Message-ID: <11328906.1075840816020.JavaMail.evans@thyme> Date: Thu, 20 Sep 2001 08:14:20 -0700 (PDT) From: joseph.deffner@enron.com To: louise.kitchen@enron.com Subject: FW: IM I/IM II PPA TerminationPayments. Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: quoted-printable X-From: Deffner, Joseph X-To: Kitchen, Louise X-cc: X-bcc: X-Folder: \ExMerge - Kitchen, Louise\'Americas\East Power X-Origin: KITCHEN-L X-FileName: louise kitchen 2-7-02.pst -----Original Message----- From: =09Godfrey, Jay =20 Sent:=09Wednesday, September 19, 2001 2:23 PM To:=09Mitchell, David; Deffner, Joseph Cc:=09Lindholm, Tod A.; Payne, Michael; Lamb, John Subject:=09IM I/IM II PPA TerminationPayments. Gents Attached please find a copy of the IM I PPA with San Antonio together with = a short note from Joh Lamb regarding Termination. =20 I look forward to our discussion at the top of the hour. Regards, JFG ---------------------- Forwarded by Jay Godfrey/EWC/Enron on 09/19/2001 12:= 17 PM --------------------------- =20 John Lamb 09/19/2001 11:43 AM To:=09Jay Godfrey/EWC/Enron@ENRON cc:=09=20 Subject:=09IM I/IM II PPA TerminationPayments. Jay: the IM I and IM II PPAs have different, but consistent, approaches to= the calculation of damages in the event that a party defaults under the ag= reement. The differences arise because the IM I agreement is based on more= typical PPAs between a independent power generator and a utility power pur= chaser. On the other hand, the IM II deal is a combination of such a PPA w= ith a number of terms that more commonly foundin in power agreements betwee= n a power marketer and a buyer. Consistent with most PPAs with utilities,= the IM I agreement does not specify the method for calculating actual dama= ges that a nondefaulting party may incur in the event of a default by the o= ther party. That methodology is left up to general contract law, which is = that the nondefaulting party receives actual damages in an amount that woul= d put them in the economic position that they would have been if the defaul= ting party would have performed its obligations. This is basic contract la= w. The IM II agreement spells out in detail the damage calculation, which = is referred to as a "termination payment", in the agreement. I understand = that this approach is typical of power marketing contracts. However, the m= echanics are basically the same as if you went by basic contract law, other= than the fact that the seller is entitled to certain consequental damages = as well as actual damages resulting from a breach by the buyer. In the end= ,the nondefaulting party, through the payment of the termination fee is bei= ng placed in the same economic position as if the defaulting party had perf= ormed its obligations. Let me know if you want further clarification on th= is point. Regards John