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Enron Mail |
All projects are owned in a TRS/FOE structure (Total Return Swap / Friend o=
f Enron) as a result of our continued ownership in Portland General. The two current East project companies are Motown and Cornhusker. Motown consists of two 50% interests and has TRS of about $56 million and i= s on the balance sheet for about $2 million: Michigan Power - 129 MW power plant fully contracted for power 20+ years an= d 14 remaining years of fixed cost gas. The PPA is deep in the money versu= s cost to generate (even after the swapped gas in 2015). Dynegy operates a= nd is Managing General Partner ("MGP") and Operator. Fair performance reco= rd on both at best. Michigan is currently entering into QF stranded cost f= ilings and the time is near to propose a restructuring. We have waited for= about 9 months as Doug Clifford (the origination on the purchase) had been= attempting to purchase Dynegy's interest (they have too high a book value = and are accrual based). The proposed restructuring will take the form of an upfront payment in retu= rn for an option to provide power from the market. This approach gives Con= sumer's (a BBB credit) much needed cash at a time when they are significant= ly underrecovering due to increased fuel costs and set fuel recovery rates.= Consumer's ( like many other utilities) has a hard time seeing their expos= ure (purchased power cost certainty for the volume and term) and doesn't se= e any regulatory filing complications with their current stranded cost fili= ngs. The amended PPA is a non-unit contingent power short which we fill long-ter= m with a contract from the power desk. The desk takes the obligation becau= se Generation Investments provides a full backstop pricing through their ow= nership of the plant and the swapped gas (we either float past the swapped = gas or contract for differences those years with the gas desk). The PPA an= d desk contract are securitized in the capital markets for the term of the = PPA at 1.05 DSCR and about 75 bps over Consumer's current corporate bonds. = The plant essentially becomes a $0 NPV machine and the power desk has sign= ificant optionality to call from the market rather than the plant for 20+ y= ears. During the term of the swapped gas, when the plant isn't called by t= he desk we can sell the gas into the market for a profit. It is fairly easy to see the increased value. The project is currently pro= ject financed at about 1.5 DSCR for about 14 years (lots of cash). The des= k has significant optionality and always a matched cost supply with the pla= nt. The plant gains efficiency due to revised O&M, insurance, reserves, et= c. which are no longer required due to the removal of project financing. Difficulties - Dynegy and Consumers. Consumers can be rational. Dynegy ei= ther must sell or play along. Current operational/project management issue= s which Dynegy caused may make their interest available. Ada - 29 MW plant fully contracted for power 20+ years. Enron is the MGP. = GE operates for us. 50% owned by ConEd. Fixed gas through 2008. We woul= d propose a restructuring at the same time as Michigan Power (this would le= ave Consumers with only one unrestructured PPA). Currently revisiting buyi= ng ComEd's interest. Cornhusker - TRS of about $206 and about $24 on balance sheet. A 100% int= erest in a single 250 MW plant in Texas. Small Coop which is very litigiou= s. Plant has had some rather spectacular failures (I have pictures which m= ake the engineers on our floor shudder which I would be glad to pass along)= but the PPA only requires 60% availability before significantly in the mon= ey capacity payments are reduced (essentially an impossible to reach loss).= The failures have been equipmentmanufacturer related (Westinghouse 501F).= Carl Tricoli spent the first 7 months (upto February) trying to sell the = project to the Coop. We spent last month determining that the Coop will ne= ver buy the project (they just don't have the $ and we are a very expensive= lender. We're taking a last stab at a restructuring proposal in the comin= g month and upon appraisal of the Coop's intentions, we'll potentially ente= r the sell mode. El Paso has indicated an interest in the project already = as the ex-Citizen's employee's over there attempted to restructure some tim= e ago. If we sell the closing should be by 9/30/01. Again, I apologize for the delay in getting you this info. Call with quest= ions. Chuck
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