Message-ID: <5103216.1075858320647.JavaMail.evans@thyme>
Date: Tue, 19 Dec 2000 02:27:00 -0800 (PST)
From: rick.buy@enron.com
To: david.gorte@enron.com, chip.schneider@enron.com
Subject: DASH FOR RIOGEN MERCHANT (AKA "ELECTROBOLT")
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fyi, please respond, tx rick
---------------------- Forwarded by Rick Buy/HOU/ECT on 12/19/2000 10:26 AM 
---------------------------


Larry L Izzo@ENRON_DEVELOPMENT
12/19/2000 10:04 AM
To: Rick Buy/HOU/ECT@ECT
cc: Richard Leibert/HOU/EES@EES 
Subject: DASH FOR RIOGEN MERCHANT (AKA "ELECTROBOLT")

Rick, I was provided a copy of the DASH at 6:30 PM last evening and asked to 
sign off soonest.  My comments follow:

Cost:  the DASH is incorrect.  EECC has provided both a cost - plus price and 
a guaranteed price.
EECC has provided a NEPCO-guaranted price of $215MM.
EECC has indicated that it's estimate of actual costs is most likely $205MM.  
We indicated this cost estimate was somewhat conservative.  Since last week, 
the cost estimate has been further revised to $202MM.  It is unlikely that 
the actual costs of the project will be significantly less than $202MM.  
$202MM represents a cost estimate with the Owners maintaining the risk of 
overruns and schedule.  This would require the Owner to maintain a 
contingency in his proforma above the most likely expected cost of $202MM.
After providing the above information to the Developer, the Developer was 
going to take a look at the carrying cost of turbines which were inside this 
estimate; I have no update on whether the turbine price changed from the 
numbers I saw last week.
Schedule:  Neither my team nor I had seen the provisions of termination by 
Petrobras, as stated in the DASH, prior to last evening.  The ability of 
Petrobras to terminate at April 30, 2002 if the project is not completed due 
to circumstances within Enron's controls, is an unlikely risk, but not 
totally impossible.  Further, the project is subject to a June 30, 2002, 
termination by Petrobras if the project is not completed due to force 
majeure.  This is considered more of an onerous risk.  It's not clear to me 
whether the requirement to complete the pipeline and bring gas to the project 
would be considered under Enron's control, considering that Enron is a 
partial Owner in CEG, the gas distribution pipeline company.
On the other hand, we have indicated that an October 31, 2001 start-up, is 
reasonable, based on a full NTP by January 1, and site access on February 1.  
If the schedule is constrained by the RAC recommendation to limit expenses to 
$15MM, the October 31, start-up could be at risk.
Performance:  The stated agreement with Petrobras for 365 megawatts (site 
condition) and an average net degraded heat rate of 9169 btu/kWH, appears 
correct, if it is LHV.
O&M Guarantee:  The DASH is not clear on what O&M availability guarantee 
Enron is prepared to sign with Petrobras.  I would suggest that OEC insure it 
agrees with any availability guarantees prior to Enron signing the Petrobras 
agreement.

Rick, sorry for this late feedback, but our system of coordination with the 
RAC needs improvement.  In the days when I worked with EI, EECC would provide 
to EI a written due diligence report direct, after checking the proforma 
against the PPA.  This was an Enron lesson-learned after years of 
experience.  The recent reorganizations have diluted this procedure.  I 
suggest I discuss with you how to improve our due diligence process.

Regards,

Larry

LI54600