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Enron Mail |
THE FINANCIAL EXPRESS, Tuesday, November 20, 2001
BSES to complete DPC due diligence by January Similar story also appeared in the following publications: THE TELEGRAPH, Tuesday, November 20, 2001 Trio to help BSES in Dabhol study=20 THE ASIAN AGE, Tuesday, November 20, 2001 BSES to complete due diligence of dpc in 2 months=20 THE HINDU, Tuesday, November 20, 2001 BSES to complete due diligence of Dabhol project by Jan.=20 THE HINDUSTAN TIMES, Tuesday, November 20, 2001 Due diligence of DPC PIONEER, Tuesday, November 20, 2001 BSES to complete due diligence of DPC in 2 months THE FREE PRESS JOURNAL, Tuesday, November 20, 2001 BSES to complete due diligence of Dabhol project by Jan end ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE ASIAN AGE, Tuesday, November 20, 2001 Maharshtra stand on Enron is vindicated, Seema Mustafa=20 Similar story also appeared in the following publication: THE DECCAN CHRONICLE, Tuesday, November 20, 2001 Enrons fiddles vindicate Indian claims on DPC=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE FINANCIAL EXPRESS, Tuesday, November 20, 2001 MSEB seeks refund of Rs 1,200 cr from DPC, Sanjay Jog=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE DECCAN HERALD, Tuesday, November 20, 2001 DPC deadline expires for issuing final termination notice ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE HINDU BUSINESS LINE, Tuesday, November 20, 2001 Greenfield-DPC time-charter pact set to be scrapped, P. Manoj=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ OUTLOOK (MAGAZINE), November 26th issue Enron had no choice but agree to what seems to be a shotgun marriage (Abhay Mehta, is the author of Power Play, a book on the Enron controversy.= ) Abhay Mehta=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE FINANCIAL EXPRESS, Tuesday, November 20, 2001 BSES to complete DPC due diligence by January BSES Ltd will begin due diligence of the 2,184 mw Dabhol power project in a= fortnight. The process, aimed at assessing the right price for buying 85 p= er cent stake in the Enron-promoted Dabhol Power Company's (DPC), will be c= ompleted by January. Speaking to reporters on Monday, BSES chairman and man= aging director RV Shahi said, "The due diligence process will take six to e= ight weeks after signing of the confidentiality agreement." According to Mr= Shahi, his company would be signing the confidentiality agreement, a pre-r= equisite for beginning due diligence, in another ten days. BSES has sent it= s comments on various clauses of the agreement to DPC. The company would ap= point three separate consultants for doing technical, financial and legal d= ue diligence of the $2.9-billion project, he said on the sidelines of a sem= inar on natural gas.=20 It would also be constituting an internal task force for doing parallel gro= und work. The whole exercise would involve assessing the value of DPC's ass= ets and liabilities besides finding out further investment needed to comple= te the 1,444 mw Phase-II. Stating that the Dabhol power project as its stan= ds was not viable, Mr Shahi said that BSES will be going in for financial r= e-engineering and renegotiation of the gas supply agreement for Phase-II be= fore taking over the project. DPC had signed a 20 year contract with Oman L= NG for 1.6 million tonnes per year and Abu Dhabi Gas Liquification Company = for 480,000 tonnes. He said the total cost of power generation has to be br= ought down to Rs 2.60-2.70 per unit for making it viable. For this fuel cos= t and capital cost has to be brought down, he added. BSES has shown interes= t in acquiring 85 per cent stake of Enron, Bechtel and GE in the Dabhol pro= ject at the recently concluded Singapore meeting convened by the Indian fin= ancial institutions. It will fix a price for taking over the stake once due= dilligence is completed. After signing the confidentiality agreement BSES = will formally look into the financial books of DPC, its loans, sponsors and= other assets and legal wrangles. Before taking any decision on the acquisi= tion price of the distressed company.=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE ASIAN AGE, Tuesday, November 20, 2001 Maharshtra stand on Enron is vindicated, Seema Mustafa=20 The Maharashtra government's refusal to accept Enron's claim of bringing in= capital cost of $2.8 billion into the controversial Dabhol Power Corporati= on has been vindicated by reports of large-scale fraudulent practices by th= e company in the United States. At present under inquiry by the US Stock Ex= change Commission, Enron has been virtually wiped out with Dynegy, a Chevro= n and Texaco company, having reportedly bought Enron for a paltry $9.12 bil= lion stock swap. Enron's share value plummeted from $90 last year to $7 thi= s month following disclosures that its senior officials had been transferri= ng funds to their own pri vate companies without reflecting this in the bal= ance sheets for the last five years. Enron's chief financial officer was fo= und involved in the scam and was sacked, although this move could not save = the company, which has been unable to explain the big gap in its balance sh= eets. It is reported to have gone down taking $72 billion in shareholders' = wealth with it. In fact, the President and CEO of Halliburton, Mr Dave Lesa= r, is on record as saying that Enron's "credibility is finished because the= y did not provide financial information and, therefore, investor confidence= declined." Halliburton claims to be the world's largest provider of produc= ts and services to petrol and energy industries, functioning in 120 countri= es with US vice-president Dick Cheney being the earlier CEO of the company.= =20 The UK, following the expose, has brought Enron's Wessex Water operations i= n the country under scrutiny with the entire range of utility and energy as= sets being given a close look. Pressure is being exerted on the Maharashtra= government now to ensure that the records are opened and the entire deal i= nvestigated. Mr Probir Purkayastha of the Delhi Science Forum, which had le= d a major campaign against the Enron power project here, said the US compan= y has survived entirely "on energy trading and influence brokering." It had= extremely close contacts with the Republican party, including former Presi= dent George Bush.=20 There was tremendous pressure on India to withdraw its objections and clear= the project, particularly after the Bush administration assumed power. The= new US ambassador to India, Mr Robert Blackwill, is on record saying that = India-US relations could be summed up in just five alphabets: "Enron." In f= act, shortly after assuming office in New Delhi, the ambassador addressed s= everal business and corporate meetings and pushed for the quick clearance o= f the stalled Enron project. The Maharashtra government, which had cancelle= d the seven-year-old power purchase agreement with Enron, was in the middle= of court proceedings with the company. It is now expected to resume discus= sions with Dynegy, although it is in a position to ensure that all records = are made available and the project thoroughly investigated. Enron's capital= cost claim, despite the fact that it was not supported by statistics, was = accepted by the state government under the then chief minister, Mr Sharad P= awar.=20 Enron went ahead with the construction of Phase I. In 1995, the Shiv Sena-B= JP government cancelled the project. Within six months the same government = revived it. The government claimed that this was because Enron had agreed t= o reduce the capital cost to $2.5 billion. But, as was pointed out by the O= pposition parties here and has been accepted by the state government now, t= he Dabhol Power Corporation had borrowed at least $2.05 billion from Indian= and foreign institutions, with the result that the total equity component = was actually only $450 million. Of this the Maharashtra State Electricity B= oard had put in $130 million as its own equity, thus, leaving only $320 mil= lion equity put in by Enron.=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE FINANCIAL EXPRESS, Tuesday, November 20, 2001 MSEB seeks refund of Rs 1,200 cr from DPC, Sanjay Jog=20 The Maharashtra State Electricity Board (MSEB) on Monday appealed to the Bo= mbay High Court that Dabhol Power Company (DPC) be ordered to pay it an amo= unt of Rs 1,200 crore towards the excess payment of capacity charges during= May 1999 and April 2001. According to MSEB, of the total payment of Rs 3,4= 99 crore towards the power purchases, the capacity charge amounted to Rs 2,= 087 crore. The average purchasing rate per unit of Dabhol Phase-I (740 mw) = power in 2000-01 has been about Rs 7.30 while its payment for the Phase-II = (if and when commissioned) would have been in the range of Rs 500 crore per= month.=20 MSEB has denied that it has failed or neglected to make payments to DPC und= er the power purchase agreement (PPA) from time to time and whenever the pa= yments were made after the due dates, interest was paid to DPC. "It is DPC = that has defaulted in paying the rebate due to MSEB for the default and mat= erial misrepresentation on the availability of power without any basis what= soever. The DPC's refusal to pay/adjust the rebate in terms of the express = provision of the PPA of undisputed facts is obdurate and wrongful," it said= .=20 MSEB in its counter affidavit has prayed that DPC's writ petition challengi= ng the jurisdiction of Maharashtra Electricity Regulatory Commission (MERC)= to adjudicate upon dispute and difference between MSEB and DPC be dismisse= d at cost. The Bombay High Court division bench comprising justices Ajit Sh= ah and Sharad Bobde would begin hearing on the DPC's writ petition from Dec= ember 11 following the Supreme Court's order of August 6 to settle the MERC= jurisdiction issue. The filing of counter affidavit by MSEB today coincide= s with the completion of six months period after the issuance of two prelim= inary termination notices by DPC on May 19. DPC, which has already issued a= nother two preliminary termination notices to MSEB on September 10 however,= has been restrained from serving a final termination notice to MSEB by the= Bombay High Court on November 9 over a civil suit filed by Indian financia= l institutions.=20 MSEB further said that the DPC cannot be permitted to go ahead with the arb= itration when the statute requires that its dispute with DPC be adjudicated= upon only by the Merc. "DPC is an Indian company doing business in India a= nd subject to Indian laws and an utility within the meaning of the Electric= ity Regulatory Commission Act (ERCA)," MSEB added. MSEB has strongly denied= DPC's apprehension that it would not get a proper or fair hearing before t= he MERC. It further said that "MERC has both the competence3, expertise and= regulatory responsibility to adjudicate upon the disputes raised in the MS= EB's petition filed on May 25 before the MERC," it said.=20 According to MSEB, the disputes it has raised before the MERC involve techn= ical, commercial and legal issues and it would clearly have consequences/ra= mifications, which directly bear on matters which have exclusively been ent= rusted to the MERC under section 22 (1) and 29 of The ERCA. "The MERC, whic= h is fully competent in every respect to adjudicate upon, is an expert body= with special knowledge and experience in matters relating to electricity i= n Maharashtra state," MSEB said. MSEB said that adjudicating functions/powe= rs/jurisdiction have been conferred on the MERC in respect of disputes and = differences between utilities.=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE DECCAN HERALD, Tuesday, November 20, 2001 DPC deadline expires for issuing final termination notice The six-month deadline set by Enron-promoted Dabhol Power Company (DPC) for= Maharashtra State Electricity Board (MSEB) to issue the final termination = notice (FTN) expired today. The power major, however, has been restrained b= y the Bombay High Court from initiating the process till December 3. Had th= e DPC issued FTN today, it would have irrevocably bound all parties to endi= ng the contract without going in for any alternative, an option which is st= ill open. DPC, on April 19, slapped a preliminary termination notice (PTN) = on MSEB, due to what it called continuing default in payment of dues by the= board on several occasions and political interference to the detriment of = its business operations. As per the power purchase agreement (PPA) signed b= etween DPC and MSEB, the PTN gave six months to both parties to resolve the= dispute, or else, allows the aggrieved party to terminate the contract and= claim damages.While the possibility of DPC issuing the final termination n= otice was real, a dramatic intervention by the Indian financial institution= s (FIs) led by IDBI, which moved the high court on November 5, have given a= temporary reprieve to the MSEB. The FIs and banks pleaded for an injunctio= n against DPC and sought reopening of the Dabhol plant The intervention by = FIs so incensed DPC that it called off the two-day meeting with the represe= ntatives of the FIs in Singapore in protest . However, it was persuaded to participate in the meeting, which was aimed at= finding a buyer of Enron's stake in the company. Two private power majors,= Tata Power and BSES, have shown interest in picking up Enron's stake, but = at a discounted price The high court, which heard the preliminary arguments= of the FIs and DPC on November 9, restrained DPC from issuing the FTN anda= djourned the hearing till December 3. DPC sources told Deccan Herald the hi= gh court order means the PTN notice period will continue till December 3 an= d the company would initiate termination process on that day, if the high c= ourt allowed it to do so. DPC has claimed that the damages it would claim o= n final termination of the contract would run around Rs 24,000 crore. This = figure too has been disputed by the MSEB and the state government. MSEB, on= its part, stopped drawing power from Dabhol plant from May 29 onwards, whi= ch brought the plant to standstill ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE HINDU BUSINESS LINE, Tuesday, November 20, 2001 Greenfield-DPC time-charter pact set to be scrapped, P. Manoj=20 THE time-charter party agreement signed between Greenfield Shipping Company= and Dabhol Power Company (DPC) is set to be scrapped as an outcome of the = controversy surrounding the Enron-promoted troubled power plant in Maharash= tra. With Dabhol's LNG facility yet to go on stream, DPC will not be able t= o deploy the 1,37,000 cubic metre capacity tanker `LNG Laxmi' once the prom= oters of Greenfield deliver it to the charterer as per the charter party ag= reement signed between the two. The charter party agreement states that the= charterer will have to take delivery of the tanker within 45 days of being= delivered by the shipowners and operators. ``A failure by the charterer to= take delivery of the tanker within the stipulated 45 days would automatica= lly rescind the charter party agreement", sources familiar with the develop= ments told Business Line.=20 Greenfield and DPC had entered into a time-charter agreement wherein DPC wi= ll time-charter `LNG Laxmi' for a period of 20 years at a charter hire rate= of $ 98,600 per day for transporting gas from Oman to its LNG facility in = Dabhol, Maharashtra. Shipping Corporation of India (SCI) is a 20 per cent s= takeholder in Greenfield. The promoters of Greenfield took possession of th= e LNG carrier on November 15 after paying the last instalment of $ 55 milli= on from Mitsubishi shipyard at Nagasaki in Japan, overcoming certain last-m= inute hiccups. Since DPC is not in a position to take physical delivery of = the tanker, the promoters of Greenfield are going through the formalities t= o full-fill contractual obligations. After the 45 days time limit is exhaus= ted and the time charter contract between Greenfield and DPC automatically = annulled, the promoters of Greenfield will be able to time-charter `LNG Lax= mi' to a new charterer.=20 In the meanwhile, Greenfield was able to locate a new charterer in the form= of Oman Government, which will time-charter `LNG Laxmi' for 20 years at a = charter hire rate of a little over $ 70,000 per day as well as pick-up a 50= per cent stake in Greenfield. Enron-affiliate Atlantic Commercial Inc., on= e of the original promoters of Greenfield with a 20 per cent stake worth $ = 11 million, has sold its entire stake to Oman Government. Besides, the lead= -partner in the consortium, Japan's Mitsui O.S.K. Lines have parted with ha= lf of its 60 per cent holding in Greenfield amounting to 30 per cent in fav= our of Oman Government. Oman Government will contribute $ 27.5 million for = acquiring 50 per cent stake in Greenfield. It will sub-charter `LNG Laxmi' = to Oman LNG in which it holds a 51 per cent stake. Oman LNG is expected to = deploy `LNG Laxmi' to transport some of its LNG cargo sold on c.i.f basis t= o destinations including Britain and Korea, the sources said. A new time-ch= arter party agreement between Greenfield and Oman Government will be inked = after the DPC contract is revoked. Oman Government is currently thrashing o= ut the finer details of the charter agreement with Oman LNG in which Shell,= Total and Mitsubishi has equity stakes. `` This will ensure that LNG Laxmi = is gainfully employed without being allowed to remain idle``, the sources s= aid. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ OUTLOOK (MAGAZINE), November 26th issue Enron had no choice but agree to what seems to be a shotgun marriage Enron had no choice but agree to what seems to be a shotgun marriage with a= rival, Dynegy, a fourth its size Lay: time to play dead? Enron, the most a= dmired company in the US six years in a row, has been consigned to the dust= bin of history and business school case studies. Once the darling of Wall S= treet for its aggressive no-holds-barred growth, its stock was languishing = at historical lows of $7.21 last week, a steep fall of 90 per cent from its= peak last October, representing a notional loss of $80 billion. In the las= t six weeks alone, its stock plunged by over 400 per cent.Kenneth Lay, the = politically-connected chairman who counts on the United States' First as we= ll as Second Families (Vice-President Dick Cheney) as close friends, and th= e acknowledged power behind 'deregulation', has faced a nightmare over the = last three weeks. Following a series of stories first published in The Wall Street Journal an= d The New York Times, Enron's stock went into a tailspin and it never recov= ered. The strawalbeit a heavy onethat broke the camel's back was a $1.01 bi= llion charge on its pro-forma statement of earnings. Subsequently, it has e= merged that most of Enron's purported earnings were bogus and accounting ju= gglery is the most charitable explanation. The company has formally acknowl= edged that its audited statements of earnings for the last three years were= of no consequence! It appears that several limited partnerships (LJM and L= JM2 in particular, apparently named after Star Wars film characters), in wh= ich officers of Enron had substantive financial interests, were key element= s in its concocted business numbers. Enron had till now gotten way with the= business equivalent of murder. To illustrate, in the matter of appointment= of key regulatory figures in the US, the California power debacle in which= the conservative California governor went as far as saying that nothing wo= uld please him more to see Kenneth Lay in a prison cell with a fellow cellm= ate greeting him with "Hi Honey, my name is Spike," and its international o= perationsthe debacles in India, Indonesia, Nigeria etc, etc, the failures o= f its very expensive forays into the broadband and water businesseswere in = a sense forgivable. What was unforgivable was the ultimate crime of siphoni= ng off shareholders' money through these limited partnerships and brazenly = lying to Wall Street. With a daily decline in its share prices ($37 to $7 in two weeks), the fail= ure of white knights to emerge (such as Warren Buffett's Berkshire Holdings= , on which Enron had pinned some hope), its bonds being only notionally abo= ve junk status (trading in two weeks from 101 to 65 cents on the dollar) an= d, consequently, the potential collapse of its trading business where it ac= ts as a trusted counter party, Enron had no choice but to agree to what app= ears to be a shotgun marriage with a rival, Dynegy, a fourth of its size. T= he almost overnight surrender and the fact that the final price for Enron w= as as low as $8 billion represents a collapse unparalleled in recent busine= ss history. =20 This merger, slated to occur over the next six to nine months, subject to a= series of caveats, may or may not take place as there could very well be s= everal unpleasant surprises in store. Among these are the pending Securitie= s and Exchange (SEC) investigation (in which the Enron counsel is a former = colleague of the investigating officer!), the several dozen class-action su= its filed over the last three weeks against Enron, its directors, Lay and s= everal officers as well as its auditors Arthur Andersen, and, of course, ap= propriate regulatory approval. In my opinion, the key surprise may very well be the several as-yet secret = limited partnerships. If these are ever made public, the reverberations thr= oughout the US business spectrum may be too unpleasant. In any event, the c= onsequences of these events do not appear to have sunk in in India. Given t= he huge, and what appears to be a very difficult-to-service debt, of $22 bi= llion from various forays that Enron has engaged in in the last three years= (raised from $15 billion the week before), it is likely a solution crafted= to the needs and limitations of all parties may be feasible given appropri= ate spine. Spine on India's part, that is.The terms that were proposed by E= nron for a settlement of the Dabhol issuea payment of $1.2 billion, now bro= ught down to $850 millionare clearly unacceptable. The missile that Enron h= as now aimed at India has not been comprehended either by the state apparat= us or the media. =20 It rests in an order issued by the London High Court, which, inter alia, pr= ohibits the government of Maharashtra from even opening its mouth about Enr= on, even in an Indian court or tribunal. There are several, in my opinion, = historically unprecedented consequences of this. This craven, abject surren= der of sovereignty is a result of a consent agreement the erstwhile BJP-Shi= v Sena government signed a year after the fraudulent 'renegotiations'. This= is a truly unpardonable crime and should be sufficient reason to send the = 'renegotiators' to jail. In any event, given a series of interests, inter alia the interests of Shar= ad Pawar (who negotiated the first Enron contract) and consequently the pre= sent state government, the danger that Indian financial institutions, in pa= rticular IDBI, may simply go under for lending without any due diligence to= this over-invoiced project, the Damocles sword hanging over Maharashtra in= the form of the London High Court order and so on, it may be in the best i= nterests of all parties concerned to iron out an appropriate transparent ag= reement that has India's and the public interest at its core, a comprehensi= ve settlement, given the effective non-existence of Enron at this moment in= history =20 (Abhay Mehta, is the author of Power Play, a book on the Enron controversy.= ) Abhay Mehta
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