Pueblo

I got a call from Tino Monaldo today passing on the results of Dennis
Langley's meeting with DOE in Albuquerque. DOE indicated that their current
PNM rate is "5.3 cents, exclusive of the demand charge." Tino's consultant
claims that factoring in the demand charge yields an effective rate of
approximately 7 cents/KWh. Assuming we need to come in at 10% less than the
current rate, our bogey is 6.3 cents/KWh. This is at the high end of the
range we hoped they'd be in.

Additionally, DOE indicated that they need "redundancy" and don't want to
rely on PNM for back up power. They want a multiple turbine facility--i.e.,
more smaller turbines instead of fewer large turbines. The new pipeline will
need to be split connected to El Paso and TW in order to access diverse
supplies and guard against supply failure. They have not asked for fuel oil
backup.

I know this is starting to look like the project that won't go away, but the
power price number looks very promising to me. I think its worth scrubbing
down the model we've used to replace the generic capital cost and O&M
assumptions with more specific assumptions related to the specific turbine
configuration we'd be using.

If this price is really as favorable as I think, can we make another run at
the ENA people and Federal Solutions guys to see if they have any interest?
DF