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Enron Mail |
=09READ THIS.
-----Original Message----- From: =09Cline, Wade =20 Sent:=09Friday, May 11, 2001 8:10 AM To:=09McDonald, Rebecca; Hughes, James A.; Walls Jr., Rob; Lundstrom, Bruce Cc:=09McGregor, Neil Subject:=09Friday Renegotiation Committee meeting and other events Here is overview of day. I've tried to summarize most of what happened. Mohan and I met early in morning with the lenders' observers to the meeting= , Mr. Kharkanis and Abhay Ahuja. Both are attorneys who work for the same l= awfirm, India Legal Advisors (previously affiliated with White & Case). Thi= s firm has represented Dabhol lenders in the past. Mr. Kharkanis is former = chief legal counsel at IDBI. Very pleasant meeting. Three points they made = -- (a) very difficult to resolve unless someone is willing to take all the = power, (b) this committee is probably not a proper committee to be renegoti= ating with as it is comprised of all Review Committee members, who are alre= ady biased in their conclusions, and © they asked about the misdeclaratio= n issue. I told them we felt we had a strong case and were willing to go al= l the way in arbitration or, assuming a big picture renegotiation could wor= k, resolve it in context of that renegotiation. But I pointed out a renegot= iation, while possible, was going to be difficult, and it would be an absol= ute non-starter unless GOI stood up and said they could take power. At Renegotiation Committee (RC) meeting, only 3 of 9 members from their sid= e were present. Dr. Godbole, chair; Mr. Lal, Energy Secretary; and Ms. Bans= al, MSEB chair. Notably absent was any GOI representative. Their offered ra= tionale for this absence was that Mr. Gaukak (not Mr. Harish Salve as earli= er reported) had been appointed only last night and could not make it. It i= s clear to me that (a) GOI is still taking a hands-off approach and they de= layed appointment until late enough so they could not make meeting, and (b)= GOI's commitment to finding workable solution is in question as they don't= seem to be giving this any type of serious consideration based on who they= appoint (Mr. Gaukak is former secretary in Telecom Dept.). The press was allowed in at the beginning of the meeting only to take photo= s. They left and the meeting began. We agreed after the meeting that neithe= r party would discuss with the press about the meeting. As we left, we were= absolutely mobbed and we "no commented" our way through the mob and left. = The mob was quite large and the walking space was small and going downstair= s, so there were a couple of reporters who tripped and fell and dropped cam= eras. Hopefully, the headlines will not read "Enron stomps Journalist." The meeting lasted almost 2 hours. The RC opened up by saying their positio= n was on the table through the Godbole Committee Report and wanted us to re= spond. I read from my prepared notes, and told them we were open minded, wi= lling to listen but we had serious constraints. My key points from my notes= were (a) who was going to buy the power from this 2184MW baseload plant th= at had to operate at high PLF for it to be economical, (b) our project was = out of money and would probably have to shut down absent further funding fr= om lenders, which depended on favorable gov't response to lender letter (th= is did not seem to bother them at all), © the main problem was their fail= ure I told them I felt it was major issue that GOI was not present and not = engaging in this dialogue. I said the absence of GOI meant that very little= would be accomplished today as the key to any solution involved GOI involv= ement, and we needed to know what GOI's position was. The RC responded by s= aying they were disappointed that we did not have representatives from shar= eholders, lenders (and they objected here to the lenders' observer role ver= sus an active participant role), fuel suppliers and others here and they di= d not know whether to interpret that as lack of seriousness/commitment or n= ot. The most disturbing thing to me was the Dr. Godbole was very clear, to the = point of stating this and repeating it again, that the original project was= a mistake and DPC should pay for that mistake. He said that DPC proposed a= 2000 MW LNG facility with high PLF, and thus now that such a project is no= t working, it is DPC's fault (his rationale being that without DPC proposin= g the idea originally, it never would have come about) and we should pay. W= hen I asked him what tariff he thought should be appropriate, he quoted fro= m the Godbole Committee report -- the lowest tariff available to any gas-ba= sed plant in the country, with no ToP. Since the whole LNG idea was DPC's, = we should bear 100% of any LNG costs except for a reasonable per MMbtu pric= e that MSEB would pay as if they had a natural gas pipeline running already= in place and running by their plant. Yes, folks, it was that ludicrous. It's clear that among the 3 people there, Dr. Godbole was the firmest in hi= s extreme positions. And he is firm in those positions. Mr. Lal and Mr. Ban= sal were more conciliatory and trying to find some middle ground, although = since they only represent MSEB/GOM, their ability to do this is limited to = only one power block, and even on that, they are looking for tariff relief = and ToP relief beyond our ability to handle. But they are trying to move to= the middle, whereas the chairman is not. Even in absence of GOI, we talked at length about the fact that they had to= play a role. The RC said they were not sure if GOI was willing to play a r= ole other than counter-guarantor, and even if they were, the GOI could not = be expected to pay more than a "market" price -- whatever a SEB in India is= willing to pay. Currently, that ranges around Rs. 2.50. It is clear that D= r. Godbole feels no responsibility whatsoever for 2 power blocks, and he th= inks DPC should take responsibility, including convincing GOI to buy some a= mount of this at the "market" price. On this market price issue, I made it = clear that it was not our problem that the market price in India was an unr= ealistically low price influenced by subsidies, lack of tariff rationalizat= ion, etc. and we would not be able to meet their demands. We discussed the = need for having a creditworthy buyer for power from DPC at 90% PLF, before = we could talk any tariff relief, and even then, tariff relief expectations = had to be reasonable (not the 30% they are asking for but less than 10%).= =20 LNG terminal separation from power plant: They asked if an LNG terminal spl= it was possible, and we asked what did they think that would get them. They= said tariff relief and absence of ToP. We pointed out tariff relief had be= en given in 1995 renegotiations when LNG terminal had been originally split= , and even when the terminal was included added back, the tariff relief had= remained to MSEB's favor. We stated that the ToP would remain with the ult= imate customer, even if the terminal was split. They said why should the po= wer plant pay for all excess capacity in LNG terminal and we reminded them = again that the LNG terminal capacity was built solely for the power station= as MSEB had required, and that 2 separate independent consultants had conf= irmed this. RC asked for various proposals on what our tariff would be at various PLFs,= assuming a certain reduced % tariff. We told them that since the project o= nly made sense at a high (90%) PLF, the key was for them and GOI to identif= y buyers for 90%, and then tariff is known. Conclusion: they wanted to meet again and have a further discussion. We agr= eed to meet on May 23, but agreed that in interim, we had to know what the = role of the GOI was. We agreed that we would both go back and think about w= hat had been said and see if solutions were there, but we said that key was= where were the buyers for this power.
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