fyi

 -----Original Message-----
From: 	Cline, Wade  
Sent:	Sunday, May 13, 2001 2:02 PM
To:	McDonald, Rebecca; Hughes, James A.; Walls Jr., Rob; Lundstrom, Bruce; Ben Glisan@ECT; Dutt, Ranabir; McGregor, Neil
Subject:	Weekend Update/Next Week Thoughts

Here is an update plus my thoughts on what we should consider this week. I hope to be able to discuss this on Monday's call. As this involves some press updates and thoughts regarding the lenders, I am sending this to Ben and Ranabir as well..

I. Press Reports in Weekend Newspapers after Friday Renegotiating Meeting -- reports were mixed on Renegotiation Meeting and possibility of success to find a solution. 

More Credible papers:
Times of India: DPC Phase II should be scrapped, panel tells Enron
Economic Times: Enron panel meet fails to make breakthrough; State weighs termination notice to DPC

Other papers who follow DPC closely:
Financial Express: DPC to meet panel on May 23; Renegotiation is only way out for DPC; Cut in tariff likely
Business Standard: Dabhol not averse to tariff renegotiation

So the press is all over the map on the outcome of Friday's meeting.


II. Press reports from Delhi with GOI reaction:

Summary: GOI hopeful that solution can be found between DPC and GOM
BUT: GOI makes clear in Sunday papers the GOI position: While GOI not opposed to allowing DPC power sale to 3rd parties, neither GOI nor NTPC will purchase power from DPC.


III. MESSAGE TO LENDERS:  Lenders want to know we are serious about finding solutions. We are, and are willing to engage in dialogue so long as willing buyers of power are at table. This was made clear in Friday's meeting. But Renegotiating Committee is not serious about realistic solutions. Evidence of this is Chairman's view that DPC (and thus its lenders and shareholders) should get no recovery for the LNG infrastructure. Rather, he strongly believes tariff should be (as reported in Godbole Committee Report) the lowest of any gas-based power plant in country, including those few with pipeline gas. Second, GOI is not serious yet, as they did not even bother to send someone to meeting. 


IV. STEPS FORWARD (for consideration)

A. Issue PTN (whether to do it with or without Transfer Notice to be discussed separately on Monday)

B. When PTN issued, press statement to be issued to cover --
after several months of meetings and proposals, no serious response by MSEB, GOM and GOI
parties are still not meeting their contractual obligations, even after both Indian and int'l lenders have written to GOI
thus we are taking steps to protect contractual rights by issuing PTN
Regarding future meetings to discuss project: 
project was designed as baseload to meet MSEB requirements and approved by GOM and GOI; project must have buyers for power to have serious negotiations
Renegotiating Committee position, which is reiteration of Godbole Committee report, is unrealistic 
If MSEB, GOM and GOI are not willing to meet their contractual obligations to offtake power, then not feasible to discuss any changes to deal; thus prior to any further meetings, DPC awaits specific proposal from MSEB/GOM/GOI on who they propose to substitute for MSEB as the party who is contractually obligated to purchase the power from DPC
the prior point is important in that we need to (a) set the going forward agenda with respect to any further meetings and (b) manage expectations regarding such future meetings and who will deliver what proposals, if any (not us).

C. Bring in senior management ASAP after PTN
Rationale is to both feed our ideas into the GOI as well let lenders know we are committed to finding solution, including bringing our senior management to India for meetings
I recommend we bring Ken Lay with Rebecca to meet in Delhi with Prime Minister, Finance Minister and Power Minister, along with Sonia Gandhi. Other meetings can be scheduled as well, and we will want to include some add'l meetings in Delhi and Mumbai. But above are the key meetings.
Key message to be delivered -- 2 [or 3] options face the project
Terminate, and we are willing to go that route rather than have to invest significant additional money into a project in the India power sector that does not currently work
Buyout of foreign debt and equity and allow an Indian solution to be found
[Renegotiate on our terms, including GOI taking 2 power blocks and IFIs funding all additional project costs. My earlier e-mail on renegotiation possibilities might provide some ideas here.] The reason I mention this option here is that if we ever think we might have to table a renegotiation option, having Ken & Rebecca do it at the highest level is the way to go. 
The solution, regardless of which of 3 options will be chosen, must be handled at the highest level, and I think it is now (right after PTN) or never to bring in Ken and Rebecca to see if the solution is there as well as let our lenders know we are seriously taking one more run to try and find a solution. After we bring in Ken and Rebecca, if the GOI still remains on the sidelines and does not step up, the Phase I lenders should realize we have done everything we can and give us the Transfer Notice approval. The quicker we bring in Ken and Rebecca, the quicker we should have the strongest argument for the Transfer Notice approval.

One logistical point: I do think it is very important to bring in Ken and Rebecca very quickly after the PTN is issued.  But we will need some advance time to set up these high level meetings as well as get Indian approvals to bring Ken's plane into India. This will take about a full business week, so I think we should schedule this trip as soon as we can -- perhaps during week of May 21. 

D. At same time as senior management comes in, have senior contacts from Wash. DC contact political leaders in Delhi to request a solution be found quickly to avoid any implications on improving India/US relations

E. Finally, I also think it is time for Enron to strongly consider an approach directly to some possible buyers. There are 2 Indian corporates who would be leading candidates. There are also some international majors that would be possible. Enron could consider a joint asset package of:
DPC
Metgas (the TARA is the real value here)
Depending on the appropriate Enron internal approvals, 2 other assets could be considered
Offshore oil & gas assets
Data center

On the last 2 items, I know that one of the Indian corporates would be interested in the oil & gas assets, and both would be interested in the data center.

We could arrange meetings with senior management of potential purchasers when Ken & Rebecca are in India (or, to avoid press, we might want to schedule these either in low-key India locations or even outside India (Dubai or Singapore)).

We can discuss these thoughts on Monday.
Wade