Message-ID: <30258453.1075845924407.JavaMail.evans@thyme> Date: Fri, 14 Jul 2000 15:10:00 -0700 (PDT) From: kay.mann@enron.com To: ben.jacoby@enron.com Subject: Re: Peoples document Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Kay Mann X-To: Ben Jacoby X-cc: X-bcc: X-Folder: \Kay_Mann_June2001_3\Notes Folders\Sent X-Origin: MANN-K X-FileName: kmann.nsf FYI. ---------------------- Forwarded by Kay Mann/Corp/Enron on 07/14/2000 10:09 PM --------------------------- Enron North America Corp. From: Lisa Bills 07/14/2000 08:52 PM To: Kay Mann/Corp/Enron@Enron, Laura Luce/Corp/Enron@Enron, Fred Mitro/HOU/ECT@ECT, Rusty Stevens/Corp/Enron@ENRON, Gregg Penman/Corp/Enron@Enron, Thomas Suffield/Corp/Enron@ENRON, Eric LeDain/CAL/ECT@ECT, Greg Johnston/CAL/ECT@ECT, Herman Manis/Corp/Enron@ENRON, Roger Ondreko/HOU/ECT@ECT, Roseann Engeldorf/Corp/Enron@ENRON cc: Kate Chaney/CAL/ECT@ECT, Morris Richard Clark/HOU/ECT@ECT, Chip Schneider/NA/Enron@Enron, Matthew Berry/HOU/ECT@ECT Subject: Re: Peoples document I have reviewed the below document provided by Kay Mann. While I realize the Chicago team is trying to proceed in an expeditious manner, there are concerns within the document which affect the financing and accounting treatment of Canada's Project Moore. The items discussed below are focused on the 2 ABB turbines Enron Canada is interested in potentially acquiring. From an accounting perspective (Herman and Roger, please correct me where I misstate something we talked about this afternoon): * Any payment amount provided to PERC from an Enron entity must be in the form of an option premium. If an Enron entity were to make any other type of payment to PERC associated with the purchase of the turbines, it would be considered a hard cost and the turbines would be put on Enron's balance sheet. Once there, they could not be used in Project Moore since that Project must be kept off balance sheet. * Enron Canada cannot just step into PERC's shoes under the WestLB Documents and Turbine Contract. These documents were entered into at the beginning of 2000 and approved by PERC's accountants. The AA team for Enron has been reviewing a considerable number of both sets of documents and the required language has changed quite a bit on both from early 2000. Therefore, both the WestLB Documents and the Turbine Contract will need to be amended to receive AA's approval to keep the turbines off Enron's balance sheet. From a financing perspective: * We are currently working at providing a Canadian lease structure for Project Moore. From a cost perspective it would be best to wait until the structure is in place and have it purchase the turbines from WestLB/PERC. Without the DASH approved, the turbines will not be able to be purchased, no matter the Purchaser. From the latest information I have, it appears that the DASH is scheduled to be presented to the Board approx. Aug 7th. The Canadian structure should be ready shortly thereafter. If there is a timing differential, our existing WestLB facility for Project Moore can be expanded to house the PERC turbines along with the existing N1s until the Canadian vehicle is ready. This will be more expensive for Enron Canada than waiting until the Canadian vehicle is in place to purchase the PERC turbines since there will be two upfront "structuring" fees to be paid by Enron Canada. Given that the WestLB documents with Enron have already been negotiated and approved by AA, this appears to be a better alternative than "stepping into" PERC's shoes under their WestLB Documents and negotiating everything again. As for the Turbine Contract, it will need to be modified regardless of who the Purchaser is - WestLB or the Canadian vehicle. * I realize PERC would like to keep all the potential deals wrapped together since they all involve Calumet Power LLC. However, given the requirements for keeping the PERC turbines off Enron's balance sheet, it would seem to be cleaner for these turbines to be carved out and have Enron Canada enter into a separate Option Agreement with PERC, subject to satisfaction of conditions precedent, for the potential purchase of the turbines. We have entered into several option agreements with vendors recently so the documentation is pretty standard and can be approved by AA quickly. Although PERC would like a firm commitment from Enron, this will be difficult without the DASH being approved. At the same time, PERC and ENA can continue to negotiate a contract for the rest of the potential transactions. As for the rest of the Assignment and Option Agreement, I apologize for being out of the loop but would someone please update me on how you see these transactions being financed. I want to insure that Finance and Accounting are up to speed with these transactions so that if ENA does move forward, it is a smooth process and balance sheet favorable. I look forward to working with the team on finalizing the agreement(s) for PERC's review on Monday. Enron North America Corp. From: Kay Mann 07/14/2000 02:24 PM To: Lisa Bills/Corp/Enron@ENRON cc: Subject: Peoples document ---------------------- Forwarded by Kay Mann/Corp/Enron on 07/14/2000 02:24 PM --------------------------- Enron North America Corp. From: Kay Mann 07/14/2000 02:10 PM To: Laura Luce/Corp/Enron@Enron, Fred Mitro/HOU/ECT@ECT, Rusty Stevens/Corp/Enron@ENRON, Gregg Penman/Corp/Enron@Enron, Thomas Suffield/Corp/Enron@ENRON cc: Subject: Peoples document Here's where I am: Kay