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Enron Mail |
Will we ask for approval of the sale? If so will we ask
From: Gary Zahn 11/27/2000 02:22 PM To: Rod Hayslett/FGT/Enron@ENRON cc: Bob Chandler/ET&S/Enron@ENRON, James Saunders/FGT/Enron@Enron Subject: Re: Asset Divestiture Approval Rod, to my knowledge the Commission has not specifically defined what is de minimus. The working definition of an Operating Unit or System is taken from an Office of the Chief Accountant Interpretative Letter issued May 26, 1961. "The principal tests are amount of investment, character of the property acquired, and continuity of operation. The following have been deemed to be operating units or systems: a large compressor station, a processing plant, an important measuring station, a gathering system or important segment thereof, a transmission line or important segment. If the transaction involves such a small amount of property as to be de minimus, it need not be considered as an operating unit." If a customer is attached to the facilities to be sold it is considered prima facie evidence that the property is an operating unit or system. In a July 8, 1992, the NNG Rate department in an interoffice memorandum regarding the Definition of an Operating Units or System noted "The Commission has not specifically defined de minimus, however, based on past rulings we can assume that the investment must be something less than $9 million, or a pipeline less than 7.586 miles." The 1.091 miles of 6" pipe and Faribault TBS #1 and the Northfield 4" branchlines of 4.9 miles and TBS have a net book value of $57,712. My main concern, if we use the de minimus rationale, are we not setting a precedent in which future sales or acquisitions will have to be viewed? Some of those future de minimus sales could involve gains! Again, it is not clear how the Commission will make its determination. The downside, if the Commission rejects our argument, NNG will have a $ 58K loss on the sale of these assets. Rod Hayslett 11/27/2000 12:23 PM To: Gary Zahn/ET&S/Enron@ENRON cc: Bob Chandler/ET&S/Enron@ENRON, James Saunders/FGT/Enron@Enron Subject: Re: Asset Divestiture Approval I want to make sure of this. From: Gary Zahn 11/27/2000 10:56 AM To: Bob Chandler/ET&S/Enron@ENRON cc: Rod Hayslett/FGT/Enron@Enron, James Saunders/FGT/Enron@Enron Subject: Re: Asset Divestiture Approval I think an argument can be made that the amount is de minimus which leads to a non-operating unit designation. From: Bob Chandler 11/21/2000 05:17 PM To: Gary Zahn/ET&S/Enron@ENRON cc: Rod Hayslett/FGT/Enron@Enron, James Saunders/FGT/Enron@Enron Subject: Asset Divestiture Approval Gary: Are you OK with the non-operating unit assumption based on deminimus NBV? If you're OK with it and the lawyers are OK, then it must be OK for me. Rod: I don't have a clue why Steve Harris should have to sign off on this project. ---------------------- Forwarded by Bob Chandler/ET&S/Enron on 11/21/2000 05:08 PM --------------------------- Rod Hayslett 11/21/2000 05:06 PM To: Bob Chandler/ET&S/Enron@ENRON, James Centilli/ET&S/Enron@ENRON, Dave Waymire/ET&S/Enron@ENRON, James Saunders/FGT/Enron@ENRON cc: Subject: Asset Divestiture Approval Can anyone think of a reason why this should not be done or why the assumptions made here are not all 100% correct? Is there any risk on the accounting? Where is the contract for sale? ---------------------- Forwarded by Rod Hayslett/FGT/Enron on 11/21/2000 05:04 PM --------------------------- Dave Waymire 11/20/2000 12:35 PM To: Danny McCarty/ET&S/Enron@Enron, Dave Neubauer/ET&S/Enron@ENRON, Rod Hayslett/FGT/Enron@ENRON, Michel Nelson/ET&S/Enron@ENRON, Mike McGowan/ET&S/Enron@ENRON, Mary Kay Miller/ET&S/Enron@ENRON, Steven Harris/ET&S/Enron@ENRON, Julia White/ET&S/Enron@ENRON, Drew Fossum/ET&S/Enron@ENRON cc: James Centilli/ET&S/Enron@ENRON, Bob Stevens/ET&S/Enron@Enron Subject: Asset Divestiture Approval Attached is a "Asset Divestiture Approval Form" for the sale of the Faribault Minnesota branchline location # 83801 consisting of 1.091 miles of 6" pipe and the Faribault TBS#1 and the Northfield branchlines location No.'s 85001 and 85002 consisting of approximately 4.9 miles of 4" pipe, and the Northfield TBS#1. Please indicate your approval or rejection of this proposal on the approval form and return to either James Centilli (EB4250) or David Waymire (OMA0755) by 5PM Monday, November 27th. If you have questions or concerns, please contact James Centilli (853-5028) or myself (398-7062). These branchlines are experiencing heavy encroachment. The Faribault branchline is currently being odorized by NSP per a previous arrangement in order to comply with a commitment NNG made to the DOT to transport odorized gas because of the population density along the pipeline. There is no threat of a by pass by selling these branchlines. There is an estimated annual O&M savings of $10k to $20k plus the avoided expense, exposure and operational headaches of not having to monitor high pressure branchline odorization. The net book value of these facilities is $57,712. The facilities will be sold for $1. In addition, NSP has agreed to enter into a 1 year transportation agreement guaranteeing incremental revenues of $350,000. The net book value of the facilities, is assumed to be of such small value as to be de minimus as allowed by previous rulings of the Commission and will be treated as a non-operating unit. This will allow the undepreciated balance to be cleared to depreciation reserves. The sale will require that the Northfield TBS be relocated upstream of the main line take off at an estimated cost of $225,000. David
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