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Enron Mail |
Will the madness never end? We go through this on every claim. I don't k=
now why our insurance guys cannot get on Enron's side to get as much paid f= or as possible. Let there be no mistake--Enron Risk Management has a long = held disdain for lawyers gettin involved to examine their policies. I don'= t doubt for a minute Stuart was preconditioed on this one. Eddy & I are me= eting with Jim Bouillion today and we'll see what we can do. I agree with = Eddy that if they pay the big stuff, we need to be careful. I'm pissed but = don't worry--I'll be charming and nice as long as I have to be. There are = definitely a list of things that should be covered, although I agree examin= ation of the policy for coverage probably is not. But Gordon and Jack's wo= rk on that was limited and most of their advice has been related to the Sie= mens issues, mitigation of damages, conduct as the prudent uninsured, and q= uestions as to how to address these issues under Brazilian law which govern= s the policy. The correspondence, the POs, agreements etc should be covere= d. -----Original Message----- From: =09Daniels, Eddy =20 Sent:=09Saturday, October 13, 2001 6:00 PM To:=09Powell, Laine; Guidry, John Cc:=09Gordon Grimes; John Montgomery; Blaine, Michelle Subject:=09RE: GT11 Incident Discussions at Cuiaba 9 & 10 Oct 01 They have no right to refuse to pay legal costs -- especially for the Brazi= lian & US counsel used to paper the deal with Siemens. Much of Gordon and = Jack's work can be characterized as necessary to analyze Siemens claims in = connection with their bargaining position. Certainly Cliffs work on the ag= reements shoudl eb covered. =20 If they promptly pay the big claims, we may not want to push this. But we = shouldn't give it up just yet.=20 -----Original Message----- From: =09Powell, Laine =20 Sent:=09Saturday, October 13, 2001 6:42 AM To:=09Guidry, John Cc:=09Gordon Grimes; John Montgomery; Blaine, Michelle; Daniels, Eddy Subject:=09RE: GT11 Incident Discussions at Cuiaba 9 & 10 Oct 01 Folks - =09Further to John's comments Stuart's body language and general comments l= eft no doubt that he would not agree to pay for legal costs outside of the = very narrow range described below. In fact he once again questioned why we= had engaged counsel at all. Let's not kid ourselves - getting insurance t= o pay for legal costs is like having a 50 foot putt on a green at Augusta. rgds Laine From:=09John Guidry/ENRON@enronXgate on 10/11/2001 04:56 PM CDT To:=09Gordon Grimes <ggrimes@mainelaw.com<@SMTP@enronXgate cc:=09John Montgomery <jmontgomery@bernsteinshur.com<@SMTP@enronXgate, Mich= elle Blaine/ENRON@enronXgate, Eddy Daniels/ENRON@enronXgate, Laine A Powell= /ENRON_DEVELOPMENT@ENRON_DEVELOPMENT=20 Subject:=09RE: GT11 Incident Discussions at Cuiaba 9 & 10 Oct 01 Gordon, Stuart did not elaborate on the legal support issue, other than to say that= any work would have to be preapproved by him and that the only possible ro= le that he could see would be related to subrogation issues. He seemed lea= ry of outside attorney involvement and questioned why we might want lawyers= involved in the claim (other than the administrative issues related to agr= eement preparation).=20 During our discussions, he did state that the underwriters would settle the= claim with us and that they would figure out how to deal with Siemens. I have never read the policy (nor do I intend to), but Stuart is working to= ward getting advanced payments for us. The underwriters in London seem to b= e cooperating on this issue. For the amount that we are looking at, $21 MM,= the underwriters would have to get their board approval. If they agree to= do advanced payments (and we hope that they do), it does not matter what t= he policy says on this issue. He was, however, pleased to hear that we were= looking at an interim financing structure with an Enron company paying. He= said that this approach would make it easier to get the funds approved wit= h the underwriters (no board approval required). John -----Original Message----- From: Gordon Grimes [mailto:ggrimes@mainelaw.com] Sent: Thursday, October 11, 2001 8:07 AM To: Guidry, John Cc: John Montgomery; Blaine, Michelle Subject: RE: GT11 Incident Discussions at Cuiaba 9 & 10 Oct 01 John- This looks like great progress. Two questions. There is some mentio= n of legal fees being limited to "subrogation" issues. Can you elaborate? What are such issues? We know what subrogation is. Does this mean work to preserve the subrogation position of the insurer is allowed? If Siemens is named as an additional insured, insurers would have no such rights. This, of course, would depend on their reading of the cover- i.e. if they might say that this had nothing to do with gas commissioning. We, of course, are supposed to have covered Siemens with a "maintenance cover" which would hav= e protected them for design defects etc. Need to figure out what Stuart is getting at. =20 We had understood that any work done to facilitate the repair would also be covered, such as work on the Change Order, Parts Agreement, etc.. We are about to send out our bill and would like to do two separate bills- one which would cover things which the insurer might reimburse, and one which i= s clearly advice to you on issues like the PPA, etc. Let us know ASAP so we can work up something.=20 Second, there is discussion of "advance payment". Jim Studdert's recent e-mail said that this policy is an "indemnity" policy which he describes as a "pay if paid" approach. That is, EPE would have to have spent the mone= y already in order to get paid by insurers, rather than be paid against an estimate of cost, or against a PO being issued. That is in fact how most of the language is phrased, but there are provisions which could be read the other way too. Did Stuart get into that issue? =20 Thanks Gordon=20 THIS EMAIL MESSAGE MAY CONTAIN INFORMATION THAT IS PRIVILEGED, CONFIDENTIAL OR EXEMPT FROM DISCLOSURE UNDER APPLICABLE LAW. ALL RECIPIENTS ARE NOTIFIED THAT IF THIS MESSAGE COMES TO YOUR ATTENTION BY MISTAKE, ANY DISSEMINATION, USE, OR COPYING OF THE INFORMATION IS PROHIBITED. IF YOU RECEIVE THIS MESSAGE IN ERROR, PLEASE NOTIFY THE SENDER AT ONCE.=20 -----Original Message----- From: John.Guidry.enronXgate@enron.com [mailto:John.Guidry.enronXgate@enron.com] Sent: Wednesday, October 10, 2001 7:06 PM To: sstromeyer@mtnai.com Cc: Laine.A.Powell@enron.com; Roberto.Daniels@enron.com; James.P.Studdert.enronXgate@enron.com Subject: GT11 Incident Discussions at Cuiaba 9 & 10 Oct 01 Stuart, I would like to take this opportunity to summarize the discussions that we have had over the last two days in Cuiaba. Payment of Insurance Proceeds ? Payments from the London underwriters will flow to the IRB ? Payments made by the IRB to EPE direct will be in Reais; the claim is dollar based and will be converted from dollars to reais at the exchange rate at the time of payment [S. Stromeyer to determine if IRB can pay directly to EPE in dollars] ? Payments can be made to third parties outside of Brazil in dollars at EPE's direction [S. Stromeyer to check with IRB to determine if this is accepted by Central Bank] Siemens Meeting Last Week in Erlangen Root Cause ? To prevent coking problems from occurring in the fuel nozzles, Siemens increased the volume of purge water used to purge fuel oil from the burner fuel lines following a trip from premix. ? The increased volume of purge water resulted in quenching of Row 3 blades. ? The quenching produced high thermo-mechanical forces on the blades which produced cracks. ? One of the blade cracks eventually resulted in a blade failure. ? A meeting is scheduled for 30 October in London for Siemens to explain their conclusions on root cause. Commercial Issues ? Parts will be purchased in accordance with the Spare Parts Agreement (SPA) with the following significant exceptions: ? A 30% expediting fee will be paid on turbine blades and vanes ? Prices are FOB port of export with Siemens listed prices ? The SPA 20% discount will not apply ? Payment must be made prior to shipment ? There will be two services agreements: ? 1) between EPE and Siemens Ltda for Brazilian sourced services, paid in Reais at the rates in Siemens Price List 1725 (provided to you in Cuiaba), converted to Reais using 2.7315 Real/US$ and ? 2) between EPE and Siemens AG for non-Brazilian sourced services, paid in US$. ? These agreements will incorporate terms from the Siemens Selling Policies / Price Lists and the EPC Contract. ? Late payments will incur interest at 14% Advanced Payment ? Property damage coverage advanced payments could be made at 100% of estimated value ? Advanced payment will not be made against BI coverage ? Typical total time for advanced payment is about 30 days ? Once IRB receives funds from London underwriters, typical payment time is about 5 or so days ? Munich Re will require a Board Meeting to approve an advanced payment of the size being discussed. ? If the parts costs are financed by third party, it will be quicker to get Munich Re payment. Could know funding date by 22 October BI ? London underwriters pay on lost revenue ? IRB traditionally pays on turnover or lost net profit. S. Stromeyer and Crowford-Resin personnel will discuss with IRB to try to convince them to pay on lost revenues. A meeting is scheduled for 5 November. ? IRB will not likely allow direct payment to third parties outside of Brazil. ? A meeting is scheduled in Houston on Tuesday, 16 October to discuss BI estimate Property Damage ? Duties and taxes are included in coverage ? FX transaction costs are not included in coverage ? Legal and engineering support are covered only with prior approval of appropriate justification. Approval of legal is usually limited to subrogation issues. ? A rough estimate of insurable costs was provided by EPE and discussed (the estimate was qualified by footnotes and by the discussion). The purpose of this estimate was to provide information to obtain advanced payment. Total insurance portion of parts, expediting fee, repairs, services, taxes and less deductible was $23.3 MM. Total EPE portion was $6.3 MM. As discussed, it is possible that the insurable portion may increase pending analysis of additional components. We agreed that the amount to be used for advanced payment consideration for parts is $21.1 MM (Parts Total less Repairs less Deductible). Documentation ? The following documents were provided to S. Stromeyer: ? From Siemens: ? SI/EE-2234, dated 08/30/01 ? SI/EE-2235, dated 09/03/01 ? SI/EE-2236, dated 09/05/01 ? SI/EE-2237, dated 09/05/01 ? SI/EE-2238, dated 09/11/01 ? SI/EE-2240, dated 09/19/01 ? SI/EE-2241, dated 09/21/01 ? SI/EE-2242, dated 09/25/01 ? SI/EE-2243, dated 09/25/01 ? SI/EE-2245, dated 09/28/01 ? SI/EE-2246, dated 10/02/01 ? From J. Guidry to Siemens: ? 09/07/01 ? 09/10/01 ? 09/19/01 ? 09/23/01 ? 09/26/01 ? Purchase Order from EPE to Siemens 09/13/01 ? Letter from Dan Shultz to G. Hartmann 09/21/01 We are moving forward with preparations for returning GT11 to service, based on these discussions. If you have any comments on this summary, let me know as soon as possible. Regards, John
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