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---------------------- Forwarded by Vince J Kaminski/HOU/ECT on 02/04/2000
06:14 PM --------------------------- Kimberly Watson@ENRON 02/04/2000 04:12 PM To: Vince J Kaminski/HOU/ECT@ECT cc: Subject: El Paso / ENA Deal Completely Terminated Now I'm sure you have already heard this, but here is a summary. Kim. ---------------------- Forwarded by Kimberly Watson/ET&S/Enron on 02/04/2000 04:11 PM --------------------------- ET & S Business Intelligence From: Lorna Brennan on 02/04/2000 02:30 PM To: Bill Cordes/ET&S/Enron@ENRON, Julie McCoy/ET&S/Enron@ENRON, Lou Geiler/ET&S/Enron@ENRON, Tim Aron/ET&S/Enron@ENRON, Steve Klimesh/ET&S/Enron@ENRON, Sarabeth Smith/ET&S/Enron@ENRON, Gary Sova/ET&S/Enron@ENRON, Rob Wilson/ET&S/Enron@ENRON, Lon Stanton/ET&S/Enron@Enron, Kristen Hand/ET&S/Enron@ENRON, Rockey Storie/ET&S/Enron@ENRON, Kent Miller/ET&S/Enron@ENRON, John Dushinske/ET&S/Enron@ENRON, Dave Neubauer/ET&S/Enron@ENRON, Michael Bodnar/ET&S/Enron@ENRON, Joni Bollinger/ET&S/Enron@ENRON, David Badura/ET&S/Enron@Enron, Janet Bowers/ET&S/Enron@ENRON, Craig Buehler/ET&S/Enron@ENRON, Bob Burleson/ET&S/Enron@ENRON, Allen Cohrs/ET&S/Enron@ENRON, John Fiscus/ET&S/Enron@ENRON, Bret Fritch/ET&S/Enron@Enron, Steve Gilbert/ET&S/Enron@ENRON, Morgan Gottsponer/ET&S/Enron@ENRON, Brenda Harris/ET&S/Enron@ENRON, James Harvey/ET&S/Enron@ENRON, Stephen Herber/ET&S/Enron@ENRON, Dana Jones/ET&S/Enron@ENRON, Jane Joyce/ET&S/Enron@ENRON, Stephanie Korbelik/ET&S/Enron@ENRON, TK Lohman/ET&S/Enron@ENRON, Bill Mangels/ET&S/Enron@ENRON, Penny McCarran/ET&S/Enron@ENRON, Vernon Mercaldo/ET&S/Enron@ENRON, Larry Pavlou/ET&S/Enron@ENRON, Eileen Peebles/ET&S/Enron@ENRON, Maria Perales/ET&S/Enron@ENRON, Tony Perry/ET&S/Enron@Enron, Loren Penkava/ET&S/Enron@ENRON, Ken Powers/ET&S/Enron@ENRON, Joan Schwieger/ET&S/Enron@ENRON, Chris Sebesta/ET&S/Enron@ENRON, Frank Semin/ET&S/Enron@Enron, Neal Shaw/ET&S/Enron@ENRON, Larry Swett/ET&S/Enron@ENRON, Kay Threet/ET&S/Enron@ENRON, Mike Ullom/ET&S/Enron@ENRON, Lisa Valley/ET&S/Enron@Enron, Chuck Wilkinson/ET&S/Enron@ENRON, Jim Wiltfong/ET&S/Enron@ENRON, Jo Williams/ET&S/Enron@ENRON, Karen Lagerstrom/ET&S/Enron@Enron, Ray Stelly/ET&S/Enron@ENRON, Bob Stevens/ET&S/Enron@Enron, Sue M Neville/ET&S/Enron@ENRON, Mike Barry/ET&S/Enron@ENRON, Miriam Martinez/ET&S/Enron@ENRON, Martha Janousek/ET&S/Enron@ENRON, Kimberly Watson/ET&S/Enron@ENRON, Don Powell/ET&S/Enron@ENRON, Melinda Tosoni/ET&S/Enron@ENRON, Steve Weller/ET&S/Enron@ENRON, Michael G Stage/ET&S/Enron@ENRON, Tim Johanson/ET&S/Enron@ENRON, Chris Gaskill/ET&S/Enron@ENRON, Mary Kay Miller/ET&S/Enron@ENRON, Michel Nelson/ET&S/Enron@ENRON, Mike McGowan/ET&S/Enron@ENRON, Julia White/ET&S/Enron@ENRON, Drew Fossum/ET&S/Enron@ENRON, Dari Dornan/ET&S/Enron@ENRON, Maria Pavlou/ET&S/Enron@ENRON, Jim Talcott/ET&S/Enron@ENRON, Steven Harris/ET&S/Enron@ENRON, Lindy Donoho/ET&S/Enron@ENRON, Jeffery Fawcett/ET&S/Enron@ENRON, Lorraine Lindberg/ET&S/Enron@ENRON, Kevin Hyatt/ET&S/Enron@Enron, Christine Stokes/ET&S/Enron@ENRON, Lee Huber/ET&S/Enron@ENRON, Susan Scott/ET&S/Enron@ENRON cc: Subject: El Paso / ENA Deal Completely Terminated Now El Paso, Enron Terminate $38 Million Mega-Deal In a stunning announcement late yesterday, El Paso Natural Gas said it had reached a "mutual agreement" with Enron North America Corp. to terminate the $38 million negotiated mega-deal for 1.2 Bcf/d of capacity that the marketer had entered into in December. The negotiated arrangement covers three separate capacity agreements. The decision to release Enron from the three capacity agreements was somewhat puzzling, given that Enron last week had asked to be let out of only one contract - the famed Block II agreement (614 MMcf/d) - due to the restrictions that FERC had placed on the delivery rights of the capacity. In a Jan. 27 letter, Enron notified El Paso of its intent to exit the Block II contract, but the letter didn't indicate that it wanted to terminate the Blocks I and III contracts. See Daily GPI, Feb. 3) "They asked for it [to be released] and we agreed to it. It was a mutual agreement," said El Paso spokesman Mel Scott. The capacity agreements will be terminated on Jan. 31. Afterward, El Paso said it will hold open season from Feb. 7 to Feb. 14 for the capacity. "It is unfortunate that the recent FERC order modified the capacity rights in a way that will not allow the capacity to serve the purpose that Enron North America originally intended when they outbid the prearranged transactions. In the interest of fairness and good customer relations, we have agreed to release them from the contracts," said John W. Somerhalder II, president of El Paso Energy's Pipeline Group. El Paso Natural Gas has asked FERC to reconsider the mid-January order that essentially has reduced the commercial value of the Block II firm transportation capacity that Enron had agreed to acquire. With the collapse of its contract deal with Enron, it couldn't be immediately determined whether El Paso will continue to pursue rehearing. El Paso is seeking rehearing after being rebuffed by FERC in its request to stay the provision in the order restricting delivery rights of Block II capacity. The pipeline is seeking a reversal of a decision in which FERC said El Paso's 1996 turned-back capacity settlement bars El Paso from marketing Block II capacity on a primary basis to any delivery point other than the one at Pacific Gas & Electric-Topock, AZ. That ruling stripped the Block II capacity of primary delivery access to the Southern California Gas-Topock delivery point, which is the most sought-after by shippers of San Juan Basin gas. It was a major blow to El Paso and Enron, which had contracted for the Block II capacity in December on the condition that it would have primary delivery access to the Southern California market.. Without a favorable decision on rehearing, "the result may well be a diminution of the value of Block II capacity," El Paso told FERC. "Without question, Enron, as a new shipper on the capacity" and future holders of that capacity "will suffer a disadvantage in the market...." El Paso contends the Commission's ruling, if unchanged, would thwart the intent of the 1996 settlement, which called for the pipeline and its customers to share the risks of unsubscribed capacity on El Paso's system, and for El Paso to share a portion of the revenues it received from re-marketing the capacity. "An essential element in El Paso's ability to maximize the revenues it agreed to share with its firm customers was the ability to market the 614 MMcf/d of Block II capacity on a primary basis to delivery points other than PG&E-Topock," the pipeline noted. Stripping El Paso of delivery-point flexibility for Block II capacity "will have a serious adverse impact on [its] ability to generate the maximum possible revenues for its capacity and thereby recover the costs it and its customers would otherwise have to absorb." El Paso further said the Commission's decision was at odds with a 1998 order addressing whether the pipeline could re-market capacity turned back by PG&E to the SoCal-Topock delivery point on a primary basis. Since the 1996 settlement was silent on whether El Paso could re-market the capacity to delivery points other than PG&E-Topock, the Commission reasoned the settlement didn't preclude El Paso from selling the capacity at SoCal-Topock. "That ruling established the proper interpretation of the 1996 settlement. Now, the Commission has re-interpreted that same provision in a manner that is completely contrary to its previous ruling. The Commission provides no explanation as to how these two rulings can be reconciled or, alternatively, why it has changed its mind...." El Paso said it was also seeking rehearing because it "cannot find any evidence" in the mid-January order that the Commission "even read, much less considered" its response as to the "proper interpretation" of the1996 settlement.
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