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'US Exim Bank questioned Enron's Dabhol project'

Enron Corp piled pressure on the US Export-Import Bank to expedite financing for a power project in India, drawing fire from bank staff who questioned its long-term viability and how the funds were used, according to documents dating back to the mid-1990s.

Former Enron chairman Kenneth Lay made a personal appeal in 1994 to the head of the Export-Import Bank to push through the energy trader's request for $336 million in financing for the $2.9 billion Dabhol power project, citing its "importance ... to the United States, as well as the companies involved."

But behind the scenes, bank officials complained in e-mails about Enron's "attitude" and questions whether the company could make the Indian power project work. Other documents, citing a 1993 review by the World Bank, called the power project "unviable."

"I have been involved in a lot of transactions and come in contact with any number of poorly behaved people, but I think that Enron's attitude and demeanor in this transaction has been extraordinarily bad and very counterproductive," an Export-Import Bank official said in a November 1994 e-mail.

The e-mail was one of thousands of documents released by the Export-Import Bank on Thursday in response to a Freedom of Information Act request detailing the agency's negotiations in the 1990s with now-bankrupt Enron to finance the project.

Enron -- President George W Bush's biggest financial backer in the 2000 campaign -- filed for bankruptcy on December 2 amid revelations of losses from off-the-books partnerships.

Government documents released in January showed that Vice President Dick Cheney and others in the Bush administration intervened with Indian officials last year as part of a coordinated effort to salvage the Dabhol plant.

The second phase of the project was nearly complete when construction was halted last June after its sole customer, the nearly bankrupt local utility (Maharashtra State Electricity Board), which is also a shareholder, fell $240 million behind in payments.

The largest gas-fired plant in the world, Dabhol is bankrupt Enron's largest asset in Asia and most valuable property still on the block. Nearly 30 banks and government-run financial agencies lent $1.9 billion to help build the plant, which is 65 per cent owned by Enron.

General Electric, privately-owned US contractor Bechtel Corp, and the Maharashtra State Electricity Board, the provincial Indian utility, also hold stakes in the project.

In a March 1994 letter, Lay and executives from GE and Bechtel appealed to Kenneth Brody, then chairman of the Export-Import Bank, to expedite $336 million in financing.

"We are requesting your help in making whatever special arrangements are needed internally to truly ensure that the June time frame can be met," they wrote.

Eight months later Export-Import Bank officials bitterly complained in e-mails and hand-written notes that Enron was threatening to "pound on the table and complain to others at the bank" to get the agreement drafted.

"I have real trouble imagining how they are going to function in India on a long-term basis," one official wrote in a November 1994 e-mail.

Three months later, Lay sent a note to Brody thanking him for his "personal involvement" in rushing the financing through. In the same letter, Lay thanked the Export-Import Bank staffers who had challenged the deal in November.

"Recognising that your team is stretched very thin and does not receive the kind of rewards they might in the private sector, this level of sustained effort warrants special appreciation," Lay wrote in January 1995.

Later that year, however, staff at the Export-Import Bank raised concerns about the way Enron was tapping the funds.

In addition, a Maharashtra government report, dated July 1995 and stamped "secret," complained that the project lacked transparency.

"The conduct of the negotiations shows that the sole objective was to see that Enron was not displeased. In fact, the entire negotiation with Enron is an illustration of how not to negotiate," the government report said.

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