From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked], [email-masked]
Date: Mon, 1 Oct 2001 06:45:33 -0700 (PDT)

Cuiaba status:
1.  GT 11 -- parts still scheduled for shipment from manufacturer November 4.  Plan for operation Dec. 1, 2001.  We are seeking a commercial solution for payment of parts and services with Siemens.

2.  GT12 -- repairs complete for first fire Oct. 2, 2001. Full commissioning scheduled long before year end deadline. 

3.  Coverage:  We have a verbal assertion from insurance adjuster for coverage, both property damage and BI.  No written confirmation.  Our legal analysis among US & Brazilian lawyers is that '"penalties" under the PPA for delay damages and the availability shortage will be covered by BI, but we have no confirmation from the insurer.  

4.  Warranty issues:  GT 12 is covered by warranty, confirmed by Siemens.  GT11--continuing investigations indicate potential warranty coverage for the parts on GT11, and should conclude that investigation this week.  It appears this would not preclude BI coverage from the insurer.

5.   BI:  Enron's BI calculations experts are preparing BI models for the insurance auditors.

6.  Force majeure:  While Brazilian counsel advises that under Brazilian law, this failure could be characterized as a force majeure event, further analysis of the root cause is prudent, along with an agreement by the adjuster that the insurer expects to pay for any legal battle with Furnas arising out a force majeure claim. There is no imminent deadline regarding FM notice to Furnas, since Furnas was already informed of the incident and a notice was also given that this is potentially a FM event.  It is my reading of the PPA and Brazilian law that this is a tenuous claim and would result in a major dispute with Furnas and delays in payment, even if the insurer pays for the defense.  The only reason we would pursue it is in our duty to act as the "prudent uninsured." It is my advice that this is a claim we should not pursue.  We should have a root cause analysis on Oct. 4 to finalize/confirm this decision.
 
7.  Shell:  Preparing for mediation with Shell regarding budget end of  OCT.

8.  Furnas:  Potential for arbitration against Furnas appears inevitable. We have no decision from Furnas although the minister with primary responsibily for resolving the Cuiaba situation assured a resolution by last Friday. I am advising Pete on the cost, timing, and logistics for arbitration and preparing the lawyers to begin drafting a Request for Arbitration if we don't get a resolution this week.