Message-ID: <6230160.1075862104853.JavaMail.evans@thyme> Date: Wed, 7 Nov 2001 11:30:47 -0800 (PST) From: trevor.woods@enron.com To: e.taylor@enron.com Subject: FW: Methanol Plant Credits and Allowances Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Woods, Trevor X-To: Taylor, Michael E X-cc: X-bcc: X-Folder: \MTAYLOR5 (Non-Privileged)\Taylor, Michael E\Inbox\methanol plant X-Origin: Taylor-M X-FileName: MTAYLOR5 (Non-Privileged).pst -----Original Message----- From: Massey II, John Sent: Wednesday, November 07, 2001 1:25 PM To: Mcgowan, Kevin; Woods, Trevor Subject: FW: Methanol Plant Credits and Allowances Kevin - This is a deal that I want to do - We have been working on this for a while and think the deal brings significant upside opportunity for Enron. The deal would involve buying the below mentioned credits and involve spending around $2 million - Any thoughts? John -----Original Message----- From: Woods, Trevor Sent: Wednesday, November 07, 2001 1:08 PM To: Massey II, John Subject: Methanol Plant Credits and Allowances Massey, I had another meeting with Jim Prentice at EOTT regarding the VOC credits and NOx allowances in HGA (see the charts below for the volumes) generated by the shutdown of the facility. I think he's comfortable with transacting with EGM. He's now aware that EGM is responsible for all of the environmental responsibilities with the MTBE plant. Under the MTBE sale agreement EGM must provide capital for technology enhancements or allowances to ensure that all TNRCC emissions requirements are met through 2005. With this in mind they are no longer interested in holding onto the Methanol plants allowances to get the MTBE plant into compliance. Keep in mind that we would have the option of taking the NOx as ERCs or allowances. There have been no transactions for the NOx allowances but our models lead me conclude there will be more value in allowances than ERCs and I recommend we take them as allowances. Volumes: NOx ERCs (tons) 86 Year NOx Allowances 2002 2531 2003 2531 2004 1815 2005 1064 2006 689 2007 212 2008+ 76 VOC ERCs (tons) 594 The two structures we've discussed are as follows: Option A: Purchase of NOx and VOC Price: Should be between $2mm and $2.5mm Allowance Seller: EOTT Allowance Buyer: EGM Emissions Option B: VOC Purchase with NOx revenue share Term: Until allowances are exhausted VOC Price: $750,000 NOx Revenue Share: 70% EGM and 30% EOTT Jim is willing to be flexible and look at either transaction. If we have a strong desire one way or the other I believe he'll allow us to choose the terms. With that in mind, I'd prefer Option A. The revenue share makes the deal far more complicated long term and could limit our earning potential over the long haul. In our current environment can we spend the cash? This is a good deal and one that, if possible, I strongly recommend we do. Let me know the answer so I can get the process rolling with Jim. Trev