Enron Corp. - University of California | Office of The President

In essence, his report concluded, Enron did nothing in return for the money
it received from the Connecticut agency except promise to pay it back, with interest.
"This $220 million was an infusion of cash when Enron needed it," he said.
571. Enron, CRRA and CL&P had entered into various agreements which provided that
CL&P would fund a $220 million buy-down of an 85 electric purchase agreement for output from
the electric generation facility. CL&P paid the $220 million directly to Enron Power Marketing, Inc.
("EPMI"), an Enron subsidiary, which EPMI was to repay to CRRA in monthly installments similar
to an unsecured loan at an imputed annual rate of 7% over the life of the contract. EPMI nominally
took on certain additional obligations to buy and sell energy to or from CRRA and to deliver power
to CL&P. However, EPMI assumed no real performance obligations or risks for the production, sale
or purchase of electric energy or steam.
572. Specifically, Enron or EPMI’s involvement consisted of an agreement to make
payments to CRRA, at the beginning of each month through 5/31/12, irrespective of CRRA’s
performance under any of its agreements with EPMI.
573. Enron's financial statements for the quarters ended 3/31/01, 6/30/01, and 9/30/01
were false and misleading because the transaction described above was in fact a loan and not an
energy contract for which revenue could be recognized. The reality was that EPMI was an incidental
party to the production, purchase and sale of electricity or steam from CRRA to CL&P. For
instance: (1) the price of power purchased by EPMI was exactly the same as the price of power
which it paid; (2) invoicing each month related to power purchases was initiated by CRRA billing
EPMI, which in turn billed CL&P and was timed to allow for EPMI to make payment to CRRA one
day following EPMI’s receipt of payment from CL&P – essentially a wash transaction leaving Enron
or EPMI with only the obligation to make its required monthly payments under the two agreements.
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