I agree - thanks for this. it will have slow death......................................

 -----Original Message-----
From: 	Calger, Christopher F.  
Sent:	Wednesday, October 10, 2001 7:24 PM
To:	Kitchen, Louise
Subject:	Cogentrix

Louise,

I only spent an hour on this.  However, I would pass.  This would keep a lot of orig/tech/finance people employed for a while in order to manage it and then work off the pieces.  

This looks like a fairly impressive private asset company - they appear to be good developers, acquirers, etc.  They even say that they that restructured 8 of their PPA's - presumably they restructured the ones that make sense - further reduces our restructuring proposition.  

To me, the QF optionality goes like this:  
- If you have a high-variable cost QF that operates as a baseload facility, the math works to shut it down or convert to a peaking PPA when the market is low.  
- If the market is high, you have an easy-to-develop expansion.

Problem is, their assets appear to have low variable costs (coal and new gas) so the restructuring play does not jump out at me
...and we are bearish on development

At PV18, this could look like a good diversified low risk business - superior to most of our regulated businesses and most of our international businesses, but I think it would be real tough to get returns >30%.  Besides, I think someone will pay more for it.  Over half the net MW is new 7FA capacity - attractive to Calpine and the Calpine wanabees.   This is actually a cheap way for an IPP to hit its MW growth targets without blowing their brains out in the spot market.  

Someone should pay up - not us.   

Question: Did we form qf teams in the east and west because of the success of East Coast Power?  Was that success largely driven by the fact that we bought it cheap?  Or did we innovatively restructure the PPA?  If we brought innovative financing to the deal, isn't that the same as buying it cheap?  Was East Coast Power a formal auction or was it a negotiated deal? 

I can dig into this some more if you'd like.  Our internal model would be my next step.  Let me know.

Regards,

Chris Calger
503-464-3735