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Enron Mail |
Sounds reasonable to me. When do we sign? Seriously, this just confirms in
my mind that Langley isn't looking very closely at the economics of the deal because he doesn't have any capital or O & M numbers (or heat rates) on the generation equipment so he has no idea how thick or thin the margins might be on this project. Once we are able to show him some economics he will presumably be in a position to be reasonable on the issues discussed below. If he's not willing to be reasonable, we're done talking to him. Steven Harris 03/07/2000 10:28 AM To: Drew Fossum/ET&S/Enron@ENRON, Kevin Hyatt/ET&S/Enron@Enron, Lorraine Lindberg/ET&S/Enron@ENRON, James Centilli/ET&S/Enron@ENRON, Tim Aron/ET&S/Enron@ENRON cc: Subject: Pueblo project I spoke to Dennis Langley yesterday about his ideas on the financial stake he is looking for in the project. There are several items which will need to be included in our economic analysis as they will burden the project . The conditions are as follows: - Dennis needs (wants) to recover the O&M for his idea-generating group which he estimates to be $2 to $3 million per year! - Share with Dennis a 50/50 split of any incremental revenue TW receives on its existing line as a result of additional capacity sold to serve these markets! - A 50/50 split of any revenue received on the new line which is built . - The Native American tribe(s) will receive 25% of ownership in the assets and 25% of the cashflow stream after payout (he mentioned something about an IRR of 8% being the threshold). His general feeling was that the pipeline should be a 50/50 joint venture but the gas-fired generation plant would be ours. James will need to run the numbers but my uneducated guess says that if things were slim before these financial hits will certainly render the project uneconomic (especially the $2 to $3 million/year extra O&M). He did indicate that they are having very good conversations with the DOE and would expect to sign a contract in April. I am somewhat puzzled by what he could commit to since he would have no idea what rates he could charge for the electricity or gas transportation. I told Dennis we would follow-up with him shortly. In the meantime, we will be working with Mark Baldwin to scope out the opportunities in New Mexico.
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