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Enron Mail |
This past Tuesday, Ron Tapscott, Dwight Larson, Saeed Raja and myself met w/
all 5 counterparties from Cristobal (AEP, First Energy, CMS Energy, Detroit Edison and Virginia Power - collectively the Alliance Partners) to initiate the discussions and process of asset valuations. Also, attending the meeting on behalf of the Alliance Partners was a representative from Arthur Andersen who will be assisting them in this process. AA has also been working with the Partners since their own inception of forming an RTO. Overall the meeting was productive and we focused on both asset valuations as well as structural issues. We itemized a general list of data/info (deliverables) that will be necessary to begin the analysis/negotiation process. We also highlighted a list of specific issues related to structural aspects which we (ENE) felt were critical path items and have to be addressed. The Alliance Partners focus is that the combination of operating synergies, revenue enhancements, growth and financial engineering for a Pipe/Wire combo has to produce significant upside value that the Wires Co can't get on its own. Of the 5 Alliance Partners, it is clear that 3 of them (AEP, First Energy and Detroit Edison) are definitely "in the game" and serious about moving forward. We're not so sure about either CMS or Va Power. The primary obstacle seems to be both parties apparent reluctance to divulge the level of financial/operating information (which they feel is too sensitive of info to be shared on an individual basis at this time) necessary to move the deal forward. They did however agree to AA playing the role of an information clearinghouse whereby each Alliance Partner can send its individual data to AA who in turn will aggregate it into one "Wires Co." Finally, both CMS and VP seem to be somewhat "non-committal" towards how they would participate (i.e., divest, lease, etc...) but AEP, First Energy and Detroit Edison all made it very clear that once the group (at least a majority thereof) decides to move forward, any entity not divesting would be excluded from subsequent discussions, etc... where values, structural issues, etc... are being discussed. They would essentially be treated as a counterparty in an ordinary contracting process. The path forward with action items and deadlines are as follows: 1/7 - ENE is to provide AA with basic GPG financial info pursuant to the list we discussed in the meeting (basically, FERC Form 2 data) 1/7 - ENE is also to provide to AA for each of the 5 Alliance Partners, the financial info, assumptions, etc... we have used to date in our analysis 1/7 - CMS to decide if they're interested in including their pipes (PEPL and TGP) 1/10 - AA is to distribute ENE's assumptions/info to each respective Alliance Partner for them to review/confirm/edit (as needed) 1/17 - AA is to have gathered the individual data from each Partner and "aggregate" it into one Wires Co and submit it to all parties including ENE 1/28 - AA is to analyze and quantify the potential operating synergies for Wires Co and submit a new "synergized" version of Wires Co financial data/info 2/4 - next meeting with ENE and Alliance Partners scheduled in Houston at ENE office (Beth Ryan coordinating details) ENE to outline/summarize details re: all structural issues and send to Alliance Partners prior to the 2/4 meeting in Houston If you have any questions/comments, call me at x33212 to discuss. RANDY
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