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Most Enron projects mired in controversy

BS Banking Bureau

The face-off between the Houston (Texas) based Enron Corporation and the Maharashtra State Electricity Board on the 2,184-mw Dabhol power project is not a unique case. Enron's operations across the globe are mired in controversies and litigation.

Allegations of overpricing and underhand deals to win contracts are not confined to the Dabhol scene alone. Enron has a history of getting into difficulties, after its local opponents have alleged political favours to win bids, be it the pipeline project in Argentina to Chile or a diesel-fired power plant in the Philippines.

Most of the Enron projects have been mired in controversy right from the drawing board stage through completion and even beyond.

Back in 1993, following the visit of the former US secretary of state James Baker to Kuwait, Enron's bid to rebuild Shuaiba North, a 400-ma power plant, that supplied five per cent of Kuwait's electricity before it was bombed during the 1991 Gulf War, gained favour of the Kuwaiti government. But, it was despite the fact that Enron priced its power at 11 cents a kilowatt hour.

The rival bid, put forward by the German company Deutsche Babcock, was six cents, while the state-subsidised rate for power to the consumer was half-a-cent a kilowatt hour. Baker was working as a consultant for Enron at the time. Following an outcry, Enron abandoned its plans altogether.

In the same year, Enron was held responsible for the resignation of seven members of the Philippine National Power Corporation board after the US energy major won a contract to build a 105 mw, diesel-fired power plant in the Philippines. Critics said the power would cost NPC eight cents a kilowatt hour, 20 per cent more than what NPC charged consumers.

Despite a probe into the row, initiated by the then Philippine President Fidel Ramos' energy secretary Delfin Lazaro, Enron was cleared of all improprieties.

Access to powerful political figures in its own home country has clearly helped Enron win various bids across the globe.

The pipeline project from Argentine to Chile was criticised because no less a person than George W Bush, then governor of Texas and son of the former President, called Rodolfo Terragno, the Argentine cabinet minister in charge of public works under then-President Raśl Alfons, to award Enron contract.

History was repeated once again in the case when the Clinton officials publicly helped Enron push contracts in India as well as in Indonesia. Most of these contracts were directly negotiated, without any competitive bidding.

In the last two years, Enron has received the US government funds to build power plants in China, the Philippines and Turkey. Enron also won contracts in Pakistan and Russia while accompanying senior US government officials on state trips.

Favours have not come cheap. Enron Corp has spent a sum in excess of $ 1.6 million for lobbying expenditure. This is based on data complied in 1998 by the Center for Responsive Politics, using lobby disclosure reports and amendments filed under the Lobbying Disclosure Act of 1995.

Recently the University of California and the California State University sought an injunction in the federal courts to prevent Enron Energy Services Inc from unilaterally altering the contract under which Enron delivers electrical power and other services to the two university systems.

This followed Enron seeking to change the contract a year prior to its expiry. In the altered terms, the two universities were to return to the general electrical power distribution, scheduling and billing systems of Pacific Gas & Electric and Southern California Edison.

Such a move would have freed Enron, an electricity generator and broker, to sell power previously intended for delivery to the universities at higher prices in the spot market. This would enable Enron to book higher profits at the expense of students, parents and taxpayers.

UC and CSU had signed a four-year contract with Houston-based Enron in 1998 specifying the amount and price of electricity and other services to be delivered to most campuses within the two systems and requiring Enron to perform a number of tasks which aid UC and CSU in their conservation efforts. The contract is scheduled to expire March 31, 2002.

(Compiled from the Web by Freny Patel)

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