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original document   : \\BHAMFP01\APPS\DOCSOPEN\BHAMLIB\DBAILEY\090000\306\XPPP02_.DOC
and revised document: H:\DOCSOPEN\BHAMLIB\DBAILEY\090000\306\XPPP03_.DOC

CompareRite found   60 change(s) in the text
CompareRite found    2 change(s) in the notes

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January 10, 2001

Enron North America Corp.
P. O. Box 1188
Houston, TX  77251-1188
Attn:	Mr. Les Webber

Enron Global LNG

Gentlemen:

	Enron North America Corp. (“ENA”) and Southern Company Services, Inc. (“SCS”) (each individually a “Party” and collectively the “Parties”) have had certain discussions with respect to the possibility of SCS, as agent for the individual entities identified as Buyer under that certain Gas Purchase Agreement dated December 29, 1999 by and between ENA, as Seller, and SCS, as agent for Buyer, purchasing certain quantities of gas, including regassified liquefied natural gas (“LNG”), from ENA for use in a new combined cycle electric generating facility to be developed by SCS or one of its affiliates in the vicinity of McIntosh, Georgia.  The Parties recognize that (i) ENA’s sale of regassified LNG is dependent on Enron LNG Atlantic II, CPA’s receipt of any and all licenses, permits, authorizations, or other approvals necessary to construct, own and operate the Venezuela Facilities (as defined below) and (ii) SCS’s construction of the new combined cycle electric generating facility near Savannah is dependent upon its bid for the sale of power from such facility being accepted in the request for competitive bids for power supply to be conducted by Southern Company in 2001 (the “Southern Company RFP”) and receipt of any and all licenses, permits, authorizations, or other approvals necessary to construct, own and operate such facility.  The Venezuela Facilities shall mean the natural gas liquefaction facilities of Enron LNG Atlantic II, CPA in Venezuela including the liquefaction plant facilities onshore, gas inlet facilities, gas pre-treatment and processing facilities, storage tanks, utility jetty, and berthing and loading facilities(as such facilities are modified or expanded from time to time, and shall include the gas field production facilities used to furnish gas to the Venezuela Facilities, the natural gas pipeline facilities serving the Venezuela Facilities, purchased utilities at the Venezuela Facilities, the LNG tanker utilized to deliver LNG to the Elba Island Terminal, and the dock and harbor facilities serving the Venezuela Facilities.  

	In light of ENA’s desire to sell regassified LNG to SCS and SCS’s desire to purchase such regassified LNG to fuel its electric generation operations at the McIntosh, Georgia site, the Parties hereto are entering into this Letter Agreement to evidence their mutual agreement to proceed with such a transaction on the terms and conditions set forth in this Letter Agreement and described in Exhibit A attached hereto and incorporated herein.

1.	Binding Commitment to Enter Into Confirmation Letter.  In reliance on the pricing and other terms contained in the attached Exhibit A, SCS shall submit a bid in the forthcoming Southern Company RFP for the sale of energy to be produced from a plant to be developed by SCS or an affiliate thereof near McIntosh, Georgia.  ENA’s obligations to enter in the Confirmation Letter shall be subject to and conditioned upon the receipt by the appropriate Enron importing LNG into the United States and/or constructing, owning or operating the Venezuela Facilities by no later than December 31, 2001, in such form and substance as may be acceptable to Seller of any and all licenses, permits, authorizations, or other approvals necessary to construct and operate the Venezuela Facilities and to import LNG into the United States (the “ENA Conditions Precedent”). In the event SCS’s bid for the McIntosh site is selected as one of the winning bids and the ENA Conditions Precedent have been satisfied and/or waived by ENA then at any time during the term of this Letter Agreement but, SCS and ENA shall each execute the Confirmation Letter attached hereto as Exhibit A not later than fifteen (15) days of following execution of a power sales agreement with Southern Company or one of its electric utility affiliates., SCS and ENA shall each execute the Confirmation Letter attached hereto as Exhibit A

2.	Term.  This Letter Agreement shall become effective as of the date first stated above and shall remain in effect until the earlier of:  (i) completion of the Southern Company RFP process and determination that the McIntosh site bid has not been selected as one of the winning bids or (ii) the execution of the Confirmation Letter attached in Exhibit A, or (iii) December 31, 2001.  {SCS will provide language for extending the term of this letter agreement based upon an event at the Georgia PUC.} Notwithstanding the foregoing, ENA shall have the unilateral right to terminate this Letter Agreement if it and its affiliates have not received by October 1, 2001, any and all licenses, permits, authorizations, or other approvals necessary to construct and operate the Venezuelan Facilities and to import LNG into the United States in such form and substance as may be acceptable to ENA. 
 
3.	Entire Agreement.  The agreements set forth in this Letter Agreement and the attached Exhibit A constitute the entire agreement between the Parties relating to the subject matter hereof and supersede all prior discussions, agreements or understandings, whether oral or written, relating to such subject matter.  There are no other written or oral agreements or understandings between the Parties.  Any amendment of the agreements set forth herein must be in writing and signed by both Parties.

4.	Governing Law.  Any disputes regarding the interpretation of this Letter Agreement or regarding enforcement of the agreements set forth herein shall be governed by and construed in accordance with the laws of the State of Texas Alabama, without giving effect to conflict of laws principles.

5.	Relationship of the Parties.  The Parties shall not be deemed in a relationship of partners or joint ventures by virtue of this Letter Agreement nor shall either Party be an agent, representative, trustee or fiduciary of the other.  Neither Party shall have any authority to bind the other to any agreement.

6.	Assignment.  This Letter Agreement shall inure to the benefit of the Parties hereto and their respective successors and permitted assigns.  Neither Party may assign its rights or obligations under this Letter Agreement without the prior written consent of the other Parties which consent shall not be unreasonably withheld; provided, however, that each Party shall have the right to assign its rights and obligations hereunder to an affiliate of at least equivalent creditworthiness without prior notice to or consent of the other Party, but no such assignment shall relieve the assigning party of its obligations hereunder.

7.	Assignment of Tolling Arrangement:  In lieu of executing the Exhibit A, ENA may provide SCS with an assignment of the event ENA terminates this Letter Agreement pursuant to the provisions of Paragraph 2 above, at SCS’s option, Enron Global LNG’s LNG shall assign to SCS all of its rights and obligations under those certain letter agreements with El Paso Merchant Energy for the sale of LNG and redelivery of gas supply at the Southern LNG Inc.’s Elba Island LNG terminal.  Such assignment is outlined shall be made pursuant to the terms of that certain Assignment Agreement attached hereto as Exhibit B. and attached hereto

If the provisions set forth above correctly set forth our binding agreement, please execute each of the enclosed originals of this Letter Agreement in the space provided below.

						Sincerely,

						____________________

Accepted and agreed to this ___ day of __________, 2001:

ENRON NORTH AMERICA CORP.

By: _____________________________

Its: _____________________________

ENRON GLOBAL LNG

By: _____________________________

Its: _____________________________

EXHIBIT A

CONFIRMATION LETTER

	This Confirmation Letter is made and entered into this ______ day of ________, 2001, by and between ENRON NORTH AMERICA CORP., a Delaware corporation, hereinafter referred to as “Seller,” and SOUTHERN COMPANY SERVICES, INC., (“SCS”) as agent for its affiliated electric utility companies, Mississippi Power Company, Gulf Power Company, Alabama Power Company, Georgia Power Company, Savannah Electric and Power Company and Southern Power Company, such utility companies hereinafter referred to as “Buyer, and collectively known as the “Parties.”

This Confirmation Letter is incorporated into and subject to the terms of that certain Gas Purchase Agreement dated December 29, 1999, by and between SCS as agent for Buyer and Seller (the “Agreement”).  When executed, this Confirmation Letter is binding for the term stated below.

Primary Term: May 1, 2004, through April 30, 2014. {SCS to propose alternative language for greater term with price re-opener that defaults to Arbitration}.

Term:  From the earlier of (i) the in-service date of a new gas fired combined cycle electric generating facility to be constructed by Buyer near McIntosh, Georgia (the “Plant”) or (ii) the commercial operation date of the Plant as defined in the initial power sales agreement under which Buyer agrees to sell power generated from the Plant through the expiration of Enron Global LNG’s letter agreements with El Paso Merchant Energy dated _______ for the sale of LNG and redelivery of gas supply at Southern LNG Inc.’s Elba Island marine terminal Facilities (the “LNG Facilities”), which shall not be earlier than ____________.

Contract Quantity:  100,000 MMBtu per day. {ENA needs to draft language; provided, however, that gives SCS shall have the option to change increase the purchase quantity Contact Quantity from 100,000 MMBtu per day to 160,000 MMBtu per day but must notify ENA no by providing written notice to Seller of such election not later than December 31, 2001. fifteen (15) days following execution of a power sales agreement with Southern Company or one of its electric utility affiliates covering generation produced from the Plant.

 Delivery Point: The Primary Delivery Point shall be at the point of interconnection between the Elba Island LNG marine terminal facilities LNG Facilities of Southern LNG Inc. and any downstream pipeline, as selected by Buyer at any time and from time to time.  The Secondary Delivery Point shall be at In the event Seller or any of its affiliates constructs a pipeline extending from the LNG Facilities to a mutually agreeable connection point on the(“Secondary Delivery Point”) on Buyer’s lateral serving the McIntosh site from Sonat’s system. extending to the Plant from Southern Natural Gas Company’s pipeline system, Seller shall have the option at any time and from time to time to make of making deliveries of gas hereunder at such Secondary Delivery Point in lieu of making deliveries at the Primary Delivery Point.  Buyer hereby grants Seller or any of its affiliates shall have the right to build a bypass from Elba Island LNG Terminal facilities of Southern LNG Inc. to construct, at its or their cost, an interconnection between Seller or its affiliates’ pipeline and the Secondary Delivery Point or to otherwise effect deliveries of gas at such Secondary Delivery Point. If Buyer or any of its affiliates build a bypass pipeline, the Demand Charge; provided that (i) the design and operation of such interconnection shall be adjusted to twenty two cents ($0.22) per MMBtu subject to Buyer’s prior written approval, such approval not to be unreasonably withheld; (ii) the construction of such interconnection shall not interfere with Buyer’s operations at the Plant, and (iii) Seller indemnifies Buyer for all claims, losses, damages and expenses associated with the design, construction, operation, maintenance and abandonment  of the interconnecting facilities and Seller or its affiliates’ upstream pipeline. 

Contract Price:  The Contact Price for each MMBtu of gas delivered hereunder shall be comprised of (i) a Demand Charge of twenty cents ($0.20)[______________] per MMBtu for gas delivered at the Primary Delivery Point or a Demand Charge of [____________] per MMBtu for gas delivered at the Secondary Delivery Point and (ii) a Commodity Charge equal to the “Index” price for “Prices of Spot Gas Delivered to Pipelines” (per MMBtu dry) for Henry Hub, as reported in the first publication of each month of Inside FERC’s Gas Market Report for the applicable month in which deliveries are made hereunder (the “Index”). Buyer shall have no obligation to pay the Demand Charge on any portion of the Contract Quantity that Seller fails to deliver. does not deliver.  [Notwithstanding the foregoing, in the event Buyer or any of its affiliates construct a line extending from the LNG Facilities to the Plant, the Demand Charge shall be adjusted to [__________________] per MMBtu.]
[need to discuss further]

Price Renegotiation:  Either Party shall have the right to request that the Contract Price set forth above be renegotiated and revised pricing made effective as of the expiration of the term of the initial power sales agreement under which Buyer sells power generated from the Plant (the “Price Renegotiation Effective Date”).  As soon as the Price Renegotiation Effective Date becomes known, Buyer shall be required to provide Seller with written notification of such date.  In the event either Party desires to renegotiate the Contract Price, it shall provide the other Party with at least twelve (12) months written notice prior to the Price Renegotiation Effective Date.  Following receipt by the other Party of such notice, the Parties shall commence good faith negotiations with respect to the renegotiated Contract Price.  In the event the Parties have not reached agreement as to such renegotiated Contract Price by no later than six (6) months prior to the  Price Renegotiation Effective Date, unless the Parties otherwise agree,  the Contract Price following such Price Renegotiation Effective Date shall be decided pursuant to the Dispute Resolution procedures set forth herein.  In such event Buyer shall continue to pay Seller the existing Contract Price until such time as a new price is established pursuant to the Dispute Resolution procedures, in which case the new Contract Price shall be implemented effective as of the Price Renegotiation Effective Date.

Other Provisions:  

Conditions Precedent: Buyer’s obligations under this Confirmation Letter shall be subject to and conditioned upon its receipt in such form and substance as may be acceptable to Buyer of any and all United States federal, state or local licenses, permits, authorizations, or other approvals necessary to construct, own and operate a combined cycle electric generating facility at the McIntosh, Georgia site by no later than December 31, 2001[__________________].  Seller’s obligations under this Confirmation Letter shall be subject to and conditioned upon the receipt by the appropriate Enron and/or El Paso entities importing LNG into the United States and/or constructing, owning or operating the Elba Island LNG terminal, plant and/or related facilities Venezuelan Facilities by no later than December 31 October 1, 2001, in such form and substance as may be acceptable to Seller of any and all United States federal, state or local licenses, permits, authorizations, or other approvals necessary to reactivate, construct, and operate the Elba Island LNG marine terminal, plant and/or related facilities near Savannah, Georgia Venezuelan Facilities and to import LNG into the United States.  In the event each of the conditions precedent set forth above have not been satisfied or waived by the Party on whose behalf such condition is imposed by the date applicable to such condition, either Party may terminate this Transaction by giving the other Party at least thirty (30) days prior written notice of termination; provided, however, that such termination shall not be effective if during such thirty (30) day period the Party on behalf of whom the condition precedent is imposed satisfies or waives such condition precedent. 

Liquidated Damages:  For purposes of this Transaction only, the Parties do hereby agree to amend the Agreement by deleting the existing Sections 7.2 and 7.3 and substituting the following Sections 7.2 and 7.3 therefor:

7.2	In the event Buyer’s actual purchases of Gas under a Transaction for any Day during the term of this Agreement are less than the applicable Contract Quantity for such Day, unless excused by Force Majeure (as defined in Article 15 below) or by any other provision of this Agreement, including Seller’s failure to deliver the Contract Quantity to or for Buyer’s account, Seller shall determine the amount by which the Contract Quantity for the Day exceeds the actual quantity in MMBtus of Gas purchased by Buyer at the applicable Delivery Point (the “Buyer Deficiency Quantity”).  Seller’s remedy shall be to collect from Buyer for each MMBtu of the Buyer Deficiency Quantity an amount equal to the positive difference, if any, between the Contract Price per MMBtu as set forth on the applicable Confirmation Letter and the highest price reasonably available to Seller under the circumstances at which Seller is able to remarket the Buyer Deficiency Quantity.  In the event Seller does not elect to remarket the Deficiency Quantity for any Day, Buyer shall pay Seller an amount equal to the Deficiency Quantity times the positive difference, if any, between the Contract Price and the amount per MMBtu received by Seller for such gas at the Primary Delivery Point. In the event Seller elects to remarket the Deficiency Quantity, Seller shall act in good faith to obtain replacement markets at the highest price reasonably available to Seller under the circumstances, taking into account the time constraints involved and the fact that Seller’s LNG terminalling arrangements require consistent gas deliveries.

7.3	In the event Seller’s actual deliveries of Gas under a Transaction for any Day during the term of this Agreement are less than the applicable Contract Quantity for such Day, unless excused by Force Majeure or by any other provision of this Agreement, including Buyer’s failure to purchase and receive the Contract Quantity, Buyer shall determine the amount by which the Contract Quantity for the Day exceeds the actual quantity in MMBtus of Gas delivered by Seller at the applicable Delivery Point (the “Seller Deficiency Quantity”).  Buyer’s remedy shall be to collect from Seller for each MMBtu of the Seller Deficiency Quantity an amount equal to the positive difference, if any, between Buyer’s Replacement Cost of Fuel per MMBtu and the Contract Price per MMBtu as set forth on the applicable Confirmation Letter.  For purposes of this Section 7.3 Buyer’s Replacement Cost of Fuel shall be equal to (a) the actual cost of gas delivered to Buyer’s electric generating facility in McIntosh, Georgia, that Buyer purchases from a source other than Seller to replace the Seller Deficiency Quantity (including transportation expenses) or (b) to the extent Buyer is unable to purchase gas and instead uses alternate fuel to replace the Seller Deficiency Quantity, the actual delivered cost (per MMBtu equivalent) of the alternate fuel (including transportation expenses) used by Buyer.  Buyer shall act in good faith to obtain replacement gas or alternate fuel at the lowest price reasonably available to Buyer under the circumstances, taking into account the time constraints involved and the fact that Buyer requires the gas in order to generate power for high priority loads.

Force Majeure:  For purposes of this Transaction only, the Parties do hereby agree to amend the Agreement by deleting the existing Article 15 and substituting the following Article 15 therefor:

In the event either Party is rendered unable, wholly or in part, by Force Majeure to carry out its obligations under this Agreement, other than its obligation to make payment due hereunder, it is agreed that upon such Party giving notice in writing as soon as practical, then the obligations of the Party giving notice insofar as performance thereof is prevented by Force Majeure, shall be suspended until such occurrence is remedied.  Force Majeure shall include, without limitation, acts of God, freezing of wells or lines of pipe, fires, floods, washouts, explosions, breakage or accident or necessity of repairs to machinery or equipment, labor disputes, restraints of governments, interruption, curtailment or unavailability of applicable firm transportation by Transporter(s), hurricanes, storms, storm warnings, or other similar weather related events that interfere with the ability of LNG tankers to make timely delivery of [Seller’s ] LNG to the Elba Island LNG Terminal near Savannah, Georgia, LNG Facilities the interruption or curtailment of firm terminalling services by Southern LNG, Inc. under Section 8.3 of the General Terms and Conditions of its FERC Gas Tariff (or any successor provision), the interruption of curtailment of terminalling services at the Venezuela Facilities, damage to, or loss or failure of, an LNG tanker inability of an LNG Tanker shipping [Seller’s ] LNG to the Elba Island LNG Terminal near Savannah, Georgia, or inability of such an LNG Tanker LNG Facilities to reach or clear berth once such tanker is in the Savannah River channel, if such event is not within the reasonable control of Seller, or similar occurrences not within the control of the Party claiming suspension preventing performance hereunder.  The Party claiming Force Majeure shall promptly notify the other Party in writing of the Force Majeure event and take all reasonably available steps to remedy the situation with reasonable dispatch; provided however, that the duty to remedy shall not require either Party to settle a labor dispute in a manner inadvisable in the sole opinion of the Party having the difficulty.  Notwithstanding anything to the contrary in this Agreement, Force Majeure specifically excludes the failure of or loss of any specific source of LNG or the availability of better prices from other suppliers or customers, or the interruption of interruptible or secondary firm transportation by Transporter.

Binding Arbitration:  For purposes of this Transaction only, the Parties do hereby agree to the following arbitration provision: 

All disputes, controversies, or claims arising out or relating to the Agreement, or this Confirmation Letter, shall be submitted to and settled by binding arbitration.  Such arbitration shall be held in [Atlanta, Georgia/Houston, Texas ] or such other place as may be agreed upon by those involved in the arbitration.  The Commercial Arbitration Rules of the American Arbitration Association shall apply to such arbitration proceedings.  There shall be three arbitrators.  The party demanding or initiating arbitration shall inform the other party of the name of its arbitrator and the other party shall within thirty (30) days thereafter name its arbitrator.  The two arbitrators so designated shall choose a third, who shall be the chairman.  If such other party fails to name an arbitrator within the time specified or if the two arbitrators fail to appoint a third arbitrator, then that arbitrator shall be appointed under the aforementioned Rules.  Judgment on any decision rendered pursuant to arbitration proceedings may be entered in any Court of competent jurisdiction on application made to any such Court for judicial acceptance of the decision and an order for enforcement.  Unless the parties agree to share the costs of arbitration or an apportionment of such costs is provided herein, the arbitrators shall determine what part of the costs and expenses including attorney’s fees incurred in any such proceedings shall be borne by each party.  The parties shall, during the period of such proceedings and pending the making of an arbitral decision, continue to perform their respective obligations under this Agreement insofar as the circumstances reasonably will allow without prejudice to final adjustment in accordance with the arbitral decision.  The arbitrators shall be instructed by the parties to render their decision within forty-five (45) days of the conclusion of the hearing.  The decision of the arbitration shall be final and binding on the parties.

IN WITNESS WHEREOF, duly authorized representatives of the Parties hereto have executed this Agreement in duplicate originals on the day and year first written above.

SOUTHERN COMPANY SERVICES, 	ENRON NORTH AMERICA CORP. INC.					
“Buyer”					“Seller”

By:________________________	By:_________________________

Title:_______________________	Title:________________________

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