Enron Mail

To:kenneth.lay@enron.com, joseph.sutton@enron.com
Date:Thu, 7 Sep 2000 10:17:00 -0700 (PDT)

Ken/Joe, As I was walking back to my office reflecting on our conversation,
there are three points that I mentioned but I think got lost in the

1) This needs to be a stock deal to avoid Indian tax (48%), poorly written
preferential purchase language and gov't approval. (Still requires RBI
approval) All of the numbers I have in the document assume a stock

2) RIL is very tax advantaged, currently and for the foreseeable future they
will be in an NOL position; therefore, at the numbers we are discussing they
should see this as an unleveraged return opportunity of 16% (stock purchase
fully taxed with no basis) to 27% (stock purchase shielded from taxes-- Btax
scenario). Again, the tax position makes RIL unique for this transaction
and a very likely buyer at these numbers. Few other parties will be as
positioned to consider a stock transaction of a company with minimal Indian
basis, accept the operational conditions and be able to close as quickly.

3) The idea of coupling the other India assets with the E&P is a good
strategy if your goal is to ultimately sale, but time is unimportant. I've
done multi-asset deals before with a major and the bureaucracy rivals India.
The due diligence on the multiple assets will eliminate any chance of closing
this year. In fact, I would be surprised if we could even get a PSA signed
before year-end on a multi-asset deal, plus the gov't approvals become more

If the goal is money in the door before 12/31/00, I favor a buy/sell at
Ken's number. If we go to October and don't get the documents in place we
really haven't lost anything because there is little likelihood of closing
under a traditional scenario even if we start today. We will prepare our
dataroom while the negotiations on the documents take place and be ready to
bring in bidders by October. If we buy at these numbers I believe we can flip
the deal within 6-9 months if not sooner since we have operatorship, critical
mass a major would covet, only one partner and Reliance is not a partner.

Also, If we elect to go to a traditional auction, I would strongly suggest
we keep the E&P separate from the other India assets, at least initially, to
run the auction with the best chance of getting a PSA signed before
year-end. We can always combine them at a later date during negotiations
once we see how the process is going. Too many pieces right out of the box
will be very cumbersome and time consuming. If we have to combine them to
get interest, we can do it as we see the need for an enhancement.

My final thought, if we do an outright sale to RIL ( not a pre-negotiated
buy/sell with stipulated closing dates,,, etc.) they will want to do a
certain amount of due diligence and rightfully so. They would expect and
probably demand the same considerations as any other buyer including a
dataroom visit to pick our brains one more time. Again this becomes a time
issue!! Under the buy/sell scenario we have devised, there is no due
diligence period, the structure of the deal is stipulated and everything is
handled via representations and warranties in the pre-negotiated PSA.

Let me know how and when you wish to proceed. I will pursue with complete
dedication whichever option you select.

Thanks for the time to share my thoughts,