TCE Negotiation Update.pdf

1. TCE Proposal: ICE submitted a proposal on March 10, 2011, and a subsequent letter on April 29, 2011, with no significant changes to their original value proposition.
2. Government Counter Proposal: The OPA Commercial Team prepared a government-instructed counter proposal, which was delivered to ICE on April 21, 2011.
3. Financial Parameters: The OPA used ICE's disclosed financial parameters, including CAPEX of $540 million, to calculate a project return (IRR) of 5.1%, while ICE claims a 5.3% return.
4. Outstanding Issues: The two main issues to resolve with TCE are the financial value of the OGS contract and CAPEX for the Replacement Plant.
5. Arbitration: The OPA recommends starting arbitration discussions to determine the boundaries of a potential arbitration.
6. Commercial Discussions: The OPA does not recommend making further offers to meet ICE's demands and suggests ending commercial discussions.
7. Legal Action: The OPA is prepared to pursue legal action, including arbitration or litigation, if a settlement cannot be reached.

Recommendations:

1. Start arbitration discussions immediately.
2. Send a clear message that commercial discussions will end if ICE does not revise their proposal.
3. Seek clarifying questions from TCE, but do not send another counter proposal.

Attachments:

1. Draft Letter 1A
2. Draft Letter 1
3. OPA Ltr to TCE 4 May 2011.docx
4. Slides from Legal team discussing arbitration discussions with TCE.