From: henry.means@enron.com
Date: 2001-05-03 17:16:00+00:00
Subject: Enron Mentions - 05/03/01

ENRON PLANT HEARING PLANNED FOR TONIGHT
South Florida Sun-Sentinel, 05/03/01

Would buying boycott help lower California's electricity bill?
Associated Press Newswires, 05/03/01

INDIA: Indian banks appeal to govt to help end Enron row
Reuters, 05/03/01

DNC: Special Interests Write Bush Energy Policy
PR Newswire, 05/03/01

UK: INTERVIEW-Innogy starts trading power in mainland Europe
Reuters, 05/03/01

Mosaic Group posts strong first quarter results
Canada NewsWire, 05/03/01

European Phone Companies' Outlook Brightens: Rates of Return
Bloomberg, 05/03/01
                                                                              
             
UK:Corporates warm to charms of credit derivatives
Reuters, 05/03/01

Allegheny Energy buys three power plants
Associated Press, 05/03/01

Allegheny Energy Buys Midwest Capacity From Enron Unit
Dow Jones, 05/03/01

Allegheny Energy Supply Completes Purchase of Midwest Assets; Adds 1,700 MW 
to Growing Generation Fleet
Business Wire, 05/03/01

SSB Cuts Forecast For Power Profitability In 2002, Beyond
Dow Jones, 05/03/01

Fitch Affs Northern Border; Rtg Outlook To Stable From Negative
Business Wire, 05/03/01

INDIA: UPDATE 1-Enron to meet govt panel over Indian project
Reuters, 05/03/01

India State Panel's Sat Meet With Enron Unit Postponed
Dow Jones, 05/03/01

EnergieKontor Secures Enron Deal For Spain, Germany Projs
Dow Jones, 05/03/01
The Bottom Line: Scottish Power Looks To Refine Focus
Dow Jones, 05/03/01





LOCAL
ENRON PLANT HEARING PLANNED FOR TONIGHT
Staff Reports

05/03/2001
South Florida Sun-Sentinel
Broward Metro
3B
(Copyright 2001 by the Sun-Sentinel) 

Pompano Beach 
A town meeting will be held tonight on Enron Corp.'s power plant proposal for 
Pompano Beach. Called by Commissioner Kay McGinn, the meeting will be open to 
anyone who wants to speak. 
The City Commission is to vote Tuesday on whether to approve a zoning 
variance for the project. The meeting will be held at 7 p.m. at the Pompano 
Beach Civic Center, 1801 NE 6th St.



Would buying boycott help lower California's electricity bill?
By MICHAEL LIEDTKE
AP Business Writer

05/03/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved. 
SAN FRANCISCO (AP) - There's a limit to how much people will pay for most 
things in life. If the cost scares off enough buyers, prices eventually fall. 
So what would happen if this textbook example from Economics 101 were applied 
to California's electricity crisis? What if the state officials struggling to 
maintain energy supplies simply refused to buy power above a certain price 
and accepted more blackouts this summer?
The question would have been absurd just a few months ago and even now the 
notion seems surreal, given the possible consequences. 
Inviting even more blackouts inevitably would hurt businesses and frustrate 
consumers, threatening to further depress California's already slumping 
economy - the sixth largest in the world. 
But desperate times require drastic measures, according to the economists, 
lawmakers and activists who believe the state will be better off sitting in 
the dark than buying electricity at any price during a summer shortage likely 
to produce recurring blackouts anyway. 
"It's better to use (blackouts) and break the (wholesale energy) cartel than 
simply to suffer them," said Michael Shames, executive director of the 
Utility Consumer Action Network, a San Diego watchdog group. 
Refusing to buy enough power to keep the lights on "would be like playing 
with fire," counters Wells Fargo & Co. chief economist Sung Won Sohn. 
"Blackouts aren't a just matter of inconvenience or being too hot or cold. 
They cost businesses a lot of money." 
Buying electricity at the last minute to meet the state's power needs already 
has cost the California government $5.7 billion in the past 3 1/2 months. The 
state energy bill for 2001 could reach $50 billion, in money otherwise spent 
on education, public safety and health care, Shames said. 
Faced with the prospect of a significant budget deficit, some lawmakers think 
it's time for California to take a stand against the power wholesalers - many 
of whom are based outside the state. 
This Tuesday, the state Senate Energy Committee will consider authorizing the 
state to refuse to buy power above certain prices. Current law requires state 
electricity managers to avoid blackouts by buying all available power at any 
cost. 
"We have been over a barrel in so many ways," said Sen. Dede Alpert, 
D-Coronado, who sponsored SB73x. "Maybe there's a point in the market where 
(we) just say no and go with the planned blackout strategy instead." 
Economists give the bill little chance of succeeding. 
"It's never going to happen. It's not a viable option," said University of 
California at Berkeley Professor Severin Borenstein, one of the energy 
experts who have studied the idea. 
The business lost during blackouts would mean more layoffs in a state already 
skittish over the technology downturn and the looming Hollywood writers 
strike, economists say. 
Other ripple effects include diminished gasoline supplies, leading to even 
higher prices at the pump, and distribution headaches that could leave store 
shelves bare. 
And some consumers - the elderly and the infirm, for example, need power at 
any price. 
Without electricity, Manteca resident Betty Jarzemkoski said she wouldn't be 
able to help her ailing husband to get out of his motorized bed at home. 
"It would be a real hardship for us," said Jarzemkoski, 78. "I'm on a fixed 
income so I hope they can figure out something to bring down prices. But we 
need power." 
Despite such concerns, the concept of a buyer's boycott hasn't been flatly 
ruled out - at least publicly - by Gov. Gray Davis as he struggles to reduce 
the state's staggering electricity bill. 
The state is spending as much as $90 million per day to meet California's 
electricity needs and the bleeding is sure to get worse. When the summer heat 
increases demand and tightens supplies, California might spend more than $1 
billion each week, state officials estimate. 
Extended blackouts pose an even greater cost, economists say. 
When Northern California suffered rolling blackouts for several hours Jan. 
18-19, the economic losses totaled $2.3 billion, mostly from lost profits and 
wages, estimated the Los Angeles Economic Development Corp. 
Multiply that over several weeks across the entire state, and it becomes 
apparent why it makes more sense for California to continue buying power at 
inflated prices, even if leaves the state with deep debts and a ruined credit 
rating, economists argue. 
As it is, California probably won't be able to round up enough power at any 
price on some days this summer, making some blackouts a virtual certainty. 
The blackouts will reduce the state's economic output by $2 billion to $16 
billion, according to a study released last month by the Bay Area Economic 
Forum. 
The resolve of the state's politicians and ratepayers would be sorely tested 
for a boycott to succeed, much in the way that labor strikes boil down to 
whether workers or management can withstand more financial pain. 
"Politicians aren't going to willingly turn out the lights because 
politicians want to get re-elected," said Borenstein, director of the 
University of California's energy institute. "As soon as people start losing 
their jobs because the power is off, the public will get tired of the 
blackouts real quick." 
Still, Californians might tolerate an increase in blackouts if they 
understand why the state chose to pursue such a drastic course, said Stanford 
economics Professor Frank Wolak, who heads the Independent System Operator's 
market surveillance committee. 
"This isn't something you could do without an enormous public relations 
campaign," he said. "The campaign would have to explain that the state had no 
other choice but to do this because (federal power regulators) aren't doing 
their job and enforcing the law against unjust and unreasonable prices." 
The largest out-of-state generators are in such robust financial shape that 
it might take weeks before they would feel such pain from a California 
boycott that they would be forced to lower prices. 
After making record profits last year, power wholesalers Enron, Reliant, 
Dynegy, Duke Energy, Williams and Mirant and earned a combined $1.6 billion 
during the first three months of this year. 
--- 
On The Net: 
Bay Area Economic Forum report: 
http://www.bayareacouncil.org/ppi/enp/enp-mid.html 
Electric Power Research Institute: http://www.epri.com 
Utility Consumers' Action Network Report: http://www.ucan.org/cartelrep2.htm




INDIA: Indian banks appeal to govt to help end Enron row

05/03/2001
Reuters English News Service
(C) Reuters Limited 2001.
BOMBAY, May 3 (Reuters) - Indian lenders to U.S. energy group Enron Corp's 
gas-fired power plant south of Bombay have appealed to the Indian government 
to help end the company's row with a state-owned electricity board over 
pricing and upaid bills. 
The board of Enron's Indian unit, Dabhol Power Co (DPC) has authorised 
management to stop selling power to the Maharashtra State Electricity Board 
(MSEB) if a bitter dispute over pricing and unpaid bills cannot be resolved.
In the past half year the MSEB has defaulted on bills for electricity 
supplied by Dabhol, which operates the world's largest gas-fired plant on the 
west coast of India, 160 kilometres (100 miles) south of Bombay. 
Indian financial institutions, which contributed $1.4 billion towards the 
project in loans, are pressing the government to help end the crisis, a 
source told Reuters. 
"We have asked the government for help. We are awaiting their reply," the 
source, who is employed with a large financial institution, said. 
The domestic lenders to the project are Industrial Development Bank of India 
, ICICI Ltd , Industrial Finance Corporation of India , Canara Bank and State 
Bank of India . 
The Dabhol Power Company (DPC), owned 65 percent by Enron, last month took 
the major step of bailing out of the $2.9 billion power project, citing 
non-payment of bills by the Maharashtra State Electricity Board (MSEB). 
The DPC board's move sparked widespread fears that India's image as a safe 
destination for foreign direct investment would be damaged. 
POWER STRUGGLE 
MSEB, which is a state-owned utility, has been a regular defaulter on 
payments to DPC saying that it finds the power too costly. It has also backed 
out on its commitment to buy more power to be produced by the project's 
second phase which is to begin operations later this year. 
Last month MSEB said it had paid Dabhol Power 1.34 billion rupees ($28.60 
million) for electricity it bought in March. 
But the payment only partially resolves the total overdue amount of 2.26 
billion rupees ($48.2 million), which Enron has been unable to collect even 
after invoking guarantees issued by the government of Maharashtra, India's 
most industrialised state, and the federal government. 
The state utility still owes Enron payments for power purchases in December 
and January. 
The Indian government has maintained that the contract must be renegotiated 
and has set up a committee to do so. 
"We are concerned and would like the renegotiations to happen fast," the 
source added. 
The dispute has raised fears that Enron could pull the plug on the project, 
cease providing power to the local state electricity board and perhaps even 
sell the plant. 
"The plant is good, Maharashtra needs power and I am sure buyers can be 
found," the source added. ($1=46.82 Indian rupees).




DNC: Special Interests Write Bush Energy Policy

05/03/2001
PR Newswire
(Copyright (c) 2001, PR Newswire)

WASHINGTON, May 3 /PRNewswire/ -- The Democratic National Committee issued 
the following today: 
Dick Cheney began dropping hints this week as to what the Bush energy policy 
will look like, and it is long on oil and short on conservation. But 
something was missing from the coverage of Cheney's announcement: not just 
who benefits from the Bush plan, but who's writing it as well. (Photo: 
http://www.newscom.com/cgi-bin/prnh/20000107/DCF015 ) 
It's hard to understate the influence big donors and high-ranking executives 
have with the Bush Administration. Take Tom Kuhn, for example, one of the 
energy executives who came calling when Bush was thinking about actually 
following through on his pledge to limit carbon dioxide levels. Kuhn, a top 
Bush fundraiser, also served on Bush's Energy Department transition advisory 
team, and still enjoys access to the highest reaches of the Bush White House. 
Not surprisingly then, the Big Oil Bush Administration's energy policy could 
not make Bush's huge donors and the special interests in the energy business 
any happier. Since the energy industry's problems are Bush's problems, the 
first things on Bush's hit list are the environmental regulations that keep 
Big Energy in check -- and our country clean. 
With an energy executive running around the West Wing, Bush's energy policy 
could be summed up as, "Drill anywhere, anytime, and keep those checks 
coming." 
The Democratic Party is committed to fighting for a balanced energy policy 
that keeps our country's priorities -- such as a clean environment -- in 
mind. 
To learn more about Bush's misplaced priorities and kowtows to the special 
interests, keep reading to find out the "Top Ten Paybacks To The Energy 
Industry," and to see how you, too, can get on the Bush gravy train in 
"Recipe for a Quid Pro Quo," courtesy of the Democratic Party's 
http://www.100DaysofBush.com. 
BUSH'S TOP TEN PAYBACKS TO THE ENERGY INDUSTRY 
One of the most obvious and recurring themes of Bush's first 100 days has 
been the extraordinary influence the oil and gas industry has had in the new 
administration. Oil and gas interests are some of Bush's top campaign 
contributors, giving more than $3 million to get Bush elected. In exchange, 
Bush has rolled back regulations issued by the Clinton administration on such 
things as air conditioner efficiency, as well as breaking his campaign 
promise to regulate carbon dioxide emissions. Bush has proposed drilling in 
the Arctic National Wildlife Refuge and national monuments. Bush has taken a 
backseat when it comes to the energy crisis California is experiencing, while 
cutting funding for energy conservation programs. He has also repaid top 
donors, lobbyists and industry officials with key positions throughout his 
administration. 
Here is just a sampling of how the oil, gas and other energy industries have 
benefited in Bush's first 100 days: 
2 - BUSH TAKES HANDS-OFF APPROACH TO CALIFORNIA CRISIS WHILE ENERGY COMPANIES 
MAKE MILLIONS 
Bush Did Little to Aid California in Energy Crisis; Fleischer Said Crisis is 
a "California Matter." Bush has done little to aid California in its energy 
crisis, such as refusing to support wholesale price caps on electricity. 
White House spokesman Ari Fleischer said, "The president continues to believe 
that the issue is mostly a California matter, dealing with the legislation 
that is before the state. And the leaders of California are working to 
address that in their own right." Fleischer also said that Bush wanted to 
focus on a "long term" national energy policy. (AAP Newsfeed, 1/23/01; Wall 
Street Journal, 1/23/01) 
Texas Energy Company Accused of Price Gouging to Make Money off California's 
Energy Crisis. The Federal Energy Regulatory Commission ordered further 
inquiry into allegations by California officials that El Paso Natural Gas 
Co., a Houston based subsidiary of El Paso Energy Co., manipulated the 
natural gas market by keeping supply artificially low, contributing to the 
high price of electricity in the state. El Paso Energy was one of the Texas 
firms "grandfathered" by Bush's voluntary emissions standards in Texas. 
Between 1993 and 1998, El Paso Energy and El Paso Natural Gas PACs gave a 
total of $8,000 to Bush's gubernatorial campaigns. During the 1999-2000 
election cycle, El Paso Energy Corp. and El Paso Natural Gas Co. gave a total 
of $743,029 to Bush and the GOP -- $460,395 to GOP in soft money, $247,750 to 
GOP candidates from its PAC, and $34,884 to the Bush campaign from its 
employees and executives. (www.opensecrets.org; Los Angeles Times, 3/30/01; 
tebb.epenergy.com; Boston Globe, 10/3/99) 
Electricity Wholesalers Reported "Gigantic Earnings Surges" from Energy 
Crisis. According to the Los Angeles Times, several electricity wholesalers 
to California reported "gigantic earnings surges" for the quarter ended March 
31. The following companies, all contributors to Bush, have earned record 
profits off of the energy crisis in California. 
(Los Angeles Times, 4/18/01) 
COMPANY TOTAL TO BUSH COMPANY PROFIT 
Enron Corp. Enron is Bush's largest Enron's operating income was career 
patron, giving at $406 million in the first 
least $563,000 for his quarter of 2001, compared campaigns, including his 
with $338 million in the 1978 House campaign. same period last year, a 20% 
(San Diego Union-Tribune, increase.(Los Angeles Times, 2/11/01) 4/18/01) 

6 - BUSH'S TRANSITION TEAMS 
Energy Interests Dominated Bush Transition Energy Advisory Team. Big energy 
and oil firms dominated the Bush transition's Energy Advisory Team, having 
contributed $857,232 to the Republican Party and Bush during the campaign. 
(Center for Responsive Politics, www.crp.org) 
Almost Two-Thirds of Bush's Energy Transition Team Worked for Energy 
Industry. Out of the 48 members of the Bush Energy Department transition 
team, 31, or almost two-thirds, worked for the energy industry: 
NAME    EMPLOYER 
Brian Bennett   Southern California Edison 
Robert Card   Kaiser Hill 
Steve Chancellor  Black Beauty Coal Company 
Joe Colvin   Nuclear Energy Institute 
Don Duncan   Phillips Petroleum Company 
Tom Farrell   Dominion Energy 
Gay Friedman   Interstate Natural Gas Association of America 
Jack Gerrard   National Mining Association 
J. Roger Hirl   Occidental Chemical Corporation 
Hunter Hunt   Hunt Power, L.P. 
Jerry Jordan   Independent Petroleum Association of America 
Buddy Kleemeier  Kaiser Francis Oil Company 
Tom Kuhn   Edison Electric Institute 
Ken Lay   Enron 
Albee Modiano   U.S. Oil and Gas Association 
David N. Parker   American Gas Association 
C.J. "Pete" Silas  Phillips Petroleum Company 
Gary Ellsworth   USEC, Inc. 
Buck Harless   International Industries 
Stephanie Kroger  Mayor, Day, Caldwell & Keeton (lobbies for companies in oil 
and gas industries; www.mdck.com) 
Joe Farley   Balch & Bingham (lobbying firm which focuses on managing and 
operating utilities of all kind; 
www.balch.com) 
Bill Martin   Washington Policy and Analysis (lobbying firm which represents 
American Gas Association; 
www.influenceonline.net) 
The Honorable Howard Baker  Baker, Donelson, Bearman, Caldwell (lobbying firm 
dealing with energy industry; 
www.bakerdonelson.com) 
Erle Nye   TXU Electric and Gas Corporation 
Gregg Renkes   The Renkes Group (lobbies for members of industry, including 
Edison Electric Institute; 
www.influenceonline.net) 
Dick Silverman   S.R.P. 
Matt Simmons   Simmons & Co. International 
John Tuck   Baker, Donelson, Bearman, Caldwell (lobbying firm dealing with 
energy industry; 
www.bakerdonelson.com) 
Daniel Yergin   Cambridge Energy Research Associates 
The Honorable Thomas C. Merritt  Merritt Tool Company, Inc. (Oilfield Service 
Business; Inside F.E.R.C.'s Gas Market Report, 5/5/95) 
John Wootten   Peabody Group Coal Executive, Irl Engelhardt was an Energy 
Advisor to the Bush-Cheney Transition, gave $100,000 to Inaugural Fund. Irl 
Engelhardt of Peabody Group, Inc. served as an energy advisor on the 
Bush-Cheney transition. During 1999- 2000 the Peabody Group gave $250,000 to 
the Republican National Committee, and Irl Englehardt personally gave 
$100,000 to the Bush-Cheney Inaugural fund. (Washington Post, 3/25/01; 
www.crp.org) 
/CONTACT: Jenny Backus of the Democratic National Committee, 202-863-8148/ 
11:47 EDT 




UK: INTERVIEW-Innogy starts trading power in mainland Europe
By Stuart Penson

05/03/2001
Reuters English News Service
(C) Reuters Limited 2001.
LONDON, May 3 (Reuters) - British utility Innogy said on Thursday it had 
started trading wholesale electricity on the French-Italian border and was 
set to enter the German power market. 
"We have done some wholesale trading on the Italy-France border, moving power 
from France to Italy, and we are very close to doing some in Germany," said 
director of trading Tony West in an interview with Reuters.
"This year we will significantly increase our trading in (mainland) Europe; 
we are discussing relationships with counterparties at the moment," he added. 
Innogy is building a European power trading team at its headquarters in 
Swindon, southern England, from where it already trades the UK gas and power 
markets. 
FRANCE COULD BE KEY MARKET 
West said the company initially had expected the main focus of its European 
trading strategy to be Germany and the north west of the continent. 
But the early signs were that France would also play a key role, particularly 
as Innogy had gained access to capacity in the UK-France undersea 
interconnector cable. 
"France has taken me by surprise. It might be more important than we 
anticipated although there are clearly still issues about the speed of 
liberalisation," said West. 
A core of about eight companies regularly trade power in France, including 
TXU Europe, Enron and a trading alliance between Endesa and Morgan Stanley 
Dean Witter, according to traders. 
West said Innogy had so far concentrated on buying power in France, not 
always from French companies, and taking it to Italy via the cross border 
interconnector between the two countries. 
Innogy had bought some of the 400-megawatts available on the interconnector 
through recent auctions, he said. 
"It's easy to trade through France, the cost of taking power through to the 
border is minuscule, although buying power in France and then selling it in 
France is a lot more difficult," said West. 
He said Innogy had signed grid balancing agreements with French transmission 
grid operator RTE. 
Andy Duff, managing director of generation and trading, added France could 
become become important for Innogy on a retail level, as well as a trading 
level, depending on how effectively the UK-France interconnector could be 
used. 
"The European market will be driven by the operation of interconnectors and 
transmission services as well as exchanges," said Duff. 
Innogy may look to trade on Germany's two power exchanges as well as that 
country's burgeoning over-the-counter market. 
The company is in the process of signing standard trading agreements for 
Germany based on the terms devised by the industry group the European 
Federation of Energy Traders (EFET). 
FOCUS ON TRADING, NOT ASSETS 
Duff said Innogy's strategy in Europe was to focus on trading but not the 
acquisition of physical assets. 
"We are not going to lead with assets in Europe. We will focus on trading 
services-type arrangements, extracting value from (other companies') assets. 
That's the main thrust of the business," he said. 
West said Innogy's trading in mainland Europe would expand into natural gas 
as opportunities emerged. The company already trades around the UK-Belgium 
gas interconnector.




Mosaic Group posts strong first quarter results

05/03/2001
Canada NewsWire
(Copyright Canada NewsWire 2001)
-- Diluted Cash Earnings per Share Increases by 29% and Revenues up by 89% --
TORONTO, May 3 /CNW/ - Mosaic Group Inc. (MGX:TSE), Canada's leading 
outsourced marketing services agency, announced today that it continued its 
trend of strong earnings growth for the period ending March 31, 2001. Posting 
its 18th consecutive quarter of year over year revenue growth, Mosaic has 
also reported an average quarterly organic growth rate of 27% since 1996. 
Financial highlights from continuing operations(x) for this quarter include: 
- Revenues at $171.8 million - up 89% or $80.7 million from Q1 2000. 
"Mosaic has consistently outpaced the growth of its peers within an industry 
that is clearly expanding," said Mike Preston, Chairman and CEO Mosaic Group 
Inc. "We have posted 18 consecutive quarters of continued growth while adding 
to our blue chip client list. We are building our business by taking our 
clients' business farther every time we deal with them. 
Our organic growth comes not only from securing new client wins, but from the 
cross-selling wins that are characteristic of a mature company able to 
leverage a robust and diverse range of service offerings." 
New Client Wins 
In the first quarter of 2001, Mosaic's newly acquired business unit Paradigm, 
has secured new client business worth between $20 million and $25 million a 
year in revenue. Combined with new client wins from Mosaic's other business 
units, and increases in spending from some existing clients, Mosaic has made 
significant progress in closing its new business gap for 2001. 
New Power 
--------- 
During the first quarter of 2001, Paradigm signed a contract with New Power 
to acquire residential and commercial customers through a variety of direct 
response channels such as outbound telemarketing, inbound telemarketing, 
direct mail and "feet on the street". New Power was formed by Enron Corp., 
the largest buyer and seller of electricity and natural gas in North America. 
Paradigm had previously provided contract marketing services to New Power. 
Through diligent effort, Paradigm was able to expand the contract to include 
the performance-based customer acquisition component. 
/For further information: Please Contact: Clint Becker, Chief Financial 
Officer, Mosaic Group Inc., (416) 813-4275, email: 
beckerc(at)mosaicgroupinc.com; Donna Cox-Davies, Director of Communications, 
Mosaic Group Inc., (416) 813-4279, Email: cox-daviesd(at)mosaicgroupinc.com/ 
16:10 ET 





European Phone Companies' Outlook Brightens: Rates of Return
2001-05-03 08:52 (New York)

European Phone Companies' Outlook Brightens: Rates of Return

     London, May 3 (Bloomberg) -- European telephone companies
such as British Telecommunications Plc and Deutsche Telekom AG
have improved their ability to pay back debt in recent weeks,
making their bonds a buy, investors said.
     ``Sentiment seems to be changing,'' said Anna Lees-Jones,
who helps manage about 28 billion pounds ($40 billion) of
corporate bonds at M&G Investment Management. ``I've been
building up my telecoms position all year.''
     British Telecom's 10-year euro-denominated bonds sold in
January yield about 214 basis points more than government debt,
down from a record 238 in March. Contracts that pay out if the
company goes bankrupt have also fallen in the past month,
according to Enron Corp., which trades the derivatives.
     Bond yields and bankruptcy derivatives have also declined for
Deutsche Telekom and Royal KPN NV, after the companies said they
would sell assets to pay down debt that has pushed their credit
ratings to record lows and weighed on their shares. Phone
companies sold $100 billion of bonds last year to finance licenses
and equipment for new mobile services.
     British Telecom said yesterday it will sell its stakes in
Japan Telecom Co. and Spain's Airtel SA to Vodafone Group for 4.8
billion pounds. British Telecom may also sell as much as 7.5
billion pounds of shares to existing investors in a so-called
rights offer, according to Legal & General Group Plc, one of the
company's shareholders.
     Deutsche Telekom will sell assets such as cable television,
and a stake in Global One and Wind SpA, Chief Financial Officer
Karl-Gerhard Eick said last week. KPN, the biggest Dutch phone
company, said on March 26 it plans to raise at least 5 billion
euros from asset sales to lower debt.
     Those plans have helped shift investors' perceptions of the
companies' creditworthiness, money managers said.

                       `Drastic Measures'

     ``At the beginning of the year the market was assuming
telecoms companies would be downgraded from single-A to triple-
B,'' said Peter Harvey, who helps run about $8.6 billion at F&C
Management. ``Drastic measures such as deeply-discounted rights
issues led investors to believe they will maintain their single-A
status.''
     The gap, or spread, between British Telecom's sterling
denominated bonds maturing in 2006, and U.K. five-year government
bonds has narrowed 50 basis points to 109 basis points in the
past month. Spreads between Deutsche Telekom's 6.125 percent five-
year euro bonds and German government debt narrowed 35 basis
points to 107 in April.

                      Bankruptcy Swaps Fall

     Those shifts in sentiment are also reflected in Enron's
bankruptcy swaps, where prices have fallen in the past month,
said Simon Brooks, a trader at Enron.
     Enron prices the swaps using indexes that measure the
probability of bankruptcy and the likely recovery rate in that
event. The price is expressed as a percentage above a benchmark
interest rate such as the London interbank offered rate, or
Libor.
     British Telecom bankruptcy swaps have declined to 66 basis
points from 96 on April 1, Enron said. Bankruptcy swaps on
Deutsche Telekom dropped to 78 from 100, while KPN's fell to 135
from 183. Over the same period, France Telecom SA's declined to
70 from 100 and Telecom Italia SpA's fell to 94 from 119.
     British Telecom's bond yields may fall further relative to
government debt, analysts said. They still offer higher yields
than those of rival Vodafone Group Plc, which has the same
ratings though with a stable outlook.
     While both companies have five-year euro-denominated bonds,
British Telecom's offer 55 basis points more yield. The rivals
also both have bonds maturing in 2004, and Vodafone's yield about
23 basis points fewer.
     ``If BT retains their rating, their spreads should be
probably 20 to 30 basis points narrower,'' said Brian Venables,
head of credit strategy at WestLB. ``Even though it has performed
extremely well this year, there is much greater potential for
BT's debt.''

                      Debt Reduction Target

     Both Moody's Investors Service, which rates British Telecom
``A2'', and Standard & Poor's, which rates it ``A'', have those
ratings on watch for further cuts after trimming them four rungs
last year.
     The company's asset sales to Vodafone are ``definitely
positive in terms of the rating assessment,'' said Aidan Fisher,
who rates British Telecom for Moody's. In combination with the
proceeds of a rights sale, ``that would meet the target they set
themselves this year -- that's quite a lot to achieve in a 12
month period.''
     British Telecom has said it wants to slash its 30 billion
pounds of debt by a third and fend off further rating cuts.
     Before companies such as British Telecom clarified their
debt-reduction plans, ``the world and his wife were underweight''
telecom bonds in March, said Harvey at F&C. The investment firm
has since raised its holding of telecom bonds to neutral, from
underweight, relative to its benchmark, he said.
     Bond yields ``were trading very much out of line to the rest
of the market,'' said Lees-Jones at M&G. Now, ``they have come in
quite a bit and will come in further.''

--Tom Kohn and Alice James in the London newsroom (44-20) 7330
7929 or at tkohn@bloomberg.net, with reporting by Christine
Harper /zls

Story illustration: {CRED <GO>} to see credit analysis on
Bloomberg. {BRITEL <Corp> <GO>} for BT's bonds. {DT <Corp> <GO>}
for Deutsche Telekom's bonds.





UK:Corporates warm to charms of credit derivatives
By Tom Bergin

05/03/2001
Reuters English News Service
(C) Reuters Limited 2001.

LONDON, May 3 (Reuters) - European corporates are beginning to turn to credit 
derivatives, among the more esoteric and complex of financial instruments, to 
hedge the risk their debtors won't pay up, market participants said on 
Thursday.

Credit derivatives are insurance-like tools that allow users to hedge the 
risk of default on a debt. They are mainly used by banks, hedge funds and 
insurance companies to hedge or gain exposure to the risk of a bond issuer 
defaulting. Dealers said an environment of deteriorating credit quality and a 
growing awareness among corporates that credit derivatives offer certain 
advantages over established hedging tools was behind the increasing use of 
the instruments.

The market remains small, with only around a dozen non-financial European 
corporates regularly using credit derivatives to manage their credit 
portfolio at present. But market professionals predict they will one day 
become as commonplace in the corporate world as other hedging tools such as 
interest rate swaps and currency options.

"We see (corporate use) as a big growth area for credit derivatives, maybe 
the biggest," says Bryan Seyfried, vice-president of Enron Credit in London.

Enron Credit grew out of the efforts of energy company Enron Corp. to hedge 
its own credit risk portfolio and now specialises in marketing credit risk 
management solutions to other non-financial corporates.

Ralf Lierow, director of credit derivatives at Siemens Financial Services in 
Munich, said the ability to buy and sell in a liquid market means credit 
derivatives offer a flexibility that established tools like credit insurance 
and forfaiting guarantees lack. Credit derivatives were are often cheaper 
than the alternatives, too, he added.

"This is not a trading book thing. For us, the credit default swap is another 
tool for credit risk management," Lierow said.

HELPS OPERATIONAL UNITS DO MORE BUSINESS

Siemens Financial Services acts as the centralised risk portfolio management 
operation for companies within the Siemens electronics and industrial group. 
It first started using credit derivatives in July 2000.

Large companies like Siemens can have hundreds of millions of dollars in 
receivables on their books at any time. The efficiency with which these 
companies manage the credit risk on their receivables has an impact on their 
day to day business.

"The advantage for the operative area is that they can offload more 
receivables and do more business," Lierow said.

Siemens uses credit default swaps, the most liquid type of credit 
derivatives, to hedge its portfolio of debtors on a constant basis. As the 
balance of cash owed by each name fluctuates over time, the company tries to 
match this with
default swap positions. Hence, if a customer fails to pay, Siemens can recoup 
the debt from the default swap seller.

Other companies use credit derivatives less frequently.

"There are occasional corporate users that have secured one-off requirements 
for balance-sheet management aims or to strip out the credit risk of a 
commercial transaction," said Walter Gontarek, head of global credit products 
at RBC Dominion Securities.

By hedging a country or company risk which a corporate may not be comfortable 
in carrying, a credit derivative can facilitate a project that may otherwise 
be unfeasible, dealers said.

NOT PUT OFF BY BAD PRESS

Corporates' adoption of credit derivatives is in spite of the negative 
publicity the instruments have received in recent years. A number of disputes 
over whether protection buyers could force banks to pay up on contracts have 
ended up in court. However, traders insist that subsequent work done on 
contract documentation minimises the risk of such disputes in future. 

Nonetheless a very practical concern for corporates remains, in that credit 
derivatives documentation was designed by bankers with sovereign and 
corporate bonds in mind. The International Swaps and Derivatives Association 
(ISDA)
standard documentation for credit default swaps allows for a pay-out in 
relation to defaults on bond payments but not on a private debtor's failure 
to pay.

"We use the ISDA framework but we need it redrafted in specific ways to fit 
our needs. You cannot take a standard contract and trade on it if you want to 
hedge trade receivables," Lierow said. These amendments add to the cost of the
credit derivative.

Another problem that corporates face is the complexity of credit derivatives. 
There is little experience of the instruments, which are barely a decade old, 
in the corporate world. Siemens had to get its expertise from the financial 
markets, hiring Lierow from Bankgesellschaft Berlin.

Clive Banks, UK head of derivatives sales to buy-side clients at Schroder 
Salomon Smith Barney, said much of the effort in marketing credit derivatives 
to corporates involves educating them about the products and the risks 
involved.

"It's about explaining credit risk management and what kind of volatility and 
cost having credit risk introduces," he said.

OUTLOOK PROMISING

Yet some corporates are beginning to take full advantage of their new tool. 
Lierow said that Siemens, which currently only buys credit protection, 
planned to start acting as a default swaps seller in the coming months.

He said selling would facilitate better matching of protection levels to 
actual exposures, and would enable diversification of risk away from industry 
sectors where the company's activities are concentrated.

"You could improve the portfolio mix by buying protection on automotives and 
selling protection on pharmaceuticals," he said.



Allegheny Energy buys three power plants

05/03/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

HAGERSTOWN, Md. (AP) - Allegheny Energy Inc. said Thursday it has purchased 
three power plants from Houston-based Enron Corp. 
The company said it issued more than 14 million shares of common stock worth 
$667 million to pay for the transaction. The plants are in Tennessee, Indiana 
and Illinois.
The Midwestern purchase will bring an additional 1,710 megawatts on line. The 
company is expected to own 14,000 megawatts of generating power by 2005. 
Allegheny also has plans to build natural gas-fired facilities in Arizona, 
Indiana and Pennsylvania. 
Allegheny Energy is the parent of Allegheny Power, which supplies electricity 
and natural gas to 3 million people in Maryland, Ohio, Pennsylvania, Virginia 
and West Virginia.


Allegheny Energy Buys Midwest Capacity From Enron Unit

05/03/2001
Dow Jones News Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
HAGRSTOWN, Md. -(Dow Jones)- Allegheny Energy Inc.'s (AYE) Allegheny Energy 
Supply Co. unit purchased 1,710 megawatts of natural gas-fired merchant 
generating capacity in three Midwest states from Enron Corp.'s (ENE) Enron 
North America unit. 
Financial terms weren't disclosed.
In a press release Thursday, Allegheny said it financed the acquisition 
through debt and equity and expects the purchase to add to earnings in 2001, 
excluding transaction costs. 
Allegheny noted that this latest acquisition gives Allegheny Energy Supply 
more than 14,000 MW of total generating capacity that it will own or control 
by 2005. 
Allegheny Energy Global Markets will market output from the three facilities. 
On April 27, Allegheny priced its public offering of 12.4 million shares at 
$48.25 each, and said it would use the $598.3 million in gross proceeds to 
fund its previously reported acquisition of generating facilities located in 
the Midwest and for other corporate purposes. 
New York Stock Exchange-listed shares of Allegheny recently traded at $49.85, 
down 51 cents, or 1%, on composite volume of 306,000 shares. Average daily 
volume is 538,773 shares. 
Allegheny, which posted an operating net of $313.7 million, or $2.84 a share, 
on revenue of $4.01 billion for the year ended Dec. 31, is an energy company. 
Company Web site http://www.alleghenyenergy.com 
-Karen M. Chow; Dow Jones Newswires; 201-938-5400




Allegheny Energy Supply Completes Purchase of Midwest Assets; Adds 1,700 MW 
to Growing Generation Fleet

05/03/2001
Business Wire
(Copyright (c) 2001, Business Wire)

HAGERSTOWN, Md.--(BUSINESS WIRE)--May 3, 2001--Allegheny Energy, Inc. (NYSE: 
AYE) today announced that its unregulated generation subsidiary, Allegheny 
Energy Supply Company, LLC, has completed the purchase of 1,710 megawatts of 
natural gas-fired merchant generating capacity in three Midwest states from 
Enron North America, a wholly owned subsidiary of Enron Corp. (NYSE: ENE). 
The acquisition gives Allegheny Energy more than 14,000 MW of total 
generating capacity that it will own or control by 2005 and marks a 
significant step in the Company's strategic course toward becoming a national 
energy supplier.
Earlier this year, Allegheny Energy Supply acquired 83 MW of coal-fired 
generation in the Conemaugh Generating Facility near Johnstown, Pa. 
Additionally, the Company has announced plans to build a 1,080-MW natural gas 
combined-cycle plant in La Paz County, Ariz.; a 630-MW natural gas 
combined-cycle facility near South Bend, Ind.; and a 540-MW natural gas fired 
combined-cycle generating facility in Springdale, Pa. Another 220 MW of 
peaking capacity have already been completed in Pennsylvania. 
The Midwest acquisition was financed through a combination of debt and equity 
and will be accretive to Allegheny Energy's earnings in 2001, excluding 
transaction costs and other costs related to the integration. Yesterday, the 
Company issued more than 14 million shares of common stock to facilitate the 
transaction. 
Alan J. Noia, Chairman of the Board, President, and Chief Executive Officer 
of Allegheny Energy, said, "I am pleased to announce the closing of Allegheny 
Energy's largest generation acquisition to date. It provides our Company with 
significant generation presence and capability as an energy merchant to sell 
electricity from efficient natural gas-fired generation facilities in more 
areas of the country with a growing demand for energy." 
Output from the three facilities will be marketed by Allegheny Energy Global 
Markets. 
"These premium generating assets are designed for operation in times of peak 
electricity demand," said Noia. "Because of its national presence, Allegheny 
Energy Global Markets will be able to market the output from these newly 
acquired facilities in a wide variety of ways with our portfolio of existing 
assets and other supply arrangements so that overall operational efficiency 
and shareholder value is maximized." 
Allegheny Energy Supply's newly acquired facilities include: the Gleason, 
Tenn., plant (546 MW), approximately 40 miles north of Jackson, Tenn.; the 
Wheatland, Ind., plant (508 MW), approximately 70 miles northeast of 
Evansville, Ind.; and the Lincoln Energy Center plant (656 MW) in Manhattan, 
Ill., near Chicago. These assets give Allegheny Energy Supply additional 
generating capacity within the East Central Area Reliability region (ECAR) 
and initial generation sources in the Mid-America Interconnected Network 
(MAIN) and the Southeastern Electric Reliability Council (SERC). 
Salomon Smith Barney acted as financial advisor and Jones, Day, Reavis & 
Pogue acted as legal counsel for Allegheny Energy for the acquisition. 
CONTACT: Allegheny Energy Supply, Hagerstown (Media) Janice Lantz, 
412/858-1630 Media Hotline: 888/233-3583 or (Investors) Greg Fries, 
301/665-2713 
11:35 EDT MAY 3, 2001 


SSB Cuts Forecast For Power Profitability In 2002, Beyond

05/03/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
NEW YORK -(Dow Jones)- Salomon Smith Barney's utility analysts sharply cut 
their forecast of the profitability of generating electricity in the U.S. in 
2002 and beyond because power prices are expected to drop more sharply than 
natural gas prices starting next year. 
The analysts cut the profit margin in natural gas-fired power in 2003 to 
$3.98 a megawatt-hour from $8.73/MWh, a 54% difference from their last 
forecast in February. They lowered their power price index for 2002 by 1.5% 
and for 2003 by 7.1% Thursday in a published report. Their forecast is based 
on forward markets for electricity and gas.
"Gas prices are remaining strong for a much longer period of time, while 
power prices drop off," senior electricity industry analyst Raymond Niles 
said in a telephone conference with investors. 
As a result, stock prices for power producers such as AES Corp. (AES), Mirant 
(MIR), Calpine Corp. (CPN) and NRG Energy (NRG) could peak this summer in 
advance of strong third quarter earnings reports, the Salomon report says. 
"Investors may still shy away from asset and investment-heavy power producers 
if realized prices begin to reflect the decreases in power prices now 
projected in the forward curve," the report warns. 
After this summer, the stocks of energy companies that focus more on trading 
will regain momentum, Salomon expects. These "energy merchant" companies, 
such as Enron Corp. (ENE), Williams Cos. (WMB), Duke Energy (DUK) and Dynegy 
(DYN), should be able to take advantage of higher trading volume and greater 
volatility in power markets in non-summer months, according to Salomon. 
"We expect (annual trading) volumes to grow, industry-wide, between 25% and 
40%, on average, during 2001-03, as the $800 billion global energy commodity 
market continues to open," the report predicts. 
The overall electricity price trend is national, according to Salomon. The 
report, titled "Power Curve," expects 2001 wholesale power prices to exceed 
last year's by 131% in the West and by 34% on average in the eastern U.S., 
including Texas. But since their last forecast, the analysts lowered their 
forward price curve for next year and beyond in 10 of 11 regional power 
pools. 
"Interestingly, the exception to that is the New York Power Pool," Niles told 
investors. 
For the remainder of this year, however, Salomon still expects power 
producers to beat substantially last year's breakthrough results. 
"About 50% of the spike upward in western U.S. power prices the past six 
months has been from something we've never seen before in this industry: 
political and credit risk," Niles said in the conference. 
Western merchant power suppliers are benefitting from the "unholy mess in 
California," Niles said, but that won't last forever. 
"Whenever the debate tapers off and we have a resolution in sight, that 
premium will slowly drain out of the western markets, and bring down 
profitability for the group," Niles said. 
National calls for reregulation due to the California crisis could continue 
to hurt stock prices for the entire sector, even though reregulation won't 
happen. Further, in so far as such calls discourage investment in generating 
plants, transmission lines and gas pipelines, they could also extend the 
current period of extremely high earnings, according to the report. 
In non-western states, the greatest profitability from power generation for 
the next two years is seen in New England. 
-By Mark Golden, Dow Jones Newswires; 201-938-4604; mark.golden@dowjones.com



Fitch Affs Northern Border; Rtg Outlook To Stable From Negative

05/03/2001
Business Wire
(Copyright (c) 2001, Business Wire)

NEW YORK--(BUSINESS WIRE)--May 3, 2001--Fitch has affirmed its `BBB+' senior 
debt rating for Northern Border Partners, L.P. (NBP) and its `A-` senior debt 
rating for its regulated pipeline affiliate Northern Border Pipeline Co. 
(NBPL). 
The Rating Outlook for both companies is changed to Stable from Negative. The 
rating action was taken after a review of NBP's recent acquisitions and 
long-term business plan. A combination of debt and equity at NBP was used to 
fund the recent acquisitions of Bear Paw, LLC, Midwestern Gas Transmission 
Company, and Dynegy Canada midstream assets. An additional $125-150 million 
of equity is expected to be sold in the coming months to pay down short-term 
debt and complete the permanent financing.
The improvement in Rating Outlook primarily reflects NBP's demonstrated 
commitment to undertake conservative long-term financing and operating 
strategies. Future acquisitions at the partnership level are expected to be 
financed 50/50, debt/equity so as to maintain financial flexibility and a 
stable credit profile. Moreover, management has shown a strong bias to 
minimize commodity price risk as it expands its non-regulated gas operations. 
For example, processing contracts for Bear Paw's four processing facilities 
are contracted for on a percentage of proceeds basis and liquids prices have 
been 90% hedged by NBP through 2001, limiting downside exposure. 
NBPL continues to exhibit strong competitive market, operating, and financial 
characteristics that are consistent with its current `A-` rating. The company 
is a low-cost transporter of Canadian gas into the Midwest, with costs per 
hundred miles of less than 4 cents per mcf. The December 2000 completion of 
the Alliance Pipeline has had minimal impact on Northern Border as capacity 
utilization approaches 100%. Pipeline capacity is 99% subscribed through 
mid-September 2003. Its shippers are financially strong customers with 
uniform take-or-pay contracts. The company has never written off a bad debt. 
NBPL should generate EBITDA/interest coverage of nearly 4.0 times over the 
next few years. 
Credit concerns primarily relate to NBP's changing business mix and the 
expectation of increased market risk associated with its growing midstream 
operations as compared with the stable, low-risk profile of NBPL. While 
projected consolidated and stand alone credit measures at NBP remain 
relatively strong, there will be less predictability in the future cash 
stream utilized to service debt. 
NBP is a publicly traded master limited partnership. Its primary holding is a 
70% economic interest in NBPL, a 1,214-mile FERC regulated interstate 
pipeline transporting natural gas from the Canadian border to the upper 
Midwest. Enron Corp. and The Williams Companies, Inc. hold a 10.0% and 3.3% 
stake in NBP, respectively, with the remainder publicly held. Enron controls 
an 82.5% stake in the management committee of NBP with Williams holding the 
remaining management allocation.
CONTACT: Fitch, New York Ralph Pellecchia, 212/908-0586 or Hugh Welton, 
212/908-0746 
13:58 EDT MAY 3, 2001 




INDIA: UPDATE 1-Enron to meet govt panel over Indian project

05/03/2001
Reuters English News Service
(C) Reuters Limited 2001.

NEW DELHI, May 3 (Reuters) - The Indian unit of Enron Corp said on Thursday 
that its officials would meet members of a government panel formed to 
re-negotiate a troubled $2.9 billion power project in western India. 
But the willingness to meet the panel next week should not be construed as an 
offer to renegotiate the contract, Dabhol Power Company (DPC) said in a 
statement.
"As a matter of courtesy we have agreed to meet with them next week," the DPC 
statement said. "Since the purpose of our meeting is to hear out the 
committee and understand their thoughts, we will not present any proposal." 
DPC said it had constantly maintained that it was open to maintaining a 
dialogue towards resolving issues. 
"(But) This meeting should in no manner be construed as an open offer from 
DPC to renegotiate the terms of the contract," it added. 
DPC and the government of the western state of Maharashtra have been locked 
in a payment battle for months, with the state's electricity board balking at 
paying Enron what it considers too high a rate for electricity. 
At present, Maharashtra's State Electricity Board (MSEB) owes the DPC, of 
which Enron is a 65 percent stakeholder, some $48 million for power. 
The Maharashtra government last week announced the formation of a panel of 
experts to re-negotiate its contract with DPC and lower the cost of power 
sold to MSEB. 
LARGEST FOREIGN INVESTMENT 
The Dabhol project, the single largest foreign investment in India, consists 
of two phases, the already-built 740 megawatt power plant and a 1,444 MW 
plant that is expected to be finished this year. 
Last week, Dabhol's board authorised the plant's managing director to issue a 
preliminary notice of termination of service to MSEB. The notice, which has 
not been issued, would be the first step for Enron to pull out of the 
project. 
Earlier, a source familiar with the project told Reuters that Indian lenders, 
who have provided millions of dollars to Houston-based Enron to build DPC are 
lobbying with the government to act quickly and end the crisis. 
"We have asked the government for help. We are awaiting their reply," the 
source, who is employed with a large financial institution, said. 
The domestic lenders to the project are Industrial Development Bank of India 
, ICICI Ltd , Industrial Finance Corporation of India , Canara Bank and State 
Bank of India . 
If Enron pulls out of the project, the source said, the lenders would have no 
choice but to seek an alternative buyer. 
"The plant is good, Maharashtra needs power and I am sure buyers can be 
found," the source added.




India State Panel's Sat Meet With Enron Unit Postponed

05/03/2001
Dow Jones International News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW DELHI -(Dow Jones)- India's Maharashtra state government's expert 
committee's Saturday meeting with the U.S. energy major Enron Corp.'s (ENE) 
Indian unit Dabhol Power Co. has been postponed until May 11 at the request 
of DPC, a committee member told Dow Jones Newswires late Thursday. 
The nine-member committee has been appointed to renegotiate the Maharashtra 
State Electricity Board's controversial power purchase agreement with DPC. 
The state government has asked the committee to try to negotiate a revised 
agreement within a month.
"The negotiating committee's first meeting with the Dabhol Power Co. 
management scheduled for Saturday has been postponed until May 11, 0530 GMT, 
at DPC's request. They (DPC) told us they wanted some more time to prepare 
themselves for the meeting and we have granted their request," said a 
committee member. 
The committee's goals are to lower the power tariff and allow the sale of 
excess power to the federal government or its utilities. A restructure of the 
DPC's stakeholding may also be on the agenda. 
-By Himendra Kumar, Dow Jones Newswires; 91-11-461-9427; 
himendra.kumar@dowjones.com


EnergieKontor Secures Enron Deal For Spain, Germany Projs

05/03/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
LONDON -(Dow Jones)- German wind farm developer EnergieKontor AG said 
Thursday it has signed a framework agreement with Enron Wind GmbH for 
deliveries of wind turbines for projects in Germany and Spain. 
In all, Enron will deliver 200 megawatts' worth of 1.5 MW turbines for 
onshore projects in EnergieKontor's home market and in Spain, one of its 
fastest-growing export markets.
In addition, Neuer Markt-listed EnergieKontor said it has entered into 
exclusive negotiations with the local authorities for permission to build up 
to 15 wind farms at a number of sites in the Castilla-La Mancha region. Each 
site would have an installed capacity of 45-50 MW, making a total of 700 MW. 
"Once we reach this stage there is about an 85-90% of the project going 
ahead, sometimes more," a spokesman told Dow Jones. 
EnergieKontor said it assumes that it will set up the first windfarms in 
Castilla-La Mancha as early as next year. 
-By Geoffrey T. Smith, Dow Jones Newswires; (+44 20) 7842 9260; 
-geoffrey.smith@dowjones.com

The Bottom Line: Scottish Power Looks To Refine Focus
By Andrea Chipman
Of DOW JONES NEWSWIRES

05/03/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

LONDON -(Dow Jones)- After more than a year of lagging earnings, investment 
missteps and unexpected disasters, U.K. vertically-integrated utility 
Scottish Power (SPI) is hoping a new strategy to streamline its businesses 
will signal a more focused period for the company. 
But it's got its work cut out. While investors were cheered by news that its 
U.S. Utah-based Hunter power plant is back online after a six-month outage 
that cost the company an estimated $160 million, uncertainty over its plans 
for its Southern Water unit and apparent ongoing commitment to loss-making 
telecoms venture Thus are seen as muddling group focus.
"It all adds up - the lack of coherent strategy, quite substantial downgrades 
and a whole host of non-core businesses that they don't have any natural 
management flair or expertise in," said Brian Gallagher, a senior fund 
manager at London-based Gartmore Investment Management, which has GBP3 
million of Scottish Power shares in its Global Utilities Fund. "We have a 
reasonably low opinion of the company." 
The company said Thursday that its pretax profit before goodwill amortization 
and exceptional items for the fiscal year ending March 31 fell to GBP628 
million from GBP736 million a year ago. Adjusted earnings per share declined 
to 30.65 pence in the 2001 fiscal year from 41.22 pence in 2000. 
The company acknowledged profits have been hit hard by the Hunter outage, 
competition on wholesale and retail markets in the U.K. and strict price 
controls on its regulated infrastructure businesses. 
Although the company's shares were trading at 458.5 pence after the release 
of Thursday's earnings results, up from 441.5 pence Wednesday, they are down 
more than 15% from 533 pence a year ago. 
Executives say they are restructuring the business into three targeted 
divisions to capitalize on its traditional strengths in generation and power 
supply and infrastructure and to expand its overseas activities. 
"We've now got a trading and commercial link between generation and supply 
and the first thing we are doing is putting emphasis on that...on growing 
earnings across that value chain," Scottish Power Chief Executive Ian Russell 
told journalists in a conference call Thursday. "In the U.S., we are focused 
on cost cutting and on acquiring new businesses." 
Scottish Power's move away from a full multi-utility profile - begun last 
year with its partial disposal of Thus and its withdrawal from an Internet 
banking venture with the Royal Bank of Scotland - toward a more narrowly 
focused energy business mimics a trend across the industry toward greater 
specialization. 
The company is also considering selling Southern Water, which would allow it 
to focus even more closely on its power business. 
Yet analysts and investors say they are looking for more details of the 
company's overall growth strategy from Russell, who took over as chief 
executive last month, and other managers. The toll from months of drift, is 
evident, they said. 
Sales Of Southern Water, Thus Seen 
Indeed, despite its efforts to chart a new road, Scottish Power appears to be 
reluctant to acknowledge the failure of some of its non-core ventures. 
Russell said his company remains "supportive" of Thus, which reported a 2000 
fiscal year loss of GBP21.4 million this week, and has no plans to exit its 
remaining 50% stake in the company. 
Similarly, he said, Scottish Power hasn't yet made a final decision to 
dispose of Southern Water - which has cut costs under its Scottish parent but 
is increasingly unable to cover its capital expenditure - although he said 
the company had received "a number of offers" from potential buyers. Although 
he declined to identify any of the bidders, Italian energy company Enel SpA 
(ENI) has confirmed its interest. 
Industry sources said a prompt sale of the water unit looks likely, with some 
bids already exceeding the GBP2 billion at which many analysts value the 
company's combined assets and debt. It's unclear, they said, how Southern 
Water or Thus would fit into Scottish Power's new image. 
"Scottish Power sees itself as an international energy company," a source 
familiar with the company said. In a year's time, he added, "it would be 
unlikely that Southern Water and Thus would be part of the company." 
Revenues from the sale of the water unit would also help Scottish Power 
pursue its U.S. expansion without adding to its 90% gearing levels, analysts 
and investors said. 
Russell declined to comment on reports Scottish Power is considering buying 
Enron Corp.'s Oregon-based unit, Portland General, but admitted the company 
would be a logical geographical fit with Pacificorp. 
Analysts said Scottish Power's plans for U.S. growth is likely to be a key 
part of its energy strategy. 
"We like their U.S. strategy where they've leveraged expertise gained in the 
highly competitive U.K. market," said Gareth Lewis-Davies, head of utilities 
research at Lehman Brothers in London. 
Closer to home, competition and the trend toward increased specialization in 
the power industry may force Scottish Power to determine whether its business 
strength lies in asset management or retail and generation. 
"Strategic decisions need to be made, and I'm not sure if they are going to 
make them in the near term or not," said Andrew Wright, U.K. utilities 
analyst at UBS Warburg in London. "They are pretty much involved across the 
value chain, and I think it remains to be seen which part of the value chain 
they specialize in, if any." 
Company Web site: www.scottishpower.co.uk 
-By Andrea Chipman, Dow Jones Newswires; 44-207-842-9259; 
andrea.chipman@dowjones.com