0703005 Informal Interpretation

From:(redacted)

Sent:Tuesday, March 06, 2007 6:07 PM

To:Verne, B. Michael

Cc:(redacted)

Subject:Rule 802.2

Hi Mike - hope you had a good weekend. You must megoing totally nuts without Nancy there to share the work load. Are you bringinganyone else into the office? If so I hope you can get someone really good.

Under 802.2(a), an acquisition of a new facility isexempt as long as it has not produced income. In the instance that I amadvising on, the new facility is a power plant. The acquired person owns landand permits, it will build a power plant on the land. The acquiring person hasan option to buy the power plant when it is completed, as a turnkey facility.Up to this point it seems to clearly be covered by 802.20(a).

However, as the power plant construction nears completion,testing phases will be undertaken. As the power plant is being tested, prior toconsummation of the delivery / sale to the buyer, it will generate electricitywhich as part of the testing process will be delivered to the local power grid,and as such the testing will also generate revenue for the developer of theplant. Because the testing needs will be significant and occur over a period oftime, this not necessarily a one-time thing. Will this result in the exemptionbeing lost?

Thanks for your help and I hope to see you sometimesoon. Regards,