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Enron Mail |
THE FINANCIAL EXPRESS, Monday, October 22, 2001
Dabhol seeks dismissal of MSEB's special leave petition, Sanjay Jog=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE ASIAN AGE, Monday, October 22, 2001 Judge name for Enron panel will be out in a week=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE FINANCIAL EXPRESS, Sunday, October 21, 2001 Maharashtra govt seeks Lord Alexander at ?500 per hour, Sanjay Jog=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE TIMES OF INDIA, Monday, October 22, 2001 DPC for written undertaking from Maharashtra govt=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE INDIAN EXPRESS, Monday, October 22, 2001 Why Enron needs to simply 'Lay Off', Ramesh Chauhan=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE TIMES OF INDIA, Saturday, October 20, 2001 MSEB asked to rescind tariff hike plan, Vidyadhar Date ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE FINANCIAL EXPRESS, Monday, October 22, 2001 Dabhol seeks dismissal of MSEB's special leave petition, Sanjay Jog=20 The Dabhol Power Company (DPC), in its counter affidavit has appealed to th= e Supreme Court to dismiss the special leave petition filed by the Maharash= tra State Electricity Board (MSEB) against the Mumbai high court order with= regard to invocation of letter of credit (L/C) of Rs 136 crore towards Apr= il power purchase bill by the DPC through its assignee, the Bank of America= (BoA). The Supreme Court, which has stayed the Mumbai high court order on = September 21, would hold hearing on November 2. However, MSEB in its reply = has made it clear that it will face irrepairable loss and harm if DPC was a= llowed to draw a letter of credit. The invocation of letter of credit would= also upset the financial equilibrium. "DPC ought not to be permitted to up= set the status quo and financial equilibrium as it now seeks to do particul= arly after Supreme Court order of September 21," the board said.=20 The DPC has opposed the MSEB's pray to maintain status quo in view of May 2= 9 order passed by the Maharashtra Electricity Regulatory Commission (Merc) = and later upheld by the high court and apex court with regard to reactivati= on of escrow account and proceed on international arbitration. According to= the company, MSEB's claim of causing irrepairable harm in the wake of invo= cation of letter of credit was "unsupported by reference to any factual bas= is." The company has reiterated that the Merc was not a competent authority= to adjudicate the dispute and difference between DPC and MSEB. "Any attemp= t to preserve status quo by freezing all payments and suspending all operat= ions will have a contrary effect. MSEB is refusing to pay any payments. It = has not paid since early May 2001," the company said.=20 However, MSEB has reiterated that the Merc's May 29 order has been issued k= eeping in view the interest of the power consumers of Maharashtra and its f= inding has not been disturbed by either Mumbai high court or Supreme Court.= The Board has made out special equities. The DPC has reiterated its argume= nt that the letter of credit was an independent contract and on June 21, 19= 99, it had irrevocably transferred its right under letter of credit to the = Bank of America, which is a trustee as per the provisions of PPA. The Bank = of America is likely to intervene in the matter and is expected to make a p= etition in this regard shortly. The letter of credit has been renewed from = time to time. It was renewed on August 16, 2001 by the Canara Bank and its = validity was extended up to May 2002. According to DPC, the invocation of l= etter of credit was necessary as sufficient funds would be made available i= n the onshore retention account to meet the debt service payment to be made= to the lenders and meet DPC's other liabilities.=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE ASIAN AGE, Monday, October 22, 2001 Judge name for Enron panel will be out in a week=20 Chief Minister Vilasrao Deshmukh has described his two-year tenure as a tig= ht rope walk. Addressing a district Congress meet at Satara on Saturday, Mr= Deshmukh said: "Running the government for the past two years has meant wa= lking the tight rope. I learnt to keep an ice-pack on my head and put sugar= in my mouth while carrying out my responsibilities. That is why I am const= antly smiling while doing my work and there is nothing wrong with it. Since= there is no money in the treasury, the development work is moving at a slo= w pace and this is a fact. To add to it, I have to run an eight-party coali= tion government where it is difficult to predict who would be satisfied wit= h a decision and who would not." He said the government would name a judge = within a week for the judicial inquiry set up to probe the Enron imbroglio.= "I am committed that the truth about Enron should come forth for it will b= e in the interest of the people. Within a week, we will announce the name o= f the judge to head the inquiry. The Congress is strong enough to weather t= he consequence of this decision. Even if we have to lose the government bec= ause of our decision, we will have no regrets," he said. The Nationalist Co= ngress Party, which is a member of the Democratic Front government, has bee= n insisting that the appointment of the judge be deferred and the state, al= ong with the Centre, hold negotiations with Enron to resolve the issue. The= party had asked Mr Deshmukh to defer the inquiry by two months.=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE FINANCIAL EXPRESS, Monday, October 22, 2001 Maharashtra govt seeks Lord Alexander at ?500 per hour, Sanjay Jog=20 The Maharashtra government's woes vis-a-vis the Dabhol Power Company (DPC) = continue to mount. Additional financial burden is on the cards for the stat= e government to the extent of Rs 8 crore as payment towards the Queen's cou= nsel and solicitors. This is to vacate the ex-parte order granted by the Lo= ndon High Court of Justice restraining it from filing any suit in Indian co= urts against the international arbitration proceedings initiated by DPC. Se= nior state government sources told The Financial Express that the hunt is o= n for the appointment of a counsel based in London. And on the shortlist: l= eading Queen's Counsel Lord Alexander who is to be appointed soon. Sources = said that Lord Alexander would plead the Maharashtra government's case befo= re the London High Court of Justice (Queen's Bench division, Commercial Cou= rt).=20 But the good Lord Alexander's services come at a price. The state coffers a= re none-too-healthy. Efforts, therefore, are on so that Lord Alexander's se= rvices can be contracted at 500 sterling pounds per hour instead of the quo= ted 750 sterling pounds per hour. The state authorities, on their part, hav= e appointed Messers DLA as its solicitors to provide back-up support to Lor= d Alaxander, and a resolution has already been issued to this extent. The g= overnment's solicitors in India, Rafiq Dada, Amit Harayani and Darious Kham= bata would brief DLA and Lord Alexander. According to sources, Messers DLA = has also been appointed as solicitors for the government during the interna= tional arbitration proceedings initiated by DPC. The DPC has served arbitra= tion notices for the violation of State Support Agreement, Supplemental Sta= te Support Agreement and Government of Maharashtra Guarantee. The hourly ra= tes at which fees would be paid to DLA are as follows: senior partner 325 p= ounds, junior partner 300 pounds, senior advocate 235 pounds, assistant 180= pounds and paralegal/trainees at 100 pounds. These rates would be discount= ed at between five per cent to 10 per cent for lawyers in their offices out= side London. The London court in its ex-parte order of October 10 has restr= ained the state government from filing any suit in the Indian court to chal= lenge the international arbitration proceedings initiated by the DPC.=20 Simultaneously, the government has been prohibited from filing any suit wit= h regard to fraud against DPC. The DPC had earlier pointed out that the inj= unction ordered by the London court "facilitates the timely and impartial r= eview by the international arbitration panel of the dispute between DPC and= Government of Maharashtra dealing with its failure to comply with its obli= gations under the state guarantee and the state support and supplemental st= ate support agreements". However, the anti-Enron lobby has alleged that the= London's order has created a disadvantageous situation for the State where= it would be unable to defend itself in the writ-petitions with respect to = its disputes with the DPC and to which, it has been made a party pending be= fore various courts and tribunals.=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE TIMES OF INDIA, Monday, October 22, 2001 DPC for written undertaking from Maharashtra govt=20 US energy major Enron's Dabhol Power Company has demanded a written underta= king from Maharashtra government stating that it will not file a civil suit= against the multinational as it was not a party to the power purchase agre= ement.. "Any attempt by the Government of Maharashtra to file a civil suit = agaisnt DPC in which the Power Purchase Agreement is impeached, is precisel= y that which it undertook not to do as per the terms of the final consent a= ward of December 1996", DPC's legal firm Linklaters and Alliance have said = in a letter dated October 16 to Maharashtra government's lawyers M/s Hariya= ni & Co.Referring to a media report, Linklaters has warned Maharashtra gove= rnment that it was "not and has not ever been a party to the power purchase= agreement signed between DPC and Maharashtra State Electricty Board"."Acco= rdingly, any civil suit such as that being referred (in the media report) m= ust relate to the agreement to which the GoM is party, namely the guarantee= s", the letter said. The firm said, it wanted a "written undertaking" from = GoM that it will not file a civil suit against DPC in respect of any disput= es arising out or in connection with any three GoM agreements, but that any= such dispute would be referred to arbitration in accordance with arbitrati= on agreements. The media report has quoted the state as saying that Queen's= Court in London did not enjoy jurisdiction to issue an injunction restrain= ing it from filing a suit against in India against on-going international p= roceedings, Linklaters said.=20 The US energy major's legal firm said, "DPC simply could not understand how= the state government is not enjoined from filing a civil suit against DPC = of the sort described in the article". The multinational has also filed a s= uit in the London Queen's Court alleging that GoM had breached the consent = agreement which it had entered with itself in 1996. On October 10, DPC deal= t a legal blow to Maharashtra by obtaining an injunction from Commerical Co= urt of London, restraining the state from filing a suit in India challengin= g international arbitration proceedings to be held in UK. The injuction was= obtained due to the state's failure to comply with its obligations under G= oM guarantee dated February 10, 1994, state support agreement dated June 24= , 1994 and supplemental state support agreement dated July 27, 1996. "Over = the last few months, Maharashtra and other government entities have taken a= ctions to aviod complying with their contractual oblogations. This has frus= trated the rights of international investors that were legally agreed to by= the relevant parties several years ago", DPC said. Meanwhile, the state ad= ministration is gearing up to present its case before the London commercial= court with a team comprising of lawyers, state energy secretary V M Lal an= d MSEB chief Vinay Bansal leaving for London on October 29. ( PTI )=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE INDIAN EXPRESS, Monday, October 22, 2001 Why Enron needs to simply 'Lay Off', Ramesh Chauhan=20 Surfing the net, the other day, I came across an interesting debate. It ema= nated from a comment made by the California Attorney General Bill Lockyer, = who is investigating the energy crisis in that state and has offered hundre= ds of millions of dollars in reward for information about law breaking in t= he energy business. It is a comment that has had the gay rights groups, the= prisoners' rights groups and assorted other civil liberties groups up in a= rms. But it has even more interesting import for India. So what is the comm= ent anyway? Well talking about Enron and the way the energy major conducts = its business Lockyer said, 'I would love to personally escort (Enron Corp c= hairman Kenneth) Lay to an 8 x 10 cell that he could share with a tattooed = dude who says, Hi honey! My name is Spike'.=20 Remember, this is the AG of the State of California. Not some money grabbin= g, 'property expropriating' communist ideologue from a third world country.= Does he know something that we in India don't? Enron Corp has its back to = the wall and has made it abundantly clear that it is desperate to get out o= f India. Good riddance all of us would say, except for the caveats attached= for this exit. It has been claimed the project has been financed using a c= ombination of debt (about $2.2 billion odd) and the rest by equity. The equ= ity number varies from time to time, but their claim is about billion plus,= perhaps as much as 1.2 billion. Enron wants the equivalent of 1.2 billion = odd dollars (about Rs 6,000 crore) to make an exit. On the face of it this = would seem to be a perfectly reasonable argument. After all as a businessme= n, if I want to exit a project mid-way, the least I expect the buyer to pay= is what I have invested in the project. But herein lies the problem.=20 If these numbers were correct, then the project cost of Dabhol is now adds = up about $3.4 billion that is, the equivalent of $1.7 million per MW. This = would have the dubious honour of the MOST expensive gas fired power station= in the history of the world and winning the honours without even a close c= ompetitor. Let us keep the Enron issue aside for a minute and look at three= power plants that were set up over the last eight years in our part of the= world. Seoinchon, Korea has a 2,000 MW combined cycle gas turbine plant. I= n every technical sense, it is a clone of the Dabhol Plant. The same GE STA= G 207FA turbines are being used, as those in the Dabhol plant. Guess what i= s the cost of the plant? $900 million or $0.45 million/MW! Less than a thir= d of the Dabhol cost.=20 Again in Korea, construction of the 2,000 MW combined cycle gas turbine pla= nt at Poryong began in 1996 and the plant was commissioned in 1999. And the= price. $850 million or $0.425 million/MW! Interestingly, the efficiency of= the Pryong power plant is 60 per cent, while that of Dabhol is effectively= 48 per cent. As recently as this month, Malaysian state-owned utility Tena= ga Nasional Bhd signed a PPA to buy power from Malakoff Bhd for its 640-MW = project. The project's cost are estimated at about $370 million or about $0= .58/MW. This is slightly higher than the other two examples, but bigger pla= nt would always be cheaper due to efficiencies of size. Prayas, a tiny, thr= ee-member NGO from Pune, has studied project costs of about 40,000 MW of po= wer projects between 1991 and 1998. The average project cost was in the reg= ion of $0.6 million/MW and this included small 30 MW plants as well.=20 As a businessman, the cost of electricity matter to me to run my business e= fficiently. The main reason for my interest in the subject is the ridiculou= sly high cost of power and the decline of competitiveness on this among oth= er reasons. As a matter of interest, the energy from the Malaysian PPA is s= lated to be delivered at energy prices of about 3.2 cents/kWh under a 21-ye= ar PPA that is about Rs 1.54/unit. This represents the cheapest power on th= is side of the world and less than a one-third of both Enron as well as the= price my plants pay today. So let us look at the calculations for investme= nt in Dabhol again. $900 million is cost of an identical plant (the first K= orean one of the same size and using identical turbines that is nearly a cl= one). 'Wait a minute,' you may ask me here, 'but did Enron not spend more m= oney.' Yes we would probably need to factor some 'additional' costs.=20 Let us add the cost of the LNG jetty, the regassification terminal and othe= r add ons. (By the way these had very little to do with the Dabhol Power Pl= ant. The LNG jetty was to the cornerstone of Enron's energy distribution bu= siness in India. But like any good supplier Enron billed all of it's costs = to its client-Maharashtra State Electricity Board (MSEB)- which like any go= od public sector unit agreed to pay for things it did not need in the first= place). Even with these add ons, the capital costs (proportionately) to MS= EB ought not exceed $1.2 billion. Now doing business in India is particular= ly difficult. As Enron itself said, it had to spend a lot of money to 'educ= ate' Indian decision makers. ('Educating' IDBI and ICICI on how to lend. So= let us assume that the cost of doing business in India is an additional on= e or two per cent of project costs -two per cent in this case, adds another= 24 million-Enron had of course claimed about 20 million in these 'addition= al' costs (in other words 'over and above project costs'-the now infamous '= education monies' of 20 million). The figure does not budge. 1,224 million.= This represents a difference of 250 odd per cent!=20 Let me be more generous and add, on say another 30 per cent to this-say $40= 0 million. ($400 million is a very large number by the way, in today rupee = terms nearly Rs 2,000 crore) for completely arbitrary costs. But this still= brings us to $1,600 million odd. One would think the number above, $1,600 = million, would be the cost of the project. However, we are not even close. = Enron has claimed project costs to be nearly $3,400 million. I can think of= perhaps a difference of a few per cent, but over a 100 per cent? The expla= nation perhaps lies in a little story that was related to a friend of mine.= A few years ago, he was a consultant to an industrialist setting up a stee= l plant. He was looking at the numbers and felt that they did not add up. T= he industrialist put his head back, laughed and said, 'No one puts up proje= cts in India so that you can make money after the project is commissioned a= nd product starts selling. You put up a project so that you can make money = while the project is being implemented'.=20 I suspect that is exactly what has happened in the Enron project. The missi= ng $1.7 billion odd has been probably siphoned off by over invoicing and ot= her time honoured tricks. In other words, Enron has already recovered all i= ts money that it had invested and also made a very generous return on the m= oney it actually invested. At this stage, instead of demanding money at all= , Enron should be worrying about returning the siphoned money in equity, pe= rhaps about $400 million, and additionally, the $400 million it owes MSEB a= result of the breach of its contractual obligations. To summarise, an equi= table settlement at this stage would be that Enron pays us $800 million (ab= out Rs 3,800 crore) and in return, we agree to forget the whole issue! Thre= e days after the tragic events of September 11, when not only America but t= he entire world was in a state of deep shock, Lay ought to be told to stop = screaming 'expropriation' and threatening sanctions on us. Instead he ought= to be grateful for small mercies, count the money he has already made and = simply lay off. Otherwise he may have to worry about some Indian prosecutio= n.=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE TIMES OF INDIA, Saturday, October 20, 2001 MSEB asked to rescind tariff hike plan, Vidyadha Date The Maharashtra government has been announcing subsidy on electricity sold = to farmers, powerloom owners and other categories but not actually passing = on the benefit to the Maharashtra State Electricity Board (MSEB), the distr= ibution agency. This has added to the financial problems of MSEB. The dues = to be given to MSEB run into hundreds of crores of rupees. It includes a su= bsidy of Rs 700 crore for farmers, Rs 300 crores for powerloom operators, R= s 600 crore to municipal bodies for use of power for water supply and Rs 21= 5 crore for the Mula Pravara cooperative electric distribution society.The = chairperson of MSEB Vinay Bansal has appealed to the Maharashtra Electricit= y Regulatory Commission to ask the government to pay the arrears to MSEB. M= r Bansal was responding to opposition voiced by a number of representatives= of domestic, commercial and powerloom consumers before the Maharashtra Ele= ctricity Regulatory Commission (MERC) against the proposed power tariff? hi= ke by MSEB. If it recovered the arrears and reduced its losses, MSEB could = manage very well without any tariff increase, they said.Mr Bansal said the = board suffered from various constraints. It could not cut off the power sup= ply of municipal bodies because this would be in conflict with public inter= est. He said the board had improved its performance in various ways. There = had been no load shedding in the past one week, he said. There had been no = increase in arrears in the past one year as against the previous two years.= MERC chairperson P. Subrahmanyam observed that the board was `more sinned = against than sinning.' Its job was not easy and it could not improve its pe= rformance overnight, he said. Experts during their submissions strongly opposed MSEB's move to increase t= ariff every year. S.R. Paranjpe, a former director of the Indira Gandhi Cen= tre for Atomic Research, Kalapakkam, said his techno-economic evaluation of= MSEB's working revealed several shortcomings and lapses. He said the board= deliberately created the impression of a power shortage in the state last = year in a bid to justify its purchase of power from Dabhol Power of Enron a= t exorbitant rates. The board resorted to deliberate load shedding as part = of this exercise and in the process it lost revenue. Besides, sections whic= h were getting? subsidised power were deprived of the supply. The power sta= tions also? performed at an `under frequency' level posing several problems= . The board should have resorted to demand and supply management. It should= have asked farmers to consume power at night when the supply was easily av= ailable.When Dabhol company's power supply was reduced, MSEB's generation s= uddenly went up. This shows that earlier the board had deliberately operate= d below capacity. MSEB was disconnecting power supply to many consumers to = show that it was taking action against defaulters. Yet, the consumption of = power by consumers in these categories had gone up. It means, some consumer= s drew power from their neighbours unauthorisedly or resorted to some other= means. The small fry among them were being penalised while the big fish were being= allowed to scot free, Mr Paranjpe said. Pradyumna Kaul, a management consu= ltant and environmentalist, said MSEB had failed to improve its performance= on the lines suggested by MERC last year. S.C. Karandikar, appearing on be= half of the Bhiwandi citizens' welfare society, complained that powerloom o= wners in Bhiwandi were unjustifiably being given a bad name. He faulted the= MSEB on several counts and showed photographs depicting the sorry state of= transformers in the town. He also complained that Bhiwandi experienced dai= ly power cuts for three hours in morning and three hours in evening.He said= transmission and distribution losses of the board had gone up, though the = commission had stipulated last year that they be brought down. Some consume= rs also alleged that the MSEB was claiming subsidy from the government even= for power not supplied to subsidised consumers. Pratap Hogade, vice-presid= ent of state Janata Dal (secular), called for? rejection of the entire tari= ff proposal. It was wrong to penalise consumers for the inadequacies of the= board, he said. The board's deficit and its expenditure had gone up instea= d of going down. The commission should not allow frequent tariff revisions.= More reprehensible, he said, was that the board had sought to effect the m= aximum increase for ordinary consumers, including domestic users, small tra= ders, farmers and gram panchayats. Those using two or three bulbs face an i= ncrease of almost 250 per cent, Mr Hogade said.
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