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Enron Mail |
Guys, what is this!!!!
No - I think that Ahlstrom should take this risk or it should be reflected in a price reduction. I vote not to do the deal otherwise. Regards Delainey ---------------------- Forwarded by David W Delainey/HOU/ECT on 12/06/2000 06:48 PM --------------------------- Enron North America Corp. From: Chip Schneider @ ENRON 12/06/2000 06:07 PM To: Greg Blair/Corp/Enron@Enron, W David Duran/HOU/ECT@ECT, Terry W Donovan/HOU/ECT@ECT, Christopher F Calger/PDX/ECT@ECT, David W Delainey/HOU/ECT@ECT, Stephen H Douglas/HOU/ECT@ECT, Mark E Haedicke/HOU/ECT@ECT, Brian Redmond/HOU/ECT@ECT, David Gorte/HOU/ECT@ECT, Ben F Glisan/HOU/ECT@ECT cc: George Schaefer/NA/Enron@Enron, William Keeney/HOU/ECT@ECT, Lou Stoler/HOU/ECT@ECT, David Leboe/HOU/ECT@ECT, Rick Buy/HOU/ECT@ECT Subject: Change to the Inga DASH The Approval Amount for the Inga DASH has been revised from $98 million to $105.25 million to accomodate the potential requirement of having to replace existing credit support facilities provided by the seller, A. Ahlstrom, or the target, Ahlstrom Development Corporation ("ADC"). Although not explicit, this requirment may arise as A.Ahlstrom/ADC attempt to obtain "change-in-ownership" consents from partners, lenders and lessors to complete Enron's acquisition of ADC. As we believe that the liklihood of this requirement occuring is greatest with regard to 1) and 2) below, the DASH reflects the aggregate of these amounts. The requirement with regard to 3) below lies with an ADC subsidiary and should not "reasonably" merit replacement by Enron. This change was reflected in the DASH mailed to the Finance Committee of the BoD on 12/05/00. The potential credit support facilities are detailed as follows: 1) Panther Creek -- A. Ahlstrom Comfort Letter: A. Ahlstrom provided a "comfort letter" for the benefit of the lenders at the Panther Creek project. Upon acquisition by Enron, the beneficiaries of this comfort letter may require that it be replaced by an ENE guaranty. The comfort letter requires A. Ahlstrom to provide up to $1.5 MM in additional equity to the project in the event that the project cannot meet its debt service. Based on the origination team's analysis, the likelihood of an equity call related to the comfort letter appears to be minimal given: the project is projected to achieve an average 1.92x debt service coverage ratio in the pro forma model the partnership maintains business interruption insurance the project can subordinate $2MM in O&M incentive payments annually to meet its debt service targets 2) Panther Creek -- Equity Support Agreements: ADC, as well the other major partner, Constellation, have provided guarantees in favor of the Panther Creek project lenders, each with a maximum exposure of $5.75 MM Equity support under this agreement may be called on if the Panther Creek project does not meet its debt service requirements. We believe that these obligations should be maintained by ADC and not up-streamed to Enron as Enron obligations, however, the consenting parties may disagree. In the event that Enron is required to provide this support in exchange for consent, the origination team believes it is unlikely that the project lenders will call on the equity support agreements due to the coverage ratio, insurance and payment subordination items discussed above under item 1) above. 3) Gilberton -- Capital Support Agreement: Orion Power Company (a subsidiary of ADC) has committed to providing a maximum of $1.25 MM in equity support to the Gilberton Power Project, in the event that debt service cannot be met. We have not provided for this in the DASH as we believe that these obligation should be maintained by Orion and not upstreamed to either ADC or Enron as either an ADC or Enron obligation. The origination team believes that if Enron is called upon to provide this credit support, the impact of such would be minimal because: the agreement expires once project debt is repaid in Dec 2002 the project maintains a cash debt service reserve of $16 MM (and only $32 MM of debt reamains outstanding) pro forma debt service coverage ratios average 1.53x against a target of 1.15x Given there is minimal expectation the facilities will be drawn upon, RAC does not foresee a material impact on the overall project economics. To the extent guarantees or letters of credit are issued, an appropriate cost for these guarantees should be deducted from the value of the transaction. Please let me know if you have any questions with regard to this change. Regards,
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