Re: Meeting with Ft. James

---------------------- Forwarded by Richard B Sanders/HOU/ECT on 09/27/99
10:26 AM ---------------------------

"David A. Barr" <dab@sprintmail.com< on 09/26/99 10:34:46 AM
Please respond to dab@sprintmail.com
To: Kevin Hyatt/HOU/ECT@ECT
cc: David W Delainey/HOU/ECT@ECT, Richard B Sanders/HOU/ECT@ECT, Cliff
Baxter/HOU/ECT@ECT
Subject: Re: Meeting with Ft. James

Kevin,

Good summary!

I think in addition to putting together the three cases as you discussed
below, I
think we may also want / need to show how the FJ's "savings target" that they
told
us we had to meet was constantly changing over the two years (from $100k
annually
to $225k to $500k to $1mm then my latest project from $1.5-2mm). I think this
correlates to what you are depicting in the cases. It almost appears
everytime we
had a potential project which may be able to reach X dollars in savings to FJ
they
would raise it.

Please provide questions or comments. Thanks.

Regards,
David Barr

Kevin Hyatt wrote:

< On Tues. 9/21 I met with Phil Zirngibl, the Alliance manager for Ft.
James. I
< informed him Enron wanted the original $10mm back. It was our belief that
FJ
< did not act in good faith in "expeditiously and fairly evaluating" all of
< Enron's energy proposals. Phil argued that Enron saw substantial revenue
from
< the commodity (gas & coal) deals that were executed. I argued that
commodity
< deals were never the "intent" of the Alliance as outlined in the
"Objectives of
< the Parties." I told him we didn't need an Alliance agreement to do
commodity
< deals.
<
< Phil was only prepared to argue the definition of "substantial assets" as it
< related to the asset sale. I told him Kalamazoo was substantial to us
because
< that was where we had a significant energy project. It was also substantial
< because the mill was ranked in the top 3 in terms of natural gas
consumption.
< FJ let us work on the Kzoo project for 9 months before informing us the mill
< would be sold. I told Phil this is not how Alliance partners treat each
other.
<
< I asked Phil if he was prepared to offer any proposal to resolve the
situation.
< His response was FJ was happy with the Alliance and wanted to continue with
it
< "as is." My response was that was not acceptable to Enron.
<
< I told him the list of potential mediators for the dispute was being sent to
< their counsel Greg Chaffee.
<
< Next Steps:
<
< I think we need to pick out a couple of strong project examples to use in
our
< case to present to the mediator. Rather than just show the list of
potential
< deals Enron pitched and the lost opportunity value, I think a stronger case
to
< get our original $10mm back is to say here are 3 examples, here is the
value to
< both parties, and FJ still did not do the project (or they chose to do it
< themselves). This should go a long way to proving "bad faith".
<
< I will get with David Barr and start assembling this information along with
the
< entire project list and the various "reasons" FJ chose not to do the
projects.
<
< Based on this initial meeting, if the parties can't resolve the dispute
within
< 30 days, the dispute goes to non-binding mediation. The parties are to meet
< with the mediator within 21 days of the dispute being referred to the
mediator.
< Per the Alliance agreement, the mediation meeting should take place anytime
< between now and November 10.
<
< Let me know if you have questions.