Re:

Just a few of questions.

1. Will Kevin take MTM income on this position on "day one?"

2. Why just 5 years sold?

3. Does your 9% contemplate covering depreciation?

Wes

John J Lavorato@ENRON
12/11/2000 08:44 AM
To: Kevin M Presto/HOU/ECT@ECT, David W Delainey/HOU/ECT@ECT, Wes
Colwell/HOU/ECT@ECT, Don Miller/HOU/ECT@ECT, Greg Whalley/HOU/ECT@ECT
cc:
Subject:

The following points refer to the methodology that we are taking to rebook
the New Albany Plant. Please send me a note immediately if you disagree.
Assume that NewAlb is a non mark to market entity and Enron is the mark to
market entity. However, it is fully owned and operated by us for now.

* The power mark to market book will pay NewAlb a capacity payment of $4.87
for 5 years. We shaped this payment as follows:

2001 - $5.06
2002 - $4.96
2003 - $4.86
2004 - $4.75
2005 - $4.65

* This payments allows Enron to supply gas to NewAlb and receive power.

* Enron will pay NewAlb $1000 per unit start.

* Enron will also pay NewAlb $1.05/MW hour for varialbe o&m.

* This will create an entity "NewAlb" that will return 9% assuming a book
value of $336/kw on 12/31/2005 vs. 409 currently.

* If NewAlb pays the 9% out that entity should be relatively flat each year
for the next five.