Re: EPC Limits of Liability

I can send you what I have on the WestLB stuff, but it may not help too much
if you are trying to figure out how to get turbines into a project. We are
currently working on the mechanics relating to that.

It may take a while to get a copy, as I don't have an electronic version and
I'm currently in meetings where I'm using my hard copy. How soon do you need
it?

Kay

Karen E Jones@ECT
08/18/2000 10:52 AM
To: Kay Mann/Corp/Enron@ENRON
cc:

Subject: Re: EPC Limits of Liability

Hi Kay. Thanks for this input. My somewhat knee-jerk reaction has been that
NEPCo is, indeed, taking a very aggressive approach. We are also hearing
that they are under some sort of "mandate" to include these provisions in
their contracts on a going forward basis (I think I might have some idea of
what that's about), but we are obviously concerned that it won't fly with a
third party buyer of our project. Dean, Jim Fowler (our outside counsel at
McCutchen) and I may want to chat about it with you further.

On a related note, I keep running into the need to have a more basic
understanding of the West LB documents and the GE LM-6000 contract than I
have. Do you have copies of those documents, and could I ask you to have
copies made and sent to me? Much appreciated.

Hope all is well,
Karen

To: Dean Russell/SF/ECT@ECT
cc: Karen E Jones/HOU/ECT@ECT, Sheila Tweed/HOU/ECT@ECT
Subject: Re: EPC Limits of Liability

NEPCO's position sounds more typical for a cost plus contract. Is this a
lump sum deal? If so, then I think NEPCO is taking an aggressive approach to
both LOL and retention. A 10% limit of liability during the warranty period
is particularly aggressive, unless there are a lot of carve outs to the limit
of liability, and other give-and-takes which make it make sense. Another
factor which might make a difference is the treatment given to the GE
contract. Is NEPCO taking risk on GE performance, and is the dollar value of
the GE equipment included in the price used to figure the % of liability?

I'm glad to discuss this if I can be of help.

Kay

From: Dean Russell @ ECT 08/17/2000 10:17 AM

To: Kay Mann/Corp/Enron@Enron
cc: Karen E Jones/HOU/ECT@ECT, Sheila Tweed/HOU/ECT@ECT

Subject: EPC Limits of Liability

Kay - Ron Coker in the CTG group suggested you might be able to help with
this.

ENA/SF is in the middle of negotiating the EPC contract for Pastoria (750 MW)
with NEPCO. We have hit a couple of snags in the contract and would very
much appreciate your input as to what is "market."

1. Limit of Liability - NEPCO would like 80% up to Substantial Completion,
40% up to Final Acceptance, and 10% for the Warranty Period. GE's LOL is
100% of their contract value though the warranty period. (which Kiewit also
agreed to on Pittsburg.)
2. Retention - NEPCO would like to have 10% retention on payments only for
the first 5% on the contract value and then 5% retention thereafter. We
would prefer 10% throughout the payment schedule.

What do you think? We want the Owner's position to be as strong as possible
to enhance the sale of the project, but NEPCO is under a great amount of
pressure to reduce their contingent liability, and we really don't want to
leave them holding the bag once we are gone if it is not necessary.

Regards, Dean