Summary of terms and conditions prepaid, natural gas forward sale transaction
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MILBANK DRAFT DECEMBER 5, 2000 SUMMARY OF TERMS AND CONDITIONS PREPAID, NATURAL GAS FORWARD SALE TRANSACTION $500,000,000 ENRON CORP. This Summary of Terms and Conditions has been prepared for discussion purposes only and is subject to continuing review by all Transaction Participants. I. Definitions: Assignee Agent: Chase, as agent for the Purchasers and the Offtake Party. Chase: The Chase Manhattan Bank. Closing Date: December [21], 2000. ENA: Enron North America Inc., a _______ corporation. Enron Corp.: Enron Corp., an Oregon corporation. Mahonia: Mahonia Natural Gas limited, a newly formed, Jersey Channel Islands [100% owned subsidiary of Mahonia Limited]. Offtake Party: Chase. Purchasers: Chase, _____________ and ______________. II. Summary of Transaction: All of the following will happen on the Closing Date: 1. Mahonia and ENA will enter into a prepaid natural gas inventory forward sale contract (the “Forward Sale Agreement”) pursuant to which Mahonia will pay $[500,000,000] to ENA in exchange for an agreement by ENA to deliver a scheduled amount of natural gas to Mahonia monthly for ___ months. 2. Mahonia will sell to the Purchasers all of its rights to receive deliveries of natural gas from ENA under the Forward Sale Agreement. Mahonia will acknowledge that, when gas is delivered under the Forward Sale Agreement, it will take title to the natural gas as record owner, with all beneficial ownership interests remaining with the Purchasers. 3. The Purchasers and the Offtake Party will enter into a fixed-price forward contract (the “Offtake Agreement”) pursuant to which the Purchasers agree to sell to the Offtake Party an amount of natural gas corresponding to the monthly scheduled deliveries to be made by ENA pursuant to the Forward Sale Agreement. 4. The Purchasers, the Offtake Party and the Assignee Agent will enter into an Agreement (the “Assignee Agent Agreement”) pursuant to which the Assignee Agent will agree to act as the agent of the Purchasers and the Offtake Party with respect to the Margin Agreement, the Guarantee Agreement and the Surety Bond referred to below. 5. ENA will enter into a margin agreement (the “Margin Agreement”) with the Assignee Agent, pursuant to which ENA will agree to post collateral with the Assignee Agent in an amount equal to the excess (if any) of the marked-to-market value of the remaining natural gas to be delivered under the Forward Sale Agreement over the initial value of the gas to be delivered under the Forward Sale Agreement. Both the Purchasers and the Offtake Party will have the right to instruct the Assignee Agent to make calls on the margin account. 6. Enron Corp. will issue a guarantee (the “Guarantee”) in favor of the Assignee Agent guaranteeing the obligations of ENA under the Forward Sale Agreement and under the Margin Agreement. 7. ENA will purchase a surety bond (the “Surety Bond”) in favor of Mahonia to protect against non-delivery under the Forward Sale Agreement. The Assignee Agent will have the right to make demands under the Surety Bond. 8. The Purchasers and Mahonia will enter into an agency agreement (the “Mahonia Agency Agreement”) pursuant to which Mahonia will agree to act as agent for the Purchasers in handling the sale and delivery to the Offtake Party of any natural gas delivered by ENA under the Forward Sale Agreement.
A diagram of the foregoing transaction steps is attached as Annex 1. III. Transaction Documents: A. Forward Sale Agreement Seller: ENA. Guarantor: Enron. Buyer: Mahonia. Arranger: Chase. Description: A $[500,000,000] prepaid forward sale by ENA to Mahonia of U.S. delivered natural gas. Delivery Schedule: Continuous monthly deliveries commencing [April 2001 and ending November 2005]. Natural Gas Delivery Location(s): Pooling point(s) to be agreed prior to the Closing Date. Natural Gas Delivery Quantity: Approximately ___ million cubic feet (mcf) per day. Determination of Prepayment Amount: An amount determined simultaneous with closing. In addition to Delivery Quantity and Delivery Schedule, factors contributing to determination of the prepayment amount include: (i) the forward price curve for natural gas and (ii) the Discount Factor. “Discount Factor” means the USD interest rate reflecting the sum of (a) an interpolated discount rate from the forward LIBOR curve related to the Delivery Schedule plus (b) ___ basis points. Voluntary Termination: Neither party will be allowed to terminate the Forward Sale Agreement voluntarily. B. Assignment Agreement Assignor: Mahonia. Assignees: Purchasers. Description: Ratable assignment of undivided interest in the Forward Sale Agreement as follows: Chase: 33% Assignee 2: 33% Assignee 3: 33%
Seller: Purchasers. Buyer: Offtake Party. Description: A fixed-price forward sale by Purchasers to the Offtake Party of U.S. delivered natural gas in amounts corresponding to the monthly scheduled deliveries to be made by ENA pursuant to the Forward Sale Agreement. Delivery Schedule: Continuous monthly deliveries commencing [April 2001 and ending November 2005]. Natural Gas Delivery Location(s): Pooling point(s) [to match pooling points under Forward Sale Agreement]. Natural Gas Delivery Quantity: Approximately ___ million cubic feet (mcf) per day. Price: Fixed price to be determined on the Closing Date and payable contemporaneously with each monthly delivery. Voluntary Termination: Neither party will be allowed to terminate the Offtake Agreement voluntarily.
Principals: The Purchasers and the Offtake Party. Assignee Agent: Chase. Description: Agreement for the Assignee Agent to act as the agent of the Purchasers and the Offtake Party with respect to the Margin Agreement, the Guarantee Agreement and the Surety Bond.
Depositor: ENA. Guarantor: Enron. Beneficiaries: Assignee Agent for the benefit of the Purchasers and the Offtake Party. Description: ENA will agree to post collateral with the Assignee Agent in an amount equal to the excess (if any) of the marked-to-market value of the remaining natural gas to be delivered under the Forward Sale Agreement over the initial value of the gas to be delivered under the Forward Sale Agreement.
Surety: [To be determined.] Beneficiary: Mahonia. Description: Surety Bond in favor of Mahonia to protect against non-delivery under the Forward Sale Agreement. The Assignee Agent, will have the right to make demands under the Surety Bond, and all payments under the Surety Bond will be made directly to the Assignee Agent.
Principal: Purchasers. Agent: Mahonia. Description: Agreement by Mahonia to act as agent for the Purchasers in handling the sale and delivery to the Offtake Party of any natural gas delivered by ENA under the Forward Sale Agreement.
[TO BE DETERMINED] IV. Legal Counsel Vinson & Elkins: Counsel to Enron and ENA. Milbank, Tweed, Hadley & McCloy LLP: Counsel to the Purchasers. Mourant & Co.: Counsel to Mahonia. |