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Enron Mail |
Here is the latest on this issue:
On Monday, Austin Energy asked if they could take early title certain equipment (the foxbourgh equipment - sp?) in order to "work around" an internal budget issue. Apparently, if AE takes early title, they will be able to pay for the equipment (approx $440,000) from another fund and avoid the appearance of being over budget on the 4 LM project. Based upon my discussions with various internal groups, ENA is comfortable with either option #2 or option #3 below. See the tax response from Warren below. David Marshall is comfortable from an insurance perspective. Kay Mann (lawyer on GE breakout contract) confirmed in a voicemail that she did not anticipate the title transfer creating an issue with the warranties granted to ENA in the breakout agreement. Keenan phoned Chris Kirksey yesterday to relay the message that based upon preliminary discussions, we are comfortable with either approach. Next Steps: Jeffrey anticipates hearing from Chris today to get preliminary feedback on if Austin needs title (option #3) or if the "acknowledgement letter" (option #2) would suffice. Monday, December 4, there is an internal meeting to discuss the topic. Let me know if you have any thoughts or concerns. Regards, Eric Warren Schick@ENRON 11/28/2000 09:01 AM To: Eric Booth/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT cc: Patrick Maloy/HOU/ECT@ECT, Matthew F Gockerman/HOU/ECT@ECT, Billy Lemmons/Corp/Enron@ENRON, Stuart Zisman/HOU/ECT@ECT, Ben Jacoby/HOU/ECT@ECT, Jeffrey Keenan/HOU/ECT@ECT, Eric Booth/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT Subject: Re: Update: Austin Project Property Tax Issue Eric: Regarding the various scenarios you discussed I think the best, from a property tax prospective, is proposal #2. It is not reasonable to think that the taxing authorities will overlook the property as discussed in #1. The City of Austin is a taxing unit within Travis County and there is a good possibility that they will go after the value and assess it all to ENA. We would be in a much stronger position if we took the proactive approach with an agreement as discussed in #2, and if the question was ever raised we would have the explanation in our "hip pocket". Please call me if you have any questions at 30689. Warren Eric Boyt 11/27/2000 03:31 PM Sent by: Eric Boyt To: Warren Schick/Corp/Enron@ENRON, Patrick Maloy/HOU/ECT@ECT, Matthew F Gockerman/HOU/ECT@ECT cc: Billy Lemmons/Corp/Enron@ENRON, Stuart Zisman/HOU/ECT@ECT, Ben Jacoby/HOU/ECT@ECT, Jeffrey Keenan/HOU/ECT@ECT, Eric Booth/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT Subject: Update: Austin Project Property Tax Issue Gentleman, I have discussed the property tax issue with Billy Lemmons, Stuart Zisman, Ben Jacoby and Jeff Keenan. A couple of thoughts came to mind and we need your opinion on these matters so we can take the most appropriate steps necessary to reduce the potential tax liability. First, a couple of facts for clarification: It is anticipated the turbines (and transformers) will be on the City of Austin site on or before 12/31/00 (the City owns the land); It is anticipated ENA will be the legal owner of the assets on 12/31/00 (the NEPCO assignment will not be complete); Under the current participation agreement, the City of Austin will not take title to their 91.4% ownership until the plant is complete and successfully tested (sometime 1Q 2001); However, by 12/31/00 the City of Austin will have paid for 100% of their ownership in the plant ($85,641,800); The tax liability could be $250,000 per turbine, $1,000,000 in total. The thoughts/ideas are as follows: Is it reasonable to assume the Travis County taxing authorities will not tax the equipment at all because it will be located on land owned by the City of Austin at year end? What is the probability they will actually review items of the property and trace legal owner? If #1 above is a risky position, and one you would not support, would it be acceptable to the taxing authorities, in your opinion, for ENA and the City of Austin to sign a letter stating that ENA is simply holding title to the equipment for the benefit of the City of Austin. Therefore, because of this and the fact that the City has paid for its 91.4% ownership, only the 8.6% is taxable. If neither #1 or #2 are acceptable in you view, would it be acceptable for ENA and Austin sign a side letter agreement to officially convey 91.4% of the project to the City of Austin, but totally indemnify the City of Austin from all liabilities. After year-end, ENA would "take back" the conveyance and the plant would continue in ENA's name until the plant is officially conducted its final performance tests. Please provide your thoughts on these ideas as soon as possible. If these do not work, we need some creative thinking on your behalf to minimize the liability. I look forward to hearing from you soon. Regards, Eric x5-7754
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