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California and the West Panel OKs Bills on State Purchase of Power Grid Energy
Los Angeles Times, 02/14/2001 California Legislature's Power Advisers Exert an Interest in Outcome Knight-Ridder, 02/14/2001 NewPower posts quarterly loss Reuters, 02/14/2001 GERMANY: INTERVIEW-Enron lauds Germany's open power market resolve. Reuters English News Service, 02/14/2001 GERMANY: German gas market regulation inevitable-Aquila. Reuters English News Service, 02/14/2001 UK: Goldman, Morgan Stanley top energy derivative trade. Reuters English News Service, 02/14/2001 Italy's ENI signs MoU to build power plant in Nigeria Agence France-Presse, 02/14/2001 Qatar, UAE Dolphin Gas Proj Deal Expected In Mar - Enron Dow Jones Energy Service, 02/14/2001 Dallas-Based Blockbuster's Net Loss Widens in Quarter Knight-Ridder, 02/14/2001 DEMAND A DEAL Blockbuster pacts for PPV, VOD rights to U pix Daily Variety, 02/14/2001 Mirant of US plans power plant bid. Business Times (Singapore), 02/14/2001 FEDERAL POWER MIN GIVES PRESENTATION TO INDIAN CABINET Asia Pulse, 02/14/2001 ASIA-PACIFIC: No let-up for Indian electricity Financial Times, 02/14/2001 Cabinet okays Navy land transfer to Andamans The Times of India, 02/14/2001 Equity dilution, not divestment in Maruti The Times of India, 02/14/2001 Power reforms and regulations Business Standard, 02/14/2001 DPC not to invoke central guarantee Business Standard, 02/14/2001 Enron saga: Powered by govt generosity The Times of India, 02/14/2001 Centre signs power sector reforms MoU with Haryana Business Standard, 02/14/2001 India: Enron review panel to begin sittings today The Hindu, 02/14/2001 Macerich Announces Year-End Results PR Newswire, 02/14/2001 Racing friend of the Queen to be US ambassador The Daily Telegraph, 02/14/2001 USA: INTERVIEW - Enron business model almost limitless-Skilling. Reuters English News Service, 02/13/2001 Contracts save electricity costs, but college natural gas bills soar Associated Press Newswires, 02/13/2001 Edison Says Banks Mulling Request to Delay Remedies (Update1) Bloomberg News, 02/13/2001 Acegas listed on February 28 and aims for telecoms market Il Sole 24 Ore - Italy, 02/13/2001 ------------------------------------------------------------------------------ ------------------------------------------------------------ Metro Desk California and the West Panel OKs Bills on State Purchase of Power Grid Energy: Senate measures would authorize takeover of transmission lines and construction of generating plants. Backers say the plan is not a bailout of utilities. CARL INGRAM MITCHELL LANDSBERG; JENIFER WARREN TIMES STAFF WRITERS 02/14/2001 Los Angeles Times Home Edition A-3 Copyright 2001 / The Times Mirror Company SACRAMENTO -- Nudging government toward an expanded role in the energy business, a Senate committee Tuesday approved two far-reaching bills paving the way for the state to buy California's sprawling electrical transmission grid and build and operate its own power plants. The legislation aims to protect California from the crisis it faces today, a nightmare of supply shortages and sky-high power prices, said the bills' author, Senate leader John L. Burton (D-San Francisco). "What we're trying to do here is give the state some influence and control over its own destiny," Burton said. "The idea is to provide affordable, reliable energy at times we need it most." One of the bills authorizes Gov. Gray Davis to negotiate with California's beleaguered utilities about a state takeover of the transmission system, a transaction that could help them avoid bankruptcy. By paying anywhere from $3 billion to $9 billion for the 32,000 miles of electric wires, the state would provide the utilities with cash to help relieve their mushrooming debt. "Some would call it a bailout," Burton said. "I would prefer to call it an infusion of capital." Davis prefers the term buyout and said any state takeover of the grid "should be a moneymaker." Talking with reporters after a speech in Los Angeles, Davis said he hopes to announce a proposal Friday under which the state would receive the transmission system, a financial stake in the utility companies and some other asset--possibly some of the utilities' hydroelectric facilities--in exchange for billions of dollars in state cash. "We will insist upon receiving commensurate, equivalent value for any value we confer on the utilities," Davis said. The governor added that the utilities' parent companies--which have received, among other assets, billions of dollars in tax overpayments from Southern California Edison and Pacific Gas & Electric--should help bring the utilities back to fiscal health. Tuesday marked the 29th straight day in which California endured a Stage 3 power alert, with energy reserves critically low on the grid serving most of of the state. Grid operators came closer than usual to triggering rotating blackouts, but by the evening hours of peak demand, officials at the California Independent System Operator were optimistic that conservation and power purchases would help them dodge outages. Cal-ISO spokesman Patrick Dorinson blamed the power shortfall on a cold snap that boosted electricity consumption and on the shutdown of power plants capable of generating one-third of the state's winter peak demand. Four years after electric utilities were partially deregulated in California, the state is caught in a tangle of skyrocketing energy prices, booming demand and short supplies. Battered by debt, the state's largest investor-owned utilities lack the cash and credit to buy power themselves, forcing the state to step into the electricity market. For more than three weeks, the state Department of Water Resources has spent an average of $45 million a day purchasing power, as negotiators work to nail down long-term power contracts under a $10-billion program authorized by the Legislature. Davis maintains that in recent weeks the state has made major progress toward solving the electricity crisis. Officials have signed four "very good contracts" with electricity providers, begun an $800-million conservation program and embarked upon an aggressive drive to get power plants built, he said. In other developments Tuesday, the precarious financial condition of Edison and PG&E remained a top concern of utility-watchers as a grace period granted by banks that are owed money by Edison expired. "We are now on a daily involuntary-bankruptcy filing watch," said Steven Fleishman, a utility analyst with Merrill Lynch & Co. "We believe that creditors will wait to see what plan the [governor] proposes, but time is short." Edison formally asked a group of 23 banks for an extension of a 30-day period of forbearance on a $230-million default, Ted Craver, Edison International's chief financial officer, said in a conference call with debt holders. The banks had not yet responded, he said. Several electricity generators have said they are willing to wait for the utility debt-relief plan that Davis and legislators have promised in the coming days, the governor's spokesman, Steve Maviglio, said Tuesday. "They have signaled to us that they have patience," he said. Most of the action in the Capitol on Tuesday centered on Burton's two bills, both of which cleared the Senate Energy Committee and will go next to the Appropriations Committee. A third measure, SB 5X by Sen. Byron Sher (D-Stanford), which would provide $1.2 billion in taxpayer subsidies to consumers, government entities and businesses to help pay for conservation measures, also passed. Burton said his bill paving the way for the purchase of the transmission grid, SB 33X, is based on the concept of "willing buyer, willing seller" and would not lead to any unilateral seizure of utility assets. Although it attracted support from consumer groups, skeptics say that the system is overburdened and needs an estimated $1 billion in repairs and expansion--and that it costs several million dollars annually to maintain. As lawmakers debated the bill, a private company quietly pressed its own bid to buy the system. Trans-Elect Inc. has offered to pay $5.25 billion for the grid. Company Vice President Bob Mitchell was in the Capitol to pitch the idea to lawmakers, most of whom are indifferent to the notion. "We're not convinced that a single, for-profit, monopoly owner of the grid gains the people a lot," said Assemblyman Bill Leonard, (R-San Bernardino). But others said they were open to proposal: "We certainly prefer to keep the transmission grid in the private sector where it belongs," said Jamie Fisfis, spokesman for Republican Assembly leader Bill Campbell (R-Villa Park). The other Burton bill approved Tuesday, SB 6X, seeks to create a California consumer power and conservation financing authority that would build, finance and run power plants alone or in partnership with private generators. The new agency would be financed by the sale of up to $5 billion in bonds, which would be repaid by revenues from power sales. The bill also would empower the state to take over private plants by condemnation. Several other states, including New York, operate public generation and transmission facilities, Burton said, adding that they provide electricity at favorable rates. Burton insisted that the agency would "supplement" but not take over the electricity business that traditionally has been a private-sector enterprise in California. He predicted that the state would involve itself mostly in "peaking" generators--portable generators about the size of big-rig trucks--whose energy would be tapped during periods of short supply but high demand, such as hot summers and cold winters. But GOP Sens. Charles Poochigian of Fresno and William Morrow of Oceanside voiced fears that the public energy agency would be too dominant and could disadvantage private generators with its power of condemnation. "This bill is pretty much sending a large, bright red flag," Morrow told Burton. Lobbyists for the power generators, testifying before the committee, agreed that a public power authority could scare off private investors reluctant to compete with the state. "That type of uncertainty, about the state's role in this system . . . can have the role of discouraging private capital," said Mike Day, a lobbyist for Enron Corp. In another development Tuesday, state officials working to fire up new power plants to add 5,000 megawatts of electricity by this summer raised the possibility that the new generators might not be adequate to meet demand. Winston Hicox, director of the California Environmental Protection Agency, said the gap between supply and demand could be greater than 5,000 megawatts this summer, given that other Western states probably won't be sending as much electricity to California, and that the state's own production of hydroelectric power might be low. Calling conservation steps "incredibly important," Hicox said the state needs to cut use by at least 7% to avoid blackouts. Meanwhile, the California Republican Party said it will begin airing a second radio ad today blasting Davis, a Democrat, for his handling of the energy crisis. Unlike the first ad, which ran in smaller markets on conservative radio stations, the new ad will run in Los Angeles and San Francisco on mainstream stations, said a party spokesman. On the federal level, President Bush said Tuesday that he intends to discuss California's power needs and other energy policy issues in his talks Friday with President Vicente Fox of Mexico. They will talk "about improving the power plants to be able to help additional power get into the Western grid," Bush told reporters aboard Air Force One on a flight back to Washington after visiting the Norfolk, Va., Naval Base. Bush said he also intends to discuss the flow of natural gas between the two countries, specifically the issue of California natural gas flowing to Mexican power plants. "It's conceivable that that gas will be interrupted, and it will create, obviously, a problem for our neighbors to the south," Bush said. "But gas can flow both ways. And any gas down in Mexico that improves the Mexican situation will help America." * Ingram and Warren reported from Sacramento and Landsberg from Los Angeles. Times staff writers Miguel Bustillo, Dan Morain, Rone Tempest and Nancy Vogel contributed from Sacramento. Nancy Rivera Brooks contributed from Los Angeles and James Gerstenzang from Washington. California Legislature's Power Advisers Exert an Interest in Outcome 02/14/2001 KRTBN Knight-Ridder Tribune Business News: The Orange County Register - California Copyright (C) 2001 KRTBN Knight Ridder Tribune Business News; Source: World Reporter (TM) Gov. Gray Davis and top lawmakers have enlisted a small circle of energy insiders to help craft electricity bills and policies that could indirectly affect their financial interests. Key parts of the $10 billion financial plan that launched the state into the power buying business were written by investment bankers for Credit Suisse First Boston, which also works for a Texas power generator. Other advisers include a former Southern California Edison executive who owned stock in three independent power companies while advising the governor. A third is a New York banker whose company prepared the sale of $1.4 billion in securities last week for two power generators who sell electricity in California. These power companies earned record profits last year selling electricity into California's troubled market. State utilities were pushed to the brink of insolvency by power prices because their billing rates were still frozen by 1996 rules that deregulated the market. Now some lawmakers, consumer advocates and legal scholars worry that the businessmen who have come to Sacramento to help sort out the mess are too closely tied to these same power companies, and won't be able to place the interests of the state and its small electricity users first. "They've let the fox into the hen house," said Peter Navarro, a University of California, Irvine business professor and author of "The Dimming of America" which predicted a national deregulation fallout. "The (deregulation) bill was drafted in large part by utility lobbyists. If we've learned anything from this it should be that people with a vested interest shouldn't draft legislation." No one denies that industry insiders are playing a critical role inside the Statehouse. But Davis administration officials and Assembly Speaker Robert Hertzberg say they needed industry experts to help solve the state's energy crisis. "I said give me the best possible experts in the investment banking world," Hertzberg said. "Everyone who is an expert has conflicts all over the place." The outcome of these energy initiatives could prove beneficial to some of the state's advisers or their companies: Southern California Edison vice president Larry Hamlin joined the Davis team last Thursday as the project manager for the governor's new plan to speed construction of power plants statewide. Hamlin has taken a two-month leave from Edison, where he was vice president of power production and operations. A faster construction cycle could directly benefit the utility's operations and generating divisions. Former Treasury Secretary Robert E. Rubin, chairman of the executive committee at Citigroup Inc., was appointed in January to advise Davis on bond financing, long-term power contracts, and ownership of power plants. SEC filings show that Citigroup's Salomon Smith Barney subsidiary works as an investment banker for several private power companies that sell electricity in California. Salomon prepared for sale last week $1.15 billion in securities offered by Calpine Corp and $300 million in securities by AES Corp. In addition Citigroup owned or managed $2.5 billion in independent power company stocks as of September, 2000. A Citigroup spokeswoman said neither Rubin nor the company would have any comment on his role. Michael R. Peevey, a former president of Southern California Edison Co., began advising the governor last June. Peevey left Edison in 1993 and formed New Energy Ventures Inc., a non-utility energy service provider, which he sold to AES Corp. in 1999 for $100 million. He now sits on the board of Excelergy, a Lexington, Mass. provider of technology to energy companies. A sworn disclosure signed by his wife, Assemblywoman Carol Liu, D-La Canada Flintridge, shows that the couple owned between $20,000 and $210,000 of stock in AES, Enron and Unisource, all independent power companies, last year. The UniSource stock, was purchased one month after Peevey began his advisory role. Liu said in an interview that Peevey has sold all his energy stocks since she made that disclosure Dec. 15. Davis spokesman Steve Maviglio said he was unaware that Peevey had continued to hold power company stocks after the appointment. Neither Peevey, Hamlin nor Rubin responded to requests for an interview, but Maviglio said the governor has chosen the best people and is reviewing suggestions to make sure the best interests of Californians are being protected. "It seems natural to tap people who are the best at this and can get the job done for California," said Maviglio. "They know that they need to separate their past and their future when it comes to helping the state." Many experts applaud these choices. If you're in a bind and California clearly is who better to enlist than the insiders? "Is it a potential conflict? Yes. Is it a big one? Not likely," said UCLA Finance Professor William M. Cockrum, a specialist in business ethics and a former investment banker himself. Cockrum said such relationships are routine on Wall Street and investment bankers are trained to handle them. "What you want is a bunch of smart people who are used to dealing with economic realities," Cockrum said. Not everyone agrees. "It is a different matter when public dollars are at stake and matters of public policy of this order of magnitude are being decided," said Harvard Law professor Elizabeth Warren. "The Legislature needs to be clear when they are getting independent advice and when they are getting lobbied. Just because this is how business is always done, doesn't mean it's right." Lawmakers have raised similar concerns, saying there hasn't been enough disclosure of potential conflicts. "I'm uncomfortable with someone who represents a stakeholder, like power generators, providing independent advice on which direction we should go," said Sen. Joe Dunn, D-Santa Ana. "These are folks out of the financial markets, whose businesses may very well have a lot at stake in terms of the outcome of this crisis. I don't think we can consider that to be independent advice." Dunn was talking specifically about the role of Credit Suisse First Boston, which worked to restructure El Paso Electric Co. which went bankrupt in 1992. Today, the investment firm is preparing a public stock offering for a new subsidiary of Reliant Energy of Houston, called Reliant Energy Resources, Securities and Exchange Commission documents show. As of September 1999, the company also held or managed $35 million worth of stock in AES Corp., which owns power plants in Orange County. Investment bankers usually earn between 1 percent and 25 percent of the amount underwritten; the exact amount is not disclosed. Credit Suisse First Boston declined comment, other than to say Hertzberg asked its investment bankers to help and they are working for free. Some of Davis' appointments have been applauded. For instance, he tapped Los Angeles Department of Water and Power head David Freeman to lead the state's negotiations for long-term contracts with power suppliers. Freeman has been praised for his role at the DWP because he fought against those who wanted to sell the public utility's own generators. "There is no one I would rather have negotiating for the state of California," said Assemblywoman Jackie Goldberg, D-Los Angeles. "He has never worked for anything other than the public. This man lives and breaths and thinks about what is in the best interest of ratepayers." Others sought by the governor decided on their own they had too many conflicts. In January, consultants from investment banker Goldman, Sachs met with Davis' Finance Director Tim Gage to discuss advising the governor. Goldman, Sachs owns J. Aron, a Singapore-based energy trader that supplies 10 percent of Pacific Gas and Electric's natural gas needs. According to SEC records, Goldman also held or managed more than $1.5 billion in power company stocks as of September of 1999; and is listed as another lead underwriter, with Credit Suisse, on the Reliant public offering. Consumer advocates immediately began criticizing Goldman for its conflicts. Goldman decided shortly thereafter that its competing business interests posed a conflict Critics worried about the role of the investment bankers said their concerns mounted when they learned that Credit Suisse was doing more than offering advice. Hertzberg asked the company to craft a financing plan for the state's power purchases. AB1X, the landmark bill, which put California into the long-term energy buying business, included a revenue bond financing plan written by Credit Suisse. Another part of Credit Suisse' plan, which would use the bonds to pay off utilities past debts, has stalled in committee and may die there. Some lawmakers say the experts have helped protect Californians. For example, AB1X has a provision that came from a panel of bankruptcy attorneys who are advising the governor and the legislature. The state was going to buy energy and then sell it to the utilities, but this would have made the state an automatic party in any bankruptcy lawsuit. As a result of advice from experts, the state is making sure the energy gets delivered to customers, but the ownership of the electricity never shifts to the utilities. "We learned that if we are going to go out and buy power there are very specific things we must do to protect ourselves," Hertzberg said. "For example, that if there was a bankruptcy we would have been is an unsecured creditor. Their advice has been very valuable." And Hertzberg said when it comes to advisors with serious conflicts the Legislature is smart enough to take the advice of experts and recognize any bias. But Dunn, the Santa Ana senator, thinks the issue is too complex. "With all due respect, that's nonsense," Dunn said. "No one in this building can rise to the sophistication of the players in this market. Their entire professional life is dedicated to make sure they understand how this works in all its subtletiesIn fact, the advisers may believe they can step aside and provide independent, unbiased advise, but I don't think they can. If you have lived your life in this arena, you have a certain point of view." --By Chris Knap, Kimberly Kindy and Mark Katches --Register staff writer Kate Berry contributed to this report. NewPower posts quarterly loss PURCHASE, N.Y., Feb 14 (Reuters) - NewPower Holdings Inc. (NPW.N), parent of New Power Co., a national provider of electricity and natural gas to residential and small commercial customers in the United States, reported a bigger-than-expected fourth-quarter loss. The Purchase, N.Y.-based company reported a net loss of $57.5 million, or $1.02 per share for the quarter. Analysts expected a loss of 99 cents, according to First Call/Thomson Financial. NewPower Holdings, formed by Houston-based Enron Corp (ENE.N) in 1999 to take advantage of utility deregulation in U.S. energy markets, said it expected to reach 1.2 million customers in 2001, and that net revenues would be between $530 million and $540 million. Customer count reached 368,000, ahead of the 340,000 the company had projected in an earlier plan. NewPower's shares added 20 cents to $8.40 on Wednesday on the New York Stock Exchange. Shares are off 52-week highs of $28.69, and above 52-week lows of $4.63. GERMANY: INTERVIEW-Enron lauds Germany's open power market resolve. 02/14/2001 Reuters English News Service (C) Reuters Limited 2001. ESSEN, Germany, Feb 14 (Reuters) - Germany's cartel office and economics ministry have shown an encouraging commitment to clamping down on energy network owners who blocked access for newcomers, U.S. energy giant Enron said on Wednesday. "The cartel office last week charged E.dis Nord over excessive grid access tariffs," said Paul Hennemeyer, who specialises in government and regulatory affairs at Enron's office in Frankfurt. "This will begin to send a signal to the market that these sorts of games have to stop and of course there's increasing pressure coming out of the ministry," he told Reuters during the E-world of energy conference and exhibition. E.dis, a subsidiary of major utility E.ON , has until March 8 to respond to charges its fees are more than 50 percent above the national market average. Hennemeyer said the cartel office was doing a good job, given it was badly resourced and with its role reduced to rule whether certain tariffs were anti-competitive on a case by case basis. The office cannot actually set tariff levels. Hennemeyer said a state regulator would be better placed to ensure competition, but the preferred reliance on voluntary agreements had created reasonable conditions for wholesale power markets since their liberalisation in April 1998. "If the German associations can extend these agreements to the retail market, they might be able to avoid regulation," he said. The situation was different in gas, which was deregulated in October 2000, but where market participants were dragging their feet over access terms, forcing the government to start working on its own network access decree. "I've made my bets that regulation in gas will come, hopefully in the right way," Hennemeyer said. "The networks are natural monopolies and the regulator should make sure the system is properly run, the commodity part is different and there should be competition, it should be up to supply and demand." "Either by design or by default, I see these things mixed up a lot when they are really two separate topics." GERMANY: German gas market regulation inevitable-Aquila. By Vera Eckert 02/14/2001 Reuters English News Service (C) Reuters Limited 2001. ESSEN, Germany, Feb 14 (Reuters) - A leading German energy trader said on Tuesday failure of German gas distributors and consumers to work out terms for market deregulation means political intervention is inevitable. "It's not a question of if, but when, the economics ministry will impose measures to force the market open," Joerg Spicker, managing director of Aquila Energy GmbH told Reuters during the E-world of energy conference and exhibition. "The experiment with negotiated, instead of regulated, market access in Germany, has failed. I think the customers are beginning to realise that they would fare better with a regulated system." Negotiations among the four associations for a new network agreement to come into force by the end of September 2001 (VV2) are still non-conclusive ahead of a top level meeting of the associations' presidents on February 21. The two sides, which maintain that Germany's fragmented market nature and consensual political tradition makes voluntary negotiations the best option, failed to agree on access terms to networks and storage and the priorities at times of bottlenecks. These would be the minimum requirements to start free competition. To date only a few short-term delivery contracts for industrial clients have been secured by independent, international traders such as Aquila, Enron and local firm Trianel, but these often have to be enforced by court orders or interference by the cartel authorities. "That's maybe the beginnings of a market, but you would not call it true competition," Spicker said. Aquila, which had won new business in southern Germany in the first few weeks of this year, was finding negotiations over point-to-point access with sometimes up to four pipeline owners challenging, given they had to be done within a short time period. QUIBBLING OVER PIPELINE VALUES Spicker, who attended closed-door meetings last week through Aquila's membership of the European Federation of Energy Traders (EFET), said, it was highly doubtful that a solution could be found on February 21 that would pass governmental and EU scrutiny. One of the most controversial points was that pipeline operators wanted to base charges on renewal costs of their facilities when many installations had long been written off, Spicker said. "We refuse to help pay for pipelines that have already enabled the incumbents to reap profits for many decades," he said. The economics ministry in his view was already drawing up terms for cost structures and for the obligation to publish rates and capacity utilitisation. Aquila is a subsidiary of the Aquila U.K. group which belongs to U.S. company Utiliticorp. UK: Goldman, Morgan Stanley top energy derivative trade. 02/14/2001 Reuters English News Service (C) Reuters Limited 2001. LONDON, Feb 14 (Reuters) - Investment banks Goldman Sachs and Morgan Stanley Dean Witter continued to dominate global oil derivatives trade last year, while U.S. energy companies were tops on power and gas products, an industry survey found. The survey was conducted by industry publications Energy & Power Risk Management and Risk of more than 1,000 banks, brokers, end-users and traders worldwide. Goldman Sachs took the lead in 10 categories, including Brent swaps and options as well as European jet fuel and gas oil swaps and options, the survey found. Morgan Stanley Dean Witter claimed its dominance mainly outside Europe, with the top spot for West Texas Intermediate (WTI) crude swaps and Dubai swaps and options, plus U.S. jet fuel swaps and options and gasoline swaps. The two banks also held another 13 second and third places in the survey, all in oil or oil products. Among brokerages for oil products, UK-based Intercapital Commodity Swaps led with seven top spots, including Brent crude swaps and options, followed by Starsupply and Prebon Energy, which both claimed four top places among the brokerages. On the power side, Enron Corp took pole position in eight categories versus six in last year's survey. They included NYMEX look-alike swaps and options, basis swaps and options and UK electricity swaps and options. El Paso Energy, which recently acquired Coastal, swept the North American electricity trading groups, including swaps and options for the West, Centre and East. Koch Energy Trading was deemed best for North American weather derivative swaps and options, the survey found. The polling took place between late November and mid-January. Self-nominating and anonymous responses were discounted and respondents were asked to comment only on products with which they had direct experience. Categories with an insufficient number of votes were excluded. Italy's ENI signs MoU to build power plant in Nigeria 02/14/2001 Agence France-Presse (Copyright 2001) LAGOS, Feb 14 (AFP) - The Nigerian subsidiary of Italian oil group ENI has signed a memorandum of understanding to build a 400 megawatt power plant in southern Nigeria, a spokesman said Wednesday. The multi-million dollar agreement was signed Tuesday by Nigeria's Power and Steel Minister Olusegun Agagu for the government and Antonio Viera, the managing director of Nigerian Agip Oil Company, company spokesman Tajudeen Adigun said. Viera told reporters at the ceremony he expected the two sides to finalise an agreement on the purchase by the national power company NEPA of the power produced by the plant within two weeks. The gas-fired plant, to be built in Kwale in Delta State and expected to cost around 350 million dollars to build, would be expected to come on stream by December 2003, Viera said. The power minister, Agagu, told reporters he was delighted that the two sides had reached this stage and said he was confident a final deal would be signed soon. "It will not take long before a power purchase agreement that is acceptable to all parties could come to be because most of what could constitute stumbling blocks have actually been addressed," he said. He praised ENI's subsidiary for moving ahead with the project where other companies - including US group Enron, Anglo-Dutch oil company Royal Dutch/Shell and US group ExxonMobil were still in talks on proposals. "Finally, we are on our way to actualising the first major independent power production through AGIP," he said. Agagu said the government was very concerned to build up power generation and improve transmission and distribution. "The federal government has put a lot of emphasis on the power sector being the driving force behind the economy," he said. Nigeria's state-run power company NEPA has under-performed for many years and is incapable of providing constant power throughout the country. President Olusegun Obasanjo has pledged an overhaul of the sector and promised to increase average power generated to 4,000 megawatts by the end of this year. The memorandum signed on Tuesday followed the signing of a memorandum in April last year to study the feasibility of the project. pcj/jlr Qatar, UAE Dolphin Gas Proj Deal Expected In Mar - Enron 02/14/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) DUBAI -(Dow Jones)- Qatar and the United Arab Emirates Offsets Group, or UOG, plan to sign a final agreement for the Dolphin gas project in mid-March, U.S. Enron Corp. Middle East General Manager Mac McClelland said Wednesday. Two years ago, UOG and Qatar's General Petroleum Corp. signed a statement of principle for the $10 billion Dolphin project, under which natural gas from Qatar's offshore North Field will be piped by sea to Abu Dhabi for onward delivery to Dubai and Oman. Last year, Offsets sold 49% of the project to TotalFinaElf SA (TOT) and Enron (ENE), which have been commissioned to implement the initial phase of the project, estimated at a cost of about $4 billion. McClelland said Enron is responsible for midstream and marketing while Totalfina will be in charge of upstream operations. The 365-kilometer pipeline from the Qatari capital Doha to Abu Dhabi is estimated to cost about $1.2 billion, $750 million-$800 million of which will be on the subsea pipeline, he added. McClelland said currently, it's economically feasible to pipe 2 billion cubic feet a day of gas through the pipeline but the long term plan is to send 3.2 bcf a day from Qatar to the UAE and Oman. He added that Enron will retain equity in pipeline. U.S. Exxon Mobil Corp. (XOM), which has a concession in the North Field, might get involved in supplying the additional amounts of gas in the future, he added. Qatar's Oil Minister Abdullah bin Hamad Al-Attiyah said earlier this week that a final agreement between Qatar and the UAE would be signed within weeks and that previous disagreements on the transfer price of the gas between the two sides had now been resolved. McClelland said Wednesday that marketing the gas in the region wouldn't be a problem. Also in the long term plans are possibilities to take the gas further east to India and Pakistan. Enron is already involved in a project which supplies gas from Abu Dhabi and Oman to an Indian power plant. First gas from Dolphin is targetted to reach Abu Dhabi by late 2004 or early 2005. About 1 billion to 1.5 billion cubic feet per day of Qatari gas would be consumed by utilities in Abu Dhabi and the remainder would be supplied to Dubai. Enron's McClelland said the Dolphin project and a natural gas venture in Saudi Arabia are two priority projects for the company in the Middle East. Enron is involved jointly with Canada's Occidental, in making investment proposals for Saudi Arabia's natural gas sector, a process which kicked off last year. He said Enron is looking into several new ventures in the region, such as a power swap between Syria and Turkey, gas distribution in the Omani capital, Muscat, and other opportunities in Jordan and Egypt. Enron is currently building a powerplant in Gaza in the Palestinian territories but the project has been on hold since October 2000, McClelland said. -By Dyala Sabbagh, Dow Jones Newswires; 9714 3314260; dyala.sabbagh@dowjones.com Dallas-Based Blockbuster's Net Loss Widens in Quarter Maria Halkias 02/14/2001 KRTBN Knight-Ridder Tribune Business News: The Dallas Morning News - Texas Copyright (C) 2001 KRTBN Knight Ridder Tribune Business News; Source: World Reporter (TM) Blockbuster Inc., the world's largest video store chain, posted stronger results from operations and continued to gain market share last year, while its fourth-quarter loss widened. The Dallas-based company's net loss was $24.6 million, or 14 cents a share, in the period ended Dec. 31, compared with a net loss of $6.8 million, or 4 cents, last year, the company said Tuesday. Excluding goodwill amortization, earnings of 22 cents a share were up 10 percent from last year and exceeded estimates. Wall Street analysts had expected cash earnings of 20 cents a share, according to a survey by First Call/Thomson Financial. The amortization of almost $6 billion in good will was left over on Blockbuster's balance sheet from 1994, when Viacom bought the company. Blockbuster is a publicly traded subsidiary of entertainment giant Viacom Inc., which owns 80 percent of the chain. John Antioco, Blockbuster's chairman and chief executive officer, said the company's market share increased last year to 36 percent of U.S. video rentals, up from 32 percent in 1999. The company is poised to end this year at 40 percent, he said. Total revenue was up 12.1 percent to $1.34 billion in the fourth quarter from $1.20 billion last year. Same-store sales increased 7 percent. Blockbuster also said it has sold more than 100,000 DirecTV Systems since September. In June, Blockbuster will begin co-branding DirecTV's pay-per-view service, Mr. Antioco said. The company also said that Blockbuster's video on demand tests are under way with an Enron Corp. subsidiary in Seattle, Portland, New York and a Salt Lake City suburb. This year, Blockbuster said, it plans to open 200 to 250 company-owned stores, about half the number of stores it opened last year. It plans fewer stores because competitors have slowed store growth. Blockbuster operates 7,700 stores throughout the United States, Europe, Asia and Australia. The company's stock price gained 4 cents a share to close at $11.72 on the New York Stock Exchange. NEWS DEMAND A DEAL Blockbuster pacts for PPV, VOD rights to U pix PAUL SWEETING 02/14/2001 Daily Variety 6 Copyright 2001 Variety, Inc. WASHINGTON --- Blockbuster Entertainment is close to a deal with Vivendi Universal that would give the retailer its first agreement with a major studio for pay-per-view and video-on-demand rights to movies. Blockbuster threatened to withhold two of this week's new Universal releases from its store shelves Tuesday if Vivendi Universal didn't agree to the PPV terms. In a conference call with analysts Tuesday, the same day its favorable earnings report was released, Blockbuster chairman John Antioco said the vidtailer had reached a verbal agreement with Vivendi U late Monday, covering homevideo, pay-per-view and video-on-demand rights to Universal films. The vidtailer has been seeking those additional rights for several months, as it struggles to expand beyond its video rental base. Company recently launched a video-on-demand system in conjunction with Enron in four cities but up until now had been unable to offer its 700 subscribers any new releases from the major studios. Instead, Blockbuster had to rely on a few hundred indie films it owns. The vidtailer is also slated to launch a 42-channel pay-per-view service with DirecTV in June. Recently, however, Antioco signaled Blockbuster's new get-tough attitude with the studios, saying that the chain would not renew any of its video revenue-sharing deals with the studios unless those deals also covered PPV and VOD rights. Those deals have proved highly beneficial for the studios, and, along with Blockbuster's 40% share of the U.S. video rental market, gives the vidtailer considerable leverage. Blockbuster and Universal have been operating without a formal revenue-sharing agreement since October, when their previous deal expired. "As late as yesterday afternoon, we had no deal" with Universal, Antioco said Tuesday. "As a result, we had decided that we would only purchase Universal's retail (i.e., sell-through) priced product, which, by the way, includes all of their major hits. We also decided we would not stock the titles 'Bring It On' and 'Rocky & Bullwinkle,' which have a street date of today." At that point, Antioco said, the companies reached a verbal agreement to renew their revenue-sharing agreement and to grant Blockbuster the additional rights it sought. The chain will also now stock the two titles in all its stores. Blockbuster officials declined to disclose whether the new deal covers all Universal product or when the new rights would take effect. If the deal parallels the companies' rev-sharing agreement, however, it would likely cover all new U releases. Blockbuster would gain access to the PPV and VOD rights during the existing windows for those delivery systems, generally 30-90 days after homevideo release. Universal execs had no comment. Profits up for Blockbuster Word of the U deal comes on the heels of a strong fourth quarter for Blockbuster. Cash earnings for the video segment grew 31.6% for the quarter to $49.6 million, on the strength of a 7% increase in worldwide same-store sales. Overall revenue for the quarter was up 12.1% to $1.34 billion, paced by a 12.5% increase in rental revenue. For the year, cash earnings from the video segment (excluding new media) grew 55.9%, to $154.5 million. Full-year cash flow (earnings before interest, taxes, depreciation and amortization) for the video segment grew 13.0% to $588.2 million. For the quarter, cash flow grew 15.2% to $168.3 million. Antioco said that Blockbuster is exploring a store-within-store concept to focus on a broader range of home entertainment products. The retailer said it sold more than 100,000 DirecTV systems in its 3,800 stores in 2000. For each DirecTV system it sells, the vidtailer receives a portion of the customer's subscription fees to the satcaster, plus a cut of all PPV revenue from that subscriber. Mirant of US plans power plant bid. 02/14/2001 Business Times (Singapore) © 2001 Singapore Press Holdings Limited It's open-minded about going it alone or with partners SINGAPORE'S long-awaited Big Bang for the power industry is reviving foreign interest in the industry, which had waned in the wake of the Asian financial crisis. One company displaying strong interest is Atlanta-based Mirant Corporation. Frederick Kuester, Mirant's managing director for Asia-Pacific, said Mirant wants to bid for one of the three power plants the Singapore government wants to privatise later this year. The three power plants are: PowerSeraya (2,800 MW), PowerSenoko (2,500 MW) and the newest Tuas Power which has a capacity of 1,900 megawatts. Other foreign companies which have indicated interest in the power plants include Mission Energy and Enron International, which have lined up local heavyweights to work on the bids. In an interview with BT yesterday, Mr Kuester said Mirant has been studying Singapore's privatisation programme and will take part in the bidding when the invitations are issued. "We know the rules will be fair and transparent. We have been talking with the authorities and also with potential partners," he said. An added attraction for foreign investors is the likelihood the government would allow them to own 100 per cent of the power plant, giving them a freer hand. Mr Kuester indicated that Mirant has been sounding out potential local partners and is still open-minded on whether it would go it alone or with partners. According to him, Singapore's installed capacity exceeds demand by 50 per cent, giving operators a margin to hedge in the futures market, unlike in California. Mirant, listed on the NYSE in September 2000, reported net income of US$359 million (S$627 million) last year. FEDERAL POWER MIN GIVES PRESENTATION TO INDIAN CABINET 02/14/2001 Asia Pulse © Copyright 2001 Asia Pulse PTE Ltd. NEW DELHI, Feb 14 Asia Pulse - Indian Cabinet today discussed in detail the power situation in the country and the reforms in the sector. The discussion took place after the federal power minister Suresh Prabhu gave a presentation on the power sector reforms. While refusing to divulge any details of the presentation, the federal parliamentary affairs minister Pramod Mahajan said it focussed on the power situation. To a query whether the Enron Issue also came up for discussion, the minister said it was only a small part of the overall discussions. (PTI) 14-02 1309 ASIA-PACIFIC: No let-up for Indian electricity Financial Times; Feb 14, 2001 By KHOZEM MERCHANT Enron, the US power company, has received Rs740m (Dollars 16m) from India's Maharashtra State Electricity Board to settle an electricity bill whose non-payment forced Enron last week to call in a central government guarantee. But the pressure on the Bombay-based utility continued as a deadline on a state guarantee exercised by Enron lapsed last night without the payment of a further Rs1.54bn in overdue bills incurred in December. Enron may now invoke a guarantee from New Delhi for the second time in two weeks. Enron officials indicated privately that the company would not be pressing the central government unless the situation worsened. For Enron, this means two months of unpaid bills - which "exceeds our comfort level by one month", one official said. That threshold may be breached on February 25, the deadline for the payment of January's bill of Rs1.12bn. Maharashtra State Electricity Board was assisted in its payment of the outstanding Rs740m November bill (and an interim payment of Rs50m) by the state of Maharashtra. Both MSEB and the local government, buoyed by the anger of local politicians at what they regard as high tariffs, have delayed payments for power generated at Enron's Dabhol plant near Bombay for more than a year. Enron believes - and MSEB privately accepts - that the situation would improve if the utility were able to improve collection of its own bills. Copyright: The Financial Times Limited Cabinet okays Navy land transfer to Andamans The Times of India News Service 02/14/2001 The Times of India Copyright (C) 2001 The Times of India; Source: World Reporter (TM) NEW DELHI: The Cabinet on Tuesday approved the transfer of 200 acres of land being held by the Indian Navy at Hutbay, Little Andaman, to the Andaman and Nicobar administration free of cost. The land is part of the 410 acres held by the Navy in the area, parliamentary affairs minister Pramod Mahajan said after the Cabinet meeting. The land will be used by the Andaman and Nicobar administration to re-settle tribals from Car-Nicobar, Mahajan said. The transfer of the land is subject to the condition that the Andaman and Nicobar administration acquire 70 acres of private land co-located with the Port Blair air field for expansion of the run-way and transfer it to the Navy on a no-profit, no-loss basis. The 410 acres of land was given to the Indian Navy by the Andaman and Nicobar Islands free of cost and part of it at Hutbay was being used for a high frequency direction finder (hf/df) station and radar station. The Cabinet also approved the signing of an aviation safety promotion agreement with Russia, under which both sides would conduct technical assessments to understand their standards and systems in areas such as air-worthiness, environmental testing, maintenance facilities, approval of flight operations and approval of aviation training establishments. Mahajan said if the assessment by the two sides led to the sense that standards, systems, rules, procedures and practices were compatible, then each side would agree to accept a certification of the other on a reciprocal basis. The agreement was a follow-up of the setting up of Indo-Russian Working Group for promoting cooperation in civil aviation finalised during the meeting of the Indo-Russian Commission on trade, economic, scientific and cultural cooperation held here in January last year. While these two decisions as well as the one extending the life of the commission examining the Constitution took just 15 minutes, the rest of the meeting was spent in discussing in detail the power situation in the country and the reforms in the sector. The discussion took place after power minister Suresh Prabhu gave a presentation on the power sector reforms. The slide-presentation and the paper on the power scenario in the country provides an insight into the various mechnanisms being put in place for augmenting power supply. To a query whether the Enron issue also came up for discussion, Mahajan said it was only a small part of the overall discussions. Equity dilution, not divestment in Maruti The Times of India News Service 02/14/2001 The Times of India Copyright (C) 2001 The Times of India; Source: World Reporter (TM) NEW DELHI: The government on Tuesday decided to dilute its half-ownership of Maruti Udyog Ltd through a new equity-rights issue, to which it will waive its right to subscribe, in favour of financial institutions (FIs). According to a Cabinet Committee on Disinvestment (CCD) decision, once this is done, the FIs may do what they will with their new share -sell it to the other half-owner, Japan's Suzuki Motors, sell it in the market, or keep it. All this is contingent on the prior, written consent of Suzuki; a 1992 agreement between the two partners compels each to take the other's prior permission before doing anything about equity ownership. ``We aim to do everything (only) in full agreement with Suzuki,'' said Disinvestment Minister Arun Shourie; he stressed the point more than once. Suzuki will, the plan presumes, fully exercise its proportionate right to the new equity issue. ``If they (Suzuki) agree, we expect the entire process to be completed by September,'' Shourie said. The invitation to Suzuki to start negotiating details will be issued in a couple of days. All the details - the quantum of the rights issue, the valuation and everything else - will be settled through negotiation between Suzuki and the government. The CCD decided that the valuation, if Suzuki agrees, should be done by three bankers of international repute -- one to be decided by it, one by Suzuki and the third by mutual consent. ``The entire basis for valuation, indeed, the entire process at each stage will be made completely transparent,'' Shourie said. This decision was one of the five options before the CCD, the outcome of a series of discussions between a panel of Union government secretaries and Suzuki. In addition, on Monday, the secretaries had another detailed discussion with financial institutions, on what would be needed if the rights issue was cleared. ``Suzuki's main concern (in the talks already held) was to ensure we don't disinvest our share in favour of one of their competitors,'' Shourie said, adding it was a legitimate wish. The CCD, he said, had decided on doing it this way to ensure two things. One, to ensure Maruti retains its competitive strength. Two, to ensure maximum valuation of the government's present equity in it. The CCD decision aims at ensuring both, he said. In another development, the Union Cabinet discussed the power situation in the country and the reforms in the sector. The discussion took place after power minister Suresh Prabhu gave a presentation on the power sector reforms. The slide presentation and the paper on the power scenario in the country provide an insight into the various mechanisms being put in place for augmenting power supply. While refusing to divulge any details of the presentation, Parliamentary Affairs Minister Pramod Mahajan said it focussed on the power situation. To a query whether the Enron issue also came up for discussion, the minister said it was only a small part of the overall discussions. Power reforms and regulations Kirit Parikh 02/14/2001 Business Standard 11 Copyright © Business Standard Power shortages, scheduled power cuts and unscheduled brownouts have plagued the country for many years. The process of privatisation and reforms was begun in 1992 to solve these problems. Yet eight years later the situation is, if anything, worse than before. Why is it? What have we done? Why has not it worked? What should we do? It is obvious that power shortages imply lack of capacity to generate power. In turn, this reflects inadequate investment in building power plants, transmission and distribution network, or fuel production and transport capacity. It could also reflect poor operation of existing capacities. In mid-eighties when Rajiv Gandhi became the Prime Minister, he concentrated on the latter and emphasised improving load factor of thermal plants. This worked for some time but the slack was more or less exhausted by early nineties. Today, the average load factor on thermal plants has reached 68 per cent, which is very good. Since then despite some progress in further raising load factor, lack of adequate investment has been the main reason for power shortages. Over the last decade, installed generating capacity has grown by 50 per cent, whereas power generation has grown by 130 per cent. Inadequate investment was mainly the result of the inability of state electricity boards (SEBs) to generate financial surpluses. The main reasons for the financial sickness of SEBs are poor pricing of electricity and pilferage. Most SEBs subsidise highly agricultural consumers and some also domestic consumers. All have high losses due to pilferage of power disguised as transmission and distributions (T&D) losses and also as agricultural consumption. This is the fundamental reason for power shortages. Unfortunately, instead of tackling this main problem, successive governments have tried to skirt around it. Their efforts at reforms have more or less failed. What have they done and why have they failed? The first attempt was to attract private investors to set up generating plants. The power sector was opened up for private, both domestic and foreign, power generators in 1992. Despite massive interest of private investors the progress has been miniscule. The private generators were required to sell only to the SEBs. When one's only customer is financially sick, one would think twice before getting into the business. The difficulties Maharashtra SEB is facing in meeting Enron's bills would make private producers think even more before they invest. In fact, unless the financial sickness of the SEBs is taken care of, private power generators are even less likely to come now. Once the reluctance of private generators was perceived, the government thought of mega-projects. There were and are to be large projects, which would supply power relatively cheaply. To reduce the price of power, the government offered concessions such as no customs duty and longer tax holiday. Thus, the government provides the subsidy up front. But here also the unreliability of SEBs as customers which may not honour bills is a problem. To get around this, a new public corporation called Power Trading Corporation (PTC) is envisaged. This will buy all the power from a mega-project, pay the bill (how?), and in turn sell the power to different SEBs. How would the PTC collect its dues from SEBs? If it cannot, presumably the central government will foot the bill. The sick SEBs would have an even greater incentive to default on payment to a public corporation than to a private generator. This is obvious as today the various SEBs together owe public sector corporations such as NTPC, Coal India, NHPC, etc Rs 27,000 crore. Pricing and pilferage reforms are inescapable. If we delay these reforms, even good firms like NTPC would be dragged down by the sick SEBs. The chief ministers agree in New Delhi to raise tariff for agricultural consumers, but as soon as they return to state capitals, they develop cold feet. Only a handful of chief ministers have made some progress here. To force state governments to raise the price of power, the idea of state electricity regulatory commission (SERC) was thought of. SERCs are to be independent statutory bodies and are to prescribe power tariffs. If a state government wants so subsidise any particular set of consumers, it has to give direct budgetary support to the SEB. This roundabout way has not yet produced substantial result and progress is understandably slow as the SERCs are appointed by state governments. Only three state SERCs had issued tariff orders by the end of June 2000. To deal with pilferage, i.e. theft of power, should be easy. Unfortunately, it is not, as some of the large staff of SEBs collude in this theft. Thus, it was felt that if distribution is privatised, the problem of pilferage can be solved. Naturally, the SEB unions oppose such moves. The progress has been miniscule. Only Orissa has fully privatised distribution. Some states have privatised small parts of their system. The few cases, where distribution is privatised, customers have not been happy as they are asked to pay higher price. They pay it but do not see any improvement in the reliability of quality of supply. If reforms are done properly, consumers who are not subsidised at present should benefit from them. Reforms should improve the efficiency of the system, reduce costs and hence price for such consumers. How should we carry out reforms, which have such effects? Privatisation of distribution is the necessary first step. However, it should be done in a way that does not turn the consumers away from reforms. For this, we should set up a process which ensures that consumers are not required to pay any more for the inefficiency of the system. This requires the following: First of all we should work out the minimum cost at which an efficiently working power system, without pilferage, would supply power to different consumers. Consumers should be informed about it and made to accept that they have to pay such a price. Next, SERCs should not permit anyone to charge a price higher than the optimal price or the present price, whichever is higher. If the present price is higher, it should be brought down to optimal level in a time bound schedule over two or three years. The private distribution company should be given a plan of eliminating pilferage over a period of two years as per an agreed schedule. The state should compensate the private distributor for pilfered power only as per the agreed schedule. If the private firm eliminates pilferage at a faster pace, it would make extra profit. If it delays, it loses money. That is its incentive. Such a scheme makes privatisation of distribution acceptable to consumers who should see better, cheaper power with higher efficiency. So deal with the main problem first. DPC not to invoke central guarantee Our Corporate Bureau Mumbai 02/14/2001 Business Standard 1 Copyright © Business Standard The Enron -promoted Dabhol Power Company (DPC) has decided not to invoke the Central government counter-guarantee for now, although the Maharashtra government failed to pay the Rs 152 crore bill for December, 2000 on Tuesday. DPC had invoked the state government guarantee last week when the Maharashtra State Electricity Board failed to pay the bill. The last date for paying the bill as per the terms of the state government guarantee was Tuesday. "This is not a double default situation. They have already paid the November bill and only the December bill is pending. Consequently, we have decided not to invoke the counter-guarantee for the moment," said Neil McGregor, CEO and president of DPC. When queried further, he clarified that this did not mean that the counter-guarantee would not be invoked at all. "The next key date is February 25, when the January 2001 bill becomes due," he added. It is also learnt that DPC does not want to embarrass the state government at a time when negotiations are due to be held with the Godbole panel. The Maharashtra government last week announced the formation of a panel under former Union home secretary Madhav Godbole to review the controversial power project. Meanwhile, DPC has said in a press statement that it has received the outstanding amount of Rs 74 crore towards the November bill. "The receipt of this payment as well as the formation of the review committee are very positive signals". Enron saga: Powered by govt generosity Rajesh Ramachandran 02/14/2001 The Times of India Copyright (C) 2001 The Times of India; Source: World Reporter (TM) NEW DELHI: The tariff structure of Enron's Dabhol power project was conceived in such a manner that it was inevitable that the company would invoke its counter-guarantee against the Maharashtra and Union governments. The Shiv Sena-BJP combine came to power in Maharashtra in 1995 on the slogan of throwing Enron into the Arabian Sea. Soon after, it cancelled the project. Later, it renegotiated the deal with Enron and even gave an assurance for the second phase. Meanwhile, the 13-day Vajpayee government approved the extension of the government of India's counter-guarantee on May 27, 1996. The first counter-guarantee, given on September 15, 1994, was for Phase-I of the Dabhol project with a capacity of 695 mw. After the SS-BJP government cancelled the project, the then finance secretary Montek Singh Ahluwalia told the parliamentary sub-committee on fast-track projects that ``as of today, if the power purchase agreement (PPA) is being revised, that means the counter-guarantee is not effective''. When Ahluwalia said this in 1995, the project was being cancelled only to be re-negotiated again after Enron's Rebecca Mark visited Bal Thackeray. But, Ahluwalia had held that if the PPA is revised, the earlier counter-guarantee would not hold good. Yet, the Union power minister told Parliament in May 1996 that the counter- guarantee held good. Thus, a member of the standing committee gave a breach of privilege notice against Ahluwalia for misleading the House. The finance ministry, on behalf of Ahluwalia, replied to Parliament thus: ``While the government of Maharashtra had announced its decision for cancellation of the Dabhol power project, the PPA between MSEB and the company was not terminated.'' That is, despite the project being cancelled, the agreement to purchase power from the cancelled project is valid and hence the counter-guarantee stands. It was then pointed out by the member who had moved the breach of privilege notice that the contract was repudiated by the Maharashtra government. After re-negotiation, the project itself was revised. There was a change in the capacity of the project, the fuel to be used, the capital cost, tariff and change in scope after inclusion of phase II of the project which was not included earlier. In reply, Ahluwalia submitted that the counter-guarantee had provided for amendments to be made to the PPA, subject to prior written approval by the Central government. Thus, if Jaswant Singh as finance minister had not approved the extension of the earlier counter-guarantee, it would not have been valid insofar as the amendments to the PPA were concerned. So the onus of the counter-guarantee rests with the 13-day BJP government, which did not wait for a review before it approved the extension of the earlier counter-guarantee. All this was done within 13 days when the government had not even won a vote of confidence in Parliament. Again it was not a fresh counter-guarantee but the extension of the earlier one despite the Maharashtra government's repudiation, its renegotiation with Enron and the changed physical parameters of the project. It is interesting to note what Jaswant Singh as chairman of the committee had said about the counter-guarantee a year before his government gave the approval for extension: ``Counter-guaranteeing for any project is uncalled for since several
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