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Enron Mail |
John:
The following points outline the current status of the project for our discussion at 2:30 pm (Houston): Budget: The attached spreadsheet outlines the current status of the budget as compared to previous reports. The basic status is that we have $4 million in unallocated contingency and are basically on budget. Sales Process: We have received one indicative proposal from Perez Companc to purchase 50% of the project equity in the asset company at approximately $3 million below book. This offer is only for the asset company and does not include any transfer of the upside of the marketing company. Total has indicated that they will give us an offer next week, but this has been delayed several times. We are currently scheduled to complete the process with Perez Companc prior to year-end, but the schedule is aggressive. OPIC Financing: The main finance agreement should be complete by early next week. We have worked with OPIC over the last few days to change certain parts of the deal structure to accelerate the process. OPIC is now indicating more willingness to work towards a year-end closing. The financing would represent $190 million in financing out of a total capital budget of approximately $282 million. Construction Financing Structure: All construction costs for the project are currently financed through an off-balance sheet / on-credit vehicle with WestLB as the lead bank in the group. The financing vehicle contemplates the take-out of the vehicle upon the completion of construction. The definition is in accordance with the construction contract. Final completion of construction will not be completed until late December or early January in accordance with the construction contract due to the final completion of the water treatment facilities. We are currently using temporary facilities to run the plant. Enron Equity: Under the current process, Enron would need to contribute approximately $45 million in equity in the final capital structure of the project assuming the indicative offer we have from Perez Companc. The basic issue is the timing of the OPIC financing and equity syndication closing and the WestLB take-out. Commercial Operations: Upon the completion of testing of the eight unit next week, we are planning to declare the start date under the Petrobras agreement such that we can begin receiving the guaranteed payment. The conflict created with this action is that this could create problems with WestLB under the construction financing vehicle. The contract is clear that the take-out must occur upon completion in accordance with the construction contract which shall not have ocurred. However, the banks have stated in the past that they did not contemplate taking operating risk. We are working with the finance agreement to ensure that we have a coordinated strategy and story for the banks to keep them comfortable. However, there is a risk that the banks will push for a take-out during this period. Turbine: We are currently evaluting the purchase of a turbine (only the engine) which is required to be on-site for operational purposes. This is not a ninth turbine generating set as we had previously discussed. The plan to date has been to lease this unit from GE. However, we were presented an offer to buy a used unit with significantly better economics and operating conditions than the lease. With our current status in the budget, we believe that we can accomplish this and still be under the original construction budget as outlined in the attached table. We are currently expecting to receive a $6.8 million tax rebate, we have been able to defer $2.5 million in expenditures contemplated in the original budget (still included above) and we have unallocated contingency of $4 million. Thanks, Brett
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