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What steps did you take to create the letter template? If you have access to My Oracle Support ( http://support.oracle.com ) you can take a look at the following knowledge document:
How To Create a New Contract Management Letter Template in BI Publisher (Doc ID 1357830.1)
Apparently you can either create the letter template within Oracle BI Publisher or you can create it in Microsoft Word using the BI Publisher Desktop Plug In which you can download after logging into the Oracle BI Publisher User Interface.