Political Influence Wins Contracts For Gas Company

WASHINGTON, Jul 18, 1995 (IPS) - Enron, the world's largest natural gas company, uses powerful connections to bid for contracts that observers complain are over-priced.

The 10-year-old company which racked up nine billion dollars in sales last year, shot into the news recently when a state government in India threatened to cancel a 2.8-billion-dollar deal to build a power plant near Bombay.

Critics argue that Enron over-charged the Indian government and used political contacts to clinch the deal. They also say this is nothing new for the Texas-based company.

Enron is bidding for a contract to re-build Shuaiba North, a 400-megawatt power plant that supplied five percent of Kuwait's electricity before it was bombed during the 1991 Gulf war, according to Seymour Hersh, a journalist for New Yorker magazine.

Hersh wrote in a 1993 article that Enron's price for supplying the power is 11 cents a kilowatt hour. The rival bid put forward by the German company Deutsche Babcock was six cents, while the state-subsidised rate is half-a-cent a kilowatt hour.

Despite the large price difference, Hersh notes that Enron's bid received favourable consideration after former Secretary of State James Baker visited Kuwait in 1993. Baker, a Texan, was working as a consultant for Enron at the time.

Questioned about the contract, Kuwait's press attache here, Raed al Rifai, declined to discuss the subject: ''We expect that the contract will be awarded very soon, but until it is awarded, we cannot comment on the matter.''

In India, Enron will charge the state government eight cents a kilowatt hour -- almost twice the current price paid by consumers. This will rise to 33 cents by the year 2017.

Critics like Prayas, a non-governmental group based in India, charge that this works out at a 32 percent rate of return, almost three times the average rate of return in this country. They also say Enron built a similar plant in northern England for half the price tag of the Indian plant.

Enron won a contract to build a 105-megawatt, diesel-fired power plant in the Philippines that critics said would cost the Filipino National Power Corporation (NPC) eight cents a kilowatt hour -- 20 percent more than NPC charged consumers.

The controversy led to resignations in 1993 of all seven members of the NPC board. Filipino President Fidel Ramos and Delfin Lazaro, the energy secretary at the time, ordered investigations into the matter.

One probe by a three-member team led by energy under-secretary Rufino Bomasang cleared Enron of improprieties. The team said the up-front cost of the contract was high but concluded that worked out over 25 years, it would be close to the current price of electricity,

''Power is now being supplied by private contractors to the NPC after selection through open bidding,'' says Victor Gosiengfiao, the Filipino economic counselor here. ''It's not always the lowest bidder that wins the deal. There are other factors involved.''

Diane Bezalides, Enron's vice-president for public relations, also defends the bidding process.

''There were questions asked in open legislative process. We did provide information to the department of energy, and they were satisfied with our replies. In fact, President Ramos even attended our inauguration ceremonies,'' she says.

Enron has similar access to powerful political figures here, say observers in this city. The company has close connections in the two main political parties in the United States.

Kenneth Lay, the founder and chief executive of Enron, is known to be a friend of former U.S. President George Bush's, and raised funds for Bush's bid for re-election in 1992. Lay also hosted the reception committee for the Republican National Convention that year.

Following the Republican's loss at the polls, Lay hired as his consultants two of Bush's key cabinet officials: Baker and secretary of commerce Robert Mosbacher. Thomas Kelly, the director of operations for the Bush's Joint Chiefs of Staff during the Gulf war was already working for Lay.

Baker and Kelly accompanied Bush on a private visit to Kuwait in Apr. 1993 after Bush left the White House.

Hersh says in his New Yorker article that Baker along with the former president's two youngest sons, Neil and Marvin, remained in Kuwait after Bush left to negotiate on Enron's behalf with the Kuwait ministry of electricity and water.

Their efforts apparently paid off. Hersh's sources told him that Enron's Kuwaiti business partners in the bid to re-build Shuaiba had ''obviously been hand picked'' by the Kuwaiti prime minister.

Enron calls the New Yorker article ''completely incorrect'', but the company remains vague about what did happen in Kuwait.

''Bush's sons were not working for us and never have. I cannot comment on whether on not we have a bid in that country,'' Bezalides told IPS. ''James Baker did have one or two meetings on our behalf in Kuwait but that was after George Bush left.''

Enron's political luck did not run out after Bush's departure. Lloyd Bentsen, another Texan, and Clinton's first treasury secretary, was already a recipient of Enron's largesse.

In one Senate election campaign, the Democrat received more than 14,000 dollars from Enron. According to data provided to IPS by the research group, Centre for Responsive Politics, the amount is the second highest paid out by Eron to a political campaign.

Bentsen quit his job as secretary of the treasury at the end of 1994 and was succeeded by Robert Rubin, a business associate of Enron's when he was at the investment bankers, Goldman Sachs.

Clinton first hired Rubin to head his National Economic Council. Soon afterwards, Rubin wrote on Goldman Sachs stationery to former clients, including Enron, in which he ''looked forward to continuing to work with you in my new capacity.''

In the meantime Lay has wasted no time in cultivating friends with the new Clinton administration.

In Aug. 1993, McLarty arranged an invitation for Lay to play golf with Clinton in Vail, Colorado. This date irritated Oscar White, chief executive of Coastal, another natural gas company that had helped the Clinton election campaign raise funding.

These connections to the Democratic administration have helped Enron considerably, says Ken Silverstein, who publishes Counterpunch, a fortnightly newsletter here.

Clinton officials publicly helped Enron win the contract in India as well as in Indonesia. And in the last two years, Enron has received U.S. government funds to build power plants in China, the Philippines and Turkey. Enron also won contracts in Pakistan and Russia while accompanying senior U.S. government officials on state trips.

Pratap Chatterjee is a campaigner with Project Undeground.

Source: Inter Press Service

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