very talented. The issue is which payroll is appropriate. . . . These are political opposition research attack dogs. If the governor wants them, he ought to pay for them with his $30-million political war chest." Some consumer advocates also criticized the move, citing the consultants' work on behalf of Southern California Edison. In their private consulting business, Fabiani and Lehane are working to win over public and political support for Davis' $3.5-billion plan to rescue Edison from its financial difficulties. Legislation embodying aspects of the deal is pending in Sacramento. On Monday, Brulte and Cox also complained about the consultants' dual role. "California taxpayers should not be asked to finance political consultants or individuals who have a vested business interest with the state," the letter said. Fabiani and Lehane had worked in the Clinton administration, and in Vice President Al Gore's presidential campaign, where they gained a reputation as attack-oriented operatives. Lehane on Monday defended the governor's decision to use tax money to pay their fees, saying government often hires outside experts and that he and Fabiani will "serve as communications advisors to help the governor fight against these generators." "The Republicans," Lehane added, "ought to be spending time writing letters to George W. Bush to get him to stop the Texas generators from gouging California. . . . That is the real issue here." Davis, meanwhile, returned to California on Monday after a weekend of fund-raisers. He was in Texas on Saturday for a Dallas event that had been scheduled for April 11. It was postponed when Pacific Gas & Electric filed for bankruptcy protection. "There is a very large fund-raising base for Democrats in Texas," Davis' campaign strategist, Garry South, said of the state that is home to some of the generators that Davis has criticized. Davis traveled to Chicago for another fund-raiser Sunday, then met Monday with city officials to discuss how Chicago deals with electrical blackouts. After blackouts crippled downtown Chicago in the summer of 1999, Mayor Richard M. Daley demanded that the city's electricity provider, Commonwealth Edison, give advance notice of power cuts. Customers now sometimes receive warnings two or three days in advance. Davis emerged from the meeting saying "the utilities have got to tell us in advance when they're going to have a planned blackout." It was not, however, readily apparent how Chicago's solutions would translate to California, because its electrical problems are vastly different. Rather than suffering a shortage of electricity throughout the grid like California, Chicago has the more microcosmic ills of an aging system--an obsolete transformer going down, for example, leaving several city blocks in the dark until workers can fix it. * Times staff writer Eric Slater contributed to this story. PHOTO: Protester Barbara King shakes a light bulb outside Sacramento office of a lobbyist for energy producer Enron near the Capitol.; ; PHOTOGRAPHER: ROBERT DURELL / Los Angeles Times Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Business/Financial Desk; Section C BUSINESS DIGEST 05/22/2001 The New York Times Page 1, Column 1 c. 2001 New York Times Company Enron Moves to End India Contract Fed up with its main customer's refusal to pay its bills, Enron's Indian power-generating venture said that it would terminate its power supply contract. [World Business, Section W.] Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. International World Watch Compiled by David I. Oyama 05/22/2001 The Wall Street Journal A18 (Copyright © 2001, Dow Jones & Company, Inc.) EUROPE/MIDEAST Insurer Storebrand Favors Sampo's Bid Over Den Norske Norway's largest insurer, Storebrand, became the center of a bidding war between Finnish financial-services company Sampo and Norway's Den Norske Bank, with Storebrand favoring Sampo. Sampo's offer values Storebrand at 20.8 billion Norwegian kroner ($2.3 billion), compared with DnB's 17.6 billion kroner bid, as the Nordic region's top financial companies battle for position in a consolidating sector. Sampo and Storebrand, in a joint Helsinki news conference, said they were confident their deal would succeed. Sampo's cash-and-stock offer, valued at 75 kroner a share, represents a 31% premium to Storebrand's average share price during the past month and was backed by Storebrand's management. DnB wouldn't say whether it would alter its bid. "One cannot count on that," its chairman said. HypoVereinsbank Results Disappoint Bayerische Hypo- und Vereinsbank, Germany's second-largest bank, known as HypoVereinsbank, said first-quarter pretax profit rose 25% from a year earlier to 770 million euros ($678 million), below analysts' consensus forecast of 795 million euros. Profit rose 63% to 468 million euros; earnings and pretax profit were both helped by one-time gains of 454 million euros. Operating profit fell 59% in the retail-banking division to 98 million euros, and was down 43% in the international-markets division to 184 million euros. HypoVereinsbank said tough market conditions world-wide reduced regular commission and interest income. Enron Pulls Out of Emirates Gas Project U.S. energy company Enron has decided to pull out of the multibillion-dollar Dolphin natural-gas project, selling its 24.5% stake to the United Arab Emirates Offsets Group, or UOG, according to Dolphin Energy's managing director, Ahmed Al-Sayigh. He didn't specify the reason for Enron's withdrawal or the value of Enron's stake. The Dolphin project agreement, reached two years ago by UOG and Qatar Petroleum, aims to bring two billion cubic feet a day of natural gas from Qatar's offshore North Field in the Persian Gulf to Abu Dhabi and onward to Dubai. Enron and France's TotalFinaElf each held a 24.5% stake, with UOG owning the remaining 51%. Mr. Sayigh said UOG will hold discussions with other companies on a possible sale of Enron's original stake. Richard Bergester, manager for Enron Middle East, said that having contributed to the project's initial stages, Enron now feels it can't "add" any more. He didn't elaborate. A TotalFinaElf official said it is interested in a greater stake in Dolphin. Marc Rich Gains Control of Swiss Firm Marc Rich, the former U.S. fugitive given a controversial pardon by President Clinton, effectively pulled off a management coup at Swiss real-estate company Feldschloesschen-Huerlimann Holding by thwarting its merger plans with Swiss Prime Site and forcing the board to quit. Feldschloesschen's ousted chairman, Robert Jeker, said Marc Rich Group now had control of the company. Mr. Rich himself is not on the board, but he controls more than 10% of the votes in Feldschloesschen. ASIA/PACIFIC BRIEFLY: -- Bass Hotels & Resorts, a unit of Britain's Bass, said it will buy the Regent Hotel Hong Kong for $346 million from Hong Kong's New World Development. -- Indian lenders said they want the Indian government to intervene after U.S. energy company Enron's threat to walk out of its Dabhol Power unit's huge project in Maharashtra state put their loans in jeopardy. Domestic lenders have lent $1.4 billion out of the project's total $2.9 billion cost. -- Australian Prime Minister John Howard caved in to intense pressure over the collapse of HIH Insurance, announcing a royal commission into the company's failure and setting aside over 500 million Australian dollars ($265 million) to assist victims of the Australian insurer's collapse. -- Japan's trade surplus shrank at a faster-than-expected pace in April, narrowing 42% from a year earlier to 665.9 billion yen ($5.39 billion), as reduced foreign demand weighed on the country's economy. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Business; Financial Desk IN BRIEF / ENERGY Enron Withdraws from Qatar Project Bloomberg News 05/22/2001 Los Angeles Times Home Edition C-2 Copyright 2001 / The Times Mirror Company Enron Corp. pulled out of a $2-billion pipeline project to export gas from Qatar as it became increasingly likely that an Indian power-sales agreement will collapse. The company said the move is not related to a filing by its 65%-owned Dabhol Power Co. to India's Maharashtra state's electricity board to stop supplying power because it's owed about $63.9 million by the board. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA: UPDATE 1-Indian state spurred by Enron reopens power deals. By Narayanan Madhavan 05/22/2001 Reuters English News Service (C) Reuters Limited 2001. BANGALORE, India, May 22 (Reuters) - India's technology state of Karnataka, spurred by a payments row involving U.S. power developer Enron Corp in a neighbouring province, has reopened sealed power purchase deals with 11 private firms. The southern state's government has told independent power producers (IPPs), which are yet to start generation, that they need to make their tariffs more competitive, officials said. "Now it (electricity) cannot be at any cost," V.P. Baligar, chairman and managing director of the Karnataka State Power Transmission Corp Ltd (KPTCL), the state's monopoly power distributor, told Reuters in an interview late on Monday. The move comes on the heels of the bitter wrangle in Maharashtra state involving Dabhol Power Co, 65-percent owned by Houston-based Enron. Dabhol issued a preliminary notice on Saturday to end a contract to sell power to the Maharashtra State Electricity Board. The step came after Maharashtra ceased payments saying Dabhol's tariffs were too high. The $2.9-billion project, which is 90-percent complete, was first billed as a showcase of India's decade-old reform programme but now is regarded by critics as a symbol of policy bungling. "Enron is a lesson for all of us," Baligar said. Karnataka also said it would not provide financial assurances in the form of escrow cover and government loan guarantees which the firms wanted to help sweeten lending rates. "We're trying to tell them your tariff has to be competitive," Baligar said, but added that the state was open to negotiations. "You have to have the final capability so you can implement the project without any guarantee or escrow." SIGNED DEALS Five years ago, the state signed power purchase deals with 14 private firms. Three of them are already generating power at rates higher than the state would now like to pay. They will continue to get these rates but the 11 unbuilt units face an uncertain future. The 11 plants involve 2,000 megawatts (MW) of capacity, half of which would be supplied by the Mangalore Power Co (MPC) from which U.S.-based Cogentrix exited in 1999, citing litigation and delays in government approval. China Light & Power now owns the company, in which India's Tata group is expected to take 30 percent. MPC Managing Director V.P. Sharma told Reuters that his firm's project would not be hit by the demand for lower tariffs because it was based on coal unlike the Enron project, based on naphtha. "Our cost is the lowest cost approved (and) coal prices have fallen (since the agreement)," Sharma told Reuters from Bombay. Company officials say the project is also looking forward to a federal guarantee to help it move forward. Baligar said the government's intention was to weed out those who are not serious. "Those who are serious can sit with us and sort out their problems," he said. Power tariffs vary, depending upon foreign exchange rates and the type and prices of fuels. Three projects which are already generating power get about 3.0 to 4.0 rupees (6.4 to 8.5 U.S. cents) per unit. The 11 uninstalled plants had comparable rates but MPC says falling coal prices helped its competitiveness. One generating firm, Jindal Tractabel, which uses coal and gas, gets about 2.60 rupees. Its purchase agreement was not among the 14 and is awaiting regulatory approval. The state wants the Jindal rate to be the benchmark for reopened agreements. If private firms cut capital costs and work out long-term fuel supplies, they will be able to cut rates, Baligar said. The state says it needs 4,000 MW of new capacity over 10 years and 2,500 MW over five years. State-run utilities are in a position to meet five-year needs at low rates, Baligar said. Asked if Karnataka could face litigation over the reopening of the contracts, Baligar had legally strong arguments. ( $1 = 46.9 rupees). Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA: India utility may slap 4bln rupee fine on Enron unit. 05/22/2001 Reuters English News Service (C) Reuters Limited 2001. BOMBAY, May 22 (Reuters) - An Indian utility is planning to impose a second penalty of four billion rupees ($85 million) on Enron's local unit, barely a week after the U.S. energy giant took its first step to pull out of the embattled project. A senior official at the Maharashtra State Electricity Board (MSEB) said on Tuesday the fine on Dabhol Power Company (DPC) was for not meeting capacity targets within a stipulated period. "We will do this as soon as the bill for May is received next month," the official told Reuters. DPC officials declined to comment on the matter. Earlier this year, MSEB had imposed a similar penalty on DPC - which DPC has not paid - saying its plant could not be ramped up to full capacity within three hours from a cold start. Enron and MSEB have been battling for six months over payment defaults and last week DPC, owned 65 percent by Enron, issued a preliminary notice to terminate a power purchase agreement - widely seen as a move that would lead to a pull out. According to DPC, it is owed $48 million by MSEB. A top government official told Reuters in Delhi on Monday the federal government is optimistic Houston-based Enron and the Maharashtra state will resolve their wrangle. The agreement signed between MSEB and DPC in 1995 stipulates that if Dabhol's plant cannot achieve 100 percent capacity within three hours from restart, MSEB is entitled to impose a penalty. The MSEB official said the plant had failed to fulfil this condition in February and March, considered peak periods for power demand by the utility. DPC is building a $2.9 billion, 2,184 MW plant, of which the first phase of 740 MW began operations in May 1999. Enron is India's largest foreign investor. ($1=47.0 Indian rupees). Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. IXEurope creates a Storm in colocation 05/22/2001 M2 Presswire Copyright 2001 M2 Communications, Ltd. All Rights Reserved. IXEurope, a leading pan-European provider of Internet infrastructure and hosting services, today announces that it has signed a deal with Storm Telecommunications Limited (Storm), the international optical switched service provider, with an intelligent optical backbone network built in the UK, France, Germany, the Netherlands, Denmark, Sweden and Norway. Over the coming months Storm's network will also be operational in the USA, Switzerland, Italy and Austria. Under the agreement Storm will locate its optical switching equipment at IXEurope's flagship datacentres in London and Frankfurt, with plans to use other IXDatacentres across Europe for colocation of its equipment to support its European and North American metro access rollout. Storm is the tenth carrier to enter the London city IXDatacentre meaning that IXEurope's customers (including other carriers) will benefit from the services that Storm offers. This illustrates the advantages that IXEurope's carrier-neutral status brings -connectivity, cost-effective choice and flexibility. Guy Willner, CEO of IXEurope, commenting on the deal, said: "We are pleased to support Storm's IP network rollout. It will naturally interlink with the new gigabit ethernet service we are offering across our pan-European network of IXDataCentres." Mark Stewart, senior vice president, business development of Storm, said "We chose IXEurope as one of our colocation partners because of its extensive pan-European presence and the strategic location of its datacentres. IXEurope has ensured that its datacentres are located where there is an abundance of network, and provides a choice of carriers, which allows us great flexibility. IXEurope will also provide us with the ability to expand over an agreed time scale." IXEurope, which now has eight operational datacentres across Europe, has recently signed contracts to provide colocation and managed services to Hewlett Packard, Enron Broadband Services (EBS) and The Data Company. IXEurope has just been awarded the ISO9002 quality assured certification for the second consecutive year , showing its commitment to quality across its European operations. IXEurope IXEurope provides neutral colocation and facilities management services to corporate, internet and telecoms organisations, allowing them speedier access to market and the freedom to focus on their core business. IXDatacentres are present across Europe in all major business centres, including London, Paris, Frankfurt, Zurich, Nice, Dusseldorf, Milan and Barcelona. IXEurope is an ISO9002 Quality Certified Company and a founding member of the Colocation and Hosting Association. IXEurope's funders include Bank of America, JPMorgan and European Acquisition Capital. For more information please visit the website at www.ixeurope.com About Storm Telecommunications Storm Telecommunications Limited, wholly owned and group operating company of Storm Investments Limited, is the first OSP (optical-switched service provider). Storm provides voice, bandwidth and IP services and had revenues of GBP52m in 2000. Storm's intelligent mesh network is operational in the UK, France, Germany, Norway, Sweden, Denmark and the Netherlands, shortly reaching the USA, Italy, Austria and Switzerland. In February 2000, Storm's management completed an MBO backed by investment affiliates of Soros Private Equity Partners, and further backing by investment affiliates of Merrill Lynch & Co came in May 2000. Storm's intelligent optical network is in prime position to meet the e-business challenges of 2001 and beyond. For more information, please visit HTTP:\\WWW.STORMTEL.COM. ((M2 Communications Ltd disclaims all liability for information provided within M2 PressWIRE. Data prepared by named party/parties. Further information on M2 PressWIRE can be obtained at http://www.presswire.net on the world wide web. Inquiries to info@m2.com)). CONTACT: Victoria Dickson, Citigate Technology Tel: +44 (0)207 950 2982 e-mail: victoria.dickson@citigatetechnology.com Chris Moseley/Vidushi Patel, Miller Shandwick Technologies Tel: +44 (0)20 7282 2844 e-mail: cmoseley@miller.shandwick.com e-mail: vpatel@miller.shandwick.com Russell Poole, General Manager UK, IXEurope e-mail: russell.poole@ixeurope.com Helen O'Hanlon, PR Manager, Storm Telecommunications e-mail: H.O'Hanlon@stormtel.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Power corrupts... 05/22/2001 The Economic Times Copyright (C) 2001 The Economic Times; Source: World Reporter (TM) APROPOS of Enrons notice to the government of Maharashtra, Mumbai should act pragmatically instead of indulging in heroics and rhetoric. It should set its own house in order, improve MSEBs functioning and quickly privatise. If it fails to do these its threat to Enron will also be taken as just another case of demanding kickbacks. IT is sad really that Enron had to issue its pre-termination notice. We should now ask whether MSEB would be able to construct such a project in record time. Corruption is rampant in MSEB. They may say Enron power is not needed, but you cannot even get a new connection easily. Interruptions are commonplace in rural areas (sometimes up to four times a week). Power thefts are commonplace too. Each day, on average, we pay MSEB about Rs 6 per unit for commercial connections. But most people would be willing to pay Rs 7 or so if they got clean, uninterrupted power. We have seen, for example, the vast cost overruns of many of the official water management projects. These overruns go up to 20 times, with delays stretching up to 10 years with no guarantee no results even then. All told, the government is sending very wrong signals to the international community by raking up the Enron controversy. It should set its own house in order. THE new state ministries are too big in size West Bengals in particular. It has allotted one minister just to deal with fire brigades. The expenditure in lakhs it entails could exceed the total number of fire tenders under the department. Despite that it needed 7 complete days to control a recent fire (with private tankers requisitioned to help over and above the ones owned by the corporation and municipalities). We need more fire tenders, not ministers or those who are associated with the big boss. Also we need a new minister, plus a full-fledged department, to examine corrupt practices in local government and also in the central government offices located in states. Meanwhile, was the Sarkaria Commissions recommendation to restrict the size of the ministry to within 10 per cent of the size of the Assembly advanced only to be flouted? We should call a stop to such commissions as not even 10 per cent of their purpose is served; they too entail huge establishments which are maintained year after year at taxpayer expense. SINCE 1993, I have been familiar with the political, social and business scenarios in the US and so I feel reasonably qualified to make some observations on US immigration policy by Sudhir Shah. Shahs statistics are not totally accurate but they depict the `global picture. The Indian immigrants (a million plus now) are, in many respects, a class apart. Their education levels are far higher than those of other immigrants, many of whom are just a grade above our rag-pickers (they are the cherry and berry pickers on US farms). I have not come across a single uneducated Indian in the US since 1983. Even in asset-formation, Indians (even Pakistanis) are leagues ahead of the other immigrants. B T Dasture, Mumbai - Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. The Godbole findings Our Editorial 05/22/2001 Business Standard 15 Copyright © Business Standard The Godbole committee's first report, submitted on 10 April, is an eye-opener to what can only be called a massive scandal. It leaves several players MSEB, successive Maharashtra governments, the Kirit Parikh re-negotiation exercise, the Central Electricity Authority, and other players in New Delhi with no clothes on. MSEB claimed that it had negotiated a tariff that was lower than would result from applying the central government's standard formula. But this was patently fraudulent, because the comparison was based on wrong numbers, incorrect technical parameters and unequal assumptions (one rupee-dollar rate for the Dabhol tariff, another for calculating the government formula), all of it designed to establish what was not true. Asked in court why there had been no competitive bidding, the answer (believe it or not) was that MSEB was not competent to handle competitive bidding. But it was so wonderfully capable of handling direct tariff negotiations that it eventually gave Dabhol a higher tariff than Enron had initially sought, before the negotiations began! That's only for starters. There is much more in the Godbole report. On the basis of a passing comment in an FIPB meeting, that the project's costs were broadly in line with other similar projects, the power secretary in New Delhi tells the Central Electricity Authority that the CEA's techno-economic clearance is not required though this is statutorily mandated. The CEA agrees to this untenable proposition, but later issues a vaguely worded clearance on the basis of a meeting whose minutes were not made available to the Godbole committee. The re-gasification project that was made part of the power project had a capacity to handle 5 million tonnes, though Dabhol itself needed only 2.1 million tonnes. A port facility had similar excess capacity. Yet the entire cost of these facilities was loaded on to Dabhol, along with the full cost of the 20-year gas supply contract. Thus, as the Godbole committee observes, what should have been a variable cost was converted to part of the fixed cost, which MSEB would have to service through a capacity charge, whether any power or gas was bought or not. Even the power requirements of Maharashtra were mis-calculated in order to over-ride a warning from the World Bank that the Dabhol power would not be needed. This was done by assuming that industrial demand for power would grow overnight at twice the earlier rate, and that MSEB itself would overnight see a dramatic worsening of its operating parameters. There is still more in the report, but the point should be obvious. What the report shows is that the Dabhol contract can be subjected to legal test (as in fact two members of the Godbole committee recommend), on the grounds that it was improperly handled and violative of law and common sense. If a favourable judicial decision becomes possible, that should help mitigate the costs of winding up a truly scandalous project. For reasons that are not clear, MSEB and the Maharashtra government have chosen not to go down this route. Perhaps they have greater and continuing faith in the re-negotiation process. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. SMARTMONEY.COM: Power Grab By Elizabeth Harris 05/21/2001 Dow Jones News Service (Copyright © 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- Feeling squeezed by rising electricity bills and shrinking investment returns? Consider investing in utilities, which posted solid gains amid the recent bear-market carnage. But plugging into this volatile sector is risky business, as anyone who piled in this year based on energy's surge in 2000 can testify. After returning 7.28% last year as demand for power outstripped supply, the average utilities fund is so far down 1% through May 18, according to the fund research firm Morningstar. Though the sector's prospects remain attractive, such volatility is par for the course, says Mark Beckwith, portfolio manager of the Vanguard Utilities Income fund (VGSUX). Utilities and funds that focus on the sector no longer perform like bonds, delivering most of the gains via relatively predictable dividend yields. Instead, the industry has greater growth prospects (and the correspondingly higher potential for losses) tied to the fluctuating demand for power. Already, high prices for natural gas and electricity have created incentives for producers to boost supplies. And the stodgy local monopolies that once dominated the industry must now reckon with a bevy of independent producers, distributors and traders. Even telecom companies are now considered fair game, offering managers of sector funds fresh choices alongside greater risk. "The classification of a utility has changed," Beckwith says. At the same time, the crisis gripping electricity-starved California is showing other states the pitfalls to avoid as they deregulate their grids. "The outlook for wiser deregulation is very much with us," says Bill Reaves, a manager of the Strong American Utilities fund (SAMUX). The crisis out west has also spurred construction of new power plants from New York to Florida, he adds. Managers also count on continued political support from the former oilmen in the White House who are determined to boost domestic output. With such inducements in mind, we screened Morningstar's database looking for no-load utilities portfolios with one-year returns of at least 1% and three-year annualized returns of 5% or more. We also sought funds with initial investment minimums no higher than $3,000 and expense ratios below the category's average. Strong American Utilities Bill Reaves, co-manager of the Strong American Utilities fund, characterizes the $290 million portfolio's positions as "real utilities." "We try to concentrate in the electric and natural-gas area," Reaves says. "We try to concentrate in holdings and companies where we see good growth." Last year, that meant scaling back significantly from telecom stocks, in part because of a deteriorating outlook. Right now, electric utilities represent 44.5% of the fund - and Dominion Resources (D) is the largest position. Energy ranging from gas utilities to integrated oil and gas companies has also been a significant holding, at 24.2%. Reaves and the rest of the portfolio management team are also very sensitive to valuations. The portfolio consists of 40 stocks, but the managers can devote up to 75% of the fund's assets to the 16 to 18 companies seen as the best bargains. This cautious approach has stood the fund well at a time when some of its competitors got hit by telecoms' travails. The Strong portfolio rose 27.33% in 2000 and is up 2.42% so far this year, contributing to a 15.18% three-year record. Reaves expects the good times to last, with industry earnings growth on the order of 8% to 10% coupled with dividends of about 5% over the next three to five years. "Demand is likely to keep on being strong...and the value of the service is going to be appreciated a great deal more," Reaves says. For example, the electric utilities' average price-to-earnings ratio for 2002 is about 12 - roughly a 50% discount to the Standard & Poor's 500 index. The minimum investment is $2,500, and the portfolio bears a 1% expense ratio. Vanguard Utilities Income "We won't be moving with the Nasdaq," says portfolio manager Beckwith of the Vanguard Utilities Income fund he runs. Beckwith invests a relatively small 17% slice of the $900 million fund in telecom stocks. As with the other funds in this screen, such caution paid off last year, when the fund gained 18.7%. That turned the tables on 1999, when the technology boom consigned Vanguard Utilities to the rear echelon of its peer group. Annualized over three years, the portfolio has returned 9.33%, trailing the average utilities' fund's 10.53%. Here, too, the emphasis is on attractive valuations. Beckwith also has a mandate to invest at least 95% of the portfolio in dividend-paying utilities (last year, all assets had to be invested in such stocks.) "I'm going to get as much growth as I can without taking on too much risk," Beckwith says. Right now, Beckwith has 61% of his assets in defensive electric utilities such as Dominion Resources or the FPL Group (FPL). The portfolio is down 2.65% so far this year, but Beckwith, too, is counting on continued strong demand for electricity. "Earnings momentum will be very good for the group at least over the next year," he says. His main concern is that high energy prices could encourage conservation, eventually depressing demand. The investment threshold is $3,000, and the expense ratio is a slim 0.38%. American Gas Index fund This concentrated portfolio rises and falls with the gas industry's prospects. Strong natural-gas prices boosted the American Gas Index fund's (GASFX) return last year to a 55.86%, far above the sector's average. That more than offset the 3.71% drop in 1999. Annualized over three years, the roughly $300 million fund has gained 15.82%. Like other index portfolios, the fund doesn't make stock picks; instead it owns 73 members of the American Gas Association, representing much of the gas distribution and transmission industry in most U.S. regions. Stocks are weighted by market-cap and by the portion of a company's assets involved in natural gas. Top holdings include Williams Companies (WMB), Enron (ENE) and Duke Energy (DUK). The initial investment is $2,500, and expenses are 0.85%. For more information and analysis of companies and mutual funds, visit SmartMoney.com at http://www.smartmoney.com/ Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Malaysian LNG Sales to India Threatened by Enron Power Dispute 2001-05-22 06:32 (New York) Malaysian LNG Sales to India Threatened by Enron Power Dispute Kuala Lumpur, May 22 (Bloomberg) -- Malaysia LNG Tiga Sdn. may have to find new buyers for as much as 2.6 million metric tons a year of liquefied natural gas if Dabhol Power Co. carries through termination of electricity supplies to India's Maharashtra State Electricity Board. MLNG Tiga has an agreement to deliver a maximum 2.6 million tons a year of LNG each year to an import terminal Enron is building to feed the Dabhol power plant. Saturday, Dabhol Power, 65 percent owned by Enron Corp. of the U.S., started a procedure to end its power supply contract to the electricity board, its sole customer, which owes over 3 billion Indian rupees ($64 million) in unpaid power bills. ``It is our hope that matters in India would be resolved,'' said Azman Ibrahim, spokesman for state-owned Petroliam Nasional Bhd., which owns 60 percent of MLNG Tiga. ``If they do not work out, we would have to find or make alternative arrangements.'' MLNG Tiga is constructing Malaysia's third gas export facility, which will raise the country's LNG capacity to 23 million tons from about 16 million tons in 2000. If Dabhol goes through with cancellation of its power supply contract, MLNG Tiga would have to find buyers for more than a third of the 6.8 million tons it is adding to Malaysia's output capacity. Other partners in MLNG Tiga are the Sarawak state government with a 10 percent share, Royal Dutch/Shell Group's unit Shell Gas BV with 15 percent, Nippon Oil LNG (Netherlands) BV with 10 percent and Diamond Gas Netherlands BV with 5 percent. The plant is due to be completed at the end of 2002 with commercial production due to begin in 2003. India's federal and state governments may have to pay Dabhol Power Co. more than 170 billion rupees ($3.6 billion) if the Enron Corp. unit cancels its 2,184 megawatt power venture. LEADER: India unplugged Financial Times; May 22, 2001 The latest threat from Enron, the US energy group, to pull out of its Dabhol power plant venture near Bombay illustrates both the shambolic nature of India's electricity system and the wider risks of investing in the country. The project had serious drawbacks. But unless energy companies can expect a commercial return, they will not invest in badly needed new infrastructure. Unless contracts are honoured, few foreign companies will consider India as a place to do business. The Maharashtra state electricity board, the Dabhol plant's only customer, is refusing to pay its bills, arguing that the tariffs are unjustifiably inflated. Prices are certainly high. The plant, fuelled by expensive naphtha, is running way below capacity due to unexpectedly low demand, further increasing unit costs. More difficult to judge is whether this is within the terms of the contract, since Enron is keeping the details confidential. The argument over unit costs, though, is in any case less relevant than it might seem as most of India's state electricity boards, including Maharashtra's, operate at a large loss. Many consumers pay highly subsidised rates. Many pay nothing. Bills go uncollected. Half of Delhi's electricity output is stolen, mostly to power middle-class air conditioners rather than light bulbs for the poor. Bankrupt state utilities are then periodically bailed out to the detriment of spending on health and education. India's state authorities urgently need to introduce a common minimum tariff and a more targeted form of subsidy. This may be unpopular, but the central government's offer of Dollars 5.6bn, raised via a bond issue, to pay off the electricity boards' debts should sweeten the pill. A new pricing regime is only the first step. Electricity generation, transmission and distribution should be unbundled and privatised. Contracts should be awarded through competition, not by arrangement with the relevant political party. This would require much more transparency than many of India's politicians have been ready to concede. Enron's difficulties over the Dabhol plant, the largest foreign investment in India, have persuaded other western companies to withdraw from similar projects. This will hardly help the country to overcome the power shortages that hinder economic development. But the effect will reverberate well beyond the energy sector. India receives a pitifully small slice of the world's foreign direct investment. Infrastructure weaknesses are certainly one factor. But as important is the readiness of Indian politicians to manipulate foreign business for their own ends. Copyright: The Financial Times Limited May 22, 2001 Houston Chronicle Enron pulls out of venture drilling in Qatar's waters By LAURA GOLDBERG Copyright 2001 Houston Chronicle Enron Corp. is pulling out of a large natural gas project off Qatar, the company said Monday. Plans for the Dolphin project called for Houston-based Enron to work with Elf, a subsidiary of France's TotalFinaElf, and the United Arab Emirates Offsets Group to develop and pipe natural gas from a block of the Qatar North Field. More than a year ago those involved with the project said it could end up requiring investments of up to $10 billion over six or seven years. Enron said Monday it was transferring its 24.5 percent stake in the project to the United Arab Emirates Offsets Group, which said in a news release it had started negotiating with other international players to become stakeholders. With the transfer, United Arab Emirates Offsets Group will own 75.5 percent of Dolphin. Terms of the deal weren't released. Enron pulled out for a couple reasons, including that it believes there are better places to invest its money, said Alex Parsons, a company spokesman in London. The project doesn't necessarily fit with Enron's current focus. It is emphasizing businesses such as marketing and trading in wholesale markets such as those for natural gas, electricity and broadband. Enron said it would consider future ventures with the United Arab Emirates Offsets Group that were "in line with our core business activities." M. Carol Coale, an energy analyst with Prudential Securities in Houston, said Enron's move is consistent with its exit strategy from international assets that generate low returns. May 22, 2001 Houston Chronicle Enron exploring commodity trading Copyright 2001 Houston Chronicle News Services NEW YORK -- Houston-based Enron Corp., the nation's largest natural gas and electricity trading house, is looking to continue its expansion into industries beyond energy with a move into the cocoa, coffee and sugar businesses, industry sources said Monday. Enron has had conversations and interviews with members of the commodity trade in recent weeks, using a London-based recruitment firm to help them, the sources said. "They are definitely interested in getting into the business. Enron has been looking for physical traders. They have some internal people and are looking for lieutenants with experience," a cocoa trader said. A representative of Enron's public relations department would only say that the firm is constantly investigating different markets and opportunities. "There is always a lot of speculation about what we are doing," Habiba Bayi of Enron said Monday. May 22, 2001 Houston Chronicle Local and state Plains Resources gets new officers Former executives of Enron and Kinder Morgan are among those chosen for a new slate of officers at Plains Resources, an oil and gas exploration and production company that had been sharing management with Plains All American Pipeline. They are filling vacancies created by people who went over to the pipeline side, said spokeswoman Carolyn Tice. John T. Raymond, who was vice president of corporate development at Kinder Morgan and Kinder Morgan Energy Partners, was appointed executive vice president and chief operating officer of Plains Resources. Jere Overdyke Jr., formerly managing director of Enron Global Markets, was named executive vice president and chief financial officer. Timothy Stephens, formerly chairman, president and chief executive of Abacan Resource Corp., was named general counsel and executive vice president-administration.
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