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Enron Mail |
Randy, give them what they want and lets move on - don't give another
guarantee provide the indemnity for the IRS and environmental claims. Mark if there is a flaw in my thinking let me know. Joe, these guys have been exceedingly difficult to deal with - I would think twice before we bring these guys into any Enron deal in the future. Regards Delainey ---------------------- Forwarded by David W Delainey/HOU/ECT on 01/05/2001 10:18 AM --------------------------- Randal Maffett 01/04/2001 01:13 PM To: David W Delainey/HOU/ECT@ECT cc: Mark E Haedicke/HOU/ECT@ECT Subject: Fidelity update Last week during the holidays, we made a lot of progress w/ Fidelity regarding their "take-out" from the Partnership at Dallas. We exchanged 2 drafts of a Letter Agreement which says ENA (or an affiliate) will buy their 99% LP interest in Landfill Gas Investments, LP (LGI) on or before Jan 31, 2001. Included in our draft was a provision whereby the ENE Guaranty would be extinguished. However, late yesterday Fidelity came back and said they're not willing to extinguish the Guaranty completely. The way the deal w/ Fidelity will be structured, ENA will pay them the delta between the $5.2MM initial payment they made less the accrued tax credits on the date we close (est to be $300K+/-). Fidelity wants 2 things: protection in the event the IRS disallows/disqualifies the tax credits accrued (i.e., the $300K), and protection against any environmental claims that may have occurred while they were a partner in LGI (June, 200 thru Jan, 2001). There are 2 basic alternatives to consider: replace the existing guaranty to LGI with a new guaranty to Fidelity with a specific cap on the tax credit amount ($300K+/-) and with the same environmental coverage (up to $5MM) as currently exists but restricting it to issues which occurred while they were a partner. The probability of either ever being triggered is extremely remote. Replacing the benefactor from LGI to Fidelity is significant for us because it eliminates future environmental exposure related to LGI as well as prevents potential future buyers of our LP interest from seeing that ENE once was willing to issue such a guaranty. replace the existing guaranty with an indemnity from ENA which provides Fidelity with the same protection as alternative #1. Per ENA accounting since the amount of exposure is limited to $5.3MM in aggregate, this would not be significant/material enough to be separately identified as a balance sheet item. The problem we have is Fidelity has a Guaranty "in hand" and unless you give me approval to go back and structure our deal around them, we don't have any leverage to get them to release it. They are willing to work with us on either of the 2 alternatives listed above. This is the only remaining commercial issue left w/ Fidelity. Please advise or call to discuss further. Ext. 33212. Thanks! RANDY
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