RE: NMC Term Sheet

Ron,

I'm available today from 3:30 to 4:00 or 4:30 to 5:00 tomorrow if either of those works for you.

Fletch

-----Original Message-----
From: Ron Tapscott
Sent: Friday, May 18, 2001 8:00 PM
To: Fletcher J Sturm
Cc: Terri Clynes; Doug Sewell
Subject: NMC Term Sheet

Fletcher,

I have attached a generic term sheet as a starting point for an opportunity we have discussed with Nuclear Management Company. Any and all of these points included in the terms sheet are subject to change (in particular, the intra-day discussion).

Background info on NMC is as follows:

Nuclear Management Company Llc (NMC)
joint venture between -- NSP, Alliant, WEPCO and WPS
services provided -- manage the companies (noted above) 7 nuclear facilities (5 sites)
The Facilities are as follows:
Point Beach Units 1&2, owned by WEPCO, located in east central Wisconsin (30 miles SE of Green Bay), mW 523 and 500 mW respectively
Kewaunee, owned by WPS, located 27 miles SE of Green Bay, mW 511
Prarie Island Units 1&2, owned by NPS, located in Red Wing, MN, mW560 and 500 mW respectively
Monticello Unit 1, owned by NPS, located 30 miles NW of Minneapolis, mW 536
Duane Arnold, owned by Alliant (IES Utilities), located 8 miles NW of Cedar Rapids, mW 515
Michigan nuclear facility (no details)

They are looking for a physical hedge (they suggested a 600 mW gas fired peaking facility) but may be receptive to a financial hedge (especially for the Michigan site) as well. Or, a combination. I would like to explore leveraging the Arpin site if we could but at this time I want to hold off from mentioning the site since it is part owned by Great Rivers Energy. They want ownership (percentage or all) of the gas fired facility. Based on the geographic location of the facilities noted above, the Arpin site should work well. I would imagine they have firm service for those sites and if they are looking for the gas fired facility to take up the slack when these units are out, we should not have a problem with transport from the Arpin site (even though there is a west to east issue).

They would also like to market the gas fired facility when the unit is not needed as a backstop! From a physical plant standpoint -- I would suggest that we carve out the development with a slight ownership that has a put option (for the equity we retain) at a future date (but retain a percentage of the marketing arrangement for sale of excess power in the market). I think NMC wants complete control based on their view of deregulation in Wisconsin. I believe their long term strategy is to have a PPA with the above Utilities for the offtake (firm output w/ firm price) and the ability to market the excess (from both the Nuclear Units and peaking facility) at market rates.

This arrangement should be able to flange well with a financial insurance product (since the addition of the gas fired facility would provide more liquidity) that I have discussed with the Mid-Market Group (Terri Clynes and Doug Sewell).

Let's arrange a time when we can discuss at your convenience. Thanks, Ron.

<< File: NMC Tolling Term Sheet 5.18.01.doc <<