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Enron Mail |
THE HINDU BUSINESS LINE, Thursday, November 22, 2001
Dabhol agrees to due diligence: BSES chief=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE ECONOMIC TIMES, Thursday, November 22, 2001 DPC sponsors meet in US next week to discuss due diligence (Carried only by= the online edition) ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE ECONOMIC TIMES, Thursday, November 22, 2001 'Enron may sell Dabhol at half price', WASHINGTON (Carried only by the onli= ne edition) ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE ECONOMIC TIMES, Thursday, November 22, 2001 Enron crisis deepens, bankruptcy looms (Carried only by the online edition) ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE ECONOMIC TIMES, Thursday, November 22, 2001 Enron closes a decade low at $7=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE FINANCIAL EXPRESS, Thursday, November 22, 2001 Unprecedented defence ties on way: Blackwill ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE FINANCIAL EXPRESS, Thursday, November 22, 2001 Fitch thumbs down to India currency ratings Similar story also appeared in the following publication: THE INDIAN EXPRESS, Thursday, November 22, 2001 Fitch downgrades India's currency ratings ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE HINDU BUSINESS LINE, Thursday, November 22, 2001 Dabhol agrees to due diligence: BSES chief=20 THE Enron-promoted Dabhol Power Company (DPC) has agreed to the due diligen= ce of its 2,184-MW project, Mr R.V. Shahi, Chairman and Managing Director, = BSES Ltd, has said. The DPC management has agreed to facilitate the due dil= igence but has asked us (Tata Power and BSES Ltd) to enter a confidentialit= y agreement with the company, which is only fair, Mr Shahi told newspersons= on the sidelines of a seminar here on Wednesday. He said Tata Power and BS= ES had received a draft of the confidentiality agreement from DPC soon afte= r they submitted their proposal to buy the power project, at the Singapore = meeting. An issue like valuation and share transfer cannot be done unless t= he buyers get to examine details. Due diligence is a pre-requisite for the = sale process to continue, Mr Shahi said. He said the companies would sign t= he confidentiality clause within the next two-three weeks while the due dil= igence process will take about six-eight weeks. Lenders to DPC, foreign spo= nsors, prospective buyers, the Centre, and other interested parties had met= in Singapore earlier this month to discuss the sale of the company. The DP= C spokesperson declined comment on the matter. Next week, DPC officials are= scheduled to meet its other offshore sponsors General Electric and Bechtel= which hold 30 per cent stake each in DPC, to discuss the sale of the asset= .=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE ECONOMIC TIMES, Thursday, November 22, 2001 DPC sponsors meet in US next week to discuss due diligence (Carried only by= the online edition) SENIOR officials of energy major Enron Corp, Bechtel and GE, the three for= eign sponsors of the troubled Dabhol Power Company, will meet in Houston ne= xt week to take a decision on whether to proceed with the proposal of due d= iligence to be carried out by city-based power utilities, the Tata Power Co= mpany and BSES. "The offshore sponsors of DPC have not yet given their go-a= head for potential buyers of their 85 per cent equity to commence due dilig= ence. They are scheduled to meet before this month-end to decide their next= step regarding the Dabhol project," sources close to the sponsors said her= e on Tuesday. When contacted, DPC spokesperson declined to confirm or deny = the development. Sources said the sponsors' decision would be conveyed to t= he Industrial Development Bank of India-led consortium of Indian lenders by= first week of December. "Contradictory to recent announcements by Indian l= enders and the prospective buyers, the ability of any party to sign the con= fidentiality agreement and proceed with due diligence will, after all, depe= nd on the three foreign sponsors' approval," they pointed out. Both Tatas a= nd BSES would need their approval and cooperation to commence due diligence= , sources emphasised. Tata Power Ltd managing director Adi Engineer confirmed they were yet to co= mmence DPC due diligence. "We are waiting to sign the confidentiality agree= ment with DPC sponsors after which Tata Power Ltd would take at least a few= months to complete the process," Adi Engineer said. Sources termed the mee= t as "critical" in deciding the future course of events in resolving the is= sues surrounding the $3-billion power project. "Enron, GE and Bechtel had r= aised the issue of continuing costs of fundings during the three-day marath= on Singapore meet, risen as a result of the Indian and foreign lenders' ref= usal to disburse additional funds," they informed. The proposed due-diligen= ce was expected to take another two-three months, sources said, adding situ= ation had become "more fragile" with Maharashtra State Electricity Board no= t drawing power since May 29 and lenders stopping disbursements to the 2,81= 4-mw project March onwards. "This has resulted in the beleaguered DPC also = being unable to meet its loan repayment commitments in September and Octobe= r," they added. During the Singapore meet, the three foreign sponsors had a= lso expressed their grave concern about bearing additional expenses as the = due diligence process would take its own time and incur significant costs, = only adding to deterioration of assets and their cost burden, the sources s= aid. Yesterday, BSES Ltd chairman and managing director R V Shahi had announced = that the company was likely to complete the due diligence of the Dabhol pro= ject by January end next year. Shahi said BSES has returned the draft of co= nfidentiality agreement with comments to DPC. BSES would appoint three sepa= rate consultants for doing technical, financial and legal due diligence alo= ng with an internal task force to do parallel ground work, he said. (PTI) ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE ECONOMIC TIMES, Thursday, November 22, 2001 'Enron may sell Dabhol at half price', WASHINGTON (Carried only by the onli= ne edition) EMBATTLED US power major Enron may be forced to sell its stake in the Dabho= l power plant at around half a billion dollars instead of the asking price = of a billion dollars, a report here said. Tata Power and BSES, the Indian b= idders for Enron's stake in the 2184 mw Dhabol Power Plant were reportedly = willing to pay only half of the asking price which stood over a billion dol= lars, the New York Times reported. If the lenders and prospective buyers ad= opt a take it or leave it line, Enron may have little choice but to accept = their offer and swallow a huge loss on a controversial project which one gl= eamed with promise, it said. "It is bound to be a distress sale," one banke= r told the paper. Though Enron's chairman and chief executive Kenneth L Lay= was earlier quoted as saying that India would have to face economic sancti= ons if the government did not create a favourable climate for the sale of E= nron's stake, the paper said "Enron now will find little lobbying traction = in either Washington or New Delhi". "The coalition-building diplomacy of th= e war in Afghanistan makes it unlikely that the Bush administration would a= gree to press India on Enron's behalf," the paper said.( PTI ) ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE ECONOMIC TIMES, Thursday, November 22, 2001 Enron crisis deepens, bankruptcy looms (Carried only by the online edition) The crisis of confidence ravaging cash-strapped Enron deepened on Wednesday= amid mounting concerns that a proposed rescue by rival Dynegy could fall t= hrough, threatening the energy giant with bankruptcy. While the Houston-bas= ed energy giant said it secured the remaining $450 million of a new $1 bill= ion credit line and pushed back the deadline for repaying a $690 million de= bt, its shares fell a further 28 per cent, after falling 23 per cent on Tue= sday. "If Dynegy steps away entirely from the merger, Enron's credit situat= ion seems untenable with a bankruptcy filing highly possible," rating agenc= y Fitch Investors said. UBS Warburg analyst Ron Barone said, "Bankruptcy wo= uld not be out of the question if the merger fell through or ran into obsta= cles." "We believe the odds of Enron incurring a material adverse change on= its operations is soaring," Barone said in a research note, saying that Dy= negy may invoke clauses allowing it to walk away from or alter the terms of= the $9 billion agreement. In a statement, Enron said it was in feverish ta= lks with its other lenders to restructure its debt obligations and reaffirm= ed its commitment to the Dynegy deal. "We continue to believe that this mer= ger is in the best interests of our shareholders, employees, and lenders," = Enron chairman and chief Executive Ken Lay said. JP Morgan Chase vice chair= man James Lee said in the same statement that Chase believes its interests = and those of Enron and its other primary lenders are aligned, and that the = bank would "develop a plan to strengthen Enron's financial position up to a= nd through its merger with Dynegy." SHARES HIT 1989 LEVELS Enron's shares fell $1.98, or 28 per cent, to close at $5.01. It was the mo= st actively traded issue on the New York Stock Exchange for the second day = in a row. The shares had dipped as low as $4.58 earlier in the day, rebound= ing slightly after Enron's announcement. Accounting for stock splits, that = is the lowest Enron has been since February 1989. Dynegy shares were off $1= .94, or 4.65 per cent, at $39.76. Dynegy Chairman and Chief Executive Offic= er Chuck Watson said he is encouraged by the new loan and debt extension. H= e said in a statement that Dynegy was working to "accelerate the regulatory= approvals required to complete the merger". Watson said ChevronTexaco, whi= ch owns 26 per cent of Dynegy, reiterated its "full confidence" in Dynegy's= ability to complete the merger. Privately, analysts were calling the odds = of success lower since Enron made a filing with the Securities and Exchange= Commission on Monday alerting investors to its credit crunch. Most analysts interviewed by Reuters called the chances even, where earlier= they had called odds of success at 60-70 per cent. However, one analyst sa= id he thought emotion was driving the current stock moves, and that it come= s despite three powerful factors in favor of the deal. "The bottom line, En= ron needs this to happen, Dynegy wants this to happen, and ChevronTexaco is= supportive of it happening," Credit Suisse First Boston analyst Curt Laune= r said. Goldman Sachs downgraded Enron and Dynegy to market perform, and to= ok both off its recommended list. Goldman said the cash infusion from Dyneg= y -- $1.5 billion -- "appears inadequate to restore the confidence of Enron= customers." Enron's trading partners, now more publicly than before, on Tu= esday said they were treading carefully. "We've been scaling back for some time, but we're still dealing with Enron.= Everyday, our credit people are watching," said Al Butkus, a vice presiden= t with Kansas City-based Utilicorp United.The trading business, Enron's cro= wn jewel and the part most coveted by Dynegy, relies on volume for profitab= ility, and Enron has said it was possible that the lower volumes would hamp= er fourth-quarter earnings. One indicator of Enron's shape was the fact tha= t its bonds are now being quoted by price, like junk bonds, rather than by = how much extra yield they carry over US treasuries, like investment-grade b= onds. The company's 6.4 per cent notes maturing in 2006 and 6.75 per cent notes m= aturing in 2009 were respectively bid Wednesday afternoon at 62 and 60 cent= s on the dollar, each down from the high-60s on Tuesday. Their yields to ma= turity were a respective 19 and 16 per cent. Its 20-year zero-coupon conver= tible bonds traded Wednesday at just over 34 cents on the dollar, down from= 38 cents on Tuesday. ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE ECONOMIC TIMES, Thursday, November 22, 2001 Enron closes a decade low at $7=20 THE LATEST negative disclosures from Enron on Tuesday speared its stock pri= ce, which crashed to a decade low after new debt problems and an earnings r= evision emerged a day earlier. Shares of Enron closed down $2.07, or 22.8 p= er cent, at $6.99 on the New York Stock Exchange, after touching $6.55 duri= ng the day -- a low not seen since May 1991. Enron was far and away the day= 's most active stock, with more than 62.8 million shares changing hands. Vo= lume was more than double the second most active issue, Xerox Corp. Meanwhile, credit rating agency Standard & Poor's said it may again cut the= Houston company's BBB-minus rating, which could trigger those debt payoffs= . But the agency said Enron's liquidity issues were unlikely to derail its = merger with smaller cross-town rival Dynegy, announced November 9. "This is= as high a high-wire act as I have ever seen," analyst John Olson of invest= ment house Sanders Morris Harris said. "If this merger is to survive, equit= y investors will need to have a reason to buy the stock and their confidenc= e will need to be restored, because the equity investor has been leading th= e way down." Enron's hellish Tuesday on the market came after the company m= ade new disclosures in a US Securities and Exchange document, filed after t= he market closed on Monday. Most pressing was news that Enron has until Nov= ember 26 to put up $690 million in collateral against a debt to a partnersh= ip. Otherwise, the partnership could begin liquidating assets, including a = Brazilian gas company which Enron plans to sell to raise $250 million. In t= he SEC filing, known as a Form 10-Q, Enron said it was suffering a decrease= in trading volumes, particularly in longer-term deals. TRADING VOLUME DOWN Since the trading business -- Enron's crown jewel and the segment most cove= ted by Dynegy -- is low-margin, volume drives its profitability. It is too = early to tell what effect the lower volumes would have on future profitabil= ity, Enron said, but analyst Andre Meade of Commerzbank Securities said Dyn= egy will watch the volume drop carefully. "If it has a long-term effect, it= will definitely impact the value Dynegy will put on this business," he sai= d. Dynegy gave a limited response when asked if it was concerned about lowe= r volumes, and whether it was aware of the $690 million debt before it made= its deal to acquire Enron. "We are in due diligence and Enron's 10-Q is a = part of that process," Dynegy spokesman John Sousa said. Meade said the filing yet again showed Enron's penchant for making disclosu= res bit-by-bit. Of note was its latest downward revision of its third-quart= er earnings, he said. "The restatements are coming out piecemeal as they fi= nd them, and my guess is they don't know the full extent. We think further = revisions are likely," Meade said. One analyst who follows Enron said the S= EC filing painted a darker picture of the company's cash position, given th= at it had $2.3 billion on hand as of Nov. 16. "It shows that the cash drain= on the company looks to be very significant," said the analyst, who asked = not to be identified. Standard & Poor's said Enron currently has about $1.5 billion in cash, but = that follows an infusion in recent weeks of $1.5 billion from the Dynegy me= rger, $550 million in loans secured by pipeline assets, and $3 billion from= its revolving credit lines. Another $450 pipeline-backed loan is expected = in a day or two, and Enron said it expects $500 million of private equity i= nvestment plus $800 million from asset sales. Enron owes $9.15 billion by t= he end of next year, and its total liability for debt and other obligations= is $16.86 billion, according to the SEC filing. Its merger with Dynegy is = expected to close by the third quarter of 2002, raising the possibility tha= t an Enron without investment-grade credit might not have the liquidity to = survive that long. Enron acknowledged as much in the SEC filing, stating starkly that it would= be unlikely to "to continue as a going concern," if a credit rating cut tr= iggers the early payoff of $3.9 billion in debts to partnerships to which i= t belongs. Enron said that if its rating were cut, it would work out other = payment arrangements. S&P said a similar effort being undertaken in the cas= e of the $690 million debt will likely be successful "given the alignment o= f the interests between Enron and the banks." Enron spokesman Vance Meyer s= aid the company had received verbal indications that the deadline on that d= ebt was going to be extended, but it details had yet to be worked out.( REU= TERS ) ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE FINANCIAL EXPRESS, Thursday, November 22, 2001 Unprecedented defence ties on way: Blackwill US envoy Robert D Blackwill has said, "conclusive acceleration" of Indo-US = defence cooperation is progressing, "in an unprecedented way". Mr Blackwill= listed, "joint exercises, education, intelligence, civilian nuclear safety= cooperation, a joint cyber terrorism initiative, and military to military = cooperation", as areas where the two countries will be engaged in during a = flurry of visits over the next 2-3 weeks. This includes chief of US Pacific= command Admiral Dennis Blair and US under secretary of defence Douglas Fei= th. Mr Feith is the third senior-most official at the Pentagon. Mr Blackwil= l also made direct references to "sale of arms" and "spares", as areas whic= h will see future cooperation. He was speaking at the Foreign Correspondent= s\' Club here. Even as he read out, "an ennumerative list of strategic coop= eration in the months and years ahead," the envoy cautioned that won't give= "a flat promise" on such matters. "Fundamentally, it is for both sides to = earn each other's trust. Yes, the US has had an episodic and an ad hoc appr= oach in the past, but then September 11 has changed our position on terrori= sm, as it has for the entire world. Is there any use in insisting on a hist= orical approach lifted from the Cold War? But having said all this, I can't= give a flat promise to any country. US policies are in the hands of our pe= ople, who in turn express themselves through their representatives".=20 Asked if unprecedented cooperation meant that Enron was no longer 'a five l= etter word' jarring the Indo-US commercial dialogue, Mr Blackwill cautioned= , "Enron remains a problem. We hope there will be a quick, and mutually acc= eptable resolution. The problem continues to pass a very dark shadow. That = remains true to this day". In a reaction, Indo-American Chamber of Commerce= regional president Bimal Sareen, who was in the audience, endorsed Mr Blac= kwill's assessment. "It is extremely critical for the (Indian) government t= o take a proactive stand on an expeditious solution...Enron is casting a cl= oud over foreign investment," Mr Sareen told The Financial Express. "Of cou= rse, expansion of commercial relations into defence, and more security coop= eration will greatly help in renewal of confidence," Mr Sareen added.=20 On a more general note, Mr Blackwill said the regime on high tech commerce = will be allowed to flow "on the assumption of approval rather than denial".= On terrorism, the envoy showed heightened understanding of what India has = repeatedly complained about. "There are no exceptions in this war. We won't= allow terrorism against the US. Nor will we allow terrorism against India.= So, without (addressing concerns of) India, this war (against the Al Qaeda= ) won't be complete otherwise. US and India are in this battle together. An= d as secretary of defence Don Rumsfeld has said on Fox TV, there is no diff= erence between terrorist networks....a terrorist is a terrorist is a terror= ist. He can never be a freedom fighter. Also, no country will be allowed to= provide a sanctuary to terrorists". On Afghanistan, Mr Blackwill said, "th= e US sees India as a central player in the assistance once the war is over"= He talked of the forthcoming visits of US special coordinator Richard Haas= , and US envoy on Afghanistan James Dobbins to India and defended the exclu= sion of 'moderate Taliban' elements in the forthcoming Berlin conclave, quo= ting US national security advisor Condoleeza Rice. In Ms Rice's view, "mode= rate and Taliban don't go together".=20 ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ---------------------------------------------------------------------------= ------------ THE FINANCIAL EXPRESS, Thursday, November 22, 2001 Fitch thumbs down to India currency ratings (Carried only by the online edi= tion) International rating agency, Fitch, on Wednesday downgraded India's soverei= gn foreign and local currency ratings to 'BB' and 'BB+', respectively, from= 'BB+' and 'BBB-' (triple B minus). However, the rating agency changed its = outlook to 'stable' from 'negative' in recognition of India's continuing ex= ternal strengths. Fitch said that this rating action -- presaged by a chang= e in the outlook from 'stable' to 'negative' in May 2001 -- has been prompt= ed by India's continued fiscal profligacy, while an unfavourable political = environment is hindering economic reforms. Further, while changing its outl= ook to 'stable' from 'negative', Fitch cautions that \"the outlook for the = local currency rating remains negative because of high and rising domestic = debt and weak public finances.\"=20 The rating downgrades reflect the absence of any significant improvement in= India's public finances and slow progress on disinvestment. Persistent gen= eral government deficits of over 9 per cent of GDP are the highest among 'B= B' Fitch-rated sovereigns. "The agency believes that fiscal consolidation e= nvisioned for 2001 is unlikely to materialise due to revenue shortfalls ari= sing from the current economic slowdown and the inability of the government= to cut expenditures. More importantly, the composition of the fiscal defic= it has deteriorated, with a sizable part of the revenue deficit attributabl= e to rising public consumption. Interest payments constitute 50% of revenue= s and leave little room for social and capital spending,\" said Fitch Sover= eign's director, Paul Rawkins.=20 Like China, India's large domestic market and the closed nature of its econ= omy makes it less vulnerable to external shocks. Nonetheless, it is unlikel= y to escape unscathed from the current global economic downturn. Declining = exports have already induced a dramatic slowdown in industrial production a= nd capital spending. Lower oil prices and sluggish non-oil imports should, = however, help to contain the deterioration in current account deficit, whic= h remains manageable at around 1 per cent of GDP. India's 'BB' foreign curr= ency rating balances this factor plus continuing improvements in its extern= al solvency and liquidity ratios against a prospective deterioration in the= foreign investment climate (and hence non-debt creating flows) consequent = upon the Enron case.
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