Message-ID: <30627488.1075840820573.JavaMail.evans@thyme>
Date: Tue, 27 Mar 2001 11:19:00 -0800 (PST)
From: charles.ward@enron.com
To: louise.kitchen@enron.com
Subject: QF projects summary
Cc: w.duran@enron.com, garrick.hill@enron.com, mike.mazowita@enron.com, 
	chip.schneider@enron.com
Mime-Version: 1.0
Content-Type: text/plain; charset=us-ascii
Content-Transfer-Encoding: quoted-printable
Bcc: w.duran@enron.com, garrick.hill@enron.com, mike.mazowita@enron.com, 
	chip.schneider@enron.com
X-From: Charles Ward <Charles Ward/Corp/Enron@ENRON>
X-To: Louise Kitchen <Louise Kitchen/HOU/ECT@ECT>
X-cc: W David Duran <W David Duran/HOU/ECT@ECT>, Garrick Hill <Garrick Hill/HOU/ECT@ECT>, Mike Mazowita <Mike Mazowita/Corp/Enron@Enron>, Chip Schneider <Chip Schneider/NA/Enron@ECT>
X-bcc: 
X-Folder: \ExMerge - Kitchen, Louise\'Americas\East Power
X-Origin: KITCHEN-L
X-FileName: louise kitchen 2-7-02.pst

All projects are owned in a TRS/FOE structure (Total Return Swap / Friend o=
f Enron) as a result of our continued ownership in Portland General.

The two current East project companies are Motown and Cornhusker.

Motown consists of two 50% interests and has TRS of about $56 million and i=
s on the balance sheet for about $2 million:

Michigan Power - 129 MW power plant fully contracted for power 20+ years an=
d 14 remaining years of fixed cost gas.  The PPA is deep in the money versu=
s cost to generate (even after the swapped gas in 2015).  Dynegy operates a=
nd is Managing General Partner ("MGP") and Operator.  Fair performance reco=
rd on both at best.  Michigan is currently entering into QF stranded cost f=
ilings and the time is near to propose a restructuring.  We have waited for=
 about 9 months as Doug Clifford (the origination on the purchase) had been=
 attempting to purchase Dynegy's interest (they have too high a book value =
and are accrual based).

The proposed restructuring will take the form of an upfront payment in retu=
rn for an option to provide power from the market.  This approach gives Con=
sumer's (a BBB credit) much needed cash at a time when they are significant=
ly underrecovering due to increased fuel costs and set fuel recovery rates.=
 Consumer's ( like many other utilities) has a hard time seeing their expos=
ure (purchased power cost certainty for the volume and term) and doesn't se=
e any regulatory filing complications with their current stranded cost fili=
ngs.

The amended PPA is a non-unit contingent power short which we fill long-ter=
m with a contract from the power desk.  The desk takes the obligation becau=
se Generation Investments provides a full backstop pricing through their ow=
nership of the plant and the swapped gas (we either float past the swapped =
gas or contract for differences those years with the gas desk).  The PPA an=
d desk contract are securitized in the capital markets for the term of the =
PPA at 1.05 DSCR and about 75 bps over Consumer's current corporate bonds. =
 The plant essentially becomes a $0 NPV machine and the power desk has sign=
ificant optionality to call from the market rather than the plant for 20+ y=
ears.  During the term of the swapped gas, when the plant isn't called by t=
he desk we can sell the gas into the market for a profit.

It is fairly easy to see the increased value.  The project is currently pro=
ject financed at about 1.5 DSCR for about 14 years (lots of cash).  The des=
k has significant optionality and always a matched cost supply with the pla=
nt.  The plant gains efficiency due to revised O&M, insurance, reserves, et=
c. which are no longer required due to the removal of project financing.

Difficulties - Dynegy and Consumers.  Consumers can be rational.  Dynegy ei=
ther must sell or play along.  Current operational/project management issue=
s which Dynegy caused may make their interest available.

Ada - 29 MW plant fully contracted for power 20+ years.  Enron is the MGP. =
 GE operates for us.  50% owned by ConEd.  Fixed gas through 2008.  We woul=
d propose a restructuring at the same time as Michigan Power (this would le=
ave Consumers with only one unrestructured PPA).  Currently revisiting buyi=
ng ComEd's interest.

Cornhusker -  TRS of about $206 and about $24 on balance sheet.  A 100% int=
erest in a single 250 MW plant in Texas.  Small Coop which is very litigiou=
s.  Plant has had some rather spectacular failures (I have pictures which m=
ake the engineers on our floor shudder which I would be glad to pass along)=
 but the PPA only requires 60% availability before significantly in the mon=
ey capacity payments are reduced (essentially an impossible to reach loss).=
  The failures have been equipmentmanufacturer related (Westinghouse 501F).=
  Carl Tricoli spent the first 7 months (upto February) trying to sell the =
project to the Coop.  We spent last month determining that the Coop will ne=
ver buy the project (they just don't have the $ and we are a very expensive=
 lender.  We're taking a last stab at a restructuring proposal in the comin=
g month and upon appraisal of the Coop's intentions, we'll potentially ente=
r the sell mode.  El Paso has indicated an interest in the project already =
as the ex-Citizen's employee's over there attempted to restructure some tim=
e ago.  If we sell the closing should be by 9/30/01.

Again, I apologize for the delay in getting you this info.  Call with quest=
ions.

Chuck
