Re: EnBW Default

Thanks , could you call Richard to talk though approach and strategy and then
ensure that he is also kept fully in the loop as you go forward .
Thanks

Michael Schuh
08/02/2000 22:09
Sent by: Michael Schuh
To: Michael R Brown/LON/ECT@ECT
cc:

Subject: EnBW Default

Michael,

here a quick update on the EnBW default situation.

The monthly damages for January were calculated to be appr. 500,000 Euro.
With letter dated February 2, 2000 we informed EnBW of our intent to claim
the excess replacement price over the contract price as damages.

Raphael Brun is putting together the required documentation to calculate and
support the exact amount of damages.

The strategy for the remaing term of the underlying Transaction Agreement is
to inform EnBW of our intention to terminate that agreement and to enter into
a long term supply agreement with a third party for the remainder of the
original term in order to mitigate damages. (Under the assumption that
continued purchases on a daily or weekly basis cause a greater risk for EnBW
concerning the replacement price). This will primarily serve to eliminate
interest payments for a standby letter of credit that has been issued on our
behalf to the Italian network operator . Monthly costs are supposed to be
100,000 Euros, on a decreasing scale.

Peter Heydecker, Justin and I will work this week on putting together a
letter to EnBW informing them about the potential termination ( With input
from P_nder).
At the same time we will give written notice of our exact damages claim and,
after the required notice period and payment being due, we would be in a
position to bring arbitration proceedings for these damages. Upon termination
and contracting for the long term supply, we would also have a basis to
establish the termination amount.

I will contact an arbitration lawyer at P_nder, experienced with the DIS
arbitration organisation as agreed upon in the Master Agreement, to advise on
the above outlined steps under the applicable German law.

Please advise if you have any comments or recommendations.

Regards,
Michael