Summary of $ at Risk for Customs

Please see attached. Rob, perhaps while in London you could stop by Mark's
desk to discuss.
----- Forwarded by Steven J Kean/NA/Enron on 03/07/2001 11:22 AM -----

Mark Schroeder@ECT
03/07/2001 03:45 AM

To: Steven J Kean/NA/Enron@Enron
cc: Jane Wilson/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
Subject: Summary of $ at Risk for Customs

Steve - the issue to which I believe Jane is referring in the first sentence
("confirmation of the issues which I have articulated") concern possible
paymensts made to receive informal, and favourable, guidance, on customs
issues (which informal opinions are now seemingly being reversed, formally).
In some cases such payments may still be legal. But, subject to Jane
confirming that I am explaining this correctly (given that the communication
below is a bit cryptic), it now seems to me to be timely (as Rebecca and Jim
have apparently been alerted in London on Monday, per her note below) to
satisfy yourself that we are now clean on this issue under the Foreign
Corrupt Practices Act. The informal customs advice was obtained by Muktesh
Tyagi (spelling?), one of two people known as Sanjay's "fixers" (that should
make you fell comfortable!). You may wish to discuss with Jane further, but
once you satisfy yourself that there is some smoke here, my thought was that
you might want to simply confirm with Rebecca that we are running the facts
to ground, so that we can satisfy ourselves that we are either clean, or need
to come clean with USG. let me know if you need more. thanks mcs
---------------------- Forwarded by Mark Schroeder/LON/ECT on 07/03/2001
09:42 ---------------------------

Jane Wilson@ENRON_DEVELOPMENT
07/03/2001 04:38
To: Mark Schroeder@ECT
cc:

Subject: Summary of $ at Risk for Customs

Mark, I have confirmation of the issues on which I have articulated concern
to you although such confirmation is verbal. Apparently, there are more
areas that I will identify in due time. This information was conveyed to the
Legal Team (which included Rebecca, Bruce, Sandeep Katwala and outside
attorneys) in London on Monday. In addition, below is additional bad news.
In addition, there is at issue now the fact that the flow diagrams and import
lists do not match. I'll forward an additional e:mail from Seethayya,
---------------------- Forwarded by Jane Wilson/ENRON_DEVELOPMENT on
03/07/2001 10:04 AM ---------------------------

Heidi Hellmann

03/06/2001 01:39 AM

To: Jane Wilson/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc: Robert Mathis/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Chandran
Bhaskar/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT

Subject: Summary of $ at Risk for Customs

I found out more info on some of these extraneous customs issues above and
beyond the LNG stuff:

PHASE I ISSUES
1. SPM
(This equipment has already been imported at 22.38%, but customs is claiming
merit duty rates of 67%.)
This is currently being evaluated by the courts.
Total Value at Risk = $7 MM
2. "D" - Stream
Are Bechtel's design charges of $66 MM specific to our equipment or to the
project as a whole?
If the former, then duty of 22.38% should apply.
Total Value at Risk = $13.5 MM ($66 MM x 22.38%)

PHASE II ISSUES
1. Services Loading on Power Plant Equipment
Same issue as for LNG Equipment. Currently we are paying a 10% loading on
duty into a reserve deposit to cover this.
Total Value at Risk = $22.38 MM ($100 MM x 22.38%)
2. LNG Equipment to be dutied at 53.8% or 22.38%?
Think we all know this issue.
Total Value at Risk = $56 MM (as per Risk Matrix)
3. Services Loading on LNG Equipment
Think we all know this issue
Total Value at Risk = $80 MM ($149 MM x 53.8%)

TOTAL VALUE at RISK ~$180 MM - - This is WORST, WORST CASE!

Note: There is still this issue of goods being imported under the wrong
classification. Currently, this is preventing goods from being imported on
time, which could lead to delay claims by the contractors. It will take me
some time to hunt down what this could cost us if the problem isn't resolved
soon. Pavan's estimate is that it will take a month for Site to generate
accurate equipment lists and for the same to be reviewed and approved by MSEB.
Heidi