Subject: TW Generation
From: [email-masked]
To: [email-masked], [email-masked], [email-masked], [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked]
Date: Fri, 30 Mar 2001 13:20:00 -0800 (PST)

Are we still considering adding ETS-owned generation at one or more of the TW compressor stations in Arizona or NM?  In case that is still a possibility, let me pass on something we may want to follow up on.  I called an old law partner of mine from DC who is now in the generation development business this week to have lunch and catch up.  This guy says he has come up with a good formula for getting new generation built fast and cheap.  He's got an 80mw nameplate simple cycle project (two frame 6 turbines) under development in Utah that he started development on a month ago and is projected to go in service on July 1.  Pretty quick work compared to other projects I've seen.  Here's his racket:

1.  He gets used, first quality turbines that have been well maintained.  His Utah turbines are something like 2 year old GE units that he bought from Tokyo Electric (he said they had 4000 hours on them and were maintained in typical electric utility gold plated style).  He didn't say, but I suspect there is no warranty on the units.  Obviously, this isn't a bold new strategy, but this guy claims to have a good handle on available used equipment.

2.  His siting/permitting strategy is to use "brownfield" sites--i.e., existing industrial or utility infrastructure is there along with some existing air emissions sources.  His Utah site is at the Magnesium Corp. of America plant on the Great Salt Lake. Magcorp is an ex-client of mine and I know it is a huge emissions source and has no Nimby issues.  Our compressor sites, in contrast, are not major emissions sites but may have some other things in common with this strategy.

3.  Here's a mysterious one--he says the financing is backstopped by the site owner (Magcorp in his project, potentially us if we do a TW project) but the corporate structure he has designed results in the power plant being treated as a non-controlled, non-affiliated entity for air permitting purposes.  That means the power plant emissions are not treated as part of the same emissions source as the host/site.  I'm not sure how/whether this works in a TW scenario, but it might be worth looking at.  We'd need to make sure that any power plant deal we chase doesn't screw up the timetable on the RedRock expansion application at FERC.  MKM--if we could preserve the "separate source" concept for air permitting purposes, could we even start work on developing a power project soon or would we be better off to wait until we have a FERC certificate in hand??       
    
Let me know if there is anything worth pursuing on this.  I'm having lunch with this guy on Mon. and will probably learn more.  The thing he is proudest of is that given the low permitting cost and relatively cheap cost of installed capacity, the project is expected to pay for itself in TWO MONTHS and then generate 100% upside.  Sounds good to me if its real.  DF