Gleason

????
Delainey
---------------------- Forwarded by David W Delainey/HOU/ECT on 06/08/2000
08:51 AM ---------------------------

Enron North America Corp.

From: Scott Healy 06/07/2000 05:31 PM

To: Don Miller/HOU/ECT@ECT, David W Delainey/HOU/ECT@ECT
cc: W David Duran/HOU/ECT@ECT
Subject: Gleason

Bob Virgo has informed me that the desk wants to convert Gleason to combined
cycle. Bob told me this in the context of asking me whether Calpine would
sell us any additional combined cycle equipment (i.e., steam turbines). My
guess is they won't.

If 1) it was of interest to us and 2) we are really going to convert Gleason,
I think I could get Calpine to execute a purchase/short term tolling
transaction on Gleason on favorable terms. I say this for the following
reasons:

1. Calpine is typically a strong bid for combined cycle installations.
2. Calpine has been trying unsuccessfully to get a combined cycle project in
TVA (due to their rank in the cue) and thinks that it will take them a year
to get through TVA. We actually think that their project is blocked.
3. Calpine would likely take the incremental construction cost risk on the
transaction.
4. I believe that Calpine would undertake the permitting and interconnection
work at their cost and risk, if needed. Given the cost of preparing a
combined cycle permit along with the potential fight that ENA might face from
TVA in such an effort, this risk sharing scenario could be attractive to ENA.
5. Calpine would likely accept a short term tolling arrangement. On their
eastern assets, Calpine is generally executing 1-2 year deals.
6. Calpine particularly in the east has been aggressively purchasing
projects.
7. If feasible, Calpine would probably be willing to further increase the
size of Gleason. Calpine's current plants announcements are generally in the
700-1,000 MW range.

I know that Dave Delainey has not previously supported selling Gleason
individually. However, you may want to investigate if anything has changed
in this circumstance, particularly since we are not generally a strong bid
for combined cycle projects. Please let me know.

FYI--Dave Duran and I are meeting with Bob Kelly of Calpine on next Tuesday
to discuss the use of Enron NOLs in Calpine's PG&E contract buyouts.