FYI
---------------------- Forwarded by Ben Jacoby/HOU/ECT on 04/24/2001 02:39 PM 
---------------------------


Christopher F Calger
04/24/2001 01:59 PM
To: Ben Jacoby/HOU/ECT@ECT
cc:  
Subject: Re: Northwestern Deal  

Sounds great.  


   
	Enron North America Corp.
	
	From:  Ben F Jacoby                           04/24/2001 09:38 AM
	

Sent by: Ben Jacoby
To: Christopher F Calger/PDX/ECT@ECT
cc: Kay Mann/Corp/Enron@Enron, W David Duran/HOU/ECT@ECT, Chris 
Booth/NA/Enron@Enron 
Subject: Re: Northwestern Deal  

Chris:

1. I have not analyzed the TurboPark deal to determine what would constitute 
an event of default in that deal and at the same time preclude our ability to 
exercise our call option. Finance / Accounting have not provided specific 
guidance on this.

2. We have spoke to GE. We have advised them of the deal with Northwestern. 
We do not believe the acknowledgement and consent will be a problem, and that 
it will follow the same discussion process as has been going on regarding 
Pastoria.

3. NW does not have negotiating rights on the acknowledgement and consent. 
They must accept it to the extent the one we receive for this deal is 
substantially the same as the one for Pastoria (we've attached the Pastoria 
form to the letter agreement).

4. If NW flakes, we keep the $8 million, can sue them to close, and can 
resell the units. This remote scenario would likely provide us with 
additional upside.

5. The only scenario that we don't get paid are the two scenarios outlined in 
my previous e-mail: we cannot obtain the GE acknowledgement and consent, or 
we otherwise cannot effect the assignment because of a default in E Next. NW 
does not have any other outs.

6. The income from the deal is expected to be at least $8 million, but could 
be as high as $10 million depending on the exact closing date, and potential 
LDs we may receive from GE. I've attached the DASH which contains an income 
analysis.

Regards,

Ben





Christopher F Calger
04/24/2001 10:28 AM
To: Ben Jacoby/HOU/ECT@ECT, Kay Mann/Corp/Enron@Enron
cc: W David Duran/HOU/ECT@ECT, Chris Booth/NA/Enron@Enron 
Subject: Re: Northwestern Deal  

Ben and Kay,

What is our performance obligation to E;Next?

Have we spoken to GE re consents?  Is GE going to be difficult because this 
is the Frame division, not the Lee J and the LM6000 team?

Does NW have any discretion / approval rights / negotiating rights w/ respect 
to the assignment to the LLC?

If NW flakes, can we keep the $8MM or do we have to resell and sue for any 
shortfall?

In what scenario(s) would we not get fully paid?

Assuming Sep 1, what is the income from this deal?

Regards,

Chris 





 



   
	Enron North America Corp.
	
	From:  Ben F Jacoby                           04/24/2001 08:25 AM
	

Sent by: Ben Jacoby
To: W David Duran/HOU/ECT@ECT, Christopher F Calger/PDX/ECT@ECT
cc: Kay Mann/Corp/Enron@Enron, Chris Booth/NA/Enron@Enron 
Subject: Northwestern Deal

Dave / Chris:

I wanted to give you both a heads up that the Northwestern (NW) GE 7EA deal 
should close today or tomorrow, and advise you of a related earnings 
recognition issue. 

The deal that we are on the path of closing is consistent with the executed 
DASH and works as follows: at the signing of the letter agreement, NW pays 
ENA $3 million, with another $5 million paid on July 15 (the Turbine 
Deposits). The balance of $40 million is paid by NW at such time as the 
assignment of the turbine contract is made to the LLC, and ENA sells the LLC 
member interests to NW. The outside date for this to occur, via a notice 
provided by NW, is Sept. 1. The $8 million paid by NW, and the obligation to 
purchase the member interests is a firm commitment guaranteed by Northwestern 
Corp. The only condition to NW's obligation to purchase the member interests 
is that ENA effect the assignment of the turbine contract into the LLC. If 
ENA does not effect the assignment, then NW would also be entitled to a 
return of the $8 million in Turbine Deposits. 

This structure is the same we followed for the Intergen deal which closed in 
January, except the Intergen deal did not have an extended period between the 
date of execution of the letter agreement, and the turbine contract 
assignment. In the Intergen deal, ENA did not receive any payments prior to 
the assignment and sale of the member interests.

The earnings issue raised by accounting (Herman Manis) is that, 
notwithstanding NW's firm commitment to purchase, ENA has two (albeit very 
minor) performance obligations. First, ENA has to obtain an Acknowledgement 
and Consent from GE prior to or concurrent with exercising its purchase 
option with E Next and assigning the turbine contract to the LLC  (we have 
had to do this for every turbine transaction). Second, ENA has to perform 
under its agreement with E Next in that if there is an event of default prior 
to the time we effect the assignment, we theoretically could loose our 
purchase option right with E Next and be unable to perform under our 
agreement with NW. We have suggested to Herman that both of these items are 
perfunctory in nature, and that all income from this transaction should be 
recognized upon execution of the letter agreement, We have further stated 
that we could obtain a letter from GE solving the first issue, but there is 
no solution to the second issue. Herman advised us that to the extent we 
receive a letter from GE on the first issue, and can convince Arthur Anderson 
that the second item is perfunctory in nature, we could recognize all income 
upon execution of the letter agreement (prior to the actual assignment of the 
turbine contract to the LLC). He did not think we had a good case relative to 
the second issue, and is reluctant to approach Arthur Anderson.

Thus, based on the above, in a worst case we may not be able to recognize any 
income form this transaction until Q3. While we think we have a shot at 
getting accounting to change their position, we do not think that this 
outcome should change our position on the deal as the underlying 
profitability is significant. The deal is also consistent with the approved 
DASH. We therefore recommend that we proceed with the execution of the letter 
agreement, and then decide as to how we should proceed on the income 
recognition issue depending on your views regarding income being recognized 
in Q2 vs. Q3.

Please advise me if you are OK with us closing on the deal as scheduled, or 
if you have any other questions.

Regards,

Ben