Last but not least, the lenghty story below is what I have been talking about with regards to the GE's versus the electrics on San Juan in conjunction with Sun Devil.  I'm afraid I've done a poor job at explaining my reasoning so, I put it on paper as best I could.  I hope this helps clear the issue up or at least provides enough information to allow you all to understand the concept... thanks  As usual this is pretty far fetched....

---------------------- Forwarded by David Roensch/ET&S/Enron on 11/16/2001 03:21 PM ---------------------------


David Roensch
11/16/2001 01:46 PM
To:	Norm Spalding/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc:	 

Subject:	FW: TW Waste Heat Recovery Projects

Sorry to be late with a response back but, I wanted to run a few things down before getting back with you and explaining why I was really so interested in this project.  After visiting with you in the field this week you asked that I jot some of this down so this will be an attempt at my reasoning and why I have such a sense of urgency about tie-ing this potential project into a Sun Devil deal.  Here goes nothing:

As I understand it, the current senario for Sun Devil as it relates to the San Juan section of this project includes:
The addition of 15,000 hp at Bloomfield
A compressor restage at Bisti
A new 15,000 hp station at Standing Rock
A larger compressor at Gallup
Potentially a larger motor at Gallup

A suggested change to this plan was to look at the 41,000 hp GE's at Bloomfield and Standing Rock allowing us to stand-down the Electrics on the San Juan Lateral.  The capital cost would increase by approximately $30 M but the capacity increase on the lateral would be around 80 mmcfd.  (These are not by any means firm numbers)  

The problem with the suggestion obviously is the term of the contracts with ECS on the Electric drives.  So, this is what I was thinking.  I know we don't want to leave ECS holding the bag or stranding cost so, if the HRSG were to move forward at Station 1, maybe we could allow them to wheel the commodity (the fuel gas) out there.  We provide them with gas in trade for electricity currently.  If we stand down the electrics, ECS would save dollars paid now to the utilities but, they would loose large bucks from the sale of natural gas that we provide them for the power.  So, we could allow them to keep the gas for the remaining term of the contracts and sell it to Gadd's group on the HRSG project.  Depending on the current margins, they may be able to help Gadd's group cut some expense's as well and keep this project rolling???   (Motive is to get this HRSG going so Operations can generate some operating revenue off of this facility)   See the example below to follow along with this idea:

ECS currently pays approximately $3,133,280 annually in electricity to provide TW shaft horse power
TW provides ECS with a commodity valued at $8,000,070 annually.  (At $2.50 per thousand)
The difference is $4,866,790
TW pays ECS a demand charge of $2,794,000 between Bisti and Bloomfield.

The $3,133,280 would be an expense ECS would no longer be required to have if the Electrics were shut down.  So, ECS should be able to allow TW out of the $2,794,00 in annual demand charges for Bloomfield and Bisti and return the $3 M in commodity value to TW.  Now there is still the issue of the $8,000,070 in commodity value minus the $3,133,280 returned to TW.  We can keep ECS whole on this value ($4,866,790) by transfering the fuel sale to the HRSG at Station 1 allowing them to simply sell the fuel there or market it accordingly for the term of the current contract.  As long as we keep ECS whole on the value of this deal, in turn ECS should be able to negotiate a deal at reduced rates to allow the HRSG project economics to become more appealing...  At least that was my idea.  Pretty crazy huh?  

None the less for an increase of 80 mmcfd on Sun Devil, the potential revenue from an operating agreement on the HRSG through EAMR, and the reduced exposure due to down time associated with the electric failures as compared to what GE is required to provide....... I thought it was worth a shot.  If you think this is too far fetched....just say so Norm..  Not carrying anything on my shoulder here.  Have a good day and sorry this dang note was so long...  

Oh yea, I would have thrown Gallups numbers into this mix as well but, those agreements are so complicated I have a hard time understanding and/or relaying information about them...   However, understand, when I say stand the electrics down on the San Juan lateral that includes, Bloomfield, Bisti and Gallup.....  R. Matthews ran the modeling info and that is who I have been chatting with about this thought.

Like in school:  I thought I would show you my work...
Bisit currently has a conversion factor of .0198 that multiplys into horse power to determine how much fuel gas we owe them for shaft power.  They also have a contract with PNM that determines the rate ECS pays per Mega Watt for the power they provide TW.   (I will use $2.50 for the price of gas in examples)  ECS pays approximately $25 per meg for power at Bisti.

10,000 hp x .0198 x $2.50 = $495 per hour
$495 / (10,000 x .7546) = $.0663 per kw 
10,000 x .0198 x 8760 x $2.50 = $4,336,200 annually in fuel provided to ECS

(10,000 x .7546) / 1000 x $25 = $188.65 per hour in electric cost
$188.65 x 8760 = $1,652,574  annually in electric cost

Bloomfield currently has a conversion factor of .0239.  Power rate I think is more in the range of $32 dollars a meg.

7000 hp x .0198 x $2.50 = $418 per hour
$418 / (7000 x .7546) = .08 per kw 
7000 x .0239 x 8760 x $2.50 = $3,663,870 annually in fuel provided to ECS

(7000 x .7546) / 1000 x $32 = $169.03 per hour in electric cost
$169.03 x 8760 = $1,480,706 annually in electric cost

Ok, enough of all that.  The bottom line expenses are as follows:
Bisti fuel commodity cost - $4,336,200
Bisti electricity cost - $1,652,574
Bisti demand fee paid to ECS - $2,017,000
Bloomfield fuel commodity cost - $3,663,870
Bloomfield electricity cost - $1,480,706
Bloomfield demand fee paid to ECS - $777,000

---------------------- Forwarded by David Roensch/ET&S/Enron on 11/16/2001 12:38 PM ---------------------------
From:	Norm Spalding/ENRON@enronXgate on 11/12/2001 02:28 PM CST
To:	Rich Jolly/ET&S/Enron@ENRON, David Roensch/ET&S/Enron@ENRON
cc:	 

Subject:	FW: TW Waste Heat Recovery Projects

FYI.  As promised, I'm looking into your questions from last week.  I haven't heard back yet on the other issues.  Let me know if you want to do anything about this one.  Thanks  again for inviting me last week.  Take care, Norm

 -----Original Message-----
From: 	Millar, John  
Sent:	Monday, November 12, 2001 7:53 AM
To:	Gadd, Eric; Spalding, Norm
Subject:	RE: TW Waste Heat Recovery Projects

Norm, 

We've been trying to develop a project at Station 1 due to its close proximity to the Round Valley substation.  Although we've considered several designs ranging from a 15MW steam cycle to a 60MW plant with an LM6000, the required power price is always about $45/MWh, which is out of the market.  Our current objective is to find a counter-party who is willing to build a plant and purchase waste heat, land, water, shared facilities, and operating services from TW.  A few parties are interested and we're pressing on.  

I would be happy to meet with you and your team to share ideas and answer questions.

John
5-8920
 -----Original Message-----
From: 	Gadd, Eric  
Sent:	Friday, November 09, 2001 5:16 PM
To:	Spalding, Norm
Cc:	Millar, John
Subject:	RE: TW Waste Heat Recovery Projects


Norm,

John Millar is progressing WHR opportunities and can provide an update.
 -----Original Message-----
From: 	Spalding, Norm  
Sent:	Thursday, November 08, 2001 8:29 AM
To:	Gadd, Eric; Eisenstein, Arnold L.
Subject:	RE: TW Waste Heat Recovery Projects



 -----Original Message-----
From: 	Spalding, Norm  
Sent:	Wednesday, November 07, 2001 6:35 PM
To:	Gadd, Eric; Eisenstein, Arnold L.
Subject:	TW Waste Heat Recovery Projects

I was in the Region Meetings today with the TW personnel.  They were asking if WHR was still being contemplated for Stations 1 through 3.  Can one of you give me an update?  Thanks, Norm