17. THE SEAMLESS “VIRTUOUS CIRCLE” OF CONTRACTING REGULATORY/COMMERCIAL ENVIRONMENT CONDUCIVE TO CONTRACTING CULTURE OF CONTRACT “ SANCTITY” RESPONSIBLE CONTRACTING ATTITUDE
18. THE ELECTRIC SECTOR IN THE LAST TWO YEARS HAS BEEN PLAGUED BY MULTIPLE CONTRACT DISPUTES - MOSTLY AT MAE LEVEL
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21. COUNTRIES WHERE ELECTRIC SECTOR REFORM WAS UNDERTAKEN HAVE AN OUTSTANDING PERFORMANCE ON CONTRACTS Austria Australia Denmark Finland Germany New Zealand Norway U.K. U.S.A. Canada Italy Poland Portugal Algeria Argentina Chile China Mexico Thailand South Africa Brazil Peru India Indonesia Sri Lanka Source: The Fraser Institute: Economic Freedom of the World 2000 - Annual Report * Proxy for security of property rights and viability of contracts includes: (i) legal security of private ownership rights (risk of confiscation); (ii) viability of contracts (risk of contract repudiation by the government); (iii) rule of law: legal institutions supportive to principles of rule of law and access to a nondiscriminatory judiciary. LEGAL STRUCTURE AND PROPERTY RIGHTS INDEX (*) - 1997
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23. IF BAILOUT IS PERCEIVED AS A POSSIBILITY, THERE WILL BE IRRESPONSIBLE CONTRACTING, LESS CAPACITY, MORE FREQUENT RATIONING ... … AND MORE PRESSURE FOR BAILOUTS ... Gas Rigidities Regulatory lag Retail competition FX Risk Low VN Cost of deficit MAE price Short positions Cost of contracting Costs of not contracting