8 Concerns Get Saudi Gas Project Role
The New York Times, 05/19/01

8 Western Firms Picked for Huge Saudi Gas Project
Los Angeles Times, 05/19/01

2 Houston-based companies win Saudi gas prize / Kingdom inviting 8 Western 
firms back in
Houston Chronicle, 05/19/01

Utility withdraws offer of aid
Associated Press Newswires, 05/19/01

Racicot lobbying for energy giant Enron
Associated Press Newswires, 05/19/01

INDIA: SBI says Enron move not to hit lenders.
Reuters English News Service, 05/19/01

Enron threatens to stop electricity supply to Indian state
Associated Press Newswires, 05/19/01

Gas bonanza in Saudi for BP and Shell: Eight companies are given stakes in 
pounds 15 billion bid to develop South Ghawar reserves
The Daily Telegraph, 05/19/01

Western oil companies invited back by Saudis
The Independent - London, 05/19/01

DPC issues PTN to MSEB, Deshmukh terms it as "improper step"
Press Trust of India Limited, 05/19/01

India's largest US investor Enron issues pull-out warning
Agence France-Presse, 05/19/01

Lenders to Dabhol to vote on termination notice
The Economic Times, 05/19/01


Business/Financial Desk; Section C
8 Concerns Get Saudi Gas Project Role
AP

05/19/2001
The New York Times
Page 2, Column 5
c. 2001 New York Times Company

DALLAS, May 18 -- The Exxon Mobil Corporation and Royal Dutch/Shell led a 
group of eight oil companies that will take part in a $25 billion gas 
development program in Saudi Arabia, the country's biggest opening of its oil 
and gas industry to outsiders since the 1970's. 
The Western companies will help Saudi Arabia convert its utilities, which now 
burn oil, to natural gas. This would free more crude oil for export.
The other companies selected are BP P.L.C., TotalFinaElf S.A., Conoco Inc., 
the Phillips Petroleum Company, the Occidental Petroleum Corporation and the 
Enron Corporation. Saudi Arabia's government-owned energy company, Saudi 
Aramco, will be an equity owner in the projects. 
Exxon Mobil, based in Irving, Tex., the world's largest publicly traded oil 
company; Shell; BP; and Phillips were picked to participate in the biggest of 
the projects, a $15 billion development in the South Ghawar region, according 
to the official Saudi Press Agency. The lead company was not announced. 
Exxon Mobil was also selected to lead a smaller Red Sea project that involves 
Enron and Occidental. Exxon Mobil said the combined investment in both 
projects would total $20 billion. 
Shell, TotalFinaElf and Conoco will help develop gas at Shaybah in southeast 
Saudi Arabia.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 



Business; Financial Desk
8 Western Firms Picked for Huge Saudi Gas Project
From Times Wire Services

05/19/2001
Los Angeles Times
Home Edition
C-2
Copyright 2001 / The Times Mirror Company

Exxon Mobil Corp. and Royal Dutch/Shell Group led a group of eight Western 
companies named Friday that will take part in a $25-billion natural gas 
development program in Saudi Arabia, the kingdom's biggest opening of its 
energy industry to outsiders since the 1970s. 
The companies, including Occidental Petroleum Corp. of Los Angeles, will help 
Saudi Arabia convert oil-burning utilities to natural gas, which would free 
up more of the kingdom's crude oil for export. The other companies selected 
were BP of Britain, Total Fina Elf of France and American energy firms Conoco 
Inc., Phillips Petroleum Co. and Enron Corp., the official Saudi news agency 
said.
For Saudi Arabia, the program would create jobs and spur an economy saddled 
with a 15% unemployment rate. For its business partners, the initiative 
offers benefits in the short and long term. In particular, analysts noted, 
the Western companies would have a lead should the kingdom open access to its 
crude oil reserves, the world's largest. 
"I don't think it's going to be spectacularly lucrative, but there are other 
pressing reasons to be there," said Julian Lee, an analyst at the Center for 
Global Energy Studies in London. "It's part of a long-term play by the oil 
companies, [which] want ultimately to get access again to Saudi crude." 
Saudi Arabia took over its oil fields in 1975 in the wake of tensions arising 
from the Arab oil embargo against the West that began in 1973. 
The awards announced Friday are the culmination of three years of talks and 
lobbying by the companies with the Saudis, whose natural gas reserves are the 
world's fifth-largest. 
Shares of all five American companies rose in trading Friday on the New York 
Stock Exchange. Exxon Mobil gained $1.47 to close at $90.20, Phillips rose 
$1.65 to $67.52, and Enron added $2.70 to $54.90. Occidental rose 53 cents to 
$31.08, and Conoco climbed $1.25 to $33.05, both 52-week highs. 
* 
Associated Press and Bloomberg News were used in compiling this report.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 



A
2 Houston-based companies win Saudi gas prize / Kingdom inviting 8 Western 
firms back in
MICHAEL DAVIS
Staff

05/19/2001
Houston Chronicle
3 STAR
1
(Copyright 2001)

Conoco, Shell and Enron were among eight major energy companies that have won 
a place in Saudi Arabia's coveted natural gas initiative, a sweeping $25 
billion project to exploit the country's vast gas reserves. 
Announced Friday, the project will be the first time in decades that foreign 
oil companies will be allowed to be involved in exploration in the kingdom. 
The project will produce huge amounts of natural gas, which the Saudis have 
not historically used because their economy was built around oil exports.
This also represents an industrial development project on a gigantic scale. 
In the past, Saudi Arabia has not had the capability to capitalize on its 
natural gas reserves. 
The gas initiative began two years ago when oil prices were just starting to 
rebound and the kingdom was looking for new ways to expand its economy. 
In addition to drilling for gas, the three ventures will also finance and 
build industrial facilities such as power plants and water desalination 
plants to use the gas. That is expected to create much needed jobs in the 
country, which suffers from a high unemployment rate. 
All of the companies vying for the Saudi projects have been tight- lipped 
about their proposals and the negotiations, which have lasted two years. Even 
after learning they were winners of this multibillion- dollar prize, the most 
any company had to say was that it was pleased with the decision. 
A formal signing of memoranda of understanding for the projects will take 
place in the next few weeks. 
Royal Dutch/Shell Group, Houston-based Conoco and Total Fina Elf were picked 
for Saudi Arabia's Shaybah natural gas project, also known as Core Venture 3, 
the official Saudi Press Agency reported. 
Exxon Mobil Corp., Occidental Petroleum Corp. and Houston-based Enron Corp. 
were chosen for the Red Sea project, or Core Venture 2, the agency said. 
Exxon, Shell, BP and Phillips Petroleum Co. won the rights to the most 
coveted project, Core Venture 1, the South Ghawar project, the largest of the 
three. 
There were three companies who just missed the cut. Chevron, Italy's ENI and 
Houston-based Marathon Oil Corp. They had all made the kingdom's original 
shortlist of 11 potential participants. Chevron had the oldest ties of any of 
the companies, because it initially discovered oil in Saudi Arabia at the 
Ghawar Field, the largest oil field in the world. 
"I don't think the results were that surprising. Clearly the Saudis wanted to 
go with the two largest integrated oil companies in the world," said Michael 
Young, oil analyst with Gerard Klauer Mattison in New York. Chevron's 
rejection "was a bit surprising given its history there," he said. 
Core Ventures 1 and 2 could result in a total estimated industry investment 
of more than $20 billion, according to an estimate provided by Exxon Mobil. 
Core Venture 1 will expand Saudi Arabia's power, water desalination, 
petrochemical and gas system. It will also provide for exploration and 
development of the kingdom's gas resources in the Northern Rub' Al-Khali 
region. 
The project includes field production and gathering facilities, gas 
processing and fractionation plants to recover and separate liquids from 
existing and new gas production, gas and liquids pipelines and investment in 
power, petrochemicals and water desalination. 
Core Venture 2 includes development of discovered gas resources in northwest 
Saudi Arabia, power and desalination facilities in that region and 
exploration in the Northern Red Sea with the opportunity for additional 
investment in chemicals, power and desalination facilities on the West Coast 
depending on exploration success. 
Exxon Mobil is the largest foreign investor in Saudi Arabia, with stakes in 
two petrochemical and a refinery joint venture. 
Exxon Mobil will be the lead operator on Core Venture 2. The company expects 
a percentage return "in the mid- to high teens" from its investment, Chief 
Executive Lee Raymond said in an interview with Bloomberg News. The 
possibility this could allow the company to get back into Saudi oil fields 
"was not a consideration," he said. 
"The crown prince told me 2 1/2 years ago that this was a gas project, not an 
oil project," Raymond said. "I've known him for a long time and I take him at 
his word. It would be foolish to spend money now on these projects in the 
hope of getting oil in 20 years." 
Leaders for Core Ventures 1 and 2 were not revealed. The Saudi press agency 
quoted Saudi Foreign Minister Saud al-Faisal as saying a ministerial 
committee will announce that decision later. 
Details about Core Venture 3, as well as estimated investment, were not 
available. 
Archie Dunham, Conoco's chairman, said at the company's annual meeting last 
week that he would be "very disappointed," if Conoco was not named the lead 
operator for Core Venture 3. 
Conoco issued a statement saying it was pleased to be included in Core 
Venture 3. Dunham said Conoco maintains a high interest in expanding its 
presence in the Middle East beyond Dubai and its growing presence in Syria. 
"We are prepared to quickly pursue other opportunities that fit our strategy 
and capital discipline requirements," he said in the statement. 
Alex Parsons, Enron spokesman in London, declined to comment on Enron's 
participation in the project. 
"We are unable at this stage to discuss our involvement because of commercial 
confidentiality," Parsons said.


Mug: 1. Conoco exec Archie Dunham will be "disappointed" if his firm doesn't 
have a lead role in deal (color); Map: 2. Locations of Saudi Arabia Core 
Venture 1 and 2 (b/w, p. 19) 

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 



Utility withdraws offer of aid

05/19/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

LAS VEGAS (AP) - Sierra Pacific Resources, the holding company for the 
state's two largest electric utilities, has withdrawn its offer to contribute 
$5 million to help low-income residents pay their power bills. 
Sierra Pacific made that offer in January when it asked state regulators for 
a record $311 million rate increase.
But now Sierra, the parent of Nevada Power Co., no longer sees a need for the 
$5 million outlay, spokeswoman Sonya Headen said Friday. 
Headen explained that Assembly Bill 349, sponsored by Las Vegas Democrat 
David Goldwater, would provide funds to help low-income people pay their 
bills. 
But a state official was displeased with the utility company's about-face. 
"The greed of this company never ceases to amaze me," said Tim Hay, state 
consumer advocate. 
Hay noted that the $311 million rate increase for Nevada Power and a sister 
company in Reno, Sierra Pacific Power Co., set a new record. About two-thirds 
of the $311 million was sought for Nevada Power. 
To withdraw the $5 million offer, he said, "is totally inequitable and 
irresponsible." 
Hay compared the $5 million to $7.5 million that the company paid to Enron 
Corp. of Houston to terminate Sierra's agreement to acquire Portland General 
Electric of Oregon on April 26. 
Had Sierra waited 10 days, the merger agreement would have terminated 
automatically without any payment to Enron, Hay said. 
"They can afford to do what they want to do (with Enron), but they're a 
little too greedy to pay money to assist low-income ratepayers," Hay said. 
Gov. Kenny Guinn budgeted $5 million to subsidize the bills of the poor for 
one year, but it's possible that money won't be available. 
Jack Finn, the governor's press secretary, said late Friday he didn't have 
current information on the status of the $5 million budget item. 
The governor has trimmed his budget since learning of anticipated state 
revenue shortfalls. 
Goldwater's bill passed the Assembly by a 28-11 vote, but the 
Republican-dominated Senate has not yet acted on the measure. His bill 
provides for a 40-cent assessment on the typical residents' power bill to 
raise $10 million for subsidizing the utility bills of poor people and for 
weatherizing their homes to cut energy consumption.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Racicot lobbying for energy giant Enron

05/19/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

HELENA (AP) - Former Gov. Marc Racicot is lobbying for Enron Corp. as part of 
its effort to fight possible government controls on energy prices, The Wall 
Street Journal reported. 
Racicot was Montana's Republican governor from 1993 until January. Four years 
ago he signed into law a bill for deregulation of the electric industry in 
the state. He recently took a job in the Washington, D.C., office of 
Bracewell & Patterson, a Texas law firm.
Racicot could not immediately be reached for comment Saturday about his work 
on behalf of Enron. The Texas company is the nation's largest trader of gas 
and electricity. 
The Wall Street Journal reported Friday that the company has been lobbying 
hard for open access to electricity transmission systems across the country, 
as well as fighting any attempts to delay or roll back deregulation through 
measures such as caps on energy prices. 
Enron and eight other energy companies have pledged $50,000 each to pay for a 
media and lobbying campaign countering anti-deregulation initiatives, 
according to the newspaper. 
States where deregulation is being reconsidered include Oregon. Lawmakers 
there passed a deregulation law in 1999, and the Oregon Legislature now is 
considering whether to repeal or delay the implementation. 
Two weeks ago Racicot met with Oregon's governor, Democrat John Kitzhaber, 
who supports caps on wholesale prices for electricity. The men talked about 
"the energy situation in general in the West," said Bob Applegate, 
Kitzhaber's press secretary. 
Sky-high prices for power in the West have been blamed for a number of 
cutbacks by industries unable to pay steep prices for electricity and still 
make a profit.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


INDIA: SBI says Enron move not to hit lenders.

05/19/2001
Reuters English News Service
(C) Reuters Limited 2001.

BOMBAY, May 19 (Reuters) - State Bank of India (SBI), , India's largest 
commercial bank, on Saturday dispelled fears a preliminary notice by the 
Indian unit of U.S. energy giant Enron Corp to cancel a contract to sell 
power would affect the country's lenders. 
"We are definitely concerned. But there is no reason to panic as there is an 
arrangement to recover our loans," SBI chairman Janaki Ballabh, told Reuters.
On Saturday, Enron's Dabhol Power Company (DPC) moved closer to walking out 
of its giant power plant in India by issuing a preliminary notice of 
termination. 
"After months of working with the Maharashtra State Electricity Board (MSEB), 
and the governments of Maharahstra and India to find a solution, it is 
apparent that they are unwilling to honour their offtake commitments for the 
entire power station," a statement by DPC said. 
The move immediately sparked concerns that Indian lenders, whose loans are 
not covered by a federal government guarantee, would suffer the most. 
Local banks have provided $1.4 billion of the total debt of around $2.0 
billion for the 2,184 MW project covering two phases. 
Ballabh said even if Enron walked out, lenders will not lose as their loans 
are secured by the assets of the plant, which is nearing full completion. 
"The project is more or less ready and running," he added. 
Other Indian lenders to the project are Industrial Development Bank of India 
, Industrial Finance Corporation of India , Canara Bank and ICICI Ltd . 
Ballabh said Dabhol Power Company had only issued a preliminary notice and 
has not actually walked out of the project. 
"There is a procedure for dealing with this. There is a six months cooling 
off period. We are hopeful that negotiations will resolve the issue," he 
added. 
($1=46.93 indian rupees).


Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Enron threatens to stop electricity supply to Indian state
By RAMOLA TALWAR BADAM
Associated Press Writer

05/19/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

BOMBAY, India (AP) - The Indian subsidiary of American energy giant Enron 
Corp. on Saturday delivered a notice to a state-run utility that it would 
stop supplying electricity if the latter continued to default on payments. 
"After months of working with Maharashtra State Electricity Board, the 
government of Maharashtra state and the government of India to find 
solutions, it is apparent that (they) are unwilling to honor their offtake 
commitments," company spokesman Jimmy Mogul said in a statement.
Mogul, however, added: "We are still open to constructive discussion of 
solutions." 
Enron Corp.'s dlrs 3 billion power project in western India is the largest 
foreign investment in India. 
The dispute centers on the state-run utility's stand that the outstanding 
December and January bills should be offset against a fine of 4 billion 
rupees (dlrs 85.31 million) it imposed on Enron for non-supply of power 
during that period. 
Enron does not accept the fine imposed by the Maharashtra State Electricity 
Board and demands that the state utility pay dlrs 48 million in electricity 
bills for December and January. 
A six-month reconciliation period will now follow. 
Maharashtra state Chief Minister Vilasrao Deshmukh criticized Enron's threat 
to cut off electricity to the state-run utility and offered to resolve the 
issue through talks. 
"There should be a right kind of atmosphere to talks. The MSEB has fulfilled 
all its contractual obligations. We are not defaulters as we have cleared all 
Enron dues," Deshmukh told reporters in Bombay. 
Maharashtra state has been complaining about the high cost of power from 
Enron. The price of electricity has almost quadrupled from the 1.8 rupees 
(four cents) per unit agreed upon six years ago to 7 rupees (15 cents) now. 
Enron has a 65 percent stake in Dabhol Power Corporation and is the project's 
largest shareholder. Other shareholders include the Maharashtra State 
Electricity Board with 15 percent and General Electric Co. and Bechtel 
Enterprises with 10 percent each. 
"We have continued to meet our contractual obligations, including enforcing 
our rights under contracts and taking various disputes to dispute resolution 
process. This will continue," Mogul of Dabhol Power Corporation said in a 
statement. 
(rtb, aks/ss)

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Gas bonanza in Saudi for BP and Shell: Eight companies are given stakes in 
pounds 15 billion bid to develop South Ghawar reserves
Sophie Barker

05/19/2001
The Daily Telegraph
Copyright (C) 2001 The Daily Telegraph; Source: World Reporter (TM)

BP AND Shell were among eight oil giants chosen by Saudi Arabia yesterday to 
begin developing its multi-billion-dollar gas reserves - the biggest 
opportunity for foreign investment in the Kingdom since the 1980s. 
Both London-listed companies are members of the consortium chosen to develop 
the centrepiece of the initial $25 billion scheme, the $15 billion South 
Ghawar development, said Saudi Arabian foreign minister Prince Saud al-Faisal.
Sir John Browne, BP chief executive, said he "looked forward to working 
closely with the Kingdom in a long-term partnership". 
The western oil majors are banking on the three gas projects providing a 
foothold for larger and more lucrative oil and gas developments. 
Exxon Mobil, the world's largest oil company, and America's Phillips 
Petroleum were also given stakes in the South Ghawar project. Saudi Arabia 
has yet to decide which of the four will lead the scheme. 
Of the two smaller gas projects on offer, Shell was named as one of the 
partners in the Shaybah development in the empty quarter of south-eastern 
Saudi Arabia, alongside France's TotalFinaElf and America's Conoco. 
Exxon Mobil secured the leading role in the third project, on the Red Sea 
coast, while two fellow United States oil giants, Enron and Occidental, were 
named as partners. 
Prince Saud said a ministerial committee would decide which companies would 
lead the South Ghawar and Shaybah developments later, although industry 
sources speculated that Exxon Mobil and Shell would win the biggest roles. 
Three shortlisted companies, the Italian group ENI and Chevron and Marathon 
of the US, did not win shares in the projects, although Prince Saud said he 
hoped they would have further opportunities. 
Oil companies have spent the last two years competing to develop the three 
gas projects, as a first step towards taking part in future Saudi Arabian oil 
and gas developments. 
As the world's largest oil producer, with the fifth-largest gas reserves, 
Saudi Arabia is keen to develop its gas reserves for its own domestic use as 
an alternative to oil. 
Output from the three projects will be for internal consumption only, helping 
to plug the growing gap between Saudi Arabia's electricity demand and its 
generation capacity, which will have to treble to 70,000 megawatts by 2020. 
The eight western companies will sign a formal memorandum of understanding 
with Saudi Arabia soon. Although the structure of the contracts is not known, 
the state-owned oil company Saudi Aramco is expected to control the projects, 
with 100pc of the equity but none of the costs. 
Analysts described the three gas projects as a gamble that Saudi Arabia would 
reopen its crude oil fields to western companies. They warned that the gas 
projects would not be commercially viable at present oil prices. 
One said: "They have all pitched quite aggressively because they think this 
is a precursor to a longer-term end game. But in the meantime, with a 15pc 
return on investment, it only becomes attractive with an oil price of $10 a 
barrel." 
London's benchmark Brent crude oil contract soared to a four-month high of 
$28.95 a barrel yesterday on fresh fears of tight gasoline supplies in the 
United States. BP and Shell shares rose 10 1/2 and 15 to 625p and 615p 
respectively.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Business
Western oil companies invited back by Saudis
Saeed Shah

05/19/2001
The Independent - London
FOREIGN
19
(Copyright 2001 Independent Newspapers (UK) Limited)

WESTERN ENERGY companies, expelled from Saudi Arabia in the 1970s, were 
yesterday invited back to take part in a $25bn (pounds 17.5bn) gas 
exploration and production programme. 
In the first opportunity to participate in upstream Saudi projects for 25 
years, several of the world's major energy companies were awarded roles in 
three big schemes on offer. Exxon, Shell, BP and Phillips were given stakes 
in the biggest of the projects, the $15bn development in South Ghawar, known 
as core venture one. Exxon also secured the leading role in core venture two, 
on the Red Sea coast, with Enron and Occidental taking smaller shares. Shell, 
TotalFinaElf and Conoco won stakes in core venture three, for gas development 
at Shaybah in the Empty Quarter of south-east Saudi Arabia.
Sir John Browne, chief executive of BP, said: "We are delighted to have been 
selected for a very significant project for both BP and Saudi Arabia and look 
forward to working closely with the kingdom in a long- term partnership." 
During the 1970s and early 1980s, the Saudi oil industry was transformed from 
one controlled by the US majors - Chevron, Mobil, Texaco and Exxon, through 
their ownership of the local operator, Aramco - into a government- owned 
business. Aramco became Saudi Aramco, with decisions taken directly by the 
royal family. 
Yesterday, some of these same companies were asked back, but there is no 
suggestion that oil will again be opened up to foreigners soon. The main 
loser is Chevron, an investor in Saudi petrochemicals, which failed to gain 
stake in any of the three new developments. Texaco, in the throes of a merger 
with Chevron, withdrew in January. 
The agreement relates solely to gas, which has been overlooked and 
underexplored in a country whose economy is dominated by its massive oil 
reserves. A formal signing of memorandums of understanding will take place in 
the next few weeks. 
Manouchehr Takin, of London's Centre of Global Energy Studies, said the 
liberalisation move would have met opposition from elements in the Saudi 
government, as well as Saudi Aramco, which wanted to exploit gas itself: 
"There are people in government who were in favour of foreign companies, to 
break the [Saudi Aramco] monopoly, providing a comparator, investment and 
know-how. Governments across the world have realised that national companies 
have management and efficiency shortcomings." 
Saudi Crown Prince Abdullah initially invited major oil companies to return 
to the kingdom in October 1998, at a time of low oil prices. To the surprise 
of some, the country has stuck by the policy, even through the current oil 
price boom. Saudi gas is reckoned to be at least the fourth- largest reserve 
in the world.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


DPC issues PTN to MSEB, Deshmukh terms it as "improper step"

05/19/2001
Press Trust of India Limited
(c) 2001 PTI Ltd.

Mumbai, May 19 (PTI) The curtain finally seems to be falling over the western 
Indian state of Maharashtra's most controversial and ambitious 2,184 mw power 
project with Enron's Dabhol Power Company (DPC) issuing a preliminary 
termination notice (PTN) to its partner, Maharashtra State Electricity Board 
(MSEB). 
After six months of allegations and counter allegations of non-adherence and 
violation of the Power Purchase Agreement (PPA) of the USD three billion 
project in Dabhol, DPC's move did not much surprise the state government, but 
chief minister of Maharashtra Vilasrao Deshmukh termed the decision as an 
"improper step".
"It is not proper to issue a PTN when the renegotiations aimed at bringing 
down the power tariff are on", he said adding that legal advise would be 
taken to decide upon the future course for solving the Enron imbroglio. 
Deshmukh said "exorbitant power tariff" was the only core issue and it could 
be resolved through discussions alone. 
On the other hand, in a faxed statement DPC said "it had no choice but to 
issue the PTN, given MSEB, state and federal government's failure to meet 
their contractual obligations". 
"Even though it was necessary to take this step, DPC is still open to 
constructive discussions on the solutions", the US energy major said. 
DPC alleged that "it was apparent that MSEB and the state are unwilling to 
honour their offtake commitments for the entire power station". 
Many state government officials termed the development as a "hasty decision" 
as the state government appointed Godbole Rengotiations panel had already 
commenced talks with DPC. 
Interestingly, DPC continues to maintain that its May 11 meeting with the 
panel was a mere "courtesy call". 
In its statement, it categorically stated that MSEB, the federal Government 
and state (Maharashtra) should come up with a specific proposal for 
purchasing DPC's power, "which will form the basis for future discussions, 
and not the Godbole committee report" 
DPC is also upset with the federal government over the absence of the 
latter's nominee at the May 11 meeting. "Although this date was known several 
days in advance, federal government did not even bother to send their 
representative", it said. 
Last week, federal Power Minister Suresh Prabhu had said India's National 
Thermal Power Corporation would not buy DPC's "costly" power. 
The officials regard the above statement as "mere passing the buck tactic" 
and have been doubting the federal government's intentions over sharing 
Maharashtra's problems. 
Meanwhile, the most taken aback due to DPC's sudden decision are the Indian 
financial institutions, whose exposure in the entire project runs to more 
than Rs 70 billion, as they have signed the counter-guarantee payable to 
their foreign counterparts in case of default by DPC. 
Terming the move as "a hurried decision", the FIs said the inevitable has 
happened and DPC has gone ahead despite the London meeting" 
The Enron Virodhi Andolan (Anti Enron Movement) welcomed the move, saying "we 
see a beginning to the end of Enron crisis" and Janata Dal (Secular) demanded 
scrapping of the project. 
(THROUGH ASIA PULSE) 19-05 2001

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


India's largest US investor Enron issues pull-out warning

05/19/2001
Agence France-Presse
(Copyright 2001)

NEW DELHI, May 19 (AFP) - US-based Enron Power Corp's Dabhol Power Company on 
Saturday issued a warning notice threatening to terminate an electricity 
supply contract with India's Maharashtra state. 
The "preliminarly termination notice" effectively gives six months to the 
state to sort out disputes over a power purchase pact with US-based Enron 
Corp., that has become mired in controversy.
The Enron-backed Dabhol Power Co. (DPC) is building a three- billion-dollar 
two-part power plant in the western state -- the single largest US investment 
project in India. 
"Dabhol Power Company has issued a preliminary termination notice under the 
Power Purchase Agreement (PPA)," a company statement said. 
"This initiates the process of terminating the PPA with Maharashtra State 
Electricity Board (MSEB). 
"After months of working with the MSEB, the Government of Maharashtra state 
and Government of India to find solutions, it is apparent that MSEB and 
Government of Maharashtra are unwilling to honour their offtake commitments 
for the entire power station." 
The power station is being erected at the port town of Dabhol, 200 kilometres 
(125 miles) south of the state capital, Bombay. 
Payments for electricity have been guaranteed by the state and federal 
governments. 
Part one of the plant began generating power in May 1999, but the project has 
run into snags, with the Maharashtra state government arguing it could not 
afford the high electricity bills. 
The state and federal governments last month decided to set up a panel to 
renegotiate the power purchase agreement. 
"We have continued to meet our contractual obligations, including enforcing 
our rights under contracts and taking various disputes to the dispute 
resolution process," the company said Saturday. 
Early in April, DPC served the state electricity board a notice of political 
"force majeure", which is a legal manoeuvre that enables a party to break a 
contract in the case of events beyond its control. 
The Dabhol project has had a turbulent ride since intial contracts were 
signed in 1992. 
Allegations of corruption and high costs led to the scrapping of the contract 
in 1995, but it was re-negotiated the same year. 
In February a state government panel recommended fresh re- negotiations to 
bring down the tariffs and charged Enron with inflating costs. 
bm/kma

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Lenders to Dabhol to vote on termination notice
Our Bureau

05/19/2001
The Economic Times
Copyright (C) 2001 The Economic Times; Source: World Reporter (TM)

MUMBAI 
INSTITUTIONAL lenders to the Dabhol Power Company on Friday agreed that the 
final decision on the issue of a pre-termination notice would be taken 
through a vote in writing instead of a voice vote as earlier planned.
A written vote would enable representatives to decide after taking up the 
issue with their respective headquarters, but would delay the results until 
next Tuesday. 
The Indian and foreign lenders on Friday attended a conference call with US 
energy major Enron, the promoters of Dabhol Power Company, on whether the 
company should issue a PTN to the Maharashtra State Electricity Board. 
Sources said the meeting was attended by the lenders to Phases I and II of 
project. "Discussion over the conference call continued for three successive 
days, and, finally, it was decided that each lender will express its decision 
in writing after careful deliberation," said sources. 
The lenders to the 2,144-mw power company are divided on the issue and unless 
the majority of the lenders agrees, DPC cannot go ahead with issuing a PTN to 
MSEB. Enron is keen on issuing PTN to MSEB following defaults in payments for 
a number of months. 
Although Indian lenders are a majority both in terms of funded amount and 
number or participants, the voting rights are so framed that the rights of 
each investor is protected and that large lenders do not end up dominating 
the voting proceedings. 
Indian lenders to the project are firm on the view that DPC should not issue 
a PTN to MSEB considering that the government has set up the Godbole 
Committee to renegotiate the deal. The Godbole panel is due to meet next on 
May 23. Enron officials will also be present in the meeting.

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