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Enron Mail |
David W Delainey
11/13/2000 10:55 AM To: dlhart1@aep.com cc: Brian Redmond/HOU/ECT@ECT, Timothy J Detmering/HOU/ECT@ECT Subject: Confidential Dwayne, in response to your request, I am providing a quick summary of our discussion on Friday. As I had mentioned, this is a competitive process and time is of the essence. If we get resolution to these points, I would be prepared to sit down over a finite period of time (three or four days) to try and hammer out the transaction. Specifically: AEP Point #2: ENA would accept a triggering event and MAC clause for the lease. This would under certain conditions allow AEP to purchase the leased assets at the present value of the future lease payments plus the fair value in year thirty of the underlying assets at an agreed upon discount rate. The triggering events would include bankruptcy, insolvency or Enron Corp falling below investment grade. An Enron Corp guarantee would be offered to secure that covenant. We would similarly ask for similar credit language in the lease agreement, with an AEP parental guarantee, securing the lease obligation from AEP. These paragraphs would be constructed in a similar manner to triggering events and MAC clauses in master commodity documents. ENA would also acknowledge that it would not sell the lease or physical assets underlying the lease to any other party but AEP. I would anticipate that this would be managed through a ROFR structure. This would ensure that AEP would have access to the assets if sold and that AEP can feel confortable that they will be dealing with Enron for the period of the lease. Notwithstanding above, Enron needs the flexibility to pledge or sell the AEP lease stream in order to monetize your obligation to cash if desired. This makes the set-off language difficult. With the triggering event and MAC clause, the need for set-off to protect AEP in the event of Enron default should not be required. AEP Point #5: ENA would agree to a three month non-compete which prohibits ENA from soliciting business with the suppliers or producers connected to the Pipeline. This non-compete would apply to transactions over one month in duration. This would apply to ENA only and no other Enron Corp affiliates. AEP Point #6: I believe that ENA has already agreed in principal to your request under this point. AEP Point #1: ENA would require indemnity limitation, including representation and warranties and basic construction, similar to our last draft language previously provided to you. Would also request a two year window rather than three on environmental claims. AEP Point #3: ENA would counter with a $40 million break up fee if AEP does not get requisite SEC approval by April 1, 2001. AEP Point #4: On HSR and FERC approvals, AEP's position as layed out in the letter is not practical since it would be very difficult to pull out certain pieces of the pipe from the deal and ensure that both parties get the benefit of the bargain. If AEP is unwilling to give an asset divestment covenant and given AEP's limited gas infrastructure position, ENA's position is that AEP should take the risk that they will be able to get the approvals. Other: ENA will not agree as a condition to this transaction a settlement of any FERC issues between AEP and EPMI; however, ENA would always be willing to discuss such items in a different forum. If you have any questions or comments do not hesitate to contact myself or Tim Detmering. Regards Dave Delainey
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