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Enron Mail |
Kim,
I am reviewing the changes you made to see if they conform to our discussion. I understand from your comments in the email that you disagree with the items we discussed and are attempting to go back to the previous language which I indicated would be unacceptable. As such, I have gone back over the redlined contract and have only commented on the things that differ from our previous agreement. Please review these and call me in the morning if you feel that your client cannot agree to these changes. 1. The sentence added at the end of 9.1 should be deleted. Any differences between the DCQ and actual is to be handled between the party and its transporter. As I explained, if we schedule a DCQ of 10,000 with you and the pipeline and only deliver 9,500 to the pipeline, the pipeline will deliver 10,000 to you and collect the 500 shortfall from us. Likewise, if we schedule 10,000 with you and the pipeline and you only take 9,500, we still sell you the 10,000 and the 500 you didn't take is between you and your pipeline transporter. 2. 10.3 and 10.4 need to be deleted. What we agree to say was as follows: "10.3 Buyer represents that no taxes are applicable at the Point of Sale. In the event such representation is false, then such misrepresentation shall be a Triggering Event allowing Seller to terminate the Contract pursuant to Section 17.1." 3. Delete the language "not otherwise due to an event of force majeure" that you added in the 2nd and 8th lines of 12.3. 4. Delete the language added at the end of 12.5 and add language after the word "expired" at the end of the second sentence. "In no event shall any event of force majeure extend for a period in excess of 10 days during the term of this Contract. After such 10 day period, the parties shall be obligated to resume performance as if the event of force majeure had been remedied, and if such party does not resume performance, such nonperformance shall be deemed a Triggering Event allowing the other party to terminate pursuant to Section 17.1." 5. Delete item (vii) added in 17.2 because it is adequately covered by my inserted language in 12.5. 6. The $15,000,000 changed in the 3rd line of 17.4 needs to be changed back to $10,000,000. If the exposure exceeds $10,000,000, that is the reason additional security would be required. This contract contemplates that Seller has to provide security for any exposure in excess of $0 whereas the Buyer only has to provide security for exposure in excess of $10,000,000. Not a very balanced obligation because the Seller is bearing all risk of payment after it makes deliveries under the contract. "Kim Decell" <kdecell@gassupplyconsulting.com< 12/07/2000 11:51 AM To: <Dan.J.Hyvl@enron.com< cc: Subject: Wisconsin Public Service contract Dan, Attached is a redline document which compares our current version to your 11/22 version. I have summarized our differences below, but I will call you at about 10:30, subject to your calendar, to discuss the items. Significant Differences (1) Taxes I deleted Enron reference to Buyer paying taxes AT the Point of Sale. I (a) kept our 10.3 but added sentence that "no taxes currently applicable at POS and (b) added Sec 10.4, which we discussed gives either Party right to terminate contract if they are assessed an unduly burdensome tax. (2) Exceptions to Force Majeure I added "not otherwise due to an event of force majeure" to the section addressing failure of reserves/insufficient production from reserves. This should clarify that if a force majeure event, ie explosion, occurred at Seller's supply point, Seller would NOT be obligated to perform (except as identified in Triggering Events). (3) Billing We cannot accept Enron's requested changes. It is the industry-standard to bill Buyer's based on what WAS, not what was TO BE, delivered. If actuals are not available, it is acceptable to bill based on DCQ, but once actuals are available, prior period adjustments would be made to the next invoice. To demand a procedure different than the accepted industry-standard is something that should have been stipulated by Enron at the time the Contract Terms were established in 8/00. Given the tremendous progress we've made to this point, I am hopeful that Enron will accept the industry-standard (billing on actuals) for this contract. We can address this issue next month when we begin preparation of the future Enron/WPS Master Contract. (4) Credit Terms Based on our 12/6 discussion, I (a) removed Enron's Material Adverse Change definition, (b) removed Enron's Sec 17.2(vii) regarded MAC and © added back our Section 16.10 Credit Terms, whereby either Party has the right to demand credit support if in their sole and non-discriminatory assessment the other Party might not be able to meet its financial obligations pursuant to the Contract. Failure to provide credit support is considered a Triggering Event per Enron's language. (5) Effect of Force Majeure Based on our 12/6 discussion, I (a) removed language referring to consequences of extended force majeure but revised to refer to Sec 17.2 Triggering Events and (b) added Sec 17.2 (vii) to make extended FM a Triggering Event. (6) Collateral Requirement THIS IS A NEW REQUEST. I would like to change the Termination Payment threshold from $10MM to $15MM. In light of soaring gas prices, WPS could find itself owing more than $10MM strictly based on standard, full-performance Accounts Receivable (for example: 15,000 (MDQ) * $10 (gas price) * 60 (days) = $9MM.) I believe your provision was intended to keep Buyer's from having multi-month A/R and/or non-performance charges. Since I believe we agree WPS is fully capable of meeting its financial obligations, we should not set a threshold below potential standard, full-performance A/R. MINOR ITEMS (1) Throughout document, I made changes to your comments to make consistent with form of entire document, including changing Daily Contract Quantity to DCQ and putting days in words (ie 20 days became twenty (20) days). (2) Deleted Nominated Quantity definition as this term was replaced by DCQ. (3) Other changes that we agreed to yesterday. Dan, please let me know the earliest, convenient time for you to discuss these items with me on the phone. Thanks for your help. Kim Gas Supply Consulting, Inc. (281)558-0735 kdecell@gassupplyconsulting.com - WPS Enron 3 mo ANR Swing 12-6-00 COMPARE Enron response.doc
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