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Date: Thu, 20 Sep 2001 08:14:20 -0700 (PDT)
From: joseph.deffner@enron.com
To: louise.kitchen@enron.com
Subject: FW: IM I/IM II PPA TerminationPayments.
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 -----Original Message-----
From: =09Godfrey, Jay =20
Sent:=09Wednesday, September 19, 2001 2:23 PM
To:=09Mitchell, David; Deffner, Joseph
Cc:=09Lindholm, Tod A.; Payne, Michael; Lamb, John
Subject:=09IM I/IM II PPA TerminationPayments.


Gents

Attached please find a copy of the IM I PPA with San Antonio together with =
a short note from Joh Lamb regarding Termination.


=20

I look forward to our discussion at the top of the hour.

Regards,

JFG

---------------------- Forwarded by Jay Godfrey/EWC/Enron on 09/19/2001 12:=
17 PM ---------------------------

=20
John Lamb
09/19/2001 11:43 AM
To:=09Jay Godfrey/EWC/Enron@ENRON
cc:=09=20
Subject:=09IM I/IM II PPA TerminationPayments.

Jay:  the IM I and IM II PPAs have different, but consistent, approaches to=
 the calculation of damages in the event that a party defaults under the ag=
reement.  The differences arise because the IM I agreement is based on more=
 typical PPAs between a independent power generator and a utility power pur=
chaser.  On the other hand, the IM II deal is a combination of such a PPA w=
ith a number of terms that more commonly foundin in power agreements betwee=
n a power marketer and a buyer.   Consistent with most PPAs with utilities,=
 the IM I agreement does not specify the method for calculating actual dama=
ges that a nondefaulting party may incur in the event of a default by the o=
ther party.  That methodology is left up to general contract law, which is =
that the nondefaulting party receives actual damages in an amount that woul=
d put them in the economic position that they would have been if the defaul=
ting party would have performed its obligations.  This is basic contract la=
w.  The IM II agreement spells out in detail the damage calculation, which =
is referred to as a "termination payment", in the agreement.  I understand =
that this approach is typical of power marketing contracts.  However, the m=
echanics are basically the same as if you went by basic contract law, other=
 than the fact that the seller is entitled to certain consequental damages =
as well as actual damages resulting from a breach by the buyer.  In the end=
,the nondefaulting party, through the payment of the termination fee is bei=
ng placed in the same economic position as if the defaulting party had perf=
ormed its obligations.  Let me know if you want further clarification on th=
is point.

Regards

John




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