Pueblo

I called Tino today to let him know that our affiliates are sniffing around a
power plant opportunity and potential gas bypass pipeline in Albuquerque.
Kevin, you should be getting a call from a guy in Portland whose name I can't
seem to find right now. He had gotten my name from Thome out there and
called to let me know that ENA is interested in pitching either PNM or some
outfit called "Delta" on development or expansion of a gas-fired power plant
in the south part of Albuquerque. It didn't sound to me like ENA was very
far along in their deal. I explained to this guy what we were involved in
and swore him to confidentiality. I also told him he need to call either
Kevin or Steve before he talked to PNM. I thought it was a little curious
that ENA is interested in generation in Alb. all of a sudden.

On the Tino front, he apologized for not calling after their big DOE
meeting. He said it went very well and that DOE is considering their
offer--$.085/Kwh power less revenue sharing for all surplus power sold. Tino
and Dennis offered DOE 70% of the $$ from the surplus power sales until a
certain target is hit (probably a target equivalent to DOE's current PNM rate
less 10%) and then 30% of any additional $$. Tino and Dennis really blew
some smoke by showing the DOE guys this summer's Four Corners spot prices
(generally in the $200-400/mwh range) and doing the math for them. On that
basis, the net delivered power cost after rebate comes pretty close to zero.
Even using a more reasonable sampling of Four Corners prices, the DOE price
is apparently better than their current PNM price. The big issue is whether
DOE can figure out how to keep the rebate $$ at Sandia, rather than lose the
$$ to treasury. Sounds like the Dennis and Tino show is still flogging this
deal pretty hard, so I reminded Tino that we are eager to do anything we can
to help.

Bill or Kevin, please forward this to Bill Gang--I couldn't get my computer
to recognize his name.

Please call if you have any questions. DF