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Enron Mail |
Sorry if I'm a little late in the day. I feel into marathon meeting mode
today. Here are my observations of the GE contract. I tried to confine it to significant issues since it appears to me that the negotiations are far along. General Terms and Conditions I don't see where the buyer has much financial leverage for performance/warranty issues. Final payment is made at shipment, with the Buyer having the benefit of a 10% retention bond; however, the retention bond expires at Provisional Acceptance. There is no financial leverage for Final Acceptance or the warranty period. Also, usually provisional or final acceptance requires that GE provide the operating manuals. The assignment language (8) is somewhat narrow. I don't know the deal, so I don't know how it fits. It can help to have language which allows for free assignment after provisional acceptance or payment in full, whichever occurs first. Also, the contract can allow for a substitute guaranty as payment security, in lieu of the buyer guaranty. Again, I don't know the deal so this may be fine as is. The contract incorporates GE's proposal as a part of the contract, but does not give an order of precedence. I haven't seen the proposal or any other technical exhibits, but sometimes these can be very self-serving. Therefore, you can potentially lose ground with what is in the exhibit. Warranty. The language is a bit confusing to me, especially the interplay of the 1st and 2nd paragraph. Also, the "outs" they have are very broad. It is better if there outs are limited to installation/operation/maintenance not in accoredance with their written instructions (alternatively, industry practice). Also, they have an out if repairs are performed without their permission, but there's no time line or urgency for their response to a warranty claim. A statement that they must provide a service engineer within 3 days or so might help. I also suggest being clear that 1.2 applies to warranty obligations, but their obligation to respond quickly to warranty problems need to be explicit. Excusable Delay. (15) I would delete "indirectly" from the 3rd line. Provisional Acceptance. I don't understand the phrase "only to the extent and proportional share". Does this mean that GE may not be liable for the full LD's, or that the buyer has to prove a right to collect LD's? Litigation. The dispute resolution (mediation then litigation) is not consistent with the usual arbitration route we request. I didn't take a hard look at LD's, since I assumed these are settled. 13.6 Enron typically gets more precise language than this. For instance, I would delete or clarify the phrase "including that due to environment or operation", as being vague. 13.6 (i)The phrase "proper storage, installation, operation and maintenance" should be as defined by GE's written instructions, or at least based on industry standards. 13.6 (ii) could conceivably allow them to drag their feet on a repair, then not allow us to get someone else to do the work. 14.1 The last line should include the words "strict liability" after "negligence". GE ususally gives us indemnity for any hazardous substance they introduce. This is a quick look. If you need more detailed information (and you think there's time to negotiate further), I can look at it in more detail. Kay "Bob Licato" <Bob.Licato@enron.com< on 07/12/2000 03:46:26 PM To: kay.mann@enron.com cc: "Lisa Mellencamp" <Lisa.Mellencamp@enron.com< Subject: RE: GE Turbine Purchase Contract - Linden 7 site ---------------------- Forwarded by Bob Licato/ECP/HOU/ECT on 07/12/2000 03:21 PM --------------------------- Bob Licato 07/12/2000 02:31 PM To: Lisa Mellencamp/HOU/ECT@ECT, kaymann@enron.com cc: Chuck Tobias/ECP/HOU/ECT, Cliff Evans/ECP/HOU/ECT Subject: RE: GE Turbine Purchase Contract - Linden 7 site I spoke to Jon Stroble of El Paso today and he as agreed to delay signing this agreement until next week. We need to get him any comments by close of business on Monday, July 17. Can you please review and get me comments ASAP. thanks and sorry for the short notice. ---------------------- Forwarded by Bob Licato/ECP/HOU/ECT on 07/12/2000 02:15 PM --------------------------- (Embedded Enron Capital & Trade Resources Corp. image moved to file: From: "Stroble, Jon" pic17929.pcx) <StrobleJ@EPEnergy.com< 07/10/2000 11:58 AM To: "'cgoode@ssd.com'" <cgoode@ssd.com< cc: "Abramson, Shelly" <AbramsonS@EPEnergy.com<, "Kidd, Andrew" <KiddA@EPEnergy.com<, "'chuck.tobias@enron.com'" <chuck.tobias@enron.com<, "'bob.licato@enron.com'" <bob.licato@enron.com< Subject: RE: GE Turbine Purchase Contract - Linden 7 site Cory, Please see comments in attached file. I changed the date to July 14th assuming we can sign on this date. <<agree_6_13_00.doc<< <<TsCs_6_28_00.doc<< <<pricing_06_23_00.xls<< I'm hoping you can rewrite these files incorporating these comments as well as Shelly's comment below and Mike Neuman's comment from his 6/28 email copied below. Parent Guarantee-We feel the dollar amount for the parent guarantee should be raised from $33Mill to $37mill to allow us some room in case of change orders. In any event, the Contract Price is approximately $35mill. Thanks, Jon -----Original Message----- From: Abramson, Shelly Sent: Friday, July 07, 2000 4:58 PM To: 'cgoode@ssd.com'; Kidd, Andrew; Stroble, Jon Subject: FW: GE Turbine Purchase Contract - Linden 7 site As per my previous e-mail. -----Original Message----- From: Abramson, Shelly Sent: Thursday, June 15, 2000 3:28 PM To: Stroble, Jon; Kidd, Andrew; 'cgoode@ssd.com'; Baker, Bob Cc: Brown, Stephen Subject: GE Turbine Purchase Contract - Linden 7 site Jon and I met with East Coast Power this morning to discuss the contribution by El Paso of the GE Turbine for the Linden 7 Site. The assignment clause in the GE Terms and Conditions currently permits the assignment by the buyer to an affiliate without GE's consent. The word affiliate is not defined but we should be able to take the position, as a 49% equity owner in East Coast Power, that it is an El Paso affiliate. I would recommend that to clarify, we include the following clause after the word affiliate in the Assignment Section: (including but not limited to East Coast Power L.L.C.). Andrew, Bob and Coralyn, pls advise if you would like to take a different approach. I also expect that we will have a credit issue when the Contract is assigned to ECP as GE is now, I believe, getting an El Paso Energy Corp. Guaranty. According to Bob Licato at ECP, GE accepted an ECP assignment without an Enron guaranty on Linden 6 due in part to the presence of GECC as a lender/equity participant in ECP. We can discuss this with GE when we inform them of the planned assignment to ECP. Finally, I would advise that when we get GE to sign a letter accepting the assignment, we confirm that the GE warranties flow to ECP. ****************************************************************** This email and any files transmitted with it from El Paso Energy Corporation are confidential and intended solely for the use of the individual or entity to whom they are addressed. If you have received this email in error please notify the sender. ****************************************************************** (See attached file: agree_6_13_00.doc) (See attached file: TsCs_6_28_00.doc) (See attached file: pricing_06_23_00.xls) - pic17929.pcx - agree_6_13_00.doc - TsCs_6_28_00.doc - pricing_06_23_00.xls
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