From: Lundstrom, Bruce
Sent: Tuesday, May 29, 2001 1:05 PM
To: Derrick Jr., James; Walls Jr., Rob; Mark E Haedicke@ECT
Cc: Rogers, Rex
Subject: Dabhol -- A Brief Legal Update
A busy day in India that is likely to generate substantial press.
MSEB sent us 2 letters stating that there will be no Phase II performance
testing, MSEB will not pay any further amounts under the PPA and MSEB will
draw no further power from Dabhol. MSEB requested that DPC stop providing
availability declarations. These letters turn the vague "recission" letter
that we received last week into a more concrete repudiation by MSEB.
On Friday, MSEB filed a 120 page petition with the Maharashtra Energy
Regulatory Commission seeking relief on a number of issues. MSEB's position
seems to be that because they are no longer bound by the PPA, that the MERC
is the appropriate regulatory body to regulate the MSEB/DPC relationship
(e.g., determine the price for power and the amount owed by DPC on the
misdeclaration claim). The MERC ruled today that it likely has jurisdiction
in this matter and granted some interim relief to MSEB (including stopping
any arbitration proceedings by DPC against MSEB). We are preparing a
petition tor the Bombay High Court to overturn the MERC's actions.
The Government of India continues to state publicly that it will not buy
power from Dabhol. Accordingly, we have existing counterparties (MSEB and
GOM) that do not want Dabhol's power and are not creditworthy and no
reasonable hope at present to find other viable counterparties.