Message-ID: <13126000.1075857533496.JavaMail.evans@thyme>
Date: Tue, 10 Oct 2000 01:57:00 -0700 (PDT)
From: jeffrey.shankman@enron.com
To: mike.mcconnell@enron.com
Subject: Selldown of Metgas
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X-From: Jeffrey A Shankman
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any thoughts?  
---------------------- Forwarded by Jeffrey A Shankman/HOU/ECT on 10/10/2000 
08:58 AM ---------------------------


Rick Bergsieker@ENRON_DEVELOPMENT
10/08/2000 09:21 AM
To: Jeffrey A Shankman@ECT
cc: Wade Cline/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Clay 
Harris/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT 
Subject: Selldown of Metgas

The partial sale of Enron India's 100% interest in Metgas is on Cliff 
Baxter's list of corporate assets for sale.  As I expressed in our recent 
telephone conversation,  I view Metgas as a key asset that could be of great 
value to the EGM LNG network.  I believe that Enron should reconsider whether 
or not a Metgas selldown is a wise move at this time for the following 
reasons:  

1.  The Dabhol LNG terminal is ideally located for future LNG arbitrage 
plays, i.e., halfway between middle east and far east LNG suppliers.  
Opportunites for Mideast/Far East swaps or shipping backhauls could generate 
significant value for EGM.

2.  Metgas currently holds exclusive rights to use Dabhol's LNG terminal for 
imports of LNG into India, and it will be at least several years (if ever) 
before a second LNG terminal is built in India.  We should not be giving this 
strategic position away.

3.  The fact that our competitors (e.g., Petronas, BP, BG etc.) want to buy 
in is an indicator that we have something of value.  Even a partial selldown 
(and granting of voting rights) to one of these players could serously 
compromise our optionality and ability to maximize value to Enron. 

4. I suspect that the market value of Metgas at this time (given that there 
is still significant developement risk) is fairly small relative to its 
network value to EGM.


If, in spite of my arguments, a decison is made to sell down Metgas, there 
are two things that we could do to limit the damage:

1.  Prior to the sale, sign an agreement between EGM and Metgas that provides 
EGM with exclusive rights to use the terminal, and

2.  EGM should step into the Metgas/Malaysia LNG contract (i.e., EGM should 
buy from Malaysia and resell to Metgas) to ensure that we maintain maximum 
optionality in this contract.  We could do this in a way that gives us 
control of the contract but passes Metgas risk through EGM and back to 
Malaysia.

I understand that the time fuse for this selldown is very short---immediate 
action is needed if you want a vote on this.

Rick