Message-ID: <2898386.1075840206965.JavaMail.evans@thyme>
Date: Fri, 1 Sep 2000 03:40:00 -0700 (PDT)
From: joseph.sutton@enron.com
To: john.garrison@enron.com
Subject: Azurix and OPIC
Cc: pam.benson@enron.com
Mime-Version: 1.0
Content-Type: text/plain; charset=us-ascii
Content-Transfer-Encoding: 7bit
Bcc: pam.benson@enron.com
X-From: Joseph W Sutton
X-To: Jeff Skilling@ENRON, Kenneth Lay@ENRON, John Garrison
X-cc: Pam Benson
X-bcc: 
X-Folder: \Kenneth_Lay_Dec2000\Notes Folders\All documents
X-Origin: LAY-K
X-FileName: klay.nsf

Thisn is very troublesome. We will continue to look at it. Joe
---------------------- Forwarded by Joseph W Sutton/ENRON_DEVELOPMENT on 
09/01/2000 09:13 AM ---------------------------
   
	Enron International
	
	From:  John Hardy                           08/31/2000 03:57 PM
	

To: Joseph W Sutton/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc:  
Subject: Azurix and OPIC

Joe
 I want to give you a heads up on a serious issue that has developed between 
Azurix and OPIC. There is no action requested from you but I wanted you to be 
aware of this development.

 Last spring we encouraged Azurix to look to OPIC and IDB for funding support 
for the financing needed for their Argentinian concession for the province of 
Buenos Aires.  For the past several months teams from Azurix and the two 
lending agencies have been moving forward with the expectation that we could 
go to an OPIC Board vote in September for $100 million and to the IDB Board 
in October for $150 million.

 Everything was going along great until last friday.  Early last week OPIC 
had its credit committee review and approve the project, though apparently 
some members were concerned about the regulatory risk associated with water 
projects. (This would be OPIC's first financing of a water project.)   Friday 
AM, George Munoz recieved a draft cable from the US Embassy in Argentina 
providing their assessment of the project and, on the spot, pulled the 
project from Investment Committee and off the calendar for consideration by 
the OPIC Board in September.  Friday afternoon, OPIC staff informed Azurix 
and our office in a meeting that Azurix should be resorting to "Plan B", 
implying that the project would not go forward in the foreseeable future.  
OPIC would not provide Azurix or us with the cable. 

 Over the weekend, the cable was formally sent to Washington, though now 
reclassified as a classified document so we have not been able to see its 
contents.  Moreover, the Ambassador has specifically conveyed his directive 
to Washington that the cable is not to be shown to anyone outside of the 
government,   John Garrison has a relationship with the Ambassador but has 
not been able to get the Embassy to alter its position, nor would I think 
they be inclined to do so now given the fact that they could have 
disassociated themselves from the draft on friday but did not.

 On the positive side, the InterAmerican Development Bank has stated that 
they are prepared to consider increasing the size of the B loan to cover the 
additional $100 million.   We have met with the IDB and discussed the 
situation at OPIC; they seem satisfied at this point.

 It appears to me that George Munoz is unwilling to take to the Board the 
Azurix project when a damning cable has been circulated around the government 
even if the substance of the cable is exaggerated, taken out of context and 
distorted.  From what we have learned, the cable containes concerns expressed 
about the regulatroy framework, labor issues etc., etc., but also comments 
from the Argentinian goverment about Azurix and the concession about Bahia 
Blanca and the politics of Azurix in Argentina. It is uncompromisingly 
negative in its tone.

 Azurix is seeking a return of  the $250,000 fee and will withdraw its 
application.

 Hope all is well.  John