I like your approach.   Would the Norfolk location fill the UI short as well so we could potentially get a double benefit?

-----Original Message-----
From: Llodra, John 
Sent: Friday, July 13, 2001 10:10 AM
To: Duran, W. David; Presto, Kevin M.; Davis, Mark Dana
Cc: Staines, Dan
Subject: NU CT-Long-Island Transmission Opportunity


Dan Staines and I met with NU's Transmission Business Unit yesterday to discuss their proposed transmission project connecting CT and Long Island.  In a nutshell, here are the details on the project (Dan can speak to greater technical details):

Run from Norwalk Harbor (CT) to Oyster Bay area of Long Island (Shore Rd substation) 
Minimum capacity of 330 MW;  are considering approximate doubling of the capacity 
Will be HVDC line, thereby facilitating flows in either direction and flexible scheduling 
They have started siting process (formal filing to be made this fall) and have commitments from key vendors (production slots secured, etc.) 
In order for the line to be workable, one of two things needs to happen:  (1) tansmission into the Southwest CT area needs to be beefed up; or (2) new generation needs to be placed at Norwalk Harbor.  As such, NU has proposed upgrades to the transmission system into Southweast CT (they are confident these upgrades can be accomplished without too much difficulty;  Dan believes it will be difficult)

They are planning on holding an "open season" for the transmission capacity (much as gas pipelines do), and are looking to get proposals by Aug 10, 2001.   In addition to basic fixed MW block purchase bids for a term of the bidder's preference (e.g., 100 MW for 5 years), they are interested in seeing alternative creative proposals.  The main objective of the open season is to secure sufficient transmission capacity sales contracts to get this project financed and built.
 
My hunch is that while they may get some healthy interest in capacity purchases, the bids will likely be shorter-term plays on the current congestion differential between CT and Long Island, and that they probably will not get a whole lot of long-term purchase bids to support raising project debt.  As such, I was thinking we might offer them a proposal something like the following:

Enron injects some level of debt or mezzanine funding to enable the project to lever up 
In return, Enron receives either or both of: (1) series of options to acquire firm (physical or financial) capacity rights on the line for multiple periods of, say, 5 years each; or (2) option to acquire an equity position in the line 
The options on the line could be made more valuable if we locked in optionality to develop new CCGT generation at or near Norwalk Harbor, thereby having the ability to deliver CC economics into the Long Island market  (I was speaking to CMEEC, and they indicate they have a site in the Norwalk area they want to develop)

What do you all think of this concept?   Do we have a desire to enter into a long-term purchase or option position on rights to the line?

Let's chat this up so we can determine what, if anything, we would like to submit to them on the 10th of August.  Please call either me or Dan to discuss.

Thanks

John