RE: DWR Stranded Cost Update--CONFIDENTIAL

Attached is the file that contains the details behind the table below.

-----Original Message-----
From: Comnes, Alan
Sent: Friday, July 20, 2001 2:07 PM
To: Dasovich, Jeff; Thome, Jennifer; Shapiro, Richard; Steffes, James D.;
Mara, Susan; Perrino, Dave; Belden, Tim; Alvarez, Ray; Palmer, Mark A. (PR);
Calger, Christopher F.; Calvert, Gray; Etringer, Michael; Fillinger, Mark;
Page, Jonalan; Buerkle, Jim; Hyde, Crystal
Cc: Elafandi, Mo
Subject: RE: DWR Stranded Cost Update--CONFIDENTIAL

All:

The DWR contract analysis has now been updated to include the gas-indexed
deals. The total out-of-market for executed contracts stands at $12
billion. As you can see 7 counterparties hold contracts in excess of values
indicated by recent curves by $500 million or more.

Thanks goes to Mo Elafandi for pushing this analysis through the structuring
group.

GAC

Mark-to-Market of
DWR Contracts By Counter Party
($s, negative number means contract is above market)
Calpine -$4,479,764,629
Coral -$1,493,874,018
Williams -$1,056,234,556
Dynegy -$987,044,991
Allegheny -$958,949,529
High Desert -$674,251,353
Sunrise -$551,894,408
Dynegy -$471,117,317
GWF -$432,339,191
Mirant -$265,644,251
Constellation -$165,463,637
El Paso -$128,334,382
Morgan Stanley -$82,462,946
Alliance -$75,169,854
PG&E Gen -$63,165,408
Clearwood -$41,423,566
IID -$13,035,452
Duke Energy -$2,052,733
Total Overmarket PV -$11,942,222,221

-----Original Message-----
From: Comnes, Alan
Sent: Friday, July 13, 2001 9:23 AM
To: Comnes, Alan; Dasovich, Jeff; Thome, Jennifer; Shapiro, Richard; Steffes,
James; Mara, Susan; Perrino, Dave; Sharma, Ban; Belden, Tim; Alvarez, Ray;
Palmer, B. Scott; Palmer, Mark; Calger, Christopher F.; Calvert, Gray;
Etringer, Michael; Fillinger, Mark; Page, Jonalan
Subject: RE: DWR Stranded Cost Update

I am resending the same file as before (although to a larger group) and need
to make a correction regarding one assumption. I am told the analysis does
not yet include the gas indexed contracts. We're working on getting them
included and when they are, the overmarket value will likely increase.
-----Original Message-----
From: Comnes, Alan
Sent: Wednesday, July 11, 2001 3:04 PM
To: Dasovich, Jeff; Thome, Jennifer; Shapiro, Richard; Steffes, James; Mara,
Susan; Perrino, Dave; Sharma, Ban; Belden, Tim; Alvarez, Ray
Subject: DWR Stranded Cost Update

Using information pulled together by Jennifer and BAN, I requested West
Tradings Risk/Structuring Group do a more careful analysis of the
above-market costs associated with the DWR contracts. Attached is their
analysis.

In this analysis we examined only the executed contracts and NOT the
agreements-in principle. (Only executed contracts were released by the state
in the last few weeks.) Also, gas-indexed contracts were examined on their
nongas costs only. Since gas costs are a pass through on some contracts, we
excluded them as a conservatism; i.e., we did not ascribe costs to the gas
portion of the contracts since they will float with market costs over time.
These contracts were marked to market using current, applicable curves.
Finally we discounted at the LIBOR rate, which is around 4%/year.

The stranded cost under these assumptions is approximately $10 billion. The
spreadsheet shows the overmarket costs by contract. Note: a negative
"mark-to-market" equals a positive stranded cost.

As before, this analysis is based upon Enron's confidential forward curves.
Approval from Tim Belden is needed before this analysis can be released.

Alan Comnes
<< File: Stranded Cost Analysis Structuring Confidential.xls <<

<< File: Stranded Cost Analysis Structuring Confidential.xls <<