Unknown From: Glisan, Ben Sent: Tuesday, August 07, 2001 12:24 PM To: Walls Jr., Rob; Cline, Wade; Hughes, James A.; Lundstrom, Bruce Cc: Glisan, Ben Subject: Draft Agenda - Skilling/Lay meeting Looks like a novel. ~Th Dabhol Update Agenda.doc (28 K... Ben Dabhol Update Agenda August 8, 2001 * Deal Team Objectives o Minimize additional capital exposure * Termination of Construction Contracts * Rescission of PPA o Recover existing Investment * Pursue contractual/legal remedies * Commercial Settlement * Restructure * Buyout * Collect on Political Risk Policies * OPIC coverage * Commercial coverage * Deal Team Paths o Commercial Team * Asset Preservation * Cash Conservation * GOT/WI Communication * Project coordination * Buyout/Restructure Discussions o Legal Team * Pursuit of legal remedies * Termination and Transfer * Litigation and Arbitration * Implementation of defense strategy o Finance Team * Management of bank group * Consents for Termination and Transfer * Termination of construction contracts * Termination of ship charter * Utilization of bank group to apply pressure * Participation in Supreme Court and High Court * Discussions with MSEB and GOT * JBIC threats to WI's Utilization of bank group to back channel advice * Project Update (15 minutes) o Group Dynamics * Offshore Lenders * IFI's * OPIC .JBIC * OND and USExim * LNG suppliers * LNG ship o Group Tasks * Approval of Asset Preservation Plan (Cash conservation) * Execution of standstill agreement * GOI meetings o Next Areas of Focus * Additional Preliminary Termination Notices * Agreement on timing of the issuance of the Transfer Notice * Acceptable buyout!restructure terms and conditions * Funding Requirements (5 minutes) o Mothball Costs o Legal Costs o Sharing Ratio and means of funding o Exposure to Contingent Equity * Buyout Discussion (20 minutes) o Expected timing (Week of 20th or 27th) o Expected proposal * 25% discount to funded equity * Assume that offshore lenders will stay in the project * Assume that all contracts (construction, LNG and ship charter) will be replaced * All in tariff of approximately 3 rupees o ENIE Exposure as of June 30 (total of $1,135) * Funded Equity of $622 million * Retained Earnings of $110 million * Deferred Costs of $141 million * EE&CC receivable (net) of $ 16 million * EE&CC liability to subs of $164 million * Other costs of $ 82 million o ENE P&L Exposure * Anticipated bid of 75% of funded equity implies a loss of $452 million (assumes recovery of construction costs and reduction of tax liability) * If we recover 50% of construction costs and incur a portion of the tax liability then the exposure would grow to approximately $560 million o Recommendation on counter-proposal strategy * Obtain a signed MOU as quickly as possible (while incomplete, it will establish the basis for the ultimate deal) * Should focus on buyout price broken out into components * Invested capital and retained earnings * Earned but unpaid construction costs * Note that ultimate buyout will need to involve the offshore lenders, but defer that negotiation (concerned about sticker shock) * Endeavor to renegotiate project agreements * Initial concession should not be to discount price but rather to finance a portion of the buyout * Defends against asset impairment * Probably required as the offshore lenders will want to be taken out and the IFI's probably do not have the liquidity of orchestrate a total recap * Lenders will not allow equity to take out cash unless they receive a pro-rata share * Maintain legal pressure o Guidance on level of flexibility on terms of note or size of discount if opportunity arises * Recommend that we are willing to concede a discount to equity but fight to preserve collection of construction fees * Probability of recovering any shortfall through PH * Highlights of Defense Strategy (15 minutes) o To be filled in this pm, should include recommended path and point out items that are aggressive as well as the points we deemed too aggressive o Discussion on Intellectual Property a Litigation Update (GOI, GOM, MSEB) * LNG Vessel (5 minutes) o Lenders have asked equity to infuse additional capital * We have refused * Likely result will be either foreclosure or a Mitsui led recap o Implications to Dabhol * Creates uncertainty * Probably an economic benefit o Implications to Enron * Book loss on the investment in the ship * Project stakeholders will ultimately require a ship * ENE may utilize capacity of one of its vessels