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Received: from rly-yg01.mx.aol.com (rly-yg01.mail.aol.com [172.18.147.1]) by air-yg05.mail.aol.com (v67_b1.21) with ESMTP; Fri, 28 Jan 2000 18:00:52 -0500 Received: from mailman.enron.com (mailman.enron.com [192.152.140.66]) by rly-yg01.mx.aol.com (v67_b1.21) with ESMTP; Fri, 28 Jan 2000 18:00:36 -0500 Received: from dserv1.ect.enron.com (dserv1.ect.enron.com [172.16.1.37]) by mailman.enron.com (8.8.8/8.8.8/corp-1.03) with ESMTP id XAA19726 for <vkaminski@aol.com<; Fri, 28 Jan 2000 23:00:07 GMT Received: from notes.ect.enron.com (notes.ect.enron.com [172.16.4.33]) by dserv1.ect.enron.com (8.8.8/8.8.8) with SMTP id RAA24406 for <vkaminski@aol.com<; Fri, 28 Jan 2000 17:00:32 -0600 (CST) Received: by notes.ect.enron.com(Lotus SMTP MTA v4.6.5 (863.2 5-20-1999)) id 86256874.007E6242 ; Fri, 28 Jan 2000 17:00:26 -0600 X-Lotus-FromDomain: ECT From: "Vince J Kaminski" <vkamins@ect.enron.com< To: vkaminski@aol.com Message-ID: <86256874.007E61A1.00@notes.ect.enron.com< Date: Fri, 28 Jan 2000 17:00:29 -0600 Subject: Re: Mark-to-Market Mime-Version: 1.0 Content-type: text/plain; charset=us-ascii Content-Disposition: inline Content-Transfer-Encoding: 7bit ---------------------- Forwarded by Vince J Kaminski/HOU/ECT on 01/28/2000 05:00 PM --------------------------- From: Wade Cline@ENRON_DEVELOPMENT on 01/28/2000 07:17 AM ZE5B To: Pinnamaneni Krishnarao/HOU/ECT@ECT cc: Sandeep Kohli/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Vince J Kaminski/HOU/ECT@ECT Subject: Re: Mark-to-Market (Document link: Vince J Kaminski) Sandeep, Can DPC sell to MSEB and have EIPL buy an equivalent amount of power from MSEB at another spot on their grid, and then EIPL sell to the 3rd party state? Pinnamaneni Krishnarao@ECT 01/27/2000 04:00 PM To: Sandeep Kohli/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT cc: Vince J Kaminski/HOU/ECT@ECT, Wade Cline/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT Subject: Re: Mark-to-Market (Document link: Wade Cline) Sandeep: I met with Bob today and discussed the deal structure we put together. On the mark-to-market issue, Bob and his colleague Wess told me that as long as payments are tied to one particular plant, we cannot m-t-m them. They had same problem with plants here in the US (like the peaking plants) and they had to separate the plant from power sales to be able to m-t-m the assocated cashflows. What they did is: they sold power from the plant to an outside party and bought it back from them at completely different (multiple) locations. The buyback is not tied to any specific plant and is marked to maket. Even if Enron can somehow mark-to-market a deal with DPC, it can do so for only 50% of the cashflows because only 50% of DPC is owned by outsiders. And a simple loan to an affiliate cannot also be marked to market. Bob was suggesting that if EIPL buys options from DPC and from some other plants and in turn sells power to AP or Karnataka then we could have a case for m-t-m. Politically DPC selling power to EIPL may not be the best solution, to put it rather mildly! Our alternatives, as I see them, are 1. Do the deal as we structured it. The only difference is that Enron doesn't mark it to market and income is earned only in 2002-03. 2. Do the deal as we structured it. EIPL/Enron then sells the contract to another party at a profit. The problem, of course, is finding this party and forking part of the profit to them. 3. Same deal, except revenue securitization is done through an outside party in India (not EIPL). Bob said he will think about the issues some more this week. Let me know when you will be here next week so we can meet with Bob together. I will be going to Boston for Tuesday and/or Wednesday (Feb.1-2). I can book an appt. with Bob for us. Sandeep Kohli@ENRON_DEVELOPMENT 01/23/2000 09:45 PM To: Robert Butts, Pinnamaneni Krishnarao@ECT cc: Vince Kaminski, Wade Cline/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Ananda Mukerji, Jaiprakash Desai/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT Subject: Mark-to-Market Bob, I wanted to continue the analysis on mark-to-market that I had spoken to you about on the phone. I thought that it was getting very difficult explaining the whole transaction by phone, so I am having Krishnarao who is in Vince's group explain the transaction to you. Krishna has been helping us structure the deal here in India, and he has just returned to Houston from India after working with the team here. He will seek an appointment with you to explain the transaction. I would like you to please spend some time with him, and then based on the discussion please send us a note detailing how sucha a transaction would be marked to market. Please cosider the fact that currently there are no such transactions from the Indian side. This is a very important transaction for us, and we may need to repeat this in coming months, hence setting up the system to account for these maybe well worth it. Also, what I am concerned about is that there will be an Enron India (EIPL) account in India based on Indian GAAP, and upon consolidation there will be a US GAAP accounting in the US. It is here that we would like to have mark-to-market accounting. EIPL is structured through Mauritius, and then Caymen Islands. Another key question to consider is that when we m-t-m the transaction in the US there will be a tax accruing in the year of m-t-m (say 2000). However, in India, as a result of the accrual accounting, there will not be any income showing till the year 2002 or 2003. We will need to know how that would get treated, and whether there is a way to get credit for the tax payable in the US. I am also confused about whether US tax would be levied, since none of the income is being brought back into the US (remains overseas - subpart-F and other concerns). Finally, we have been working hard in structuring a fixed price contract and getting a fixed for floating swap in the US (this is still not allowed to Indian Corporates). I need you to think about this too, and see if some type of accounting will solve this issue. Krishna knows what I am talking about, and will brief you on the same. Krishna - Please walk Bob through the three structures we had worked here. Look forward to your help and comments. This is going to be an exciting project for us all. Regards, Sandeep.
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