Subject: Urgent: Media Reports re Payment Issue and Revised Statement
From: [email-masked]
To: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked]
Date: Sun, 7 Jan 2001 11:33:00 -0800 (PST)

As a follow-up to our discussions yesterday, attached is a revised 
statement/Q&As.  This statement reflects significant changes 
from the Enron India team.  It has been approved by Wade Cline and Sandeep 
Katwala (legal).   The  issue will probably resurface tomorrow, 
so your early comments and approval would be appreciated.  I can be reached 
at home (713-572-9556) or cellular (281-948-7273) this evening.
  
There have been a number of press reports today about the payment issue.  
Copies of the stories follow.  The Reuters' story was previously forwarded by 
Jim Hughes. 
In addition, there have been a number of India press reports including the 
Times of India story, which may be picked up by some international wire 
services. The other 
two Indian press reports appear to have taken other discussions/background 
briefings and unfairly attributed some quotes to Wade.  We can expect 
additional 
media interest Monday.  

FYI, Jim Hughes has indicated that Ken Lay wants to advise the US Ambassador 
before drawing the securities, so the probable timing for the draw is Monday 
night 
or Tuesday India time.

John

 

                    01/07/2001 
                     Reuters English News Service 
                     (C) Reuters Limited 2001. 

                     BOMBAY, Jan 7 (Reuters) - The Indian government has 
asked the western state of
                     Maharashtra to work out ways to pay outstanding dues to 
U.S. energy giant Enron Corp,
                     media reports said on Sunday. 

                     Enron has threatened to invoke letters of credit (LC) 
and the federal government's counter
                     guarantee. 
                      
                     "The state government has to work on the issue," the 
Press Trust of India said, quoting
                     unnamed official sources. 

                     The Economic Times on Sunday said that the lenders to 
Enron's local unit, Dabhol Power
                     Company, were meeting on Tuesday in New York to discuss 
the inability of the
                     Maharashtra State Electricity Board (MSEB) to clear its 
dues. 

                     "As a result of MSEB's mounting dues Enron said it would 
be forced to invoke the LC," the
                     newspaper said. 

                     The report said the MSEB had outstanding dues worth 2.62 
billion rupees ($56.15 million). 

                     Enron's local unit said on Friday it will lower tariffs 
from next month in a bid to defuse
                     criticism that it charges higher rates for the 
electricity it produces in Maharashtra state. 

                     Last month, the Maharashtra government decided to review 
the rate at which it buys power
                     from Enron's Dabhol Power, saying the high cost was 
threatening its finances. 

                     Enron is spending about $1.9 billion to build a facility 
to generate 2,184 MW of electricity. 

                     India, which needs to generate an additional 100,000 MW 
of power within the next decade
                     to meet growing demand, is desperate to attract foreign 
capital. But after nearly a decade of
                     liberalisation, Enron is among the few private power 
companies to begin generating power
                     in India. 

FIs in U.S. press panic button as MSEB fails to pay Enron 
                     S. Balakrishnan 
                      
                     01/07/2001 
                     The Times of India 
                     Copyright (C) 2001 The Times of India; Source: World 
Reporter (TM) 

                     MUMBAI: Financial institutions in the U.S. have pressed 
the panic button with Maharashtra
                     State Electricity Board (MSEB) defaulting on payments 
for electricity it has purchased from
                     the Enron subsidiary, Dabhol Power Corporation (DPC). 
The board owes DPC Rs 262
                     crores of which Enron expected Rs 114 crores would be 
paid by January 6. The board has
                     thrown its hands up in the air saying that it is simply 
in no position to effect the payment.
                     The situation has been vastly complicated with chief 
minister Vilasrao Deshmukh plainly
                     refusing to bail out MSEB. 

                     It is learnt that major lending institutions have 
convened a meeting in New York on January
                     10 to decide a course of action to compel MSEB to cough 
up the money. Indian lead
                     financial institutions__including IDBI, SBI and ICCI, 
who have a collective exposure of $1.2
                     billion__ have also been asked to send their 
representatives for the meeting. If MSEB does
                     not pay up by then, the institutions may decide to 
invoke the letter of credit. The implication
                     is that lending institutions may seize MSEB's accounts 
with them and adjust the monies
                     against the dues payable to DPC. 
                      
                     It is learnt that Enron has informed the U.S. embassy of 
the intransigent attitude adopted by
                     MSEB and the state government. Incidentally, Enron was a 
contributor to U.S.
                     president-elect George W. Bush's election campaign. 

                     Sources close to Enron said the company might be willing 
to restructure the power
                     purchase agreement (PPA) provided MSEB does not default 
on its payments. But the
                     restructuring of the PPA may not be an easy task since 
it will require the endorsement by
                     the Central Electricity Authority and the Maharashtra 
Electricity Regulatory Commission. 

                     The sources said the defaulting by MSEB and the stance 
adopted by Mr Deshmukh will
                     have serious implications since a large number of world 
financial institutions__like
                     Citibank, ABN Amro, Bank of America, apart from the 
governments of the U.S., Belgium and
                     Japan__have financial stakes in the 2100 MW project. The 
defaulting will also harm the
                     interests of several Indian financial institutions who 
have lent money for the controversial
                     venture. 

                     Enron is hoping that the BJP-led government at the 
Centre may persuade Mr Deshmukh to
                     defuse the crisis. But if ultimately no payment is 
forthcoming, Enron may act tough and
                     invoke the guarantee and counter guarantee given to the 
project by the state and the central
                     governments respectively. 

                     The deal with Enron was signed by Sharad Pawar when he 
was the chief minister in the
                     early nineties. It was first scrapped and later 
enthusiastically endorsed by the Shiv
                     Sena-BJP coalition which came into office in 1995. It is 
learnt that Mr Deshmukh has been
                     asked by the Congress high command to adopt a tough 
stand so as to embarrass Mr
                     Pawar__who is now in the Nationalist Congress Party__the 
Sena and the BJP. 

                     It is learnt that state finance minister Jayant Patil 
informed Enron representatives that the
                     current situation was the outcome of coalition politics. 
An Enron official countered this by
                     pointing out that a coalition of lending institutions 
was involved at the other end of the table.

Enron ready to renegotiate Dabhol deal 
                     Our Corporate Bureau MUMBAI 
                      
                     01/08/2001 
                     Business Standard 
                     1 
                     Copyright (c) Business Standard 

                     US energy major Enron is prepared to renegotiate its 
deal with the Maharashtra
                     government on the controversial Dabhol Power project, 
but has emphasised that the new
                     deal cannot be a unilateral one. 

                     This is the first time that Enron has publicly spelt out 
its stand on the issue. Enron India
                     managing director K Wade Cline said, "The deal cannot be 
a unilateral one. MSEB 
      (Maharashtra State Electricity Board) must continue to pay us for the 
power purchased. We 
      should also be allowed to continue operating our power station at 
Dabhol. Obviously, it 
      must be a deal that works." 

                     The state government, Cline said, must remember that 
just as it was important for it to sell
                     a deal to its various constituencies, it was important 
for Enron to be able to sell it to its
                     various stakeholders. 

                     "A renegotiated deal will mean that we will have to 
convince the gas suppliers to rework the
                     agreement that we have signed with them. It also means 
that we will have to convince our
                     lenders," Cline added. 

                     The $3-billion project has an equity component of $1 
billion and a debt component of $2
                     billion. Cline pointed out that the entire equity as 
well as $1.6 billion in debt had already
                     been brought in. Domestic lenders like ICICI, IDBI and 
SBI have contributed $1.2 billion. 

                     "The Indian government has a huge exposure to this 
project through the financial
                     institutions. The governments of Japan, Belgium and US 
too have a stake in the project as
                     banks and export credit agencies of these countries have 
a huge exposure," he said. 

The Economic Times Online 
 Printed from www.economictimes.com -> home -> back 

 Dabhol phase II in danger as arbitration looms

 Bodhisatva Ganguli & Girish Kuber 
 MUMBAI 
         THE MAHARASHTRA State Electricity Board's inability to pay the 
Enron-promoted Dabhol
         Power Company is rapidly emerging as a threat to the viability of 
phase II of the Dabhol
         project. 

 The project involves a generating capacity of 1,400 MW and an LNG terminal 
of five million tonnes. 

 This is because there is an increasing possibility that the dispute over 
phase I may end up in
 arbitration courts if the MSEB continues to fail to pay up and the state 
government refuses to bail out
 the ailing electricity board. As a result, lenders may stop disbursing funds 
for phase II. 

 Enron India,s managing director K Wade Cline said on Saturday evening that 
international arbitration
 was a real possibility. 

 The PPA allows for arbitration in case a dispute cannot be resolved through 
negotiations. Enron
 officials say they have made no headway so far in talks with the MSEB or the 
state government.
 Enron is also considering invoking the letter of credit and the state 
government guarantee in order to
 recover its dues. 

 We have no alternative since if we don,t get paid, then our lenders are 
saying that they won,t fund
 phase II, Cline said. If the Maharashtra government does not pay then the 
central government,s
 counter-guarantee could be invoked. 

 At a meeting on Friday evening, the MSEB is reported to have asked the state 
government to provide
 it a subsidy of Rs 130 crore per month. However, the Maharashtra Chief 
Minister, Vilasrao Deshmukh
 is said to have flatly rejected MSEB,s request. 

 The Maharashtra cabinet is meeting again on Monday evening. The cabinet will 
also discuss the
 formation of a committee to review the project. 

 The lenders to the project are meeting in New York on Tuesday, January 9, to 
take stock of the
 situation arising out of MSEB,s failure to pay part of the bill for October 
and the entire bill for November
 amounting to a total of Rs 262 crore. 

 The project,s lenders are reported to be extremely concerned about the 
viability of the second phase of
 the project in view of MSEB,s failure to pay for power bought from the first 
phase. 

 Cline said that of the total second phase project cost of $1.89 billion only 
about $400 million of debt
 remained to be disbursed. About 80 per of the construction is complete and 
95 per cent of the
 machinery is on site. 

 , The Economic Times Online. All rights reserved.