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Enron Mail |
THE ECONOMIC TIMES
Friday, June 01, 2001, http://www.economictimes.com/today/bn04.htm DPC willing to prune internal rate of return, Anto T Joseph=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- BUSINESS STANDARD Friday, June 01, 2001, http://www.business-standard.com/today/financ11.asp?= Menu=3D5 DPC lenders plan 1-2% rate cut to save project=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE ECONOMIC TIMES Friday, June 01, 2001, http://www.economictimes.com/today/01infr01.htm Prabhu meets Sinha to discuss DPC-MSEB row ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE FINANCIAL EXPRESS Friday, June 01, 2001, http://www.financialexpress.com/fe20010601/eco11.htm= l Prabhu meets Sinha to discuss DPC, MSEB dispute=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE ASIAN AGE 'No Counter-Guarantee On Power' Friday, June 01, 2001,http://www.asianageonline.com/ ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE ECONOMIC TIMES Friday, June 01, 2001, http://www.economictimes.com/today/01edit02.htm Some light at last! ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE FINANCIAL EXPRESS Friday, June 01, 2001, http://www.financialexpress.com/fe20010601/corp12.ht= ml MSEB sells 2.5 m units to Tata Power, Sanjay Jog ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE FINANCIAL EXPRESS Friday, June 01, 2001, http://www.financialexpress.com/fe20010601/fed4.html Dabhol, the FDI we didn't need , R Jagannathan ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE FINANCIAL EXPRESS Friday, June 01, 2001, http://www.financialexpress.com/fe20010601/news1.htm= l DPC expects MSEB to share 50% in $360-m loss on account of tariff cut , Sa= njay Jog ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE INDIAN EXPRESS Friday, June 01, 2001, http://www.indian-express.com/ie20010601/bus2.html Enron fallout: Fitch cuts India's rating to negative ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE INDIAN EXPRESS Friday, June 01, 2001, http://www.indian-express.com/ie20010601/bus1.html As Enron backs out, NTPC steps in with 2 mega plans ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE INDIAN EXPRESS Friday, June 01, 2001, http://www.indian-express.com/ie20010601/ed1.html Darkness over Dabhol ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- MID DAY Friday, June 01, 2001 http://www.chalomumbai.com/asp/article.asp?cat_id=3D29&art_id=3D11410&cat_c= ode=3D2F574841545F535F4F4E5F4D554D4241492F5441415A415F4B4841424152 Enron knew about DPC plant's shortcomings, Deepak Lokhande ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- MID DAY Friday, June 01, 2001, http://www.chalomumbai.com/asp/article.asp?cat_id=3D29&cat_code=3D2f5748415= 45f535f4f4e5f4d554d4241492f5441415a415f4b4841424152&art_id=3D11400 Govt allows Enron third party power sale ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- MID DAY Friday, June 01, 2001, http://www.chalomumbai.com/asp/article.asp?cat_id=3D29&cat_code=3D2f5748415= 45f535f4f4e5f4d554d4241492f5441415a415f4b4841424152&art_id=3D11337 Enron shuts down plant, to issue termination notice ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE ECONOMIC TIMES, Friday, June 01, 2001=20 DPC willing to prune internal rate of return, Anto T Joseph=20 THE Enron-promoted Dabhol Power Company has given a set of proposals to the= IDBI-led domestic lenders in a final effort to continue with the power pro= ject at Dabhol. DPC is likely to make a similar presentation to its secured= creditors like the Japanese and Belgian Exim banks on June 5 and June 6, a= nd other foreign banks on June 7, in meetings scheduled to be held in Singa= pore. FI sources said DPC is now willing to bring down the internal rate of= return from the existing rate which is more than 30 per cent as well as th= e dollar return of equity. All these will hinge around a reduction in tarif= fs, as demanded by MSEB and the state and central governments. The domestic= lenders to the controversial project have agreed to consider a reduction i= n rate of interest.=20 They have, however, shot down a proposal regarding delaying the phase II co= nstruction till the first delivery of LNG starts by 2001-end. If these prop= osals become a workable proposition for all the concerned parties, lenders = may have to start disburse loans for the second phase of the project, that = was withheld following the payment dispute. As part of the proposals, DPC h= as demanded that the lenders allow it to complete the project with some tim= e and cost overrun. "Though the exact cost overrun is yet to be calculated,= a rough calculation has put the figure at around $400 m," said FI sources.= DPC is believed to be now optimistic about completion of the project with = the help of lenders and with various adjustments that are yet to be agreed = upon by concerned parties. FI sources said some foreign developmental finan= cial institutions have already supported DPC's proposals to continue with = the project. The lenders said there was no discussion over transfer of asse= ts either to the electricity board or any special purpose vehicle. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- BUSINESS STANDARD, Friday, June 01, 2001 DPC lenders plan 1-2% rate cut to save project=20 Lenders to the $3-billion Dabhol Power Project are ready to make "sacrifice= s" to save the controversial project from sinking. According to sources, In= dian lenders-Industrial Development Bank of India (IDBI) and State Bank of = India-are considering between one and two percentage point cut in interest = rates to bring down the cost of funds for the promoters. Other domestic len= ders -- ICICI, Industrial Finance Corporation of India (IFCI) and Canara Ba= nk-may also follow suit. The Indian lenders are also not averse to the idea of raising the moratoriu= m on loan repayment by at least one more year The moratorium is currently p= egged at one year. Besides, they are also willing to consider stretching th= e repayment schedule from the existing level of nine years to about 12 year= s. "The single point agenda is to complete the project. The lenders are rea= dy to make sacrifices if that will help," said a source. To bring down cost= s, the Godbole Committee had recommended conversion of the foreign currency= loans into rupee loans.=20 However, at this stage, none of the Indian lenders are willing to do so as = it would increase their exposure. But they could, at a later stage, convert= the forex loans into rupee loans. Following the government's external comm= ercial borrowing (ECB) guidelines, 25 per cent of forex loans can be conver= ted every year following the pre-payment route. Both IDBI and SBI had cut i= nterest rates earlier also. While IDBI slashed it from around 19 to 16.5 pe= r cent, SBI cut it from around 17 to 15 per cent. The average interest cost= for the phase I rupee loan is pegged at 16.5 per cent and that of phase II= at 16.11 per cent. A percentage point cut in interest rate can translate t= o only about 2 paise lowering in tariff of the project. The lowering of six= -month Libor from over 5.5 per cent two years back to 4.25 per cent now has= also brought down the cost of forex loans for the project. The Dabhol proj= ect has already had a cost over-run of $150 million.=20 However, this has not been borne by the lenders. Three Indian lenders -- ID= BI, ICICI and SBI -- have a guarantee exposure to the tune of Rs 3,000 cro= re, besides funded exposure of around Rs 2,255 crore. In rupee terms, the t= hree lenders have a guarantee exposure of Rs 1,039 crore to phase I and Rs = 1,960 crore to phase II.=20 The outstanding rupee term loans on the Indian lenders' books is to the tun= e of Rs 250 crore for phase I and Rs 1,156 crore for phase II. Besides, SBI= also disbursed $141 million worth of foreign currency loans in phase II. = "The decision on moratorium on payment or maturity of loans can only be tak= en at the Singapore meeting on June 5-6, when the global lenders will discu= ss the future of the project. However, the Indian lenders can go ahead and = cut the rates on the rupee loan on their own," a source said. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE ECONOMIC TIMES, Friday, June 01, 2001=20 Prabhu meets Sinha to discuss DPC-MSEB row =20 POWER minister Suresh Prabhu on Thursday met finance minister Yashwant Sinh= a in the context of the ongoing dispute between Enron-promoted Dabhol Power= Company and Maharashtra State Electricity Board in a bid to break the dead= lock over the cost of power and payment of bills. At the end of nearly an h= our-long meeting, Prabhu declined to give any details about his discussion = with Sinha. Sources said, among other things, the two ministers discussed t= he situation arising out of Wednesday's development in which DPC stopped ge= nerating power in the absence of any despatch order from the MSEB. Official= s of both ministries were tight-lipped and refused to divulge any details a= bout the meeting. (PTI) ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE FINANCIAL EXPRESS, Friday, June 01, 2001=20 Prabhu meets Sinha to discuss DPC, MSEB dispute=20 POWER Minister Suresh Prabhu on Thursday met Finance Minister Yashwant Sinh= a in the context of the ongoing dispute between Enron-promoted Dabhol Power= Company (DPC) and Maharashtra state electricity board (MSEB) in a bid to b= reak the deadlock over the cost of power and payment of bills.At the end of= nearly an hour-long meeting, Mr Prabhu declined to give any details about = his discussion with Mr Sinha. Sources said, among other things, the two min= isters discussed the situation arising out of yesterday's development in wh= ich DPC stopped generating power in the absence of any despatch order from = the MSEB. (PTI) ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE ASIAN AGE 'No Counter-Guarantee On Power', Friday, June 01, 2001 The Centre has ruled out any counter-guarantee to power projects even as fo= reign investors are approaching government expressing apprehensions in the = wake of the dispute between Enron-promoted Dabhol Power Company and Maharashtra State E= lectricity Board over the cost of power and payment of bills. "I will not s= ay that they (foreign investors) do not have any apprehensions. They want t= o know about the fate of their projects. We are making it clear that our po= licy is transparent and unambiguous and we want foreign investment to suppl= ement domestic investment," power minister Suresh Prabhu said. "I have told all foreign investors that counter guarantee is out of questi= on. Success of any project is through making it commercially viable," he sa= id. Mr Prabhu clarified that any kind of Central guarantee would not put pr= essure on the state electricity boards and commercial success of the projec= ts would depend on making the SEBs financially strong and viable. He, howev= er, promised all the Central help in working out a sound payment mechanism = for the power projects to assuage the fears of both foreign and domestic in= vestors.Meanwhile, Mr Prabhu met finance minister Yashwant Sinha in the con= text of the ongoing dispute between DPC and MSEB in a bid to break the dead= lock over the cost of power and payment of bills. At the end of nearly an hour-long meeting on Thursday, Mr Prabhu declined t= o give any details about his discussion with Mr Sinha. Sources said, among = other things, the two ministers discussed the situation arising out of deve= lopment in which DPC stopped generating power in the absence of any despatc= h order from the MSEB. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE ECONOMIC TIMES, Friday, June 01, 2001=20 Some light at last! NEW Delhi's intervention in the tussle between Enron and the Maharashtra go= vernment is a welcome development. The government wants the Central Electri= city Authority to find out whether electricity generated by Dabhol Power C= ompany can be sold to states which need power badly if it can't be used by = Maharashtra. This is a good idea - India is seriously short of reliable, qu= ality electricity supply. Maharashtra claims that it doesn't need even the = 740 MW now generated by DPC at going rates. This creates further trouble: t= he lower Maharashtra's offtake, the higher the unit price of DPC power. Onc= e other power hungry states start buying up electricity from DPC, the price= per kilowatt hour will fall sharply.=20 The first step to getting DPC out of the hole that Enron, Maharashtra and s= uccessive Indian governments have dug it into, is to allow the utility to s= ell power to anyone who wants to purchase it at going rates. However, askin= g central utilities like the fledgling Power Trading Corporation to evacuat= e DPC power for sale outside Maharashtra won't solve the hassles of the sec= tor for all time. The government should modify electricity laws to allow ge= nerating companies to sell electricity to all users immediately. An ordinan= ce passed by New Delhi will do the trick - power is a concurrent subject, w= ith central legislation overriding states'. But even if that happens, it is= doubtful if there will be too many buyers for Dabhol power at its present = price - about Rs 4 per unit with the plant running at high capacities. If t= he price is to be brought down further, the deal with MSEB will have to be = renegotiated.=20 The Godbole Committee says that some financial restructuring, de-dollarisin= g of debt and equity, and so on can bring prices down by about 30 per cent = from DPC's minimum Rs 4 per unit rate today. Otherwise, as the GC points o= ut, it will be impossible for the project to be viable at current tariffs. = India desperately needs electricity to grow. For the power sector to grow, = reforms are necessary at every level - renegotiations, yes, but also change= s in laws and the rules of the game. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE FINANCIAL EXPRESS, Friday, June 01, 2001=20 MSEB sells 2.5 m units to Tata Power, Sanjay Jog THE Maharashtra State Electricity Board (MSEB), which has suspended the pow= er purchase from the Dabhol Power Company since May 29 noon, has been selli= ng 2.5 million units at a per unit tariff of around Rs 3.60 to Tata Power. = MSEB sources confirmed these developments and told The Financial Express on= Thursday that it will also sell its power to various states if they come f= orward with the proposal. "We have sold over 5 million units since last th= ree days to Tata Power whose Trombay plant is undergoing certain overhaulin= g," sources said. According to sources, MSEB's power supply has not been affected despite it = has stopped power purchase from DPC. Thanks to the daily load availability = of over 10,000 mw and a frequency of 49 per cent. MSEB has a generating cap= acity of nearly 9,767 mw in addition to this it receives in all 2,185 mw fr= om the National Thermal Power Corporation and Nuclear Power Corporation an= d nearly 190 mw from Tarapur automatic power station.Furthermore, sources s= aid that there has been no peak load shortage neither there has been load s= hedding across the state mainly due to a much needed relief received after = pre-monsoon rains and low uptake of power especially from the agricultural = consumers due to prevailing drought conditions. Similarly, MSEB's drive to= contain power thefts have started paying off. Moreover, the industrial consumers have shifted their load during night hou= rs when the power availability is more but also at off peak rates. In a rel= ated development, Indian rupee lenders consortium headed by the Industrial = Development Bank of India will hold meeting with the MSEB chairman Vinay Ba= nsal on Saturday for apprising him their position over Dabhol impasse. IDBI= along with Indian Financial Institutions (IFIs) have taken a stand that th= e legal issues be kept aside and make united efforts to save their funds cr= ossing over Rs 5,152 crore blocked in the Dabhol project. MSEB sources said= that the IDBI would also be briefed about the circumstances under which it= has filed a petition in the Maharashtra Electricity Regulatory Commission = after rescinding the power purchase agreement. "However, we still feel that= MSEB and IDBI should work together to safeguard their interests as well as= their money," sources added.=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE FINANCIAL EXPRESS, Friday, June 01, 2001=20 Dabhol, the FDI we didn't need , R Jagannathan The question is not of scrapping the deal, but how and on what terms=20 If there is one thing that stands out in the Dabhol power project controver= sy, it is the surprising unanimity all parties to the conflict have achieve= d: all of them actually want to get out. Enron, main promoters of the Dabho= l Power Company, which got a cushy bargain with no risks, wants to walk out= because it does not see itself as a power-plant runner in the long run. No= r does it want to be seen as the company that stole millions from a poor co= untry by making suckers out of Indian politicians and bureaucrats while neg= otiating the power purchase agreement (PPA). Maharashtra state electricity = board (MSEB), a self-declared victim, obviously wants to exit for reasons o= f its own long-term survival. The central and Maharashtra governments would= like to close the chapter since they want to welsh on the guarantees that = were foolhardily given to Enron. The only people who still have a stake in = the PPA and the deal are mostly Indian financial institutions and banks. Ev= en they are unlikely to hang on if they can see a way to pull their chestnu= ts out of the fire. If no one is ready to admit this, it is because everybo= dy has egg on his face. It is, therefore, best to cut one's losses, learn t= he lessons and move on.=20 The first lesson to be learnt is this: you cannot have a deal where the cos= ts are stated in one currency and prices in another. In the Enron project, = MSEB's power purchase costs were linked to the dollar when its revenues wer= e in rupees. The only way it could have taken up this risk was if it knew t= hat the rupee was actually going to strengthen against the dollar in the me= dium term - a historically invalid assumption. With dollar-rupee parities l= iving up to past form, the project was a dead duck from day one. Second, any deal done without keeping in mind a customer's willingness to p= ay the required price is folly. The Dabhol PPA makes its obvious that DPC c= onsidered MSEB the customer, when in reality it is the ultimate power users= (factories, offices, farmers, households) who are the real customers. The = deal would have worked only if MSEB believed it could raise tariffs by 100 = per cent or more every year for several years, or if Enron was given the op= tion to find its own customers and given a distribution area. This implies = that the Enron deal could have worked only if power sector reforms had prec= eded the deal, and not followed it. Third, nobody should ever try to guarantee profits to any commercial entity= . While it may sometimes make sense to give incentives (free land, tax re= lief) or even forgo revenues (through sales tax deferrals) to lure investme= nt in any given sector, it makes no sense at all to offer to pay anyone mon= ey to ensure his profitability. But this is what the Maharashtra government= and central counter-guarantees amounted to. If the power customer doesn't = pay higher tariffs, the Maharashtra government (or its central counter-guar= antor) would make up the shortfall for DPC. Four, the Enron kind of foreign direct investment (FDI) is not something th= at needs to be encouraged. If governments have to bankroll the profits of a= foreign company, if domestic institutions have to guarantee most of the lo= ans, and if local customers are not prepared to pay the price for all that = these things cost, what is the point in seeking such investment? McDonald's= and Kellogg's are not here because they are guaranteed pots of money, but = because they see a profitable market somewhere in the future. There is no r= eason why power should be any different. In future, if we are going to invi= te foreign investment, it must be on the basis of reforms that make investm= ents inherently viable and not by profit guarantees. Power purchase contrac= ts should be bid for on the basis of guaranteed rupee-based tariffs, subjec= t to reasonable escalation clauses, and not capital costs or dollar-based i= nputs or returns. To exit from the unholy mess, there are only three options: one, the govern= ment can negotiate compensation costs for Enron based on what it has invest= ed and additionally give it a reasonable return on this capital. A new prom= oter may then have to be roped in to finish the project on the basis of a n= ew PPA. He will then have to decide whether the existing contractors can be= retained to complete the project on new or existing terms; and new avenues= have to be found to make the project viable using cheaper and alternative = fuels. The tab will, obviously, have to be picked up by the central and Mah= arashtra governments, MSEB and the lenders in some proportion. The key to r= esolving the deadlock lies with Enron: whether it will be mature enough to = accept a compensation that is less than what its deal itself specifies. Mr Jagannathan is Editor, myiris.com ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE FINANCIAL EXPRESS, Friday, June 01, 2001=20 DPC expects MSEB to share 50% in $360-m loss on account of tariff cut , Sa= njay Jog DABHOL Power Company (DPC) has for the first time come up with a figure of = $360 million, which it says is on account of the 10 per cent reduction in t= ariff. This amount was indicated by the DPC at a recent meeting with the Ma= harashtra State Electricity Board (MSEB) officials. Interestingly, while t= he DPC expects MSEB to share 50 per cent of this burden, the MSEB, before a= ccepting its part of the burden, wants DPC to give the basis on which this = figure has been arrived at.According to DPC, the per unit tariff at 90 per = cent availability, will be reduced to Rs 3.50-Rs 3.59 from the estimated Rs= 4.30 after the commissioning of Dabhol phase-II to be run on the liquified= natural gas (LNG). The DPC is of the view that the tariff cut will be poss= ible only if the Centre waives 5 per cent customs duty on LNG and the India= n Financial Institutions (IFIs) restructure the repayment schedule and cut = the interest rate to 12 per cent from the prevailing 16.5 per cent. DPC has estimated a suspension period of nearly 18 months, comprising 12 mo= nths for the completion of renegotiations and six months for various other = formalities. Sources said that the implementation of tariff cut, if at all = agreed by both MSEB and DPC, would be possible after reworking the present = power purchase agreement, which has already been rescinded by the MSEB. How= ever, MSEB, which will have to share a burden of $180 million, has asked th= e DPC to explain with a backup data and formula on what basis it has arrive= d at a figure of $360 million. Sources told The Financial Express that the = prima facie DPC has ruled out the possibility of cutting the tariff at Rs 2= .50 per unit as demanded by the MSEB on the grounds that it would not even = cover the fixed charges, leave aside the variable charges. However, MSEB, a= s reported first by The Financial Express on May 29, wants to stick to its = stand that the tariff will have to be brought down at Rs 2.50 per unit. Curiously, MSEB's stand has been supported by the Infrastructure Developmen= t Finance Corporation (IDFC) which is providing secretarial assistance to t= he Madhav Godbole renegotiation committee. MSEB is of the firm view that th= e tariff cut is quite possible only after the DPC delinks dollar linkage, s= eparates its regassification unit from the Dabhol project and also sacrific= es equity earnings in dollar terms. According to sources, DPC has also aske= d the MSEB to submit its formula and backup data to lower the per unit tari= ff at Rs 2.50. However, MSEB officials have told the DPC that it would shar= e necessary data only after seeking approval of the renegotiations committe= e chief Dr Madhav Godbole. The IDFC officials would meet Dr Godbole on this front and thereafter come = out with the relevant data pertaining to tariff reduction at the next meeti= ng slated for June 2 between MSEB and DPC officials. In a related developme= nt, MSEB and DPC are believed to have expressed serious doubts over Union m= inister Suresh Prabhu's directives to the Central Electricity Authority (CE= A) to find buyers for the Dabhol power in the wake of the MSEB's decision t= o stop power purchase from Dabhol. They are reportedly doubtful over the fe= asibility and durability of this proposal as it would all depend upon the p= ower demand and the payment capacity of the "buyer" state. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE INDIAN EXPRESS, Friday, June 01, 2001=20 Enron fallout: Fitch cuts India's rating to negative Fiscal imbalance, Enron row take toll on India's rating International rating agency Fitch today changed the rating outlook on India= 's sovereign ratings from 'stable' to 'negative' citing well-flagged conce= rns about fiscal policy, privatisation, deterioration in the foreign invest= ment climate and the Enron fracas. Fitch currently rates the foreign and lo= cal currency obligations of India 'BB+' and 'BBB-' respectively.The negativ= e rating outlook reflects the slow progress of the government in implementi= ng privatisation and addressing the weaknesses in public finances, it said.= The fiscal-monetary policy mix in India remains unfavourable, resulting in= relatively high real interest rates and crowding out of private sector inv= estment. Italso expressed concern over high government guarantees - which c= an become liabilities - to various projects in the wake of the Enron imbrog= lio. Fitch also expressed additional concerns over the dispute between Enron, th= e country's largest foreign investor, and the government and worried that t= his may herald a broader deterioration in the foreign investment climate. F= oreign direct investment remains extremely low in India (less than 1 per ce= nt of GDP). Until the authorities display a concerted willingness to addres= s fiscal imbalances, India will remain locked in a stop-go cycle of growth = and the sovereign could slip into a debt trap, it said. The recent corrupti= on scandal, involving the ruling BJP-led coalition government, threatens to= exacerbate these trends and further slow economic reform, Fitch said. Indi= a's fiscal deficit at over 9 per cent of GDP is among the highest in the re= alm of rated sovereigns. Persistently high fiscal deficits have led to a bu= ild-up of the general government's debt burden, estimated to be over 60 per= cent of GDP. In addition, the government (both central and state) has guarantees outstan= ding amounting to 9 per cent of GDP. Fitch reiterates the point that such g= uarantees, issued to back mainly infrastructure projects, are contingent li= abilities of the government. This has most recently been borne out in the c= ase of Enron, where the US power company has invoked a c= entral government guarantee for payment arrears accumulated by the MSEB. On= the revenue side, the tax base remains small, while the expenditure profil= e remains rigid due to the high level of interest payments, subsidies, pers= onnel and defence costs. Interest payments comprise nea= rly 50 per cent of revenues, leaving little to be spent on the much-needed = infrastructure and social sectors. Fiscal management is also questionable given the repeated slippage in its f= iscal deficits in the past several years. Despite the weak state of public = finances, Fitch is disappointed that the government is envisaging only a mo= dest fiscal consolidation in 2001-02 and even this target could prove chall= enging, as growth and revenue projections seem optimist= ic. Although the budget contains some positive structural reform measures, = the Tehelka scandal and State elections next year could put pressure on the= government to delay these initiatives. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE INDIAN EXPRESS, Friday, June 01, 2001=20 As Enron backs out, NTPC steps in with 2 mega plans NTPC to set up coal-based plants in Maharashtra WHILE private sector power producers like Enron are finding the going tough= in Maharashtra, government-owned National Thermal Power Corporation (NTPC)= has decided to set up two new mega power projects in the State. This is de= spite Enron's Dabhol project is sputtering and projects ofReliance and Ispa= t have failed to get government clearances.NTPC plans to set up two 1,000 m= w plus coal-based power plants in Vidarbha and Konkan areas of Maharashtra = with an investment of more than Rs 4,000 crore each. "NTPC does not have a = power plant in the state, so in order to make our presence, we have shortli= sted Mauda near Nagpur for setting up a power station with two units of 500= mw each," said NTPC executive director (western region) R D Gupta. "While private power producers have found it tough running power plants, g= overnment utilities seem to be quietly consolidating their position in spit= e of huge dues," said an analyst with a foreign brokerage. NTPC alone has d= ues of over Rs 16,000 crore from various state electricity boards. "The loc= ation for Konkan will be finalised soon as we are yet to select suitable la= nd for the project," Gupta added. For the Vidarbha project, the Corporation= has been able to finalise the prospects of coal availability and was await= ing State's response on procurement of water, Gupta said, adding "For the c= oastal plant, NPTC is looking for imported coal, which would be later blend= ed with the Indian quality for usage."=20 The State government, which is in a battle with Enron over the Dabhol proje= ct, had recently put on hold providing an escrow cover and signing of power= purchase agreement with NTPC for the purchase of additional power from its= new projects. The government has, in no uncertain terms, also expressed it= s inability to consider an escrow cover at this point of time especially wh= en the Madhav Godbole energy review committee is in the process of finalisa= tion of its report on reforms and restructuring of ailing Maharashtra State= Electricity Board (MSEB). Simultaneously, neither the State nor MSEB were = in a position to give any assurance on purchase of power from NTPC's upcomi= ng projects especially when the State was meeting the power demand with the= present installed capacity of over 12,000 mw. The government had told the NTPC that the escrow cover would not be require= d in the wake of proposed implementation of Montek Singh Ahluwalia report o= n one time settlement of dues of state electricity boards (SEBs). Similarly= , the government made it clear that it would not be possible for provide es= crow cover in the wake of current 'precarious' financia= l conditions. NTPC pressed for PPAs for the supply of additional power of 1= ,345 mw from Kawas II (202 mw), Gandhar II (186 mw), Vindhyachal II (319 mw= ) and Sipat (638 mw). NTPC has already been providing around 1,900 mw to 2,= 400 mw to the MSEB. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- THE INDIAN EXPRESS, Friday, June 01, 2001=20 Darkness over Dabhol There can be no excuses for these monumental 'enwrongs' NOTHING confirms the need for transparency in decision-making more forceful= ly than the Dabhol Power Company imbroglio. Operations at the power station= have been stopped for a second time since the original contract was signed= . In 1994, alleging corruption in the deal, the then Shiv Sena-BJP governme= nt ordered suspension of the project but soon backtr= acked and signed a new contract, three times the size of the first. This ti= me the closure comes amidst claims of breach of agreement by the Maharashtr= a State Electricity Board and by the DPC. If renegotiation of the contract = does not result from this impasse, both parties willconfront each other in = court. Either way, what assurances are there that Maharashtra will be the w= inner this time? Very few, if matters proceed as they did in the past when = contracts were negotiated and renegotiated with the DPC. The Godbole commit= tee reveals there has been a comprehensive failure of governance in dealing= with Enron, the US energy company which holds a majority stake in the DPC.= For anyone wanting to understand why Maharashtra has 2184 MW of power it d= oes not need and cannot afford, the Godbole report is essential reading. It= has this to say: ''The committee is surprised at the breadth of governance= failure which has occurred across time, across governments and across agen= cies, right from 1992 till as late as 1999.'' Successive governments of Maharashtra, the MSEB, the Central Electricity Au= thority and several Central government ministries are all indicted. It must= be said that the judicial process also failed when many public interest pe= titions were filed but the courts chose not to intervene. A few errors in j= udgement on the part of government agencies would be understandable given t= he lack of experience at the time in negotiating commercial power contracts= . But every one of the assertions relating to the benefits from the project= , the effectiveness of negotiations, project design and size, the need for = power and the competitiveness of the tariff proved to be false, according t= o Godbole. Some decisions did not even meet the test of common sense. Monit= oring of compliance with negotiating committee recommendations was poor. Sm= all wonder that corruption at every stage is suspected. With greater transparency during the process, it is highly unlikely so many= wrong assumptions and so many bare-faced lies would have gone unchallenged= . The more open the process, the greater the chances of the whistle being b= lown before too much damage is done. But try telling officialdom to open up= and repose itsfaith in public scrutiny. From the start NGOs, opposition pa= rties, trade unions were denied information on unsustainable grounds of com= mercial secrecy. Even now MSEB refuses to divulge information in the public= interest despite being ordered to do so by the Maharashtra Electricity Reg= ulatory Commission. If Maharashtra does not learn from the past, it will re= peat its mistakes a third time. All documents relating to the Dabhol projec= t must be made public without delay and further proceedings should be cond= ucted in a completely transparent manner. There must be no scope for ''undu= e influence'', no more failures of governance. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- MID DAY, Friday, June 01, 2001 Enron knew about DPC plant's shortcomings, Deepak Lokhande Enron could have been aware that the Dabhol power plant might be unable to = generate electricity at full capacity within three hours of the plant's mac= hinery being started, which was why the United States energy giant must hav= e wanted the penalty clause removed from its Power Purchase Agreement (PPA)= with the Maharashtra State Electricity Board (MSEB). The MSEB has slapped= a notice for a penalty of Rs 401 crore to be paid by the Dabhol Power Corp= oration (DPC), Enron's Indian subsidiary, after the DPC could not run its p= lant at full capacity in January when MSEB demanded power. Later, the MSEB also claimed the PPA with DPC was no longer valid on the g= rounds that the plant had been fitted with substandard machinery. The MSEB = has taken up the issue with the Maharashtra Electricity Regulatory Commissi= on (MERC) and won the first round by getting an interim stay order on activ= ation of the escrow account by the DPC and halting arbitration proceedings = in London.Several legal experts, including the attorney general of India, S= oli Sorabjee, have opined that the MSEB is on strong legal ground with rega= rd to the penalty notice and can humble the US energy major. It now appears= that Enron must have been aware that the penalty clause might cause troubl= e and hence suggested it be removed from the PPA. Enron India Managing Dire= ctor K Wade Cline has said the company would like to renegotiate the penalt= y clause. Wade Cline showed a willingness to amend the PPA on May 30 when the state r= equested the Centre take over Phase II of the Dabhol power project. Speakin= g to select media persons at the Oberoi Towers on the evening of May 30, he= said his company was welcome to the idea of sharing power with the Nationa= l Thermal Power Corporation, but said Enron would also want permission to s= ell power to a third party. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- MID DAY, Friday, June 01, 2001, Govt allows Enron third party power sale The union government on Thursday allowed the Enron-promoted Dhabol Power Co= mpany (DPC) to sell power to third parties so as to sustain itself in the f= ace of the dispute with the Maharashtra State Electricity Board (MSEB). The= Ministry of Power has proposed that power deficient states can directly bu= y power from DPC.Power Minister Suresh Prabhu, in a statement in the capita= l, said this has been done in response to discussions with the negotiating= committee and the reported willingness of DPC to reduce the cost of power.= He said directions had already been issued to the Central Electricity Auth= ority (CEA) for discussions with power deficient states on the quantity of = power they can absorb and the tariff at which it can be sold. Earlier, A V = Gokak, the Centre's nominee in the negotiating committee, called on finance= and power ministry officials to discuss the situation as the Maharashtra E= lectricity Regulatory Commission (MERC), in its order, had restrained the D= PC from proceeding with the arbitration process till June 14. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------- MID DAY, Friday, June 01, 2001, Enron shuts down plant, to issue termination notice Amidst a plethora of allegations, counter attacks and legal wrangles, US en= ergy major Enron-promoted Dabhol Power Company (DPC) is set to issue the m= uch vexed Termination Notice to its partner MSEB and has also shut down the= USD three billion Guhagar plant.With MSEB not drawing power since Tuesday = noon, the multinational had no other option but to shut down as MSEB is the= ir sole customer, a senior Godbole committee member said on Wednesday. "DPC= is reeling under tremendous pressure from its lenders who have already giv= en the multinational a go-ahead for a wrap up by terminating the contract,"= he added. He said Enron India chief K Wade Cline had conveyed DPC lenders'= nod over the termination to the Committee members on Tuesday and had said = "we will have to terminate the contract, if no solution is found to this gr= ave crisis. As it is, even now DPC cannot see a way out."=20 DPC had served a Preliminary Termination Notice to MSEB on May 19. "Even t= hough there exists a cushion period of six months, the energy major will is= sue the notice," the official said. On the other hand, MSEB officials are n= ot worried over the termination of the contract. "MSEB has already rescinde= d the PPA. So even if they terminate the contract, it hardly matters to us,= " they said. Meanwhile, the Godbole committee panel would meet MSEB offici= als on June 6 but DPC representatives have not been invited for the same.
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