[Congressional Record (Bound Edition), Volume 146 (2000), Part 14]
[Senate]
[Page 20909]
[From the U.S. Government Publishing Office, www.gpo.gov]


[[Page 20909]]

                                  PNTR

  Mrs. LINCOLN. Mr. President, as a strong advocate for Permanent 
Normal Trade Relations with China, I feel a personal responsibility to 
ensure that American companies benefit from this


continuing trade relationship. I believe most of my Senate colleagues 
feel the same way. I am confident there will be many success stories, 
but there are also valuable lessons to be learned from watching U.S. 
companies that have tried to do business thus far.
  Panda Energy International is one such company. Panda is currently 
building a substantial gas-powered generator in Union County, Arkansas, 
and I have been personally briefed by Panda's officials about their 
difficulties in China. Panda spent six years developing a power project 
near Tangshan in Hebei Province. It signed a contract to sell all of 
the output from the project to the North China Power Group--an arm of 
the national utility--at a price to be determined by a formula. Armed 
with this contract, Panda borrowed $155 million needed to construct the 
project through a public bond offering in the U.S. capital markets. 
Construction for the project got underway in 1997. The project was 
completed late last year, and has been in limbo since that time.
  The project cannot sell power without formal approval of a tariff, or 
price for its electricity, by the Tangshan municipal pricing bureau. 
The Tangshan pricing bureau has been reluctant to assign a tariff that 
would then set in motion the need to buy additional electricity for the 
region where demand has recently diminished. At the same time, Panda 
Energy is in a perilous bind, because it had to mortgage all of its 
existing power plants--two in the United States and one in Nepal--as 
security to guarantee the U.S. bond holders they would be repaid their 
loans. The company is on the verge of defaulting on the loans.
  Mr. EDWARDS. Would the Senator yield?
  Mrs. LINCOLN. I would be pleased to yield to my friend from North 
Carolina.
  Mr. EDWARDS. I want to associate my self with the concern expressed 
by the Senator from Arkansas. Panda Energy has a major gas-fired co-
generator in northwestern North Carolina. That plant, in Roanoke 
Rapids, was the first project completed by this corporation and has 
been a significant supplier of electricity to the citizens of my state 
for the past ten years.
  I, too, have been briefed about the difficulties Panda has faced in 
their effort to improve China's electricity-generating infrastructure. 
The commitment to approve and issue a formal tariff to the Panda 
Project in Luannan County, that the municipal and provincial 
governments agreed to, is not being honored. By failing to honor their 
commitment to grant a reasonable tariff rate, these governments have 
precluded the commercial generation of power. If this continues, the 
U.S. bondholders will have no choice but to foreclose on what 
represents the first U.S. capital markets power project financing in 
China.
  This is a difficult situation for both sides, but the bottom line is 
that the international trading system breaks down if agreements are not 
honored, especially for large infrastructure projects like this one 
with long lead times. People invest money based on these agreements. 
They put their companies at risk.
  I would like to yield to my colleague, Senator Kerry, who has been 
working on this issue for some time.
  Mr. KERRY. Mr. President, I have been aware of this story since July. 
Many of the bonds for this project are held through mutual funds in 
which Americans have invested their savings. This is not just a 
question of inequity for the U.S. developer of the project but also for 
millions of Americans who are the bondholders, and many of whom are my 
constituents.
  In response to a letter written on August 7 to the Chinese 
ambassador, the charge d'affaires indicated that he had met with both 
the U.S. developer and representatives from the U.S. bondholders, had 
conveyed the concern back home, and would be--quote--making efforts to 
facilitate a satisfactory solution to this problem--end quote. It has 
now been almost two months, and we have seen no resolution of this 
problem, but rather delay and discrimination.
  I note that the Democratic Leader has joined us, and I would like to 
suggest to him a report by the Administration, but first I would yield 
the Floor to my colleague from Montana, Senator Baucus.
  Mr. BAUCUS. Mr. President, I do not have first hand knowledge of the 
situation, but it is troubling to hear of U.S. businesses running into 
such difficulties. I read the written statement that the U.S. sponsor 
of this project submitted to the Senate Finance Committee last spring.
  Two things struck me. One is that the mediator split the difference. 
He split the difference between the price for electricity proposed by 
the Tangshan pricing bureau and the minimum price that the U.S. 
developer of the project said it needed in order to avoid defaulting on 
the project debt. The other thing that struck me is, although this was 
no great result for the U.S. developer, all the developer is seeking at 
this point is to have the mediator's recommendation implemented.
  I would like to read a paragraph from the statement that the U.S. 
sponsor of the project submitted to the Senate Finance Committee. This 
is the president of the company speaking. ``I am not here to ask you or 
your colleagues to grant or deny China PNTR status. I am here to relate 
a story of how one U.S. company fared when it tried to supply 
electricity to the Chinese. Unfortunately, we have come to find that 
our experience is not all that uncommon. However, in our case, the 
consequences are potentially disastrous because Panda had to guarantee 
the U.S. bondholders that they would be repaid. We feel like the jilted 
bride who entered into a marriage five years ago with the Chinese only 
to find them trying to walk away from the marriage now that the child 
has been born. This isn't fair.''
  I agree, and I yield the Floor to the Democratic Leader.
  Mr. DASCHLE. Mr. President, I have discussed this unfortunate 
situation with several of my colleagues. I believe that it would be 
very helpful to have the Secretary of Commerce and the Secretary of 
Energy undertake a joint analysis of the facts of this situation and 
report back to the Senate on their discussions with the Chinese 
government within 45 days.

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