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Monday, May 28, 2001, http://www.business-standard.com/today/finance8.asp?M= enu=3D5 DPC lenders take a hard line, oppose MSEB move , Tamal Bandyopadhyay in Mum= bai ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE ECONOMIC TIMES Monday, May 28, 2001, http://www.economictimes.com/today/bn05.htm Centre not 'very keen' to resolve Enron embroglio: Deshmukh ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE FINANCIAL EXPRESS Monday, May 28, 2001, http://www.financialexpress.com/fe20010528/eco3.html 'Centre not to purchase power from DPC', Sanjay Jog ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE ECONOMIC TIMES Monday, May 28, 2001, http://www.economictimes.com/today/28edit05.htm The great Indian investment movie Ecopinion/ S L RAO=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- BUSINESS STANDARD Monday, May 28, 2001, http://www.business-standard.com/today/economy5.asp?M= enu=3D3 In Guhagarh, the majority couldn't care less, S Ravindran in Guhagarh ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- BUSINESS STANDARD Monday, May 28, 2001 Scrap Dabhol project, say NRIs , Freny Patel=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- BUSINESS STANDARD Monday, May 28, 2001, http://www.business-standard.com/today/economy3.asp?M= enu=3D3 4,000 workers at DPC site without jobs, S Ravindran in Guhagarh ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE FINANCIAL EXPRESS Monday, May 28, 2001, http://www.financialexpress.com/fe20010528/news1.html MSEB estimates up to Rs 5 crore legal expenses to fight DPC battle , Sanja= y Jog ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE FINANCIAL EXPRESS Monday, May 28, 2001, http://www.financialexpress.com/fe20010528/an2.html Enron woos regulators in era of deregulation , Bob Davis & Rebecca Smith ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE TIMES OF INDIA Monday, May 28, 2001, http://www.timesofindia.com/today/28busi1.htm MSEB plans an acid test for DPC Phase II Vinu Lal ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE INDIAN EXPRESS Monday, May 28, 2001, http://www.indian-express.com/ie20010528/bus2.html DPC may challenge MERC's jurisdiction The above article also appeared in the following newspaper: THE TIMES OF INDIA Monday, May 28, 2001, http://www.timesofindia.com/today/28busi2.htm DPC may contest MERC jurisdiction=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE TIMES OF INDIA Monday, May 28, 2001, http://www.timesofindia.com/today/28edit2.htm Defusing Dabhol=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE HINDU BUSINESSLINE Monday, May 28, 2001, http://www.hindubusinessline.com/stories/042856pd.htm Dabhol project: Politics of power , S. Padmanabhan=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- MID DAY Monday, May 28, 2001, http://www.chalomumbai.com/asp/article.asp?cat_id=3D2= 9&art_id=3D11248&cat_code=3D2F574841545F535F4F4E5F4D554D4241492F5441415A415= F4B4841424152 DPC rejects MSEB's legal notice ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- BUSINESS STANDARD, Monday, May 28, 2001 DPC lenders take a hard line, oppose MSEB move , Tamal Bandyopadhyay in Mum= bai Lenders to the $3-billion Dabhol Power Project are planning to take a hard = line against the Maharashtra State Electricity Board's (MSEB) decision to s= crap the power purchase agreement.The New York-based law firm, White & Case= , which is advising the lenders, is of the opinion that the PPA-entered int= o by MSEB with Dabhol on May 23, 1993-is not exactly an exclusive bilatera= l contract. The firm feels that the PPA cannot be scrapped without the cons= ent of the lenders, who are also stakeholders in the project by virtue of t= heir debt exposure.=20 Armed with the opinion of DPC's law firm including the Indian Law Institute= and the advice of White & Case, the lenders are meeting in Singapore in th= e first week of June to chalk out the next course of action. At the meetin= g, lenders across the board areexpected to oppose the MSEB move as they fee= l that the failure of the 657 mw phase I project in generating power in tim= e (cold start in 3 hours) is a breach of warranty which can be settled thro= ugh arbitration.It cannot be a valid ground for the termination of the PPA.= The MSEB had issued the notice toscrap the PPA on May 23, a week after DPC= served the preliminary termination notice to the board. DPC served the PTN= after the foreign lenders gave their consent despite a stiff opposition pu= t up by the Indian lenders. However, the lenders did not give DPC the conse= nt for transfer of assets. The company, has, however appointed Arthur Ander= sen and Jones Lang La Salle to undertake a valuation exercise of the projec= t.=20 The MSEB move on scrapping the PPA has unified the entire lending community= which was vertically divided on DPC's action on serving the PTN. While t= he Indian lenders-who are not covered by the Centre's counter guarantee-opp= ose the PTN tooth and nail, the foreign lenders gave the go-ahead to the co= mpany as they were apprehensive that the MSEB might pull the plug ahead of = DPC. Now both the Indian as well as the foreign lenders are planning to opp= ose the scrapping of PPA collectively. The Singapore meeting will take sto= ck of the cash position of Phase II of the project which is set to go on tr= ial run on June 7 and formalise the lenders stance whether to support or mo= thball the project.=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE ECONOMIC TIMES, Monday, May 28, 2001 Centre not 'very keen' to resolve Enron embroglio: Deshmukh =20 MAHARASHTRA chief minister Vilasrao Deshmukh on Monday accused the BJP-led = NDA government at the centre of 'not being very keen to resolve the ongoing= embroglio' between state electricity board and Enron-promoted Dabhol Power= Company. "The centre is not cooperating with the state government over thi= s issue," Deshmukh told reporters after the ruling Democratic Front coordin= ation committee meeting here. Despite several letters, the centre has not r= esponded to the state's pleas to intervene in the matter, the chief minist= er said and lamented that the centre was not taking the issue with utmost = priority. The DF constituents were briefed about the legal steps initiated = by the state government vis-a-vis DPC, Deshmukh said. The renegotiations co= mmittee appointed by the state government is slated to meet on May 29, the = day on which the Maharashtra Electricity Regulatory Commission was also to = take up the petition filed by MSEB against DPC. The DF's future strategy in= this matter will be decided on May 31 in view of the outcome of the MERC a= nd renegotiations panel meeting, Deshmukh added. (PTI) ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE FINANCIAL EXPRESS, Monday, May 28, 2001 'Centre not to purchase power from DPC', Sanjay Jog THE union minister of state for power Jayavantiben Mehta has categorically = stated that the Centre would not purchase the Dabhol power, but would allow= the Dabhol Power Company (DPC) to sell its power directly to various other= states across the country. "However, the DPC will have to drastically cut = the tariff. The Centre is prepared to facilitate the direct sale of power b= y DPC to states which are power deficit," Ms Mehta said in an exclusive int= erview. Ms Mehta's statement comes in the wake of the DPC's appeal on Frida= y to the Centre to help resolve the ongoing crisis. The minister said that although the Centre would not purchase Dabhol power,= it would provide necessary assistance to resolve the present impasse. "The= Centre will try to protect the interests of the Maharashtra state and ulti= mately of the National Democratic Alliance government in a bid to find a wa= y out to overcome the Dabhol crisis," she opined. Ms Mehta said that she wa= s of the view that efforts should be made to save the Dabhol project especi= ally when there were several states which had been striving to meet increas= ing demand for power. She said it is important to meet the demand for power= as the country is entering into newer and newer pastures in various segmen= ts like information technology, software development and oil and petroleum= through joint ventures. "Similarly, the Indian financial institutions (IF= Is) have appealed to the Centre that it should take a positive view as thei= r substantial funds are blocked in the Dabhol project," she added. The minister also said that there has been tremendous pressure from the IFI= s to get the project going. The IFIs have already made representations to = the Centre on various occasions in this regard. According to Ms mehta, the = DPC has said that it has three options comprising termination of contract, = participate in the negotiations and the take over of Dabhol project by any = agency. "I am quite optimistic that ultimately an acceptable solution will = emerge," she observed.Ms Mehta said that the people should consider the Dab= hol crisis against the backdrop of country's requirement of additional one= lakh mega watt to be created by 2012. "The NDA government is committed for= this capacity addition despite a huge required investment of Rs 8 lakh cro= re," she remarked. Ms Mehta said that the NDA government in general and her ministry in partic= ular have taken a lot of initiatives to make this a reality with the activ= e participation of the private sector. The ministry has launched a 100 per= cent metering programme, improvement and strengthening of transmission and= distribution, encouragement for the privatisation of power distribution s= ystems and implementation of power development programme across the countr= y, she added.Meanwhile, the Dabhol Power Company is believed to have projec= ted that the per unit tariff would be reduced at Rs 4.20. The per unit tar= iff will further be reduced at Rs 3.50, when the naphtha would be replaced = by liquified natural gas (LNG). DPC has already announced that the block b = of 722 of phase-II would start commercial operations from June 7. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE ECONOMIC TIMES, Monday, May 28, 2001 The great Indian investment movie Ecopinion/ S L RAO=20 THE Dabhol-Enron saga has all the ingredients for an unusual Hindi movie. T= here is a principal female interest in the (to some) ravishing and (to all)= extraordinarily shrewd, determined and tough negotiator, Rebecca Mark. If = politicians in India are our sleazy side, we have them from many political = parties at all stages in the unfolding drama. For the comic element we have= the bumbling, stuttering, uncertain, and incompetent Maharashtra State Ele= ctricity Board, always trying hard to please its masters, without any regar= d to its self-interest. For the patsy, the fall guy, we have the electricit= y customers of Maharashtra, paying increasing amounts forpoor quality. Then= there are the other bit and not-so-bit players - the academics, the NGOs, = the negotiating and re-negotiating groups, with varying interests, motivati= ons and influences.=20 But the hero(ine) of the story is undoubtedly Rebecca Mark, who rammed thro= ugh an agreement that was opposed by very many and `educated' some of the = shrewdest political leaders in India. Her Texan bulldozing ability, never-= give-up attitude, total focus on her objective, packaged in an attractive f= emale form, were too much for all her interlocutors, who were elderly men w= ith no experience of such opponents, and even less so with strong women.=20 Looming above all these characters is the brooding and baleful presence of = the government of India. What little has emerged from Abhay Mehta and the G= odbole Report shows its intervention at critical times to ease the way for = the clearance and signing of the agreement. Apparently there was little con= cern for what the record would show, as indeed it has since done, that the = approval of its technical wing (the central electricity authority), was rde= red, and the clear recommendation of the World Bank, usually a strong suppo= rter of foreign private investment, ignored. Among the government agencies = involved, except perhaps the CEA, there was an urgent and overwhelming desi= re to clear the project.=20 At the same time, the central government had done little of its policy home= work. It had not defined a clear fuel policy for the country. It could ther= efore easily sanction naphtha and imported gas based power generation proje= cts, with consequent cost escalation when the then (temporary) glut became = a shortage. It refused to accept that the external value of the rupee would= keep declining, even though it had just depreciated the rupee by a whoppin= g 20 per cent. It had little understanding of the movements of internationa= l prices of oil and gas and assumed that present prices would be the norm.= These factors led to substantial escalations in costs and of tariffs. With= out any firm plan to use the surplus gas transport and processing capacitie= s, it agreed to MSEB paying the full fixed charges for gas capacities far i= n excess of the needs of the power plant.=20 In this movie, therefore, the central government would be cast as the wicke= d uncle lurking behind the scenes and orchestrating the looting of the fall= guy. This movie can have no happy ending. Indeed, one wonders if it can ha= ve an ending at all. The hero(ine) has left the scene, as have her courtie= rs. Her kingdom, Enron, no longer has an interest in the movie and would li= ke to give it up. The bumbling MSEB and its owner, the Maharashtra governme= nt, have no clue as to what to do. The politicians are in a corner, wringin= g their hands, helpless to extricate the country from the mess, but intent = on saving themselves and their positions. The central government would like= to forget the whole sorry episode, but cannot. The country stands to lose = vast sums of money as fines and compensation payments, and a considerable l= oss of image, for not adhering to agreements.=20 It also stands exposed for incompetence, a sorry advertisement for a countr= y with the brains to become an IT `superpower'. Between the two, the exposu= re of incompetence allied to possible venality, is more damaging. Our gove= rnments must stop playing to the grandstand. They must understand that they= are playing in an international, not an Indian theatre. Their opponents, E= nron, have all the cards stacked in their favour. Time is not on our side. = We must end the movie. That requires that we use our best talents to buy En= ron out. - ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- BUSINESS STANDARD, Monday, May 28, 2001 In Guhagarh, the majority couldn't care less, S Ravindran in Guhagarh Nature is at its best along the 50-kilometre stretch connecting Chiplun, th= e cultural capital of Konkan, to Guhagarh which houses the controversial Da= bhol Power Project.Mountains dotted with Alphonso mango trees and the lashi= ng Arabian sea make the place an ideal picnic spot. However, along the wel= l-laid out road leading to Guhagarh, odd huts and barren land reveal the = sad economic plight of the region Hopes of the $3-billion power project put= ting an end to the poverty-ridden life of the people living here seem to be= short lived now.=20 Locals today say if Enron was to exit from the controversial power project,= there would be only a marginal effect on the region's economy. A few will= suffer if the power major chooses to pack its bags. The majority could not= care less. Appasaheb Salagre, called Appa by all and a long-time resident = of Chiplun running tutorial classes, says, "Initially, there was a spurt in= the economy. A number of people found employment in the project. However, = the bulk of the 12,000 -odd contract workers were from Bihar, UP, Bijapur = (Karnataka) and other regions." The locals are not an educated lot here, s= ays Appa. They could get only low-paid jobs. These jobs too were temporary= in nature. "Contract labourers would have lost their jobs once constructio= n of the project was over. This isirrespective of whether Enron decides to = stay on or exit," he adds.=20 Concurs Pramod Pednekar, a local journalist with Pudhari, a large-selling M= arathi daily, "A large number of Enron-officials in Chiplun gave a fillip t= o the travel business benefiting several lodges and hotels. Now that the c= ompany has its own township, these opportunities too have vanished. However= , a number of people used to come to do their marketing in Chiplun which wi= ll now be affected. With very few people from Guhagarh employed at the plan= t, Enron's exit will hit the region's economy by not more than five per cen= t." Appa adds that a number of locals in Chiplun and Guhagarh had purchased= Sumos to carry Enron executives to and fro. These people are yet to repay = their loans and hence would be affected. "There are 150 such Sumos. Even if= one considers that the Sumo owners have large families, only about 1,000 p= eople will be affected," he adds.=20 The project has its set of supporters too. V S Nathu, the local BJP MLA fro= m Guhagarh says, "Guhagarh, like much of Konkan, is dependent on the `mone= y order' economy. Most people work in Mumbai and they send money back home= . For the first time, this was set to change (after the Dabhol plant came = into being). Power, good roads and plenty of water is now available in the= region." He also says several other industries could have mushroomed in du= e course. Besides, if DPC went ahead with its plans of setting up the LNG= terminal, the food processing industry could have also got an impetus. Foo= d processing precisely requires temperatures of minus 59 degrees centigrade= , similar to the temperature in which LNG is stored, he adds. Nathu's estim= ate of families being affected extends beyond Guhagarh. "A total of 12,000= families in Chiplun, Guhagarh,and the adjoining regions of Dapoli and Khe= d would be affected if Enron exits," he says, adding that DPC has also bui= lt a world-class hospital in the region.=20 Yashwant Bait, a leader of the Enron Virodhi Sangharsh Samiti however disag= rees. "One, the power purchase agreement is not for selling power in the = region. It is for selling power to MSEB. How would industry come into this = region as a result? Two, DPC has not done a favour by building a hospital.= It was based on the orders of Bombay High Court. The benefits accruing to = the local population is minimal as the hospital does not charge concession= al rates for locals." ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- BUSINESS STANDARD, Monday, May 28, 2001 Scrap Dabhol project, say NRIs , Freny Patel=20 Non-resident Indians (NRIs) in the USA have called for the scrapping of the= controversial Dabhol Power project, dubbing it as the largest scam India= has ever seen. The group of NRIs, under the umbrella 'Enron Action', in th= eir outcry put up on the website (www.altindia.net/enron) have stated that= under international law, the MSEB can bypass the 'insane' obligations to t= he DPC only if an Indian court rules that the power purchase agreement (PPA= ) and the agreements surrounding it were in violation of Indian law.=20 A court case was filed by Prayas, an NGO, but has been rejected by the Bomb= ay High Court. An appeal against this dismissal is pending before the Supr= eme Court, the group says. The NRIs group stated that under the laws when t= he PPA was signed, the agreement required mandatory economic and technical = clearance from a statutory body (the Central Electricity Authority), which = has been constituted for this purpose. The CEA issued a technical clearance= to the DPC power plant, it refused the economic clearance. Rather it was t= he ministry of finance that looked into and approved the economic issues. = The petitioners are falling back on the argument that the "mandatory CEA cl= earance was the legal safeguard against signing PPAs at exorbitant rates.= =20 As this clearance was never received, they conclude the Dabhol PPA has no f= orce in law". The World Bank also categorically stated in its feasibility = report in 1993, when it was asked to part fund the project, that it was "no= t economically viable, and thus could not be financed by the Bank". It wen= t on to say that it "would place a heavy financial burden on the MSEB" beca= use it was "too large for base load operation in the MSEB system". The Wor= ld Bank letter, written by its India country director Heinz Vergin, identif= ied the need to reshape "the project to serve higher value intermediate loa= d in the western Region". The website calls "for transparency, accountabili= ty, that lost promise called a democracy". Highlighting the chronology of e= vents and legal suits filed in the past, the website also suggests "a way = out" for the Indian state and central governments. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- BUSINESS STANDARD, Monday, May 28, 2001 4,000 workers at DPC site without jobs, S Ravindran in Guhagarh At least 4,000 workers at the site of the Dabhol Power Company are now with= out jobs. These are mainly semi-skilled labour and only a fraction of them= are from Guhagarh Taluka in Ratnagiri district, the site of the controver= sial power project. "About 4,000 to 5,000 workers are jobless. The contrac= ts of most of them were coming to an end anyway as the construction is more= or lesscomplete. However, the present uncertainty surrounding the project = has led to an earlier exit," said V S Nathu, the BJP MLA who represents Gu= hagarh Taluka.=20 When contacted, a senior DPC executive said "this is mainly because during= the monsoon a number of workers are told to leave as construction is not = possible anyway. Besides, a major part of the construction is now over". A = total of about 12,000 contract workers were employed at the project site at= the height of the project construction. They were not direct employees of = DPC but of the engineering, procurement and construction contractor Bechte= l and various other sub-contractors like Besix, UB Engineering and Paharpur= Cooling Towers. Nathu also said that construction had come to a grinding = halt at the site in the last few weeks. The DPC executive, however, denied = that construction had come to a halt though he agreed there had been a slow= down as lenders had stopped disbursing funds in the last three months.=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE FINANCIAL EXPRESS, Monday, May 28, 2001 MSEB estimates up to Rs 5 crore legal expenses to fight DPC battle , Sanja= y Jog FOR the Maharashtra State Electricity Board (MSEB), the ensuing legal battl= e with Dabhol Power Company (DPC) will really be a "costly" affair. MSEB is= prepared to engage lawyers at a fee of paltry Rs 15,000 per hour to a whop= ping Rs 1.50 lakh. In terms of pounds, it has prepared to shell out a minim= um of 90 pounds per hour to 500 pounds per hour.MSEB sources told The Finan= cial Express that according to preliminary estimates, it expects the legal = expenses in the range of Rs 1 crore to Rs 5 crore. "We will spend it as we = have a strong case against the DPC for misdeclaration and default on the av= ailability of power on January 28 and non payment of rebate of Rs 401 crore= towards that," sources added. The lawyer's fees would be dependent on their experience. The more the expe= rience and the name, the higher would be the fees. "For example, if a lawye= r, other than Indian origin, has completed one year in the profession, his/= her fees would start from 90 pounds per hour. However, the lawyer represent= ing a leading firm with a vast experience, he/she would charge not less tha= n 450 to 500 pounds per hour," MSEB sources said.In a recent communication = to the MSEB, the London-based Baker & McKenzie has said the "rate of charge= s of around 360 pounds per hour are highly competitive compared to other fi= rms of similar status and experience." The solicitor firm has further said = that these rates may appear high compared to Indian lawyer's fees, however,= their competitors are now charging 420 pounds per hour or more. These rates would apply to firms such as Linklaters (representing Enron) an= d the other top firms that would have the necessary experience to respond = in kind to Linlaters, the Baker & McKenzie communication said. MSEB source= s said that it was aware that it would have to take on a battery of lawyers= and solicitors both from India and abroad engaged by the DPC. Further, it = was also aware of the fact that the US-based multinational Enron, with deep= pockets, would not mind fighting its case in various Indian courts and la= ter at arbitration in London. MSEB said that it would engage the state advocate general Ghulam Wahanvati = during the hearing at Maharashtra Electricity Regulatory Commission (Merc)= . In addition, it has already engaged Mumbai-based solicitors Shyam Diwan &= Company to provide legal assistance. MSEB would also try to rope in the be= st available solicitors across the country to plead its case in the Indian = courts. Simultaneously, it would have to pay the fees of its arbitrator and= former Bombay High Court Justice ML Pendse during the arbitration proceedi= ngs in London.MSEB sources said that it was aware that billing rates are on= ly one part of the equation that leads to the ultimate bill that a law fir= m sends to its clients. "The much more significant is the number of hours w= orked by the number of lawyers. The lesser the number of lawyers, the lower= will be the bill," sources added. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE FINANCIAL EXPRESS, Monday, May 28, 2001 Enron woos regulators in era of deregulation , Bob Davis & Rebecca Smith EVERY energy executive in America would have liked a half-hour with Vice Pr= esident Dick Cheney as he fashioned the Bush administration's national ene= rgy program. Enron Corp. Chairman Kenneth Lay got it. Mr Lay used the time= to set out an eight-point agenda intended, among other things, to head off= price controls on wholesale electricity, provide Enron and other energy tr= aders with unfettered access to the US's electricity- transmission system a= nd remove regulatory obstacles to building new generating plants and power = lines. The energy plan President George W Bush unveiled last week re-electe= d many of those same priorities. In a recent interview, the vice president = said he also met with other energy executives, but Mr Lay was the only one = he named. Mr Cheney says he sought Mr Lay's advice because "Enron has a dif= ferent take than most energy companies."=20 Indeed, Enron is a modern paradox. It has transformed itself over the past = 15 years from a stodgy gas-pipeline operator into the largest trader of gas= and electricity in the US and a formidable player in newer markets such as= telecommunications services and emissions-reduction credits. Today, it is = the quintessential model of a company dedicated to free markets.=20 In a certain respect, this is true even in Enron's dealings in India, where= the company is in the news this week because of a dispute with a state ele= ctricity board over that entity's failure to pay $48 million in overdue bil= ls. Enron was one of the first foreign power companies to enter India when = the country started free-market reforms in the early 1990s, and Dabhol Powe= r Corp., its power-generating project outside Bombay, remains India's singl= e largest foreign investment. Enron's trouble has its roots in the sometime= s wildly shifting political winds in India; it is facing political barbs fr= om opponents who attack it as a foreign multinational unjustly milking a po= or country by charging too much for electricity, a charge Dabhol denies.=20 Politics, however, is a minefield that Enron has very successfully negotiat= ed in the US. As much as any American company, it has cultivated close tie= s with government. Since the late 1980s, the Houston-based company, which = was President Bush's biggest corporate campaign donor, has beefed up its lo= bbying staff, boosted its political contributions and sought out friends i= n the world of politics. Now, with Mr Bush in the White House, it is in a u= nique position to see whether those efforts will pay off.=20 Enron's lobbying blitz reflects one of the ironies of the era of deregulati= on. Just as government created immense telephone, electric and gas monopol= ies early in the 20th century, Enron and other players feel they need the g= overnment's help in opening those monopolies and gaining access to once-clo= sed markets. In particular, Enron wants the Federal Energy Regulatory Commi= ssion to ensure that energy is deregulated on terms favourable to the compa= ny. Rather than having the nation's transmission lines controlled by the ut= ilities, it wants-those lines to provide open access for new entrants such= as Enron eager to buy and sell power.=20 Mr Lay is on a first-name basis with a half-dozen members of the Bush cabin= et and knows many senior White House staffers from their days in the Texas = governor's mansion with Mr Bush. Before joining the administration, both Wh= ite House economist Lawrence Lindsey and US Trade Representative Robert Zoe= llick were on Enron's advisory board, which pays members an annual stipend = of $50,000. Under Mr Lay, Enron has donated nearly $2 million to Mr Bush d= uring his political career. Since the start of the 2000 campaign, Enron and= its employees have contributed $1.3 million to the Bush presidential drive= , the Republican Party and the presidential inauguration, says the Center = for Responsive Politics. Enron also accounted for $461,000 in contribution= s during Mr Bush's two runs for governor, according to the Center for Publi= c Integrity. Mr Lay, who holds a doctorate in economics, says all he wants from governme= nt is a fair shake. Enron supports candidates "you believe in," he says. "= You believe in their value system, you believe in their philosophy and you= believe they'll do the right things as leaders." But it is clear that Mr = Lay wants more than that from government. For now, he is focusing on FERC, = where he worked in the early 1970s when the agency was known as the Federal= Power Commission. He hopes to make FERC his ally in beating back the power= of utilities. Long dismissed as a regulatory backwater overseeing wholesal= e transactions by electric and gas utilities the commission has emerged as = the chief navigator of the nation's transition to a fully deregulated energ= y marketplace.=20 Even before Mr Bush took office, FERC had begun to rein in the market power= of utilities. In December, it told the nation's utilities that it wanted t= hem to voluntarily surrender their high-voltage lines-those that can dispat= ch electricity across state lines-to independent grid operators, such as th= ose already in place in California and the Northeast United States, which = would provide open access to the lines. Although it told the utilities to s= ubmit plans for doing so, many of them have been reluctant to relinquish co= ntrol of their lines to such independent organisations.=20 Mr Lay wants FERC to go further, forcing the utilities to cede direct contr= ol of their lines. He also is seeking rules that would end what he calls en= ergy "Balkanisation" and create "seamless" interstate electricity markets. = "Enron is the biggest gas and electric company entirely dependent on the co= mpetitive side of the business," says Andre Meade, an analyst for Commerzba= nk. "To the extent deregulation slows down, their business slows down." Ri= ght now, it's a lucrative strategy. Enron typically targets tightly control= led markets just as they are opening up, using its financial clout and risk= -management acumen to gain a dominant market position. In doing so, it freq= uently portrays itself as an insurgent taking on entrenched interests.=20 In electricity, for instance, Enron buys the output of generating plants, s= ometimes days, weeks or years before the power is actually produced. Using = sophisticated weather data, it determines the most lucrative market for the= power, finds a buyer, and then arranges delivery via transmission lines ow= ned by others. It hedges its positions with other contracts. Its wholesale = trading volume climbed 55% for natural gas and more than doubled for electr= icity in the first quarter alone.=20 Between 1996 and 2000, Enron's yearly net income nearly doubled to $979 mil= lion and its revenue increased almost eightfold to $100.8 billion. Over the= same period, Enron's stock price, adjusted for splits, rose more than four= fold. At the start of the Bush administration FERC's future was very much u= p for grabs. Two of the five seats on the commission were vacant, and Enron= quickly sought to fill them with activist Republicans. President Bush name= d a friend of his and Enron's to one of those seats: Texas utility-regulato= r Pat Wood. Mr Wood had worked closely with Enron during a six-year effort = to open Texas' retail electricity market. Mr Wood also had shown the kind o= f backbone Enron wanted in a separate fight over telephone deregulation whe= n he insisted on closely monitoring phone utilities to make sure they opene= d their networks to competitors.=20 For the second slot, Enron backed Nora Mead Brownell, a Pennsylvania utilit= y regulator. She had come to Enron's aid in 1997 when she voted to block a = electricity-market restructuring plan backed by Philadelphia's utility and = by Republican Gov. Tom Ridge. Enron argued that the plan would have locked = it out of the Philadelphia market.A White House spokeswoman says a number o= f individuals and industry groups weighed in to favour Ms Brownell, but she= declined to name any. Meanwhile, Enron was using its Democratic contacts t= o strengthen its ties with Linda Breathitt, a Kentucky Democrat on the comm= ission. Earlier this year, the company hired two of former Vice President A= l Gore's closest friends as lobbyists: Nashville lawyer Charles Bones and M= r Gore's campaign-finance director, Johnny Hayes. Both had come to know Ms = Breathitt through Democratic politics.Ms Breathitt says she wasn't very fam= iliar with Enron's interests, but that she accepted when Mr Hayes invited h= er to dinner at a Washington restaurant in April to meet Richard Shapiro, E= nron's managing director for government affairs. "Everyone likes to get to = now the FERC commissioners," Ms Breathitt says, adding that she always pays= for her own meals. Enron has long played this kind of insider's game. Mr Lay has been friendly= with both Democratic and Republican administrations over the past 25 year= s, sharing time on the golf course with Presidents Bill Clinton and Gerald= Ford. He's been a particularly close friend of the Bush family. In the lat= e l980s, he ran fund-raising drives in Texas for the current US president'= s father, then-Vice President George Bush. After the younger Bush became go= vernor, he appointed Mr Lay to run the influential Governor's Business Coun= cil. Mr Lay also made Enron's fleet of corporate jets available to the new = governor and won his help in lobbying officials considering Enron projects.= =20 Mr Lay says he hasn't sought Mr Bush's aid directly since Mr Bush won the p= residency. "It's not a matter of us going off hunting or fishing or sitting= around and having drinks," he says. Not all Mr Lay's initiatives have bee= n successful. When Mr Bush reneged in March on a campaign pledge to fight g= lobal warming by requiring reductions in carbon-dioxide levels produced by = burning hydrocarbons, Mr Lay says he telephoned Mr Cheney to complain. "The= scientific evidence, although certainly not conclusive, is pretty compell= ing that there could be a climate-change problem," he says he told the vice= president. "The administration should still look very seriously at it." But Enron saved its main lobbying push for Mr Cheney's energy task force. I= n April, Mr Lay met with the panel's staff director, Andrew Lundquist, and = later, with Mr Cheney. In both meetings, say Enron and White House official= s, Mr Lay presented a broad agenda for opening up the nation's electrical s= ystem and wed the gas-transmission system as a point of comparison. In both= cases, he argues, pipelines and transmission lines should be like the fede= ral highway system that offers easy access to all. The Cheney report uses s= imilar language, describing the electrical grid as the highway for intersta= te commerce in electricity." As Enron sought, the report directs the energ= y secretary to determine by the end of the year whether it makes sense to e= stablish a national grid, and to identify bottlenecks in the transmission s= ystem as well as how to remove them. (Jeffrey White contributed to this article) ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE TIMES OF INDIA, Monday, May 28, 2001 MSEB plans an acid test for DPC Phase II Vinu Lal AS June 7 deadline nears for Enron-promoted DPC to declare the commencement= of Phase II, Maharashtra State Electricity Board (MSEB) has finalised its = plans to conduct a performance test on the plant. This assumes significance= because in case the plant fails to deliver full capacity according to the = power purchase agreement, the board will have the right to declare the plan= t unviable. Enron has already defaulted thrice and the board has slapped Rs= 768 crore as penalty, which is a matter in dispute.Confirming this plan, a= top official in MSEB said, ``Once they declare commercial production, we w= ill undertake a capacity test by asking them to shut down the plant complet= ely for atleast 2 days and then perform a cold start. If they do not achiev= e full rated capacity (657 MW) within three hours then we will declare the = plant as inefficient.'' MSEB has already formed a core team comprising six technical officers to wo= rk on block 1 of Phase II expansion project. As per the agreement the compa= ny is scheduled to start commercial production on June 7 and should furnish= a seven-day notice to the board to gear up to the capacity addition. Sourc= es added that while commissioning a block, there are provisions in the powe= r purchase agreements to do a performance test for both the parties, viz MS= EB and DPC. Unlike periodic reviews of the plant, this test would be crucia= l since an official added that once the plant does not qualify in the initi= al capacity check, then the board could declare the plant as unviable. Energy experts informed that under section 5.3 of the PPA, immediately afte= r commercial production, there will be a technical capacity check where all= parameters of the plant will be put to test. Here since the company has be= en charged of misdeclaration and that the plant failed to deliver power wit= hin 180 minutes from a cold start, this test will be quite crucial. Sources= added that the cold start timing will be amended only after the project is= shifted to liquefied natural gas, when instead of 180 minutes, the plant w= ould get 240 minutes to achieve full rated capacity. But this will not be = applicable to Block 1 of Phase II since the project will be run by naphtha. ``It's just impossible to achieve full rated capacity in 3 hours after a co= ld start especially after a long period of idle time. The plant took five a= nd a half hours to achieve its full capacity on January 28, where the plant= was instructed to stop operations for 6 days,'' said an MSEB official. Sou= rces added that the ramp up curves i= ncorporated in the PPA is a technical goof-up since ramp up time depends o= n how long the plant was kept idle.MSEB officials informed that there was n= o notice given by the company yet on the June 7 deadline. They added that t= he company has to furnish a seven-day notice to the board before declaring = commercial production. =20 Interestingly, the turbines used for Phase II project are not sourced from= General Electric but from Japanese companies. However, experts argue that = 3 hours ramp up time for any cold start would still prove an uphill task fo= r the company. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE INDIAN EXPRESS, Monday, May 28, 2001 DPC may challenge MERC's jurisdiction Enron-promoted Dabhol Power Company (DPC) is likely to challenge the jurisd= iction of state electricity regulatory Commission (MERC) to settle a pletho= ra of disputes, including "rescinding" of the PPA with Maharashtra State El= ectricity Board (MSEB) during the first hearing of the case, scheduled for = May 29."One cannot deny the possibility of DPC's legal intention as the mul= tinational strongly believes that the PPA of its $3 billion project, does n= ot come under MERC's perview at all," legal officials involved in the DPC-M= SEB row told PTI here today. However, MSEB's legal counsels feel DPC would = be unable to prove their point if it took the "jurisdiction" angle. MERC is a specialised body set up by Parliament in 1998 as part of the powe= r sector reforms to regulate PPAs and procurement processes of transmission= and distribution utilities. "This includes the regulation of the price or = tariff at which power shall be procured," they contend. As per section 22 (= 2)(N) of the Electricity Regulatory Commission Act of 1998, the state regul= ator has been conferred powers to "adjudicate upon disputes and differences= between licensees and ultities and refer the matter for arbitration." On M= ay 25, MSEB had moved merc challenging the agreement's legal validity and s= eeking cancellation of the PPA and claiming nearly Rs 700 crore as damages = from DPC. Terming the move as a "logical step", a state official said MSEB had sought= Justice from MERC as it had exclusive legislative jurisdiction to adjudica= te disputes between two power utilities. With such an emphatic regulation, = on what grounds would DPC insist that its PPA with MSEB did not come under = MERC, the counsels said. "After all, DPC and Maharastra State Electricity B= oard are both power utilities and the only dispute redressal forum availabl= e is the regulator," they said. Interestingly, counsels are of the view that if DPC does not attend the hea= ring or refuses to comply by the regulator's notice, then MSEB would have t= o prove its "service of summons" upon which the Commission is entitled to g= ive an ex-parte hearing on the matter. The 60 page petition, with nearly th= ousand pages of annexures, prays that MERC should adjudicate MSEB's dispute= s with DPC, including the Rs 401 crore rebate payable by the us multination= al and mainly misrepresentation of facts involving the ramp-up procedure fr= om a cold start to full capacity. The loss-making board has also referred numerous notices, the "political fo= rce majeure", the preliminary termination notice, DPC's demand for the escr= ow cover and its subsequent defaults in ramping up generation as per demand= . Maharastra State Electricity Board has also sought the regulator's direct= ion over whether it should take up international arbitration, process for w= hich is on, with DPC in London."With a suitable order, MERC will now tell u= s how to deal with the arbitration, escrow cover, damages etc," an Maharast= ra State Electricity Board official said. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE TIMES OF INDIA, Monday, May 28, 2001 Defusing Dabhol=20 In the present brouhaha over the Dabhol power project, it's all too easy to= lose sight of one fact: there is life beyond Enron. And the eventual deno= uement will have implications far beyond this particular project. At stake = is India's image as a credible investment destination. Little is gained by = winning a war if you then end up losing the peace. It's important to rememb= er that, because positions on both sides seem to be hardening. The Madhav G= odbole Committee has criticised the power purchase agreement in no uncertai= n terms. The demand and realisation projections on which the deal was based= have been described as a ``fairy-tale''. Two committee members have called= for a judicial enquiry into the entire issue, to determine whether Enron r= eceived any "undue favours". But three members disagree, at least partly be= cause judicial inquiries in India take forever and rarely achieve anything.= Enron, in turn, has flatly told the Centre that it is unwilling to negoti= ate on the basis of the Godbole Committee's report. Meanwhile, the Maharas= htra State Electricity Board (MSEB) has slapped a termination notice of its= own on Enron's subsidiary, the Dabhol Power Company (DPC), and is demandin= g compensation of over Rs 800 crore. The MSEB contends that DPC failed to s= upply power at short notice and wrongfully withheld rebate payments. DPC cl= aims that the MSEB is wilfully misinterpreting the power purchase agreement= . Clearly, both sides are now engaged in trying to stare the other guy down= . In earlier instances, it was a safe bet that Enron would blink first. But= if the signals emanating from the company's headquarters in Houston are an= y indication, that can't be taken for granted this time. Let's assume the worst-case scenario - that the talks do fail. What message= would that send out to the international community? India could, of course= , argue that the deal was flawed, but that would be tantamount to acknowled= ging that the negotiators who clinched the power purchase agreement were ei= ther criminally incompetent, or venal, or both. The fact that the deal was = signed by a different administration after the previous agreement was scrap= ped would only weaken India's position, as would the dismal fate that has b= efallen virtually every high-profile foreign investment in the power sector= . There would be a real danger of India ending up with egg on its face, apa= rt from having to pay hefty fines. Of course, it may not come to that - in = fact, let's hope it doesn't. Talks are still on, and the ideal situation wo= uld be for all parties concerned to reach a mutually satisfactory agreement= . Failing that, India should seek an out-of-court settlement which would at= least leave it with the fig-leaf of being a country which respects contra= ctual obligations. It should then finally start acting on all the brave tal= k of sweeping power sector reforms, which would hopefully prove that we sti= ll mean business. Does that mean that the people responsible for this frigh= tful mess should be allowed to just walk away? Of course not. There are man= y lessons to be learnt from the Enron fiasco, including the importance of a= ccountability and transparency at every step of liberalisation. But the fir= st priority has to be to put out the fire and contain the damage. Investiga= ting the arsonists can wait till later. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE HINDU BUSINESSLINE, Monday, May 28, 2001 Dabhol project: Politics of power , S. Padmanabhan=20 IT ALWAYS looked as if the Maharashtra Government had a definite plan while= renegotiating with Dabhol Power Company (read Enron). The plan perhaps was= to get some cosmetic changes in tariff and give DPC large benefits such as= sales tax exemption for naphtha; reduction in interest rates of loans; and= third party sales in the hope of getting the Centre to make NTPC and a few= other Central utilities buy the costly power. This would look as if the co= ntract has been renegotiated to ease the burden on Maharashtra when in fact= the burden would have been distributed among several States and the Centre= . The ultimate beneficiary would be Enron which would continue to keep a co= ntract executed so blatantly against public interest. The real objective o= f the Maharashtra Government and perhaps the Centre is to give the controv= ersy a decent burial. The party was spoilt by a statement by the Nationalis= t Congress Party President, Mr Sharad Pawar, criticising the re-negotiating= Committee Chairman, Mr Madhav Godbole. The latter resigned, but was convin= ced to retract it. But it cannot be forgotten that it was Mr Pawar as Chief= Minister of Maharashtra, who had bypassed a lot of objections to give the = project to Enron.=20 Now it has become convenient for the Maharashtra Government to say that the= State is suffering because of the decisions of the BJP-Shiv Sena Governmen= t. While the role of the BJP-Shiv Sena Government in reopening and permitti= ng Phase II and integration of the LNG terminal, by which means Enron can = recover the capital costs many times over, is utterly deplorable, it can n= ot be lost sight of that it was Mr Pawar's government that brought in Enron= . As Mr Praful Patel rightly said in STAR News' Newshour, the project had t= he blessings also of the then Prime Minister, Mr P. V. Narasimha Rao, and h= is Finance Minister, Dr Manmohan Singh. All of them, pushing for reforms, w= anted a project in double-quick time and they ignored the several layers of= approval process. The real story is described in a civil suit filed in 199= 5 by the then BJP-Shiv Sena Government in the Bombay High Court. It is anot= her matter that this civil suit was mysteriously withdrawn after the Enron = head, Ms Rebecca Mark, met the powers that be in Maharashtra, including the= Shiv Sena chief.=20 The suit -- drafted by such eminent lawyers as, Prashant Bhushan, Nitin Pra= dhan, C. J. Sawant, the then Advocate General, and F. S. Nariman -- tells t= he interesting story of how the Pawar government went out of its way to fav= our Enron by giving approvals even after the elections were announced andco= nducted in the State -- a gross violation of the election code. To this day= , neither the Congress nor the BJP-Shiv Sena nor the NCP governments has ha= d the courage to speak the truth -- perhaps because all of them were benefi= ciaries. Here are a few passages from the suit to judge the actions of the = Pawar government:=20 A After the calling of elections for the Maharashtra State Assembly, after = expiry of its full term, the following documents came to be executed namely= (i) Amendment to PPA dated 2/2/1995, (ii) Consent Agreement dated 23/24.2.= 1995, and (iii) Fuel Management Agreement dated 25.2.1995. As mentioned abo= ve, all the aforesaid documents were in aid of and supportive of the PPA da= ted 8.12.1993 (later amended as mentioned above).=20 Elections were called for by a press note dated 8.12.94 and a notification = date 10.1.95 and were held from 9-12 February, 1995, but announcement of re= sults was deferred in order to complete election process in other States wh= ich were to take place. It was this deferment of results which was taken ad= vantage of and the letters/agreements were executed and/or exchanged durin= g this period.=20 * By reason of Clause 2 of PPA, the status of the PPA was that of an agreem= ent not enforceable by law until all conditions precedents had been fully s= atisfied and/or bona fide waived as provided in the PPA itself. However, by= a letter dated 25.2.1995 these conditions precedents were waived. The so-c= alled waiver was not bona fide but was deceptive and fraudulent.=20 * The unholy haste with which the purported financial closure was sought to= be achieved was clearly in order to reap the benefit of the huge sum of $2= 0 million admittedly already spent by the principal shareholder of the Firs= t Defendant (Enron) described by them euphemistically as `educational expen= ses'; (the testimony of Ms Linda Powers specifically states that:=20 ``Moreover, our company spent an enormous amount of its own money approxima= tely $20 million on this education and project development process alone no= t including any project costs... Why do we, and other developers include su= ch things in our project? To win local support and support of the authoriti= es, and contribute to the general improvement of conditions, and contribute= to the general improvement of conditions in the area''. In the purported r= efutation also enclosed in the letter dated 18.8.1995 of the First Defendan= t, it is stated that $20 million included ``engineering, financing, legal, = travel and administrative costs actually totalling a sum in excess of $20 m= illion as of 29.3.1995.'')=20 * 20.6.1992 -- (within five days of arrival in India and within three days = of arrival in Bombay) The Enron team arrived in India on June 15 and spent = two days visiting various sites in addition to meeting people in Delhi and = Bombay. A memorandum of understanding was signed between the Second Defend= ant (represented by Mr Ajit M. Nimbalkar), then Chairman of the Second Def= endant, Ms Rebecca Mark of Enron, and Mr Douglas Mcfadden of General Electr= ic Corporation.=20 The term sheet annexed to the MoU opens with the following:=20 ``Electrical Power Purchase Contract'' -- Contract for 20 years term betwee= n Power Venture and MSEB to be structured to achieve an all in price of US$= 0.073/kWh, comprised a fixed monthly capacity payment calculating at the I= ndian rate of inflation each year and a per-kWh energy payment equal to the= per-kWh operating cost (as defined below).=20 (ii) Thus, the purported decision to set up a huge power generation projec= t in the private sector with a foreclosed obligation on a statutory corpora= tion to buy power from the private sector at a predetermined unprecedentedl= y high rate was taken in a great hurry without there being any public debat= e on the said issue apart from there being any detailed consideration of t= he matter.=20 * Before the PPA was executed in December 1993, the following events occurr= ed: (a) The World Bank expressed its opposition to the project and advised tha= t it was not viable, not in the interest of Maharashtra in particular and t= he country, the public and the consumers, in general. This objection was br= ushed aside by Enron which said, in a letter, that ``the World Bank opinion= can be changed'', that ``we (Enron) will engage a PR firm and hopefully ma= nage the media from here on'' (June 1993).=20 * The Central Electricity Authority had drawn attention to several aspects = of the MoU including:=20 (i) The all-in price is a departure from the existing norms and parameters = notified by the Government under Section 43 A(2) of the Electricity (Supply= ) Act, 1948.=20 (ii) Denominating the price in US dollars is also a departure from the exi= sting norms.=20 (iii) We take it that the price of 0.073 kWh will be applicable from 1996 w= hen power would be available.=20 * The PPA violates the tariff guidelines in force issued on December 8, 199= 3. The tariff guidelines permitted only a return of 16 per cent on equity b= ut the PPA allows a return much in excess of 25 per cent. Second, the tarif= f notification puts a cap on Operation and Maintenance (O&M) charges at 2.5= per cent of the capital cost. In the case of the PPA the O&M changes were = over Rs 90 crore annually which is over three per cent of the capital cost.= The PPA was not even structured in accordance with the said notification.= =20 The tariff notification allows payments only for the actual fuel consumed a= nd not for deemed consumption. In the present case the heat rate guaranteed= by the Dabhol Power Company to the MSEB is 7605 BTU per unit while the hea= t rate guaranteed by GEC to DPC is considerably lower. Under the PPA about = 25 per cent of this difference and deemed consumption and actual consumpti= on is allowed to be retained by DPC, contrary to the tariff notification.= =20 All these are but a few paragraphs of the 600-page civil suit. Perhaps had = the then Maharashtra Government persisted with the arbitration the compensa= tion would have been far less than what could be anticipated now. However, = for reasons best known to the BJP-Shiv Sena combine, the suit was withdrawn= and its government appointed a review committee which integrated the LNG p= lant with the power plant and gave the green signal for the second phase. T= he net result was a higher tariff than what was negotiated by the Pawar Gov= ernment.=20 The project has come a full circle now. Now the effort is on to distribute = the burden across the country. This is evident by the Maharashtra Governmen= t turning to the Centre and its representative A. V. Gokak, and stating tha= t the Centre is evaluating various options including of the Power Trading C= orporation to buy the power from DPC and distribute it to all the States. B= ut at what price? Not lower than negotiated under the PPA of course with co= smetic concessions by Enron and a lot of sacrifices by the State and the Ce= ntre. But is this what we want?=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- MID DAY, Monday, May 28, 2001 DPC rejects MSEB's legal notice Enron's Dabhol Power Company (DPC) has rejected Maharashtra State Electrici= ty Board's (MSEB) legal notice for 'rescinding' the PPA, saying 'it did not= have the right to do so', as the two partners cross swords before state El= ectricity Regulatory Commission (MERC) tomorrow. In a three-page response = to MSEB's May 24 legal notice, Enron India managing director K Wade Cline h= as said " The legal notice is not acceptable to us, as according to the PPA= , MSEB does not have the right to rescind the agreement", state government = sources told correspondents today.The letter, dated May 26, also asks MSEB = to comply to the 'sanctity' of the PPA, " please confirm that the board wou= ld also pay all DPC dues, including the disputed Rs 213 crore for December = and January bills plus the interest". In its notice, MSEB has questioned the legal validity of the entire PPA as = per the Indian Contracts' Act (ICA) 1872 and later also went a step further= by filing a petition in MERC. " Other than non-acceptance of our legal not= ice, DPC has continued its demand for an escrow account, knowing fully well= that MSEB has filed a caveat in the Mumbai high court for not activating t= he same", sourcesinformed. DPC has also demanded an increase in LC (letter = of credit) amount in line with the PPA, as MSEB was supposed to do 21 days = before the firing of its second phase on June 6, they said
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