Termination expected for troubled Enron project

Enron is set to enter the final stages of terminating its agreements with India’s Maharashtra State Electricity Board (MSEB) over the disputed Dabhol power project.

Following a meeting held in London, the US power giant has empowered its Indian management team based in Bombay to finalize proceedings to end the project, which represents the largest foreign investment in India.

Once held as a positive symbol of India’s economic reforms, the project has brought accusations of profiteering, and criticism by the World Bank for its high tariff.

Houston-based Enron has invoked two guarantees, which require that the federal government pay if state government defaults on payments for power from Dabhol.

New Delhi has said that it will not honour one of the guarantees until a parallel money dispute is resolved. The MSEB recently imposed a Rs 4bn ($89.9m) fine for mis-declaration and default on power availability.

Analysts have cited the ongoing dispute as an example of the economic price of bad governance. Both Enron and the state were placed at odds by entering into an agreement without resolving the problem of power distribution.

Capacity needed in the Philippines

Jose Isidro Camacho, the Philippines energy secretary, has warned of massive blackouts for the Philippines by 2005 if funds are not forthcoming for the development of new projects.

A study from the Department of Energy shows that the additional capacity that has been confirmed only adds up to 4816 MW, or 49 per cent of the forecast rise in demand for the next ten years. The region of Visayas, with few confirmed projects, is expected to feel the shortfall as early as 2004.

Uncertainty surrounding the passage of the power reform bill and the inability of national power utility Napocor to raise funds has been cited by Camacho as major areas of concern.

In April, Enron was also rumoured to be pulling out of a 40 MW biomass power plant in Bulacan due to funding bottlenecks for the project, which is scheduled for completion by 2003 and set to supply power to Manila Electric Co. (Meralco). Analysts believe the recent political crisis and uncertainty surrounding the passage of the power reform bill as possible reasons for the pull-out.

Transpower calls for change

New Zealand’s national grid operator Transpower has called for a change in the Electricity Act to improve rights of access to farm land. Chief executive Bob Thomson said that the cost of replacing wiring in four areas collectively known as the Taupo constraint was about NZ$40m ($17m). A change in the Act could halve the cost of upgrading the central north island lines.

Under current regulations, state-owned enterprises need to negotiate fresh easements and rights of access to transmission lines. Despite the high cost of easements – between $60m and $80m – there is no guarantee of obtaining them for the entire length of any line.

Transpower’s reluctance to upgrade central north island lines has irritated generators, who would like increased capacity so they can sell electricity to Auckland where prices are high.

One generator is proposing a new hydropower project. Thomson said that a generator should be prepared to meet the cost of upgrading their lines and include it into any new project costings from the onset.

Sumitomo wins turnkey contract

An award of $45m has been approved by the Asian Development Bank (ADB) for a turnkey contract to the Japanese firm Sumitomo Electric Industries. The work involves upgrading the 230 kW Leyte-Cebu interconnection project in the Philippines.

State owned utility NPC has revised its targeted completion date of September 2001 to 15 February 2003.

Sumitomo is expected to supply and install 32.5 km of oil-filled 230 kV submarine cable and fibre optics communication cable core from Leyte to Cebu.

Dam purchase

New Zealand’s state owned power generator Meridian Energy is reported to be buying a group of small hydro dams in Australia for around NZ$105m ($44.8m), as a first investment across the Tasman.

Meridian is also expected to buy more wind farms in line with legislation promoting renewable energy and extend its power production.

The stations are being sold by Australian company Power Facilities, which is owned by a US fund manager and private Australian investors.