Subject: ETS Asset Development weekly update - 3/1/02
From: [email-masked]
To: [email-masked], [email-masked], [email-masked], [email-masked]
Cc: [email-masked], [email-masked]
Date: Fri, 1 Mar 2002 08:11:42 -0800 (PST)

Sun Devil Project

	El Paso Full Requirements contracts - this debate was stricken from FERC's agenda again this week (for the 3rd time) indicating dissent among Commissioners on how best to settle the allocation of El Paso's system serving Arizona and California markets.  We may see a draft allocation order circulated prior to the next FERC meeting on 3/14.

	Az Public Service - Conference call was held 2/28 to discuss the latest proposal.  APS remains hesitant to make any project commitment until they have a clearer direction from FERC on their EP full requirements contract.  APS is forwarding to TW their likely operating scenarios for the 2000 Mw Red Hawk plant so we can draft an SFV rate design.

	The Arizona Corporation Commission granted permit approval this week to a new 1000 Mw gas-fired power plant in southeast Arizona.  The new Bowie plant sits on the El Paso south system and is slated to be on-line in 2004.  The new plant will only add to the capacity pressure on El Paso.

	Panda Energy - credit discussions were held outlining the provisions ETS would like to see from Panda to support a transport agreement.  Panda is forwarding to us the cash waterfall language from their debt agreements that puts the fuel supply (including transport) and electric transmission payments ahead of all others (including bondholders).

Gomez Lateral

The confidentiality agreement was executed with Pioneer Gas Pipeline this week.  Right-of-way documentation and maintenance records are being assembled so Pioneer can begin their due diligence.  Other potential purchasers of the lateral may be Western Gas Resources, Sid Richardson, El Paso Field Services, and Duke Energy.

TW Station 1 Heat Recovery

Ormat, an experienced developer/operator of HRSG equipment, has expressed written interest in acquiring all the heat production from the compressor station to generate up to 6 Mw of electricity.  They intend to sell the production to the California Power Authority as "renewable energy."  Station information has been forwarded to Ormat for their review.