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Enron Mail |
Jeff,
We shall forward to you shortly a copy of the message from Sandeep with the numbers you have requested. What follows below are the extracts from two recent articles on the power situation in India published by The Financial Times. The first article describes recent power outage in northern India affecting millions of people. One possible line of defense is pointing out to the value of output lost due to power shortages. It is obvious that the value of lost production exceeds the cost of power produced by the Dhabol plant (expensive as it may be). The power cut affected 230 million people. The second article is Enron specific. Vince ASIA-PACIFIC: Power failure hits north India Financial Times; Jan 3, 2001 By ANGUS DONALD Tens of millions of people were left without electricity in northern India yesterday after a power grid breakdown. Electricity was gradually switched on in some areas and most parts of the capital New Delhi, with 60 to 70 per cent of supply expected to be restored by the end of the day, according to power grid officials. The Associated Chambers of Commerce and Industry (Assocham), a leading business organisation, expressed "deep concern" and called for a mechanism to prevent future disruption that could "cripple the economy". The power failure across eight Indian states, including New Delhi, disrupted train services, water supplies and the telephone network and forced hospitals to switch to emergency generators. The fault occurred on the Northern Grid, which provides electricity for 226m people, and affected the states of Delhi, Haryana, Punjab, Uttar Pradesh, Himachal Pradesh, Madhya Pradesh, Rajasthan and Jammu and Kashmir. A breakdown at a sub-station in Kanpur in Uttar Pradesh, India's most populous state, caused an overload of power on other lines, which then failed as well. Trains stopped running for most of the day and signals systems were damaged. New Delhi international airport was also slightly affected before its own power supply could be engaged. "We will probe into the reasons for the failure. It is most likely to be a technical failure, but we will investigate why it happened," Suresh Prabhu, the power minister, was quoted as saying by Press Trust of India. India suffers regularly from power problems because of lack of funding to upgrade infrastructure. Theft of supplies is also a big problem. Thirty per cent of the country's electricity is stolen, according to analysts. In New Delhi as much as 50 per cent is stolen. Two years ago, a power failure blacked out Uttar Pradesh and Delhi for hours. Assocham issued a statement, saying that increasing industrial demand would exacerbate the problems already faced by India's inefficient power sector. "The slow progress, particularly in strengthening the transmission and distribution system, and ever increasing theft will contribute to worsening the power supply situation further." Copyright: The Financial Times Limited , Copyright The Financial Times Limited 2000. "FT" and "Financial Times" are trademarks of The Financial Times. Privacy Policy | Terms & Conditions. ****************************************************************************** ************************************* ASIA-PACIFIC: Energy group launches image offensive: Enron has a plan to reverse its reputation as a profiteering multinational operating in India, writes Khozem Merchant Financial Times; Jan 3, 2001 By KHOZEM MERCHANT Enron, the US energy producer and a constant target of criticism in India, is hitting back with a campaign to reverse its image as a profiteering multinational. Its "myth and reality" offensive in local newspapers follows the west Indian state of Maharashtra's decision to review the tariff it pays the Texas-based company, whose Dollars 2.2bn electricity generating plant at Dabhol is India's biggest single foreign investment. Maharashtra's tariff has more than doubled since 1993 and is three times greater than that charged by other independent power producers (IPPs). The tariff has risen because of the depreciation of the rupee against the dollar and the high but now falling price of naphtha fuel. The state also pays a fixed capacity charge of Rs970m (Dollars 21m) a month, reflecting the huge project cost and, controversially, irrespective of consumption. A showdown looks inevitable, reminiscent of a clash six years ago that damaged India's appeal to foreign investors. A former official of the World Bank, which has criticised the deal, says Enron is emerging "as the East India Company of the 21st century" - a reference to the British trader that colonised key areas of the Indian economy in the 19th century. The stand-off is the latest blot on India's power sector. The UK's PowerGen and Cogentrix of the US have quit India recently, frustrated by long approval procedures, inadequate payments mechanisms or because of higher returns elsewhere. "India has lost time and opportunity and has driven returns down by six percentage points," says Gerry Grove-White, former India general manager of PowerGen, which has sold its 655MW plant in Gujarat to China Light & Power of Hong Kong. India's national plan for the five years to 2002 says generating capacity must rise by 40,000MW to about 120,000MW. But since 1992, IPPs have added only 3,000MW and 2,500MW remains under construction. This is insufficient to support official projections of 6 to 8 per cent economic growth. Enron was a bellwether of India's liberalisation, winning fast-track project approval in the early 1990s. Phase 1, a 740MW plant fuelled by expensive naphtha came on stream in May 1999, and phase 2, a Dollars 1.87bn plant of 1,624MW capacity that will run on cheaper liquefied natural gas (LNG), will be completed this year. Only two of seven other fast-track proposals have achieved financial closure. From the outset Enron encountered attacks, culminating in Maharashtra's then nationalist government cancelling the project before renegotiating terms no less onerous. Vilasrao Deshmukh, chief minister of the successor government, says the power purchase agreement is unaffordable. Enron, whose attackers also include cultural chauvinists, wants to maintain good political relations in a hostile but lucrative environment. Enron views India as a testing ground for its evolution from a traditional manager of power plants to a broad-based trader of commodities, such as energy, gas and bandwidth. To support these ambitions Enron hopes to trade energy between power surplus and deficit states, once legislation is passed this year. It is building an LNG terminal and pipelines to trade imported natural gas. And it is laying a 15,000km fibre-optic network to trade bandwidth space in a country desperately short of this new economy commodity. In any event, Enron believes it has a watertight contract. It is supported by many that believe any subversion of the contract would confirm investor perception of Maharashtra, India's financial and industrial hub, as an unreliable destination for investment. Mr Deshmukh - who has avoided the language of his predecessor, which threatened to "dump Dabhol into the Arabian Sea" - is under pressure from radical members of his wobbly coalition. But his options are limited. Scrapping the project would be ruinous for an economically troubled state that would have to compensate shareholders. Maharashtra State Electricity Board, the local utility and Enron's main client, is obliged to dispatch or "off-take" 90 per cent of Dabhol's output. Yet MSEB has never honoured these guarantees. Its off-take has averaged 60 per cent since the plant opened and, in effect, MSEB has been paying a lot more while consuming a lot less power. One reason off-take is low is because the state's tough new regulator has told MSEB to buy from cheaper sources. Enron says the tariff would be Rs4.02/kWh if MSEB's off-take averaged 90 per cent. But with off-take a third lower, the average tariff is Rs4.94 per unit, and often higher. In October, the tariff was Rs6.91 per unit, when off-take was about 49 per cent. Enron says tariffs should come down when phase 2, run on cheaper LNG, starts. These cost pressures have forced MSEB to take up only half of a 30 per cent equity option in phase 2. Enron has acquired the balance and mandated bankers to find a buyer. Enron's difficulties have undermined the appeal of IPPs, which have failed to deliver the flood of investments. Potential IPPs feared they would never be paid by state generating boards that have become a byword for corrupt management of power. Reform of state electricity boards, whose uneconomic pricing means industrial users subsidise poor farmers, as well as transmission and distribution (T&D) services to check huge theft and technical losses, is overdue. "Given the limited resources, money would be better spent on T&D rather than on new plant," says Oliver Blackaby, managing director of N M Rothschild in India, which is advising Karnataka on the privatisation of its distribution network. For the moment, attention is fixed on Enron's ability to satisfy the competing interests of investors and clients. As Sanjay Bhatnagar, chief executive officer of Enron India, said in a recent trade magazine, one of the key lessons learned from phase 2 is "having flexibility to deal with externalities". Copyright: The Financial Times Limited , Copyright The Financial Times Limited 2000. "FT" and "Financial Times" are trademarks of The Financial Times. Privacy Policy | Terms & Conditions.
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