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Enron Mail |
Mike, I would appreciate your help on the following matter. =20
I attach the e-mail that I sent to David Haug on August 11 of this year abo= ut=20 the $2.9 million settlement payment that the SECLP project in the Dominica= n=20 Republic owes us and that they have not paid, and that has been accruing=20 interest for years. EECC will have to write off all of this amount unless= =20 some resolution is achieved. The e-mail tells the story so I won't repeat= =20 it, but will just update the note as follows: After we sent this note, there were several internal Enron meetings between= =20 EECC and CALME in which it was decided that Dan Castagnola would approach t= he=20 lenders in a last ditch attempt to obtain payment. If the Lenders refused t= o=20 approve payment, then EECC would be freed to file litigation against SECLP = to=20 recover the full uncompromised amount of the claim (approx $5.6 million,=20 excluding interest). This project was then transferred to Global Markets in connection with the= =20 CALME breakup, and the owner's efforts to discuss the matter with the Lende= rs=20 seems to have ground to a halt. We do not think that the discussion with th= e=20 Lenders ever occurred. However, we are still willing to consider alternatives to litigation, such = as=20 selling the claim to the Enron shareholder in SECLP for the amount of the= =20 settlement, and allowing the Enron shareholder company to hold and control= =20 the claim against the project and perhaps have it treated as a capital=20 contribution for which shares might be issued later. This would allow EECC = to=20 clean up its books without taking a write off and allow the Enron sharehold= er=20 to preserve the claim and perhaps capitalize it.=20 Please call me when you have had a chance to review this note. Hopefully, w= e=20 can work something out. LI51600 ********************************* =09Larry L Izzo =0908/11/2000 12:18 PM =09=09=20 =09=09 To: David Haug/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT =09=09 cc: John Schwartzenburg/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT =09=09 Subject:=20 David, as you know we have been trying to get the open claim we have with= =20 SECLP settled for some years now. I am sending you this note as part of a= =20 last effort to get this settled, and so it is to be considered part of the= =20 settlement discussions and used solely in that context, and is without=20 prejudice. For you convenience, I wanted to summarize the history of the dispute=20 involving the outstanding invoice dated 19 March 1996 from Enron Power=20 Construction Company ("EPCC") to Smith/Enron Co-Generation Limited=20 Partnership ("Owner") in the amount of $5,586,145.00 ("Claim"). Project History November 1993 Owner and GE execute the Turnkey Agreement; November 1993 NTP issued to GE; May 1994 Phase I Simple Cycle Commercial Operation achieved; September 1994 Owner and EPCC execute the Construction Completion Agreeme= nt=20 ("CCA");=20 August 1995 Phase II Combined Cycle Commercial Operation achieved; =20 The Construction Completion Agreement. Under the CCA EPCC administered the final stage of the Turnkey Agreement by= =20 stepping into the shoes of Owner in order to manage the schedule for=20 completion of the work under the Turnkey Agreement. It is important to=20 remember that (i) EPCC had no authority to settle disputes or determine if= =20 the Commercial Operation was achieved and (ii) EPCC had no warranty=20 obligations for GE or any other third person. The Costs under the Invoice. Between August 1995 and March 1996 EPCC continued to incur costs including= =20 additional scope of work items and costs incurred as a result of third part= y=20 actions (Force Majeure). Our costs totalled $5,586,145 and were included i= n=20 the 19 March 1996 invoice. Since we have not been paid, interest has been= =20 accruing on that amount. =20 Settlement Discussions. Beginning 2Q 1996 I personally had discussions with Owner about the Claim. = =20 We discussed several payout options, most involving insurance proceeds. EP= CC=20 and your partner, Smith Cogeneration Dominicana, Inc. executed a settlement= =20 agreement in early 1997. This was negotiated personally by Rod Gray, on=20 behalf of EI. However, Owner refused to execute the settlement agreement= =20 pending Lender approval. This Lender approval never materialized, and the= =20 settlement agreement was never signed by the Owner. However, I was asked b= y=20 Rod, on behalf of EI, to await the insurance settlement.The settlement=20 agreement stated that Owner would pay EPCC $2.9MM as follows: ? 6% of Owner insurance proceeds (i.e. 10% of Owner=01,s 60%) for the first= =20 $13.5MM gross=20 insurance (max is $800k); and ? 12% of Owner=01,s insurance proceeds (i.e. 20% of Owner=01,s 60%) above $= 13.5MM=20 until EECC=20 obtains $2.9MM.=20 Meanwhile, we have patiently waited to close out the CCA while Owner resolv= ed=20 its claims against the responsible parties including Raytheon/Ebasco, Gener= al=20 Electric, and Foster Wheeler. We have spent considerable time and effort= =20 investigating and addressing issues raised with respect to these liability= =20 issues even to the point of allowing our personnel to be interviewed. We= =20 have waited so long that we had to execute a Tolling Agreement on 1 August= =20 1999 in order to protect our rights from disappearing due to lack of=20 prosecution! =20 Finally, in June 2000 your team suggested that the Lenders may consent to t= he=20 settlement agreement if we sent a stern letter outlining our position and= =20 evidencing our frustration. Our litigation counsel drafted and sent such a= =20 letter on June 7, 2000, but Lenders did not consent to the settlement=20 agreement.=20 Current Status. We now have no prospect of repayment of the Claim and no path forward. EPC= C=20 is prepared to move forward and initiate appropriate proceedings for=20 collection of this long overdue outstanding balance, but I wanted to give y= ou=20 this letter as notice in case you had another solution to this dilemma. =20 Please note that the CCA allows for a 12% per annum interest charge on all= =20 unpaid amounts and we will include four years at this rate in the arbitrati= on=20 claim. Please respond with your thoughts and comments. I look forward to discussi= ng=20 this matter with you. =20 Larry LI36500
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