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Enron Mail |
Cc: lisa.lunz@enron.com
Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: 7bit Bcc: lisa.lunz@enron.com X-From: Coffey Jr., Jim </O=ENRON/OU=NA/CN=RECIPIENTS/CN=JCOFFEY< X-To: Kitchen, Louise </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Lkitchen< X-cc: Lunz, Lisa </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Llunz< X-bcc: X-Folder: \ExMerge - Kitchen, Louise\'Americas\HPL X-Origin: KITCHEN-L X-FileName: louise kitchen 2-7-02.pst Louise Brian Redmond wanted my to copy you on this preliminary draft of a response to AEP. As noted below I am coordinating updates to the response. I will also hand deliver to you a hard copy of the two faxed letters that we received from AEP. Jim Coffey - x35346 -----Original Message----- From: Coffey Jr., Jim Sent: Thursday, August 16, 2001 5:47 PM To: Edison, Andrew Cc: Lunz, Lisa; Baumbach, David; Martin, Thomas A.; Schwieger, Jim; Gray, Barbara N.; Koehler, Anne C.; Denetsosie, Troy; Yanowski, Tommy J.; Redmond, Brian Subject: Attorney Client Privledge - Important! Needed comments and actions for response to AEP Please review the information below from Brian Redmond and respond with comments. I will be pulling a meeting together for early next week to discuss in order to have a revised draft with as many of your comments as possible ready for Brian when he returns next Wednesday. Please also note the actions items on each bullet and respond accordingly if your name is noted. Let me know immediately if you are not the correct person to address the action item and also please respond to any additonal action items that you can. For your assistance I have also attached below the same info in a Word doc. Thanks in advance for you help. Please call me ASAP if you have any questions or concern at x35346. 1. Texas General Land Office: Contract #96059967 A. AEP Position: ? An amount of gas valued at $0.409MM (the "Land Office Payment") was received from The General Land Office in exchange for AEP storing gas provided by The Texas General Land Office (the "Land Office Gas"). ? The value was based on a 15% of the gas volumes received from The General Land Office [during the periods beginning Feb 1, 01 and ending May 1, 01 plus the beginning balance] priced at a 1 June 01 IF/HSC price of $3.78. ? AEP should be paid for the full value for this gas, as AEP is providing the storage services to The General Land Office. B. ENE Position: ? ENE has incurred costs and expenses in transporting and injecting the "Land Office Gas" that should be recovered by ENE. ? ENE should receive a pro rata share of the Land Office Payment for the portion of time (March through May) that ENE owned HPL and satisfied the storage obligations for the Land Office Gas. ? ENE calculates the amounts owed to AEP as follows: (i) Calculation of Land Office Payment, less (ii) Cost to transport and inject Land Office Gas, less (iii) Calculation of value of storage services provided by ENE, equals (iv) Payment to AEP ? ENE makes this offer in an attempt to settle this matter, if this is not acceptable, then AEP should seek to claim such amounts should count against the [basket of notional funds] to cover such indemnities set forth in the P&SA C. Action Item: ? Find out how the contract works in terms of payment of the "gas fee"- DAVID BAUMBACH / JIM SCHWEIGER ? Calculate the amounts due to ENE and net these amounts out of the working gas true-up payment. - DAVID BAUMBACH 2. Cannon Interests Houston: Contract #96059933 A. AEP Position: ? Payments were received from Cannon in the amounts of $400k on March 1, 2000 and $525k on March 1, 2001 for storage services to be rendered by HPL. ? AEP should receive a portion of this payment based on the period of time that AEP and ENE owned HPL calculated as follows: (i) Total payments received from Cannon 925K (ii) Portion of contract year that AEP owned HPL = 9/12 (iii) Amount due to AEP = $693k B. ENE Position: ? Payments received in 2000 were for services rendered in 2000 and should not be taken into consideration. ? ENE agrees that AEP is due a portion of the 2001 payment from Cannon based on the period of time that AEP and ENE owned HPL calculated as follows: (iv) Total 2001 payments received from Cannon 525k (v) Portion of contract year that AEP owned HPL = 9/12 (vi) Amount due to AEP = $[ ] - DAVID BAUMBACH C. Action Item: ? Verify payment amounts and start of contract year. - DAVID BAUMBACH 3. Cannon Storage: Contract #96059167 A. HPL Position: ? This agreement should be treated as a fixed price agreement rather than an index based agreement ? As a fixed price agreement, a fixed for index swap should have been put in place with respect to this agreement. B. ENE Position: ? This is not a fixed price agreement as the contract pricing is already based on index. ? No hedge will be transferred. C. Action Item: - TOM MARTIN / JIM SCHWEIGER 4. Centana Storage: A. AEP Position: ? The Centana Gas Storage Contract was assigned from ENA to HPL. ? The Centana Gas Storage Contract is necessary to conduct the business of HPL on an ongoing basis in the same manner that it was conducted prior to Close. ? AEP is willing to purchase the gas currently in storage as of August 15, 2001 at a price equal to 90% of HSC/Beaumont for large packages of gas for October. B. ENE Position: ? Contract is an ENA contract and should not have been transferred to HPL o Terms were restructured to not match with HPL o No provisions for the sale of gas in Centana storage o Representations made to FERC o Never discussed/agreed commercially o Not a scheduled material contract as it was an ENA contract ? The contract terminated on 1 July - no formal notice was given to Centana to extend the contract. ? As the Centana Storage Contract was mistakenly assigned to AEP, ENE will agree to sell the gas stored under the contract to AEP at the 1 June IF/HSC price. ? This amount will be netted out of the working gas true-up payment. C. Action Items: ? Provide Duke with an indemnity and attempt to enter into a new contract with Duke - send letter to this effect. - EDISON/KOEHLER/GRAY ? Net amount due to Enron out of Working Gas true up payment. - BAUMBACH 2. Lloyndell/Citgo: A. AEP Position: ? AEP is currently unaware of this issue B. ENE Position: ? ENE discovered that a fixed to index hedge should have been transferred to AEP with the assignment of this contract ? ENE calculates the value of this hedge to be $[ ] as of 15 August. ? This hedge should be assigned to AEP and ENE will net this amount out of any monies paid to AEP for the working gas true up payment. C. Action Items: ? Prepare a confirm for the hedge - BAUMBACH 3. Gas Lift Deposits: A. AEP Position: ? There are $50,450 in customer deposits relating to several gas lift sales which are not accurately accounted for at Closing ? AEP will require full reimbursement for these amounts B. ENE Position: ? ENE is unaware of any inaccuracies and further discussion is needed before ENE can respond. C. Actions: ? J. Coffey to call AEP accounting to try to understand what AEP is referring to. - COFFEY 4. Specialty Sands Payment: A. AEP Position: ? The sum of $91,000,000 paid by Specialty Sand to ENE pursuant to a settlement agreement to cover costs of repairs should be reimbursed to HPL since HPL is incurring the costs of such repairs B. ENE Position: ? [If this money was received from Specialty Sands, it should be paid to AEP. or AEP should count it against the "basket" of indemnities] C. Actions: ? Legal to make the call on whether we can ask AEP to claim this against the indemnity basket - . EDISON/KOEHLER/GRAY 5. ISC/SAP Billing: A. AEP Position: ? Unclear B. ENE Position: ? AEP owes ENE $86k to compensate ENE for work performed in formatting data to meet the requirements of PeopleSoft. ? Such amount will be netted out of the inventory true up payment to be made to AEP. C. Action Items: ? Confirm AEP's position on this matter. - TOMMY YANOWSKI ? Net it out of the inventory true up payment. -JIM COFFEY 6. Transport Agreements A. AEP Position: ? The following transportation contracts are not necessary to the conduct of HPL's business or, if they are, suitable alternatives exist. HPL is willing to assign these contracts back to ENE: o EPGT Texas Pipeline, L.P. 96006479 o EPGT Texas Pipeline, L.P. 96041930 o Gas Transmission TECO, Inc. 96041723 o Gas Transmission TECO, Inc. 96041724 B. ENE Position: ? Agreed C. Action Item: ? Prepare documentation for the re-assignment of these transport contracts - BARBARA GRAY 7. IT Services: A. AEP Position: ? In exchange for AEP purchasing ENE's gas in the Centana storage field at 90% of the HSC index for October, AEP requests that ENE: o Reduce the fee payable by HPL to $100,000 during the second and third six month periods of the term of the IT Services Agreement o Provide for further fee reductions as Applications and Services are no longer required by AEP B. ENE Position: ? AEP offer to purchase ENE gas in Centana is unacceptable and ENE sees no benefit to ENE for reducing the pricing provisions under the IT Service Agreement. C. Action Items: ? Discuss with Networks - COFFEY / YANOWSKI ? Ensure we have internal agreement on PGAS, ROW database, and Gregg modeling. - YANOWSKI 8. Other Payment Amounts A. AEP Position: ? Unclear B. ENE Position: ? AEP owes ENE $1.2 for overstated MidTex cash payment ? Southern Union Promotional Fund? C. Action Items: ? Jim Coffey to develop ENE position on these matters - COFFEY 12. Working Gas Inventory True Up A. AEP Position: ? AEP has submitted an invoice to ENE for payment B. ENE Position: ? The amount due in the invoice submitted by AEP must be adjusted for the following: o ENE portion of Texas Land Office Fee o Value of gas sold to AEP in Centana Storage o Value of Hedge in Llyondell Citgo Contract o Value of SAP/ISC Payment o Value of Other Payment Amounts due to ENE: Mid Tex, Southern Union promo fund, etc. C. Action Items ? Jim Coffey to coordinate preparation of response to AEP invoice. - COFFEY 9. Calpine Guarantee: A. AEP Position: ? Unclear B. ENE Position: ? AEP needs to replace ENE guarantee or AEP should indemnify ENE for any liabilities to Calpine. C. Action Item: ? Confirm AEP's position on this matter -GRAY/KOEHLER/EDISON ? Prepare back to back guarantee to send to AEP for Calpine obligations.-GRAY/KOEHLER/EDISON 10. Guadalupe Contract: A. AEP Position: ? Unclear B. ENE Position: ? AEP and ENE need to execute a back to back agreement. Enron submitted a form of agreement to AEP, but has not received a response as of yet. C. Action Item: ? Request that AEP send comments back on back to back contract -GRAY/KOEHLER/EDISON ? What is our plan if they won't comment or execute? -GRAY/KOEHLER/EDISON -----Original Message----- From: Redmond, Brian Sent: Thursday, August 16, 2001 9:53 AM To: Coffey Jr., Jim Subject: Jim, Please find my draft position paper as a basis to prepare a response to AEP. Please distribute to the team (Martin, Schwieger, Gray, Koehler, Edison, Baumbach, Troy) for comment as well as to Louise K.. Can you also get Louise a copy of the two letters from AEP. Send my a revised draft once you have everyone's comments. Regards, Brian
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