fw : attorney client privledge - important ! needed comments and actions for response to aep
louise
brian redmond wanted my to copy you on this preliminary draft of a response to aep . as noted below i am coordinating updates to the response . i will also hand deliver to you a hard copy of the two faxed letters that we received from aep .
jim coffey - x 35346
- - - - - original message - - - - -
from : coffey jr . , jim
sent : thursday , august 16 , 2001 5 : 47 pm
to : edison , andrew
cc : lunz , lisa ; baumbach , david ; martin , thomas a . ; schwieger , jim ; gray , barbara n . ; koehler , anne c . ; denetsosie , troy ; yanowski , tommy j . ; redmond , brian
subject : attorney client privledge - important ! needed comments and actions for response to aep
please review the information below from brian redmond and respond with comments . i will be pulling a meeting together for early next week to discuss in order to have a revised draft with as many of your comments as possible ready for brian when he returns next wednesday . please also note the actions items on each bullet and respond accordingly if your name is noted . let me know immediately if you are not the correct person to address the action item and also please respond to any additonal action items that you can . for your assistance i have also attached below the same info in a word doc . thanks in advance for you help . please call me asap if you have any questions or concern at x 35346 .
1 . texas general land office : contract # 96059967
a . aep position :
? an amount of gas valued at $ 0 . 409 mm ( the " land office payment " ) was received from the general land office in exchange for aep storing gas provided by the texas general land office ( the " land office gas " ) .
? the value was based on a 15 % of the gas volumes received from the general land office [ during the periods beginning feb 1 , 01 and ending may 1 , 01 plus the beginning balance ] priced at a 1 june 01 if / hsc price of $ 3 . 78 .
? aep should be paid for the full value for this gas , as aep is providing the storage services to the general land office .
b . ene position :
? ene has incurred costs and expenses in transporting and injecting the " land office gas " that should be recovered by ene .
? ene should receive a pro rata share of the land office payment for the portion of time ( march through may ) that ene owned hpl and satisfied the storage obligations for the land office gas .
? ene calculates the amounts owed to aep as follows :
( i ) calculation of land office payment , less
( ii ) cost to transport and inject land office gas , less
( iii ) calculation of value of storage services provided by ene , equals
( iv ) payment to aep
? ene makes this offer in an attempt to settle this matter , if this is not acceptable , then aep should seek to claim such amounts should count against the [ basket of notional funds ] to cover such indemnities set forth in the p & sa
c . action item :
? find out how the contract works in terms of payment of the " gas fee " - david baumbach / jim schweiger
? calculate the amounts due to ene and net these amounts out of the working gas true - up payment . - david baumbach
2 . cannon interests houston : contract # 96059933
a . aep position :
? payments were received from cannon in the amounts of $ 400 k on march 1 , 2000 and $ 525 k on march 1 , 2001 for storage services to be rendered by hpl .
? aep should receive a portion of this payment based on the period of time that aep and ene owned hpl calculated as follows :
( i ) total payments received from cannon 925 k
( ii ) portion of contract year that aep owned hpl = 9 / 12
( iii ) amount due to aep = $ 693 k
b . ene position :
? payments received in 2000 were for services rendered in 2000 and should not be taken into consideration .
? ene agrees that aep is due a portion of the 2001 payment from cannon based on the period of time that aep and ene owned hpl calculated as follows :
( iv ) total 2001 payments received from cannon 525 k
( v ) portion of contract year that aep owned hpl = 9 / 12
( vi ) amount due to aep = $ [ ] - david baumbach
c . action item :
? verify payment amounts and start of contract year . - david baumbach
3 . cannon storage : contract # 96059167
a . hpl position :
? this agreement should be treated as a fixed price agreement rather than an index based agreement
? as a fixed price agreement , a fixed for index swap should have been put in place with respect to this agreement .
b . ene position :
? this is not a fixed price agreement as the contract pricing is already based on index .
? no hedge will be transferred .
c . action item : - tom martin / jim schweiger
4 . centana storage :
a . aep position :
? the centana gas storage contract was assigned from ena to hpl .
? the centana gas storage contract is necessary to conduct the business of hpl on an ongoing basis in the same manner that it was conducted prior to close .
? aep is willing to purchase the gas currently in storage as of august 15 , 2001 at a price equal to 90 % of hsc / beaumont for large packages of gas for october .
b . ene position :
? contract is an ena contract and should not have been transferred to hpl
o terms were restructured to not match with hpl
o no provisions for the sale of gas in centana storage
o representations made to ferc
o never discussed / agreed commercially
o not a scheduled material contract as it was an ena contract
? the contract terminated on 1 july - no formal notice was given to centana to extend the contract .
? as the centana storage contract was mistakenly assigned to aep , ene will agree to sell the gas stored under the contract to aep at the 1 june if / hsc price .
? this amount will be netted out of the working gas true - up payment .
c . action items :
? provide duke with an indemnity and attempt to enter into a new contract with duke - send letter to this effect . - edison / koehler / gray
? net amount due to enron out of working gas true up payment . - baumbach
2 . lloyndell / citgo :
a . aep position :
? aep is currently unaware of this issue
b . ene position :
? ene discovered that a fixed to index hedge should have been transferred to aep with the assignment of this contract
? ene calculates the value of this hedge to be $ [ ] as of 15 august .
? this hedge should be assigned to aep and ene will net this amount out of any monies paid to aep for the working gas true up payment .
c . action items :
? prepare a confirm for the hedge - baumbach
3 . gas lift deposits :
a . aep position :
? there are $ 50 , 450 in customer deposits relating to several gas lift sales which are not accurately accounted for at closing
? aep will require full reimbursement for these amounts
b . ene position :
? ene is unaware of any inaccuracies and further discussion is needed before ene can respond .
c . actions :
? j . coffey to call aep accounting to try to understand what aep is referring to . - coffey
4 . specialty sands payment :
a . aep position :
? the sum of $ 91 , 000 , 000 paid by specialty sand to ene pursuant to a settlement agreement to cover costs of repairs should be reimbursed to hpl since hpl is incurring the costs of such repairs
b . ene position :
? [ if this money was received from specialty sands , it should be paid to aep . or aep should count it against the " basket " of indemnities ]
c . actions :
? legal to make the call on whether we can ask aep to claim this against the indemnity basket - . edison / koehler / gray
5 . isc / sap billing :
a . aep position :
? unclear
b . ene position :
? aep owes ene $ 86 k to compensate ene for work performed in formatting data to meet the requirements of peoplesoft .
? such amount will be netted out of the inventory true up payment to be made to aep .
c . action items :
? confirm aep ' s position on this matter . - tommy yanowski
? net it out of the inventory true up payment . - jim coffey
6 . transport agreements
a . aep position :
? the following transportation contracts are not necessary to the conduct of hpl ' s business or , if they are , suitable alternatives exist . hpl is willing to assign these contracts back to ene :
o epgt texas pipeline , l . p . 96006479
o epgt texas pipeline , l . p . 96041930
o gas transmission teco , inc . 96041723
o gas transmission teco , inc . 96041724
b . ene position :
? agreed
c . action item :
? prepare documentation for the re - assignment of these transport contracts - barbara gray
7 . it services :
a . aep position :
? in exchange for aep purchasing ene ' s gas in the centana storage field at 90 % of the hsc index for october , aep requests that ene :
o reduce the fee payable by hpl to $ 100 , 000 during the second and third six month periods of the term of the it services agreement
o provide for further fee reductions as applications and services are no longer required by aep
b . ene position :
? aep offer to purchase ene gas in centana is unacceptable and ene sees no benefit to ene for reducing the pricing provisions under the it service agreement .
c . action items :
? discuss with networks - coffey / yanowski
? ensure we have internal agreement on pgas , row database , and gregg modeling . - yanowski
8 . other payment amounts
a . aep position :
? unclear
b . ene position :
? aep owes ene $ 1 . 2 for overstated midtex cash payment
? southern union promotional fund ?
c . action items :
? jim coffey to develop ene position on these matters - coffey
12 . working gas inventory true up
a . aep position :
? aep has submitted an invoice to ene for payment
b . ene position :
? the amount due in the invoice submitted by aep must be adjusted for the following :
o ene portion of texas land office fee
o value of gas sold to aep in centana storage
o value of hedge in llyondell citgo contract
o value of sap / isc payment
o value of other payment amounts due to ene : mid tex , southern union promo fund , etc .
c . action items
? jim coffey to coordinate preparation of response to aep invoice . - coffey
9 . calpine guarantee :
a . aep position :
? unclear
b . ene position :
? aep needs to replace ene guarantee or aep should indemnify ene for any liabilities to calpine .
c . action item :
? confirm aep ' s position on this matter - gray / koehler / edison
? prepare back to back guarantee to send to aep for calpine obligations . - gray / koehler / edison
10 . guadalupe contract :
a . aep position :
? unclear
b . ene position :
? aep and ene need to execute a back to back agreement . enron submitted a form of agreement to aep , but has not received a response as of yet .
c . action item :
? request that aep send comments back on back to back contract - gray / koehler / edison
? what is our plan if they won ' t comment or execute ? - gray / koehler / edison
- - - - - original message - - - - -
from : redmond , brian
sent : thursday , august 16 , 2001 9 : 53 am
to : coffey jr . , jim
subject :
jim ,
please find my draft position paper as a basis to prepare a response to aep . please distribute to the team ( martin , schwieger , gray , koehler , edison , baumbach , troy ) for comment as well as to louise k . . can you also get louise a copy of the two letters from aep . send my a revised draft once you have everyone ' s comments .
regards ,
brian
fw : attorney client privledge - important ! needed comments and
actions for response to aep
louise
brian redmond wanted my to copy you on this preliminary draft of a response to aep . as noted below i am coordinating updates to the response . i will also hand deliver to you a hard copy of the two faxed letters that we received from aep .
jim coffey - x 35346
- - - - - original message - - - - -
from : coffey jr . , jim
sent : thursday , august 16 , 2001 5 : 47 pm
to : edison , andrew
cc : lunz , lisa ; baumbach , david ; martin , thomas a . ; schwieger , jim ; gray , barbara n . ; koehler , anne c . ; denetsosie , troy ; yanowski , tommy j . ; redmond , brian
subject : attorney client privledge - important ! needed comments and actions for response to aep
please review the information below from brian redmond and respond with comments . i will be pulling a meeting together for early next week to discuss in order to have a revised draft with as many of your comments as possible ready for brian when he returns next wednesday . please also note the actions items on each bullet and respond accordingly if your name is noted . let me know immediately if you are not the correct person to address the action item and also please respond to any additonal action items that you can . for your assistance i have also attached below the same info in a word doc . thanks in advance for you help . please call me asap if you have any questions or concern at x 35346 .
1 . texas general land office : contract # 96059967
a . aep position :
? an amount of gas valued at $ 0 . 409 mm ( the " land office payment " ) was received from the general land office in exchange for aep storing gas provided by the texas general land office ( the " land office gas " ) .
? the value was based on a 15 % of the gas volumes received from the general land office [ during the periods beginning feb 1 , 01 and ending may 1 , 01 plus the beginning balance ] priced at a 1 june 01 if / hsc price of $ 3 . 78 .
? aep should be paid for the full value for this gas , as aep is providing the storage services to the general land office .
b . ene position :
? ene has incurred costs and expenses in transporting and injecting the " land office gas " that should be recovered by ene .
? ene should receive a pro rata share of the land office payment for the portion of time ( march through may ) that ene owned hpl and satisfied the storage obligations for the land office gas .
? ene calculates the amounts owed to aep as follows :
( i ) calculation of land office payment , less
( ii ) cost to transport and inject land office gas , less
( iii ) calculation of value of storage services provided by ene , equals
( iv ) payment to aep
? ene makes this offer in an attempt to settle this matter , if this is not acceptable , then aep should seek to claim such amounts should count against the [ basket of notional funds ] to cover such indemnities set forth in the p & sa
c . action item :
? find out how the contract works in terms of payment of the " gas fee " - david baumbach / jim schweiger
? calculate the amounts due to ene and net these amounts out of the working gas true - up payment . - david baumbach
2 . cannon interests houston : contract # 96059933
a . aep position :
? payments were received from cannon in the amounts of $ 400 k on march 1 , 2000 and $ 525 k on march 1 , 2001 for storage services to be rendered by hpl .
? aep should receive a portion of this payment based on the period of time that aep and ene owned hpl calculated as follows :
( i ) total payments received from cannon 925 k
( ii ) portion of contract year that aep owned hpl = 9 / 12
( iii ) amount due to aep = $ 693 k
b . ene position :
? payments received in 2000 were for services rendered in 2000 and should not be taken into consideration .
? ene agrees that aep is due a portion of the 2001 payment from cannon based on the period of time that aep and ene owned hpl calculated as follows :
( iv ) total 2001 payments received from cannon 525 k
( v ) portion of contract year that aep owned hpl = 9 / 12
( vi ) amount due to aep = $ [ ] - david baumbach
c . action item :
? verify payment amounts and start of contract year . - david baumbach
3 . cannon storage : contract # 96059167
a . hpl position :
? this agreement should be treated as a fixed price agreement rather than an index based agreement
? as a fixed price agreement , a fixed for index swap should have been put in place with respect to this agreement .
b . ene position :
? this is not a fixed price agreement as the contract pricing is already based on index .
? no hedge will be transferred .
c . action item : - tom martin / jim schweiger
4 . centana storage :
a . aep position :
? the centana gas storage contract was assigned from ena to hpl .
? the centana gas storage contract is necessary to conduct the business of hpl on an ongoing basis in the same manner that it was conducted prior to close .
? aep is willing to purchase the gas currently in storage as of august 15 , 2001 at a price equal to 90 % of hsc / beaumont for large packages of gas for october .
b . ene position :
? contract is an ena contract and should not have been transferred to hpl
o terms were restructured to not match with hpl
o no provisions for the sale of gas in centana storage
o representations made to ferc
o never discussed / agreed commercially
o not a scheduled material contract as it was an ena contract
? the contract terminated on 1 july - no formal notice was given to centana to extend the contract .
? as the centana storage contract was mistakenly assigned to aep , ene will agree to sell the gas stored under the contract to aep at the 1 june if / hsc price .
? this amount will be netted out of the working gas true - up payment .
c . action items :
? provide duke with an indemnity and attempt to enter into a new contract with duke - send letter to this effect . - edison / koehler / gray
? net amount due to enron out of working gas true up payment . - baumbach
2 . lloyndell / citgo :
a . aep position :
? aep is currently unaware of this issue
b . ene position :
? ene discovered that a fixed to index hedge should have been transferred to aep with the assignment of this contract
? ene calculates the value of this hedge to be $ [ ] as of 15 august .
? this hedge should be assigned to aep and ene will net this amount out of any monies paid to aep for the working gas true up payment .
c . action items :
? prepare a confirm for the hedge - baumbach
3 . gas lift deposits :
a . aep position :
? there are $ 50 , 450 in customer deposits relating to several gas lift sales which are not accurately accounted for at closing
? aep will require full reimbursement for these amounts
b . ene position :
? ene is unaware of any inaccuracies and further discussion is needed before ene can respond .
c . actions :
? j . coffey to call aep accounting to try to understand what aep is referring to . - coffey
4 . specialty sands payment :
a . aep position :
? the sum of $ 91 , 000 , 000 paid by specialty sand to ene pursuant to a settlement agreement to cover costs of repairs should be reimbursed to hpl since hpl is incurring the costs of such repairs
b . ene position :
? [ if this money was received from specialty sands , it should be paid to aep . or aep should count it against the " basket " of indemnities ]
c . actions :
? legal to make the call on whether we can ask aep to claim this against the indemnity basket - . edison / koehler / gray
5 . isc / sap billing :
a . aep position :
? unclear
b . ene position :
? aep owes ene $ 86 k to compensate ene for work performed in formatting data to meet the requirements of peoplesoft .
? such amount will be netted out of the inventory true up payment to be made to aep .
c . action items :
? confirm aep ' s position on this matter . - tommy yanowski
? net it out of the inventory true up payment . - jim coffey
6 . transport agreements
a . aep position :
? the following transportation contracts are not necessary to the conduct of hpl ' s business or , if they are , suitable alternatives exist . hpl is willing to assign these contracts back to ene :
o epgt texas pipeline , l . p . 96006479
o epgt texas pipeline , l . p . 96041930
o gas transmission teco , inc . 96041723
o gas transmission teco , inc . 96041724
b . ene position :
? agreed
c . action item :
? prepare documentation for the re - assignment of these transport contracts - barbara gray
7 . it services :
a . aep position :
? in exchange for aep purchasing ene ' s gas in the centana storage field at 90 % of the hsc index for october , aep requests that ene :
o reduce the fee payable by hpl to $ 100 , 000 during the second and third six month periods of the term of the it services agreement
o provide for further fee reductions as applications and services are no longer required by aep
b . ene position :
? aep offer to purchase ene gas in centana is unacceptable and ene sees no benefit to ene for reducing the pricing provisions under the it service agreement .
c . action items :
? discuss with networks - coffey / yanowski
? ensure we have internal agreement on pgas , row database , and gregg modeling . - yanowski
8 . other payment amounts
a . aep position :
? unclear
b . ene position :
? aep owes ene $ 1 . 2 for overstated midtex cash payment
? southern union promotional fund ?
c . action items :
? jim coffey to develop ene position on these matters - coffey
12 . working gas inventory true up
a . aep position :
? aep has submitted an invoice to ene for payment
b . ene position :
? the amount due in the invoice submitted by aep must be adjusted for the following :
o ene portion of texas land office fee
o value of gas sold to aep in centana storage
o value of hedge in llyondell citgo contract
o value of sap / isc payment
o value of other payment amounts due to ene : mid tex , southern union promo fund , etc .
c . action items
? jim coffey to coordinate preparation of response to aep invoice . - coffey
9 . calpine guarantee :
a . aep position :
? unclear
b . ene position :
? aep needs to replace ene guarantee or aep should indemnify ene for any liabilities to calpine .
c . action item :
? confirm aep ' s position on this matter - gray / koehler / edison
? prepare back to back guarantee to send to aep for calpine obligations . - gray / koehler / edison
10 . guadalupe contract :
a . aep position :
? unclear
b . ene position :
? aep and ene need to execute a back to back agreement . enron submitted a form of agreement to aep , but has not received a response as of yet .
c . action item :
? request that aep send comments back on back to back contract - gray / koehler / edison
? what is our plan if they won ' t comment or execute ? - gray / koehler / edison
- - - - - original message - - - - -
from : redmond , brian
sent : thursday , august 16 , 2001 9 : 53 am
to : coffey jr . , jim
subject :
jim ,
please find my draft position paper as a basis to prepare a response to aep . please distribute to the team ( martin , schwieger , gray , koehler , edison , baumbach , troy ) for comment as well as to louise k . . can you also get louise a copy of the two letters from aep . send my a revised draft once you have everyone ' s comments .
regards ,
brian