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Enron Mail |
We will provide the appropriate clarificatiions ASAP.
Bradley.Barta@swec.com on 02/14/2001 09:43:16 AM To: Rob.G.Gay@enron.com cc: susan.garven@stoneweb.com, frank.kluesener@kfw.de, Bboeh@opic.gov Subject: Questions re: Siemens Negotiations Rob - We've reviewed your memo which sets forth general points of your negotiations with Siemens. Following are comments and questions regarding certain negotiated points: EOT Claim Agreement Owner must operate and maintain per O&M manuals and industry practices on oil; if not, owner must correct items materially affecting Contractor's commissioning obligations We observe that while this point places reasonable responsibility on the Owner to correct problems that were a result of their commercial operations, it is introduces an opportunity for the Contractor to place unfounded blame on the owner for affecting the Contractor's ability to commission. Risk of Loss remains with owner during commissioning on gas We understand that the Facility is under the care, custody and control of the Owner and that the Facility is currently operating under the insurance coverage intended for the commercial operating period (versus the construction period). Please confirm that there is no reason to be concerned about insurance coverage if a problem arises resulting in material damage attributable to Contractor action during commissioning on gas. We are also advising the Lenders to have this point reviewed by an insurance advisor. Degradation - agree to use curves with credit to owner for degradation during commissioning During our last conference call it was indicated that the first choice was to test to determine degradation and the alternative was to agree on a set of curves. It appears that Siemens was unwilling to agree to the test approach. We observe that the curves used to determine owner credit may be biased to the benefit of Siemens. We trust that your operations experts will diligently review the basis for the curves. Performance LD's on gas per the EPC contract with first $4,000,000 forgiven by owner Please explain the rationale behind forgiving $4 million of Contractor LDs. Delay LD's on gas do not start until 60 days after performance test on gas During our last conference call it was indicated that there would be a stand down until 7/1/01 when gas is available, no LDs would be paid related to oil firing performance, and that the LD clock would start if gas commissioning is not complete within 60 days. We do not understand the above negotiated point. Please confirm that our understanding is correct or clarify your negotiated point. TAA Agreement No 12-month look back. We assume that this negotiated point is related to the time period factored into the availability calculation for purposes of determining whether or not an extension or additional work by the Contractor has been triggered as a result of dropping below the availability standards. Please explain how this negotiated point affects the mechanics of the TAA and also please explain how availability will be calculated. As we noted during our last conference call, we are concerned that Siemens believes that the availability value is not reduced if maintenance work is being performed during periods when the Facility is not being dispatched. 12 month Initial Guarantee Period, with the clock suspended for gas commissioning unless owner delay. We interpret the above negotiated point to mean that the 12-month clock for the initial guarantee period stops during commissioning regardless of how long it takes the Contractor to commission on gas (unless delays are attributable to Owner) and re-starts after Contractor has successfully completed the performance testing on gas. Please confirm that our understanding is correct. In order to provide the lenders an adequate warranty period on gas (if there are additional delays on the P/L) our Insurance group has indicated that we will have no problem obtaining 12 months renewable business interruption insurance when we go operational on gas. This should solve the issue over the revised warranty with Siemens because it covers defects, design, and workmanship on the turbines and includes lost profits, etc. Incidentally, for insurance purposes the turbines are designated DE3 which is not a new technology designation. The duration of BI coverage is 18 months per event with US$150,000 deductible. Stone & Webster is advising the Lenders to have an insurance advisor review this point. Thanks in advance for your response. Hope all is well. Regards, Bradley
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