ERC's

Louise,

Summary and Notes:

Roseville:
Pollutant: Tons: $/T Cost
NOX 51 $21.5 $1.1MM
VOC 187 $27.5 $5.2MM
SOX 56 $6 $0.3MM
PM10 362 $29 $10.6MM
Options: $0.5MM
Total: $17.7MM

San Joaquin:
Pollutant: Tons: $/T Cost
NOX 326 $21 $6.9MM
VOC 22 $7.5 $0.2MM
SOX 36 $6 $0.2MM
Total: $7.3MM

Bay Area:
Pollutant: Tons: $/T Cost
Various 46 $11 $0.5MM

Total: $25.5MM

- San Joaquin could be sold for a $3MM - $6MM gain; we are proceeding with Calpine, Cantor and Enron desk.
- Sale of Roseville and Bay Area ERC's would result in a significant discount (40%-50%) because the air districts would be upset - basically, they could apply a transfer discount to the credits of 15%-25% and also could make future transfers conditional upon their approval (increasing risk for buyer).
- Sale would also cause collateral damage to any future ERC activities (Enron would be seen as speculator/carpetbagger)

Recommendation:
Pursue sale of San Joaquin credits and put the balance in the global finance funding vehicle. Initial indication is that transfer of credits for finance purposes is easy for an air district to accept. I am setting up a call to discuss with finance, legal and Kelly Brodbeck.

Chris Calger
503-464-3735