First Gas Power Corp.

please print
---------------------- Forwarded by Jeffrey A Shankman/HOU/ECT on 10/02/2000
02:19 PM ---------------------------

From: Doug Leach 09/25/2000 10:08 AM

To: Mike McConnell/HOU/ECT@ECT, Jeffrey A Shankman/HOU/ECT@ECT
cc: Michael L Brown/Corp/Enron@Enron, David A Terlip/Corp/Enron@Enron
Subject: First Gas Power Corp.

The First Gas Power Corp. (FGPC) liquid fuel supply transaction involves a
1000 MW (two power blocks of 500 MW each) combined cycle land based power
plant located on the island of Luzon in the Republic of the Philippines. In
May, 1997 Enron Capital & Trade Resources International Corp. (ECTRI) entered
into a fuel supply contract with FGPC to start delivering either condensate,
naphtha or gasoil to the first power block of 500 MW due online in June,
1999. ECTRI subsequently assigned the fuel contract to Enron Capital & Trade
Resources Singapore (ECTRS). Fuel deliveries were projected at 40.7 million
barrels over the following 43 months through December 2002. NPV origination
of $15.2 million was granted to Enron International (EI) and after
prudency/credit reserve the book amount given to EI was $11.3 million. ECTRS
and EI agreed to a "true-up" mechanism that would compensate either party in
the event of a mismatch between the actual volumes delivered and the MTM
volumes.

Fuel deliveries did not start until April 2000 and have not been at the MTM
volume of 31,050 barrel per day. To put it in perspective, FGPC should have
taken delivery on 14.2 million barrels by now and they have only ordered 0.9
million, a shortfall of 13.3 million barrels. This shortfall, as a result of
the delayed plant start-up and reduced consumption, has caused the ECTRS
books to currently have a $6.1 million receivable through the end of August,
2000. The plant is currently consuming 10,000-12,000 barrels per day, which
means the receivable will continue to increase until the consumption reaches
the expected MTM volume. When ECTRS approached EI Asia Pacific for the
true-up amount we were stonewalled. Following many months of discussion with
EI about the receivable, Enron Corp. reorganized EI into global regions, one
of which was Asia Pacific (APACHI). APACHI said it was not their deal, nor
had they ever benefited from the deal since the MTM revenue originally went
to EI and they didn't have money in their budget to return funds to ECTRS,
regardless of the true-up agreement. Subsequently, Global Fuels meet with
Rick Buy to discuss this matter. Rick recognized and agreed with our book
problem, but indicated that Enron Corp. was not prepared to remedy the
situation. We have been waiting for Corp.'s help ever since.

ECTRS did not do anything wrong and yet their books have suffered the
consequences of a project not living up to it's original estimate. How can
Enron operating groups grant MTM origination across company lines and not
expect those regions and projects to live up to the original MTM volumes,
term and margins granted?