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Date: Fri, 27 Apr 2001 01:25:00 -0700 (PDT)
From: sandeep.kohli@enron.com
Subject: From The Enron India Newsdesk - April 27th newsclips
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FYI news articles from Indian press.
---------------------- Forwarded by Sandeep Kohli/ENRON_DEVELOPMENT on=20
04/27/2001 08:24 AM ---------------------------


Nikita Varma
04/27/2001 07:51 AM
To: Nikita Varma/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc:  (bcc: Sandeep Kohli/ENRON_DEVELOPMENT)

Subject: From The Enron India Newsdesk - April 27th newsclips



Friday Apr 27 2001, http://www.economictimes.com/today/cm03.htm
DPC board empowers MD to cancel MSEB contract


Friday Apr 27 2001,  http://www.economictimes.com/today/27comp11.htm
MSEB pays Rs 134cr under 'protest' to DPC


Friday, April 27, 001,=20
http://www.businessstandard.com/today/economy4.asp?Menu=3D3
Enron India MD authorised to terminate PPA


Friday, April 27, 2001,http://www.financialexpress.com/fe20010427/top1.html
Foreign lenders slam brakes on disbursements to DPC , Sanjay Jog & Raghu Mo=
han
Global banks comfortable with Enron pull-out


Friday, April 27, 2001, http://www.indian-express.com/ie20010427/nat23.html
Enron: Dabhol chief gets powers to end deal with the MSEB


Friday, April 27, 2001, http://www.the-hindu.com/stories/0227000d.htm
Offer of renegotiation 'too late': Enron, By Mahesh Vijapurkar=20


Friday ,27 April 2001, http://www.timesofindia.com/today/27home2.htm
Enron ready to pull out, but lenders say wait=20


Friday, April 27, 2001, http://www.hindubusinessline.com/stories/142756dh.h=
tm
DPC board authorises MD to issue PPA termination notice=20


Friday, April 27, 2001,=20
http://www.dailypioneer.com/secon2.asp?cat=3Dstory7&d=3DFRONT_PAGE
Enron testing Maharashtra's nerves, T N Raghunatha


Friday, April 27, 2001,http://www.telegraphindia.com/
ENRON SIGNAL TO SWITCH OFF DABHOL POWER=20
=20

Friday, April 27, 2001,=20
http://www.thestatesman.org/page.news.php3?id=3D13026&type=3DPageone&theme=
=3DA
Enron threatens to pull out


Friday, April 27, 2001,=20
http://www.chalomumbai.com/asp/article.asp?cat_id=3D29&art_id=3D10006&cat_c=
ode=3D2F5
74841545F535F4F4E5F4D554D4241492F5441415A415F4B4841424152
'DPC may not wind up'


Friday, April 27, 2001,=20
http://www.chalomumbai.com/asp/article.asp?cat_id=3D29&cat_code=3D2f5748415=
45f535f
4f4e5f4d554d4241492f5441415a415f4b4841424152&art_id=3D9953
Enron offers 'no comment' on renegotiation, H S Rao
=20

 http://www.afternoondc.com/
'ENRON'S ON!'=20
State govt. to renegotiate Dabhol Power Project , By Hubert Vaz=20


THE ECONOMIC TIMES, Friday Apr 27 2001
DPC board empowers MD to cancel MSEB contract

THE ENRON power project crisis on Thursday deepened with the board of Dabho=
l=20
Power Company authorising the management to issue a termination notice to t=
he=20
Maharashtra State Electricity Board even while international lenders to the=
=20
project asked Enron to renegotiate power purchase agreement signed with the=
=20
MSEB.
The decision to authorise managing director Neil McGregor to issue "notice =
of=20
termination on the contract to sell 740 MW of power" was taken after the=20
board prevented MSEB from voting on the ground that it was an interested=20
party. The decision was taken with six votes in favour and the single=20
opposition vote was cast by IDBI, sources said.=20

According to reports, financial institutions such as ANZ Investment Bank,=
=20
Credit Suisse First Boston, Citibank, ABN-Amro and the State Bank of India=
=20
have on Wednesday advised Enron against terminating its PPA with MSEB. MSEB=
=20
chairman Vinay Bansal, who with two other directors attended the meeting on=
=20
Wednesday representing Maharashtra=01,s 15 per cent stake in the near $3-bi=
llion=20
project, said: "The Indian side told them that it would be unfortunate if=
=20
Enron broke the contract." While Bansal declined comment on the board=20
decision, the sources said the Indian side had expressed its interest to=20
holds talks on the issue rather than terminating the project and there were=
=20
possibilities of a fresh power purchase agreement between the company and t=
he=20
state. (PTI)


THE ECONOMIC TIMES, Friday Apr 27 2001
MSEB pays Rs 134cr under 'protest' to DPC

 DESPITE the threat of a possible termination notice hanging on its head,=
=20
Maharashtra State Electricity Board on Thursday made a "protest payment" of=
=20
Rs 134 crore disputed amount, towards March bill of Rs 146.64 crore to=20
Dabhol. "We were ready with the payment on Wednesday itself, but DPC=20
officials could not collect the cheque due to the statewide bandh", a senio=
r=20
MSEB official said. "We have disputed payment of Rs 12.64 crore and it woul=
d=20
be now taken up at the disputes resolution forum, of which Enron India=20
managing director K Wade Cline and Krishna Rao are members", MSEB sources=
=20
said.=20

Last week, DPC had dashed off a communication to the government and MSEB th=
at=20
it would not accept "protest payments" anymore. Cline had said the energy=
=20
major shall treat such payments as an election to pay the sums, which MSEB =
in=20
fact owed DPC in full and that the company would also not recognise the=20
"purported protest or reservation". MSEB had paid a Rs 113.5 crore February=
=20
bill in protest last month. On April 23 last, both domestic and internation=
al=20
lenders of DPC had met in London and held exhaustive discussions the=20
multinational's move to issue a termination notice to MSEB and state=20
government. (PTI)=20

BUSINESS STANDARD, Friday, April 27, 001
Enron India MD authorised to terminate PPA

The board of the Enron-promoted Dabhol Power Company (DPC), at its meeting =
in=20
London on Wednesday, authorised the managing director of Enron India to iss=
ue=20
a notice for terminating the power purchase agreement to the Maharashtra=20
State Electricity Board and the state government. =01&The board has authori=
sed=20
Wade Cline to serve the termination notice. However, this does not mean tha=
t=20
the termination notice will be served immediately. It is only an enabling=
=20
provision and will be used only if the situation arises,=018 a state govern=
ment=20
source told Business Standard from London. He said DPC was under pressure=
=20
from its lenders.=20
The DPC spokesperson here refused to comment on the issue. The hardening of=
=20
the board=01,s stand is in sharp contrast to the advice of DPC's lenders, w=
ho=20
had warned Enron not to precipitate matters by issuing a termination notice=
.=20
The lenders had arrived at a consensus that the termination notice need not=
=20
be served at this stage. Serving of the notice requires a nod from the=20
lenders, who have an exposure of about $2 billion in the project. Sources=
=20
said given the lenders' strong opposition to termination of the contract, t=
he=20
Enron board's "enabling resolution" did not have much significance beyond=
=20
conveying a hardening of its stand with regard to the current imbroglio. Th=
e=20
Maharashtra Chief Minister had warned Enron not to scuttle the process of=
=20
crisis resolution by issuing a termination notice. The state government is =
to=20
nominate an expert group to renegotiate the terms of the Dabhol contract.=
=20
Enron holds 65 per cent in DPC, while US-based GE and Bechtel hold 10 per=
=20
cent each. The balance 15 per cent is held by MSEB through a special purpos=
e=20
vehicle, Maharashtra Power Development Corporation. The MSEB representative=
s=20
were not allowed to vote at the meeting since they were an interested party=
.=20
The IDBI representative protested against the board's decision. The meeting=
=20
was attended by state energy secretary VM Lal. The meeting was held against=
=20
the backdrop of a dispute between MSEB and DPC over payment of bills.=20
After MSEB failed to pay Rs 102 crore towards the December 2000 bill, DPC=
=20
invoked the state government's guarantee and then the Union government's=20
counter guarantee. When payment of the Rs 127-crore January bill became=20
overdue, DPC again invoked the state government's guarantee. MSEB retaliate=
d=20
on January 28, 2001 by slapping a Rs 401-crore penalty for non-supply of=20
electricity at adequate levels. It demanded that DPC adjust the bills again=
st=20
this penalty. "This stand of MSEB was explained to DPC at the board meeting=
",=20
a state government official said. The Centre also supported MSEB's stand an=
d=20
refused to honour the counter guarantee. The power company then invoked the=
=20
political force majeure clause. A process of conciliation and arbitration=
=20
between the Centre and DPC is currently on.=20
THE FINANCIAL EXPRESS, Friday, April 27, 2001
Foreign lenders slam brakes on disbursements to DPC , Sanjay Jog & Raghu Mo=
han
Global banks comfortable with Enron pull-out
Lenders to the Dabhol Power Company (DPC) are a sharply divided lot.=20
International lenders, in direct contrast to the stand taken by local ones=
=20
led by the the Industrial Develoment Bank of India (IDBI), are categorical=
=20
that additional assistance to DPC=01,s phase-II will be held in abeyance de=
spite=20
the completion of 92 per cent of the project work.The stage is also set for=
 a=20
preliminary termination notice to be served by DPC to the Maharashtra State=
=20
Electricity Board (MSEB) within the next four weeks.This follows the=20
authorisation given to Enron India=01,s managing director K Wade Cline and =
DPC=20
president & CEO Neil McGregor to serve the termination notice, and transfer=
=20
notices to MSEB, following Wednesday=01,s DPC board meeting in London.
The essence of the message from the international lenders following the=20
London meeting with DPC board is: Emotions do not work. Contractual=20
obligations and payments have to be met. We are convinced that the MSEB has=
=20
failed to meet its obligations. There is no point in Enron continuing with=
=20
the project and the company should get out of it.The structuring of DPC=01,=
s=20
debt has created two classes of lenders. In phase-I, international lenders=
=20
are covered by a sovereign guarantee while in phase-II, no lender is.=20
However, all lenders have a parri passu charge, making attachment of assets=
 a=20
messy affair.
Sources in international banks were quick to point out that local lenders t=
o=20
phase-II of the project are worried that an awry DPC project will affect=20
their interests more given that they have no security =01* other than asset=
s =01*=20
like a sovereign cover. =01&It was this desperation that made local lenders=
 like=20
IDBI slash the interest rates a few months back to 16.5 per cent from 21.5=
=20
per cent,=018 a leading foreign banker pointed out.Three points that were m=
ade=20
clear and stressed in no uncertain terms by international lenders were: a)=
=20
there are contractual obligations b) MSEB was not punctual in its payments =
to=20
DPC and c) MSEB adopted a confrontational position by slapping a Rs 401 cro=
re=20
rebate charge on DPC for misdeclaration and default on the availability of=
=20
power.
While local lenders led by IDBI =01* with MSEB parroting the same =01* were=
 of the=20
view that the current situation is a temporary one, international lenders=
=20
were steadfast that pulling out of the project is the only way out. This is=
=20
despite the stance taken by IDBI and MSEB that authorisation for terminatio=
n=20
given to Mr Cline and Mr McGregor was not called for. International bankers=
=20
pointed out that they will now have to look at the issue of charges and=20
protection for their loans in the event of the power project being scrapped=
=20
in its present form.The points of contention are: a) that phase-I of DPC is=
=20
backed by a sovereign guarantee b) phase-II is not and c) to the extent tha=
t=20
phase-II is covered by assets, cancellation of phase-II may see all assets =
=01*=20
even those under phase-I =01* getting attached. Therefore, an examination o=
n the=20
segregation of assets under phase-I and phase-II is now warranted.
PTI adds: In a significant move, DPC board has empowered its management to=
=20
sever power supply agreement with MSEB, a move that could inflict a financi=
al=20
liability of about Rs 2840 crore on the Centre. A decision to authorise DPC=
=20
president Neil McGregor to issue a termination notice to MSEB for sale of=
=20
power was taken by the board at its meeting on Wednesday.=20
THE INDIAN EXPRESS, Friday, April 27, 2001
Enron: Dabhol chief gets powers to end deal with the MSEB

THE BOARD of Dabhol Power Company, a subsidiary of Houston-based Enron Corp=
,=20
has decided to warn the Maharashtra State Electricity Board (MSEB) that it=
=20
intends to pull the plug on its Guhagar-based project.In a board meeting he=
ld=20
in London on Wednesday, the board decided to authorise DPC President and CE=
O=20
Neil McGregor and Enron India=01,s managing director K Wade Cline to serve =
a=20
=01+=01+preliminary=01,=01, termination notice for sale of power to the MSE=
B within the=20
next four weeks.The Dabhol project has been mired in disputes since MSEB=20
began missing payments last year. MSEB owes Dabhol Power $48 million for=20
power delivered in December and January. The payment ran into a dispute aft=
er=20
MSEB slapped penalty notices of Rs 401 crore on DPC for its failure to supp=
ly=20
power within three hours of the demand being placed.But MSEB has paid $24=
=20
million for February. And a payment of $31 million was made for March on=20
Thursday.
The $3 billion Dabhol project is the largest foreign investment made in Ind=
ia=20
to date. Issuing the preliminary termination notice could enable Dabhol to=
=20
suspend deliveries as it negotiates payment disputes.While a preliminary=20
termination notice is the first of three steps that could potentially lead =
to=20
the abandonment of the project by Enron, analysts have described the decisi=
on=20
as a =01+=01+procedural=01,=01, move consistent with DPC=01,s negotiating s=
trategy to=20
recover overdue payments from the MSEB.
After the company issues the preliminary termination notice, step two would=
=20
be an official termination notice, and step three would be a notice that th=
e=20
company is surrendering control of the project. If the project is terminate=
d,=20
the government of India will have to take a hit of $300 million besides=20
paying bills of Rs 1,500 crore for the next one year to Enron as penalty.=
=20
=01+=01+Our (Centre=01,s) liability, if Dabhol power project is terminated,=
 would be=20
one year=01,s electricity bill and a termination fee of $300 million,=01,=
=01, Power=20
Secretary A K Basu said.=01+=01+Contractually, the Centre will have to pay =
one year=01,
s electricity bill, totalling at present prices about Rs 1,400-1,500 crore,=
=20
and take over DPC=01,s debt, which stands at around $300 million, if the pr=
oject=20
was terminated,=01,=01, Basu said in Delhi. Dabhol Power is in the process =
of=20
completing the second phase of the 2,184-megawatt power-plant project, whic=
h=20
is 95 per cent through.
While the international lenders to the project are pressurising the company=
=20
to get out of the project, Indian lenders, led by IDBI, are asking the=20
company to reconsider its decision on its termination notice. During the=20
meeting in London, MSEB which holds a 15 per cent stake in the project, had=
=20
strongly opposed DPC=01,s move to authorise Cline and McGregor to issue not=
ices=20
for termination.
MSEB Chairman Vinay Bansal and technical director Prem Paunikar =01* both=
=20
directors on the DPC board =01* and the state principal secretary (energy) =
VM=20
Lal, an invitee to the board, raised the issue at the board meeting in=20
London. MSEB claimed that DPC was needlessly =01+=01+threatening=01,=01, to=
 issue various=20
arbitration notices and thereby interpreting the clauses of PPA in=20
isolation.In recent weeks, Dabhol has raised the stakes in its spat with th=
e=20
MSEB, delivering a notice of political force majeure to Maharashtra =01* a =
step=20
typically invoked to dissolve a contract in case of an emergency like a war=
,=20
coup, or a similar radical political event. In this case, DPC=01,s move was=
=20
viewed as a threat to stop providing electricity.DPC has come under fire=20
because of the relatively high cost of its power. Critics object to the=20
company charging Rs 7.1 a kilowatt-hour for its power, compared with around=
=20
Rs 1.5 a kilowatt-hour charged by other suppliers.
THE HINDU, Friday, April 27, 2001
Offer of renegotiation 'too late': Enron, By Mahesh Vijapurkar=20
MUMBAI, APRIL 26. The Enron-sponsored Dabhol Power Company, which last nigh=
t=20
authorised its local management to issue a notice of termination of its Pow=
er=20
Purchase Agreement (PPA) with the Maharashtra State Electricity Board, has=
=20
decided to keep a stiff upper lip. This, in turn, has stoked speculation th=
at=20
the switching off of power from its Phase I plant was imminent, while in=20
reality, a lengthy procedure has to be followed as prescribed within the PP=
A.=20
As one source familiar with the PPA told The Hindu, ``it is not sudden deat=
h=20
of the project'' and in all probability, the DPC, vexed with the=20
developments, including sharp and pointed observations by the Godbole=20
Committee, has chosen to only arm itself with a serious option. ``This woul=
d=20
only eventually come into effect. It is not an overnight operation and a lo=
t=20
of legal work is involved''. Apparently, the DPC intends to do some=20
arm-twisting.=20
At the board of directors meeting in London, which Maharashtra was initiall=
y=20
disinclined to attend but later used the forum to put across its contention=
s=20
on the project, the DPC squarely told the MSEB nominees on the board that t=
he=20
offer of renegotiation had come rather ``too late''. It also said it did no=
t=20
see any room for optimism about the outcome. It did not, however, rule out=
=20
the option of talks, thus underscoring the possibility that the decision to=
=20
authorise termination was a new weapon.=20
The Maharashtra Chief Minister, Mr. Vilasrao Deshmukh, had hoped that DPC=
=20
would not take any ``harsh step'' which would cause lot of damage to the=20
interests of both the independent power producer and the Government and tod=
ay=20
he expressed his dismay. In fact, the mandate of the team that went, on the=
=20
strength of its stake in the DPC, was to put across the idea that negotiati=
on=20
was the requirement and not confrontation.=20
Echo in LS=20
The Enron issue also echoed in the Lok Sabha today where the Power Minister=
,=20
Mr. Suresh Prabhu, said that scrapping of the agreement would cost the Cent=
re=20
Rs. 2,840 crores, whose liability in the project agreement was limited. The=
=20
Centre's liability in case of termination is one year's electricity bill an=
d=20
a termination fee of $300 million.=20
Blow to FIs=20
The termination could prove to be a serious blow to the Indian Financial=20
Institutions (FIs) which, under the leadership of the IDBI, were trying to=
=20
convince the other lenders of the project against the notice. The exposure =
of=20
Indian FIs in the project is understood to be not covered by any guarantee=
=20
either of the Centre or the State.=20

THE TIMES OF INDIA, Friday ,27 April 2001
Enron ready to pull out, but lenders say wait=20

The Dabhol Power Company board, which met on Wednesday in London, authorise=
d=20
the company management to issue a termination notice to the Maharashtra Sta=
te=20
Electricity Board. The company, however, may not pull out of the project ye=
t,=20
considering its lenders, who met on Monday, opposed such a move and favoure=
d=20
renegotiations. Sources present during both the meetings said that though=
=20
foreign lenders supported Enron on the termination issue, domestic financia=
l=20
institutions, led by the Industrial Development Bank of India, prevailed ov=
er=20
the deliberations to oppose any such drastic move. Enron needs the lenders'=
=20
consent to file a pre-termination notice for pulling out from the project.=
=20
The decision to empower DPC chief Wade Cline to issue a termination notice=
=20
was taken with six votes in favour against a single IDBI vote against such =
a=20
move.=20
Another significant development during the entire proceedings was that the=
=20
financial institutions made it clear that further funding of Phase II of th=
e=20
project will depend on the Government of India assuring payment mechanisms.=
=20
Institutions are yet to disburse about 30 per cent of the sanctioned packag=
e,=20
which is crucial for completing the Phase II expansion project. ``The board=
=20
has given powers to Wade Cline to issue a pre-termination notice. But the=
=20
meeting quite unanimously felt the need of the hour is not to terminate the=
=20
project but to initiate serious re-negotiation proceedings,'' said MSEB=20
Chairman Vinay Bansal, who attended the board meeting. ``MSEB presented the=
ir=20
views to the board members and it was understood by Enron which also includ=
ed=20
the Rs 401 crore penalty issue which is heading for arbitration proceedings=
.=20
``We have also made it clear that the tariff structure of Enron is quite hi=
gh=20
and a downward revision of tariffs is unavoidable," Bansal added.=20
``They cannot issue a termination notice without our consent since our=20
exposure in the project is quite large and the lenders should approve any=
=20
plans in that direction,'' said a top banker who was present during the=20
lenders' meet. ``There is a general consensus that the project must be=20
completed and the proposal to terminate the PPA should be kept in abeyance,=
''=20
he added. The global arrangers for the DPC include ANZ Investment Bank,=20
Credit Suisse First Boston, ABN-AMRO, Citibank and the State Bank of India,=
=20
where all these parties conducted separate meetings with the company=20
officials. However, some bankers said the company can file a termination=20
notice even if one lender with a minimum 5 per cent exposure on the project=
=20
favours such proceedings.=20
Meanwhile, in a clear reversal of roles, Maharashtra Chief Minister Vilasra=
o=20
Deshmukh said that the state government was not keen on terminating the PPA=
.=20
``We will ask them to refrain from taking any such harsh steps since that=
=20
would be bad news for all of us, including DPC,'' Deshmukh said. Deshmukh w=
as=20
echoing Union Power Minister Suresh Prabhu's sentiments, who said that the=
=20
government wanted an amicable settlement of the payment row. He, however,=
=20
added that termination of the project would not hurt foreign investments, a=
nd=20
dismissed warnings by analysts that winding up the $2.9 billion project wou=
ld=20
be a blow to India's efforts to woo foreign investors.=20
The DPC has already slapped one conciliation notice on the Centre and three=
=20
arbitration notices on the state government over non-payment of dues=20
amounting to Rs 213 crore and interest towards the bills due for December=
=20
2000 and January 2001. Meanwhile, MSEB officials said in Mumbai that the=20
March bills amounting to Rs 134 crore was paid on Thursday as protest=20
payment, despite the dispute over the amount.=20
When asked on the future course of action, Bansal said it was up to the DPC=
.

THE HINDU BUSINESSLINE, Friday, April 27, 2001
DPC board authorises MD to issue PPA termination notice=20
THE board of directors of Dabhol Power Company (DPC) has authorised the=20
Managing Director, Mr Neil McGregor, to issue the notice of intent to=20
terminate its power purchase agreement (PPA) with the Maharashtra State=20
Electricity Board (MSEB) ``at an appropriate time''. The decision was taken=
=20
at a board meeting held in London yesterday. ``While MSEB, which is an=20
`interested party', was not allowed to vote, it made a presentation=20
clarifying its stand on the matter,'' a senior State Government official=20
said.=20
The resolution to authorise the management to issue the termination notice=
=20
was carried by six votes to one. IDBI voted against the decision, the=20
official said. The serving of the preliminary termination notice will lead =
to=20
a six-month ``suspension period''. According to clause 17.8 of the=20
Termination Procedure, of the PPA: ``Following the giving of a preliminary=
=20
termination notice, the parties shall consult for a period of six months (o=
r=20
such longer period as they may agree) as to what step shall be taken with a=
=20
view to mitigating the consequences of the relevant event having regard to=
=20
all the circumstances...''=20
IDBI and State Bank of India, the principal Indian lenders, had earlier=20
persuaded the overseas lenders to hold their consent to the termination=20
notice for some more time. At least one lender has to consent for the compa=
ny=20
to serve termination notice. It is understood that overseas lenders are in=
=20
favour of termination of the project and are prepared to consent. However,=
=20
domestic lenders are worried about the security of their advances if the PP=
A=20
is abandoned mid-way.=20
According to institutional sources, Indian lenders are trying to get all th=
e=20
parties concerned to thrash out outstanding issues. The Maharashtra and=20
Central Governments too are in favour of a conciliation. Mr Vilasrao=20
Deshmukh, Chief Minister of Maharashtra, yesterday went on record that the=
=20
State did not want the project terminated. Mr Yashwant Sinha, Union Finance=
=20
Minister, is also understood to be of the same opinion. ``The DPC will now=
=20
have to decide what is the `appropriate time' to serve the notice,'' the=20
official said. MSEB pays Rs 134 crore: Meanwhile, MSEB has paid DPC Rs 134=
=20
crore towards its March 2001 bill. MSEB officials confirmed that the bill w=
as=20
paid `in protest'' today morning. ``They (DPC) had billed us for an amount =
of=20
Rs 146 crore. We do not agree with some of the items included,'' a senior=
=20
MSEB official said.=20
THE PIONEER, Friday, April 27, 2001
Enron testing Maharashtra's nerves, T N Raghunatha
Dabhol Power Company (DPC) has begun to put fresh pressure on the Maharasht=
ra=20
State Electricity Board (MSEB), the Maharashtra State Government and the=20
Centre for an early resolution to the prolonged dispute between them, if th=
e=20
DPC Board of Directors' decision to authorise its managing director to serv=
e=20
a contract termination notice to the MSEB is any indication.
The DPC Board, in its meeting in London on Wednesday, empowered the company=
=20
management to sever its power supply agreement with MSEB, a move that could=
=20
inflict a financial liability of Rs 2,840 crore on the Centre. The decision=
=20
to authorise the DPC management to issue a termination notice to MSEB was=
=20
taken by a vote of six to one after the Maharasthra Government=20
representatives were prevented from voting on the ground of "interested=20
party".
When contacted, the company's Mumbai-based spokesperson, Mr Jimmy Mogal,=20
declined to comment on the reports about the decision taken by the DPC Boar=
d.=20
"We have nothing to say on the reports emanating from London. We will expre=
ss=20
our views after a few days," he said. However, Maharashtra Chief Minister=
=20
Vilasrao Deshmukh on Thursday termed the DPC board's decision as=20
"unfortunate". "We have already requested the company not to take any harsh=
=20
decision", Mr Deshmukh said in Mumbai.=20
Official sources in the State Energy Ministry interpreted the DPC Board's=
=20
decision as a pressure tactic employed by the Enron subsidiary to force the=
=20
MSEB to clear the pending power bills without any further delay. Through it=
s=20
tough posture, the DPC wants to make its position stronger before it can=20
formally agree for re-negotiations with the MSEB, the Centre and the State=
=20
Government for cutting the price of power supplied by it to the State=20
electricity board. The sources said that the DPC's reported decision to=20
authorise its managing director to stop electricity supply to the MSEB did=
=20
not mean that the Enron subsidiary would actually go ahead with the scrappi=
ng=20
of the power contract with the MSEB.
"If anything, the DPC's reported decision is to mount additional pressure o=
n=20
the MSEB for clearance of pending power bills and put itself in a stronger=
=20
position in settling its dispute with the MSEB. As part of its plan to arm=
=20
itself with powers to break a contract in case situation goes beyond its=20
control, the DPC had recently served a political force majeure to the MSEB,=
=20
the Centre and the State Government," the sources said.Not surprisingly, th=
e=20
DPC's London decision comes on the heels of the Maharashtra Government's=20
decision to set up a high-level committee, comprising representatives of th=
e=20
MSEB, the Centre and the State Government to re-negotiate with the Enron's=
=20
subsidiary company for reducing the cost of power supplied to the State=20
electricity board.Meanwhile, amidst the threat of a possible termination=20
notice hanging on its head, the MSEB on Thursday made a "protest payment" o=
f=20
the Rs 134 crore disputed amount towards March bill of Rs 146.64 crore to D=
PC.
riday, April 27

THE TELEGRAPH, Friday, April 27, 2001

ENRON SIGNAL TO SWITCH OFF DABHOL POWER =20

Enron today took the first decisive step out of the controversy-ridden Dabh=
ol=20
Power Company when it won an authorisation from the company=01,s board to s=
top=20
sale of power to Maharashtra State Electricity Board (MSEB).=20
The meeting of the company, of which the Houston-based energy giant holds 6=
5=20
per cent and the MSEB 15 per cent, was attended by state energy secretary V=
 M=20
Lal and MSEB technical director P Paunikar and it came days after its lende=
rs=20
discussed payment problems and a possible termination.The Centre=01,s liabi=
lity,=20
if Enron decides to snap the agreement, will be a year=01,s power bill and =
a=20
termination fee of $ 300 million. However, the company will have to wait fo=
r=20
six months from the day it serves the notice before it pulls the plug.The=
=20
Centre shrugged off the move, saying there would not be any adverse effect =
on=20
foreign investment in power if Enron walks out. =01&We do not see FDI inflo=
ws=20
into the power sector being hit,=018 power minister Suresh Prabhu said.MSEB=
=20
officials said the ball is now in the court of DPC, which said its corporat=
e=20
policy did not allow it to comment on proceedings at board meetings. The=20
decision coincided with a Rs 134-crore =01+protest payment=01, by the cash-=
strapped=20
power board as part of the March bill worth Rs 146.64 crore.
There was speculation that MSEB coughed up the amount to cool frayed temper=
s=20
at Enron=01,s hub in Houston, and because it was rattled by the sudden turn=
 of=20
events in the past few days during which the dispute had come to a head. MS=
EB=20
officials brushed away the allusions, saying the cheque was ready on=20
Wednesday but could not be handed over to DPC because of the state-wide=20
bandh. =01&We have a disputed payment of Rs 12.64 crore, which will be take=
n up=20
at the dispute-resolution forum,=018 a board official said. Last week, DPC =
told=20
the state government and MSEB it would no longer accept protest payments in=
 a=20
move to fortify its legal position.=20
MSEB officials say Bechtel and General Electric, the other partners who hol=
d=20
around 20 per cent in DPC, are willing to go along with Enron Corp in=20
terminating the deal but financial institutions such as IDBI are not game=
=20
because it puts their loans at risk. Investments made by Indian institution=
s=20
are not covered under the Centre=01,s and state=01,s counter-guarantees, un=
like=20
those made by international lenders.Maharashtra chief minister Vilasrao=20
Deshmukh called Enron=01,s decision unfortunate. =01&We had told state gove=
rnment=20
officials attending the Enron board meeting to stop the company from windin=
g=20
up its operations in the state as it will harm both parties.=018
THE STATESMAN, Friday, April 27, 2001
Enron threatens to pull out
=20
 The Enron crisis deepened with the Board of Directors of the Dabhol Power=
=20
Company deciding to authorise the managing director, Mr K Wade Cline, to=20
serve a notice of termination on the contract for the first phase of the $2=
.9=20
billion power project.The decision, which could lead to the cessation of=20
Dabhol=01,s power supply to the state, was taken at the meeting held yester=
day=20
in London according to reports quoting the chairman of the Maharashtra Stat=
e=20
Electricity Board, Mr Vinay Bansal.=20
While DPC officials refuse to comment on anything, it is learnt that MSEB w=
as=20
itself prepared to serve a legal notice of termination just two days before=
=20
the meeting.MSEB was said to have been dissuaded by the Nationalist Congres=
s=20
Party president, Mr Sharad Pawar, and union power minister Mr Suresh Prabhu=
,=20
who had talks in New Delhi with the Maharashtra chief minister, Mr Vilasrao=
=20
Deshmukh, and an MSEB delegation last Monday.
The state government has been served two arbitration notices while the Cent=
re=20
is ready to go for conciliation with the DPC for failing to honour its=20
counter-guarantee.Further, the DPC has already slapped a notice of politica=
l=20
force majeure which protects itself against undeserved claims in the event =
of=20
exigencies that force it to take an extreme step.The union power minister, =
Mr=20
Suresh Prabhu, contended in Delhi that since DPC contributed only 0.7 per=
=20
cent of the total energy output of the country, its termination would not=
=20
have such a phenomenal impact on the power situation.=20
However, if terminations proceedings go through, Enron Corp, a 65 per cent=
=20
share-holder in the Dabhol Power Company, would stand to net a hefty amount=
=20
in damages. The union power secretary has been quoted as saying that=20
termination of the DPC would cost the Centre Rs 1,800 crore, which is the=
=20
total of one years=01, electricity bill and a termination fee of $300 milli=
on.=20
According to an energy analyst, Mr Pradyumna Kaul, the total liability woul=
d=20
not cross Rs 350 crore. However Mr Prabhu said in the Lok Sabha today that=
=20
the that scrapping of the agreement would cost the Centre Rs 2,840 crore.It=
=20
is learnt that on 20 April, Mr Deshmukh had given the go-ahead to the MSEB =
to=20
prepare a legal notice to be issued to Enron during the meeting of the DPC=
=01,s=20
Board of Directors on Wednesday. At the meeting, the energy minister,=20
Padamsinh Patil, energy secretary, Mr Vinay Mohan Lal and MSEB chairman Mr=
=20
Vinay Bansal, were also present.The notice was prepared over the past weeke=
nd=20
and taken by the delegation when they called on Mr Prabhu on 24 April.=20
However, the politicians convinced them that Enron would not get tough, giv=
en=20
its huge stake in the project, and that such a notice would not be necessar=
y.=20
The meeting thus ended with the decision to renegotiate the power tariff,=
=20
with Enron=01,s consent.
Among those present at the London meeting were Mr Lal, Mr Bansal and MSEB=
=20
technical director, Mr P Paunikar, in their capacity as directors. However,=
=20
they abstained from voting since they were deemed an interested party. The=
=20
only vote to go against the decision was that of the IDBI which is also=20
represented on the board, it is learnt.The chief minister, Mr Vilasrao=20
Deshmukh, said the state was not in favour of terminating the project. This=
=20
could mean that the latest manoeuvre to arm-twist the Indian authorities=20
could achieve its immediate target of getting the arrears accumulated over=
=20
the past three months cleared.The MSEB owes Enron Rs 146.64 crore for March=
=20
2001 and Rs 229 crore for December 2000 and January 2001.The Centre today p=
ut=20
up a brave face on Enron=01,s decision saying there would not be any advers=
e=20
effect on foreign investment in power sector in the country, PTI reported=
=20
from New Delhi.
=01&There will be no adverse impact as a result of any action by any domest=
ic or=20
foreign company. As far as we are concerned there will be no adverse impact=
=20
on FDI in power sector,=018 Power Minister Suresh Prabhu told reporters whe=
n=20
asked about DPC=01,s decision to authorise management to issue a terminatio=
n=20
notice to MSEB.Emphasising that there would be no fallout of such decision,=
=20
Prabhu said after the meeting of the Cabinet Committee on Economic Affairs=
=20
=01&we are expecting cooperation from many Scandinavian countries as well a=
s=20
European nations in the power sector.=01&In fact not only the Power Ministe=
r but=20
also the Prime Minister of Norway was here to inaugurate a seminar on power=
=20
and he promised lot of cooperation in the sector.=018


MID DAY
'DPC may not wind up'
Maharashtra Chief Secretary V Ranganathan has said that though Neil McGrego=
r,=20
managing director of the Dabhol Power Corporation (DPC), has been given=20
complete powers with regard to DPC's operations in the state, including the=
=20
authority to wind up operations, it does not necessarily mean that McGregor=
=20
will issue such a termination notice. McGregor was given the powers at a=20
meeting of the DPC board in London on Wednesday. Ranganathan said that stat=
e=20
officials, including Maharashtra State Electricity Board (MSEB) Chairman=20
Vinay Bansal and Power Secretary V M Lal, have reported back to him about t=
he=20
meeting in London.
With regard to the state's failure to pay Enron, Ranganathan said, " Bills=
=20
are prepared as per the Power Purchase Agreement (PPA) and DPC owes some=20
money to us. Our people informed Enron officials about this.. In fact, ther=
e=20
was no reason to give powers to the MD to slap a termination notice."In the=
=20
London meeting, MSEB and Industrial Development Bank of India (IDBI)=20
representatives insisted that the DPC must pay Rs 411 crore since it could=
=20
not supply power whenever needed.=20
Chief Minister Vilasrao Deshmukh has already termed as unfortunate the=20
decision of the board of the Enron-promoted DPC to give McGregor powers to=
=20
wind up operations. Deshmukh added, " We have already requested Enron not t=
o=20
take any harsh decision."Deshmukh had earlier said, " We have directed stat=
e=20
Government officials attending the DPC board meeting to desist the energy=
=20
company from winding up operations in the state, as it would be harmful to=
=20
both of us."
Enron officials are keeping mum on the issue. McGregor said, " I am not goi=
ng=20
to give any comment."

MID DAY, April 27, 2001
Enron offers 'no comment' on renegotiation, H S Rao
A crucial meeting of the Board of Directors of the Dabhol Power Company=20
(DPC), promoted by the US energy major Enron, was held here yesterday=20
apparently to discuss fate of its $900-million power project in Maharashtra=
,=20
but there was no official word on the Indian and state Governments' decisio=
n=20
to renegotiate the contract.=20
An Enron spokesman declined to divulge what transpired at the meeting, sayi=
ng=20
the issues discussed at the meeting were 'confidential' . " We have not=20
received any direct communication. Unless we get it and evaluate the detail=
s,=20
we have no comments to make," the spokesman said when asked about the=20
proposed decision on re-negotiation of the project in which the Maharashtra=
=20
State Electricity Board (MSEB) has 15 per cent stake.
Asked whether the Board had taken a decision on empowering DPC Managing=20
Director Neil McGregor to wind up its operations in India, the spokesman sa=
id=20
he had nothing to say on them. Enron has reportedly authorised Mcgregor to=
=20
look at various options including selling the company's stake in DPC.=20
Maharashtra Chief Minister Vilasrao Deshmukh said in Mumbai that the state=
=20
Government would pay up the undisputed dues to the company. He said the=20
Maharashtra government " is not in favour of terminating the 2184-MW projec=
t,=20
but wanted an amicable solution to the imbroglio."
MID DAY, Friday, April 27, 2001,

Committee to renegotiate Enron deal
A committee to renegotiate the Power Purchase Agreement with the Dabhol Pow=
er=20
Company will be appointed by this evening, Chief Minister Vilasrao Deshmukh=
=20
said today. Addressing media persons after his meeting with the noted socia=
l=20
reformer Anna Hazare at his official residence Varsha, Deshmukh said the=20
committee would be formed by this evening or by tomorrow, at the most.He=20
termed as unfortunate the Enron board decision empowering DPC chief Neil=20
McGregor to serve a preliminary termination notice on the Maharashtra State=
=20
Electricity Board and said the state was willing to negotiate the issue wit=
h=20
power company.
" Renegotiations will be held as per the suggestions made by the Godbole=20
committee and the center will also depute its representative on the=20
renegotiating committee. We don't want to take any hasty decision," Deshmuk=
h=20
saidHe pointed that the only bone of contention with the DPC had been its=
=20
expensive tariff and hoped that the issue would be resolved amicably.When=
=20
pointed that the Enron board had taken a decision to serve the notice despi=
te=20
state=0F9 s willingness to appoint a renegotiating committee, Chief Ministe=
r=20
said it was unfortunate.
Earlier, in his meeting with Hazare, Deshmukh promised to make necessary=20
amendments to the Right to Information law recently passed by the state so=
=20
that the information was easily accessed by the common people. He also gave=
 a=20
patient hearing to Hazare on his complaints of corruption in various state=
=20
departments and promised action against guilty after a thorough inquiry=20
within three months.
=20
AFTERNOON, APRIL 27, 2001
 'ENRON'S ON!'=20
State govt. to renegotiate Dabhol Power Project , By Hubert Vaz=20
The US power giant, Enron Power Corporation's willingness to wrap up the=20
Dabhol Power Project and leave the shores may not actually materialise,=20
though the Dabhol Power Company chief, Mr. Wade Cline, has been authorised =
to=20
do so, since the lenders for the project would have a decisive say in the=
=20
matter.=20
Disclosing this, Chief Minister Vilasrao Deshmukh confirmed this morning th=
at=20
the state government would churn out a compromise formula by which the powe=
r=20
project at Dabhol could be continued, and at the same time Enron did not fe=
el=20
slighted. "Enron has not yet conveyed to us about this decision. We are=20
waiting for their letter," he said. When asked what sort of compromise the=
=20
state government plans to forge, Mr. Deshmukh said, "Let our officers come=
=20
back. After that we will decide a future course of action. But we are=20
definitely going in for renegotiation of the project. It is very difficult =
to=20
predict the outcome of Enron's decision but as of now the project is still=
=20
on." When asked whether the project could be moved to another state, if wou=
nd=20
up from Maharashtra, Mr. Deshmukh said, that was not possible as per the=20
terms of the agreement between the US company and the state government.=20
However, it was difficult for the project to move out of the state itself, =
he=20
indicated. He also confirmed that both parties would face considerable loss=
es=20
if the project was terminated.=20
The board of directors of the Dabhol Power Company, which met in London on=
=20
Wednesday, decided to put an end to all controversies surrounding the proje=
ct=20
once and for all by empowering the DPC chief to terminate the project, if h=
e=20
deemed it fit. However, this decision, as of now, does not necessarily=20
indicate the death knell for the project. The Enron project, which had been=
=20
riddled with controversies right from its inception, had been a pretext for=
=20
the political parties in the state to drag each other on the mat from time =
to=20
time. The previous Sena-BJP government, which had been out to terminate the=
=20
project, however, chose to continue with it following renegotiations with=
=20
Enron's top visiting officials like Ms. Rebecca Mark. And, the Democratic=
=20
Front government inherited the controversial project when the governments=
=20
changed hands a year and a half ago.=20
Meanwhile, State Energy Minister Dr. Padamsinh Patil, when contacted at the=
=20
Osmanabad Circuit House, said the state government and the central governme=
nt=20
have decided to appoint a joint committee to renegotiate the project with=
=20
Enron. "It is not easy for them to walk out of the project just like that.=
=20
They will have to go in for litigation and this would prove costly for both=
=20
sides," he said. In case the project is terminated, the government can stil=
l=20
manage the power needs of the state, though it would be a bit tough job, he=
=20
added.=20