Message-ID: <21671887.1075844935672.JavaMail.evans@thyme>
Date: Fri, 17 Mar 2000 07:38:00 -0800 (PST)
From: james.prentice@enron.com
To: stanley.horton@enron.com
Subject: February 2000 EMC Financial Results
Cc: kerry.roper@enron.com
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Stan, please see the attached from Kerry.  We have been close to shut down 
economics but believe it still makes sense to run.  Please let me know if you 
want to disscuss this further.
                                                                              
           JSP
---------------------- Forwarded by James Prentice/GPGFIN/Enron on 03/17/2000 
01:30 PM ---------------------------


Kerry Roper
03/17/2000 02:25 PM
To: James Prentice/GPGFIN/Enron@ENRON
cc:  

Subject: February 2000 EMC Financial Results

For the month of February, the Enron Methanol Company Income Statement 
reflects a negative gross margin.  As you pointed out, this raises a question 
as to whether we should have been running the plant during the month. 
Hopefully, this brief explanation will clarify the reasons we continued to 
run.

As stated above, the gross margin was slightly negative; however, this 
includes the cost of oxygen. Most of the oxygen expense (approx. $300,000) is 
a fixed cost because of our take or pay agreement with Praxair.  As a result, 
when we evaluate whether or not to run, we look only at variable costs (which 
do not include $300,000 of oxygen). If we ignore this take or pay oxygen 
cost, then the gross margin is approx. $200,000 positive. This is roughly 
equal to our variable O&M costs which means that were at "break even" for 
variable margin and expenses. Given the high possibility of freezing 
temperatures in February and an analysis that indicated that we could break 
even for all variable costs, the decision was made to run the plant to 
protect against freeze damage. 

A simple schedule is attached to illustrate the break even analysis.