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Enron Mail |
To All:
As a follow up to Mark's e-mail, I want to update you all on the position I am taking with Coastal Merchant (formerly Engage Energy US LP) as well. Per the ISDA in place between ENA and Coastal Merchant, we have been margining them to cover there current exposure. We are currently holding cash in addition to the unsecured credit line as stated in the ISDA. Coastal does not want to post cash but would rather increase the guaranty to cover the Financial exposure. At this time, I have told them we can not incur any increases in their guaranty because they are still securing Engage Energy Canada exposure through their physical guaranty. Coastal has since notified Engage Energy and Westcoast of this issue, and have requested that Engage work with our legal groups to finalize the guaranty issues. As I understand it from Mark's e-mail below, Engage is unwilling to work with us to negotiate a satisfactory guaranty and physical contract. I have made Coastal aware that we can not increase these guaranty's until some resolution has come about with Engage Canada, and we will continue to margin them for cash as needed. Russell From: Mark Powell 12/21/2000 10:57 AM To: Jonathan McKay/CAL/ECT@ECT, Russell Diamond/HOU/ECT@ECT cc: William S Bradford/HOU/ECT@ECT, Mark E Haedicke/HOU/ECT@ECT, Peter Keohane/CAL/ECT@ECT, Mary Cook/HOU/ECT@ECT, Dan J Hyvl/HOU/ECT@ECT Subject: Engage Energy Canada, L.P. Hey Russell and Jon, As you are aware, we have been trying to get Engage Energy Canada, L.P. ("Engage") to execute an updated master physical firm gas purchase and sale agreement (an "Amended Physical Master") over the last two and a half years with no success. Until this week, we had received no comments from Engage with respect to our suggested amendments (despite sending four distinct forms of amendments starting in August, 1998). The matter came to a head in June of this year when the Credit department wanted to call for collateral from Engage. The existing (1994) agreement does not provide for this right. As a result, we have been pressing this counterparty to execute the Amended Physical Master. However, the counterparty has delayed providing comments repeatedly. Through Russell's diligence, the general counsel of Engage gave me another call on Tuesday and (finally) provided some comments on the agreement. In addition to a few minor nits, the general counsel has informed me that he will not provide comments on the "credit related" provisions of the Amended Physical Master. He has told me that Engage requires that we put in place credit/collateral/netting agreements which contemplate: a. physical transactions (gas and power); b. financial transactions (gas and power); c. all Enron entities which transact with Engage and Engage Energy America Corp. (i.e. ECC, ENA, EPMI and any other entity) (as a result, the agreements would have to contemplate US/Canada distinctions as well). Such counsel refuses to proceed in any other manner at this time. Further, he has expressly told me that he will not go to Westcoast Energy Inc. to provide a guarantee which is specific to the Amended Physical Master. In order to comply with Engage's demands (i.e. preparing a master netting agreement, a master credit/collateral agreement and a mechanism by which we would be able to monitor exposure across all parties and products) I believe will be a fairly large undertaking (considering the emerging nature of the physical power market, the complexities involved and the general lack of response we have experienced with Engage over the last 2.5 years). However, I understand that we have undertaken such a task on occasion in the past (albeit, without additional concept of power trading) with respect to particularly important trading partners. Frankly, I am concerned that Engage's position (although, theoretically a good concept) is just another stalling technique. Nevertheless, I will leave the decision as to the manner to proceed with Engage to you. Please give me a call to discuss this matter when you get the chance ((403) 974-6708). Thanks, Mark Powell.
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