Luiz. Thank you for your note.  We are still in the boxing ring!. The first 
round was won but we still have some more rounds to go. Next week is the 
consent, provably in two weeks we will discuss the regulatory obstacles..

Jose
---------------------- Forwarded by Jose Bestard/ENRON_DEVELOPMENT on 
07/07/2001 05:54 PM ---------------------------


Jose Bestard
07/07/2001 03:41 PM
To: Cuiaba LT
cc: Sergio Assad/SA/Enron@Enron, Orlando Gonzalez/SA/Enron@Enron, Joe 
Kishkill/SA/Enron@Enron 

Subject: Cuiaba Issues - July 6 situation-

Topic I -- Amendment 4

We spent the morning perfecting Aditivo 4 with Furnas, to cover the situation 
where the commissioning plan did not go as scheduled. It was signed early 
afternoon and sent to Eletrobras.

The Eletrobras Diretoria had not followed this issue closely and need legal 
clearance. Furnas and the Ministry (Perazzo) called to give it priority. Late 
at night we received word that the "parecer" (opinion) was ready and that it 
the Anex would  signed by Eletrobras next Monday and entered into their Board 
meeting next Tuesday.

Petrobras sent us the letter we asked but took out of their version a key 
word "only". "Only" refers that they will not go after us for non-payment if 
Furnas does not pay. In the letter they also stated that they will commence 
the loading operation -- at their own risk - Saturday. This was requested by 
Perazzo to save logistical time because it takes three days to get to Cuiaba 
from the refinery. 

[Advised Laine of the situation to check Monday how many trucks were loaded 
and  in transit]

We contacted Perazzo through Sergio Assad to get his word that there would 
not be a last minute hitch; otherwise, we may have to refuse to take the 
diesel and would create a BIG PR problem for all.

Topic III - Consent Package (Opinions, Aditivo, Consent)
Furnas came in with the list of issues they wanted to discuss. I instead 
insisted that we treat this meeting as a continuation of the MME meeting and 
follow the Agenda  by looking at the Consent document package -- actually go 
over the text -  that they find objectionable, and,  if it the text had a 
direct link with any of their issues, we would discuss and examine the 
relative positions. 

What they told me is what they have told me before, that some of the issues 
have nothing to do with the Consent but they want it as a condition to agree 
to the package. Which is fine to me, because it will make it clear to the 
government what we have been saying --- they want to change the deal. In 
Furnas' defense, I need to add that they feel they have been handed a bad 
contract  and they want regulatory relief, which it has been granted, on a 
case-by-case basis, in other deals. So part of their strategy is to force 
MME, or Aneel to provide some tariff relief.

I asked them to list out  the key issues with the Consent-  Old-- a) the 90 
days additional time (Furnas), b) The guarantee substitution at the time of 
privatization, c) the lenders involvement on contract changes "we do not want 
to go to Washington to negotiate" - Newer - d) giving up their right to ask 
Aneel to "homologar", ratify; rather than "registrar" contract changes [big 
risk for us] . I believe the have more direct issues. 

We go back to Rio Monday (another holiday down the drain) ..and Tuesday to 
complete the list -- Topic II -- Regulatory conflicts

Jose