Retail Short update

Thomas,

Ben and I had a meeting with Don on Tuesday. Please see below for the summary
of meeting:

ENA would sell to an IPP (AES or Calpine) a combination of EES short position
and peaking turbines.

ENA would generate profit from;
1. spread between buying power from the IPP and selling it to EES at premium
- will be very thin
2. having a call option on the peaking plant for the portion of excess
capacity of the plant
3. fees from EES or/and IPP for providing/arranging capacity/off-taker
4. better project financing by leveraging up more and having lower debt
cost, which would be possible by having off-taker (EES) - Not quite sure yet.

Next steps/Assumptions;
1. Assume equity IRR of 12% after tax
2. Match assets to EES load curve
3. Dispatch assets into market when not to meet load @ENA curve ("RevenueM")
4. Calculate transfer price to meet load ("RevenueL") to meet equity return
objectives of 12%
5. Compare "RevenueL" to EES's market position
6. Find Scaler value (option value from volatility)
7. Calculate book earning for bid package
--< We try to have work of 1 to 4 done by Thursday (2/24). Next meeting with
Don is scheduled on Thursday.

Regarding our starting point of NY East, EES has short position ranging from
0 MW to 126 MW in NY East region for next 11 years. I attached Excel file
which shows an analysis of NY East including load graph.

To read EES data correctly, see the below definition.
- WD: weekdays, WE: weekends.
- Each 4 hour block number shows average load for 4 hour block, so actual
peak load is higher than that.

Idea of sharing data with East Coast Power: Don does not mind if we
distribute EES data internally within Enron, but he does not want data to go
to Elpaso. He does not know Brad Alford.

Jinsung
(Ext: 37330)