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----- Forwarded by Elizabeth Sager/HOU/ECT on 04/23/2001 10:49 AM -----
"JOHN KLAUBERG" <JKLAUBER@LLGM.COM< 04/22/2001 07:59 PM To: Elizabeth.Sager@enron.com cc: "BENNETT YOUNG" <BYOUNG@LLGM.COM<, "CARL EKLUND" <CEKLUND@LLGM.COM<, "JAMES HUEMOELLER" <JLHUEMOE@LLGM.COM< Subject: Draft PG&E Letter PRIVILEGED AND CONFIDENTIAL: ATTORNEY WORK PRODUCT Elizabeth: Attached is draft of the termination payment letter with a few suggested changes, but nothing major. I tried to include a blackline, but it seemed to get corrupted so I don't know if it will be of much use to you. A few notes: (1) I did not have the various contracts with me when I reviewed this, but I have asked Jim if he could make sure I did not make any inaccurate statements as well as input the few contract section references that are open and the information on the Canadian termination. (However, I was not sure whether you wanted Peter Keohane to input the relevant information on the Canadian side.). (2) In light of PG&E's letter to us, I thought we may want to make some short statements about the affiliate set off rights under the Bankruptcy Code in the termination letter. (3) I modified some of the language on the CalPX liabilities. I didn't have my exposure sheet with me, but I thought I recall that we were both owed money from the CalPX and that we had some risk on the chargeback liability depending on how FERC ultimately comes out on the issue. As you know, the FERC decision about 3 weeks ago prohibited the CalPX from proceeding with the chargeback "under these circumstances" or some type of language like this, but it seemed to have punted the final resolution of the issue until at least the commandeered contract valuation issue had been resolved--thus, although perhaps not likely, it seemed to me at the time that FERC gave itself an opening to reconsider the chargeback issue after the valuation determination had been made. (4) While I bracketed the language, I thought we may want to affirmatively and briefly set forth the business reason why EPMI is holding the direct access claim to at least give them something to think about. As we have discussed, PG&E's likely reaction will be that we are using unsupportable self help to not pay them anything on the termination of the 3 power confirmations by claiming a set off for the negative CTCs. To the extent we can articulate a short business rationale for EPMI having that claim, it may at least make them pause as to whether our business rationale arguably could prevail. (5) We note in the letter certain claims we have against PG&E that we are not setting off--e.g., the ISDA termination payment. We also reference the claims held by EPMI through the CalPX, even though we are not "terminating" any "contracts" in that respect. I assume that we do not want to reference in the letter the claims held by Portland General which "route" through the CalPX and the ISO, even though we are not claiming rights of offset for those. PG&E will be put on notice of those when we put in Portland's claims as part of our proof of claim with the bankruptcy court. I'll plan on getting together with you to review this tomorrow afternoon. Lastly, I have not read the decision yet, but I saw that the DC Circuit upheld FERC in all respects in the PCA case so since our contracts do not have to be on file, they can be terminated without waiting for the 60 day period to expire. That should reduce another potential challenge to the power contract termination. Thanks. John John Klauberg LeBoeuf, Lamb, Greene & MacRae, L.L.P. 212 424-8125 jklauber@llgm.com ============================================================================== This e-mail, including attachments, contains information that is confidential and may be protected by the attorney/client or other privileges. This e-mail, including attachments, constitutes non-public information intended to be conveyed only to the designated recipient(s). If you are not an intended recipient, please delete this e-mail, including attachments, and notify me. The unauthorized use, dissemination, distribution or reproduction of this e-mail, including attachments, is prohibited and may be unlawful. ============================================================================== - Settlement-3.doc - Settlement-bl.rtf
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