Message-ID: <10053039.1075844462671.JavaMail.evans@thyme> Date: Wed, 13 Dec 2000 01:23:00 -0800 (PST) From: sheila.glover@enron.com To: bruce.harris@enron.com Subject: Re: Next steps with Copel shares Cc: theresa.brogan@enron.com, sara.shackleton@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: theresa.brogan@enron.com, sara.shackleton@enron.com X-From: Sheila Glover X-To: Bruce Harris X-cc: Theresa T Brogan, Sara Shackleton X-bcc: X-Folder: \Sara_Shackleton_Dec2000_June2001_1\Notes Folders\Notes inbox X-Origin: SHACKLETON-S X-FileName: sshackle.nsf Bruce, At the end of the day, we need the name of the entity which will be the owner of the shares to set up an account at Morgan Stanley, if it is different from Enron Brazil Power Holdings. Legal will need corporate paperwork to open the account. Please let Theresa and I know when that determination is made. It sounds like it is still under discussion. Sheila ---------------------- Forwarded by Sheila Glover/HOU/ECT on 12/13/2000 09:16 AM --------------------------- Lynn Aven@ENRON 12/12/2000 10:42 AM To: Bruce Harris/NA/Enron@Enron cc: Robert H George/NA/Enron@Enron, Kay Young/HOU/ECT@ECT, Dan Boyle/Corp/Enron@Enron, Joe Kishkill/SA/Enron@Enron, Kent Castleman/NA/Enron@Enron, Sheila Glover/HOU/ECT@ECT, Edward E Graham/SA/Enron@Enron, Rick Hopkinson/NA/Enron@Enron, Jeffrey E Sommers/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Bruce Harris/NA/Enron@Enron Subject: Re: Next steps with Copel shares Once ESA LLC (a Delaware company) gets the two certificates for 1.25M each, Enron Brazil Power Holdings XII can be sold to Whitewing. If there is a legal issue for having the ADR's held offshore we can certainly have EBPH XII sale to a Cayco which will have net tax consequences similar to the distribution to ESA LLC. . I am simply trying to simplify the transaction. Please let me know if they need to be transferred to a Cayco and I can work with legal and try to find an appropriate Cayco that may already be established rather than setting up a new one. Lynn Bruce Harris 12/12/2000 10:25 AM To: Lynn Aven/NA/Enron@Enron cc: Robert H George/NA/Enron@Enron, Kay Young/HOU/ECT@ECT, Dan Boyle/Corp/Enron@Enron, Joe Kishkill/SA/Enron@Enron, Kent Castleman/NA/Enron@Enron, Sheila Glover/HOU/ECT@ECT, Edward E Graham/SA/Enron@Enron, Rick Hopkinson/NA/Enron@Enron, Jeffrey E Sommers/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Bruce Harris/NA/Enron@Enron Subject: Re: Next steps with Copel shares What happens to ESA LLC with respect to Whitewing? If nothing, then transferring to that company is ok as long as it is a CayCo. if it is nota CayCo, we may have a legal issue to transfer it in. Lynn Aven 12/12/2000 10:04 AM To: Bruce Harris/NA/Enron@Enron cc: Robert H George/NA/Enron@Enron, Kay Young/HOU/ECT@ECT, Dan Boyle/Corp/Enron@Enron, Joe Kishkill/SA/Enron@Enron, Kent Castleman/NA/Enron@Enron, Bruce Harris/NA/Enron@Enron, Sheila Glover/HOU/ECT@ECT, Edward E Graham/SA/Enron@Enron, Rick Hopkinson/NA/Enron@Enron, Jeffrey E Sommers/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT Subject: Re: Next steps with Copel shares Bruce Harris: We do not need to set up a new Cayman entity to transfer the two certificates for 1.25M to. We achieve no US tax benefit for transferring or holding the shares in a Cayman entity. I propose that EBPH XII obtain the two certificates and then distribute those certificates to Enron South America LLC, the sole shareholder of EBPH XII. The value of the certificates at the date of transfer will determine the US tax treatment. Given the liquidity discount surrounding the stock, using the screen price on the date of the transaction is probably not a good indicator of the fair market value. For tax purposes, we will assume the value to be the historical cost basis since recent trades have been in a narrow band on either side of that value. If the first 1.25M certificate is sold shortly after the transfer to Enron South America LLC, we will need to adjust the transfer price since the sales price to a third party will be a valid indicator of what the fair market value was on the date of the distribution.. If the ultimate transfer price is higher than the tax basis, EBPHXII will recognize taxable income and pay US tax on the gain in the year the distribution was made to Enron South America LLC. This would result in reporting a tax expense in 2000 and perhaps book income in 2001 if that sale takes place after the end of the year. If the value on the date of the transfer is ultimately determined to be less than the historical tax basis, the distribution to Enron South America LLC will result in there being unrecovered basis in EBPH XII. If the shares are sold by EBPH XII to affiliated Cayman companies, the same valuation issues exist with the same potential for recognition of US gain on the sale from EBPH XII to an affiliated. Distributing the shares to Enron South America LLC will be much easier. Lynn Bruce Harris 12/08/2000 11:31 AM To: Robert H George/NA/Enron@Enron, Kay Young/HOU/ECT@ECT cc: Dan Boyle/Corp/Enron@Enron, Lynn Aven/NA/Enron@Enron, Joe Kishkill/SA/Enron@Enron, Kent Castleman/NA/Enron@Enron, Bruce Harris/NA/Enron@Enron, Sheila Glover/HOU/ECT@ECT, Edward E Graham/SA/Enron@Enron, Rick Hopkinson/NA/Enron@Enron, Jeffrey E Sommers/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT Subject: Next steps with Copel shares Robert and Kay, thanks for all your work on getting the shares moved out of Brazil and into the parent CayCos. I understand that by sometime early next week the physical ADR certificates will be returned by BONY to the Enron vault. Here is what we now need to do: 1. We are going to need to send one certificate back to BONY and split it into three new certificates. Two certificates will be for approximately 1.25M shares each, the balance for about 5M shares. 2. We need to form a new CayCo and sell or otherwise transfer (capital split?) the two 1.25M tranches to this NewCo. This needs to happen next week. 3. Pending Dan Boyle's structuring efforts and an affirmative Corp. decision (supervised by Joe Kishkill), the two existing CayCos which now own the Copel shares will be sold into Whitewing Fund. That means about 12.5M shares will go to Whitewing and the certificates will remain in the vault. This would happen last week of the year--if it happens (there are actually about 15,443,000 total ADRs--I am approximating in this email). 4. The NewCo shares will remain outside this structure entirely. We will need to put one tranche of 1.25M into a brokerage account--Sheila at this point we will bring you in for assistance (again, hopefully next week). 5. Robert--we need to work out soon with Sheila, Skadden,and BONY to establish an efficient mechanism to convert the full 1.25M share certificate to unrestricted ADRs absent and prior an immediate buyer(s)--or we need to figure out foolproof mechanics for constantly reissuing new certificates for every small sale. We will then be looking for effective points to sell these 1.25M shares--and again, Joe Kishkill will provide price/volume targets (execution via Gary Hickerson's group who has not yet been informed). In 3 months time, we will repeat the process for the other 1.25M tranche. Robert--please call me so we can determine: (a) how to set up NewCo/transfer shares, and (b) how to work the 1.25M "unrestriction" with BONY and Skadden. Regards, Bruce 713-853-0950