From The Enron India Newsdesk - Nov 14th - 18th Newsclips ,
 BUSINESS STANDARD, Thursday, November 15, 2001
FIs peg reserve price of Dabhol at $700 million
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THE ECONOMIC TIMES, Wednesday, November 14, 2001
Editorials - Just stick it out or be a sucker, Abracadabra / Shubhrangshu R=
oy=20
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THE HINDU BUSINESS LINE, Wednesday, November 14, 2001
'LNG Laxmi' to bring prosperity to SCI, P.Manoj=20
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THE FINANCIAL EXPRESS, Wednesday, November 14, 2001
DPC arbitration tribunal to meet on November 24, Sanjay Jog=20
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THE TIMES OF INDIA, Thursday, November 15, 2001
`Enron buyout will not affect Dabhol project'
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THE FINANCIAL EXPRESS, Thursday, November 15, 2001
DPC meet suggests lenders taking cut, MAT exemption, Sanjay Jog=20
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THE FINANCIAL EXPRESS, Thursday, November 15, 2001
Andersen's underbelly gets exposed, Sunil Jain=20
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THE ASIAN AGE, Friday, November 16, 2001
Bidders demand distribution rights, Rajesh Unnikrishnan=20
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THE FINANCIAL EXPRESS, Friday, November 16, 2001
MSEB asks Dabhol Power to defer Houston meet in wake of HC order, Sanjay Jo=
g=20
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THE ASIAN AGE, Saturday, November 17, 2001
MSEB 'will not' attend DPC meet in Houston
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THE DECCAN CHRONICLE, Saturday, November 17, 2001
MSEB to skip Enron board meet=20
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THE INDIAN EXPRESS, Saturday, November 17, 2001
Parleys on Enron stake sale continue; BSES, Tata Power begin due diligence
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THE HINDU BUSINESS LINE, Sunday, November 18, 2001
It is deal-making time in Dabhol, D. Sampathkumar
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THE ECONOMIC TIMES, Wednesday, November 14, 2001
'DPC sale to be decided by Enron, Tatas, BSES'=20
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THE TIMES OF INDIA, Thursday, November 15, 2001
Tatas, BSES keen to acquire DPC=20
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THE ECONOMIC TIMES, Sunday, November 18, 2001
Govt not to encash gurantees against DPC=20

Similar story also appeared in the following publication:

THE TIMES OF INDIA, Sunday, November 18, 2001
Govt restrained from encashing DPC guarantees
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THE ECONOMIC TIMES, Friday, November 16, 2001
FIs for allotting distribution zone to DPC buyer, Anto T Joseph
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BUSINESS STANDARD, Thursday, November 15, 2001
FIs peg reserve price of Dabhol at $700 million

The Indian financial institutions (FIs) led by the Industrial Bank of India=
 (IDBI) have fixed the reserve price of the $3 billion Dabhol Power Company=
 at $700 million. At a meeting in Singapore last week with the two prospect=
ive bidders _ BSES and Tata Power Company _for the controversial 2,184 MW p=
ower project, IDBI chairman P.P. Vora reportedly took a hard line and told =
them in no uncertain terms that they should be prepared to put in at least =
$700 million for the project. BSES and Tata Power have evinced interest in =
acquiring an 85 per cent stake in DPC (65 per cent of Enron Corporation of =
the US and 10 per cent each of Bechtel Enterprises and General Electric's e=
quity). "Technically, no bid has been called for. But for all practical pur=
poses, the reserve price has been fixed at $700 million as the IDBI chairma=
n made it clear to the BSES and Tata Power brass that DPC would not be sold=
 cheaper than this," an institutional source said.=20

Both the companies seem to have accepted the IDBI stand on the project's pr=
ice as they are planning to start due diligence of the project, after signi=
ng a confidentiality agreement with DPC. The FIs have taken a proactive rol=
e in scouting for a white knight for DPC because they would end up sinking =
hefty sums in the venture. The total exposure (both funded and non-funded) =
of the Indian banks and financial institutions to DPC is about Rs 6,100 cro=
re _ about 70 per cent of the debt component of the project built on a 70:3=
0 debt: equity ratio. IDBI has the maximum exposure (around Rs 2,300 crore)=
, followed by the State Bank of India (Rs 1,800 crore) and ICICI (Rs 1,700 =
crore). Besides, the Industrial Finance Corporation of India (IFCI) and Can=
ara Bank also have exposure to the project. The Singapore meeting focused o=
n completing Phase-II of the project and the sale of the shareholding oh En=
ron, Bechtel and General Electric to either of the prospective new buyers, =
BSES and Tata Power. DPC has mothballed phase I of the project (740 MW) som=
e time back. Phase-II of the project, 90 per cent of which has been complet=
ed, includes a LNG processing facility of about 5 million tonne per annum.=
=20
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THE ECONOMIC TIMES, Wednesday, November 14, 2001
Editorials - Just stick it out or be a sucker, Abracadabra / Shubhrangshu R=
oy=20

YOU move a step forward and you are a sucker, you move a step backward and =
you are a sucker still. That just about sums up India's predicament in tryi=
ng to get one-time US energy trading giant Enron off its back and off the 2=
,100 MW Dabhol power plant for some time now. For the past fortnight or so,=
 the institutions have been bargaining hard to find a buyer for Enron's ass=
ets in Maharashtra, having committed over Rs 6,200 crore in loans. Last wee=
kend, they even went into a huddle in Singapore to sew up the loose ends of=
 a bail-out. Little seems to have been thrashed out so far. Little possibly=
 will. Unless, of course, the FIs tighten the screws with a take-it or leav=
e-it offer. The time to make that choice is now. A gentleman in pin-stripes=
 who's done a lot of running around these past few weeks to help sew up the=
 deal, told me the other day that Enron had indeed agreed to part with its =
stake in DPC at a 30 per cent discount. That would have fetched it just abo=
ut $800-odd million spread over a five-year period. So, why hasn't a deal b=
een struck?=20

It's probably not worked out because of what Enron considers a fair discoun=
t on what it has sunk into the project. Prospective buyers consider this to=
o high an asking price. For the record, Enron claims to have sunk in $1.2 b=
illion in the project together with its partners GE and Bechtel who have su=
pplied equipment and helped construct the plant. But my gentleman friend in=
 pin-stripes suggests that $1.2 billion isn't exactly their equity contribu=
tion in Dabhol. That amount works out to just about $800 million. Enron, ac=
tually splurged close to $200 million on development expenses, which in gen=
tlemen's lingo is another way of saying that the energy giant could have en=
ded up bribing its way to see the once coveted project through besides figh=
ting sundry court cases in India. And it wants part of that money back. Now=
 which prospective buyer will compensate Enron for possible bribes or for m=
aking court appearances?=20

Enron, it appears, has also claimed another $140 million as its share of Da=
bhol's retained earnings, which should eventually go to all stake-holders i=
n DPC (the MSEB included) once the company's board passes a resolution that=
 the amount is shared proportionately among all those who have invested in =
Dabhol's equity capital. Till then, leave the retained earnings aside. So, =
what Enron should work on is a fair discount on its equity contribution in =
the project, which is no more than $800 million. Now given its willingness =
to take a 30 per cent knock, Enron should not expect more than $560 million=
 as the asking price for walking out of Dabhol. Add to that, if you will, a=
nother $140 million by way of retained earnings and Enron should not be get=
ting more than $700 million at the most. Is Enron willing to take this knoc=
k?=20

Given a choice, it could resist this offer. But Enron has no choice. And th=
at's reason for cheer. Last week, Enron, close to the present American disp=
ensation (chairman Ken Lay was the biggest fund-raiser for President George=
 Bush's campaign effort last year) opted for a $7.8 billion rescue offer fr=
om smaller Houston rival Dynegy after narrowly escaping credit ratings cut =
to junk status. For the past several months Enron had been using its clout =
with Mr Bush to push through a bail-out package on Dabhol that suited its t=
erms. That privilege now seems to be gone as the company grapples to stave =
off a Securities Exchange Commission inquiry into off-balancesheet transact=
ions. And until Enron clears several questions back home about its finances=
, it will remain suspect in the eyes of US investors.=20

In India, where Enron's made more news for its misses than its hits, the ti=
ming couldn't have been more opportune than now for prospective private bid=
ders to strike a potentially lucrative deal. Two such bidders, Tata Power a=
nd BSES, are said to have offered no more than $400 million to buy out Enro=
n's stake in DPC. It's time they stuck to that price. Or else, we could sti=
ll end up being suckers. What?=20
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THE HINDU BUSINESS LINE, Wednesday, November 14, 2001
'LNG Laxmi' to bring prosperity to SCI, P.Manoj=20

A DIWALI gift is on the way to State-owned Shipping Corporation of India (S=
CI) when a consortium takes possession of a 137,000 cubic metre capacity LN=
G tanker from Japan's Mitsubushi yard on Thursday (November 15) after weath=
ering a last minute financial storm. Aptly named `LNG Laxmi', after the God=
dess of Wealth and Prosperity, SCI's 20 per cent equity stake in the projec=
t worth $ 1 million will bring in returns in the form of time charter hire =
rates in proportion to its equity holding. Though, the 20 per cent stake wi=
ll ensure a board presence for SCI on the joint venture Greenfield Shipping=
 Company, it falls short of ensuring veto powers for the State-owned shippi=
ng line. This is the maiden foray by an Indian shipping company into the hi=
ghly specialised and capital- intensive LNG shipping trade, marked by stead=
y revenue streams over long periods, ranging from 10 to 25 years. Says Mr P=
 K Srivastava, Chairman and Managing Director, SCI: ``This was a pioneering=
 effort by an Indian shipping company into LNG shipping.=20

So we were very keen that we should not fumble. We are optimistic that the =
experience gained from Greenfield would lead us to more such ventures in fu=
ture.'' Rightly so. While LNG Laxmi was being built, SCI also secured its s=
econd LNG shipping deal, when it teamed up with Mistui, NYK Line and K Line=
 to clinch the contract from Petronet LNG Limited (PLL) for owning and oper=
ating two tankers of 138,000 cubic metre capacity each for transporting gas=
 from Qatar to Dahej in Gujarat. Though SCI had only 20 per cent stake in G=
reenfield, it managed to secure a higher holding of 34.21 per cent in the P=
LL deal worth Rs 130 crore. Originally, LNG Laxmi was ordered for transport=
ing 2.5 million metric tonnes per annum of LNG from Oman to the controversi=
al Dabhol Power Project in Maharashtra.=20

Greenfield was formed for owning and operating the tanker costing $220 mill=
ion. The consortium members comprise Japan's Mitsui O.S.K. Lines holding 60=
 per cent stake, SCI and Enron-affiliate Atlantic Commercial Inc with 20 pe=
r cent stake apiece. Greenfield had entered into a time charter agreement w=
ith DPC for transporting gas from Oman to its power plant in Maharashtra fo=
r a period of 20 years at a time charter hire rate of $98,600 per day. With=
 DPC in trouble, the time charter party signed between DPC and Greenfield w=
ill be scrapped. `LNG Laxmi' went through major birth pangs before the prom=
oters were able to take possession of the vessel. In the process, Greenfiel=
d underwent a major change in the complexion of its promoters leading to a =
re-alignment in the equity holding pattern.When Enron announced its intenti=
on to exit from DPC by selling its equity in view of the problems facing th=
e power plant, the bankers to the LNG shipping deal led by ANZ Investment B=
ank, decided not to disburse the last tranche of the project loan of $ 55 m=
illion, declaring an event of default. This was after the 16-member lending=
 consortium had provided $ 110 million as debt to fund the project out of a=
 total loan commitment of $ 165 million. The three promoters were now requi=
red to invest an additional $ 55 million to bridge the gap in the project c=
ost to take possession of the vessel or face the risk of the tanker being c=
onfiscated by the lenders to recover their investments.=20

Then came the knight in shining armour in the form of the Oman Government w=
ho was generous enough to bail out LNG Laxmi from the tentacles of the lend=
ers. The Oman Government offered to time charter LNG laxmi for 20 years at =
a charter hire rate of over $70,000 per day besides picking up 50 per cent =
equity in Greenfield, buying out the 20 per cent stake of Atlantic as well =
as acquiring 30 per cent from Mitsui. The financial crisis facing LNG Laxmi=
 was thus sorted out. Oman Government would bring in $27.5 million as its c=
ontribution for holding a 50 per cent stake in Greenfield, Mitsui will inve=
st an additional $ 16.5 million for its 30 per cent stake while SCI's extra=
 contribution would be $11 million for its 20 per cent stake. As per curren=
t plans, the Oman Government will sub-charter `LNG Laxmi' to Oman LNG in wh=
ich it holds a 51 per cent stake to ferry some of its LNG cargo to Korea an=
d Britain, among other destinations.=20
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THE FINANCIAL EXPRESS, Wednesday, November 14, 2001
DPC arbitration tribunal to meet on November 24, Sanjay Jog=20

The maiden meeting of the arbitration tribunal headed by Lord Mustill, afte=
r the takeover of Enron Corp by the Dynegy Inc, will take place on November=
 24 in London to decide the future course of action on carrying out arbitra=
tion proceedings against the Maharashtra government initiated by the Dabhol=
 Power Company (DPC) for the non-payment of December bill of Rs 102 crore. =
The arbitration tribunal comprises Maharashtra government's arbitrator Quei=
nton Loh and the DPC's arbitrator Andrew John Rogers QC (former chief judge=
 of the commercial division of the Supreme Court of New South Wales). The m=
eeting deserves significance especially when the conciliatory efforts betwe=
en the DPC, the Maharashtra government and the government of India which co=
ncluded on August 18 failed to reach a compromise formula as the trio stuck=
 to their stands. The DPC referred the matter of non-payment of December bi=
ll to the arbitration tribunal led by Lord Mustill.=20

Sources told The Financial Express that the November 24 meeting would decid=
e the future timetable of arbitration proceedings to be held in London as p=
er the power purchase agreement and the UNCITRAL Arbitration Rules. The dis=
pute related to the non-payment of December bill would be taken up during t=
hese proceedings. The DPC, which has been restrained by the Supreme Court f=
rom proceeding against the Maharashtra State Electricity Board for carrying=
 out arbitration process until the issue of jurisdiction of Maharashtra Ele=
ctricity Regulatory Commission is resolved, in its arbitration notice serve=
d on April 12 had said that the board had disputed the payment of December =
2000 bill. The MSEB, which was served a total bill of Rs 159.86 crore on Ja=
nuary 5, 2001 failed to pay the full the sum on the due date, January 25.=
=20
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THE TIMES OF INDIA, Thursday, November 15, 2001
`Enron buyout will not affect Dabhol project'

The buyout of Enron Corp by its rival, Dynegy Inc, would have no bearing on=
 the future of the Dabhol Power project for the moment. It is learnt that t=
alks on selling out Enron's investment in DPC, amounting to over $ 1 billio=
n, would continue as before. A DPC spokesman said, "It is too early to comm=
ent on how this will impact us." On the question of selling Enron's stake i=
n DPC, he said, "While discussions are happening, it will be inappropriate =
to comment." According to the agreement worked out last week with Dynegy, E=
nron Corp would sell its share for $9.5 million. Pointing out that the deal=
 with Dynegy would materialise only in the third quarter of 2002, an offici=
al with a Indian financial institution aid, "It is important to realise tha=
t this is not a deal based on balance sheets but a stock-swap."=20

The deal was announced even as Indian and foreign lenders to the DPC were m=
eeting in Singapore with DPC office-bearers to negotiate with bidders. The =
prominent companies interested in buying out DPC at this stage are Tata Pow=
er and Bombay Suburban Electric Supply (BSES). A senior official with a fin=
ancial institution said that though assets like DPC could be transferred to=
 Dynegy at a later stage, these aspects would emerge only later in the talk=
s to consolidate the takeover. Financial institutions though are concerned =
about the fallout of the deal on the offers received for Enron's stake in D=
PC. Also, the legal status of such a sale, if it does take place, would hav=
e to be scrutinised carefully, says a senior official of a company which ha=
s lent funds to DPC. In Singapore, Indian FIs led by IDBI and including ICI=
CI and State Bank of India met DPC executives over two days from November 8=
 and discussed the pricing of the stake of the three multinational partners=
 in DPC - Enron, Bechtel and General Electric - with the prospective sponso=
rs, Tata Power and BSES. Incentives promised by the Centre to expedite reso=
lution of the decade-old controversy and the possibility of an affordable t=
ariff also came up for discussion.=20
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THE FINANCIAL EXPRESS, Thursday, November 15, 2001
DPC meet suggests lenders taking cut, MAT exemption, Sanjay Jog=20

A reduction in per unit tariff at Rs 2.70, equity holders and lenders to ta=
ke hits and cuts, a cut in interest rate, exemption from payment of minimum=
 alternate tax, providing mega power status for the Dabhol project and, abo=
ve all, separation of the liquefied natural gas (LNG) facility from the pow=
er project are some of the highlights of the package considered by the Indi=
an Financial Institutions (IFIs) along with Dabhol Power Company (DPC), Tat=
a Power and BSES at the recently concluded three-day meet in Singapore.=20

IFI sources involved in the Singapore meeting told The Financial Express th=
at the participants have made it clear that the implementation of the packa=
ge would not be possible unless the present equity holders and lenders are =
prepare to take hits and cuts and the Government of India, Government of Ma=
harashtra and Maharashtra State Electricity Board (MSEB) provide substantia=
l incentives and concessions. The emphasis has been laid on a substantial r=
eduction in tariff and an early completion of Dabhol phase-II - the constru=
ction of which has been suspended since June 17. "The project will continue=
 to languish if there is no possibility of providing power at an affordable=
 tariff by adding value to the equity," sources added.=20

According to sources, both equity holders and lenders would stand to loose =
enormously as both would have to take hits and cuts. "The existing equity p=
romoter would have to be prepared to take a substantial cut in the equity v=
alue without which the tariff would not come down to a reasonable level," s=
ources said. They have stressed the need for a payment security mechanism f=
or the sale of power. "The Government of Maharashtra will have to take a po=
licy decision to allot suitable distribution circles of above 1,500 mw capa=
city load without which the project will remain unviable," sources said. Th=
e IFIs and utilities have demanded that the Centre would have to provide ex=
emption from the payment of minimum alternate tax (MAT). "Such an incentive=
 is needed as tax is passed on to the consumers. The exemption in MAT will =
ultimately help in the reduction of tariff," sources said. The package also=
 envisages substantial reduction in interest rates by lenders, conversion o=
f foreign debt into rupee debt so that the price of power would not get aff=
ected following foreign exchange fluctuations. The IFIs, DPC, Tata Power an=
d BSES have also suggested a suitable moratorium period of 15 years or more=
. They have unanimously called for providing a mega power status to the Dab=
hol project in a bid to get concessions in the customs duty.=20

According to sources, the existing promoters would have to facilitate final=
isation of a new fuel supply agreement which would result in the fall in co=
st of supply. Further, the LNG facilities would have to be restructured to =
help reduce the capital cost substantially. According to the power purchase=
 agreement between DPC and MSEB, the re-gassification facility is for 5 mil=
lion metric tonne per day (MMTPA) of LNG, whereas the power plant has contr=
acted for only 2.1 MMTPA of LNG (of which 1.8 million tonne is take or pay)=
, and even using that requires an unreasonably high plant load factor. Acco=
rding to Madhav Godbole renegotiation committee, after segregating the LNG =
facility, it could be marketed to other buyers of gas, separate from the po=
wer project. Sources said various government departments and lenders would =
have to consider this package as appropriate decisions would have to be tak=
en at different levels. Moreover, cabinet decisions as well as approvals fr=
om the board of directors of IDBI, ICICI and other lenders would also be re=
quired for the implementation of the package.=20
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THE FINANCIAL EXPRESS, Thursday, November 15, 2001
Andersen's underbelly gets exposed, Sunil Jain=20

The Enron disclosures raise questions about top-notch audit firms. After al=
l the curious financial dealings of various Enron Corp officials, comes the=
 admission that the firm had overstated its profits by around a fifth for t=
he past four years. The disclosure comes in a Securities and Exchange Commi=
ssion filing on the eve of the Enron-Dynegy takeover talks. For those India=
ns who've been agitating against Dabhol Power Company plant in Maharashtra,=
 all this is, of course, just another 'example' of the power company's perf=
idy. If Enron could do this in the US, imagine the kind of fiddles it must =
have done in the case of the Dabhol plant.=20

This, may or may not be true, and certainly needs to be proved. But the fir=
m whose reputation has taken an equal, if not bigger beating, is the audit =
firm Arthur Andersen, a reputed global player. What was, a lawsuit filed la=
st week in Oregon asks, Arthur Andersen doing when all this happened? How c=
ould Andersen not find anything fishy with Enron's financial deals? And, th=
ough the law suit doesn't deal with this, how did Andersen allow such a mas=
sive over-stating of profits? While only a probe will reveal how things man=
aged to go so wrong, it's a good idea to go back and read a book called The=
 Big Six by Mark Stevens, incidentally also the author of The Big Eight, wh=
ich is the number of the top global audit firms before they consolidated an=
d reduced their number to six. Stevens' most evocative story is the one abo=
ut ZZZZ Best, the carpet-cleaning business begun by Barry J Minkow. Barry b=
uilt his company into a formidable enterprise with a turnover of $ five mn,=
 and then decided to go public, and while doing so, boasted that his firm w=
as in the lucrative insurance-restoration business - that is, he got restor=
ation contracts from insurance firms. Minkow then hired top accounting firm=
 Ernst & Whinney (that later merged with Arthur Young to become Ernst & You=
ng) to help boost his image.=20

Ernst decided to do an audit of Minkow's insurance business. Minkow hired s=
omeone's office in Sacramento, bribed the security guard to pretend he was =
familiar with ZZZZ's staff and forced Ernst to do an inspection on a Sunday=
, when other offices were closed. Ernst gave a glowing report of the busine=
ss. The same pattern of 'inspections' was then repeated in other cities. Wh=
en the scandal became public, Ernst pleaded they couldn't be blamed for not=
 being able to detect such an elaborate fraud, and they certainly didn't ha=
ve the skills of the police. The police, who, for instance, just spent arou=
nd ten minutes in each city going to the building department to find out if=
 the buildings that ZZZZ was helping 'restore' had ever had a fire or water=
 leakages ZZZZ claimed they'd had.=20

Fair enough, but the House Committee on Oversight asked what about the 'con=
fidentiality letter' that Ernst had signed? A confidentiality letter that s=
aid Ernst would never disclose the location of the buildings ZZZZ was resto=
ring to any third party - that's fine. It also said it would 'not make any =
follow-up telephone calls to any contractors, insurance companies, the buil=
ding owner ... involved in the restoration project.' Congressman Ron Wyden =
asked Ernst how it proposed to do an independent audit with such restrictio=
ns? Ernst said 'It did not restrict me being able to perform that and I did=
 go on site ... if I would have had any questions that came up in the cours=
e of that review, I would have pursued those questions ...' Of course, ques=
tions didn't come up because Ernst wasn't looking too hard.=20

It gets better. An informant told Ernst the 'restoration' job it had inspec=
ted in Sacramento was a fake. Later, the charge was withdrawn, but none of =
this made Ernst want to revisit the Sacramento site. Later, Ernst walked ou=
t on ZZZZ after some bad press about false credit card billings by ZZZZ, an=
d the account was taken over by Price Waterhouse. This despite Ernst tellin=
g Price Waterhouse that it had found evidence of payments by ZZZZ to the in=
dividual who made and then withdrew the complaint about the restoration job=
s being fake! Incidentally, the discovery didn't prompt Ernst into reportin=
g the matter to the authorities either.=20

In other cases, like the widely-reported Savings & Loan scandals in several=
 states, it was the Big Six - such as Touche Ross in the S&L case - who all=
owed firms to get away with major fiddles such as changing descriptions of =
loans, and ignoring warnings by even the internal auditors. In one Congress=
ional hearing, for instance, the Touche partner was talking of a particular=
 deal which had both an equity and a loan component. What was the amount of=
 the equity, the Congressman asked. I don't know, replied the Touche partne=
r? And they were the auditors. The Enron-Andersen episode shows much remain=
s the same. It'll be interesting to see what action the SEC takes against b=
oth Enron and Andersen in this case. The veneer of professionalism of the B=
ig Six audit firms, needless to say, has been badly damaged.=20
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THE ASIAN AGE, Friday, November 16, 2001
Bidders demand distribution rights, Rajesh Unnikrishnan=20

The two bidders for the 85 per cent stake in Enron promoted Dabhol Power Co=
mpany - Tata Power and BSES Ltd have demanded the distribution rights for t=
he 1,500 mw power from Dabhol in the Maharashtra state as one of the pre-co=
ndition for buying out the stake. The bidders' demand will be one of the ma=
in points in the new proposal being prepared by the Indian financial Instit=
utions led by the Industrial Development Bank of India for the Maharashtra =
state government and the Maharashtra State Electricity Board. This was one =
of the main issues which had been discussed between the Indian FIs, Tatas a=
nd BSES during their recently concluded meeting in Singapore.=20

Sources close to the development said that both Tatas and BSES have asked a=
 1,500 mw power distribution zone preferably Nagpur Distribution Zone or Na=
vi Mumbai Distribution Zone to formulate a workable model for DPC project o=
nce the equity acquisition gets over. FIs sources said that there have been=
 some preliminary talks in this direction. " We believe that a workable mod=
el would emerge in order to facilitate the take-over," they said. However, =
the sources refused to divulge more on the issue. However, a senior executi=
ve engineer of MSEB said that the Board is totally out of the picture now. =
There is no official communication from the FIs as far as the allocation of=
 distribution zones are concerned. Once a proposal comes in, MSEB will cons=
ider it. Industry sources pointed out that allocating new distribution zone=
s will not be a viable idea for MSEB as the financial health of the board h=
as been deteriorating for the last couple of years. Navi Mumbai Distributio=
n Zone and Nagapur Distribution Zone are considered as the cash- rich distr=
ibution zones and giving away any of these zones would further affect the f=
inancial health of board.=20
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THE FINANCIAL EXPRESS, Friday, November 16, 2001
MSEB asks Dabhol Power to defer Houston meet in wake of HC order, Sanjay Jo=
g=20

The Maharashtra State Electricity Board (MSEB) has dashed off a letter aski=
ng the Dabhol Power Company (DPC) to postpone the November 19 board meeting=
 slated to take place in Houston, in view of the Bombay High Court restrain=
ing DPC from issuing a final termination notice. The DPC board among others=
 proposes to authorise the Enron India managing director K Wade Cline to is=
sue the final termination notice to the MSEB. MSEB, which has heaved a sigh=
 of relief following the Bombay High Court order on a civil suit filed by t=
he Indian financial institutions (FIs), have made it clear that the meeting=
 needed to be postponed as the state principal energy secretary VM Lal, who=
 is on the DPC board, had been to London to brief the government solicitors=
 DLA in connection with the ex-parte order passed by the London court restr=
aining the state government from filing any civil suit against DPC in India=
. MSEB has said that Mr Lal would need some time as he was busy with the Lo=
ndon court matter.=20

MSEB sources told The Financial Express that it has told the DPC that there=
 was no point rushing for November 19, as the high court has already prohib=
ited the DPC from issuing a final termination notice "until further orders.=
" Sources added that the high court has slated next hearing on December 3. =
However, DPC has verbally communicated to the MSEB that as of now the meeti=
ng was on. According to DPC, the final termination notice would not be serv=
ed at the November 19 meeting but it would simply authorise the Enron India=
 managing director K Wade Cline for issuing such a notice to MSEB, the sour=
ces said. DPC spokesman Jimmy Mogal said "we are unable to confirm or deny.=
 Mr Cline, who had recently attended the three-day Singapore meet convened =
by the Indian financial institutions, has yet to land in Mumbai as he is st=
ill camping in Singapore. Mr Cline, who would later go to Houston, New York=
 and Washington in the wake of Dynegy Inc's decision to acquire Enron Corp,=
 is likely to return to Mumbai around December 3.=20

The November 19 meeting, which coincides with the expiry of six months sinc=
e the issuance of a preliminary termination notice by DPC to MSEB on May 19=
, would also take up issues related to the question of financial position o=
f DPC relating to the phase-I (740 mw) which has been lying idle since MSEB=
's decision to suspend power purchase from May 29. The meeting would also t=
ake up matters related to the debt servicing for phase-II (1,444 mw). The c=
onstruction work has already brough to a halt following the termination of =
construction contract by the construction contractors from June 17. The DPC=
 has already defaulted the interest/guarantee fee of Rs 57 crore, which was=
 due in September/October this year to rupee lenders/guarantors.=20

Maharashtra govt denies permission to attend meet=20
The Maharashtra government has denied its consent to MSEB chairman Vinay Ba=
nsal, the state principal energy secretary VM Lal and MSEB technical direct=
or Prem Paunikar for attending the November 19 meeting at Houston. It is li=
kely that none of the directors representing MSEB and the state government =
would be present for the said meeting. MSEB holds 30 per cent equity in the=
 Dabhol Phase-I while it has not picked up similar equity in the Phase-II i=
n view of its precarious finances.=20
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THE ASIAN AGE, Saturday, November 17, 2001
MSEB 'will not' attend DPC meet in Houston=20

Maharashtra State Electricity Board has once again decided not to attend th=
e board meeting of Enron-promoted Dabhol Power Company, scheduled to be hel=
d in Houston on November 19. "We reserve our right to be present in the boa=
rd meeting being held in Houston," MSEB sources said on Friday. This is the=
 third time that MSEB has refused to attend the board meetings, which were =
earlier held in Mumbai. It also did not attend the annual general meeting o=
f the energy major held a couple of months ago in the city. "DPC has consis=
tently ignored our rebate claim for their material misrepresentation in the=
 operating capabilities of the plant. Since there is nothing that we can di=
scuss we see no point in attending such meetings," sources added.=20

A DPC spokesman, when contacted, declined to comment stating that "it is a =
statutory internal matter." MSEB also refused to take cognisance of the Nov=
ember 5 asset transfer notice and several monthly bills despatched by DPC s=
tating that it had rescinded the power purchase agreement. The first prelim=
inary termination notice expires on November 19, the same day as the board =
meeting. However, the Mumbai high court has restrained DPC from issuing the=
 final termination notice till December 3. DPC has also sought lenders' app=
roval for issuance of the final termination notice but Indian lenders are y=
et to give their consent. (PTI)=20
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THE DECCAN CHRONICLE, Saturday, November 17, 2001
MSEB to skip Enron board meet=20

Maharashtra State Electricity Board has once again decided not to attend th=
e board meeting of Enron-promoted Dabhol Power Company, scheduled to be hel=
d at Houston on November 19. We reserve our right to be present in the boar=
d meeting being held in Houston, top MSEB sources said here on Friday. This=
 is the third time that MSEB has refused to attend the board meetings, whic=
h were earlier held in Mumbai. It also did not attend the annual general me=
eting of the energy major held a couple of months ago in the city. DPC has =
consistently ignored our rebate claim for their material misrepresentation =
in the operating capabilities of the plant. Since there is nothing that we =
can discuss we see no point in attending such meetings, the sources added. =
A DPC spokesman declined to comment on the matter.=20
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THE INDIAN EXPRESS, Saturday, November 17, 2001
Parleys on Enron stake sale continue; BSES, Tata Power begin due diligence

WHILE more skeletons are tumbling out from Enron's cupboards in Houston, he=
ctic negotiations are currently on between Indian financial institutions an=
d power firms BSES and Tata Power for the sale of Enron's Dabhol power proj=
ect. Mumbai-based power companies BSES Ltd and Tata Power have kicked off t=
he process of carrying out due diligence - to find out the true value of th=
e project and economics of the takeover - of the troubled $2.9 billion Dabh=
ol Power Company (DPC). Facing a default on its Rs 6,190 crore loan to DPC,=
 Indian financial institutions are pushing the takeover plan seriously with=
 Enron and bidders. They are also looking out for other buyers besides DPC =
and BSES.=20

BSES has already announced its decision to appoint internal and external ta=
sk forces for carrying out due diligence of the project after signing a con=
fidentiality agreement with DPC. Tata Power is also negotiating to work out=
 the modalities for signing a confidentiality agreement for carrying out du=
e diligence. "Indian institutions are insisting for a minimum reserve price=
 of $700 million (around Rs 3,360 crore) for the Enron stake. Now the ball =
is in the courts of BSES and Tata," said an institutional source. However, =
both BSES and the Tatas are not in favour of paying more than $400 million =
for the project due to huge liability including to the Indian Customs.=20

BSES chairman and managing director RV Shahi had already gone on record say=
ing that the company has shown its interest to acquire 85 per cent stake (6=
5 per cent of Enron and 20 per cent of GE and Bechtel) in the Dabhol projec=
t at the recently concluded Singapore meeting convened by the Indian financ=
ial institutions (IFIs). The rest of the equity would be held by MSEB which=
 is the only buyer of power from Dabhol Power. Shahi said until the complet=
ion of due diligence, BSES expects concrete formulations of various types o=
f incentives/concessions which should be available from the Government of I=
ndia, Government of Maharashtra and lenders. "Outcome of due diligence with=
 concrete proposals of incentives/concessions will enable BSES to assess th=
e valuation for the Dabhol project. It is not a workable proposal for the c=
ompany to accept without due diligence," he added. Bidders are keen that al=
l the steps should be required to significantly reduce the generation tarif=
f. "Unless that happens it will be difficult to positively look at the oppo=
rtunity," said an official.=20

But it's still not clear whether Dynegy will support the exit plan. "Though=
 the takeover has been announced, the process will be completed only by the=
 third quarter of next year," Enron circles said. Maharashtra State Electri=
city Board (MSEB) which holds 15 per cent stake in DPC is trying hard to pr=
event any exit before the stake sale. It is learnt that the two bidders are=
 keen for a reduction in per unit tariff at Rs 2.70, a cut in interest rate=
, exemption from payment of minimum alternate tax, providing mega power sta=
tus for the Dabhol project and separation of liquefied natural gas (LNG) fa=
cility from the power project. These issues were considered at the recent S=
ingapore Singapore meet. "The project will continue to languish if there is=
 no possibility of providing power at an affordable tariff by adding value =
to the equity," FI sources add.=20

According to sources, both equity holders and lenders would stand to loose =
enormously as both would have to take hits and cuts. "The existing equity p=
romoter would have to be prepared to take a substantial cut in the equity v=
alue without which the tariff would not come down to a reasonable level," s=
ources said. They have stressed the need for a payment security mechanism f=
or the sale of power. "The Government of Maharashtra will have to take a po=
licy decision to allot suitable distribution circles of above 1,500 mw capa=
city load without which the project will remain unviable," sources said. Th=
e FIs and utilities have demanded that the Centre would have to provide exe=
mption from the payment of minimum alternate tax. "Such an incentive is nee=
ded as tax is passed on to the consumers. The exemption in MAT will ultimat=
ely help in the reduction of tariff," sources said.=20

The package also envisages substantial reduction in the interest rates by l=
enders, conversion of foreign debt into rupee debt so that the price of pow=
er would not get affected following foreign exchange fluctuations. The IFIs=
, DPC, Tata Power and BSES have also suggested a need for a suitable morato=
rium period of 15 years or more. They have unanimously called for providing=
 a mega power status to the Dabhol project in a bid to get concessions in t=
he customs duty. MSEB, which has heaved a sigh of relief following the Mumb=
ai high court order on a civil suit filed by the Indian financial instituti=
ons, have made it clear that the meeting needed to be postponed as the stat=
e principal energy secretary VM Lal, who is on the DPC board, had been to L=
ondon to brief the government solicitors DLA in connection with the ex-part=
e order passed by the London court restraining the state government from fi=
ling any civil suit against DPC in India. MSEB has said that Lal would need=
 some time as he was busy with London court matter.
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THE HINDU BUSINESS LINE, Sunday, November 18, 2001
It is deal-making time in Dabhol, D. Sampathkumar

THE Enron-promoted Dabhol Power Company continues to navigate choppy waters=
, in its quest for the safe harbour of unhindered domestic operations. If t=
he uncertainty over cancellation by the Maharashtra State Electricity Board=
 (MSEB) of its power purchase agreement with the company is not enough, the=
re comes the news that MSEB, a 15 per cent stakeholder in the company, refu=
ses to participate in the deliberations of the company's Board. Its tactica=
l compulsions in this regard are entirely understandable. It does not want =
to be even remotely seen as party to decisions of the company that could co=
mpromise its claims against the company at a later date. But the continuing=
 standoff between the MSEB and the overseas promoters notwithstanding, a un=
ique combination of circumstances has provided the right conditions for an =
amicable resolution of the messy tangle that the project is enmeshed in, at=
 the moment. Each of the parties with a stake in the project has its own co=
mpulsions in seeking a resolution of the dispute and thereby put an end to =
the uncertainties facing them vis-a-vis their financial exposure to the pro=
ject. For all the bravado, the basic fact remains that none of the parties =
involved in the deal can afford to dig in its heels and refuse to go along.=
 Leading the list is Enron, the project's principal promoter. Its claims to=
 being the injured party in the game of political football that the project=
 has become, has lost some of its strength in the wake of troubles confront=
ing it at home. Its non- energy business is largely in tatters and controve=
rsies over accounting policies and disclosures of performance, are developm=
ents it could have done without in its quest for an image of purity of a fr=
esh driven snow.=20

Adding a new dimension to the issue is the news of takeover of Enron by Dyn=
egy Inc., a much smaller rival in the industry but without any of the exces=
s baggage of questionable investments of the former. This is a positive dev=
elopment. Dynegy would have its hands full managing the merged business wit=
h all its inherent complexities. The position domestic financial institutio=
ns find themselves in, in this imbroglio, is even more untenable than that =
of the overseas promoter. Servicing of debt would be the first casualty in =
any termination of the commercial contract between the Maharashtra Electric=
ity Board and Dabhol Power Company. With their balance sheets in a precario=
us position the implications for provisioning for non-performing assets tha=
t a default occasions are horrendous. As for the Central Government, its po=
sition as merely the counter guarantor of MSEB's payment obligations under =
the power purchase agreement does not offer it much room for comfort. Also,=
 while in theory, the Centre can pay and recover it out of the finances dev=
olving on Maharashtra from the Centre, in practice, this may prove to be po=
litically infeasible. As it is, some of the more prosperous states in the f=
ederal set-up feel they are contributing far more to the cause of balanced =
regional development than they can reasonably be credited with. The extract=
ion, by way of counter-guarantee obligations, is certain to stoke fissiparo=
us regional sentiments besides handing out a stiff price to the party in po=
wer at the Centre when it is election time in that region.=20

What, then, could be the contours of a possible deal among the interested p=
arties? If the deal is to be sold by each party to its constituents, it mus=
t be seen as a fair one and yet recognise the harsh commercial realities th=
at characterise the present situation of each of the parties to the dispute=
. The project with its integrated structure of power generation, port handl=
ing and regasification can no longer be sustained if domestic bidders are t=
o be roped in as new promoters. For then, the financial outlay implicit in =
a project of such a composite nature is beyond the capability of most domes=
tic players in the power utility business. It hence needs to be rebundled i=
nto two components - namely, the generation assets and support infrastructu=
re such as gas terminal and regasification plant.=20

Second, differential treatment in the valuation of assets in the two phases=
 of the projects is a must. Enron, after all, is in possession of a counter=
-guarantee for the investment made in the first phase of the project. Hence=
, the broad principle of international market price for assets taken over w=
ill have to be tempered by the recognition that insofar as the first phase =
is concerned, the valuation is not so much for pieces of generating equipme=
nt as for a stream of guaranteed cash flows from a commercial contract. The=
 political education expenses that Enron has admittedly incurred cannot com=
pletely be ignored as some Indian entities appear to have been the benefici=
aries. Sensitivity to these aspects provides a possible framework for resol=
ving the dispute.
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THE ECONOMIC TIMES, Wednesday, November 14, 2001
'DPC sale to be decided by Enron, Tatas, BSES'=20

THE INDUSTRIAL Development Bank of India on Monday said the selling price o=
f the erstwhile US energy major Enron's troubled Dabhol Power Company will =
be decided by the two city-based utilities Tata Power and BSES with the mul=
tinational through `mutual negotiations'. "It is expected that further step=
s in this regard will be initiated by DPC, BSES and Tata Power in the next =
few days to begin the due diligence, after signing a confidentiality agreem=
ent with DPC," IDBI chairman and managing director P P Vora said in a state=
ment here. He said Indian financial institutions including IDBI, ICICI, Sta=
te Bank of India and IFCI, who have an exposure of over Rs 6,000 crore in D=
PC, along with the Centre, MSEB and Maharashtra government, could consider =
certain incentives to prospective new sponsors with a view to making the pr=
oject more attractive and bring down the tariff to a reasonable level. "Bri=
ef features of an incentive package prepared by a committee appointed by th=
e Centre were also discussed," Vora said.

DPC officials also clarified various technical and operational issues, whic=
h will need to be resolved for smooth management transfer and successful op=
eration of the plant by the new sponsors, it said. The three day Singapore =
meeting of the FIs with DPC and the private utilities also included officia=
ls from National Thermal Power Corporation and Central Electricity Authorit=
y to to provide technical advice, the Chairman informed. The issues discuss=
ed included completion of the 1,444 mw phase-II of the project and the cost=
 thereof, sale of Enron, Becthtel and GE's shareholding in DPC (aggregating=
 85 per cent of total capital) to either of the prospective new sponsors li=
ke BSES and Tata Power."Based on these discussions and clarifications provi=
ded by IFIs and DPC, both BSES and Tata Power have expressed deep interest =
to purchase the 85 per cent shareholding of DPC subject to certain conditio=
ns, inter-alia, on price of shares and other related technical and operatio=
nal issues," Vora said.

After their return from the three-day Singapore meet, a senior FI official =
had confirmed that "the road map was now clear. Tata Power and BSES will fo=
rmally look into the financial books of DPC, its loans, sponsors and other =
assets and most importantly the legal wrangles and then make a final bid fo=
r the distressed company". Interestingly, the erstwhile energy major had in=
formed the FIs a few days ago that it was ready to take a 30 per cent hit o=
n its equity at around $850 million from the initial offer price of $1.2 bi=
llion. However, both Tata Power and BSES have demanded a 50 per cent reduct=
ion in Enron's offer. (PTI)=20
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THE TIMES OF INDIA, Thursday, November 15, 2001
Tatas, BSES keen to acquire DPC=20

Indian power generation companies Tata Power Company Ltd and BSES Ltd have =
expressed interest in acquiring the 85 percent stake held by Enron and its =
associates in the controversial Dabhol Power Company. "Both BSES and Tata P=
ower have expressed deep interest to purchase the 85 percent shareholding h=
eld by Enron and its associates. They would also like to conduct due dilige=
nce of the project," said a statement Tuesday by the Industrial Development=
 Bank of India (IDBI), the lead lender to the project. The statement also s=
aid lenders and owners of Dabhol held a three-day meeting last week in Sing=
apore that was "fruitful and expected to pave the way towards the solution =
for the various issues." US-based Enron has said expects about $1 billion f=
or the stake. Enron, along with the Maharashtra State Electricity Board and=
 the state government, had jointly set up the power plant in the western st=
ate, which stopped generating electricity after MSEB failed to pay for powe=
r from the 1,284 megawatt project. DPC has served an "asset transfer notice=
" to the MSEB for the valuation of the company's assets in order to sell th=
em off. IDBI and other lenders such as the State Bank of India, ICICI and I=
FCI have lent more than Rs 6000 crore to the project and filed a lawsuit ag=
ainst DPC to ensure they get their funds back. ( AFP )
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THE ECONOMIC TIMES, Sunday, November 18, 2001
Govt not to encash gurantees against DPC=20

IN AN ad-interim order, Mumbai High Court has restrained the Centre and cus=
toms authorities from encashing guarantees undertaken by State Bank of Indi=
a in regard to customs duty payable by Enron-promoted Dabhol Power Corporat=
ion for importing equipment to build liquified petroleum gas terminal in it=
s Dabhol plant. The ex-parte injunction was granted by justice D G Karnik o=
n November 15 on a petition filed by DPC challenging the show cause notice =
issued by customs authorities asking the company to pay Rs 245 crore as imp=
ort duty on the equipment. The court also restrained the SBI to make paymen=
t under the guarantees undertaken by it on behalf of DPC. The judge, howeve=
r, allowed DPC to file an appeal before customs, excise and gold appellate =
tribunal within a period of four weeks from the date of his order (November=
 15). He also ruled that the ex-parte injunction order shall automatically =
stand vacated from December 15 subject to the orders that may be passed by =
the tribunal.

Meanwhile, the court directed DPC and respondents to keep the bank guarante=
e alive and enforceable. It also ordered that notices be issued to the resp=
ondents after four weeks. On a show cause notice issued by the customs depa=
rtment, the adjudicating officer had ruled that the power producer had wron=
gly availed of the customs duty concession to import equipment needed for L=
PG project. According to him, the concession was available only for the pow=
er plant and not for the LPG facility. He had also imposed a penalty of Rs =
45 crore taking the total liability of DPC to Rs 290 crore. DPC, on the oth=
er hand, contended that LPG facility was essential to the power project and=
 was thus eligible for concession in customs duty.( PTI )
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THE ECONOMIC TIMES, Friday, November 16, 2001
FIs for allotting distribution zone to DPC buyer, Anto T Joseph

IDBI-LED financial institutions are putting together a proposal to be prese=
nted to the state government and Maharashtra State Electricity Board, under=
 which the buyer of Enron's Dabhol Power Company would be allotted a distri=
bution zone. The new owner would also be allowed to sell electricity direct=
ly to consumers, if the proposal is accepted. This proposal formed the basi=
s of discussions during the recent three-day Singapore meet between IFIs, D=
PC and the two utilities in the fray for buying Enron out of DPC, Tata Powe=
r and BSES. If the proposal doesn't find favour with MSEB and the governmen=
t, it will be a setback for domestic lenders, who would be forced to piece =
together another workable model.

FI sources said offering a profitable distribution zone and allowing third-=
party sale of electricity was a pre-condition set by both the contenders. P=
rimarily electricity distribution utilities, both Tata Power and BSES will =
also evaluate one of the lucrative distribution zones of Navi Mumbai, Thane=
 or Pune as part of the package deal. ET had on October 6 reported that the=
 domestic lenders had mooted a similar proposal, with the help of the Centr=
al Electricity Authority. Maharashtra State Electricity Board had then reje=
cted the proposal to part with any part of its distribution network to any =
private power utility. Since then, things have moved fast and mostly in fav=
our of the domestic lenders with the Union government and the power ministr=
y supporting the proposal. "This is a payment security mechanism, thrown up=
 by Indian lenders. If MSEB buys the power from phase I (744 mega-watt), th=
ere needs to be a buyer for the rest of 1440 MW produced by the second phas=
e.

This could be a combination of two - handing-over of a MSEB-owned distribut=
ion circle and selling power directly to a few industries," said a BSES off=
icial. Another option of NTPC buying power from the plant was also discusse=
d at the Singapore meet. MSEB chairman Vinay Bansal told ET that no such pr=
oposal has ever come to the board from domestic lenders. "Tata Power has be=
en demanding an extension of their distribution areas. But we can't afford =
to oblige because that would imbalance our receivables," said Bansal. As th=
e FI officials pointed out, the proposal involves all involved parties maki=
ng sacrifices to salvage the project. While the sacrifice would be in the f=
orm of lower interest rates for lenders and selling its stake for an amount=
 below its initial investment by Enron, MSEB would have to sacrifice a dist=
ribution zone.

MSEB, however, says that once a lucrative zone is chopped off from its dist=
ribution area, it will lead to MSEB's cashflows declining drastically. "The=
se economics are preventing us from giving away any distribution areas," sa=
id a MSEB official. Over the last two years, Maharashtra State Electricity =
Board had tried to unbundle its functions and privatise distribution circle=
s by appointing IL&FS and the Administrative Staff College of India of Hyde=
rabad. Both IL&FS's proposal to form a joint venture to privatise Navi Mumb=
ai, and ASCI's Maharashtra Electricity Reform Bill are currently on the bac=
kburner.
nikita.varma@enron.com