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Enron Mail |
This Risk Memo relates to our first import of physical power into Italy.
Under the deal, we supply the municipality, IMOLA, with 66GWh of power at the Swiss/Italian border for 1 year (rolling for further yearly periods if the contract is not terminated by either party). The contract value is in the region of o1 million. The power is for onward supply to IMOLA's own customers. The contract is on a standard form I produced recently in conjunction with Italian counsel, but warrants this risk memo as it is the first deal of its kind. It is conditional on IMOLA securing from the Italian network operator (ENEL) transmission from the border to the ultimate customer within 90 days. We have agreed we will extend this period by a further 90 days in appropriate circumstances. We prepared the customer's request for transmission to give it the best possible chance of success. As required by Italian law, IMOLA have the right to terminate the contract at any time (including during the first year) upon 6 months' notice. We are raising with the Italian Energy Authority whether such a right of termination (which was recently introduced under the new energy law) is appropriate for one year deals such as this. In the case of IMOLA, we are seeking to restrict their right of termination to cases where their own customers have exercised the same right (this will stop IMOLA shopping around for a better price). It is not clear whether this restriction is effective under the new law, but we have principle on our side (the law is intended to protect the ultimate customer) and there is no legal (or other) down-side in including it. Each party has a right of termination if interconnector charges above a certain proportion of the contract price are introduced. However, it is worth noting that there are no such charges levied at the moment and (so far as we are aware) none are proposed. The contract includes a right on the part of Enron to match third party offers IMOLA may receive when the contract expires, and Italian counsel have confirmed that this right should be legally enforceable by us. The deal (and indeed the standard form) is subject to Italian law and to ICC arbitration in Geneva. There are no particular legal risks under this transaction, but please call me if you would like to discuss it in greater detail. Best regards Paul
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