Selldown of Metgas

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