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Enron Mail |
I have attached a memo from Don Black regarding his meeting with Duke
yesterday. As you will note,this memo outlines the factual differences between the parties. The legal issue is one straight out of first year Contracts class: Was there a meeting of the minds so as to create a binding contract? When I first looked at this I was somewhat concerned. In response to an email from Duke describing a particular index pricing, Julian responded simply "I agree." But after talking to Don, Greg Whalley ,reviewing all the email correspondence, and, most importantly, listening to the trader tapes, I am convinced that Julian never agreed to the index that Duke is alleging. In other words I think we can make a good argument to get around the damaging " I agree" email. It is clear that Duke's trader didn't, and probably still doesn't understand what index she was usingin her email. The Master Agreement provides for arbitration in Houston with three arbitrators, one of whom must have 8 years of experience in derivatives. I'll take my chances with that kind of panel. I estimate our liklihood of prevailing is in the 70-80% range. Let me know if you need anything further. ---------------------- Forwarded by Richard B Sanders/HOU/ECT on 10/06/99 08:14 AM --------------------------- Don Black@ENRON_DEVELOPMENT 10/05/99 05:46 PM To: Richard B Sanders@ECT, Greg Whalley@ECT cc: Subject: Duke meeting Julian Poole and I attended at meeting at our office with Erik Ludtke and Amy Statler of Duke Intl. today. We reviewed the tapes and the emails, and they are hanging their hat on the fact that the only monomic price published by Cammesa is the index to which they are referring. Our answer to that claim is that they defined the trade as a 7 by 24 flat load, when the index they are trying to use is a demand weighted index. Also, in the tape, immediately following the word "monomic" by Amy, is a definitional description; "capacity plus energy". Cammesa states that there is no where that you can find the definition of the word monomic in their library. We believe that monomic means the hourly price plus the capacity payment for peak hours. Lastly, the index she wants to use is a monthly number, published only once a month, but she states in her "let's add" email that she would like it to "be the monthly average of the monomic spot price published by Cammesa" I asked her how do you calculate the monthly average of a number that is published once a month. I related to her that the logic did not follow. She responded with a forgettable comment. We had a long discussion about whether or not a trade had occurred. I explained to them that legally, the transaction is not closed until the deal is closed by an authorized ECT trader in Houston. Also, we explained the closure process to them multiple times. We never admitted to a trade. They think that they caught Julian. I told them that if they had been clearer in their definition of their desired index, I would feel a "trader's obligation" to follow-thru with the process, but if they wanted to use the "Precio Medio Monomico as Published by the Cammesa in the section of The Boletin entitled Los Resultados Economicos for the applicable months" or the "Precio Medio En El Mes, Monomico, published in the Informe Mensual under the heading Precio de la Energia and Monomico", they should have just said it. They want $500,000 in LD's, or they will let us honor the trade and flip it out to them at $22.50 for a MTM loss of $308,000. Our estimate is that the alleged trade is about $220,000 out of the money at present. Our decision is to allow this matter to take its course. Erik is going to decide what he wants to do, and will inform me. If he wants to pursue the matter, he will refer the matter to Bruce of Duke Intl. If anyone has any instructions as to how we should proceed, please let us know. For future reference, the traders here have been informed to not agree to things in an email, even if they are agreeing to the clarification of an outline of a deal clearly marked "INDICATION". Lesson learned.
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