We currently have $21.4 million in reserve for potential Northwest refunds. $10 million currently sits in the LTCA book and $11.4 currently sits in the LTNW book. During the summer, FERC initiated an investigation into the potential of unjust and unreasonable spot prices in the northwest from December of 2000 through June of 2001. Seatlle City Light, Tacoma City Light, Eugene Water and Electric Board, and Sacramento Municipal Utility District all filed claims at FERC for refunds from EPMI. The claims totaled close to $100 million. However, many of these claims were, on their face, spurious. For example, Eugene Water and Electric Board filed for refund of forward purchases which was clearly outside the scope of FERC's proceeding. We hired consultants from Charles River Associates (CRA) to help us with this process. One of their tasks was to apply the CAISO competitive benchmark pricing methodology to the Northwest market. That is, CRA attempted to reverse engineer the CAISO's methodology in order to estimate our Northwest risk. I was informed by our litigation team that EPMI's realistic potential exposure using this methodology was roughly $30 million. We decided to reserve roughly 2/3 of this amount which came to about $21 million. In September a FERC Adminitrative Law Judge heard the case and submitted a draft decision to the FERC. The draft decision recommended against any refunds. This draft decision is supposed to come in front of the FERC commissioners for approval before the end of the year. If this draft decision is approved, it would be appropriate to remove these reserves.
Answer: Northwest Reserves
On Thursday, May 25 you were repaid $2,535,786.72 from the refinance of Da= vid's home ($1mm) and my home ($1,535,786). We forwarded the funds to pay= down your personal Bank of Amercia (BA) LOC. The Family Partnership had t= o borrow from your personal line at BA $200,000 to cover the $588k cash ca= ll for SRE properties. With today's closing prices, the Family Partnershi= p's available BA line is between $25k-$50, which is an estimate because mu= tual funds don't post their NAVs until around 5pm (Central time). That ma= kes the Partnership's total payable to KLL/LPL personal line at $1,303,50= 0. =20 I contacted the guys regarding the BBT Fund (Bass family). Per our conver= sation, I told them that the timing was bad, but we did not want to miss o= ut before they close the fund. I indicated that our initial investment wo= uld be the following: KLL/LPL personal $250,000; KLL & LPL Investments, Lt= d. $100,000; Foundation ? (possibly $100,000). The initial investment amo= unt for the partnership, and possibly the foundation, are about as low as = we can go if we want to get into the fund. I am aware that the Foundation= is waiting to as long as possible to pay out any contributions os I wasn'= t sure if we wanted to make something happen there. Also, I indicated tha= t we would prefer to fund as late as possible, which looks like July . I= f we decide on doing something in the foundation they have an Offshore Par= tnership to eliminate the tax implications of UBIT. The Offshore Partners= hip is run exactly the same as the Onshore version, but is unitized and pa= ys a dividend rather than distributions to the investors. Let me know if = the amounts (above) to invest are okay with you and if you want anything i= n the Foundation.
Answer: Update - May 25, 2001
Here are my initial comments: There's no clear triggering event which would expedite the internal approval process. For instance, paragraph 3 is a current obligation (re landscaping). It would be easier to process this agreement if the effectiveness of this agreement commences when we file for a building permit. I understand that we would have to pay some of this prior to the time the permit is issued, but again, magic words help. Paragraph 6 on right of first refusal for power. Looks like a free call for the next 30 years. Just want to make sure you've bought in on this. Other than the obvious valuation impact, it could impact a purchaser's ability to obtain project financing. Kay
Answer: Deerfield development agreement
I am negotiating an ISDA on behalf of ENA with an Australian corporate insisting upon a legal opinion (enforceability) with respect to the Enron Corp. guaranty. Is this a customary request by Australian corporates that you would normally grant? If so, who has issued the opinion? I look forward to your reply. Regards. Sara
Answer:
Australian counterparties - Guaranty in connection with ISDA Master Swap Agreement