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Date
Rule
801.10
Staff
Michael Verne
Response/Comments
Stepping into an existing contract is the acquisition of an asset, but its only value is whatever premium is being paid to step in. Since there is no premium in this case, there is no value. N Ovuka concurs.

Question

From:(redacted)
Sent:Tuesday, May 94, 2004 6:14 PM
To: Verne, B. Michael
Subject: PowerPurchase Agreement

I would greatly appreciate yourinput regarding whether the following transaction is reportable:

Two companies, A and B, entered intoa power purchase agreement that obligates B to take power from A, a generatorof power. B wishes to assign its rights and obligations under the contract tomy client C. In essence, C will step into B's shoes. In addition, company Bwill pay my client approximately $120 million to assume the contract with A. Asa result of the assignment, C will not acquire any rights in any plant orequipment or other tangible or intangible asset of A or B.

It is my view that thiscontractual exercise is not reportable because its a simple contractualassignment and because it does not reach any underlying assets of either A orB. Nevertheless, our of an abundance of caution, I'd appreciate your views onthis matter.

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