Global Policy Forum

by James V. Grimaldi

Enron Corp.'s vast overseas energy investments were aided by promises of more than $7 billion in loans and insurance from the European, Asian and worldwide development banks, as well as key U.S. export-support agencies, according to a report to be released today.

It has previously been reported that the United States' two primary development banks provided more than $3 billion in backing for Enron projects. The report by the Institute for Policy Studies, a progressive think tank, said Inter-American Development Bank and World Bank agencies each agreed to provide about $750 million, and an array of other agencies overseas promised $2 billion in assistance to power projects from China to Nigeria in which Enron was a participant.

Compiled from media reports and agency annual reports, the study's totals include hundreds of millions of dollars in financing and insurance that were approved but never disbursed. The Overseas Private Investment Corp. (OPIC), for example, did not disburse about $840 million of the $2.5 billion it promised in support of Enron projects.

The tally reflects Enron's aggressiveness in soliciting the help of government and taxpayer-supported development banks in its quest for global expansion.

Since Enron's bankruptcy, many agencies are reexamining their dealings with the energy trader. OPIC yesterday released a letter to the Justice Department seeking help determining whether Enron made "material misrepresentations" in its dealings with the agency and whether the agency has legal claims against the company. Enron has filed a $200 million claim on its OPIC insurance policy on its failed Dabholpower plant project in India.

Last month, OPIC cut its $1 billion Enron exposure to about $650 million by canceling four loans for two projects in Brazil and Bolivia because the firm had missed deadlines for financing the projects, an OPIC spokesman said.

Both OPIC and the Export-Import Bank of the United States, government agencies whose mission is promoting the sale of U.S. companies' goods and services overseas, said their loans and insurance have not been affected by Enron's bankruptcy filing.

Enron's foreign projects, which were at the center of an acrimonious internal debate in the 1990s over the firm's future, have come under fire from environmental groups that said they increased pollution. More broadly, the groups oppose the development banks' support of certain oil and energy company projects overseas.

Enron spokesman John Ambler faulted the report as "extreme opportunism" and saidsome of the loans were sought not by Enron, but by foreign countries doing business with it.

Ambler said many of the projects aided the environment by substituting cleaner-burning natural gas-powered plants for coal-fired plants that are predominant in developing countries.

He cited Enron's efforts to build a $3 billion power plant in Dabhol to replace a coal-fired operation. It had $319 million in OPIC support, $258 million in support from the Japanese Bank for International Cooperation and $175 million in backing from the Japanese Ministry of International Trade and Industry.

Daphne Wysham, co-author of the report, said that even if not all the funds approved by development agencies for Enron-related projects were disbursed, "the reality of their official support frees up private financing." Thus, she said, "Approval is the vital trigger for a project's advancement."

After the Asian financial crisis of the late 1990s caused problems with Enron's power project in Indonesia, Enron collected a $15 million political insurance claim from a World Bank agency -- the only insurance claim in its 13-year history. The agency paid the claim and, in turn, won a promise from Indonesia to repay the World Bank over three years.

Despite the company's success in getting development agency support for foreign projects, Enron's former chief executive, Jeffrey Skilling, told a congressional committee that the overseas deals never produced a "compensatory return." Skilling had fought attempts at Enron to expand the international projects as part of an internal power struggle.

Skilling tried to sell foreign properties to raise cash. However, in 2000 a deal fell through in which Enron would have sold a chunk of foreign assets for as much as $8 billion through a group of Middle Eastern investors. Documents from various investigations show that Enron debts incurred in financing some of those foreign projects were folded into some of the controversial off-the-books partnerships, whose collapse triggered the company's bankruptcy.

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.