Re: Request for permission

found it. Mark

Stuart Zisman
02/23/2001 04:17 PM

To: Mark E Haedicke/HOU/ECT@ECT
cc: Don Miller/HOU/ECT@ECT
Subject: Request for permission

Mark,

I am currently negotiating an Option to Obtain an Easement in connection with
our peaking power plant in Caledonia, Mississippi. As you know, the
Caledonia facility is currently scheduled to be sold to Cinergy Capital &
Trading, Inc. The anticipated closing date is March 27, 2001 (but this is
subject to change depending on when we obtain the requisite regulatory
approval).

One of the things that ENA was seeking to do, prior to deciding to sell the
plant, was to establish a second interconnection to the Southern Company
(currently Caledonia is interconnected to TVA). In pursuit of this second
interconnection, certain ENA developers were charged with the responsibility
for obtaining options for easements. The easements were needed in order to
run the transmission wires from the plant to the point of the interconnection
with Southern. To date, we have obtained all but one of the required options
(the "Galiano Option").

We are obligated to cooperate with Cinergy from now until the closing date in
pursuit of the Galiano Option. Ms. Galiano and her lawyer have insisted upon
adding an indemnity in the form of easement which requires the grantee
(Caledonia Power I, LLC) to indemnify the grantor against liabilities arising
from grantee's use of the easement. They have adamantly rejected, however,
my request that the indemnification be limited to actual damages (and that
special, consequential and punitive damages be waived).

Cinergy has asked us to execute the Galiano Option without the waiver of
consequential damages and I am seeking your permission to do so.

I think that this should be acceptable from ENA's perspective for several
reasons:

1) It is likely (99%+) that we sell Caledonia Power I, LLC (the proposed
counterparty to the Galiano Option) in the next several weeks;
2) The Galiano Option is structured as an option to obtain an easement and
the waiver of consequential damages issue only arises if the option is
actually exercised; and
3) If for some odd reason the sale doesn't go through, we finally decide to
complete the second interconnection and we exercise the option for easement,
we can probably mitigate our risk by procuring additional insurance.

Please let me know, at your earliest possible convenience, if I may proceed
with the execution of the Galiano Option. Many thanks.

Stuart