|
|
Enron Mail |
Great--looks like a good start at working through this project. I've got a
couple of thoughts, questions, etc. that I'd like to discuss with you all before we get back to Tino with any kind of preliminary response: 1. What is our pulse on a project that ramps up slowly to full utilization? This deal will not be 100% subscribed for several years (optimistically) as it is designed to gain market share from a combination of market growth and bypass of existing GCNM customers (and new power generation load, but that part of Tino's story needs more thinking). The rates on the attached spreadsheet would provide full cost recovery only after the project is fully subscribed, right? We need to think about the economics of this thing in terms of deferring and recovering in the out years the revenue shortfalls in the early years. Has GPG ever done deals like that? 2. On the GCNM discounting issue, it seems we need at least three data points to understand our risks: a. What do GCNM's current discounts look like? b. How much more aggressively could GCNM discount in the future if they had to to avoid bypass? (i.e., are there regulatory or political constraints on increased discounts?) c. Will the big industrial loads stick with the low cost provider if GCNM tries to undercut the project, or will they be willing to pay a little more just to assure that a new pipeline gets built into their backyard? 3. Assuming we don't have the risk appetite to get in on a project like this, how do we positiion ourselves to be the preferred upstream pipeline for Langley's project? I assume that if neither TW nor El Paso partner with Langley he'll interconnect with both. Do we already have or can we create any kind of competitive advantage under that scenario? 4. Is the right of way that Langley has negotiated really all that valuable? From Lorraine's memo, it seems that the issue of which route is best is half baked at best. If that's all Dennis brings to the table (not counting his big bag of $$$$), does a deal with him really make sense? I'm sure there are a lot of other issues we need to discuss, but these are the first that come to mind. Please give me a call when you get together to discuss this as I'd like to be involved in how we respond to Tino and Dennis. Thanks. DF Lorraine Lindberg 01/10/2000 04:46 PM To: Steven Harris/ET&S/Enron@ENRON, Drew Fossum/ET&S/Enron@ENRON cc: Kevin Hyatt/ET&S/Enron@Enron Subject: Albuquerque Project Bullets 1. The initial study of the Albuquerque project brought to Transwestern by Dennis Langley has been completed. 2. Facility Planning provided Level A (+/- 30%) cost estimates for 3 separate routes. (Two of which were brought to us by Langley, the third; Facility Planning identified as being a shorter, cheaper route.) 3. Economic Analysis was run on the three options. The attached spreadsheet details project rates and costs. 4. Current PNM tariff transmission rates indicate higher rates than potential Albuquerque project rates. We know that PNM discounts (deeply when necessary to keep a customer from leaving its system), but we don't know definitively. We continue to research current discounted rates. 5. The initial take on the feasibility of this project is good enough to forge ahead. Please call me if you have any questions and as to our plan to respond to Tino. Thanks. Lorraine
|