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Santa Clara County, Calif., Joins Lawsuit against Electric Suppliers
San Jose Mercury News, 4/27/01 Huge increase in Calpine earnings / San Jose power supplier rakes in $94.8 million San Francisco Chronicle, 4/27/01 Creek Seeks Hearing on Power Plant Plan South Florida Sun-Sentinel, 4/27/01 Oil People Energy Compass, 4/27/01 Venezuela Moving On Plans To Build Up Natural Gas Indus Dow Jones Energy Service, 4/27/01 Prospects dim for Enron's India power project. Energy Compass, 4/27/01 Report Out on Indian Power Project AP Online, 4/27/01 Enron, India in dispute over future of gas-fired power plant Associated Press Newswires, 4/27/01 Enron Offl Given Authority To End India Pwr Proj -Report Dow Jones International News, 4/27/01 German trade sees strong aluminium, copper demand. Reuters, 4/27/01 Enron India MD authorised to terminate PPA Business Standard, 4/27/01 Gas hub blues Energy Compass, 4/27/01 Might is right Energy Compass, 4/27/01 Venezuela Moving On Plans To Build Up Natural Gas Indus Bloomberg, 4/27/01 Enron Offl Given Authority To End India Pwr Proj -Report Bloomberg, 4/27/01 O'Brien and Bauman's Hot Stocks: YHOO ENE SFA YUM Bloomberg, 4/27/01 Santa Clara County, Calif., Joins Lawsuit against Electric Suppliers John Woolfolk 04/27/2001 KRTBN Knight-Ridder Tribune Business News: San Jose Mercury News - California Copyright (C) 2001 KRTBN Knight Ridder Tribune Business News; Source: World Reporter (TM) Santa Clara County agreed Thursday to join a lawsuit against power suppliers, alleging they conspired to raise prices and boost profits while subjecting consumers to higher bills and rolling blackouts. The county is the first to join the suit originally filed by San Francisco in January. The suit seeks refunds for consumers of more than $1 billion in alleged excess electricity profits. "The San Francisco suit contains significant allegations of manipulation and collusion by the wholesalers, resulting in the disastrous consequences we're all familiar with," said lead deputy county counsel Alan Tieger. "We looked at the evidence on which those allegations were grounded and found they were indeed supported by the evidence, expert and otherwise." The suit names a dozen electricity generating and marketing companies, including Duke Energy and Enron Energy Marketing. Similar claims have been filed by three water districts in the San Diego area, and two class-action lawsuits by private attorneys on behalf of consumers are pending against power suppliers. The companies have vigorously denied the charges. "I don't think there will be any evidence of illegal activity by anyone," said Jan Smutny-Jones, executive director of the Independent Energy Producers Association, when asked about various government probes. BUSINESS Huge increase in Calpine earnings / San Jose power supplier rakes in $94.8 million Christian Berthelsen Chronicle Staff Writer 04/27/2001 The San Francisco Chronicle FINAL B.1 (Copyright 2001) Power producer Calpine Corp. announced a 424 percent increase in earnings yesterday, capping a series of huge first-quarter earnings announcements by companies that are profiting mightily during California's energy crisis. Calpine said it earned $94.8 million in the first three months of the year, compared with $18.1 million in the same period last year. That profit level, on $1.2 billion in revenue, puts Calpine in league with industries such as computer sales and securities brokering in terms of median return on revenue, and far above the median annual return in the energy industry, which averages about 1 percent. Calpine's 30-cents-per-share earnings blew past the average analyst estimate of 24 cents per share compiled by Thomson Financial/ First Call. The San Jose power generator said last month that it expected to report earnings of 20 cents to 25 cents. Williams, a Tulsa, Okla., energy concern that markets electricity in California produced by AES, the Arlington, Va., generation company, reported first-quarter profit of $378 million, more than double its results one year ago. (AES reported gains yesterday of 19 percent). Other energy companies with business in California -- including Reliant and Enron -- have reported huge gains in recent days. Calpine executives yesterday sought to distinguish themselves from other merchant energy companies in California, saying most of the electricity it sells here is under relatively low-cost contracts with the utilities, the state and other entities, and very little of it is sold in the spot market, where prices are often three times as high. "It is not our business strategy to play in the volatility of the market but to have long-term contracts," said Bill Highlander, the company's director of public relations. Calpine was not among the companies named in a report last month by the California Independent System Operator identifying power concerns that gouged California consumers. Calpine's stock was hit hard earlier this month when it revealed that it had not set aside reserves to offset more than $270 million in potentially bad debt owed by Pacific Gas & Electric Co., which filed for bankruptcy protection. But Calpine's stock was trading near the top of its 52-week high yesterday, ending up $2.01, or 3.75 percent, to close at $55.71. Ann Curtis, Calpine's chief financial officer, said in an interview yesterday that the company still expects to be paid by PG&E, since the power it provides under contract to the utilities and the state is much less expensive than if they voided the contract and sold the power on the spot market. "It makes sense and would be in the best interest of the utility and state to honor the contract," Curtis said. As it had last quarter, Calpine's announcement made no mention of runaway wholesale energy costs in California, which have severely damaged the state's leading utilities and are beginning to hurt the state government's finances. Rather, Calpine Chief Executive Officer Peter Cartwright, in a prepared statement, attributed the earnings growth to "the continued execution of Calpine's strategy to acquire and build low-cost generation facilities in key power markets throughout the U.S." More than half of the company's plants are in California. Overall, the supplier operates 44 plants nationwide that generate nearly 6,000 megawatts. Calpine is one of the darlings of the energy industry, viewed as a model for a "new" energy company because of its aggressive expansion plans and reliance on relatively clean, efficient generation. The company is relatively small in the industry, with a market capitalization of about $16 billion, compared with about $34 billion for an industry giant like Duke Energy of Charlotte, N.C. Calpine is in the midst of a program that is expected by 2005 to boost its electricity generation portfolio to 70,000 megawatts -- an amount equivalent to more than twice the energy California uses at this time of year -- from its current capacity of about 6,000. Lehman Bros. calls Calpine one of its "top picks" and maintains a strong buy rating on the company's stock. CREEK SEEKS HEARING ON POWER PLANT PLAN DAVID FLESHLER and JEREMY MILARSKY Staff Writers 04/27/2001 South Florida Sun-Sentinel Broward Metro 3B (Copyright 2001 by the Sun-Sentinel) Coconut Creek filed a legal petition with the state Thursday that could stall Enron Corp.'s plans for a power plant in Pompano Beach. Attorneys for the city requested an administrative hearing on the state's plans to issue an air permit for the plant. This could delay the company's plans by six months, if it doesn't thwart them altogether. Coconut Creek, which is downwind from the site, is a center of opposition to Enron. When Pompano Beach held public hearings on the project, condominium complexes in Coconut Creek chartered buses to pack the meeting rooms with opponents. The state Department of Environmental Protection already has announced its preliminary intention to issue the permit. In its petition, the city argues that the state had failed to take into account the cumulative effect of the sources of air pollution in the area. These include the North Regional Wastewater Treatment Plant, a Florida Power & Light Co. substation, a Broward County landfill, the Wheelabrator trash incinerator, the Broward County Hazardous Materials Receiving Facility and the Waste Management Transfer Station, according to the petition. Eric Thode, spokesman for Enron, disputes the petition's statement that the cumulative effect on air quality has not been considered. "You have to take it into account when you're assessing air quality and the cumulative impact on air quality," he said. He said the petition may ruin the company's plans to open the plant by the summer of next year, but not its plans to build the plant. "We'll continue to go forward with the project," he said. Now that the petition has been filed, DEP will decide whether to send it to the Division of Administrative Hearings. Both sides present their case to a judge, who recommends whether the department should issue the permit. The department usually follows the recommendations, said Alvaro Linero, the DEP administrator handling the Enron petition. Meanwhile, in Deerfield Beach, Enron officials made their final pitch to a volunteer committee that's studying their plans for a plant identical to the one proposed for Pompano Beach. Company officials promised to build a plant that wouldn't be an eyesore to the subdivisions of Independence Bay and Waterways. Steve Rose, a traffic expert for Enron, said the company would build a 10- foot wall on the neighborhoods' border. Enron officials plan to plant Australian pines that would grow up to 15 feet along that wall. "From Independence Bay, there's virtually no visibility of this facility," Rose said. David Fleshler can be reached at dfleshler@sun-sentinel.com or 954- 356-4535. Jeremy Milarsky can be reached at jmilarsky@sun-sentinel.com or 954-572-2020. Oil People. 04/27/2001 Energy Compass © 2001 Energy Intelligence Group. All rights reserved Jim Hall has been hired for environmental and public safety consulting by Colonial Pipeline, operator of the largest US refined oil products pipeline. Hall was until January chairman of the National Transportation Safety Board (NTSB). Egil Myklebust has become new chairman of Norway's Norsk Hydro in place of Einar Kloster, who asked to step down last year. Myklebust retires as president and chief executive on May 2. The company also has two new board members, Ingvild Myhre and Elisabeth Grieg. Noble Affiliates president and chief executive Charles Davidson will take on the additional role of chairman in place of Robert Kelley, who is retiring. President George W. Bush plans to nominate career diplomat Richard Henry Jones as ambassador to Kuwait. Jones, now ambassador to Kazakstan, was ambassador to Lebanon from 1996-98, and was previously director of the State Department's office of Egyptian affairs. Bush also plans to nominate Enron Energy Services vice chairman Thomas White as secretary of the army at the Pentagon. The Senate has to approve the nominations. Venezuela Moving On Plans To Build Up Natural Gas Indus By Charles Roth Of DOW JONES NEWSWIRES 04/27/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) Porlamar, MARGARITA -(Dow Jones)- Venezuela is forging ahead with plans to develop its natural gas industry through a series of concessions involving both foreign and local companies. Industry officials reckon the effort should generate up to $13 billion in investment over the next 10 years. The biggest push now underway in the "Gasification of the Nation" program is the awarding of 11 licenses for the exploration and production of non-oil associated gas in central-western Venezuela, a zone estimated to contain 6 trillion to 20 trillion cubic feet in reserves. Of 34 companies that have qualified for the concessions, 26 are foreign. The government is also moving to open up offshore exploration and production of free gas in the Paria and Plataforma Deltana regions in waters bordering northeast Venezuela, where officials suspect 40 Tcf to 60 Tcf are waiting to be discovered. Jose Pacheco, vice minister of energy, told Dow Jones Newswires that the government wants to start the pre-qualification process sometime this year. Trinidad, he said, has been aggressively tapping reserves in the area, some of which may extend into Venezuela territory. The government has been talking with authorities from the island to reach some understanding for the exploitation of the region, he said. Rafael Ramirez, president of Venezuela's gas regulator, said state-oil company Petroleos de Venezuela SA (E.PVZ) has allocated $200 million for exploration in the area. He noted that industry giants such as Royal Dutch/Shell (RD), BG Group Plc's British Gas (BRG), Exxon Mobil Corp. (XOM), Phillips Petroleum Co. (P), El Paso Corp. (EPG) and Enron Corp. (ENE) have already expressed interest in the area. Pacheco, Ramirez and other industry officials are attending a conference on gas and electricity. Fiscal Incentives To Attract Companies Venezuela, the world's third largest oil producer, has proven gas reserves of 147 Tcf, the eighth largest worldwide. About 10% these reserves are non-associated. It produces about six billion cubic feet a day, of which 70% goes to various segments of the country's petroleum industry and 30% is divided between electricity generation, petrochemicals production, the steel and aluminum industries, the cement and manufacturing sectors and residential consumption. Industry officials want to raise natural gas production to 9 Bcf/d to 10 Bcf/d by 2010. To meet that goal, Venezuela is enticing companies by exempting them from the value-added tax, reducing the income tax for them to 34% from 64%, and lowering it a further 8% in they make new investments. Royalties will be assessed at 20%. Companies interested in participating in the expansion of the natural gas pipeline network are excluded from royalties, Ramirez said. He noted that official pricing calculations indicate the rate of internal return on transmission and distribution of gas hovers around 15%, but could be higher for more efficient companies. The latest transmission project underway would connect mainland Venezuela and Margarita Island. The approximately 170-kilometer pipeline will cost $90 million. Bidding is slated to start in the weeks ahead and the project should be completed by the end of 2003. Following Margarita, a natural gas pipeline connecting Valencia and Paraguana is planned. The network should then expand to the offshore platforms and ultimately link the populated cities across the northern coast to production facilities both inland and offshore. Ultimately, the transportation network should cover 6,300 kilometers and extend to Colombia and Brazil. The network will cost an estimated $1.6 billion. To turn around what has heretofore been an unprofitable business, authorities are planning on economies of scale and dividing the country in four regions that will each include both industrial and residential consumers. Pricing of natural gas will rise according to the type of consumer, with the lowest tariffs assessed for residential and commercial clients, and scale upwards for petrochemical producers, the steel, electricity and manufacturing industries and others. Jorge Depresbiteris, director general of Margarita electricity utility Seneca, controlled by U.S. CMS Generation Co., said the substitution of diesel by natural gas could be viable for the company's bottom line if it is sold at $1.50/billion British thermal units or less. Beyond that, the utility's profitability will be affected. Seneca, he added, is planning ahead for the conversion to natural gas because it is clear the "gasification" policy is being implemented, "and there's no turning back." Regulatory authorities assured that natural gas will be "adequately valued" even as greater volumes come on stream, and will include adjustments for devaluation in the country's currency and, if necessary, for inflation. Natural gas processing is yet another area in which newcomers are being invited to participate. Overall, energy ministry officials figure that natural gas can currently substitute 9 million barrels a day, or 100%, of fuel oil, and 72 million b/d, or 56%, of the diesel that is consumed in the country, among other carbon-based derivatives. Officials reckon that all the investment should create up to 10,000 direct jobs and 52,000 indirect jobs in auxiliary industries. -By Charles Roth, Dow Jones Newswires; 58-14-235-8525; charles.roth@dowjones.com Prospects dim for Enron's India power project. 04/27/2001 Energy Compass © 2001 Energy Intelligence Group. All rights reserved The future of Enron's Indian Dabhol power project hangs in the balance, after the board of Dabhol Power Co. (DPC) authorized the termination of a deal to supply 740 MW to Maharashtra State Electricity Board, its main customer (EC Apr.13,p12). MSEB claims it can use only 300 MW, and has asked DPC, which is 65% owned by Enron, to scrap the plant's planned second phase as it won't be able to pay for the electricity. But global lenders have persuaded Enron not to pull the plug on the $3 billion power-plus-LNG project just yet. These include ANZ Investment Bank, Credit Suisse First Boston, ABN-Amro, Citibank, and State Bank of India. With nearly 85% of the project complete and the Indian government offering to renegotiate the power purchase agreement, lenders want to see the plant's second phase and LNG project completed later this year. Report Out on Indian Power Project By RAMOLA TALWAR BADAM Associated Press Writer 04/27/2001 AP Online Copyright 2001 The Associated Press. All Rights Reserved. BOMBAY, India (AP) - A top official of the U.S. energy concern Enron Corp. was authorized to issue a termination notice to pull out of a $3 billion power project in western India, the largest foreign investment in the country, a newspaper reported Friday. The project has been in trouble since December when the government of Maharashtra state demanded renegotiation of the price being charged for power from the project. The board of the Dabhol Power Co., the Indian subsidiary of Enron, met in London on Wednesday and authorized the company's managing director to issue a preliminary notice to terminate the project, billed as the world's largest natural gas fired power plant, The Times of India reported. "The board has given powers to the management to issue the pre-termination notice. But the meeting unanimously felt the need of the hour was not to terminate the project but to initiate a re-negotiation process," Vinay Bansal, chairman of the Maharashtra State Electricity Board, was quoted as saying by the newspaper. Enron officials have refused comment. Enron is based in Houston. In Bombay, Krishna Rao, a state electricity board official, said Friday that negotiations with Dabhol Power would be the next step. "The government and DPC have to come together. The government has already said a negotiation team is being appointed," Rao said. The notice is the first of three steps that could end in the abandonment of the project. A six-month reconciliation period would follow any move by Dabhol Power to issue the termination notice, Bansal said. Indian lenders, present at a meeting with foreign financial institutions in London earlier this week, have said they favor renegotiation. The state power utility has said it cannot pay Dabhol's monthly electricity bills, since rates for power have nearly quadrupled. That prompted Dabhol to invoke a federal guarantee in February, the first time in India that such a federal guarantee was invoked. As part of the 1995 agreement between the company and the state government, the federal government must pay in case of a state default. But before the federal government stepped in, the state government paid $17 million in outstanding bills. Since then, the state power utility has confirmed that all pending bills have been paid. However, a dispute over payment of $48 million for December and January bills is pending. Several political parties had earlier demanded the project be scrapped, since the costs had increased from 1.8 rupees (four cents) per unit agreed six years ago for electricity generated by the 740-megawatt naphtha plant, to 7 rupees (15 cents). Enron has maintained that work will be completed by the end of the year on a 1,444- megawatt liquefied natural gas plant. Enron has a 65 percent stake in Dabhol Power, and is the project's largest shareholder. Other shareholders include the Maharashtra State Electricity Board with 15 percent and General Electric Co. and Bechtel Enterprises with 10 percent each. Enron, India in dispute over future of gas-fired power plant By RAMOLA TALWAR BADAM Associated Press Writer 04/27/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. DABHOL, India (AP) - Workers in yellow helmets scramble up steel girders to fit pipes into place for the world's largest natural gas-fired power plant, to be completed off India's western coast this year by American energy giant Enron Corp. But 200 miles away in Bombay, government officials say they cannot afford the electricity that Enron is now providing from a naphtha plant at the site, and they expect the electricity generated by liquefied natural gas will cost even more. "Enron is simply unaffordable," said Padamsinh Patil, energy minister for the state of Maharashtra, which includes Bombay. "The state cannot afford the power, so we take less power, but still have to pay Enron huge amounts." India needs power - during the April-to-October 2000 hot season, the nation had a daily shortfall of nearly 8,000 megawatts of electricity, according to the Center for Monitoring the Indian Economy. Enron's naphtha and gas plants at Dabhol will together be able to generate about 2,200 megawatts, but politicians have trouble with the price. Aging coal- and gas-fired plants that have been depreciated can charge about two rupees (4 cents) per kilowatt hour, while Enron's naphtha plant has been charging 11 to 15 cents. "Everyone wants to use us to blame for the systemic problem that the state electricity boards in this country sell power for less than it costs them to generate or buy power," said K. Wade Cline, president of Enron India. Despite the protests, Cline believes that the $3 billion project - India's biggest-ever foreign investment - will go on line at the end of 2001. But the company's frustrations are obvious. This week the board of the Dabhol Power Co., Enron's India subsidiary, authorized the company's managing director to issue a preliminary notice that could lead to termination of the power project. Enron says it is owed $48 million for power delivered in December and January. The February power bill has already been paid, and Krishna Rao, member of the Maharashtra State Electricity Board, said Wednesday the March electricity bill was being paid. Rao said renegotiation of the existing contract was the next step. "The government and DPC have to come together," he said. "The termination notice will have to wait till negotiations actually begin." Indian lenders insist it is impossible for Enron to pull out before it makes up the huge amounts already spent. They speculate that the company's board is using pressure tactics to ensure timely payments in future. An advantage for Enron - and the major complaint against it - is a unique contract that requires the federal government to pay up in case of default by Maharashtra. Another grievance is that the Enron deal requires Maharashtra to pay for electricity even if it doesn't use it. Enron invoked the federal guarantee in February, when the state utility said it could not afford to pay Dabhol Power. But before the national government stepped in, state officials paid $17 million in overdue bills. The state bailout drew attention to the Enron deal, with opponents again raising questions about the cost to be borne for foreign investment and development. The debate comes as the government in New Delhi tries to reduce subsidies and sell off state-owned enterprises. Enron says federal payment guarantees were essential because few foreign companies were willing to invest when India began opening its economy in the early 1990s. "Who wanted to come to India at that time? Very few companies did," said Cline. "We came along, with some others, and said we're willing to invest because we think India has a bright future." Preparing for that future, workers at Dabhol clamber around inside an LNG tank that could fit three jets stacked one atop another. They weld a steel-reinforced dome, while others outside drill concrete blocks for the mile-long jetty where the LNG tanker Laxmi - meaning "wealth" in Hindi - is scheduled to dock in November. Enron says LNG is the cleanest and most economical fuel, but Bombay politicians have their doubts. They point at electricity prices that have increased fourfold, which Enron attributes to the rise to the jump in oil prices and a depreciation of the Indian rupee. Opponents of the project say the government should have invested in its own power plant instead of tying up with a foreign company. "We're not against foreign companies, but the Enron project is a sure pill for India's financial collapse," said Pradyumna Kaul, an anti-Enron activist. "It will bankrupt the nation. Both sides should agree to a separation and abort the contract now." Enron believes a crackdown on power theft and reduction of waste in transmission and distribution would generate enough money to pay for Dabhol's electricity. A state government-appointed committee agreed and this month called for reform of the state power utility that defaulted on its payments to Enron. But the five-member panel also insisted on lower tariffs and urged renegotiating the price agreement. Enron chief executive Jeffrey Skilling likened the India situation to the power woes being felt in California. "The utility offers a fixed rate to their customers and the wholesale costs of electricity have gone up like they have in the U.S.," he said from Enron headquarters in Houston. "The distribution company is having a liquidity squeeze identical to what you have with (Pacific Gas & Electric)." Meanwhile at Dabhol, managers are moving to the next phase, training workers to man tug boats to guide that first LNG tanker into port. Enron Offl Given Authority To End India Pwr Proj -Report 04/27/2001 Dow Jones International News (Copyright © 2001, Dow Jones & Company, Inc.) BOMBAY (AP)--A top official of U.S. energy giant Enron Corp. (ENE) was authorized to issue a termination notice to pull out of a controversial power project in western India, the largest foreign investment in the country, a newspaper reported Friday. The board of the Dabhol Power Company, the Indian subsidiary of Enron, met in London on Wednesday and authorized the company's managing director to issue a preliminary notice to terminate the project, billed as the world's largest natural gas fired power plant, The Times of India reported. "The board has given powers to the management to issue the pre-termination notice. But the meeting unanimously felt the need of the hour was not to terminate the project but to initiate a re-negotiation process," Vinay Bansal, chairman of the Maharashtra State Electricity Board, was quoted as saying by the newspaper. In Bombay, Krishna Rao, a state electricity board officials, said Friday that negotiations with the DPC would be the next step. "The government and DPC have to come together. The government has already said a negotiation team is being appointed," Rao said. "The termination notice will have to wait until negotiations actually begin," he said. Enron officials have refused comment. The notice is the first of three steps that could end in the abandonment of the $3 billion project. A six-month reconciliation period would follow any move by the Dabhol Power Company to issue the termination notice, Bansal said. Indian lenders, present at a meeting with foreign financial institutions in London earlier this week, have said they favor renegotiation. The project has been in trouble since December when the government of Maharashtra state, where the Dabhol project is located, said the tariffs were exorbitant and demanded a new price agreement. The state power utility said it could not pay Dabhol's monthly electricity dues, which prompted the company to invoke a federal guarantee in February. This was the first time in India that a federal guarantee was invoked. As part of the 1995 agreement between the company and the state government, the federal government has to pay in case of a state default. But before the federal government stepped in, the state government paid $17 million in outstanding bills. Since then, the state power utility has confirmed that all pending bills have been paid. However, a dispute over payment of $48 million for December and January bills is pending. Several political parties had earlier demanded the project be scrapped, since the costs had increased from 1.8 rupees (four cents) per unit agreed six years ago for electricity generated by the 740-megawatt naphtha plant, to 7 rupees (15 cents). Enron has maintained that work will be completed by year-end on the 1,444 megawatt liquified natural gas plant. Houston, Texas-based Enron has a 65% stake in Dabhol Power, and is the project's largest shareholder. Other shareholders include the Maharashtra State Electricity Board with 15% and General Electric Co. and Bechtel Enterprises with 10% each. GERMANY: German trade sees strong aluminium, copper demand. By Denes Albert 04/27/2001 Reuters English News Service (C) Reuters Limited 2001. ONLINE TRADING MODEST VDM also said that despite a mushrooming of metal trading Internet sites, online trading of physical metals remained at minimal levels. "We have to make a very clear distinction between futures and physical metals," said VDM board member Matthias Heil of Enron Metall Recycling GmbH, a unit of the U.S.'s Enron Corp . "While online metals futures trading runs between 400 million and 600 million marks a day worldwide, only a tiny fraction of physical trading, and especially scrap metal trading is done that way." Heil added that their core activity - scrap metal - did not lend itself well to online trading because of the multitude of qualities being traded. Hoffmann also said that while Norddeutsche Affinerie - Europe's largest copper refiner - had its own trading site, it was for the time being mostly a facility through which NA's clients could keep track of their contracts. "We have our trading site, but it mostly serves as a way for our clients to have access to the state of existing contracts virtually at the same time as those are updated on our internal computer network," he said. Enron India MD authorised to terminate PPA Our Corporate Bureau MUMBAI 04/27/2001 Business Standard 1 Copyright © Business Standard The board of the Enron-promoted Dabhol Power Company (DPC), at its meeting in London on Wednesday, authorised the managing director of Enron India to issue a notice for terminating the power purchase agreement to the Maharashtra State Electricity Board and the state government. "The board has authorised Wade Cline to serve the termination notice. However, this does not mean that the termination notice will be served immediately. It is only an enabling provision and will be used only if the situation arises," a state government source told Business Standard from London. He said DPC was under pressure from its lenders. The DPC spokesperson here refused to comment on the issue. The hardening of the board's stand is in sharp contrast to the advice of DPC's lenders, who had warned Enron not to precipitate matters by issuing a termination notice. The lenders had arrived at a consensus that the termination notice need not be served at this stage. Serving of the notice requires a nod from the lenders, who have an exposure of about $2 billion in the project. Sources said given the lenders' strong opposition to termination of the contract, the Enron board's "enabling resolution" did not have much significance beyond conveying a hardening of its stand with regard to the current imbroglio. The Maharashtra Chief Minister had warned Enron not to scuttle the process of crisis resolution by issuing a termination notice. The state government is to nominate an expert group to renegotiate the terms of the Dabhol contract. Enron holds 65 per cent in DPC, while US-based GE and Bechtel hold 10 per cent each. The balance 15 per cent is held by MSEB through a special purpose vehicle, Maharashtra Power Development Corporation. The MSEB representatives were not allowed to vote at the meeting since they were an interested party. The IDBI representative protested against the board's decision. The meeting was held against the backdrop of a dispute between MSEB and DPC over payment of bills. After MSEB failed to pay Rs 102 crore towards the December 2000 bill, DPC invoked the state government's guarantee and then the Union government's counter guarantee. When payment of the Rs 127-crore January bill became overdue, DPC again invoked the state government's guarantee. MSEB retaliated on January 28, 2001 by slapping a Rs 401-crore penalty for non-supply of electricity at adequate levels. It demanded that DPC adjust the bills against this penalty. "This stand of MSEB was explained to DPC at the board meeting", a state government official said. Gas hub blues 04/27/2001 Energy Compass © 2001 Energy Intelligence Group. All rights reserved "This is not a country of marchers," Bolivia's information minister bravely insisted last week, in the midst of an economic and political crisis in the country that aspires to be South America's natural gas hub. The statement was made the day that small business borrowers marched through tear gas to have their debts forgiven, and a few days before farmers teamed up with the economically dispossessed to brave truncheons and more tear gas to march to La Paz to ask the government to fulfill its pledges on water and land. Taxi drivers went on strike on Apr. 24, while all the groups, including the labor union federation, talk of blocking main roads on May 1. What is more, a privatizing ex-president, Gonzalo Sanchez de Lozada, has launched an effort to force out the incumbent, Hugo Banzer, for economic mismanagement. Banzer, a one-time military dictator, was elected democratically, but is having a tough time dealing with his constituents. While Sanchez de Lozada's effort has dismayed many people who otherwise oppose Banzer, including the US and other Latin American presidents, the throw-him-out theme underlines the problem: The urban poor are getting poorer as joblessness grows, while the rural poor say the government has gone back on agreements made last October - again after marches and blockades - for changes to a water privatization law and land registration rules. No one has forgotten the unrest of January 2000 that toppled Ecuador's elected president Jamil Mahuad, leading to his replacement by vice president Gustavo Noboa (EC Jan.28'00,p6). Private business, in the form of the Bolivian chamber of commerce, wants the government to go to the bargaining table with the marchers to resolve what appears to be an escalating conflict in which two people have already reportedly died in clashes with police. Even if the abyss is avoided, the unrest threatens Bolivia's extensive natural gas industry just as disruption to the rest of the economy heightens its dependence on gas export earnings. No one has suggested that the country's extensive gas pipeline network is at risk - as oil pipelines are in Colombia and, occasionally, in Ecuador - from rebel attacks. While Cuban guerrilla hero Che Guevara was caught and killed in Bolivia in 1967 while leading a group of rebels, armed insurgency has since subsided. Landlocked Bolivia made a big stride in meeting its gas hub goals in 1999 with the opening of the Bolivia-to-Brazil pipeline, with the capacity to send 1 billion cubic feet per day into Latin America's biggest gas market. It competes with Argentina for the Brazilian, Peruvian, and Chilean markets, even as it eyes ways of entering the Argentine market itself. "Argentina sees Bolivia as both a competitor and a potential partner," says an analyst who spends a lot of time in Argentina. "It is hard to know how much spillover there will be from high unemployment, inflation, and general instability into the Bolivian gas industry." Several foreign companies have bet on Bolivia's gas play, notably the UK's BG, which has just been awarded access to the Bolivia-Brazil pipeline to enable it to move gas from its Bolivian fields to its 60%-owned Comgas distribution network in Sao Paulo. BG is also the proposed builder of a propane pipeline to the Chilean coast announced this week (see related article). Others investing, in the line and in another, pipeline-to-power, project include Enron and Royal Dutch/Shell. Brazil's state Petrobras is a partner in the Brazil-Bolivia line, and is trying to stop other companies using the Brazilian leg (EC Apr.20,p12). Brazilian regulators, eager to open up the gas market, decided that BG should have access, at least through 2003. Petrobras has threatened to sue. Some gas pipeline projects in the region have already been delayed or killed because Brazilian demand hasn't grown as quickly as planners expected, or because of demand and financing problems in other countries. It certainly won't help investor confidence if Bolivia's economic and political woes linger. By Peter Gall, New York. Might is right 04/27/2001 Energy Compass © 2001 Energy Intelligence Group. All rights reserved As the New York Mercantile Exchange (Nymex) and the Big Oil-backed IntercontinentalExchange (ICE) look set to go head-to-head in the online energy trading business, dozens of smaller internet exchanges are likely to collapse under the pressure. Seeing the way the market was headed - where web-based transactions replace old-style ways of making deals - London's International Petroleum Exchange (IPE) started searching earlier this year for a partner that could give it an internet trading capability. ICE emerged as the frontrunner, offering around $65 million to take over the IPE (EC Apr.13,p2). Sources say the combination has won the support of a majority of IPE shareholders. But after a meeting on Apr. 26, the IPE board said it needed more time to discuss the bid, and would have to meet again. The betting is that the board will recommend the takeover to shareholders for a vote in May or June. The ICE founders are well-known to the IPE: Eight are shareholders in the IPE, and four - BP, Total Fina Elf, Goldman Sachs, and Morgan Stanley - hold seats on the board. An ICE-IPE link, along with the roll out of eNymex, which could be unveiled early next month, is putting the heat on smaller start-ups - most of which were founded with the support of established energy companies. "Instead of an expansion in the number of sites, the intense push for liquidity will squeeze many players out of the trading game," concludes a new report by US technology consulting firm Forrester Research. In the US, wholesale online energy trading is expected to be huge. By 2005, oil, natural gas, and electricity trading will be a $3.6 trillion business, up from just $400 billion today. And over-the-counter (OTC) swaps and derivatives trading will dominate, Forrester says: Of the estimated $3.6 trillion in trades in 2005, OTC trading is forecast to total $2.7 trillion. The report suggests that online OTC oil trading in the US will hit $767.6 billion in 2005, up from an estimated $26.8 billion this year. Oil trade would account for 21% of the market, trailing only OTC gas deals in market share. Forrester predicts that the winners in this bigger online world will be ICE, eNymex, Enron's EnronOnline trading system, and TradeSpark, a North American gas and power exchange backed by US energy companies Williams, TXU, and others. Losers in the online trading race will be US-based independent sites such as Altra, whose investors include BP, Koch, and Conoco, and HoustonStreet Exchange. "These early online trailblazers will be forced to sell their exchanges," Forrester suggests. HoustonStreet Exchange, along with other startups that have led attempts to take physical oil online - including RedMeteor, Pepex, and Oilspace - could also be hurt by ICE's recent decision to expand into physical oil markets after establishing a strong presence in financial markets. HoustonStreet launched its internet oil trading exchange with great fanfare a year ago, but has since failed to attract a wide audience. It has been heavily dependent on backing from minority equity partner Equiva, a joint venture of Royal Dutch/Shell, Texaco, and Saudi Aramco, which paid $6 million for its stake, and agreed to use the exchange's oil trading platform. In the event, Equiva accounted for 56% of all crude and refined oil trade on HoustonStreet last year, according to a regulatory filing by exchange founder BayCorp, which owns 46%. As of early February, about $2 billion had been transacted on the oil platform. While the Equiva deal boosted trading volumes, the exchange needs broader support to survive, says BayCorp, which lost nearly $9 million last year. Other HoustonStreet initiatives have been put on hold, following the company's decision earlier this year to try to achieve near-term profitability. Instead, it will focus on a gas trading partnership with US energy giant Enron, and developing an online gas exchange. According to an agreement signed last year, the two plan to create links between their online exchanges, with Enron cementing the partnership by taking an equity holding. Other HoustonStreet backers include Conoco, US Williams, and European firms Vivendi, RWE, Vattenfall, and Electrabel. RedMeteor, a Texas-based start-up that trades physical and some financial oil in the US, says it handled 185 million barrels in January, with a notional value of $5.3 billion. However, only one-quarter of the current volumes are traded electronically; the rest are traditional transactions by voice brokers. Last year, RedMeteor bought brokerage house TCT in a bid to drive traffic through its internet exchange. A strategic alliance between RedMeteor and trading house Vitol has also failed to provide the expected liquidity boost. Vitol is not an active user of the US platform, sources say. It is most active in the New York cargo market, where RedMeteor has yet to establish itself. RedMeteor also has a deal with Neftebid, a Russian trading consortium. It has licensed its trading software to the group, with an online exchange to be launched this quarter. Two other start-ups, Pepex and Oilspace, have their eyes set on the cargo market. As of mid-March, Pepex had handled tenders for 12 million bbl - roughly two-thirds products and the rest crude - since its launch last June. Not all volumes were necessarily awarded. Oilspace is tweaking its technology, and several oil companies are currently testing the online service. Another start-up, BrentBroker.com, closed its doors before trading a barrel. The firm, backed by Hess Energy Trading, launched with a splash last summer, but failed to go live. Canada-based exchange DigitalOutcry, which was backed by oil trading company Canpet Energy, also failed to get off the ground. Altra, a US exchange formed five years ago, has established a solid foothold in gas, power, and natural gas liquids (NGL) trade, but has made few inroads in crude oil. Last year, the online exchange handled 250 million bbl of NGLs, while crude oil volumes were about 17 million bbl. By Jeff Gosmano, Houston. Venezuela Moving On Plans To Build Up Natural Gas Indus 2001-04-27 15:00 (New York) By Charles Roth Of DOW JONES NEWSWIRES Porlamar, MARGARITA (Dow Jones)--Venezuela is forging ahead with plans to develop its natural gas industry through a series of concessions involving both foreign and local companies. Industry officials reckon the effort should generate up to $13 billion in investment over the next 10 years. The biggest push now underway in the "Gasification of the Nation" program is the awarding of 11 licenses for the exploration and production of non-oil associated gas in central-western Venezuela, a zone estimated to contain 6 trillion to 20 trillion cubic feet in reserves. Of 34 companies that have qualified for the concessions, 26 are foreign. The government is also moving to open up offshore exploration and production of free gas in the Paria and Plataforma Deltana regions in waters bordering northeast Venezuela, where officials suspect 40 Tcf to 60 Tcf are waiting to be discovered. Jose Pacheco, vice minister of energy, told Dow Jones Newswires that the government wants to start the pre-qualification process sometime this year. Trinidad, he said, has been aggressively tapping reserves in the area, some of which may extend into Venezuela territory. The government has been talking with authorities from the island to reach some understanding for the exploitation of the region, he said. Rafael Ramirez, president of Venezuela's gas regulator, said state-oil company Petroleos de Venezuela SA (E.PVZ) has allocated $200 million for exploration in the area. He noted that industry giants such as Royal Dutch/Shell (RD), BG Group Plc's British Gas (BRG), Exxon Mobil Corp. (XOM), Phillips Petroleum Co. (P), El Paso Corp. (EPG) and Enron Corp. (ENE) have already expressed interest in the area. Pacheco, Ramirez and other industry officials are attending a conference on gas and electricity. Fiscal Incentives To Attract Companies Venezuela, the world's third largest oil producer, has proven gas reserves of 147 Tcf, the eighth largest worldwide. About 10% these reserves are non-associated. It produces about six billion cubic feet a day, of which 70% goes to various segments of the country's petroleum industry and 30% is divided between electricity generation, petrochemicals production, the steel and aluminum industries, the cement and manufacturing sectors and residential consumption. Industry officials want to raise natural gas production to 9 Bcf/d to 10 cf/d by 2010. To meet that goal, Venezuela is enticing companies by exempting them from the value-added tax, reducing the income tax for them to 34% from 64%, and lowering it a further 8% in they make new investments. Royalties will be assessed at 20%. Companies interested in participating in the expansion of the natural gas pipeline network are excluded from royalties, Ramirez said. He noted that official pricing calculations indicate the rate of internal return on transmission and distribution of gas hovers around 15%, but could be higher for more efficient companies. The latest transmission project underway would connect mainland Venezuela and Margarita Island. The approximately 170-kilometer pipeline will cost $90 million. Bidding is slated to start in the weeks ahead and the project should be completed by the end of 2003. Following Margarita, a natural gas pipeline connecting Valencia and Paraguana is planned. The network should then expand to the offshore platforms and ultimately link the populated cities across the northern coast to production facilities both inland and offshore. Ultimately, the transportation network should cover 6,300 kilometers and extend to Colombia and Brazil. The network will cost an estimated $1.6 billion. To turn around what has heretofore been an unprofitable business, authorities are planning on economies of scale and dividing the country in four regions that will each include both industrial and residential consumers. Pricing of natural gas will rise according to the type of consumer, with the lowest tariffs assessed for residential and commercial clients, and scale upwards for petrochemical producers, the steel, electricity and manufacturing industries and others. Jorge Depresbiteris, director general of Margarita electricity utility Seneca, controlled by U.S. CMS Generation Co., said the substitution of diesel by natural gas could be viable for the company's bottom line if it is sold at $1.50/billion British thermal units or less. Beyond that, the utility's profitability will be affected. Seneca, he added, is planning ahead for the conversion to natural gas because it is clear the "gasification" policy is being implemented, "and there's no turning back." Regulatory authorities assured that natural gas will be "adequately valued" even as greater volumes come on stream, and will include adjustments for devaluation in the country's currency and, if necessary, for inflation. Natural gas processing is yet another area in which newcomers are being invited to participate. Overall, energy ministry officials figure that natural gas can currently substitute 9 million barrels a day, or 100%, of fuel oil, and 72 million b/d, or 56%, of the diesel that is consumed in the country, among other carbon-based derivatives. Officials reckon that all the investment should create up to 10,000 direct jobs and 52,000 indirect jobs in auxiliary industries. -By Charles Roth, Dow Jones Newswires; 58-14-235-8525; charles.roth@dowjones.com (END) DOW JONES NEWS 04-27-01 03:00 PM- - 03 00 PM EDT 04-27-01 Enron Offl Given Authority To End India Pwr Proj -Report 2001-04-27 10:19 (New York) BOMBAY (AP)--A top official of U.S. energy giant Enron Corp. (ENE) was authorized to issue a termination notice to pull out of a controversial power project in western India, the largest foreign investment in the country, a newspaper reported Friday. The board of the Dabhol Power Company, the Indian subsidiary of Enron, met in London on Wednesday and authorized the company's managing director to issue a preliminary notice to terminate the project, billed as the world's largest natural gas fired power plant, The Times of India reported. "The board has given powers to the management to issue the pre-termination notice. But the meeting unanimously felt the need of the hour was not to terminate the project but to initiate a re-negotiation process," Vinay Bansal, chairman of the Maharashtra State Electricity Board, was quoted as saying by the newspaper. In Bombay, Krishna Rao, a state electricity board officials, said Friday that negotiations with the DPC would be the next step. "The government and DPC have to come together. The government has already said a negotiation team is being appointed," Rao said. "The termination notice will have to wait until negotiations actually begin," he said. Enron officials have refused comment. The notice is the first of three steps that could end in the abandonment of the $3 billion project. A six-month reconciliation period would follow any move by the Dabhol Power Company to issue the termination notice, Bansal said. Indian lenders, present at a meeting with foreign financial institutions in London earlier this week, have said they favor renegotiation. The project has been in trouble since December when the government of Maharashtra state, where the Dabhol project is located, said the tariffs were exorbitant and demanded a new price agreement. The state power utility said it could not pay Dabhol's monthly electricity dues, which prompted the company to invoke a federal guarantee in February. This was the first time in India that a federal guarantee was invoked. As part of the 1995 agreement between the company and the state government, the federal government has to pay in case of a state default. But before the federal government stepped in, the state government paid $17 million in outstanding bills. Since then, the state power utility has confirmed that all pending bills have been paid. However, a dispute over payment of $48 million for December and January bills is pending. Several political parties had earlier demanded the project be scrapped, since the costs had increased from 1.8 rupees (four cents) per unit agreed six years ago for electricity generated by the 740-megawatt naphtha plant, to 7 rupees (15 cents). Enron has maintained that work will be completed by year-end on the 1,444 megawatt liquified natural gas plant. Houston, Texas-based Enron has a 65% stake in Dabhol Power, and is the project's largest shareholder. Other shareholders include the Maharashtra State Electricity Board with 15% and General Electric Co. and Bechtel Enterprises with 10% each. (END) DOW JONES NEWS 04-27-01 10:19 AM- - 10 19 AM EDT 04-27-01 O'BRIEN AND BAUMAN'S HOT STOCKS: YHOO ENE SFA YUM 2001-04-27 12:30 (New York) As they do every Friday, Dow Jones Newswires reporters Bob O'Brien and Larry Bauman are scheduled to hand out their stock plays of the week, shortly on CNBC-TV: Company Company News Yahoo 'Let The Sun Shine In' (YHOO) award. - - Enron 'I'd Like To Thank The (ENE) Academy' award. - - Scientific-Atlanta 'If C-Span Merged With (SFA) Home Shopping ...' award. - - Tricon Global 'A Fat Guy In A Speedo' (YUM) award. (END) DOW JONES NEWS 04-27-01 12:30 PM- - 12 30 PM EDT 04-27-01
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