Subject: FW: Enron
From: [email-masked]
To: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Date: Thu, 12 Apr 2001 00:25:00 -0700 (PDT)

Presented below is a synopsis of the 6.75 hour phone call yesterday.   The 
primary short-term issue facing us is whether we wish to throw our name in to 
be co-chair.    The only other marketer on the official committee is Dynegy, 
Reliant is not on the committee but sat in.    The group generally agreed 
that the co-chairs should be a financial player (bank, bond or CP) and an 
energy company (QF or marketer).   After the phone call, I spoke with 
Dynegy's general counsel John Herbert, who is their designated 
representative.  He was going to check within his organization whether there 
was appetite to serve today, but was not all that inclined, given his "day 
job" as he put it.   I think we would agree that a marketer should be the 
other co-chair as the QF's have a narrow agenda.  Here are some of the 
plusses and minuses if we threw our name in:

+ Better access to information and guiding consensus
+ Ability to explain the necessity of long term contracts in the solution
- time commitment
- will we be more of a lightning rod?

Regards,

Michael

 -----Original Message-----
From:  "JOHN G KLAUBERG" <[email-masked]>@ENRON 
[mailto:IMCEANOTES-+22JOHN+20G+20KLAUBERG+22+20+3Cjklauber+40LLGM+2ECOM+3E+40E
[email-masked]] 
Sent: Wednesday, April 11, 2001 9:18 PM
To: Tribolet, Michael
Cc: BENNETT YOUNG
Subject: Fwd: Enron

Michael:  I could not tell if you were copied on this, but I thought Ben's 
quick e-mail note to me gave a good description of the situation and the 
initial issues we need to focus on, particularly as regards the possible 
advisors for the committee.  Based on your economic analyses of the various 
parties exposures to date, do you think the numbers that some of the 
participants at the meeting threw out seemed to be in the ballpark?  Do you 
get the sense the numbers are "gross" or "net" (i.e., after reflecting any 
offsets, such as any out of the money power contracts entered into at the 
same time EPMI did its deal last October)?  I'll be out of town tomorrow, but 
I'll touch base with you at some point.  John
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Date: Wed, 11 Apr 2001 21:30:38 -0400
From: "BENNETT YOUNG" <[email-masked]>
To: [email-masked], "JOHN G KLAUBERG" <[email-masked]>
cc: "JAMES HUEMOELLER" <[email-masked]>
Subject: Enron
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John, Carl and Jim,

I attended the PGE Committee call today.  During the call, it became apparent 
that a group of creditors were meeting in a law firm's office nearby.  I 
therefore walked over and attended the meeting in person.  I learned that 
Reliant, Dynegy and Meriant had been in the process of forming an ad hoc 
committee which they had invited Merrill Lynch, B of A and some of the QF's 
to join.  That unofficial committee had not gotten off the ground when the BK 
hit.

All of the official committee members were present either by phone or in 
person.  Many had counsel present.  In addition, representatives of Reliant, 
Meriant (sp?), the Ohio State Teachers Ass'n and a QF called Crockett were 
permitted to attend.  Finally, representatives of PricewaterhouseCoopers, 
which is acting as financial advisors to the Banks, and of Saybrook Capital, 
which is acting as advisors to the State of TN, were present.

The US Trustee made a short presentation regarding duties of committees.  
After they got off the line, the creditors each explained their claim as 
follows:

Ohio State Teachers:  $56M of commercial paper (CP)
B of A: $938M syndicated loan and a letter of credit supporting pollution 
control bonds
Reliant: generator owed $358M
Dynegy: generator owed $255M
Crockett: QF owed $55M
GWF Power: non-gas fired QF owed $60M
Merrill Lynch: holder of CP and unsecured bonds, but declined to state amount 
at this time
Meriant: generator owed $220M
BONY: indenture trustee owed $2 bn
State of Tennessee: CP holder, owed $76M
Davey Tree: trade vendor (tree trimming) owed $10M
US Bank: indenture trustee on 3 bond issues totalling $310M
Palo Alto: party to contracts relating to WAPA and NCPA.  owed $50M, but 
claimed to represent municipalities that could be owed as much as $2 bn if 
the WAPA contracts are rejected.

The committee first discussed the SoCal Edison MOU with the governor.  The 
proposal does not help the QF's, as the rates to be paid to them going 
forward do not cover their fuel costs, and doesn't resolve the generator 
issues either.  There also is a major feasibility issue in terms of the 
ability of the capital markets to absorb $20 bn plus of bonds.

PGE's lawyers then came in and made a brief presentation.  They said:
- PGE won't pay out more than it takes in in rates.  They believe there is 
enough money in their rates to pay the QF's at rate set in Woods decision 
going forward; they racknowledge that the QF's have been the most hurt.
- they believe their liability for the net short position was cutoff at least 
as of April 6 as a result of a FERC decision and a decision of the 9th 
Circuit, and may have been cutoff as of 1/17.
- they will continue to pay the DWR 6.4 cents on an interim basis with a 
reservation of rights.  Will not pay more than they collect.  They expect 
this to become an issue when the amount they have to pay the DWR goes up to 
9.4 cents.
- they view the PUC as their adversary and want to use the BKY Ct as the 
forum for financial issues.  They want creditors' support against the PUC.
- they have hired E & Y as their financial advisors and Ken Buckfire of 
Wasserstein as their investment banker.
- they recommended that the Committee retain a PR firm.

After PGE's counsel departed, the Committee turned to organizational issues.

Clara Yang Strand of B of A offered to serve as Co-chair.  The Committee 
discussed having one of the generators serve as the other co-chair.  Enron is 
thinking about it, as is Dynegy.  During breaks, both Palo Alto and GWF Power 
(a QF) told me they would support Enron to be co-chair.

The Committee then discussed counsel retention.  A number of firms were 
discussed.  Enron suggested Milbank; other members, particularly the QF's, 
objected because of Milbank's prior representation of the PX.  Eventually a 
short list was arrived at of Sheppard Mullin; Paul Hastings; Sidley & Austin; 
O'Melveny; Skadden.  These firms will be invited to make a short presentation 
on Monday.

The issue on counsel is that Sidley has been involved for quite some time as 
B of A's counsel.  They seem like the frontrunner for that reason.  The issue 
for Enron is whether it is comfortable with the Bank as Chair and the Bank's 
counsel as committee counsel.  This is perhaps less of an issue if Enron is 
co-chair.

Next, retention of a financial advisor was discussed.  B of A tried to 
steamroll PWC through.  I objected, as did BONY, that we needed more time, so 
the matter was deferred to Monday.  Right now the only candidate for the 
position is PWC; do we have any other recommendations?  My understanding is 
that the remaining big accounting firms are all engaged by CA utilities.

I am a little concerned that the process is heading in the direction of the 
Bank as Chair, the Bank's lawyer as committee counsel and the Bank's 
financial advisor as the committee's advisor.

We then discussed retaining an investment banker.  The leading candidate is 
Saybrook Capital.  This was tabled in the short term, although Saybrook was 
asked to send a pitch book to the committee.

Finally, we discussed hiring a PR firm and a lobbyist.  The general sense was 
that both were a good idea, and names will be solicited.

The Committee will meet in person in Monday in SF starting at 11.  PGE was 
asked to visit at 2 that day.  Carl and I plan to attend on Monday along with 
Michael.

Call me with questions.

Ben Young