Transmission value and first mortgage debt

----- Forwarded by Steven J Kean/NA/Enron on 02/28/2001 02:07 PM -----

Michael Tribolet/ENRON@enronXgate
02/27/2001 09:41 AM

To: Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, James D
Steffes/NA/Enron@Enron, David W Delainey/HOU/EES@EES,
jklauber@llgm.com@SMTP@enronXgate
cc:
Subject: Transmission value and first mortgage debt

The proposed purchase of the PGE and SCE's transmission grids have vastly
different short term liquidity effects for PGE and SCE. If the current
proposal is at 2.3x book, and assuming the first mortgage bond holders want
complete repayment in return for releasing their liens, the numbers (at
12-99) fall out:

in millions PGE SCE

Book Value 1.43 1.90
Multiple of Book 2.3x 2.3x
Cash Price $3.29 $4.37

-First Mortgage Bonds $3.35 $1.18
Resulting liquidity ($0.06) $3.19

Note that the first mortgage holders may release their liens in return for
partial payment based on remaining value. Nonetheless, PGE's situation is
not as flexible.