Jeff/Ken:

I heard from Wade that there were a number of questions on Dabhol yesterday 
and I thought it may help if u received a quick update. Over the last 3 days, 
I have met with most key players in GOI and GOM assisted by some very close 
friends of ours. The start of the state assembly session has given some 
politicians and some vested interests an opportunity to raise issues about 
Dabhol in the assembly again, a feature that we have seen every year, at 
about this time, without exception and has led to a number of misleading 
newspaper reports. The usual suspects are behind the latest stirring of the 
pot. 

The facts however are as follows:

1. GOM (at the administrative and political level) and MSEB remain firmly 
behind the project and the commitments to it. They are concerned but at the 
same time looking at proactively working to find a solution. They also 
believe that they may have found one that is agreeable to GOI.

2. After discussions with us on Tuesday, GOM and MSEB are working on a plan  
(thru this weekend) to treat Dabhol as a national asset. The plan involves 
MSEB selling  power from DPC to the central government utility which will 
then pool the power with over 30,000 MW of power that they currently  control 
and sell the power onward to other states. The plan has already been 
discussed at senior levels in the GOI and finds general acceptance. Obviously 
the details are to be worked out and we are proceeding to help GOM put the 
outline together over this weekend in Delhi and GOM will then discuss it with 
MOP on Monday. 

Wade reported that it was felt that the seniormost GOI ministers be apprised  
of the seriousness which with we are viewing this situation. This was already 
done Tuesday.

3. The Indian Lenders to the Dabhol project have met and agreed to a 30 day 
waiver of MSEB delay in payment - agreed subject to review of the situation 
at the end of 6 months. They have also agreed to the Equity transfer - 
subject to lenders counsel confirming that there are no legal issues under 
any of the project contracts. This shows the lender support for continuing to 
move forward and buys us time to put in place the fix we are planning.

4. Ministry of Power has yesterday agreed to support an effort to freeze the 
duties on imported fuel at a lower level of about $12/bbl versus the current 
$35 or so. This will help achieve an immediate reduction in tariff from Phase 
I and make Dabhol more competitive. This proposal is currently with Ministry 
of Finance and our expectation is that they will review it favorably as the 
MOP is taking it up personally.

All signs that I have received in India over the last few days lead me to 
believe that the GOM is committed to solving the Dabhol issues at the 
earliest. While we all have concerns, they seem to be addressable and if the 
current plan is successful, they can  be sorted out within the context of 
current and existing documentation.

I have left names out but they are better discussed on the call that has been 
scheduled for Monday evening India time. Hope that this helps in the meantime.

Regards,

Sanjay