Solution to the Enron's dabhol Power Plant Situation

Hi Jim
Per our telecon. Pls call me upon reading and we'll discuss the fwd path
Regards
sunil
---------------------- Forwarded by Sunil Deshmukh/AIGTC/US on 05/24/2001
01:51 PM ---------------------------

Sunil Deshmukh on 05/21/2001 03:07:54 PM

To: wade_doshier@enron.net
cc:
Subject: Solution to the Enron's dabhol Power Plant Situation

Hi Wade
It was nice catching up on the old stuff.
Attached, pls find the summary of my thoughts on the subject. As time is of
the essence, I am confident, I can structure a solution that will be
satisfactory to all parties and fulfils your objective.
Pls run this by Jeff and other key people . I wud like to present my
solution to them.
As I mentioned, Ambassador Wisner is fully supportive of my efforts and we
can find a way that works

Regards
sunil

Sunil Deshmukh
MD, Structured Transactions
AIG Energy Trqding
203-861-3804 W
203-322-0546 H

---------------------- Forwarded by Sunil Deshmukh/AIGTC/US on 05/21/2001
02:52 PM ---------------------------

Sunil Deshmukh on 05/11/2001 12:23:08 PM

To: jserra@attglobal.net
cc:
Subject: Solution to the Enron's dabhol Power Plant Situation

Hi Jeff

I have the following thoughts for a clean solution to the Dabhol Power
Plant situation

Background

Locals:

Local govt in the State of Maharashtra wants to squeeze them by forcing
them to keep the plant operating but refusing to pay [ standard Chinese
torture in the 3rd world when the real pain starts after you part with the
money and stuck in the tar pit]

The Central govt characters were previously involved with the "fast track"
approval , are now hesitant to help out for the fear of political damage .

The elctricity is now too expensive for the locals due to $/Rupee and Oil
Price hit per the original contract that locals signed and did not hedge!

This has become an unpopular political football with prior champions
running for cover, so only bad things will come out of it if the agony
prolongs

Enron:

Enron has made a paradygm shift from physical to intellectual assets, so
the India Powe Plant does not fit the forward path

This is an example of "how not to do things" as it was done with highest
profile and with open involvement of political Mafia, involving broad
allegations of corruption and highly unusual approval and guarantee
process. Enron does not need this "Tar Baby" any more

If they get rid of this problem, the stock is likely to go up 10 % , a
better arbitrage for getting rid of this liability

AIG:

Ambassador Wisner, Vice Chairman of AIG was the US Ambassador to India
during this period and knows all the cast of characters and the situation
well. He is also the President of the Indo-American Chamber of Commerce and
is trying to reconcile the situation. Since he is wearing 2 hats, he does
not want to approach Enron for a role in getting rid of this liability. I
have discussed this issue with him at length

I am the only person who knows ALL the cast of characters involved in this
drama very well. I have met Ken as we were keynote speakers at a conference
and later met in NY for personal chat. Jeff gave me a personal tour of the
trading floor when he was the head of trading at Enron and I was head of
trading at Citibank.. Sanjay Bhatnagar, their previous India man whio
worked closely with Rebecca is also known to me .
Additionally, I personally know the current Chief Minister of the State of
maharashtra, Vilasrao Deshmukh, all the Left Front partners, Mr Pawar who
initially approved the deal as the previous Chief Minister. I also know Mr
Munde and Mr Thakare, the two politicians who approved the expansion of
this project when they were in power. Current minister in charge of the
Power Portfolio is also a friend of mine. My contacts with all of these
people were developed over the past 10-20 years and are on a close
personal basis; hence, I have a neutral, trusted position with all
concerned

I have close contact with Reliance and Tatas and personally discussed
this situaton with the owners during my trip to Bombay last week. As you
know, nothing gets done there without Reliance's blessings

Solution;

If Enron empoweres me, I can negotiate a clean break in this situation
that will be mutually beneficial and free up the management's energies to
focus on the main business. Ambassador Wisner is fully supportive of this,
as he just does not want to take personal initiative for the reasons of
apparent confliict of interest .

I can broker political and business peace with a clean sale of assets to
the locals or their nominees at a fair market value. Enron , being a
"merchant-operator', understands the concept of "mark-to-market" valuation
better than anyone else

This is more of a negotiated solution, brokered by a skillful negotiator
with "East-West" skills and connections rather than an M&A transaction

The lenders' interests are not aligned with those of Enron and a separate
peace needs to be brokered with the locals, if they so desire

Dealing with the burocrats with politicians playing " puppeteers" in the
background will cause further "quicksand" effect

Time is of the essence as this is akin to the "perishable goods" problem

I wud like to get together with the key decision makers on the Enron side
to present this view

You know my professional background and qualification and I feel very
confident that I am the only person in the unique position to extricate all
concerned with the ability to forge a fair solution

Sunil Deshmukh:

Education- MS Chem Engg, MBA, JD, Licences to practice law in the US

Experience-- MD Structured Transactions, AIG Energy, Greenwich, CT

Previously, MD and Head, Global Commodity
Derivatives Business , Citibank, NY
Head, Crude Oil Trading,
Louis Dreyfus, Wilton, CT
Sr Trader, J. Aron, NY
Worked for BP and Exxon

Regards
sunil

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