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Enron Mail |
This will indeed be a St Patrick's Day for us to remember in years to come.
Now that I am back in the office from Adelaide let me give some more considered replies. It appears there has been a bit a communication mix-up no doubt not helped by me being out of the office. So l let me go back to the beginning. Enron Australia Finance Pty. Ltd. is authorised to trade Australian power derivatives with counterparties so long as it follows certain procedures laid out by the Government. These require " that before entering into a contract with a counterparty, the registered facility provider (ie Enron Australia Finance) must be satisfied on reasonable grounds: (a) about the creditworthiness of the counterparty; and (b) that the counterparty is contracting on its own account." This obligation is imposed on EAF and makes no difference whether the counterparty has an Australian presence or not. In the case of EAF there was also a requirement for us to provide counterparties with an Enron Corp. guaranty. (Although this strict legal obligation provision was deleted in July 1999.) Hence one of the issues that was addressed in our legal checklist was a procedure to vet potential counterparties. We have procedures in place in the Sydney office to do this. I understood that this activity would still be done in Sydney ie our list of 26 counterparties. the alternative was to develop procedures if it was to done else where. On Tuesday we will submitt the formal notification we need to make to the Australian Securities and Investments Commission that we are adopting a screen based trading system. (This is a legal requirement). Although unlikely they may enquire as to our procedures for vetting counterparties. I was ready to explain there will be a continuation of the same procedures. In short there is nothing which needs to be added to extend the GTCs to counterparties that do not have an Australian presence. The major sensitivity is taxes and withholding tax in particular where the payment is being directed outside Australia. On reviewing the subject this evening I agree with Chris Catts there does not appear to be an issue. But I endorse Heidi's comment that now we know that there could be non-resident counterparties (a first for us) lets close off the tax issue. I have reviewed the various GTCs and probably the attached ECT Resources International Corp. GTCs is the most appropriate base to develop an appropriate clause. Heidi I can reschedule to get some time on Monday to meet with Chris. We could hopefully settle the words. In the interim I confirm that the GTCs are satisfactory. David F if you must load GTCs Friday (Houston time) then I suggest we go with what we have. I would ask for one small change.One small change though. Tana picked up one point. A new paragraph 2.1 (f) should be included as follows. "(f) Subparagragh 2© of the ISDA Master Agreement will not apply to all Transactions" Heidi Mason 03/17/2000 04:54 PM To: David Forster/LON/ECT@ECT cc: Debbie R Brackett/HOU/ECT@ECT, Tana Jones/HOU/ECT@ECT, David Minns/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Mark Taylor/HOU/ECT@ECT, Paul Smith/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Mark Dilworth/LON/ECT@ECT, Arfan Aziz/LON/ECT@ECT, Susan Musch/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT Subject: Re: Australian Status Dave I have had the following responses on the issues we discussed earlier: I spoke with David Minns re the 'Eligible Persons' criteria, and he noted that while he had discussed the capital/asset holding criteria with Tana, he had not provided to anyone the other criteria, and that while these may be covered by the US criteria, there will need to be a review of all criteria before we can assess that all are covered. I spoke with Chris Catt at Price Waterhouse Coopers and he confirmed that provided there is no interest component in the cross border settlements made, there will be no with-holding tax issues re the payments/receipts. I am going to meet with Chris on Monday to discuss both the taxation implications and to review the GTC. On the settlement issue, in the short term the best way to do the settlements for non-NEMMCO members would be via wires from Houston (this is how we settled our one previous cross border transaction) as this gives a third party review of the payments prior to release. Regards Heidi David Forster@ECT 17/03/2000 11:10 To: Debbie R Brackett/HOU/ECT@ECT, Tana Jones/HOU/ECT@ECT, David Minns/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Heidi Mason/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Mark Taylor/HOU/ECT@ECT, Paul Smith/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT cc: Mark Dilworth/LON/ECT@ECT, Arfan Aziz/LON/ECT@ECT Subject: Australian Status As I understand it, the current situation with regard to international companies being able to transact on Australian power is this: The only remaining potential issue is witholding tax. This may or may not be an issue and is being researched by Heidi Mason. If it is an issue, it is possible that we can borrow some language from the U.S. financial GTC. Heidi will coordinate with David Minns and suggest a solution (if required) for incorporation into the Australian GTC. An issue was raised with regard to "Eligible Persons", and the requirement that an "Eligible Person" hold more than $AUS 10 million. However, Tana Jones has been in discussion with David Minns on this issue and determined that the U.S. requirements are in fact more stringent than the Australian ones, hence the application of U.S. criteria for Financial trades should be more than sufficient to meet the Australian "Eligible Persons" requirements. Furthermore, a perusal of the approvals by credit indicate that no companies with an E-rating of less than 4 have been approved by credit. An issue was also raised with regard to settlements and the use of Austra-Clear. However, as we are unlikely to have large numbers of foreign companies transacting on Australian power in the near term, this should be a problem which can be resolved in the back office if it arises and should not impact the GTC, the planned Monday launch or the customer profiles. At this point, I am anticipating (possibly) having a witholding tax revision to the GTC, which will be uploaded to the system on Friday (Houston time). If anyone has any questions or concerns, please contact me on 713 853 1861 (office) or 713 562 8678 (cell). Thanks, Dave
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