Subject: Re: Questions re: Siemens Negotiations
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Date: Wed, 21 Feb 2001 08:42:00 -0800 (PST)

Brad, is there a time this week when you can do a conf. call to cover these 
questions?

Please advise.

Regards,

Rob

[email-masked] on 02/14/2001 09:43:16 AM
To: [email-masked]
cc: [email-masked], [email-masked], [email-masked] 

Subject: Questions re: Siemens Negotiations

Rob - We've reviewed your memo which sets forth general points of your
negotiations with Siemens.  Following are comments and questions regarding
certain negotiated points:

EOT Claim Agreement

Owner must operate and maintain per O&M manuals and industry practices on oil;
if not, owner must correct items materially affecting Contractor's 
commissioning
obligations

We observe that while this point places reasonable responsibility on the Owner
to correct problems that were a result of their commercial operations, it is
introduces an opportunity for the Contractor to place unfounded blame on the
owner for affecting the Contractor's ability to commission.

Risk of Loss remains with owner during commissioning on gas

We understand that the Facility is under the care, custody and control of the
Owner and that the Facility is currently operating under the insurance 
coverage
intended for the commercial operating period (versus the construction period).
Please confirm that there is no reason to be concerned about insurance 
coverage
if a problem arises resulting in material damage attributable to Contractor
action during commissioning on gas.  We are also advising the Lenders to have
this point reviewed by an insurance advisor.

Degradation - agree to use curves with credit to owner for degradation during
commissioning

During our last conference call it was indicated that the first choice was to
test to determine degradation and the alternative was to agree on a set of
curves.  It appears that Siemens was unwilling to agree to the test approach.
We observe that the curves used to determine owner credit may be biased to the
benefit of Siemens.  We trust that your operations experts will diligently
review the basis for the curves.

Performance LD's on gas per the EPC contract with first $4,000,000 forgiven by
owner

Please explain the rationale behind forgiving $4 million of Contractor LDs.

Delay LD's on gas do not start until 60 days after performance test on gas

During our last conference call it was indicated that there would be a stand
down until 7/1/01 when gas is available, no LDs would be paid related to oil
firing performance, and that the LD clock would start if gas commissioning is
not complete within 60 days.  We do not understand the above negotiated point.
Please confirm that our understanding is correct or clarify your negotiated
point.

TAA Agreement

No 12-month look back.

We assume that this negotiated point is related to the time period factored 
into
the availability calculation for purposes of determining whether or not an
extension or additional work by the Contractor has been triggered as a result 
of
dropping below the availability standards.  Please explain how this negotiated
point affects the mechanics of the TAA and also please explain how 
availability
will be calculated.  As we noted during our last conference call, we are
concerned that Siemens believes that the availability value is not reduced if
maintenance work is being performed during periods when the Facility is not
being dispatched.

12 month Initial Guarantee Period, with the clock suspended for gas
commissioning unless owner delay.

We interpret the above negotiated point to mean that the 12-month clock for 
the
initial guarantee period stops during commissioning regardless of how long it
takes the Contractor to commission on gas (unless delays are attributable to
Owner) and re-starts after Contractor has successfully completed the 
performance
testing on gas.  Please confirm that our understanding is correct.

In order to provide the lenders an adequate warranty period on gas (if
there are additional delays on the P/L) our Insurance group has  indicated
that we will have no problem obtaining 12 months renewable business
interruption insurance when we go operational on gas.  This should solve
the issue over the revised warranty with Siemens because it covers defects,
design, and workmanship on the turbines and includes lost profits, etc.
Incidentally, for insurance purposes the turbines are designated DE3 which
is not a new technology designation.   The duration of BI coverage is 18
months per event with US$150,000 deductible.

Stone & Webster is advising the Lenders to have an insurance advisor review 
this
point.

Thanks in advance for your response.  Hope all is well.

Regards,

Bradley