Subject: West Power Orig Update
From: [email-masked]
To: [email-masked], [email-masked]
Cc: [email-masked], [email-masked]
Date: Mon, 11 Jun 2001 13:58:00 -0700 (PDT)

Las Vegas:
Allegheny's bid was strong but required a financing out for 45 days - unacceptable.  Black Hills' bid has a clean purchase and sale markup with a bid that implies a $35MM gain for ENA ($10MM has to go to Calpers since they are an investor in LV 1).  They are going to their board Thursday and want to execute by early next week and close Aug 31.  We will try to get a higher bid from Northland this week ($40MM gain).  They will require a two-week financing out which they will secure with a $10MM non-refundable deposit.  If we sign with Northland, they can close in July.

In either case, accounting may require us to recognize this income this quarter because Las Vegas is a fair market value investment.   RAC requires a DASH to sell an asset of this size - we will circulate on Wednesday or Thursday.

One long shot deal we are proposing to Allegheny:  Tear up the existing 15 year toll backed by the Las Vegas project.  Enter into a 15 year firm energy sale from EPMI at Palo Verde.  The value of that deal may be in excess of $100MM since the market has fallen so much.  If we did that, we would have a merchant asset that would have to be sold at or near cost - this is achievable.  This would be significantly riskier than our current plan and would probably require board approval, but the value makes it worth exploring.

AMPS:
We continue to push Geneva Steel and Oregon Steel for permitting info.  West power markets have fallen further so the economics are marginal at best.  Friday's curves suggested a value of $10MM vs a cost of $17MM.  An imperfect put swaption would cost $4MM, further eroding the value.  I spoke to Brett Wiggs on Friday and forwarded him technical specs and reviewed different deal structures that might work.

DWR:
They announced Thursday that they have signed more definitive long term deals that they will honor (approx 6,500MW long term).  The non-binding "agreements in principle" will be renegotiated because prices have fallen so much.  DWR signed our Master Agreement for short term deals but Tim does not want to execute it because of litigation risk.  We will not do anything with them at this time.

Generator Tolls:  Interest has fallen off due to rapid drop in power prices.  We are still talking with 6-7 parties, but I dont think anything will get done soon.  

Munis:  Mcdonald got a small term sale done at NP-15 with city of Lassen.  Approx $600K of orig.

New Marketing Initiatives:
Negotiating 3 generator service agreements.  Mostly small plants coming on line this year.  The entrepreneurs behind these deals are shell shocked by the low prices , but many have already committed capital.  

Montana: - State forced divestiture of generation.  Retail load is short starting July 1, 2002.  Governor's office has asked us to bring a 700MW 10 year "solution".  They are willing to issue a $500MM bond to prepay and buydown part of the energy.  The basic play is to swap an EPMI Mid-C position for an in-state position from PPL, package that up with some renewables and sell to the state under a prepaid PPA.  Long shot but interesting.

CA Industrials:  A group of industrials want to buy up to 800MW NP-15 delivered for 5+ years as part of a negotiated settlement with CA.  Gov Affairs is working on a Core/Non-Core structure with the state that would potentially lead to open access for all industrial load if they pay a big exit fee to cover the stranded costs incurred during the past 12 months.