Message-ID: <26112614.1075852812307.JavaMail.evans@thyme> Date: Wed, 26 Sep 2001 14:07:52 -0700 (PDT) From: wade.cline@enron.com To: kenneth.lay@enron.com Subject: Reaction to Ken Lay Letter to Indian Prime Minister Cc: stanley.horton@enron.com, a..hughes@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: quoted-printable Bcc: stanley.horton@enron.com, a..hughes@enron.com X-From: Cline, Wade X-To: Lay, Kenneth X-cc: Horton, Stanley , Hughes, James A. X-bcc: X-Folder: \KLAY (Non-Privileged)\Inbox X-Origin: Lay-K X-FileName: KLAY (Non-Privileged).pst Ken, I wanted to update you on the reaction to your most recent letter to the In= dian Prime Minister. You recall that we recommended you write again to the = Prime Minister and express disappointment at the lack of progress since you= r July trip and your August letter containing our offer to sell our equity = at costs. I believe writing this letter was the proper response but only ti= me will tell what reaction (if any) finally comes from the Indian governmen= t. I think you should know about the press coverage of the letter, just in cas= e the letter were to come up in any conversation you might have with someon= e from the US government. I am not anticipating this at all, but I would no= t want you to be unprepared about the press coverage. The US embassy over h= ere is very much up to speed. I met again with Ambassador Blackwill on Tue= sday of this week and gave him a general update on the current status. His = view is that it is very difficult in the post-Sept. 11 environment to get a= nyone in Delhi or Washington to pay attention to economic matters such as D= abhol, but he is trying as best he can. He is meeting with Brajesh Mishra (= Prime Minister's principal secretary) on Saturday, who will have just retur= ned from Washington meetings with Ms. Rice, among others, principally to di= scuss anti-terrorist matters. John Hardy of our DC office briefed the State= Department last week in advance of these meetings, and we are awaiting to = hear any discussion or outcome regarding Dabhol. Regarding press coverage of the letter, as we anticipated, the entire lette= r was leaked to the press. Several articles have appeared that describe the= "harshly worded" letter and many articles have quoted verbatim sections fr= om the letter. The Wall Street Journal article from last week presented the= letter fairly, and I think it came out rather sympathetic to our position.= The Indian papers have been neutral to negative. For example, an editorial= (reprinted below) was in Wednesday's Financial Express, a business daily i= n India (but not as widely circulated or respected as The Economic Times or= The Business Standard). Note the editorial below says your letter states "= that any government found to have expropriated the property of US firms aut= omatically faces sanctions from that country." Your letter did not state th= at, but this is a holdover from the earlier Financial Times interview. Many people I have met with in the Indian government have made references t= o the letter, saying they do not think it was appropriate. I respond by say= ing that given our 9 year history of nothing but frustrations, and the lack= of progress over the past 2 months, we do think it is appropriate and it r= eflects our current views regarding our experience in India. Generally, whe= n they mention it time and again, it probably means the letter is having at= least some of its intended effect.=20 I'll keep you, Stan and Jim updated as we hear more from the Indian governm= ent. Wade Nikita Varma 09/26/2001 12:03 PM To:=09Nikita Varma/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT cc:=09 (bcc: Wade Cline/ENRON_DEVELOPMENT) Subject:=09From The Enron India Newsdesk - September 26th Newsclips ---------------------------------------------------------------------------= ---------------------------------------------------------------------- THE FINANCIAL EXPRESS, Wednesday, September 26, 2001 Lay off, Mr Lay (Editorial) Enron tries terror tactics Enron Corporation's CEO Kenneth Lay has reportedly written a letter to Prim= e Minister Atal Bihari Vajpayee warning him of adverse consequences to the = Indian economy if the Dabhol Power Company imbroglio is not resolved quickl= y. He says that if Enron receives anything less than its full investment in= DPC, it would amount to an act of expropriation. He further points out tha= t any government found to have expropriated the property of US firms automa= tically faces sanctions from that country. Reportedly, the letter was writt= en three days after the attack on the World Trade Centre. So Mr Lay probabl= y ought to be forgiven for reading more than he should into the "dead or al= ive" rhetoric of his pal, George W Bush, whose election campaign Mr Lay gen= erously funded. Saner counsel has since prevailed even at the White House; = and far from imposing fresh sanctions, the US government is busy buying sup= port even from countries such as Pakistan by lifting sanctions and offering= a hefty aid package. Enron has never hesitated to use the considerable eco= nomic and political clout of the US government in pushing the Dabhol projec= t at various times. Post September 11, the US government - which is in fact= 'rewarding' Pakistan despite its clearly identified role in funding terror= ist groups - ought not to be terrorising India on Enron. Hence, it is entir= ely appropriate for the Prime Minister to borrow that little Americanism, r= ecently made popular by Pervez Musharraf, and ask Kenneth Lay to lay off! Interestingly, Mr Lay's letter apparently makes no mention of several impor= tant facts that will dictate how much India may have to pay Enron. These in= clude the findings of the Madhav Godbole committee report which expose subs= tantial overcharging by DPC on several counts and reveals excess capacity c= reated for port handling and regassification. Moreover, DPC's inability to = ramp up the power plant to full contracted capacity within the specified ti= me period has enormous penal provisions attached to it. This serious techni= cal deficiency apart - which alone is grounds enough for repudiating the DP= C contract - the government also has a good case to charge the US company w= ith fraud and misrepresentation. The Maharashtra government 's judicial inq= uiry only makes India's case stronger. Let us not allow ourselves to be pus= hed around by Enron's threats and political connections.