Just FYI

Vince,

Please see below some of the ideas being bounced, FYI. Please keep this
confidential.

The unused capacity in Maharashtra should be dispatched on a merchant basis,
ON BEHALF OF MSEB to any customers outside MSEB's current purview. I would
like us to look at the whole issue as one of MSEB's poor credit, and hence (
as Jeff pointed out on the call), one where we need to identify all deep
pockets in and out of Maharashtra.
Secondly, there is (as Shubh and I had pointed out) the ability to evacuate
about 700-1000 MW to customers other than MSEB. The challege is - at what
price, and in coordination with which agencies. As always, in India your
greatest challenge will be in dealing with govt. agencies.
Another point to consider is that in-all we have about 5-7 customers
identified. Will all the customers we have earmarked bite ??? This is the
reason why systems need to be set up with a bulletin board on pricing 10-15
day power on the screens of the different SEBs we can connect up with. This
also substantially gets around the credit quality issue, as this would be an
arrangement akin to cash-and-carry. I see a lot of hope for such a
strategy. I do not see much hope for a strategy of selling blocks of power
to either NTPC or PTC. I would agree however, that we not put all our eggs
in one basket, and hence you could designate a team to look into the NTPC
sale issue inparallel.
In order to set up the trading sytems, however, we need to start by the end
of Q1 2001, and just start doing small deals where we break even, simply to
test the waters and introduce liquidity into the market.
Hand-in-hand with this we need a fuel risk management strategy, as I have
been pushing for. For this to happen, we need to get the Special Import
Licence reinstated. If that is not possible, we need to lobby with the
highest authorities within govt. and RBi to allow for hedging, irrespective
of whether we have an SIL. The discussions being held with IOC are therefore
very important in this regard, and I am going to get Anshuman and Mukesh
involved with the same.
Finally, I do not see much hope for your strategy of asking ENE management
for $75 Million to build transmission lines in a country where the regulatory
framework on transmission access is even less defined and understood than the
generation side of the equation. I would refrain from stating this in any
senior management forum until we are able to clearly demonstrate the
cost-benefit of this. I have some ideas on that side which I need to develop
further.

Regards,
Sandeep.