Dabhol -- A Brief Legal Update ,
 Gentlemen --

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.

Bruce
james.derrick@enron.com, rob.walls@enron.com