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Enron Mail |
here ya go.
---------------------- Forwarded by Eric Groves/HOU/ECT on 11/30/2000 05:41 PM --------------------------- Les Webber @ ENRON_DEVELOPMENT 11/25/2000 06:16 PM To: Eric Groves@ECT cc: Doug Arnell/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT Subject: LNG TRANSACTION AROUND THE ELBA ISLAND LNG TERMINAL ERIC: We had a brief discussion regarding the LNG sales arrangement Enron has entered with El Paso Merchant Energy (successor to Sonat Energy Services) centered on the firm service capacity that Merchant holds at the Elba Island LNG Terminal, which will be reactivated to accept LNG tanker deliveries sometime late next year or early in 2002. Enron signed a binding Letter Agreement (which included a fairly comprehensive Term Sheet) with Merchant on October 13, 1999. A copy of this agreement is attached hereto. It was anticipated that the parties would execute a "Definitive Agreement", which would replace the Letter Agreement and contain a number of other terms and conditions to be mutually agreed upon. As a precaution, the Letter Agreement did outline a process to bring closure to this matter in case the parties could not agree. The parties did work together for several months on negotiating an "LNG Sale and Purchase Agreement", which added a considerable number of important provisions and modified a number of terms and conditions contained in the Letter Agreement for the benefit of both parties. However, the Quality Letter Agreement, which is an attachment to the Letter Agreement, has become a major source of contention for two primary reasons: despite the fact that the parties did not intend to modify the Quality Letter Agreement, it is apparent to Enron, and indeed to Merchant, that this agreement does not position the Terminal with the capability of handling LNG from any meaningful number of LNG production sources in the world. Southern LNG, which is a party to the Quality Letter Agreement, has no intention of agreeing to meaningfully modify its Terminal, although something could be worked out if Enron were to eliminate a considerable portion of its flexibility and optionality in its sales arrangement with Merchant, an affiliate of Southern LNG. I am attaching a copy of the LNG Sale and Purchase Agreement, as it was last drafted in early July this year. This draft does represent some considerable movement from the Letter Agreement, but we found it to be acceptable with the assumption that the quality issue would be favorably resolved. This copy is in the comparewrite format, but I think you will be able to work your way through it for your purposes. When it recently became apparent that w would not be able to close with Merchant in terms acceptable to use, we decided we had better move back to the Term Sheet intent, even though both parties will realize some unattractive returns. We have now drafted up the "Definitive LNG Sale and Purchase Agreement', which we believe captures the full intent of the Letter Agreement and Term Sheet. It is attached below for your review. Following your review of the pertinent aspects of these last two documents, we would appreciate the opportunity to meet with you to discuss how, from a pricing point of view, they might be better restructured. Regards. Les
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