Enron Mail

Subject:Reaction to Ken Lay Letter to Indian Prime Minister
Cc:stanley.horton@enron.com, a..hughes@enron.com
Bcc:stanley.horton@enron.com, a..hughes@enron.com
Date:Wed, 26 Sep 2001 14:07:52 -0700 (PDT)


I wanted to update you on the reaction to your most recent letter to the In=
dian Prime Minister. You recall that we recommended you write again to the =
Prime Minister and express disappointment at the lack of progress since you=
r July trip and your August letter containing our offer to sell our equity =
at costs. I believe writing this letter was the proper response but only ti=
me will tell what reaction (if any) finally comes from the Indian governmen=

I think you should know about the press coverage of the letter, just in cas=
e the letter were to come up in any conversation you might have with someon=
e from the US government. I am not anticipating this at all, but I would no=
t want you to be unprepared about the press coverage. The US embassy over h=
ere is very much up to speed. I met again with Ambassador Blackwill on Tue=
sday of this week and gave him a general update on the current status. His =
view is that it is very difficult in the post-Sept. 11 environment to get a=
nyone in Delhi or Washington to pay attention to economic matters such as D=
abhol, but he is trying as best he can. He is meeting with Brajesh Mishra (=
Prime Minister's principal secretary) on Saturday, who will have just retur=
ned from Washington meetings with Ms. Rice, among others, principally to di=
scuss anti-terrorist matters. John Hardy of our DC office briefed the State=
Department last week in advance of these meetings, and we are awaiting to =
hear any discussion or outcome regarding Dabhol.

Regarding press coverage of the letter, as we anticipated, the entire lette=
r was leaked to the press. Several articles have appeared that describe the=
"harshly worded" letter and many articles have quoted verbatim sections fr=
om the letter. The Wall Street Journal article from last week presented the=
letter fairly, and I think it came out rather sympathetic to our position.=
The Indian papers have been neutral to negative. For example, an editorial=
(reprinted below) was in Wednesday's Financial Express, a business daily i=
n India (but not as widely circulated or respected as The Economic Times or=
The Business Standard). Note the editorial below says your letter states "=
that any government found to have expropriated the property of US firms aut=
omatically faces sanctions from that country." Your letter did not state th=
at, but this is a holdover from the earlier Financial Times interview.

Many people I have met with in the Indian government have made references t=
o the letter, saying they do not think it was appropriate. I respond by say=
ing that given our 9 year history of nothing but frustrations, and the lack=
of progress over the past 2 months, we do think it is appropriate and it r=
eflects our current views regarding our experience in India. Generally, whe=
n they mention it time and again, it probably means the letter is having at=
least some of its intended effect.=20

I'll keep you, Stan and Jim updated as we hear more from the Indian governm=


Nikita Varma
09/26/2001 12:03 PM
cc:=09 (bcc: Wade Cline/ENRON_DEVELOPMENT)

Subject:=09From The Enron India Newsdesk - September 26th Newsclips
THE FINANCIAL EXPRESS, Wednesday, September 26, 2001

Lay off, Mr Lay (Editorial)
Enron tries terror tactics

Enron Corporation's CEO Kenneth Lay has reportedly written a letter to Prim=
e Minister Atal Bihari Vajpayee warning him of adverse consequences to the =
Indian economy if the Dabhol Power Company imbroglio is not resolved quickl=
y. He says that if Enron receives anything less than its full investment in=
DPC, it would amount to an act of expropriation. He further points out tha=
t any government found to have expropriated the property of US firms automa=
tically faces sanctions from that country. Reportedly, the letter was writt=
en three days after the attack on the World Trade Centre. So Mr Lay probabl=
y ought to be forgiven for reading more than he should into the "dead or al=
ive" rhetoric of his pal, George W Bush, whose election campaign Mr Lay gen=
erously funded. Saner counsel has since prevailed even at the White House; =
and far from imposing fresh sanctions, the US government is busy buying sup=
port even from countries such as Pakistan by lifting sanctions and offering=
a hefty aid package. Enron has never hesitated to use the considerable eco=
nomic and political clout of the US government in pushing the Dabhol projec=
t at various times. Post September 11, the US government - which is in fact=
'rewarding' Pakistan despite its clearly identified role in funding terror=
ist groups - ought not to be terrorising India on Enron. Hence, it is entir=
ely appropriate for the Prime Minister to borrow that little Americanism, r=
ecently made popular by Pervez Musharraf, and ask Kenneth Lay to lay off!

Interestingly, Mr Lay's letter apparently makes no mention of several impor=
tant facts that will dictate how much India may have to pay Enron. These in=
clude the findings of the Madhav Godbole committee report which expose subs=
tantial overcharging by DPC on several counts and reveals excess capacity c=
reated for port handling and regassification. Moreover, DPC's inability to =
ramp up the power plant to full contracted capacity within the specified ti=
me period has enormous penal provisions attached to it. This serious techni=
cal deficiency apart - which alone is grounds enough for repudiating the DP=
C contract - the government also has a good case to charge the US company w=
ith fraud and misrepresentation. The Maharashtra government 's judicial inq=
uiry only makes India's case stronger. Let us not allow ourselves to be pus=
hed around by Enron's threats and political connections.