Project "Bighorn" (Colstrip Energy Limited Partnership)

----- Forwarded by Richard B Sanders/HOU/ECT on 05/06/2001 10:45 AM -----

Karen E Jones
04/01/2001 03:46 PM

To: jmaas@llgm.com
cc: Richard B Sanders/HOU/ECT@ECT, Sheila Tweed/HOU/ECT@ECT
Subject: Project "Bighorn" (Colstrip Energy Limited Partnership)

Hi John. I wanted to get you (and Richard Sanders) thinking about a request
we have received from Owen Orndorff (who, for Richard's benefit, is one of
the principals in Rosebud Energy Corp., the general partner of Colstrip
Energy Limited Partnership ("CELP"), in which Enron, now through the "Condor"
vehicle, holds a 25% limited partner interest; CELP owns a waste
coal-burning QF in Montana).

Rosebud has expressed an interest in filing suit against Montana Power
Company ("MPC"), the facility's offtake purchaser, for MPC's refusal to allow
CELP to remarket power above the minimum contract demand under the facility's
PPA. I will fax to you and to Richard a memorandum that the Doney, Crowley
firm, which traditionally has done some work for CELP, has prepared regarding
litigation theories and chances of success. Owen has preliminarily scheduled
a partnership meeting to discuss this issue (among others, as yet identified)
on April 25th in Chicago.

My preliminary reactions to the Doney memo are that, at the time it was
written, at least, there were a number of issues that had not been fully
enough researched for the partners to be making a decision. I will ask
Terry Donovan if further work has been done by now. My initial reactions are
that (1) having the PPA be the subject of a pending lawsuit could make our
current efforts to sell our interest much more difficult; (2) the potential
is there for MPC to cook up some kind of counterclaim, which, even if not
successful, puts additional pressure on the PPA, could draw out the
litigation, and add costs, not to mention problems for our sale, and (3) the
effort could result in as yet unknown costs to the partners (since, as I
recall uner the partnership agreement, the costs would be borne by the
partners - ??). I also need to check and see just who within Enron is
supposed to call the shots on the strategy for this, given that the
investment is now held in Condor.

I will be out of the country on vacation beginning late Friday, April 6th,
until Monday, April 23. I'd like to touch base with you before I leave,
since there won't be much time to develop our response to Owen prior to the
meeting on the 25th. At that time, we can also talk about what might come up
on the sale effort while I'm out (at this point, there shouldn't be much, as
Terry seems immersed on another deal).

I'll be in SF all this week trying to close on Pastoria, but am reachable at
the office there (415/782-7800) or by pager (800/316-0430). Thanks.