lincoln electric louise ,
i understand there is concern that the value associated with the assignment of the lincoln electric sales agreement to oppd is not sufficient to justify paying $ 1 . 3 million to oppd in order for them to assume this contract .
there are some considerations on this contract which i think are important and which may not have been mentioned to you :
- the original sales contract to lincoln was entered into several years ago and is one of the contracts sometimes referred to internally as " toxic waste " .
- about a month ago , we agreed verbally with oppd to accept assignment of the sales contract , as oppd is one of the few parties which can serve it .
- the execution of the documents has been delayed by lincoln , who were initially refusing to consent to the assignment
- we have another , larger under - water transaction with oppd which we would like to move off the books at some point . we ' d like to keep oppd happy to improve the chances that we can negotiate their buyout of our other sales contract to them )
- if we fail to deliver , we will be subject to penalties in the amount of $ 45 , 0000 per mw on top of liquidated damages ( lincoln is 15 mw for 02 and 30 mw for 03 ) .
- this is a highly constrained area ( only 6 counterparties can physically deliver in this area and oppd is the only one which has the surplus power in order to serve lincoln ) : the chance that we will be unable to deliver is high .
- there is intangible value associated with not being in a situation where enron fails to deliver .
- even if we do wind up serving the contract , the highly constrained nature of the area means we will likely be forced to pay extortionate prices for the power we do acquire .
- trading wishes to be out of this contract for aforementioned reasons and the fact that it will be very labour intensive to serve ( day - ahead notice on 20 % monthly load factor )
obviously , if the above is not sufficient justification to put the money out the door now , then we will smooth things as much as possible with oppd - but i wanted to make sure you had all the info . before we kill the deal .
terri has stalled oppd until monday .
dave
lincoln electric
louise ,
i understand there is concern that the value associated with the assignment of the lincoln electric sales agreement to oppd is not sufficient to justify paying $ 1 . 3 million to oppd in order for them to assume this contract .
there are some considerations on this contract which i think are important and which may not have been mentioned to you :
- the original sales contract to lincoln was entered into several years ago and is one of the contracts sometimes referred to internally as " toxic waste " .
- about a month ago , we agreed verbally with oppd to accept assignment of the sales contract , as oppd is one of the few parties which can serve it .
- the execution of the documents has been delayed by lincoln , who were initially refusing to consent to the assignment
- we have another , larger under - water transaction with oppd which we would like to move off the books at some point . we ' d like to keep oppd happy to improve the chances that we can negotiate their buyout of our other sales contract to them )
- if we fail to deliver , we will be subject to penalties in the amount of $ 45 , 0000 per mw on top of liquidated damages ( lincoln is 15 mw for 02 and 30 mw for 03 ) .
- this is a highly constrained area ( only 6 counterparties can physically deliver in this area and oppd is the only one which has the surplus power in order to serve lincoln ) : the chance that we will be unable to deliver is high .
- there is intangible value associated with not being in a situation where enron fails to deliver .
- even if we do wind up serving the contract , the highly constrained nature of the area means we will likely be forced to pay extortionate prices for the power we do acquire .
- trading wishes to be out of this contract for aforementioned reasons and the fact that it will be very labour intensive to serve ( day - ahead notice on 20 % monthly load factor )
obviously , if the above is not sufficient justification to put the money out the door now , then we will smooth things as much as possible with oppd - but i wanted to make sure you had all the info . before we kill the deal .
terri has stalled oppd until monday .
dave