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Enron Mail |
=09I spoke with George today about whether Enron would be amenable to discu= ssing settlement with Sempra and putting the facilities to work on a "going= forward" basis while continuing the fight over past breaches. George said = that we would be interested but this interest was subject to the following = general caveats: (1) We would like the facilities moved to one of the sites= we are currently trying to get permitted which would be more convenient fo= r us, and (2) we want to renegotiate certain portions of the contracts to r= eflect today's market situation. For example, the current risk apportionmen= t and price would have to be modified. =09With that in mind, do you have any thoughts about the most effective way= to facilitate these discussions? The last settlement effort was pretty us= eless and I think we should try to avoid having Holmes and Gittomer sitting= opposite from George and Wayne with Goldstein and I in the background look= ing for cover. What do you think about a mediation or otherwise getting a t= hird party involved? In the alternative, would it be a good idea to involve= you and Mel?=20 =09On a slightly related note, I agree that we probably need to get a mitig= ation letter out but I don't necessarily want to send the one we had been d= iscussing. Perhaps something that makes clear that they have a continuing = duty to mitigate and then discusses getting together to try to resolve thin= gs? Can you take a shot at it and get back to me? Thanks in advance. =09 From: =09Brownfeld, Gail =20 Sent:=09Tuesday, May 08, 2001 11:32 AM To:=09Mcclellan, George; Gregory A. Markel (E-mail); Mcgowan, Kevin; Reck, = Daniel; Arnold, Matthew; Gresham, Wayne Cc:=09Sanders, Richard Subject:=09Sempra Litigation/Conversation with Michael Goldstein =09Michael Goldstein called this morning to discuss the way forward in ligh= t of the Rev. Proc. and its recent amendment. After apologizing for being = tardy in returning my calls, he explained that, in his opinion, the tax adv= ice that we received evidences a fundamental misunderstanding of the situat= ion. First, he stated that he has been advised that the Rev. Proc. does no= t apply retroactively and that although it requires a new PLR to make chang= es going forward, it will have no impact on activities which occurred prior= to its issuance and, therefore, has no impact on whether synfuel created b= efore the Rev. Proc. qualifies for the tax credit. =09He also noted that, to determine the capacity issue, one needs to look a= t what could have been produced by the facilities as of the "in- service" d= ate. This level of capacity is the benchmark for what can be produced. Acco= rding to Goldstein, the level of production at Somerset was well below the = capacity on the "in-service" date and, therefore, their proposed modificati= ons to the facilities would not have increased the capacity in any way inco= nsistent with the intent of the Rev. Proc. When asked what he believed to = be the rated capacity of the facilities on their "in-service" date, Michael= didn't know. He has agreed to find this number and get back to me. =09After I explained my understanding of the effect of the Rev. Proc., Mich= ael kindly suggested that we consider talking to Price Monford (sp?) at VE = who he considers to be one of the inner circle of tax experts familiar with= Section 29 and the discussions with the Service and the Treasury Departmen= t about it. I told him that we had consulted with our own experts and I di= dn't know if this fellow was one of them. He said that he had not talked t= o Price and had no idea what he would advise. =09Goldstein stated on several occasions that he thought the Rev. Proc. wou= ld serve as a great facilitator to get the parties talking again in order t= o mitigate damages. He stated further that he was actually looking forward= to teeing up the remaining machine at Pier IX and, even, moving the second= machine back to Virginia. When asked what was happening with the machine = at Pier IX, he indicated that it remains idle because they can't get a sour= ce of coal for it. I told Goldstein that I would visit with the "Coal Guys"= about whether there was a way that we could continue to work together in l= ight of everything that has happened. He said that he didn't think this wa= s going to be a problem since once things were up and running, there wouldn= 't be much occasion for the parties to have sufficient contact to yield a p= roblem. I suggested that if there was a way forward, we needed to make sur= e the parties were on the same page about the Production Test, coal size, e= tc. and even suggested a modified dispute resolution process should issues = arise during the course of performance. I think that Sempra is amenable to = an trying to reach an agreement going forward but I expect that absent a me= diation or something extraordinary, we will end up fighting about November = through the date of any deal going forward. Please note that I made clear t= hat I had no idea whether Enron wanted to have anything to do with Sempra o= n this deal outside the courthouse but that I would inquire. I told him my= personal view was that, no matter how strong we felt our case was, I would= always listen to a settlement plan if they had one. =09Finally, I told him I'd get with you guys and call him later today or to= morrow so that he'd know whether it was worth having any additional discuss= ions. Please give me call when you get a chance. It might be a good idea t= o set up a call later this afternoon if you are available. =09
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