Monthly Archives: July 2005

Update on Enron’s Dabhol power plant

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dabholplant-enron.jpgOne of the enduring symbols of Enron Corp.’s failed foreign business investments was its investment in the Dabhol Power Plant on the Maharashtra coast approximately 150 miles south of Mumbai.
When it first began producing power in the late 1990s, Enron’s sponsorship of the project was widely viewed as a breakthrough in the traditional ambivalence of India’s government toward foreign investment in Indian assets. However, the plant was shut down in 2001 after a dispute between Enron and its sole customer, the Maharashtra electricity board, and the plant has remained idle as Enron slid into bankruptcy amid competing litigation claims between the foreign owners in the plant, the Maharashtra state government, and the Indian government. So much for attracting foreign investment in a fast-growing Indian economy that could use the benefits of foreign capital.

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Amegy Bank is a takeover target

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Amegy logo.gifHouston-based independent bank Amegy Bancorporation, Inc. — known until recently as Southwest Bank of Texas — is the subject of a takeover battle between Birmingham, Ala.-based Compass Bancshares Inc. and Salt Lake City-based Zions Bancorp, according to the Houston Business Journal (article not yet online). The competition for Amegy will likely be decided within the next week.
Amegy is a relatively small bank holding company with a market capitalization of $1.6 billion and first quarter net income of $about $17 million, but it is one of the few remaining independent banks in the growing and attractive Texas retail banking market. Amegy has about 75 branches in Texas that are located primarily in the the Houston and Dallas metro areas.
The Amegy is the latest in a series of big bank acquisitions in the Texas banking market. Those acquisitions have included Wachovia Corp.’s $13.7 billion acquisition of SouthTrust Corp. and Citigroup, Inc.’s purchase of First American Bank SSB.
Compass is better known in Texas than Zions, but is actually a slightly smaller bank holding company. Compass has about 400 branches in six states in the South and Southwest, about a third of which are in in Texas. Compass has a market capitalization of about $5.6 billion on reported assets of $28.8 billion and reported first quarter net income of just under $100 million. Zions has roughly the same number of branches as Compass, but they are based in eight Western states. Zions has a market cap of $6.6 billion on assets of about $32 billion, and reported first quarter net income first-quarter net income of $110.2 million.
Update: Zions appears to the winner.

The Talented Mr. Munitz

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munitz1.jpgAlmost thirty years ago, the University of Houston Board of Regents was faced with a difficult decision — replacing longtime UH president Philip G. Hoffman.
President Hoffman was the quintessential tough act to follow. The unusual administrator who was respected by faculty, administrators, and regents alike, President Hoffman sheparded UH during the era from early 1960’s to the late 1970’s as the university transformed from a sleepy city college into Texas’ first dynamic urban university. An example of President Hoffman’s influence is the fact that, when he took office in 1962, UH was admitting its first minority student and, when he retired as UH president in 1977, UH had become Texas’ most fully-integrated state university by far. Other accomplishments during his tenure included reorganization of UH’s administration into that of a major university, completion of the university’s first real master plan for campus development, implementation of the initial stages of the University of Houston System of campuses, and overseeing the rise of UH’s athletic teams into national powers.
munitz2.jpgSo, given President Hoffman’s accomplishments and stature, the UH Board really needed to make a splash in naming his replacement. Their choice? 35 year-old wunderkind, Barry A. Munitz.
Mr. Munitz was an interesting choice. Hired a year or so earlier as Vice-President and Dean of Faculties at UH’s central campus, the young Mr. Munitz and his glamorous wife cut a sophisticated and trendy swath through UH social circles. The theory behind Mr. Munitz’s appointment was that he represented the new wave of college administrator who encouraged ties between the business and university communities.

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More on the black hole that is Metro

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metroraillogo4.gifIn the “could-it-possibly-be-any-worse” department, this Rad Sadlee/Chronicle article reports on the just-released external audit of Houston’s Metropolitan Transit Authority. It’s not a pretty picture:

Comparing Metro’s numbers for fiscal years 2001 and 2004, the audit shows a 29 percent rise in operating costs, to $304 million, and a 36 percent increase per passenger boarding. On the income side, Metro’s annual report shows fare revenue has hovered around $46 million a year since 1995.
The report says ridership slipped 5 percent in the three years, from 100 million yearly boardings to 95 million, despite a one-year bump in 2004 when 5 million boardings on the new MetroRail line offset the loss of 3 million on buses. Most of the loss was on local and express routes, with Park & Ride numbers holding steady.

This less-than-inspiring performance is after Metro plunked down $325 million to construct the underutilized 7.5 mile Red Rail Line from downtown to Reliant Park and Metro’s announcement from a little over a month ago that the agency plans to spend another $104 million on the Red Line — less than three years after completion of the project — to double the number of trains and fix problems caused by construction errors. Then, as if to jolt into perspective the economic absurdity of all of this, Metro and public officials recently announced a modified public transit plan in which Metro puts up $676 million (in addition to the $325 million already spent on the Red Line) in return for an additional $1 billion in federal matching funds. Given how poorly Metro has invested public money to date makes the details of how Metro intends to spend that additional money almost an afterthought, but Anne Linehan over at blogHouston.net and Tory Gattis at Houston Strategies have done a good job of analyzing that issue. By the way, blogHouston.net’s compendium of Metro posts that Ms. Linehan and Kevin Whited have prepared is the flat-out best resource on the web to track what Metro is doing.

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Sometimes these things get overlooked on holiday weekends

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TD3.gifInasmuch as my utterly unprofessional opinion is that the Houston area is going to be hammered by a hurricane this season, just a note to let you know that Tropical Depression 3 has just formed in the Atlantic. Current projections have the storm crossing the Yucatan of Mexico, entering the Gulf of Mexico, and heading towards the upper Texas coast, where current forecasts have it reaching the coast by Wednesday morning or so. While over the Gulf, the depression is likely to intensify into a tropical storm if it survives the journey. While satellite imagery and forecast models indicate weakening, upper level conditions over the Gulf support strengthening.
One thing to note during the hurricane season is that computer models do a better job of predicting the track of a storm than its intensity, where an experienced forecaster’s gut reaction often is better than the computer models.
Frankly, a not-too-powerful storm would be welcomed in the Houston area right now as the area is suffering from a combination of typical hot summer tempuratures and a mini-drought over about the past 45 days.

Create your own traffic jam

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traffic jam.jpgWith the microsimulation of road traffic, you can now create your own traffic jam in the comfort of your home.

Let’s see, how can we blame Enron for this?

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enron_logo2.jpgOne of the enduring myths of this era of criminalizing business practices is that Enron’s energy trading policies were one of the primary causes of California’s power crisis during the early part of this decade.
Well, with Enron gone, that myth is not going to hold up this time around if what James D. Hamilton predicts comes to pass:

California may again offer the nation a useful illustration this summer of how not to deal with an energy crisis.
California Energy Blog last month passed along the warning from the Federal Energy Regulatory Commission that the southern half of our state is in “the worst electricity supply situation in the entire country.” I’m not worried about it, though, because I know that the California Energy Commission has been working for five years to come up with a plan.
And here it is, in all its glory: the fifth annual installment of the flex your power now! campaign. In the Commission’s own words, here’s how it works:

Pitch in this summer, California. When you hear the “Flex Your Power NOW!” alert, immediately conserve energy. Learn more about what to do when you hear the alert.

But the really cool thing is the “Conserve-O-Meter”. Go ahead, I’ll wait here while you check it out.
And thus we continue in the great tradition of California regulators, who seek with great diligence, earnestness and, dare I say, ingenuity, to try to balance supply and demand every day by telling each one of us exactly what we need to do. As long as we all maintain the proper spirit and check up on the Conserve-O-Meter as the day progresses, I’m certain that all Californians can be counted on to do the right thing, ensuring the equality of supply and demand as a result of conscientious attention to civic duty.

No fan of Lerach

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Lerachenrondocs150ap4.jpgIn this NY Times op-ed, Joseph Nocera tees off on the lead Enron class action securities fraud plaintiffs’ lawyer, William Lerach, who has his share of troubles these days (noted here and here). After noting Larry Ribstein’s compliment of Mr. Lerach’s complaint against Enron and its investment banks (although I suspect that’s not all Professor Ribstein observed to Mr. Nocera regarding Mr. Lerach and securities fraud class actions), Mr. Nocera lays the wood to Mr. Lerach:

While I have no way of knowing whether Mr. Lerach is innocent of the charges he may soon face – or whether the investigation is politically inspired – I do know that Mr. Lerach is hardly a candidate for canonization. For much of his career, he made his living playing a dirty game.
He would watch for the stocks of companies to drop, especially volatile high-technology stocks that missed their earnings estimate, and then he would round up a small shareholder like Mr. Lazar and race to the courthouse to be first in line to file a suit seeking class-action status. And then, usually with little else to go on, he would essentially torture the company with discovery motions and deposition requests and legal filings until it finally settled to make him go away.
And he was so gleeful about it! And so taunting! And so vindictive! He sued 3Com five times. Intel, too. He would tell executives of the companies he was suing, “I’m going to take away every penny you own.” Once when Alan Shugart, the C.E.O. of Seagate Technology, which was being sued by Mr. Lerach, started a campaign against “abusive litigation,” Mr. Lerach sent him a note that said, “Dear Al: More is coming.”
John Doerr, the Silicon Valley venture capitalist, has called Mr. Lerach “a cunning economic terrorist.”

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Justice O’Connor replacement information

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Sandra Day O'Connor.jpgWith Supreme Court Justice Sandra Day O’Connor’s resignation announcement this morning, the SCOTUSblog provides the following handy profiles of some of the leading replacement candidates:
Fifth Circuit Court of Appeals Judge Edith Hollan Jones, who is also the subject of an earlier background post here and Larry Ribstein’s choice;
Judge Janice Rogers Brown of the D.C. Court of Appeals;
Fifth Circuit Judge Edith Brown Clement
Attorney General Alberto Gonzales
Moreover, if President Bush elects to dip into the pool of candidates to replace Chief Justice William Rehnquist, this post and this post from earlier this year profile the likely candidates.
Finally, SCOTUSblog also provides The Supreme Court Nomination Blog, which provides more in-depth analysis of the positions taken and decisions written by some of the prominent candidates.

Piling on Merck

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Merck.gifTexas attorney general Greg Abbott announced yesterday that he has filed a lawsuit against Merck & Co. in state court alleging that the company bilked Texas out of about $170 million in Medicaid payments by misrepresenting the safety of its Vioxx painkiller. Although a flurry of personal injury lawsuits have been filed against Merck throughout the country after the company pulled the Vioxx drug late last year, Texas is apparently the first state to file such a suit against the company.
A one-time popular arthritis drug, Merck voluntarily withdrew Vioxx from the market last fall after a study of cancer patients correlated use of the drug with an increased risk of heart attack and stroke. As is typical in such situations, the numerous private lawsuits that have been filed against Merck allege that the company knew of potential problems with Vioxx, but disregarded them and marketed the profitable drug anyway.
Greg Abbott is one of the genuine good guys in Texas politics, but he is wandering far afield with this latest salvo against Merck. As Dr. Rangel has noted here and here, lawsuits such as this follow a troubling pattern of attempting to feed off of the sensationalism and publicity of a side effect of a new and popular drug. It’s not at all clear that Merck did the right thing in pulling Vioxx off the market, but the mainstream media and plaintiffs’ personal injury lawyers have seized on the company’s removal of the drug from the marketplace by drumming the theme that Vioxx is an excessively dangerous drug that could kill you. Not mentioned in such propaganda is the fact that there are plenty of other medications on the market that have side effects that are more common and worse than those of Vioxx, but those drugs remain on the market for patients who are willing to risk the side effects of the drugs to obtain the benefits from them.
As one doctor observed in the Wall Street Journal awhile back, given the known side effects of aspirin, that drug “probably couldn’t gain FDA approval today.”