Subject: FW: Economic Times article: FIs may take over Enron for $700-800m
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Date: Tue, 30 Oct 2001 06:52:23 -0800 (PST)

FYI, the Economic Times in India has published the following article, which suggests details of a DPC buy-out.  While this article does not accurately reflect the reception Wade Cline has been receiving in Delhi, it may be a trial balloon by the Prime Minister's office to gauge public reaction.  Dow Jones has already carried a shortened version of the story, a copy of which appears at the bottom of this e-mail.  We are using the following statement to respond to media inquiries:

Media Statement

DPC continues to hold discussions with GoI /IFI's regarding the sale of foreign sponsor equity in the Dabhol project. It would not be appropriate to elaborate further on the recurring media speculation with respect to the status of these buyout discussions. 

While we remain hopeful for an amicable resolution of this issue, DPC continues to pursue the available legal remedies under the contract documents in order to protect the interests of DPC's stakeholders.  

ECONOMIC TIMES, Tuesday, October 30, 2001

Enron nears deal to sell DPC to IFI's at 30% discount 
IFIs may take over Enron for $700-800m, Shubhrangshu Roy 

US power giant Enron is in advanced stages of negotiations to dispose of its controversial Indian venture Dabhol Power Company at a 30 per cent discount to the financial institutions at a price of $700-800 million. 

Enron and the FIs, led by the Industrial Development Bank of India, are said to be close to finalising a broad agreement to this effect in the next few days. The final settlement should be worked out before Prime Minister Atal Bihari Vajpayee leaves for the US in the second week of November. Should the deal go through, Enron is likely to settle for a five-year payment plan in equal instalments to minimise a heavy one-time foreign exchange outgo. Enron claims its financial exposure in DPC is over $1 billion. It had earlier insisted that it be paid this sum for any out-of-court settlement and to enable its exit from India. Now it is likely to settle for a lesser amount, that is in the excess of $700 million, but definitely lower than $800 million, which is its actual equity exposure in DPC. Sources close to the ongoing negotiations say that the government is eager that the FIs take over DPC quickly so that the Prime Minister can tell US President George W Bush during his forthcoming visit to Washington that justice has been done to the power major. 

Enron chairman Kenneth Lay, known to be close to the US President, was the biggest donor to Bush's campaign kitty. A settlement of the Enron imbroglio, being played out since early this year, is seen to be important to enhancing India's political relationship with the US. The government is keen that the FIs take over DPC to avoid prolonged negotiations on a settlement that would be necessary if a private Indian promoter were to step in. So far, BSES and Tata Power have evinced interest in taking over DPC, but their offer prices are said to be too low. The FIs, on the other hand, are keen on an early settlement as they have a huge loan exposure of over Rs 6,200 crore. Should the FIs take over the company, they are expected to warehouse the project before selling it to a private buyer. This is expected to take at least 90 days. 

Any prospective private sector buyer would need at least a month to undertake a proper due diligence of DPC's accounts. Thereafter, the FIs could take at least another 30 days to make an open offer and another month to close the sale with a private bidder or the State-owned National Thermal Power Corporation. 

Sources say of the $1-billion-plus exposure claimed by Enron in DPC, Enron's equity exposure -- along with its US partners GE and Bechtel -- is $800 million. The company also claims to have spent around $200 million as "development expenditure" and around $140 million by way of retained earnings.

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NEW DELHI -(Dow Jones)- U.S. energy company Enron Corp. (ENE) is in an advanced stage of negotiations to sell its Indian unit, Dabhol Power Co., at a 30% discount to financial institutions at a price likely between $700 million-$800 million, reports the Economic Times, quoting unnamed sources. 
The business daily says Enron and the financial institutions, led by the Industrial Development Bank of India (P.IDB), are close to finalizing a broad agreement within the next few days. The final settlement should be worked out before Indian Prime Minister Atal Bihari Vajpayee leaves for the U.S. in the second week of November, according to the report.
Should the deal go through, Enron is likely to settle for a five-year payment plan in equal instalments to minimize a heavy one-time foreign exchange transfer, says the report. 
Dabhol is a 2,184-megawatt power project located in the western Indian state of Maharashtra. Enron holds a 65% stake in DPC. Costing $2.9 billion, the project is the single largest foreign investment in India to date. 

Newspaper Web site: www.economictimes.com 

-By Himendra Kumar; Dow Jones Newswires; 91-11-461-9426; [email-masked]