All,

I am pleased to report that we have resolved the infamous James River contract with BPA under favorable terms.  The signed agreements are on my desk right now.  Besides significantly reducing our litigation risk, the addition of 7.5 MW/h and the change of delivery point have added $22.8 million to the value of the contract.

BPA and EPMI have amended the original contract to specify that (i) BPA will deliver 102 MW/h 24/7 for the 5-year term of the agreement (an increase of 7.5 MW/h over the original), (ii) the disputed "alternative delivery point" is designated as Mid-C, (iii) all language to the contrary is deleted from the agreement, (iv) the parties agree to "book out" the James River physical deliveries against EPMI sales to BPA at the Mid-C delivery point (so no power will flow); and (v) we will continue to invoice BPA each month for the term of the agreement, just as if the power was still flowing.

Although my preference would have been to terminate the James River agreement, BPA refused to do so because it would not have been able to recover the costs of this contract in its rates.  Similarly, I had hoped that we could do a one-time book-out, but BPA refused to do so because--according to BPA's finance person---such a book-out would have converted this to a financial deal requiring BPA to use mark-to-market accounting.  Therefore, we executed two documents:  one amending the original contract, and another called the "Book-Out Agreement," which sets out an agreement to book-out specific transactions over the next five years.  

I am satisfied that this is a favorable deal for EPMI because (1) we resolve the disputes over quantity and delivery point, which (2) will make it very difficult for BPA to change its mind in the future and argue that we are not entitled to receive power unless we are selling it to James River, and (3) the negotiated increase in quantity and change in delivery point add over $22 million in value to the contract.  

Thanks to everyone for your help.

Steve