UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-13584
ENRON GLOBAL POWER & PIPELINES L.L.C.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0456366
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ENRON BUILDING
1400 SMITH STREET
HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 853-1937
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No o
Indicate the number of shares outstanding of each of the issuer's classes of
common shares, as of the latest practicable date:
CLASS OUTSTANDING AS OF MAY 1,1996
_____________ _________________________
Common Shares 20,866,200shares
<PAGE>
ENRON GLOBAL POWER & PIPELINES L.L.C.
TABLE OF CONTENTS
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Income - Pro Forma for the
Three Months Ended March 31, 1996 and the Three Months
Ended March 31, 1996 and 1995.......................... 1
Consolidated Balance Sheets - March 31, 1996
and December 31, 1995.................................. 2
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1995............. 3
Consolidated Statement of Changes in Shareholders' Equity -
Three Months Ended March 31, 1996...................... 4
Notes to Consolidated Financial Statements .............. 5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 7
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K ........................14
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENRON GLOBAL POWER & PIPELINES L.L.C.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
_____________________________
1996 1996 1995
______________________________________________________________________
(Pro Forma
see Note 3)
<S> <C> <C> <C>
Technical Assistance Fees $ 2,604 $ 2,604 $ 2,235
Equity in Earnings of Unconsolidated Subsidiaries:
Pipeline operations 8,506 6,090 5,189
Power operations 2,277 2,277 2,448
____________________________
Equity in Earnings and Technical
Assistance Fees 13,387 10,971 9,872
General and Administrative Expenses (1,592) (1,592) (1,101)
Taxes Other Than Income (143) (143) (150)
Other Income (Expense), net (527) 323 235
____________________________
Income Before Income Taxes 11,125 9,559 8,856
Income Taxes 1,210 1,019 980
____________________________
Net Income $ 9,915 $ 8,540 $ 7,876
============================
Net Income Per Common Share $ .44 $ .41 $ .38
============================
Average Number of Common Shares
Used in Computation 22,440 20,863 20,840
============================
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
ENRON GLOBAL POWER & PIPELINES L.L.C.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
_______________________________________________________________________________
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 34,106 $ 23,364
Accounts receivable 3,595 3,778
----------------------------
Total Current Assets 37,701 27,142
Investments in and Advances to Unconsolidated
Subsidiaries 155,339 159,621
Other 620 950
----------------------------
Total Assets $ 193,660 $ 187,713
============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 6,357 $ 5,341
Accrued taxes 3,079 2,481
----------------------------
Total Current Liabilities 9,436 7,822
Deferred Income Taxes 2,790 2,539
Shareholders' Equity
Common shares 156,738 156,607
Retained earnings 24,696 20,745
----------------------------
Total Shareholders' Equity 181,434 177,352
____________________________
Total Liabilities and Shareholders' Equity $ 193,660 $ 187,713
============================
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
ENRON GLOBAL POWER & PIPELINES L.L.C.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------
1996 1995
<S> <C> <C>
Cash Flows From Operating Activities
Reconciliation of net income to net cash flows
from operating activities:
Net income...................................... $ 8,540 $ 7,876
Equity in earnings of unconsolidated subsidiaries (8,367) (7,637)
Distributions from unconsolidated subsidiaries.. 12,649 4,077
Deferred income taxes........................... 251 375
Changes in components of working capital:
Accounts receivable............................. 183 1,351
Accounts payable................................ 1,016 (477)
Accrued taxes................................... 598 881
Other, net...................................... 330 (142)
-----------------------
Net Cash Flows From Operating Activities ........... 15,200 6,304
-----------------------
Cash Flows From Investing Activities:
Net investments in and advances to unconsolidated
subsidiaries - (3,395)
-----------------------
Net Cash Flows From Investing Activities............ - (3,395)
-----------------------
Cash Flows From Financing Activities:
Common Shares Issued............................ 131 -
Dividends paid.................................. (4,589) (4,272)
-----------------------
Net Cash Flows From Financing Activities............ (4,458) (4,272)
-----------------------
Increase (Decrease) in Cash and Cash Equivalents ... 10,742 (1,363)
Cash and Cash Equivalents, Beginning of Period ..... 23,364 6,570
-----------------------
Cash and Cash Equivalents, End of Period............ $ 34,106 $ 5,207
=======================
Supplemental Cash Flow Information:
Cash paid for Income Taxes...................... $ 196 $ -
=======================
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
ENRON GLOBAL POWER & PIPELINES L.L.C.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
COMMON RETAINED
SHARES EARNINGS
- - -----------------------------------------------------------------------------
<S> <C> <C>
Balance at December 31, 1995......................... $ 156,607 $ 20,745
Common Shares Issued................................. 131 -
Net Income........................................... - 8,540
Dividends............................................ - (4,589)
-----------------------
Balance at March 31, 1996............................ $ 156,738 $ 24,696
=======================
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
ENRON GLOBAL POWER & PIPELINES L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Enron Global Power & Pipelines L.L.C. (EPP), a Delaware limited liability
company, was organized to initially own interests in a natural gas pipeline
system in Argentina, two power plants in the Philippines and a power plant in
Guatemala. EPP's pipeline operations in Argentina are conducted through its
wholly-owned subsidiary, Enron Pipeline Company - Argentina S.A. (EPCA). EPCA
owns 25% of Compania de Inversiones de Energia S.A. (CIESA) which in
turn owns 70% of Transportadora de Gas del Sur S.A. (TGS), the entity that owns
the pipeline system. EPP's power operations in the Philippines are conducted
through its wholly-owned subsidiary, Enron Power Philippines Corp. (EPPC).
EPPC owns 50% of the outstanding stock of Subic Power Corp. and Batangas Power
Corp., the entities that own the respective power plants. The Guatemala power
operations are conducted through EPP's 50% ownership interest in Puerto Quetzal
Power Corp. On May 9, 1996, EPP acquired an indirect 49% limited partnership
interest (and will, upon receipt of certain approvals, acquire an indirect 1%
general partnership interest) in Centragas - Transportadora de Gas de la
Region Central de Enron Development & Cia. S.C.A (Centragas), a 357 mile
natural gas pipeline in Colombia, in exchange for approximately 1.6 million
common shares.
2. BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared by EPP
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, they reflect all adjustments which are, in
the opinion of management, necessary for a fair presentation of the financial
results for the interim periods. Certain information and notes normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. However, EPP believes that the disclosures are adequate to make
the information presented not misleading. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the notes thereto included in EPP's Annual Report on Form 10-K
for the year ended December 31, 1995. The pro forma consolidated statement of
income for the three months ended March 31, 1996, reflects certain pro forma
adjustments as if EPP had acquired its interest in the Centragas pipeline on
January 1, 1996 (see Note 3).
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from the estimates.
EPP records as cash equivalents all highly liquid short-term investments with
original maturities of three months or less. From time to time, EPP invests
excess funds with Enron Corp. affiliates under promissory notes payable on
demand at market interest rates . At March 31, 1996, approximately $27.8
million was invested using such notes. Such amounts are classified as cash
equivalents.
All monetary amounts presented in tables herein are expressed in thousands,
except per share amounts.
Certain prior period amounts have been reclassified to conform with the current
presentation.
3. PRO FORMA
Acquisition of projects from Enron are related party transactions that are
required to be accounted for similar to pooling of interests method of
accounting with historical results restated to include the results of acquired
projects. The pro forma consolidated statement of income for the three months
ended March 31, 1996, reflects equity in earnings from Centragas of
$2.4 million (approximately $1.5 million of which are related to a nonrecurring
early completion bonus) and incremental expenses of approximately $0.8 million
associated with the acquisition of Centragas.
4. SHAREHOLDERS' EQUITY
On March 15, 1996, EPP paid a quarterly cash dividend of $0.22 per share.
5. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED SUBSIDIARIES
EPP's investments in and advances to unconsolidated subsidiaries and the
changes in such balances are as follows:
<TABLE>
<CAPTION>
Pipeline Power Total
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1995................ $ 97,609 $ 62,012 $ 159,621
Equity in Earnings.......................... 6,090 2,277 8,367
Distributions............................... (10,500) (2,149) (12,649)
--------------------------------
Balance at March 31, 1996................... $ 93,199 $ 62,140 $ 155,339
================================
</TABLE>
At March 31, 1996, EPP's share of undistributed earnings of its pipeline and
power subsidiaries totaled approximately $5.6 million and $14.0 million,
respectively. In the first quarter of 1996, EPPC received $2.1 million in
dividends from its Philippine power operations. On March 6, 1996, TGS declared
a semiannual dividend of 0.095 Argentine pesos per share which was paid on
March 20, 1996. As a result, EPCA received $10.5 million in dividends from
CIESA.
6. SUBSEQUENT EVENTS
In April 1996, CIESA signed a letter of intent with two international banks to
enter into a syndicated bridge loan facility for $220 million. The proceeds
will be used to retire the $215 million loan agreement with Morgan Guaranty
Trust Company of New York which expires in May 1996.
In April 1996, TGS issued $150 million of bonds with an effective annual
interest rate of 9.6% maturing on May 24, 2001. Approximately $100 million
of the proceeds were used to retire short-term debt and the remainder for other
corporate purposes.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
PRIMARY ASSETS AND SOURCES OF EARNINGS AND CASH
The primary assets of Enron Global Power & Pipelines L.L.C. ("EPP"), a
Delaware limited liability company owned approximately 52% by Enron Corp.
(together with its subsidiaries, "Enron"), are its interests in 50% or less
owned companies ("Project Companies") which it holds directly or indirectly
through wholly-owned subsidiaries. EPP accounts for its interests in the
Project Companies under the equity method of accounting and records its
proportionate share of the earnings or losses of the Project Companies. The
operations of the Project Companies are EPP's primary source of earnings.
However, EPP also receives technical and administrative assistance fees, paid
by Project Companies to certain wholly-owned subsidiaries of EPP, primarily by
Transportadora de Gas del Sur S.A. ("TGS") to Enron Pipeline Company -
Argentina ("EPCA"). EPP's primary source of cash is dividends paid by the
Project Companies and technical assistance fees. Declaration and payment of
such dividends is at the sole discretion of the boards of directors of the
Project Companies and is subject to operating profitability of the Project
Companies and certain restrictions including among others, restrictions on the
distribution of cash under applicable credit agreements and government imposed
currency restrictions, if any.
RESULTS OF OPERATIONS OF EPP
General
For the three months ended March 31, 1996, EPP's technical assistance
fees and equity in earnings from its Argentine and Philippine operations
constituted approximately 78% and 14%, respectively, of EPP's technical
assistance fees and equity in earnings. As of March 31, 1996, Argentine and
Philippine assets accounted for approximately 58% and 30%, respectively, of
EPP's assets. As a result, if Argentine or Philippine operations were
materially and adversely affected, EPP's financial condition and results of
operations could be materially and adversely affected. See "Pipeline
Operations" and "Power Operations" below for the results of operations of EPP's
unconsolidated subsidiaries.
Acquisition of projects from Enron are related party transactions that
are required to be accounted for similar to the pooling of interests method of
accounting with historical results restated to include the results of acquired
projects. The pro forma statement of income for the three months ended March
31, 1996, reflects adjustments to include $2.4 million of equity in earnings
from Centragas - Transportadora de Gas de la Region Central de Enron
Development & Cia. S.C.A ("Centragas") and $0.8 million of acquisition related
expenses and $0.2 million of withholding taxes. Approximately $1.5 million of
the equity in earnings are due to a nonrecurring early completion bonus.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 VS. THE
THREE MONTHS ENDED MARCH 31, 1995
TECHNICAL ASSISTANCE FEES AND EQUITY IN EARNINGS. Technical assistance
fees and equity in earnings increased $1.1 million (11%) in the first quarter
of 1996, compared to the first quarter of 1995. The increase is primarily due
to increased equity in earnings from pipeline operations and technical
assistance fees in Argentina as a result of the increase in TGS's net income
due to firm transportation capacity added in June 1995 and a net rate increase
of approximately 3%. The increase was partially offset by slightly lower
equity in earnings from power operations.
INCOME TAXES. Income taxes were relatively unchanged for the first
quarter of 1996 compared to the first quarter of 1995. The income of EPP is
not taxable to EPP; however, EPCA and Enron Power Philippines Corp. ("EPPC"),
wholly-owned subsidiaries of EPP, are taxable entities in their respective
local jurisdictions. The effective tax rate paid by these subsidiaries is less
than the statutory rate because a majority of the income of these subsidiaries
relates to ownership of equity investments, which is not subject to tax;
however, EPCA is subject to taxes (30%) on the technical assistance fees it
receives from TGS and dividends paid to EPP from EPPC are subject to certain
Philippine withholding taxes (15%).
LIQUIDITY AND CAPITAL RESOURCES OF EPP
PRIMARY CASH REQUIREMENTS
The primary cash requirements of EPP are the payment of dividends to its
shareholders and general and administrative expenses, including overhead and
costs incurred under an Administrative Services Agreement between EPP and
Enron. EPP may also use cash to satisfy its payment obligations, if any, under
various shareholder and credit agreements relating to the Project Companies and
under a Master Contribution Agreement among EPP, Enron and certain of their
subsidiaries (the "Contribution Agreement"). Pursuant to the Contribution
Agreement, Enron maintains certain commitments on behalf of EPP for the benefit
of certain Project Companies, as required by project lenders and certain other
third parties. Because EPP replaced Enron as a shareholder of the Project
Companies, in most instances EPP has agreed to indemnify Enron against
liabilities that may be incurred under such commitments. Although these
indemnity obligations could result in certain otherwise nonrecourse liabilities
becoming recourse to EPP, EPP believes the events which would trigger liability
are remote, and therefore does not expect these obligations to create any
additional liability. If, however, EPP were required to make significant
payments to Enron under the Contribution Agreement, EPP believes it would be
able to obtain financing for such payments from Enron or other sources, or
would be able to cause its subsidiaries to pay to EPP cash dividends sufficient
to make such payments, if necessary. There can be no assurance, however, that
sufficient dividends, or funds from other sources, would be available for such
purpose. On March 15, 1996, EPP paid a quarterly dividend of approximately
$4.6 million or $0.22 per share.
PRIMARY SOURCES OF CASH
EPP relies primarily on dividends from the Project Companies and
technical assistance fees to meet its cash requirements. The ability of EPP's
unconsolidated subsidiaries to pay dividends will depend on the future earnings
and debt repayment obligations of such subsidiaries, dividend restrictions
included in credit agreements at the project level, applicable currency
restrictions, income and other taxes, other laws and the declaration of
dividends by the boards of directors of EPP's various subsidiaries. Project
financings typically require that certain cash reserves be established at the
Project Company and that certain other capital and legal requirements be
satisfied before the Project Company may pay dividends to its shareholders.
However, each of EPP's unconsolidated subsidiaries has a stated dividend
policy, set forth in its respective shareholders agreement, of maximizing
after-tax cash distributions to shareholders after taking into consideration
capital requirements and applicable legal requirements. In the future, the
Project Companies may also borrow funds or otherwise accept encumbrances on
their earnings resulting in further possible constraints on their ability to
pay dividends to EPP.
In the first quarter of 1996, Subic Power Corp. ("Subic") and Batangas
Power Corp. ("Batangas") paid $1.3 million and $3.0 million in dividends,
respectively, of which EPPC received approximately $2.1 million. On March 6,
1996, TGS declared a semiannual dividend of 0.095 Argentine pesos per share
which was paid on March 20, 1996. As a result, EPCA received $10.5 million in
dividends from Compania de Inversiones de Energia S.A. ("CIESA") in the
first quarter of 1996.
LONG-TERM FINANCING POLICY
EPP's business strategy is to generate long-term growth in earnings, cash
flow and dividends per share by acquiring interests in additional power and
natural gas pipeline projects from Enron and third parties. EPP currently
expects to fund any such acquisitions from Enron by issuing additional common
shares and to fund acquisitions from third parties with a combination of common
shares, cash or debt. EPP believes that it will have sufficient cash to meet
its obligations for the foreseeable future and currently does not intend to
incur significant amounts of long-term indebtedness.
PIPELINE OPERATIONS
Results of Operations for the Three Months Ended March 31, 1996 vs. the
Three Months Ended March 31, 1995
Equity in earnings of the pipeline operations represents EPP's 25%
interest in CIESA which owns 70% of TGS. Presented below is the first quarter
of 1996 and 1995 consolidated information for CIESA on a U.S. GAAP, historical
U.S. dollar, 100% ownership basis. The exchange rate between the Ps. and the
U. S. dollar was approximately 1:1 for all periods presented.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
(In thousands) 1996 1995
- - ----------------------------------------------------------------------------
<S> <C> <C>
Gas transportation revenues..................... $ 86,030 $ 84,083
Gas processing revenues......................... 10,946 9,780
-------------------------
Total Revenues............................... 96,976 93,863
Operating, administrative and selling expense... (29,055) (27,914)
Interest income................................. 1,520 1,703
Interest expense, net of capitalized interest... (16,603) (14,671)
Other income.................................... 1,403 834
-------------------------
Income Before Minority Interest and Income Taxes 54,241 53,815
Minority interest............................... (12,729) (11,494)
Income tax expense.............................. (17,151) (21,564)
-------------------------
Net Income................................... $ 24,361 $ 20,757
=========================
EPP's Equity in Earnings of Pipeline Operations. $ 6,090 $ 5,189
=========================
</TABLE>
NET INCOME. CIESA's net income in the first quarter 1996 increased $3.6
million (17%) compared to the same period in 1995. The increase in net income
was primarily due to higher revenues as a result of the June 1995 expansion on
the General San Martin pipeline and lower income tax expense resulting from
a $4.9 million one time tax amnesty payment made during the first quarter of
1995 and a net rate increase of approximately 3%, partially offset by higher
operating and interest expenses. The following discussion analyzes the
operating results of CIESA and its 70% owned subsidiary, TGS.
GAS TRANSPORTATION REVENUES. Gas transportation revenues represented
approximately 89% and 90% of CIESA's first quarter 1996 and 1995 total
revenues, respectively. Firm transportation revenues increased $1.8 million
(2%) in the first quarter of 1996 compared to the same period in 1995 primarily
due to an increase in firm contracted capacity made possible by the June 1995
expansion of transportation capacity along the General San Mart<i'>n pipeline
by 45.9 million cubic feet per day ("Mmcf/d") and a 3.2% tariff increase in
July of 1995. These increases in revenues were partially offset by the
exercise of certain step down rights by Gas Natural BAN S.A. Interruptible
transportation revenues were relatively unchanged for the first quarter of 1996
compared to the same period in 1995.
GAS PROCESSING REVENUES. Gas processing revenues accounted for
approximately 11% and 10% of TGS's revenues in 1996 and 1995, respectively.
During the first quarter of 1996, processing revenues increased by $1.2 million
(12%) primarily due to increased volumes and increased average prices for
propane and butane.
OPERATING, ADMINISTRATIVE AND SELLING EXPENSES. Operating expenses,
consisting primarily of labor, depreciation, technical assistance and other
professional fees, and operation and maintenance expense, increased $0.7
million (3%) for the first quarter of 1996 as compared to the same period in
1995. The increase is primarily due to higher depreciation, resulting from
capital expenditures for pipeline expansion in 1995 and higher technical
assistance fees as a result of higher operating income. These increases were
partially offset by lower social security contribution due to a decrease in the
payroll tax rate. Administrative and selling expenses increased $0.4 million
(11%) for the first quarter of 1996, compared to the same period in 1995,
primarily due to the reversal in 1995 of certain reserves established in 1994.
INTEREST INCOME. Interest income decreased $0.2 million (11%) as a
result of lower interest rates on short-term investments during the first three
months of 1996.
INTEREST EXPENSE, NET OF CAPITALIZED INTEREST. Interest expense, net of
capitalized interest, increased $1.9 million (13%) during the first quarter of
1996 compared to 1995. The increase is primarily due to $1.4 million of higher
interest expense as a result of the increase in TGS average indebtedness and an
increase in the cost of CIESA debt from the first quarter of 1995. In
addition, capitalized interest decreased $0.5 million (46%) due to lower
capital expenditures during the first quarter of 1996.
INCOME TAX EXPENSE. The statutory tax rate in Argentina is 30% of
taxable net income, calculated according to Argentine tax regulations which
differ in certain respects from accounting practices followed under Argentine
GAAP for the preparation of financial statements. CIESA income tax expense in
the first quarter of 1996 decreased $4.4 million (20%) compared to the first
quarter of 1995, primarily due to a one time payment of $4.9 million made in
1995 under a tax amnesty program offered by the Argentine tax authority to
settle certain income tax issues partially offset by increased taxable income
in 1996.
LIQUIDITY AND CAPITAL RESOURCES OF PIPELINE OPERATIONS
During the first quarter of 1996, TGS generated cash flows from
operations of $59.9 million and cash flows from financing activities of $16.3.
Those cash flows, along with other funds, were principally used for a $75.5
million dividend payment and $20.4 of capital expenditures. Cash flows
from financing activities increased by $16.3 million during the first
quarter of 1996 due to increased short-term debt.
In April 1996 CIESA signed a letter of intent with two international
banks to enter into a syndicated bridge loan facility for $220 million.
The proceeds will be used to retire the $215 million loan agreement with
Morgan Guaranty Trust Company of New York which expires in May 1996.
Recently TGS filed a $350 million shelf registration with the Securities
and Exchange Commission in order to issue debt securities from time to time in
the United States. Under Argentine law, it was established as a Global Program
and was approved by the Comision Nacioinal de Valores. During April of
1996, TGS issued $150 million of bonds with an effective annual interest rate
of 9.6% for a term of five years as part of its Global Program. Approximately
$100 million of the proceeds were used to retire short-term debt and the
remainder for other corporate purposes.
TGS intends to make capital expenditures of approximately $114.2 million
during 1996, $36.9 million of which are for mandatory investments. TGS expects
to meet its short- and long-term liquidity needs through a combination of cash
from operations and issuance of short- and long-term debt.
As of March 31, 1996, CIESA's total capitalization amounted to $1.5
billion. Total capitalization was comprised of debt of $837 million,
shareholders' equity of $364 million and minority interest of $258 million.
Debt as a percentage of total capitalization increased from 56% at December 31,
1995, to 57% at March 31, 1996.
POWER OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 VS. THE
THREE MONTHS ENDED MARCH 31, 1995
NET INCOME. Net income from power operations decreased $0.3 million (7%)
for the three months ended March 31, 1996, compared to the three months ended
March 31, 1995. Results for the first quarter of 1996 reflect increased
revenues and lower interest expense offset by increased income taxes and other
expenses.
The following is a summary of income statement information for the combined
power operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
(IN THOUSANDS) 1996 1995
- - ----------------------------------------------------------------------------
<S> <C> <C>
Capacity revenues............................... $ 22,067 $ 22,892
Variable revenues .............................. 9,931 8,508
---------------------------
Total Revenues ............................. 31,998 31,400
Fuel costs...................................... 5,756 4,937
Operating and administrative expenses........... 7,471 8,610
Depreciation and amortization................... 7,143 6,723
---------------------------
Net Operating Income........................ 11,628 11,130
Interest expense, net........................... 5,237 6,226
Other income (expense), net..................... (571) 136
---------------------------
Income Before Income Taxes.................. 5,820 5,040
Income tax expense.............................. 1,266 145
---------------------------
Net Income.................................. $ 4,554 $ 4,895
===========================
EPP's Equity in Earnings of Power Operations.... $ 2,277 $ 2,448
===========================
</TABLE>
Revenues. The majority of each Project Company's revenue is attributable
to payments tied to the capacity of the respective plant, whether based on
annual availability (the Subic and Batangas plants) or an annual capacity test
(the PQPC plant). Capacity revenues decreased $0.8 million (4%) in the first
quarter of 1996 compared to the first quarter of 1995 primarily due to
increased downtime at the Subic plant for the contract period ended February
29, 1996 compared to the contract period ended February 28, 1995.
The second type of payment, an energy fee, varies directly with actual
output and under the current cost structures of the plants, essentially covers
variable costs. The variable revenues increased $1.4 million (17%) in the
first quarter of 1996 compared to the first quarter of 1995. The increase is
primarily due to increased sales and higher fuel revenue as a result of
increases in the price of fuel used to calculate fuel revenue.
FUEL COST. Fuel cost is the expense for the fuel used in the PQPC plant.
An Enron affiliate supplies fuel to the PQPC plant at market based rates.
Total fuel cost at the PQPC plant increased $0.8 million (17%) in the first
quarter of 1996 compared to the first quarter of 1995. The increase was
primarily due to an increase in the price of fuel and higher fuel use related
to the increased sales discussed above. Fuel is provided to the Subic and
Batangas plants by their customer, National Power Corporation, at no cost.
OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative
expenses decreased $1.1 million (13%) in the three months ended March 31, 1996,
compared to the same period in 1995. The decrease was primarily due to lower
fees resulting from certain contract amendments and lower expenses resulting
from more efficient plant performance at the PQPC plant.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense increased $0.4 million (6%) in the first quarter of 1996 as compared to
the first quarter of 1995. The increase was due primarily to depreciation of
property, plant and equipment additions at the Batangas plant.
INTEREST EXPENSE, NET. Interest expense, net decreased $1.0 million
(16%) in the first quarter of 1996 compared to the first quarter of 1995. The
decrease is primarily due to the amortization of the loan balances at all three
plants and higher interest income resulting from larger cash balances at the
Batangas and Subic plants.
OTHER INCOME (EXPENSE), NET. Other income (expense), net increased $0.7
million primarily due to an insurance deductible incurred at the Batangas
plant.
INCOME TAX EXPENSE. Income tax expense increased $1.1 million primarily
due to increased pretax net income from PQPC (38.75% tax rate). Income tax
expense is the tax on the power plants in their respective local jurisdictions.
On an aggregate basis, the effective tax rate for the Philippine power plants
is less than the statutory rate due to the Subic and Batangas plants being
granted certain income tax holidays and concessions that range from six to 15
years. PQPC is organized as a U.S. domiciled company with a foreign branch
office. At March 31, 1996, there were no significant differences between
PQPC's effective tax rate and the U.S. statutory rate.
LIQUIDITY AND CAPITAL RESOURCES OF POWER OPERATIONS
Capital expenditures for the power plant operations are expected to be
insignificant in 1996. The power operations expect to meet short- and long-
term liquidity needs using cash flows from operations. If a specific power
plant has short-term liquidity needs that cannot be met with cash flows from
operations, it is expected that such plant would borrow or be advanced the
necessary funds from an affiliated company, with such loans repaid out of
future cash flows.
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
The statements in this Form 10-Q that are not historical information are
forward looking statements within the meaning of Section 27A of the Securities
Act of 1993 and Section 21E of the Securities Exchange Act of 1934. Although
EPP believes that its expectations are based on reasonable assumptions, it can
give no assurance that its goals will be achieved. Important factors that
could cause actual results to differ materially from those in the forward
looking statements herein include political developments in foreign countries,
the timing and success of Enron's efforts to develop international power,
pipeline and other infrastructure projects and conditions of the capital
markets and equity markets during the periods covered by the forward looking
statements.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER MATTERS
On April 15, 1996, EPP entered into a Purchase Agreement among
Enron Holding Company L.L.C., Enron Equity Corp., Enron Development
Corp. and EPP to acquire a 49% limited partner interest (with the right
to acquire an additional 1% general partner interest in the future
assuming certain third party consents are obtained) in Centragas-
Transportadora de Gas de la Region Central de Enron Development & Cia.,
S.C.A., a Colombian limited partnership ("Centragas"). The acquisition
of the 49% limited partnership interest closed on May 9, 1996.
Centragas was formed by affiliates of Enron Corp. to build, own and
operate, for a 15 year period, a 575 km (357 mile), 18-inch natural gas
pipeline and related facilities from Ballena on the northern coast of
Colombia to Barrancabermeja in the central region of the country. EPP
anticipates that Centragas will continue to operate as a natural gas
pipeline and related facilities.
The purchase price for the interest in Centragas was $41,500,000,
which sum was paid by EPP to the Enron Corp. affiliates by EPP issuing
1,576,808 common shares of EPP to the Enron Corp. affiliates. The
amount of the consideration was determined in accordance with the
Purchase Right Agreement between Enron Corp. and EPP, which has been
filed as Exhibit 10.1 to EPP's Annual Report on Form 10-K for year ended
December 31, 1994. Enron Corp. currently owns approximately 52% of the
outstanding common shares of EPP.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Purchase Agreement dated as of April 15, 1996, among Enron
Holding Company L.L.C., Enron Equity Corp., Enron Development
Corp. and EPP.
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ENRON GLOBAL POWER & PIPELINES L.L.C.
(Registrant)
Date: May 14, 1996 By /S/ RODNEY L. GRAY
---------------------------------
Rodney L. Gray
Chairman, President and
Chief Executive Officer
Date: May 14, 1996 By /S/ PAULA H. RIEKER
---------------------------------
Paula H. Rieker
Vice President and
Chief Financial Officer
(Chief Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. METHOD OF FILING
10.1 Purchase Agreement dated as of April 15, 1996, Filed herewith
among Enron Holding Company L.L.C., Enron electronically
Equity Corp., Enron Development Corp. and EPP
EXHIBIT 10.1
PURCHASE AGREEMENT
Among
ENRON HOLDING COMPANY L.L.C.
ENRON EQUITY CORP.,
ENRON DEVELOPMENT CORP.
and
ENRON GLOBAL POWER & PIPELINES L.L.C.
April 15, 1996
<PAGE>
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement") is made and entered into as of
April 15, 1996 by and among Enron Holding Company L.L.C., a Delaware limited
liability company ("EHC"), Enron Equity Corp., a Delaware corporation ("EEC"),
Enron Development Corp., a Delaware corporation ("EDC"), and Enron Global Power
& Pipelines L.L.C., a Delaware limited liability company ("EPP").
WHEREAS, (i) EHC is the record and beneficial owner of 53.07% of the
issued and outstanding shares (the "Enron Colombia Shares") of capital stock of
Enron Commercial Finance Ltd., a Cayman Islands company ("Enron Colombia"), and
(ii) EEC is the record and beneficial owner of 46.93% of the Enron Colombia
Shares; and
WHEREAS, Enron Colombia, through one or more direct or indirect wholly-
owned subsidiaries, owns directly or indirectly a 49% limited partner interest
in Centragas - Transportadora de Gas de la Region Central de Enron
Development & Cia., S.C.A., a sociedad en comandita por acciones established
under the laws of the Republic of Colombia ("Centragas"); and
WHEREAS, EDC is the sole general partner of Centragas and owns 1% of the
partnership capital of Centragas (the "General Partner Interest"); and
WHEREAS, Enron Corp., a Delaware corporation ("Enron"), and EPP are
parties to a Purchase Right Agreement dated as of November 15, 1994 (the
"Purchase Right Agreement") pursuant to which EHC and EEC have offered to sell
and transfer to EPP the Enron Colombia Shares and EDC has offered to sell and
transfer to EPP the General Partner Interest (collectively, the "Ownership
Interest"); and
WHEREAS, EPP desires to evidence its acceptance of such offers of the
Ownership Interest and, subject to the satisfaction of the conditions to EPP's
obligations as herein set forth, to purchase and pay for the Ownership
Interest, so that following such purchase EPP will own, directly or indirectly,
100% of the issued and outstanding capital stock of Enron Colombia and the
General Partner Interest;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and covenants herein contained, the parties hereto hereby agree as
follows:
<PAGE>
ARTICLE I
CERTAIN DEFINED TERMS
1.1 TERMS USED AS DEFINED IN PURCHASE RIGHT AGREEMENT. Capitalized
terms used in this Agreement and not defined herein are used as defined in the
Purchase Right Agreement.
1.2 OTHER TERMS. As used in this Agreement, the following items shall
have the following meanings:
"Agreement Among Partners" shall have the meaning assigned in Section
4.4.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Current Market Price" means the average closing price per share of
Common Shares in EPP reported at the close of trading on the New York Stock
Exchange for the 20 trading days immediately preceding March 28, 1996, which is
agreed to be for all purposes of this Agreement $26.319 per Common Share.
"Ecopetrol" means The Empresa Colombiana de Petroleos, an industrial and
commercial enterprise of the State of Colombia.
"Enron Colombia Subsidiaries" means each of Transportation, Pipeline and
Investments.
"Enron Subsidiary" means any direct or indirect wholly-owned subsidiary
of Enron.
"EPP Common Shares" shall have the meaning assigned in Section 2.1.
"Indenture" shall have the meaning assigned in Section 5.2(e)(i).
"Investments" means Enron Colombia Investments Limited Partnership, a
Cayman Islands limited partnership.
"GP Transfer Consents" shall have the meaning assigned in Section
5.2(d)(ii).
"O&M Agreement" means the Operations and Maintenance Contract dated as of
July 7, 1994 between Centragas and Promigas.
"Offer Price" shall have the meaning assigned in Section 2.1.
"Partners Agreement" has the meaning assigned in Section 4.9.
"Pipeline" means Enron Pipeline Colombia Limited Partnership, a Cayman
Islands limited partnership.
"Project" means the 575-kilometer 18-inch Ballena-to-Barrancabermeja
natural gas pipeline project in Colombia constructed, owned, and operated by
Centragas pursuant to the Transportation Services Contract, together with all
the property, structures, vessels, machinery, equipment and spare parts that
are owned by Centragas and are part of or used or useful in connection
therewith.
"Project Document" means any Project Document with respect to the
Ownership Interest or the Project.
"Promigas" means Promigas S.A., a Colombian SOCIEDAD ANOMINA.
"Second Closing Date" shall have the meaning assigned in Section 5.1(b).
"Tomen" shall have the meaning assigned in Section 2.2.
"Transportation" means Enron Colombia Transportation Ltd., a Cayman
Islands company.
"Transportation Services Contract" means the Transportation Services
Contract dated as of May 12, 1994, between Centragas and Ecopetrol, as amended
by (i) Amendment No. 1 to Transportation Services Contract dated as of November
2, 1994, (ii) Amendment No. 2 to Transportation Services Contract dated April
3, 1995, and (iii) Amendment No. 3 dated January 29, 1996.
<PAGE>
ARTICLE II
PURCHASE AND SALE OF OWNERSHIP INTEREST
2.1 PURCHASE AND SALE OF OWNERSHIP INTEREST. Subject to the
satisfaction of the conditions specified in Section 5.2, in consideration of
the Offer Price, (a) on the Closing Date, EHC and EEC shall sell, transfer,
convey and deliver to EPP, and EPP will purchase and accept from EHC and EEC,
the Enron Colombia Shares, as evidenced by the delivery of certificates
evidencing the Enron Colombia Shares, duly endorsed by EHC or EEC, as
applicable, or accompanied by stock powers (or comparable instruments) duly
executed by EHC or EEC, as applicable, and in proper form for transfer, and (b)
on the Second Closing Date, EDC shall sell, transfer, convey and deliver to EPP
or its designee, and EPP will accept (or cause such designee to accept) from
EDC, the General Partner Interest, as evidenced by certificates representing
the General Partner Interest, duly endorsed by EDC, or accompanied by stock
powers (or comparable instruments) duly executed by EDC, and in proper form for
transfer. The aggregate consideration for the purchase and sale of the
Ownership Interest shall be $41,500,000 (the "Offer Price"), consisting of
$40,670,000 attributable to the Enron Colombia Shares and $830,000 attributable
to the General Partner Interest. EPP shall pay the Offer Price by issuance on
the Closing Date (i) to EHC of Common Shares in EPP that have an aggregate
Current Market Price equal to 52% of the Offer Price, which Common Shares shall
be comprised of Restricted Common Shares having an aggregate Current Market
Price equal to 21% of the Offer Price (1/21st of which shall be Special
Restricted Common Shares) and Common Shares that are not Restricted Common
Shares having an aggregate Current Market Price equal to 31% of the Offer
Price, (ii) to EEC of Common Shares in EPP that have an aggregate Current
Market Price equal to 46% of the Offer Price (none of which Common Shares shall
be Restricted Common Shares), and (iii) to EDC of Common Shares in EPP that
have an aggregate Current Market Price equal to 2% of the Offer Price (none of
which Common Shares shall be Restricted Common Shares) (collectively, the "EPP
Common Shares"), in each case as evidenced by the delivery of original issue
certificates representing the EPP Common Shares.
2.2 DIVIDENDS OR DISTRIBUTIONS PRIOR TO CLOSING DATE. Enron Colombia
and each Enron Colombia Subsidiary shall have the right (a) at any time prior
to the Closing Date, to declare dividends or distributions in an amount equal
to (i) the amount of all cash received or to be received by such Person (either
directly or as a dividend or distribution from the Enron Colombia Subsidiary
directly receiving or to receive such cash) as consideration for the sale (A)
by Pipeline of a 25% limited partner interest in Centragas to Tomen
Corporation, a Japanese corporation ("Tomen"), and (B) by Investments of a 25%
limited partner interest in Centragas to Promigas, whether or not such amounts
have been received by such Person, and (ii) of the receivable arising from the
refund of Colombian withholding taxes due to Investments relating to amounts
withheld from the consideration for such sale to Promigas, which dividend or
distribution may be payable in cash (if such receivable is sold or otherwise
liquidated) or in kind, and (b) to pay any such dividend or distribution (i) if
such dividend or distribution is in cash, at any time prior to or after the
Closing Date after the receipt by such Person of such cash and (ii) if such
dividend or distribution is in kind, at any time prior to or after the Closing
Date. Any such dividend or distribution shall be paid by such Person to its
partners or members as of the date of the declaration of such dividend or
distribution. EHC or its designee shall have the right, on behalf of
Investments, to file for and pursue the withholding tax refund referred to in
Section 2.2(a)(ii), and EPP shall cause Investments to execute any documents
prepared by EHC or such designee and reasonably satisfactory to EPP, including,
without limitation, powers of attorney, and take all such other actions as may
be reasonably necessary to obtain such withholding tax refund. Other than as
expressly set forth in this Section, neither Centragas, Enron Colombia, nor any
Enron Colombia Subsidiary shall declare or pay any dividend or distribution
prior to the Closing Date. EDC agrees that, if the Closing Date occurs, it
will have the obligation to transfer the General Partner Interest on the Second
Closing Date (subject to the satisfaction of the conditions to its obligation
to do so) or, if the Second Closing Date does not occur it will have the
obligation to pay to EPP on the Termination Payment Date (as defined in Section
5.4) the amount required to be paid on such date pursuant to Section 5.4.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF EHC. EHC hereby represents and
warrants to EPP that:
(a) ORGANIZATION OF EHC, EEC AND EDC. Each of EHC, EEC and EDC
is a limited liability company or corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware and
has all requisite corporate or similar power and authority to own, lease,
operate and otherwise hold all of its properties and assets and to carry
on its business as presently conducted and as proposed to be conducted
and is duly qualified to do business in each jurisdiction in which the
nature of its business as now conducted or its assets makes such
qualification necessary, except where the failure to be so qualified
would not have a material adverse effect on Centragas or the Ownership
Interest.
(b) ORGANIZATION OF CENTRAGAS, ENRON COLOMBIA AND ENRON COLOMBIA
SUBSIDIARIES. Each of Centragas, Enron Colombia, and each Enron Colombia
Subsidiary is a partnership, company, corporation or other entity duly
formed and validly existing under the laws of its jurisdiction of
organization or incorporation and has all requisite partnership,
corporate, or similar power and authority to own, lease, operate and
otherwise hold all of its properties and assets and to carry on its
business as presently conducted and as proposed to be conducted and is
duly qualified to do business in each jurisdiction in which the nature of
its business as now conducted or its assets makes such qualification
necessary, except where the failure to be so qualified would not have a
material adverse effect on Centragas or the Ownership Interest.
(c) PREEMPTIVE RIGHTS. Except as set forth in any of the Project
Documents, (i) there are no preemptive rights or other rights to
subscribe for or to purchase any limited or general partner interests in
Centragas or any limited or general partner interest, capital stock, or
other equity interest in Enron Colombia or any Enron Colombia Subsidiary
and (ii) there are no restrictions upon the voting or transfer of the
limited or general partner interests of Enron Colombia or any of the
Enron Colombia Subsidiaries in Centragas.
(d) LIENS, ETC. The Ownership Interest is being conveyed by EHC
and EEC and, in the case of the General Partner Interest, by EDC to EPP
free of material liens or other material rights or material encumbrances
(other than as disclosed in the Project Documents).
(e) TITLE TO PROPERTIES. Centragas is the lawful owner of all
material properties, rights of way, and assets that constitute the
Project, free and clear of all material liens, encumbrances and security
interests, except as disclosed in and permitted by the Project Documents
or as would not have a material adverse effect on Centragas or the
Ownership Interest.
(f) CERTAIN DISCLOSURES. Enron has delivered to the Oversight
Committee true and correct copies of all Project Documents for the
Project. There are no Project Document Violations by an Enron Party (or,
to Enron's knowledge, any other party) under the Project Documents. Part
III of Exhibit A attached hereto contains a complete list of all Project
Documents. Enron has disclosed in writing to the Oversight Committee all
pending (or, to its knowledge, threatened) claims by or against Third
Parties or for violations of Law that could reasonably be expected to
have a material adverse effect on the Ownership Interest. There are no
material contracts to which any of Centragas, Enron Colombia, any of the
Enron Colombia Subsidiaries or EDC (in its capacity as general partner of
Centragas) is a party or by which any of them is bound other than the
Project Documents.
(g) INFORMATION. The copies of written materials that Enron has
delivered to or made available to the Oversight Committee constitute
accurate copies of the originals thereof, and the files and records that
Enron has delivered to or made available to the Oversight Committee
constitute all material written factual information in the possession of
Enron or its affiliates concerning Centragas, Enron Colombia, the Enron
Colombia Subsidiaries, EDC (in its capacity as general partner of
Centragas), or the Project. It is understood that EHC makes no
representation regarding any information in such files obtained from
third parties. Enron is not aware of any fact, matter or circumstance
that has not been disclosed to the Oversight Committee that does or may
render any such materials, files, records, or other information untrue,
inaccurate, or misleading in any material respect or the disclosure of
which would be material to the decision by the Oversight Committee to
accept, on behalf of EPP, the Offer of the Ownership Interest. If any
dispute arises as to whether or not any matter was orally disclosed to
the Oversight Committee, EHC will have the burden of proving that such
matters were in fact so disclosed.
(h) FINANCIAL STATEMENTS. Enron has heretofore furnished EPP
with the audited balance sheet of Centragas as of December 31, 1995 and
the related statement of income and undistributed earnings for the year
ended December 31, 1995, and with unaudited balance sheets as of December
31, 1995 and the related statements of income and earnings for the year
ended December 31, 1995 for Enron Colombia and each Enron Colombia
Subsidiary (the "Financial Statements"). The Financial Statements
present fairly the financial condition, results of operations and cash
flows of Centragas, Enron Colombia, or such Enron Colombia Subsidiary, as
applicable, at the date and for the period indicated and have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated. Except
as disclosed in writing to the Oversight Committee, since December 31,
1995 there has not been any material adverse change in the assets,
business, financial condition or results of operations of Centragas,
Enron Colombia, or such Enron Colombia Subsidiary.
(i) CAPITALIZATION.
(i) The Enron Colombia Shares are the only issued and
outstanding shares of capital stock of Enron Colombia and are
validly issued, fully paid and nonassessable and were not issued in
violation of the preemptive rights of any person. Enron Colombia
owns, beneficially and of record, all of the outstanding shares of
Transportation and a 99% limited partner interest in each of
Pipeline and Investments. Transportation owns, beneficially and of
record, a 1% general partner interest in each of Pipeline and
Investments. The limited or general partner interests, capital
stock, or other equity interests in the Enron Colombia Subsidiaries
owned directly or indirectly by Enron Colombia are the only issued
and outstanding equity interests of the Enron Colombia Subsidiaries
and are validly issued, fully paid and non-assessable and were not
issued in violation of the preemptive rights of any person. Enron
Colombia, Pipeline and Investments own, beneficially and of
record, limited partner interests in Centragas of 0.015%, 37.500%
and 36.485%, respectively. Such limited partner interests in
Centragas are validly issued, fully paid and nonassessable and were
not issued in violation of the preemptive rights of any person.
(ii) Other than the Option Agreement dated as of December
29, 1995, among EDC, Investments, and Promigas, there are not now
any outstanding options, warrants, rights to subscribe for, calls
or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares
of any class of capital stock of Enron Colombia or any limited or
general partner interests, capital stock, or other equity interest
of any Enron Colombia Subsidiary or Centragas or any contracts,
understandings or arrangements to which Enron Colombia, any Enron
Colombia Subsidiary, or Centragas is a party, or by which any of
them is or may be bound, to issue additional shares of its capital
stock, limited or general partner interests, or other equity
interests or options, warrants, or rights to subscribe for, or
securities or rights convertible into or exchangeable for, any
additional shares of its capital stock, limited or general partner
interests, or other equity interests.
(iii) The General Partner Interest is validly issued and was
not issued in violation of the preemptive rights of any person.
The General Partner interest represents 1% of the partnership
capital of Centragas. EDC is the sole general partner of
Centragas.
(iv) None of Centragas, Enron Colombia and the Enron
Colombia Subsidiaries owns any capital stock, general or limited
partner interests, joint venture interests or other equity
interests, except as set forth in clause (i) of this Section
3.1(i). Centragas has, and has had, no business or assets other
than the development, financing, acquisition, construction,
operation and ownership of the Project as contemplated by the
Project Documents. Neither Enron Colombia nor any Enron Colombia
Subsidiary has, or has had, any business or assets other than the
ownership of the equity interests set forth in clause (i) of this
Section 3.1(i).
(v) EHC has no substantial assets other than its ownership
interest in EPP and a promissory note in the amount of $50 million
payable by Enron to EHC and has no substantial liabilities.
(j) AUTHORIZATION AND VALIDITY OF AGREEMENT; NO CONFLICT. Each
of EHC, EEC, and EDC has all necessary corporate or similar power and
authority to enter into this Agreement and to perform its other
obligations hereunder, and the execution, delivery and performance hereof
by each of EHC, EEC, and EDC have been duly and validly authorized by all
necessary corporate or similar action. This Agreement has been duly
executed and delivered by each of EHC, EEC, and EDC and constitutes the
legal, valid and binding obligation of each of EHC, EEC, and EDC,
enforceable against each of EHC, EEC, and EDC in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). Each
of EHC and EEC will have on the Closing Date, and EDC will have on the
Second Closing Date, all necessary corporate or similar power and
authority to convey, and will have taken all necessary corporate or
similar action to authorize the conveyance of, the Enron Colombia Shares
or the General Partner Interest, as applicable, to EPP or, in the case of
EDC, upon termination, the cash payment required pursuant to Section 5.4.
The conveyance of the Enron Colombia Shares and, subject to EDC's
obtaining the GP Transfer Consents, the General Partner Interest will not
(i) conflict with or result in a breach of, give rise to any preferential
purchase right under, or require any consent which has not been obtained
under, any Project Document or applicable Law (to the extent the failure
to obtain the same could reasonably be expected to have a material
adverse effect on the Ownership Interest), (ii) result in the creation or
imposition of any lien or encumbrance on any of the property of
Centragas, Enron Colombia, the Enron Colombia Subsidiaries or EDC or
(iii) with the passage of time or the giving of notice or both, or the
taking of any other action by a third party, have any of the effects
listed in clauses (i) and (ii) of this sentence.
(k) INVESTMENT PURPOSE. Each of EHC, EEC, and EDC will acquire
the EPP Common Shares it acquires for its own account and not with a view
to a sale or distribution thereof in violation of any securities laws,
and each of EHC, EEC and EDC has no intention of selling or distributing
any of the EPP Common Shares in violation of any securities laws. Each
of EHC, EEC and EDC agrees that the certificates representing the EPP
Common Shares will bear an appropriate legend referring to restrictions
on transfers thereof except in compliance with the registration
provisions of applicable state and federal securities laws or pursuant to
applicable exemptions therefrom.
(l) REGULATORY MATTERS.
(i) None of Enron, any Enron Subsidiary, Enron Colombia,
any Enron Colombia Subsidiary, EDC, or Centragas is an "investment
company" within the meaning of the Investment Company Act of 1940,
as amended.
(ii) None of Enron, any Enron Subsidiary, Enron Colombia,
any Enron Colombia Subsidiary, EDC, or Centragas is a "holding
company" or a "subsidiary company" of a "holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as
amended, and the rules and regulations promulgated thereunder.
(m) BROKERS AND FINDERS. None of Enron, any Enron Subsidiary,
Enron Colombia, any Enron Colombia Subsidiary, EDC, or Centragas has
retained any broker, finder, or similar intermediary who might be
entitled to a fee or commission from Enron Colombia, any Enron Colombia
Subsidiary, Centragas, or EPP, or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the sale
of the Ownership Interest pursuant to this Agreement.
(n) COMPLIANCE WITH LAW. Each of Centragas, Enron Colombia, the
Enron Colombia Subsidiaries and EDC (in its capacity as general partner
of Centragas) has complied with all applicable Laws and obtained all
applicable licenses, permits, approvals and authorizations of all
governmental authorities, except in each case as would not have a
material adverse effect on the assets, business, financial condition or
results of operations of Centragas, Enron Colombia, such Colombia
Subsidiary or EDC (in its capacity as general partner of Centragas).
(o) LITIGATION. There is no litigation, arbitration or
governmental proceeding pending or, to the knowledge of Enron, threatened
against Centragas, Enron Colombia, any Enron Colombia Subsidiary or EDC,
or their respective partners, officers or directors in their capacities
as such, in which an unfavorable ruling, decision or finding would have a
material adverse effect on the Project, Centragas, the Ownership
Interest, Enron Colombia or any Enron Colombia Subsidiary.
(p) TAXES. Each of Centragas, Enron Colombia, the Enron Colombia
Subsidiaries and EDC has filed all federal, state and foreign income tax
returns that have been required and has paid all taxes indicated by said
returns and all assessments received by it, except for such taxes as are
being contested in good faith by appropriate proceedings and for which it
has established adequate reserves.
3.2 REPRESENTATIONS AND WARRANTIES OF EPP hereby represents and
warrants to EHC, EEC, and EDC that:
(a) AUTHORIZATION AND VALIDITY OF AGREEMENT; NO CONFLICT. EPP
has all necessary power and authority to enter into this Agreement, to
issue the EPP Common Shares to EHC, EEC, and EDC hereunder and to perform
its other obligations hereunder, and the execution, delivery and
performance hereof by EPP have been duly and validly authorized by all
necessary company action. This Agreement has been duly executed and
delivered by EPP and constitutes the legal, valid and binding obligation
of EPP, enforceable against EPP in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The issuance of the EPP
Common Shares will not (i) conflict with or result in a breach of, give
rise to any preferential purchase right under, or require any consent
which has not been obtained under, any material agreement to which EPP is
a party or applicable Law (to the extent the failure to obtain the same
could be reasonably expected to have a material adverse effect on EPP or
the EPP Shares), (ii) result in the creation or imposition of any lien or
encumbrance on any of the property of EPP or (iii) with the passage of
time or the giving of notice or both, or the taking of any other action
by a third party, have any of the effects listed in clauses (i) and (ii)
of this sentence. The EPP Common Shares issued to EHC, EEC, and EDC
pursuant to this Agreement, upon issuance in accordance with this
Agreement, will be validly issued and outstanding and not subject to any
preemptive, preferential or other similar rights. Such shares, upon
issuance in accordance with this Agreement, will be fully paid (subject
to EDC's obligations to transfer the General Partner Interest to EPP on
the Second Closing Date or to make the payment specified in Section 5.4
hereof) and, except to the extent specified in Section 18-607(b) of the
Delaware Limited Liability Company Act and except to the extent specified
in Section 4.01(d) of the Company Agreement with respect to Special
Restricted Common Shares, nonassessable.
(b) INVESTMENT PURPOSE. EPP is acquiring the Ownership Interest
for its own account and not with a view to a sale or distribution thereof
in violation of any securities laws, and EPP has no present intention of
selling or distributing any of the Ownership Interest in violation of any
securities laws. EPP agrees that the certificates representing the
Ownership Interest will bear an appropriate legend referring to
restrictions on transfers thereof except in compliance with the
registration provisions of applicable state and federal securities laws
or pursuant to applicable exemptions therefrom.
<PAGE>
ARTICLE IV
CERTAIN COVENANTS
4.1 INDEMNITY. EPP agrees that (a) effective as of the Closing Date,
(i) EPP will assume the Shareholder Commitments described in Part I-A of
Schedule 4.1 to this Agreement and the other obligations described in Part I-B
of Schedule 4.1 to this Agreement (except to the extent that any thereof are
included in the Shareholder Commitments described in Part II of Exhibit B to
this Agreement) and (ii) indemnify and hold harmless EHC and its related
persons (as such term is defined in Section 4.4 hereof) against such
Shareholder Commitments and such other obligations from and after the Closing
Date and (b) effective as of the Second Closing Date, (i) EPP will assume the
obligations described in Part II of Schedule 4.1 to this Agreement and
(ii) indemnify and hold harmless EHC and its related persons (as such term is
defined in Section 4.4 hereof) against such obligations from and after the
Second Closing Date.
4.2 NON-LIABILITY OF ENRON FOR LIABILITIES OF ENRON COLOMBIA AND OTHER
PERSONS. EPP warrants and covenants that (a) upon transfer of the Enron
Colombia Shares pursuant to this Agreement, EHC and its related persons (as
such term is defined in Section 4.4 hereof) will have no liability or
obligation to EPP (except for obligations and liabilities under this Agreement)
or any third party with respect to the debts and liabilities of Enron Colombia,
any Enron Colombia Subsidiary, or Centragas, and (b) upon transfer of the
General Partner Interest pursuant to this Agreement, EHC and its related
persons (as such term is defined in Section 4.4 hereof) will have no liability
or obligation to EPP (except for obligations and liabilities under this
Agreement) or any third party with respect to the debts and liabilities of EDC
as general partner of Centragas, in each case whether incurred before or after
the date hereof, and EPP hereby agrees to indemnify and hold harmless EHC and
its related persons (as such term is defined in Section 4.4 hereof) against any
Claim (as such term is defined in Section 4.4 hereof) brought by any third
party with respect to any such liabilities or obligations.
4.3 MAINTENANCE OF CENTRAGAS PARTNERSHIP STATUS. EPP will take such
action as may be required from time to time to maintain the classification of
Centragas as a partnership for U.S. federal income tax purposes; provided,
however, that EPP shall not be required to take any action to comply with any
classification requirement that may be imposed after the date of this
Agreement.
4.4 INDEMNIFICATION. Each of EHC and EPP (each an "Indemnifying
Party") hereby agrees to indemnify, defend and hold harmless the other, its
directors, officers, and employees, its controlled and controlling persons and
persons under common control, and their respective directors, officers, and
employees (collectively "related persons" (provided that EPP and its
subsidiaries shall not be related persons of EHC, and EHC and its related
persons other than EPP and its subsidiaries shall not be related persons of
EPP)), from and against all Claims (as hereinafter defined) asserted against,
resulting to, imposed upon or incurred by such party or such party's related
persons (an "Indemnified Person"), directly or indirectly, by reason of,
arising out of, or resulting from (a) the inaccuracy or breach of any
representation or warranty of the Indemnifying Party contained in or made
pursuant to this Agreement and (b) the breach of any covenant of the
Indemnifying Party contained in or made pursuant to this Agreement. In
addition, EHC shall indemnify, defend, and hold harmless EPP, Enron Colombia,
the Enron Colombia Subsidiaries, and Centragas and each of their related
parties from and against (i) all Claims for any liability resulting from the
sale by Pipeline to Tomen of a 25% limited partner interest in Centragas or by
Investments to Promigas of a 25% limited partner interest in Centragas; (ii)
any Claim against Enron Colombia pursuant to Section 2(a), and any reduction in
the amount of the termination payment otherwise distributable to Enron Colombia
and the Enron Colombia Subsidiaries as a result of Section 3 (and any related
Claim), of the Agreement Among Partners dated as of January 23, 1996 (the
"Agreement Among Partners"), among EDC, Pipeline, Investments, Enron
International Development Services, Inc., Enron Pipeline Colombia G.P., Inc.,
Enron International, Inc. and Tomen. "Claim" shall include (i) all debts,
liabilities and obligations; (ii) all losses, damages, costs and expenses
including, without limitation, interest (including prejudgment interest in any
litigated matter), penalties, court costs and reasonable attorneys' fees and
expenses; and (iii) all demands, claims, actions, costs of investigation,
causes of action, proceedings, arbitrations, judgments, settlements and
assessments, whether or not ultimately determined to be valid.
4.5 DEFENSE OF THIRD PARTY CLAIMS. In the event any Claim is asserted
against any Indemnified Party by a third party, the Indemnified Party shall
with reasonable promptness notify the Indemnifying Party of such Claim;
provided that failure to give such notice shall not relieve the Indemnifying
Party of its obligations under this Article IV unless the Indemnifying Party is
actually and materially prejudiced thereby. Pursuant to its defense obligation
provided in Section 4.4, the Indemnifying Party shall employ counsel
satisfactory to the Indemnified Party and shall take such other steps as are
reasonably necessary or appropriate to defend the Indemnified Party against
such Claim.
4.6 PRESERVATION OF RECORDS. EPP agrees that (a) for five years after
the Closing Date (or, if longer, through the end of any applicable statute of
limitations of any relevant jurisdiction), it will preserve the corporate,
financial and other books and records of Enron Colombia, the Enron Colombia
Subsidiaries, and Centragas, and (b) for five years after the Second Closing
Date (or, if longer, through the end of any applicable statute of limitations
of any relevant jurisdiction) , it will preserve the corporate, financial and
other books and records of EDC relating to its having been the General Partner
of Centragas, and will in each case furnish to Enron reasonable access thereto
in the event Enron or any of its affiliates needs information therefrom in
order to comply with any accounting, financial reporting, auditing, tax
reporting, regulatory filing or other requirement to which it is subject.
4.7 CERTAIN ACTIONS BY CENTRAGAS PRIOR TO THE SECOND CLOSING DATE.
From the Closing Date until the Second Closing Date, EDC shall not, and shall
not cause or permit Centragas to, as applicable, take any of the actions
specified in Schedule 4.8 hereto.
4.8 POST-CLOSING FILINGS. EDC and EPP shall use reasonable efforts
following the Second Closing Date to file and obtain as soon as reasonably
practicable (a) the filing required to be made with the Ministry of Mines and
Energy of the Republic of Colombia evidencing the transfer of the General
Partner Interest from EDC to EPP or its designee, (b) the provisional
liquidation of taxes relating to the assignment of the General Partner Interest
from the National Tax and Customs Directorate of the Republic of Colombia and
(c) the registration of EPP or its designee acquiring the General Partner
Interest with the Bank of the Republic of Colombia.
4.9 RIGHT TO CENTRAGAS FUNDS.
(a) EPP hereby agrees to cause Enron Colombia, Pipeline, and
Investments to direct Centragas to make available to Enron, or any affiliate of
Enron designated by Enron, at the request of Enron, that portion of Centragas
funds that would otherwise be available to Tomen but for Section 10 of the
Agreement Among Partners on the terms prescribed by Section 6 of the Partners
Agreement dated as of September 13, 1994, among EDC, Enron Colombia, Pipeline,
Investments, Promigas, and Tomen (the "Partners Agreement"); provided that
Enron shall use reasonable efforts to cause any such funds so made available to
it or as directed by it to be invested in such a manner as will not, solely by
reason of such investment, cause Enron Colombia to be a Passive Foreign
Investment Company within the meaning of Section 1296(a) of the Code or to have
excess passive assets within the meaning of Section 956A of the Code.
(b) To the extent, if any, that Centragas funds are loaned to EPP or
its subsidiaries, EPP will enter into an agreement reasonably satisfactory to
EPP and Enron whereby EPP agrees to reimburse Enron for any repayments of such
loans made by Enron pursuant to the Cash Management Agreement made as of
December 16, 1994, by Enron in favor of Centragas and The Bank of New York, a
New York corporation, as Trustee under the Indenture, or the Distribution
Account Cash Management Agreement to be made by Enron in favor of Centragas.
<PAGE>
ARTICLE V
CLOSING
5.1 CLOSING DATE AND PLACE.
(a) The Closing Date shall be the fifth Business Day to occur
after the satisfaction or waiver of the closing conditions set forth in
Section 5.2(a), Section 5.2(b), and Section 5.2(c), or if later, the
fifth business day after EHC and EPP execute and deliver this Agreement.
The Closing Date may be extended by mutual agreement of the parties. The
closing of the purchase and sale of the Enron Colombia Shares shall take
place in the offices of EPP. At such closing, the consideration
specified in Section 2.1 shall be delivered.
(b) The "Second Closing Date" shall be the fifth Business Day to
occur after the satisfaction or waiver of the closing conditions set
forth in Section 5.2(d). The Second Closing Date may be extended by
mutual agreement of the parties. The closing of the purchase and sale of
the General Partner Interest shall take place in the offices of EPP.
5.2 CONDITIONS.
(a) The obligations of each of EHC, EEC and EPP to consummate the
purchase and sale of the Enron Colombia Shares shall be subject to the
satisfaction or waiver by such party of the Designated Closing Conditions
(except that the truth of EHC's representations and warranties shall not
be a condition to the obligations of EHC or EEC).
(b) The obligations of EHC and EEC to consummate the purchase and
sale of the Enron Colombia Shares shall be subject to the satisfaction or
waiver by such party of the following further conditions:
(i) EPP shall have received a fairness opinion that meets
the requirements of Section 7.06 of the Company Agreement;
(ii) the representations and warranties of EPP in this
Agreement shall be true and correct on and as of the Closing Date;
and
(iii) EPP shall have executed and delivered to Enron an
agreement in the form of Schedule 5.2(b) hereto (the "Ownership
Maintenance Agreement").
(c) The obligation of EPP to consummate the purchase and sale of
the Enron Colombia Shares shall be subject to the satisfaction or waiver
by such party of the following further conditions:
(i) EPP shall have received opinions of counsel to EHC,
EEC, and EDC reasonably acceptable to the Oversight Committee as to
the matters set forth in Schedule 5.2(c).
(ii) Promigas shall have executed and delivered to EPP a
certificate reasonably acceptable to the Oversight Committee
certifying that the O&M Agreement is in full force and effect, that
Promigas is not in default under the O&M Agreement and that, to the
knowledge of Promigas, Centragas is not in default under the O&M
Agreement;
(iii) Ecopetrol shall have executed and delivered to EPP a
certificate reasonably acceptable to the Oversight Committee
certifying that the Transportation Services Contract is in full
force and effect, that Ecopetrol is not in default under the
Transportation Services Contract and that, to the knowledge of
Ecopetrol, Centragas is not in default under the Transportation
Services Contract;
(iv) EPP shall have received a fairness opinion satisfactory
to the Oversight Committee meeting the requirements of Section 7.06
of the Company Agreement and stating that the acquisition by EPP of
the Ownership Interest is fair to the public shareholders of EPP
from a financial point of view; and
(v) Enron shall have executed and delivered to EPP the
Ownership Maintenance Agreement.
(d) The obligation of EDC and EPP to consummate the conveyance of
the General Partner Interest shall be subject to the satisfaction or
waiver by both parties of the following conditions:
(i) the purchase and sale of the Enron Colombia Shares
shall have been consummated;
(ii) EDC shall have obtained consents satisfactory to EDC
and EPP to the transfer of the General Partner Interest from
Ecopetrol, all of the partners in Centragas, and the holders of a
majority of the outstanding Centragas Notes (as defined below) (the
"GP Transfer Consents").
(e) The obligation of EPP to consummate the conveyance of the
General Partner Interest shall be subject to the satisfaction or waiver
by EPP of the following additional conditions:
(i) the Indenture dated as of December 8, 1994 (the
"Indenture"), by and between Centragas and The Bank of New York, as
Trustee for the holders from time to time of the 10.65% Senior
Secured Notes Due 2010 of Centragas (the "Centragas Notes"), and
all Security Documents (as defined in the Indenture) shall have
been amended as specified in Schedule 5.2(e)(i) hereto and, unless
such amendments to the Indenture were consented to by all holders
of the Centragas Notes, EPP shall have received an opinion from
counsel reasonably satisfactory to the Oversight Committee that all
consents to such amendments were obtained as are necessary to make
such amendments enforceable against all holders of the Centragas
Notes;
(ii) the Indenture shall have been amended to remove
references to EDC and where appropriate replace them with
references to the SOCIO GESTOR of Centragas; and
(iii) EPP shall have received an opinion of Brigard &
Urrutia, or other Colombian counsel reasonably acceptable to the
Oversight Committee, to the effect that a Colombian court would
give effect to the limitations on recourse to the general partner
of Centragas provided for in the Indenture and the Security
Documents, as so amended.
5.3 FAILURE TO MEET CONDITIONS TO CLOSING.
(a) If all conditions set forth in Section 5.2(a) are not satisfied or
waived by June 15, 1996 (the "Termination Date"), this Agreement may be
terminated by either party by notice to the other.
(b) If all conditions set forth in Section 5.2(b) are not satisfied or
waived by EHC and EEC by the Termination Date, this Agreement may be
terminated by EHC and EEC by notice to EPP.
(c) If all conditions set forth in Section 5.2(c) are not satisfied or
waived by EPP by the Termination Date, this Agreement may be terminated by EPP
by notice to EHC and EEC.
(d) Upon any termination in accordance with this Section 5.3, (a) none
of the parties will have any liability to any other party (except for any
liability arising from the breach of this Agreement prior to the such
termination) and (b) the rights of Enron (or the applicable Enron Subsidiary)
to sell or dispose of the Ownership Interest will be governed by
Section 2.02(f) of the Purchase Right Agreement.
5.4 FAILURE TO MEET CONDITIONS TO SECOND CLOSING. If the purchase and
sale of the Enron Colombia Shares is consummated but the conditions set forth
in Section 5.2(d) are not satisfied or waived by December 1, 1996, the
obligations of the parties to convey the General Partner Interest may be
terminated by any party by notice to the others, and upon any such termination,
neither party will have any obligation to the other to convey the General
Partner Interest; provided that this Agreement shall survive any such
termination of the obligation to convey the General Partner Interest. From and
after any termination of the obligation to convey the General Partner Interest
in accordance with the immediately preceding sentence, EDC shall not, and shall
not cause or permit Centragas to, as applicable, take any of the actions
specified in Schedule 4.8 hereto without the consent of Enron Colombia,
Pipeline and Investments, and as soon as reasonably practicable following such
termination, EDC, Enron Colombia, Pipeline, and Investments shall enter into an
agreement in form and substance reasonably satisfactory to EDC and EPP
documenting such consent rights. On or before the fifth Business Day following
any termination of the obligation to sell the General Partner Interest (the
"Termination Payment Date"), EDC shall pay to EPP, in cash in immediately
available funds, an amount equal to that portion of the Offer Price
attributable to the General Partner Interest (as specified in Section 2.1
hereof) plus interest at 14% from the Closing Date as consideration in lieu of
the transfer of the General Partner Interest in consideration for the EPP
Common Shares acquired by EDC pursuant to this Agreement.
5.5 LIMITATION ON REMEDIES AGAINST EEC. Notwithstanding anything to
the contrary contained in this Agreement, in the event of any breach by EEC of
its obligations under this Agreement, EPP agrees that it will not file a
petition in bankruptcy against EEC until 367 days after the redemption of all
of the shares of the 8.57% Preferred Stock of EEC and all of the shares of the
7.39% Preferred Stock of EEC.
<PAGE>
ARTICLE VI
MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the substantive law of Texas without giving effect to the
principles of conflicts of law thereof.
6.2 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be an original, but all of which together shall constitute one
and the same agreement.
6.3 SURVIVAL. The representations, warranties and covenants herein
shall survive the transfer and sale of the Ownership Interest hereunder.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
ENRON HOLDING COMPANY L.L.C.
By /s/ JAMES V. DERRICK, JR.
-----------------------------------
Name: James V. Derrick, Jr.
Title: Authorized Representative
ENRON EQUITY CORP.
By /s/ ROBERT J. HERMANN
-----------------------------------
Name: Robert J. Hermann
Title: Vice President, Tax
ENRON DEVELOPMENT CORP.
By /s/ Clifford E. Shedd
-----------------------------------
Name: Clifford E. Shedd
Title: Vice President
ENRON GLOBAL POWER &
PIPELINES L.L.C.
By /s/ THOMAS C. THEOBALD
-----------------------------------
Name: Thomas C. Theobald
Title: Chairman, Oversight Committee
<PAGE>
EXHIBIT A
To Purchase Agreement
PROJECT DESCRIPTION
<PAGE>
SCHEDULE 4.1
To Purchase Agreement
SHAREHOLDER COMMITMENTS
AND OTHER OBLIGATIONS
PART I-A
1. Agreement dated as of May 12, 1994, between Enron and Ecopetrol (the
"Enron Agreement").
2. Partners Agreement.
3. All reimbursement obligations under any performance bond established in
favor of Ecopetrol as contemplated in Clause 19 of the Transportation
Services Contract.
PART I-B
1. Agreement Among Partners.
2. Option Agreement dated as of December 29, 1995, among EDC, Investments,
and Promigas.
PART II
1. Obligations of EDC under the Agreement Among Partners, the Partners
Agreement, and the Option Agreement.
2. All liabilities and obligations of EDC as general partner of Centragas
under Colombian law (other than liabilities and obligations under this
Agreement).
3. Letter Agreement dated as of December 29, 1995, between EDC and Promigas
regarding payment of Option Price under Option Agreement.
4. Letter Agreement dated as of December 29, 1995, between EDC and Promigas
regarding Promigas administration rights.
<PAGE>
SCHEDULE 4.8
TO PURCHASE AGREEMENT
ACTIONS REQUIRING CONSENT
1. Any vote by EDC in the General Assembly of Partners of Centragas.
2. The sale of any assets of Centragas having an aggregate value greater
than $500,000.
3. Approval of the annual operations and maintenance budget for Promigas
and any amendments thereto pursuant to the O&M Contract.
4. Any amendments to (a) the O&M Contract, (b) the Transportation Services
Contract, (c) the Indenture, (d) the Amended and Restated Technical
Services Agreement dated as of October 13, 1994, between Enron
International Development Services, Inc., and Centragas, (e) the Onshore
Services Agreement dated as of October 13, 1994, between Enron
Engineering & Construction Company and Centragas, or (f) any agreements
among one or more of the partners in Centragas to which either Centragas
or EDC is a party.
5. The execution, termination, or material amendment of any other agreement
having a term of longer than one year or involving consideration greater
than $500,000 to which Centragas becomes or proposes to become a party.
6. Any capital expenditure, incurrence of debt, loan (other than loans made
pursuant to Section 6 of the Partners Agreement), or investment in
another person by Centragas in excess of $500,000 or purchase of assets
by Centragas for consideration greater than $500,000.
7. Any determination by EDC under Section 6 of the Partners Agreement as to
the amount of cash in Centragas accounts available to the partners in
Centragas in accordance with such Section or as to the necessity of
causing the partners in Centragas (or their affiliates, if applicable) to
restore funds to such accounts.
8. Any material transaction between Centragas and EDC or an affiliate of EDC
or between Centragas and Promigas or an affiliate of Promigas (other than
transactions covered by the O&M Agreement).
9. Any voluntary dissolution, liquidation, or declaration of bankruptcy by
Centragas.
10. Any change in the business of Centragas.
<PAGE>
SCHEDULE 5.2(B)
TO PURCHASE AGREEMENT
OWNERSHIP MAINTENANCE AGREEMENT
[Enron Corp. Letterhead]
____________, 1996
Enron Global Power & Pipelines L.L.C.
1400 Smith Street
Houston, Texas 77002
Attn: Chief Executive Officer
Re: Purchase Agreement (the "Purchase Agreement) dated as of
_______________________, 1996, among Enron Holding Company L.L.C.,
a Delaware limited liability company ("EHC"), Enron Equity Corp., a
Delaware corporation ("EEC"), Enron Development Corp., a Delaware
corporation ("EDC"), and Enron Global Power & Pipelines L.L.C., a
Delaware limited liability company ("EPP")
Gentlemen:
As of the date hereof, (i) EPP has purchased from EHC and EEC, in
accordance with the Purchase Agreement, the stock of Enron Commercial Finance
Limited, a Cayman Islands company ("Enron Colombia"), which in turn owns
indirectly 49% of the partnership capital of Centragas-Transportadora de Gas de
la Region Central de Enron Development & Cia., S.C.A., a Colombian
SOCIEDAD EN COMANDITA POR ACCIONES ("Centragas"), and (ii) EPP has issued
Common Shares of EPP to EDC in consideration of the agreement by EDC to
transfer the general partner interest and 1% of the partnership capital of
Centragas held by EDC to EPP (or to pay cash in lieu thereof) in accordance
with the Purchase Agreement. EHC, EEC, and EDC are direct or indirect
subsidiaries of Enron Corp., a Delaware corporation ("Enron"). In satisfaction
of certain conditions to the obligation of EHC, EEC, EDC, and EPP to
consummate such purchase in accordance with the Purchase Agreement, Enron and
EPP hereby agree as follows:
1. Capitalized terms used but not defined in this letter agreement
shall have the meanings given such terms in the Purchase Agreement.
2. Enron hereby agrees that it will (a) at all times during the
Operational Phase, as such term is defined in the Transportation Services
Contract, and during any period in which any of the Centragas Notes are
outstanding or the Indenture is still in effect, maintain ownership, directly
or through wholly owned subsidiaries, of at least 52% of the outstanding EPP
Common Shares or (b) indemnify EPP, Enron Colombia, the Enron Colombia
Subsidiaries and Centragas from, and hold them harmless against, all Claims
based on the breach of any provision in any agreement requiring Enron to
maintain a specified ownership interest in Centragas. In the event any Claim
asserted against EPP, Enron Colombia, the Enron Colombia Subsidiaries, or
Centragas by a third party, EPP shall with reasonable promptness notify Enron
of such Claim; provided that failure to give such notice shall not relieve
Enron of its obligations under this paragraph 2 unless Enron is actually and
materially prejudiced thereby.
3. EPP hereby agrees that it will at all times during the Operational
Phase, as such term is defined in the Transportation Services Contract, and
during any period in which any of the Centragas Notes are outstanding or the
Indenture is still in effect, (a) maintain ownership, directly or indirectly,
of 100% of the issued and outstanding equity securities of Enron Colombia and
each Enron Colombia Subsidiary, (b) cause the Enron Colombia Subsidiaries to
maintain collectively a 49% limited partner interest in Centragas, and (c) from
and after the Second Closing Date, maintain ownership, directly or indirectly,
of 51% or more of the entity holding the General Partner Interest. EPP also
agrees to make the foregoing undertakings directly to Ecopetrol, provided that
the documentation of such undertakings is reasonably satisfactory to Enron,
EPP, and Ecopetrol.
4. Enron hereby agrees that it will cause EHC at all times until the
Effective Transfer Date (as defined in the Transportation Services Contract) to
maintain a net worth, computed on a fair market value basis and excluding the
Common Shares in EPP owned by EHC, at least equal to the greater of (a) 10% of
the aggregate capital contributions to EPP and (b) $55,000,000.
Notwithstanding the foregoing, if (i) at the time any claim is made by EPP
against EHC under the Purchase Agreement, EHC's net worth is at least equal to
the amount specified in the immediately preceding sentence, and (ii) EHC's net
worth is reduced as a result of its payment of such claim, Enron shall have no
obligation under this Agreement to restore EHC's net worth and shall thereafter
be obligated to maintain EHC's net worth at an amount at least equal to the
amount required by the immediately preceding sentence less the amount of such
claim.
5. Enron hereby agrees that during the period prior to the Second
Closing Date it will make all payments to Centragas that it is required to make
under the Cash Management Agreement or the Distribution Account Cash Management
Agreement to be made by Enron in favor of Centragas.
Very truly yours,
ENRON CORP.
By:
Name:
Title:
Accepted and Agreed To:
ENRON GLOBAL POWER & PIPELINES L.L.C.
By:
Name:
Title:
<PAGE>
SCHEDULE 5.2(c)
To Purchase Agreement
OPINIONS OF COUNSEL
<PAGE>
[Enron Letterhead]
____________, 1996
Enron Global Power & Pipelines L.L.C.
1400 Smith Street
Houston, Texas 77002
As Senior Vice President and General Counsel of Enron Corp., a Delaware
corporation ("Enron"), I am familiar with (i) the Amended and Restated Limited
Liability Company Agreement of Enron Holdings Company L.L.C., a Delaware
corporation ("EHC") and (ii) the Certificate of Incorporation and the bylaws,
as amended, of Enron Equity Corp., a Delaware corporation ("EEC"). This
opinion is being furnished to you under Section 5.2(c) of the Purchase
Agreement (the "Purchase Agreement") dated ____________, 1996 among EHC, EEC,
Enron Development Corp., a Delaware corporation, and Enron Global Power &
Pipelines L.L.C., a Delaware limited liability company ("EPP"). Capitalized
terms used but not defined herein are used as defined in the Purchase
Agreement.
Before rendering the opinions hereinafter set forth, I (or other
attorneys in the Enron Corp. legal department) examined the Purchase Agreement.
I (or other attorneys in the Enron Corp.legal department) also examined and
relied upon original or photostat or certified copies of such corporate
records, certificates of officers of Enron Corp. and of public officials, and
such agreements, documents, and instruments as I (or such attorneys) deemed
relevant and necessary as the basis for the opinions hereinafter expressed. In
such examination, I (or such attorneys) assumed the genuineness of all
signatures (other than those of Enron, EHC and EEC) and the authenticity of all
documents submitted to me (or such attorneys) as originals and the conformity
to original documents of all documents submitted to me (or such attorneys) as
photostat or certified copies.
Based on the foregoing, and subject to the assumptions, qualifications
and explanations set forth herein, I am of the opinion that:
1. Each of EHC and EEC is a limited liability company or corporation
duly organized, validly existing and in good standing under the laws of the
state of Delaware and has all requisite corporate or similar power and
authority to own, lease, operate and otherwise hold all of its properties and
assets and to carry on its business as presently conducted and is duly
qualified to do business in each jurisdiction in which the nature of its
business as now conducted or its assets makes such qualification necessary,
except where the failure to be so qualified would not have a material adverse
effect on Centragas or the Ownership Interest.
2. Each of Centragas, Enron Colombia, and each Enron Colombia
Subsidiary is duly qualified to do business in each jurisdiction in which the
nature of its business as now conducted or its assets makes such qualification
necessary, except where the failure to be so qualified would not have a
material adverse effect on Centragas or the Ownership Interest.
3. Each of EHC and EEC has all necessary corporate or similar power
and authority to enter into the Purchase Agreement and to perform its
obligations thereunder, and the execution, delivery and performance thereof by
each of EHC and EEC have been duly and validly authorized by all necessary
corporate action. The Purchase Agreement has been duly executed and delivered
by each of EHC and EEC. Enron has all necessary corporate power and authority
to enter into the Ownership Maintenance Agreement and to perform its
obligations thereunder, and the execution, delivery and performance thereof by
Enron has been duly and validly authorized by all necessary corporate action.
The Ownership Maintenance Agreement has been duly executed and delivered by
Enron.
4. Each of EHC and EEC has all necessary corporate or similar power
and authority to convey, and has taken all necessary corporate or similar
action to authorize the conveyance of, the Enron Colombia Shares to EPP.
Enron has all necessary corporate power and authority to perform, and has taken
all necessary corporate action to authorize the performance of, its obligations
under the Ownership Maintenance Agreement. The conveyance of the Enron
Colombia Shares will not (i) conflict with or result in a breach of, give rise
to any preferential purchase right under, or require any consent which has not
been obtained under, any Project Document (to the extent the failure to obtain
the same could reasonably be expected to have a material adverse effect on the
Ownership Interest), (ii) result in the creation or imposition of any lien or
encumbrance on any of the property of Centragas, Enron Colombia, or the Enron
Colombia Subsidiaries or (iii) with the passage of time or the giving of notice
or both, or the taking of any other action by a third party, have any of the
effects listed in clauses (i) and (ii) of this sentence.
The opinions set forth above are subject in all respects to the following
qualifications:
(a) In rendering the opinion expressed in paragraph 4 above, neither I
nor any other attorney has made any examination of any accounting
or financial matters related to certain of the covenants contained
in certain documents to which Enron may be subject, and I express
no opinion with respect thereto.
(b) The opinions expressed herein are as of the date hereof only, and I
assume no obligation to update or supplement such opinions to
reflect any fact or circumstances that may hereafter come to my
attention or any changes in law that may hereafter occur or become
effective.
This opinion relates solely to matters of Texas and U.S. federal law and
the General Corporation Law of Delaware. This opinion is furnished in
connection with the transactions evidenced by the Purchase Agreement and
anticipated in connection therewith and may not be relied upon in connection
with any other transaction or by any person other than you; provided, however,
that Vinson & Elkins L.L.P., Figueroa Sierra & Asociados, and Hunter & Hunter
may each rely on this opinion for the purposes of rendering its opinion in
connection with Section 5.2(c) of the Purchase Agreement.
Very truly yours,
James V. Derrick, Jr.
<PAGE>
[Hunter & Hunter Letterhead]
_______________, 1996
Enron Global Power & Pipelines L.L.C.
1400 Smith Street
Houston, Texas 77002
Re: Purchase Agreement dated as of _______________________, 1996, among Enron
Holding Company L.L.C., Enron Equity Corp., Enron Development Corp. and
Enron Global Power & Pipelines L.L.C.
Dear Sirs,
We refer to the Purchase Agreement ("the Purchase Agreement") dated as of
____________, 1996, among Enron Holding Company L.L.C., a Delaware limited
liability company ("EHC"), Enron Equity Corp., a Delaware corporation ("EEC"),
Enron Development Corp., a Delaware corporation ("EDC"), and Enron Global Power
& Pipelines L.L.C., a Delaware limited liability company ("EPP"), providing for
the sale by EHC and EEC of the stock of Enron Commercial Finance Ltd., a Cayman
Islands company ("Enron Colombia") to EPP and for the sale by EDC of the
General Partner Interest (as defined in the Purchase Agreement) to EPP.
We have examined the following (the "Documents"):
(1) a copy as executed of the Purchase Agreement dated ____________, 1996;
[List relevant corporate and partnership documents of Enron Colombia,
Enron Colombia Transportation Ltd. ("Transportation"), Enron Pipeline
Colombia Limited Partnership ("Pipeline"), and Enron Colombia Investments
Limited Partnership ("Investments") (together, the "Enron Colombia
Subsidiaries"), including the corporate records of Enron Colombia at its
registered office in the Cayman Islands]
In giving this opinion, we have relied upon the accuracy of the Certificate of
a Director of Enron Colombia dated ____________, 1996 without further
verification. We have assumed, without independent verification, the
genuineness of all signatures, authenticity of all documents submitted to us as
originals and the conformity with original documents of all documents submitted
to us by telefax or as copies or conformed copies.
On the basis of the foregoing and subject to qualifications below, we are of
the opinion that:
1. Each of Enron Colombia and each Enron Colombia Subsidiary is a
limited partnership or company duly formed and validly existing under the laws
of the Cayman Islands.
2. Except as set forth in the Documents, there are no preemptive
rights or other rights arising under Cayman Islands law to subscribe for or to
purchase any limited or general partner interest, capital stock, or other
equity interest in Enron Colombia or any Enron Colombia Subsidiary.
3. The Enron Colombia Shares are the only issued and outstanding
shares of Enron Colombia and are validly issued, fully paid and nonassessable
and were not issued in violation of the preemptive rights of any person arising
under Cayman Islands law or the Documents. Enron Colombia is registered in the
Members' Register of Transportation as the holder of all of the outstanding
shares of Transportation and is registered in the register of partnership
interests of Pipeline and Investments as the holder of a 99% limited partner
interest in each of Pipeline and Investments. Transportation is registered in
the register of partnership interests of Pipeline and Investments as the holder
of a 1% general partner interest in each of Pipeline and Investments. The
limited or general partner interests or shares in the Enron Colombia
Subsidiaries owned directly by Enron Colombia (or indirectly by it through its
ownership of the issued shares of Transportation) are the only issued and
outstanding partnership interests or shares of the Enron Colombia Subsidiaries
and are validly issued, fully paid and nonassessable and were not issued in
violation of the preemptive rights of any person arising under Cayman Islands
law or the Documents.
4. There are not now any outstanding options, warrants, rights to
subscribe for, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of any class
of capital stock of Enron Colombia or any limited or general partner interests,
capital stock, or other equity interest of any Enron Colombia Subsidiary in
each case arising under Cayman Islands law or the Documents.
5. The conveyance of the Enron Colombia Shares will not (i) conflict
with or result in a breach of, give rise to any preferential purchase right
under, or require any consent which has not been obtained under, any Document
or any applicable Law of the Cayman Islands (to the extent the failure to
obtain the same could reasonably be expected to have a material adverse effect
on the Ownership Interest), (ii) result in the creation or imposition of any
lien or encumbrance on any of the property of Enron Colombia or the Enron
Colombia Subsidiaries under any Document or any applicable law of the Cayman
Islands, or (iii) with the passage of time or the giving of notice or both, or
the taking of any other action by a third party, have any of the effects listed
in clauses (i) and (ii) of this sentence.
We are practising in the Cayman Islands and do not purport to be experts on the
laws of any other jurisdiction and we therefore express no opinion as to the
laws of any jurisdiction other than Cayman Islands law. This opinion is also
based upon the laws of the Cayman Islands in effect at the date hereof and is
given only as to the circumstances existing on the date hereof and known to us.
Except as specifically stated herein, we make no comment with regard to any
representations which may be made by any party in any of the documents referred
to above or otherwise.
This opinion is addressed to you and is solely for your benefit and that of
your legal advisors. You may give copies of this opinion to your legal
advisors who may rely on it as though it were also addressed to them. It may
not be relied upon by any other person without our prior written consent.
Yours faithfully,
HUNTER & HUNTER
per:____________________________
Rory Todd
<PAGE>
[Figueroa Sierra & Asociados Letterhead]
Santafe de Bogata D.C.
____________, 1996
Enron Global Power & Pipelines L.L.C.
1400 Smith Street
Houston, Texas 77002
Re: Purchase Agreement dated as of _________________, 1996, among Enron
Holding Company L.L.C., Enron Equity Corp., Enron Development Corp., and
Enron Global Power & Pipelines L.L.C.
Gentlemen:
We have acted as Colombian counsel to Enron Holding Company L.L.C., a Delaware
limited liability company ("EHC"), Enron Equity Corp., a Delaware corporation
("EEC"), and Enron Development Corp., a Delaware corporation ("EDC"), in
connection with the sale by EHC and EEC of the stock of Enron Commercial
Finance Ltd., a Cayman Islands company, and the sale by EDC of the general
partner interest in Centragas - Transportadora de Gas de la Regi<o'>n Central
de Enron Development & C<i'>a., a SOCIEDAD EN COMANDITA POR ACCIONES formed
under the laws of Colombia, to Enron Global Power & Pipelines L.L.C., a
Delaware limited liability company ("EPP"). This opinion is furnished to you
at the request of EHC, EEC, and EDC pursuant to Section 5.2(c) of the Purchase
Agreement dated as of ___________, 1996, among EHC, EEC, EDC, and EPP (the
"Purchase Agreement"). Capitalized terms used in this opinion and not
otherwise defined have the meanings given to them in the Purchase Agreement.
In connection with this opinion, we have examined copies of the following
documents (the "Documents"):
A. Purchase Agreement;
B. Partners Agreement;
C. Agreement Among Partners;
D. Option Agreement; and
E. The bylaws of Centragas, as amended to the date hereof.
We also have examined and relied on corporate records, certificates of officers
of EHC and Centragas, and such other documents and instruments as we have
deemed relevant and necessary as the basis for the opinions expressed below.
In our examination, we have assumed (i) the due authorization, execution, and
delivery of documents and instruments by all parties, (ii) the legal capacity
of all natural persons, (iii) the genuineness of all signatures, (iv) the
authenticity of all documents submitted to us as originals, and (v) the
conformity to the original documents of all documents submitted as copies. As
to factual matters not directly within our knowledge, we have relied solely on
and have assumed the genuineness and accuracy of statements made to us by
representatives of EHC and Centragas and by public officials, in each case
without independent investigation of those matters.
Based on the foregoing, and subject to the assumptions, qualifications, and
explanations set forth below, we are of the opinion that:
1. Centragas is a SOCIEDAD EN COMANDITA POR ACCIONES duly formed and
validly existing under the laws of Colombia and has all requisite partnership
power and authority to own, lease, operate and otherwise hold all of its
properties and assets and to carry on its business as presently conducted and
is duly qualified to do business in each jurisdiction in which the nature of
its business as now conducted or its assets makes such qualification necessary,
except where the failure to be so qualified would not have a material adverse
effect on Centragas or the Ownership Interest. Each of Enron Colombia and each
Enron Colombia Subsidiary is duly qualified to do business in Colombia, except
to the extent the failure to be so qualified would not have a material adverse
effect on Centragas or the Ownership Interest.
2. Except as set forth in the Documents, (a) there are no preemptive
rights or other rights arising under Colombian law to subscribe for or to
purchase any limited or general partner interests in Centragas and (b) there
are no restrictions arising under Colombian law upon the voting or transfer of
the limited or general partner interests of Enron Colombia or any of the Enron
Colombia Subsidiaries in Centragas.
3. Enron Colombia, Pipeline, Investments, and EDC own of interests
in the partnership capital of Centragas of 0.015%, 37.500%, 36.485% and 1%,
respectively. Such interests Centragas are validly issued, fully paid and
nonassessable and were not issued in violation of the preemptive rights of any
person arising under Colombian law or the Documents.
4. Other than the Option Agreement, there are not now any outstanding
options, warrants, rights to subscribe for, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of any class of capital stock of Enron Colombia or any
limited or general partner interests, capital stock, or other equity interest
of any Enron Colombia Subsidiary in each case arising under Colombian law or
the Documents.
5. EDC is the sole general partner of Centragas.
6. The conveyance of the Enron Colombia Shares and, subject to
EDC's obtaining the GP Transfer Consents, the General Partner Interest will not
(i) conflict with or result in a breach of, give rise to any preferential
purchase right under, or require any consent which has not been obtained under,
any Document or any applicable Law of Colombia (to the extent the failure to
obtain the same could reasonably be expected to have a material adverse effect
on the Ownership Interest), (ii) result in the creation or imposition of any
lien or encumbrance on any of the property of Centragas, Enron Colombia, the
Enron Colombia Subsidiaries or EDC under any Document or any applicable law of
Colombia, or (iii) with the passage of time or the giving of notice or both, or
the taking of any other action by a third party, have any of the effects listed
in clauses (i) and (ii) of this sentence.
7. The Commercial Establishment Pledge Agreement entered into pursuant
to the Indenture constitutes a direct and valid lien on and perfected first
priority security interest only subordinate by mandate of Colombian law to
judicial expenses and labor and tax liabilities, in all of the Pledged Property
(as defined in the Commercial Establishment Pledge Agreement) in favor of the
Trustee under the Indenture for the benefit of the holders of the Centragas
Notes, subject only to the exceptions referred to therein.
8. The obligations of Ecopetrol under the Transportation Services
Contract are valid and legally binding and enforceable against Ecopetrol in
accordance with their terms, except as may be limited by applicable laws with
respect to the liquidation of Ecopetrol.
The opinions set forth in the numbered paragraphs above are subject in
all respects to the following qualifications:
(a) Our firm includes attorneys who are licensed to practice in the
Republic of Colombia, and for purposes of this opinion we do not
hold ourselves out at experts on, nor do we express any opinion as
to, the law of any jurisdiction other than the law of the Republic
of Colombia.
(b) The opinions expressed above are expressed as of the date of this
opinion only, and we assume no obligation to update or supplement
our opinions to reflect any fact or circumstances that may
hereafter come to our attention or any changes in law that may
occur or become effective after the date of this opinion.
This opinion is being furnished to you in connection with the
transactions contemplated by the Purchase Agreement and is solely for your
benefit, and no other person shall be entitled to rely hereon nor may this
opinion be quoted or otherwise referred to or furnished to any other person
without our prior written consent.
Very truly yours,
Augusto Figueroa Sierra
<PAGE>
[Vinson & Elkins Letterhead]
____________, 1996
Enron Global Power & Pipelines L.L.C.
1400 Smith Street
Houston, Texas 77002
Re: Purchase Agreement dated as of _______________________, 1996, among Enron
Holding Company L.L.C., Enron Equity Corp., Enron Development Corp. and
Enron Global Power & Pipelines L.L.C.
Gentlemen:
We have acted as U.S. counsel to Enron Holding Company L.L.C., a Delaware
limited liability company ("EHC"), Enron Equity Corp., a Delaware corporation
("EEC"), and Enron Development Corp., a Delaware corporation ("EDC"), in
connection with the sale by EHC and EEC of the stock of Enron Commercial
Finance Ltd., a Cayman Islands company, and the sale by EDC of the general
partner interest in Centragas - Transportadora de Gas de la Region Central
de Enron Development & Cia., a SOCIEDAD EN COMANDITA POR ACCIONES formed
under the laws of Colombia, to Enron Global Power & Pipelines L.L.C., a
Delaware limited liability company ("EPP"). This opinion is furnished to you
pursuant to Section 5.2(c) of the Purchase Agreement dated as of ___________,
1996, among EHC, EEC, EDC, and EPP (the "Purchase Agreement"). Capitalized
terms used in this opinion and not otherwise defined have the meanings given to
them in the Purchase Agreement.
In connection with this opinion, we have examined copies of the Purchase
Agreement and the Ownership Maintenance Agreement. We also have examined and
relied on such other documents and instruments as we have deemed relevant and
necessary as the basis for the opinions expressed below. In our examination,
we have assumed (i) the due authorization, execution, and delivery of documents
and instruments by all parties (which, in the case of EHC, EEC, EDC, and
Enron, is the subject of an opinion delivered to you by James V. Derrick, Jr.,
Senior Vice President and General Counsel of Enron Corp.), (ii) the legal
capacity of all natural persons, (iii) the genuineness of all signatures,
(iv) the authenticity of all documents submitted to us as originals, and
(v) the conformity to the original documents of all documents submitted as
copies. In connection with the opinion expressed in paragraph 1 below, we have
also assumed that (a) each of EHC, EEC, EDC, Enron is duly formed, valid
existing, and in good standing under the laws of the jurisdiction of its
organization and (b) has full power and authority to execute the Purchase
Agreement or, in the case of Enron, the Ownership Maintenance Agreement, and to
enter into the transactions contemplated thereby. As to factual matters not
directly within our knowledge, we have relied solely on and have assumed the
genuineness and accuracy of statements made to us by representatives of EHC,
EEC, EDC, and Enron, and by public officials, in each case without independent
investigation of those matters.
Based on the foregoing, and subject to the assumptions, qualifications,
and explanations set forth below, we are of the opinion that:
1. The Purchase Agreement constitutes the legal, valid and binding
obligation of each of EHC, EEC, and EDC, enforceable against each of EHC, EEC,
and EDC in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
The Ownership Maintenance Agreement constitutes the legal, valid and binding
obligation of Enron, enforceable against Enron in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
2. The conveyance of the Enron Colombia Shares and, subject to EDC's
obtaining the GP Transfer Consents, the General Partner Interest and the
performance by Enron of its obligations under the Ownership Maintenance
Agreement will not, including with the passage of time or the giving of notice
or both, conflict with or result in a breach of, give rise to any preferential
purchase right under, or require any consent which has not been obtained under,
any Applicable Law (to the extent the failure to obtain the same could
reasonably be expected to have a material adverse effect on the Ownership
Interest).
3. None of Enron, any Enron Subsidiary, Enron Colombia, any Enron
Colombia Subsidiary, EDC, or Centragas is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
4. None of Enron, any Enron Subsidiary, Enron Colombia, any Enron
Colombia Subsidiary, EDC, or Centragas is a "holding company" or a "subsidiary
company" of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended, and the rules and regulations
promulgated thereunder.
The opinions set forth in the numbered paragraphs above are subject in
all respects to the following qualifications:
(a) Our firm includes attorneys who are licensed to practice in the
State of Texas, among other jurisdictions, and for purposes of this opinion we
do not hold ourselves out at experts on, nor do we express any opinion as to,
the law of any jurisdiction other than the law of the State of Texas and
applicable federal law of the United States of America.
(b) Our opinion in paragraph 1 is subject to the effect of
(i) bankruptcy, insolvency, reorganization, fraudulent transfer, or other
similar laws relating to or affecting creditors' rights generally (regardless
of whether considered in a proceeding in equity or at law), (ii) principles of
good faith, fair dealing, and reasonableness, (iii) general principles of
equity (regardless of whether considered in a proceeding in equity or at law),
including, without limitation, the possible unavailability of specific
performance, injunctive relief or other equitable remedies, and (v) the
unenforceability under certain circumstances of waivers and provisions imposing
penalties, forfeiture, late payment charges, or an increase in interest rate
upon delinquency in payment or the occurrence of any event of default. For
purposes of our opinion in paragraph 1 we have also assumed that the Purchase
Agreement does not contravene or contradict, and would not be rendered void,
invalid, or unenforceable under, the law of any jurisdiction other than the
United States of America or the State of Texas that may be applicable thereto
(including, without limitation, the laws of the Cayman Islands and the Republic
of Colombia) as contrary to the public policy of such jurisdiction and that
such opinion would not otherwise be adversely affected by any laws of such
jurisdiction that may be applicable thereto.
(c) For purposes of the opinion expressed in paragraph 2 above,
"Applicable Law" means any constitution, statute, code, regulation, rule of, or
any injunction, judgment, order, decree, ruling, charge, or other restriction
of general applicability of, any governmental authority of the United States or
of the State of Texas which in our experience is normally applicable to
transactions of the type provided for in the Purchase Agreement. The term
"Applicable Law" does not include, and expresses no opinion with regard to, (a)
antitrust laws or (b) state or federal securities laws.
(d) The opinions expressed above are expressed as of the date of this
opinion only, and we assume no obligation to update or supplement our opinions
to reflect any fact or circumstances that may hereafter come to our attention
or any changes in law that may occur or become effective after the date of this
opinion.
This opinion which is being furnished to you in connection with the
transactions contemplated by the Purchase Agreement and is solely for your
benefit, and no other person shall be entitled to rely hereon nor may this
opinion be quoted or otherwise referred to or furnished to any other person
without our prior written consent.
Very truly yours,
VINSON & ELKINS L.L.P.
<PAGE>
[Enron Development Corp. Letterhead]
____________, 1996
Enron Global Power & Pipelines L.L.C.
1400 Smith Street
Houston, Texas 77002
As [Senior] Vice President and General Counsel of Enron Development
Corp., a Delaware corporation ("EDC"), I am familiar with the Certificate of
Incorporation and the bylaws, as amended, of EDC. This opinion is being
furnished to you under Section 5.2(c) of the Purchase Agreement (the "Purchase
Agreement") dated ____________, 1996 among Enron Holding Company L.L.C., a
Delaware limited liability company, Enron Equity Corp., a Delaware corporation,
EDC, and Enron Global Power & Pipelines L.L.C., a Delaware limited liability
company ("EPP"). Capitalized terms used but not defined herein are used as
defined in the Purchase Agreement.
Before rendering the opinions hereinafter set forth, I (or other
attorneys in the EDC legal department) examined the Purchase Agreement. I (or
other attorneys in the EDC legal department) also examined and relied upon
original or photostat or certified copies of such corporate records,
certificates of officers of Enron Corp., a Delaware corporation, and of public
officials, and such agreements, documents, and instruments as I (or such
attorneys) deemed relevant and necessary as the basis for the opinions
hereinafter expressed. In such examination, I (or such attorneys) assumed the
genuineness of all signatures (other than those of EDC) and the authenticity of
all documents submitted to me (or such attorneys) as originals and the
conformity to original documents of all documents submitted to me (or such
attorneys) as photostat or certified copies.
Based on the foregoing, and subject to the assumptions, qualifications
and explanations set forth herein, I am of the opinion that:
1. EDC is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware and has all requisite
corporate or similar power and authority to own, lease, operate and otherwise
hold all of its properties and assets and to carry on its business as presently
conducted and is duly qualified to do business in each jurisdiction in which
the nature of its business as now conducted or its assets makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on Centragas or the Ownership Interest.
2. EDC has all necessary corporate or similar power and authority to
enter into the Purchase Agreement and to perform its obligations thereunder,
and the execution, delivery and performance thereof by EDC have been duly and
validly authorized by all necessary corporate action. The Purchase Agreement
has been duly executed and delivered by EDC.
3. EDC has all necessary corporate power and authority to convey,
and has taken all necessary corporate action to authorize the conveyance of,
the General Partner Interest to EPP. Subject to EDC's obtaining the GP
Transfer Consents, the conveyance of the General Partner Interest to EPP will
not (i) conflict with or result in a breach of, give rise to any preferential
purchase right under, or require any consent which has not been obtained under,
any Project Document (to the extent the failure to obtain the same could
reasonably be expected to have a material adverse effect on the Ownership
Interest), (ii) result in the creation or imposition of any lien or encumbrance
on any of the property of EDC or (iii) with the passage of time or the giving
of notice or both, or the taking of any other action by a third party, have any
of the effects listed in clauses (i) and (ii) of this sentence.
The opinions set forth above are subject in all respects to the following
qualifications:
(a) In rendering the opinion expressed in paragraph 4 above, neither I
nor any other attorney has made any examination of any accounting
or financial matters related to certain of the covenants contained
in certain documents to which EDC may be subject, and I express no
opinion with respect thereto.
(b) The opinions expressed herein are as of the date hereof only, and I
assume no obligation to update or supplement such opinions to
reflect any fact or circumstances that may hereafter come to my
attention or any changes in law that may hereafter occur or become
effective.
This opinion relates solely to matters of Texas and U.S. federal law and
the General Corporation Law of Delaware. This opinion is furnished in
connection with the transactions evidenced by the Purchase Agreement and
anticipated in connection therewith and may not be relied upon in connection
with any other transaction or by any person other than you; provided, however,
that Vinson & Elkins L.L.P., Figueroa Sierra & Asociados, and Hunter & Hunter
may each rely on this opinion for the purposes of rendering its opinion in
connection with Section 5.2(c) of the Purchase Agreement.
Very truly yours,
Robert H. Walls, Jr.
<PAGE>
SCHEDULE 5.2(e)(i)
To Purchase Agreement
INDENTURE AND SECURITY DOCUMENT AMENDMENTS
INDENTURE:
The words "or shall be taken to prevent the institution of proceedings against
Enron Development Corp. in its capacity as general partner of Centragas" shall
be deleted from Section 7.1 of the Indenture.
NOTES:
The words "; and PROVIDED, FURTHER, that nothing herein shall relieve the
obligations of Enron Development Corp. as general partner of Centragas" shall
be deleted from the Notes in the paragraph of the Notes containing limitations
on recourse.
COMMERCIAL ESTABLISHMENT PLEDGE AGREEMENT:
The words "; PROVIDED, HOWEVER, that nothing herein shall relieve the
obligations of Enron Development Corp. as general partner of Centragas" shall
be deleted from Clause Sixteen of the Commercial Establishment Pledge
Agreement.
SECURITY AGREEMENT:
The words "; PROVIDED, HOWEVER, that nothing herein shall relieve the
obligations of Enron Development Corp. as general partner of Centragas" shall
be deleted from Section 4.8 of the Security Agreement and Assignment of
Contracts.
The following words shall be added to the end of the definition of "Collateral"
in Section 1.1 of the Security Agreement and Assignment of Contracts: ";
provided, however, that any obligation of the general partner of Centragas
under Article 243 of the Colombian Commercial Code shall not constitute
Collateral".
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 34,106
<SECURITIES> 0
<RECEIVABLES> 3,595
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37,701
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 193,660
<CURRENT-LIABILITIES> 9,436
<BONDS> 0
0
0
<COMMON> 156,738
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 193,660
<SALES> 0
<TOTAL-REVENUES> 2,604
<CGS> 0
<TOTAL-COSTS> 1,735
<OTHER-EXPENSES> (323)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,559
<INCOME-TAX> 1,019
<INCOME-CONTINUING> 8,540
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